10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2013

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)	(I.R.S. Employer Identification No.)
10900 NE 8th Street, Ste. 800 Bellevue, Washington	98004
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (425) 201-6100

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.    x  Yes    ¨  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).    x  Yes    ¨  No

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at October 29, 2013
Common Stock, Par Value $0.0001	41,195,692

BLUCORA, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months ended September 30, 2013 and 2012	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2013 and 2012	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	54
Item 4.	Mine Safety Disclosures	54
Item 5.	Other Information	54
Item 6.	Exhibits	54
Signatures		55

PART I—FINANCIAL INFORMATION

Item 1.—Financial Statements

BLUCORA, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

	September 30, 2013			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	97,821		$	68,278
Short-term investments, available-for-sale		150,561			94,010
Accounts receivable, net of allowance of $31 and $10		46,896			34,932
Other receivables		8,943			3,942
Inventories		26,577			—
Prepaid expenses and other current assets, net		6,928			10,911
Total current assets		337,726			212,073
Property and equipment, net		15,165			7,533
Goodwill		343,139			230,290
Other intangible assets, net		185,421			132,815
Other long-term assets		6,043			2,582
Total assets	$	887,494		$	585,293
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	50,862		$	37,687
Accrued expenses and other current liabilities		26,278			13,280
Deferred revenue		6,195			3,157
Short-term portion of long-term debt, net of discount of $0 and $160		—			4,590
Derivative instruments		14,495			8,974
Total current liabilities		97,830			67,688
Long-term liabilities:
Long-term debt, net of discount of $264 and $468		65,120			69,278
Convertible senior notes		180,725			—
Deferred tax liability		56,020			29,333
Deferred revenue		2,143			1,319
Other long-term liabilities		2,022			2,225
Total long-term liabilities		306,030			102,155
Total liabilities		403,860			169,843
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock, par value, $0.0001 - authorized, 900,000,000 shares; 41,175,868 and 40,832,393 shares issued and outstanding at September 30, 2013 and December 31, 2012		4			4
Additional paid-in capital		1,434,471			1,392,098
Accumulated deficit		(950,843	)		(976,376	)
Accumulated other comprehensive income (loss)		2			(276	)
Total stockholders’ equity		483,634			415,450
Total liabilities and stockholders’ equity	$	887,494		$	585,293

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

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BLUCORA, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Revenues:
Services revenue	$	109,491		$	92,870		$	392,010		$	309,449
Product revenue		14,630			—			14,630			—
Total revenues		124,121			92,870			406,640			309,449
Operating expenses:
Cost of revenues:
Services cost of revenue (includes amortization of acquired intangible assets of $1,906, $2,014, $5,773, and $5,605)		72,935			69,918			219,274			192,308
Product cost of revenue		10,622			—			10,622			—
Total cost of revenues		83,557			69,918			229,896			192,308
Engineering and technology		2,905			2,410			7,951			7,431
Sales and marketing		18,230			7,796			71,409			37,492
General and administrative		8,421			5,283			21,362			21,705
Depreciation		697			560			1,738			1,627
Amortization of intangible assets		4,184			3,169			10,521			8,450
Total operating expenses		117,994			89,136			342,877			269,013
Operating income		6,127			3,734			63,763			40,436
Other loss, net		(13,118	)		(5,196	)		(20,427	)		(7,681	)
Income (loss) before income taxes		(6,991	)		(1,462	)		43,336			32,755
Income tax benefit (expense)		510			(936	)		(17,803	)		(14,049	)
Net income (loss)	$	(6,481	)	$	(2,398	)	$	25,533		$	18,706
Income (loss) per share:
Basic	$	(0.16	)	$	(0.06	)	$	0.62		$	0.47
Diluted	$	(0.16	)	$	(0.06	)	$	0.60		$	0.45
Weighted average shares outstanding:
Basic		41,088			40,511			41,048			40,108
Diluted		41,088			40,511			42,878			41,425
Other comprehensive income (loss):
Net income (loss)	$	(6,481	)	$	(2,398	)	$	25,533		$	18,706
Unrealized gain (loss) on investments, available-for-sale		(23	)		9			13			—
Unrealized gain (loss) on derivative instrument		57			(20	)		266			(298	)
Reclassification adjustment for realized gain on investments, available-for-sale, net, included in net income		—			—			(1	)		(26	)
Other comprehensive income (loss)		34			(11	)		278			(324	)
Comprehensive income (loss)	$	(6,447	)	$	(2,409	)	$	25,811		$	18,382

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

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BLUCORA, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine months ended September 30,
	2013			2012
Operating activities:
Net income	$	25,533		$	18,706
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		8,490			6,637
Warrant-related stock-based compensation		—			4,286
Loss on derivative instrument		5,931			4,274
Depreciation and amortization of intangible assets		19,413			16,950
Excess tax benefits from stock-based award activity		(24,596	)		(20,882	)
Deferred income taxes		(8,209	)		(7,398	)
Unrealized amortization of premium on investments, net		857			(335	)
Loss on equity investment in privately-held company		289			—
Impairment loss on equity investment in privately-held company		3,711			—
Amortization of debt issuance costs		841			746
Accretion of debt discount		1,972			294
Loss on debt extinguishment and modification expense		1,593			—
Interest incurred but not paid due to refinance		199			—
Other		120			(21	)
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable		(8,756	)		(907	)
Other receivables		1,090			504
Inventory		900			—
Prepaid expenses and other current assets		6,694			705
Other long-term assets		(2,296	)		(612	)
Accounts payable		1,873			(2,344	)
Deferred revenue		2,563			3,183
Accrued expenses and other current and long-term liabilities		27,176			15,174
Net cash provided by operating activities		65,388			38,960
Investing activities:
Business acquisition, net of cash acquired		(180,500	)		(279,386	)
Equity investment in privately-held company		(4,000	)		—
Purchases of property and equipment		(3,066	)		(2,776	)
Change in restricted cash		2,491			168
Proceeds from sales of investments		25,825			184,934
Proceeds from maturities of investments		151,561			32,125
Purchases of investments		(234,771	)		(59,076	)
Net cash used by investing activities		(242,460	)		(124,011	)
Financing activities:
Proceeds from issuance of convertible debt, net of debt issuance costs of $6,432		194,818			—
Proceeds from loan, net of debt issuance costs of $2,343 and debt discount of $953		—			96,704
Debt issuance costs on credit facility		(28	)		—
Repayment of debt		(10,000	)		(25,504	)
Stock repurchases		(3,525	)		—
Excess tax benefits from stock-based award activity		24,596			20,882
Proceeds from stock option exercises		1,700			7,812
Proceeds from issuance of stock through employee stock purchase plan		1,065			601
Tax payments from shares withheld upon vesting of restricted stock units		(2,011	)		(934	)
Net cash provided by financing activities		206,615			99,561
Net increase in cash and cash equivalents		29,543			14,510
Cash and cash equivalents:
Beginning of period		68,278			81,897
End of period	$	97,821		$	96,407
Cash paid for:
Income taxes	$	1,637		$	2,571
Interest	$	6,512		$	2,737
Supplemental disclosure of non-cash investing activities:
Purchases of property and equipment through leasehold incentives	$	1,006		$	—

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

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BLUCORA, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. The Company and Basis of Presentation

Description of the business: Blucora, Inc. (the “Company” or “Blucora”) operates three primary businesses: an internet search business, an online tax preparation business and an e-commerce business. The Company’s Search business, InfoSpace, provides search services to distribution partners’ web properties as well as to the Company’s owned and operated properties. The Tax Preparation business consists of the operations of the TaxACT tax preparation online services and software business that the Company acquired on January 31, 2012. The E-Commerce business consists of the operations of Monoprice, Inc. (“Monoprice”), which the Company acquired on August 22, 2013, and is a provider of self-branded consumer electronics and accessories.

On January 31, 2012, the Company acquired TaxACT Holdings, Inc. (“TaxACT Holdings”) and its wholly-owned subsidiary, TaxACT, Inc. (“TaxACT”), previously 2nd Story Software, Inc., 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 its online service at www.taxact.com.

On August 22, 2013, the Company completed the acquisition of Monoprice pursuant to the terms of the Stock Purchase Agreement dated as of July 31, 2013. As a result of the Acquisition, Blucora owns 100% of Monoprice, an online provider of self-branded electronics and accessories for both consumers and businesses. Monoprice generates revenue primarily through its website, www.monoprice.com.

Segments: The Company has three reporting segments: Search, Tax Preparation and E-Commerce. The Search segment is the InfoSpace business, the Tax Preparation segment is the TaxACT business, and the E-Commerce segment is the Monoprice business. Unless the context indicates otherwise, the Company uses the term “Search” to represent search services, the term “Tax Preparation” to represent services and products sold through the TaxACT business, and the term “E-Commerce” to represent products sold through the Monoprice business (see “Note 10: Segment Information”).

Seasonality: Blucora’s Tax Preparation segment is highly seasonal. Revenue from the Company’s Tax Preparation segment tends to be highest during its first and second quarters as a result of significantly higher sales of income tax preparation services and products during the period from January through April. During the third and fourth quarter, the Tax Preparation segment typically reports losses because revenue from the segment is minimal while core operating expenses continue at relatively consistent levels.

2. Summary of Significant Accounting Policies

The Company’s critical accounting policies and methodologies during the quarter ended September 30, 2013 include those described in its Annual Report on Form 10-K for the year ended December 31, 2012, along with those presented below.

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 indicate that the evaluation of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity.

Search services revenue recognition: The majority of the Company’s revenues are generated from its web search services. The Search business does not generate its own search content for its web search services, 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, and those providers are referred to as “Search Customers”. 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 (i.e., when 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.

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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 service revenue from the sale of tax preparation online services, ancillary service offerings, packaged tax preparation 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, e-filing services, and other value-added 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. Other value-added service revenue consists of revenue from revenue sharing and royalty arrangements with third party partners. Revenue for these transactions 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 the Company’s determination of when collectability is probable.

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. 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.

E-Commerce revenue recognition: The Company recognizes product revenue from product sales when all four revenue recognition criteria, as outlined above, have been met. Because the Company either (i) has a general practice of refunding customer losses for products damaged while in-transit despite selling terms indicating title transfers at the point of shipment or (ii) has FOB-destination shipping terms specifically set out in certain arrangements, delivery is deemed to have occurred at the point in time when the product is received by the customer. All amounts billed to a customer in a sale transaction related to shipping and handling, if any, represents revenues earned for the goods provided, and these amounts have been classified as “product revenue”. Costs related to such shipping and handling billings are classified as “product cost of revenue”.

The Company provides its customers with a thirty-day right of return. Return allowances, which reduce revenue, are estimated using historical experience.

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Cost of revenues: The Company records the cost of revenues for sales of products and services when the related revenue is recognized. Services cost of revenue 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 the Company’s 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, bank service fees, and royalties. Product cost of revenue includes product costs, inbound and outbound shipping and handling costs, packaging supplies, and provisions for inventory obsolescence. Shipping charges to receive products from the Company’s suppliers are included in inventory, and recognized as product cost of revenue upon sale of products to customers.

Sales and marketing expenses: Sales and marketing expenses consist principally of marketing expenses associated with the Company’s TaxACT and Monoprice websites (which include the following channels: television, radio, online display and text, and email), the Company’s owned and operated web search properties (which consist of traffic acquisition, including the Company’s online marketing, which includes fees paid to search engines to drive traffic to an owned and operated website, agency fees, brand promotion expense and market research expense), personnel costs (which include salaries, benefits and other employee-related costs, and stock-based compensation expense) for personnel engaged in marketing and selling activities, and fulfillment expenses primarily associated with the Company’s E-Commerce business. Fulfillment includes direct operating expenses (including personnel costs) relating to the Company’s purchasing, customer and technical support, receiving, inspection and warehouse functions, as well as the cost of temporary help and contractors, and credit card processing fees.

Inventories: Inventories, consisting of merchandise purchased for resale in the E-Commerce business, are accounted for using the first-in-first-out (“FIFO”) method of accounting, and are valued at the lower of cost or market. Inventory quantities on hand are reviewed regularly, and allowances are maintained for obsolete, slow moving, and nonsalable inventory.

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. 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.

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 in the case of the Company’s credit facility (see “Note 8: Debt”).

Debt issuance costs related to the Company’s Convertible Senior Notes (the “Notes”) issued in 2013 were allocated to the liability and equity components of the instrument. The debt issuance costs allocated to the liability component are amortized to interest expense through the earlier of the maturity date of the Notes or the date of conversion, if any. The debt issuance costs allocated to the equity component of the Notes were recorded as an offset to additional paid in capital (See “Note 8: Debt”).

Supplier Concentration: A material part of Monoprice’s business is dependent on two vendors. During the period from August 22, 2013, the date of the acquisition, to September 30, 2013, these unrelated vendors accounted for $1.3 million or 16% and $742,000 and 9%, respectively, of Monoprice’s inventory purchases and at September 30, 2013 accounted for $1.1 million or 12% and $843,000 or 10%, respectively, of Monoprice’s related accounts payable, respectively.

Impairment of Equity Method Investments: The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate, in management’s judgment, that the carrying value of such investment may have experienced a decline in value. When evidence of an other-than-temporary decline has occurred, the Company compares the estimated fair value of the investment to the carrying value of the investment to determine whether an impairment has occurred.

For the three months ended September 30, 2013, in connection with the Company’s review of its equity method investments for other than temporary impairment, the Company determined that its equity investment in a privately-held company had experienced a decline in value which was other than temporary, due to recurring losses from operations, significant personnel reductions and a change in the underlying business model. The Company’s impairment loss calculations require management to apply judgment in estimating future cash flows and assessing the probability of differing estimated outcomes. The Company assesses the fair value of its equity method investments using commonly accepted techniques to the extent applicable, and may use more than one method. Accordingly, this equity investment in a privately-held company with a carrying value of $3.7 million was written down to zero, resulting in a loss of $3.7 million, which was included in “other loss, net” in the Company’s condensed consolidated statements of operations for the three and nine month periods ended September 30, 2013.

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3. Acquisitions

Monoprice. On August 22, 2013, the Company acquired all of the outstanding stock of Monoprice, an online provider of self-branded electronics and accessories for both consumers and businesses (see “Note 1: The Company and Basis of Presentation”). The preliminary acquisition consideration paid by the Company was equal to $183.3 million, which was funded from available cash and is subject to a final working capital adjustment during the fourth quarter of 2013. 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. Preliminary valuations are as follows (in thousands):

	Fair Value
Tangible assets acquired	$	49,515
Liabilities assumed		(23,122	)
Identifiable net assets acquired	$	26,393
Fair value adjustments to intangible assets
Customer relationships	$	30,900
Trade name		38,000
Fair value of intangible assets acquired	$	68,900
Purchase price:
Cash paid	$	183,319
Less identifiable net assets acquired		(26,393	)
Plus deferred tax liability related to intangible assets		24,823
Less fair value of intangible assets acquired		(68,900	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	112,849

The preliminary fair value determinations for assets acquired and liabilities assumed for this acquisition was based upon a preliminary valuation and certain of our estimates and assumptions are subject to change as we obtain additional information for our estimates in future periods. The primary areas of the acquisition accounting that are not yet finalized relate to income and non-income based taxes, certain contingent liability matters, indemnification assets, and residual goodwill. The Company incurred acquisition costs of $646,000 and $698,000 in the three and nine months ended September 30, 2013, which were recognized in general and administrative expenses as incurred. The Company did not assume any equity awards or plans from Monoprice. Following the completion of the acquisition, the Company issued 27,152 options and 126,259 restricted stock units (“RSUs”), which are at levels consistent with other awards to Blucora subsidiary employees, and 243,750 performance-based restricted stock units (“PSUs”) to Monoprice’s employees.

The Company’s estimates of the economic lives of the acquired intangible assets are two years for the business-to-consumer customer relationships, seven years for the business-to-business customer relationships, approximately six years for the personal property assets, and the trade name is estimated to have an indefinite-life. The Company plans to amortize the definite-lived intangible assets over their respective estimated lives. The goodwill and the trade name will be tested for impairment at least annually.

The gross contractual amount of trade accounts receivable acquired was $3.2 million, which the Company expects to be completely collectible. The Company recorded a fair value of $1.3 million for deferred revenue, which Monoprice, prior to the acquisition, had recorded at $2.0 million as of the acquisition date.

For the period from the August 22, 2013 acquisition date to September 30, 2013, the Company’s total revenues included $14.6 million in revenue from Monoprice’s sales. For the same period, Monoprice contributed $427,000 to the Company’s net loss.

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The financial information in the table below summarizes the combined results of operations of Blucora and Monoprice on a pro forma basis for the three and nine months ended September 30, 2013 and 2012, 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 condensed combined consolidated statement of operations for the three months ended September 30, 2013 combines the historical results of operations of Blucora for the three months ended September 30, 2013 and the historical results of operations of Monoprice for the period from July 1, 2013 to the acquisition date. The pro forma condensed combined consolidated statement of operations for the nine months ended September 30, 2013 combines the historical results of operations of Blucora for the nine months ended September 30, 2013 and the historical results of operations of Monoprice for the period from January 1, 2013 to the acquisition date. The following amounts are in thousands:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013		2012
Revenues	$	145,852		$	122,411		$	496,559	$	394,879
Net income (loss)	$	(6,017	)	$	(1,351	)	$	26,771	$	20,055

TaxACT. As described in “Note 1: The Company and Basis of Presentation”, on January 31, 2012, the Company acquired all of the outstanding stock of TaxACT Holdings and its wholly-owned subsidiary, TaxACT. 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). For further discussion of the credit facility, see “Note 8: Debt”. The acquisition was intended to diversify the Company’s business model and expand its operations. The Company recorded $185.5 million in goodwill upon final valuation.

The financial information in the table below summarizes the combined results of operations of Blucora and the TaxACT Tax Preparation business on a pro forma basis for the nine months ended September 30, 2012, as though it had been combined as of the beginning of the period, compared to the consolidated results for the three and nine months ended September 30, 2013. 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 2012. The pro forma condensed combined consolidated statements of operations for the nine months ended September 30, 2012 combines the historical results of the Company for the nine months ended September 30, 2012 with the results of the TaxACT business for the month ended January 31, 2012. The following amounts are in thousands:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013		2012
Revenues	$	124,121		$	92,870		$	406,640	$	330,339
Net income (loss)	$	(6,481	)	$	(2,398	)	$	25,533	$	22,999

Goodwill. The goodwill arising from the acquisitions of Monoprice and TaxACT consists largely of the ability to attract new customers and develop new technologies post acquisition, which do not qualify for separate recognition. The Company does not expect that any of the goodwill arising from the acquisitions will be deductible for tax purposes. The following summarizes our goodwill activity by segment in the nine months ended September 30, 2013 (in thousands):

	Search		Tax Preparation		E-Commerce		Total
Goodwill – January 1, 2013	$	44,815	$	185,475	$	—	$	230,290
New acquisitions		—		—		112,849		112,849
Goodwill – September 30, 2013	$	44,815	$	185,475	$	112,849	$	343,139

Other intangibles, net. Intangible assets other than goodwill consisted of the following (in thousands):

	September 30, 2013							December 31, 2012
	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	$	(12,555	)	$	95	$	12,650	$	(12,369	)	$	281
Core technology		1,085		(1,085	)		—		1,085		(1,085	)		—
Tax Preparation customer relationships		101,400		(21,125	)		80,275		101,400		(11,619	)		89,781
Tax Preparation proprietary technology		29,800		(12,416	)		17,384		29,800		(6,829	)		22,971
E-Commerce B2C customer relationships		14,500		(780	)		13,720		—		—			—
E-Commerce B2B customer relationships		16,400		(235	)		16,165		—		—			—
Other		6,667		(6,667	)		—		6,667		(6,667	)		—
Total definite-lived intangible assets		182,502		(54,863	)		127,639		151,602		(38,569	)		113,033
Indefinite-lived intangible assets:
Tax Preparation trade names		19,499		—			19,499		19,499		—			19,499
E-Commerce trade names		38,000		—			38,000		—		—			—
Other		283		—			283		283		—			283
Total indefinite-lived intangible assets		57,782		—			57,782		19,782		—			19,782
Total	$	240,284	$	(54,863	)	$	185,421	$	171,384	$	(38,569	)	$	132,815

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Amortization expense for the three and nine months ended September 30, 2013 is presented in the table below (in thousands):

	Three months ended September 30, 2013		Nine months ended September 30, 2013
Statement of operations location of amortization:
Services cost of revenue	$	1,906	$	5,773
Depreciation and amortization		4,184		10,521
Total	$	6,090	$	16,294

The weighted average amortization period for definite-lived intangible assets is 65 months.

Information about expected amortization of definite-lived intangible assets held as of September 30, 2013 in the next five years is presented in the table below (in thousands):

	2013		2014		2015		2016		2017		2018		Thereafter		Total
Services cost of revenue	$	1,895	$	7,513	$	7,450	$	621	$	—	$	—	$	—	$	17,479
Depreciation and amortization		5,583		22,268		19,676		15,018		15,018		15,018		17,579		110,160
Total	$	7,478	$	29,781	$	27,126	$	15,639	$	15,018	$	15,018	$	17,579	$	127,639

4. Fair Value Measures

Certain financial assets and liabilities are remeasured and reported at fair value each reporting period. 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 Company measures its cash equivalents, available-for-sale investments, and derivative instruments at fair value. The cash equivalents and available-for-sale investments are valued within Level 2 in the fair value hierarchy because the Company values its cash equivalents and marketable securities using alternative pricing sources utilizing market observable inputs. The Company classifies its interest rate swap derivative within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. As more fully discussed in “Note 8: Debt”, the interest rate swap was terminated for break-even on September 10, 2013. The Company classifies the Warrant derivative (see “Note 5: Stock-Based Compensation”) within Level 3 because it is valued using the Black-Scholes valuation model, which has significant unobservable inputs. Those unobservable inputs reflect the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. This valuation requires significant judgment.

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 reporting date using
	September 30, 2013			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	$	1,700		$	—	$	1,700	$	—
Money market funds		40,155			—		40,155		—
Commercial paper		15,999			—		15,999		—
Time deposits		1,215			—		1,215		—
Taxable municipal bonds		1,383			—		1,383		—
Total cash equivalents		60,452			—		60,452		—
Available-for-sale securities:									—
U.S. government securities		42,299			—		42,299		—
Commercial paper		9,992			—		9,992		—
Time deposits		11,247			—		11,247		—
Taxable municipal bonds		87,023			—		87,023		—
Total available-for-sale securities		150,561			—		150,561		—
Total assets		211,013			—		211,013		—
Liabilities
Derivative instruments
Warrant (see Note 5)		(14,495	)		—		—		(14,495	)
Total liabilities		(14,495	)		—		—		(14,495	)
Total assets and liabilities at fair value	$	196,518		$	—	$	211,013	$	(14,495	)

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				Fair value measurements at the reporting 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 5)		(8,564	)		—		—			(8,564	)
Interest rate swap (see Note 9)		(410	)		—		(410	)		—
Total liabilities		(8,974	)		—		(410	)		(8,564	)
Total assets and liabilities at fair value	$	122,697		$	—	$	131,261		$	(8,564	)

Maturity information was as follows for investments classified as available-for-sale at September 30, 2013 (in thousands):

	Amortized Cost		Gross unrealized gains		Gross unrealized losses			Fair Value
Within one year	$	150,558	$	27	$	(24	)	$	150,561
Greater than one year		—		—		—			—
Total	$	150,558	$	27	$	(24	)	$	150,561

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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

In the nine months ended September 30, 2013 and 2012, and at December 31, 2012, the Company did not measure the fair value of any of its assets or liabilities other than cash equivalents, available-for-sale investments, and derivative instruments. The Company’s management considers the carrying values of accounts receivable, other receivables, inventory, prepaid expenses and other current assets, accounts payable, accrued expenses, and other current liabilities to approximate fair values primarily due to their short-term nature.

5. Stock-Based Compensation

The Company has included the following amounts for stock-based compensation expense, including the cost related to RSUs, stock options, PSUs and market stock units (“MSUs,” a form of share price performance-based restricted stock unit) granted under the Company’s equity award plans including the Company’s employee stock purchase plan (“ESPP”) and the warrant issued in August 2011 (the “Warrant,”), in the accompanying unaudited condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2013 and 2012 (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Services cost of revenue	$	94	$	183	$	541	$	331
Engineering and technology		370		332		942		894
Sales and marketing		649		587		1,652		1,389
General and administrative		2,139		1,093		5,355		8,309
Total	$	3,252	$	2,195	$	8,490	$	10,923
Excluded and capitalized as part of internal-use software	$	34	$	21	$	68	$	66

In October 2011, the Company granted 200,000 stock options to a non-employee consultant who performed acquisition-related activities, and the award’s vesting was predicated on completing a “qualified acquisition” under the terms of the award. The completion of the acquisition of the TaxACT business on January 31, 2012 constituted a qualifying acquisition under the terms of the award, and the vesting of the award resulted in a charge of $903,000 to stock-based compensation expense in the nine months ended September 30, 2012, which was classified in general and administrative expenses.

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. The completion of the acquisition of Monoprice on August 22, 2013 constituted a qualifying acquisition under the terms of the awards, and the vestings of the awards resulted in a charge of $526,000 to stock-based compensation expense in the three and nine months ended September 30, 2013, which was classified in general and administrative expenses.

In August 2011, the Company issued a Warrant to purchase one million shares of common stock, exercisable at a price of $9.62 per share. The Warrant was originally scheduled to expire on August 23, 2014, but the acquisition of the TaxACT business on January 31, 2012 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 the Company. The extension of the Warrant’s term was a modification that resulted in a $4.3 million charge to stock-based compensation expense in the first quarter 2012 equal to the increase in the Warrant’s fair value and was recognized in general and administrative expenses. 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 was classified as a current liability (See “Note 9: Derivative Instruments and Hedging Activities”).

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The total net shares issued for RSUs and MSUs vested, options exercised, and shares purchased pursuant to the ESPP during the three and nine months ended September 30, 2013 and 2012 is presented below (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
RSUs vested		70		18		265		191
MSUs vested		—		—		29		30
Options exercised		39		243		157		817
Shares purchased pursuant to ESPP		48		38		84		62
Total		157		299		535		1,100

6. Net Income (Loss) per Share

Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income (loss) 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, the Warrant, vesting of unvested RSUs, MSUs, and PSUs, and the impact of shares that could be issued upon conversion or maturity of our convertible debt. Potentially dilutive shares are excluded from the computation of earnings per share if their effect is antidilutive.

The weighted average dilutive and anti-dilutive shares for the three and nine months ended September 30, 2013 and 2012 are as follows (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Weighted average common shares outstanding, basic		41,088		40,511		41,048		40,108
Dilutive stock options, RSUs, PSUs, MSUs, and Warrant		—		—		1,830		1,317
Weighted average common shares outstanding, diluted		41,088		40,511		42,878		41,425
Antidilutive awards with an exercise price less than the average price during the applicable period excluded from dilutive share calculation		98		26		766		246
Outstanding awards with an exercise price greater than the average price during the applicable period not included in dilutive share calculation		32		655		83		848
Outstanding awards with performance conditions not completed during the applicable period not included in dilutive share calculation		160		190		97		157
Outstanding awards excluded from dilutive share calculation due to anti-dilutive effect of a net loss		5,603		5,000		—		—

As more fully discussed in “Note 8: Debt”, in March 2013, we issued Convertible Senior Notes (the “Notes”) maturing in April 2019. The Company intends, upon conversion or maturity of the Notes, to satisfy any conversion premium by issuing shares of our common stock. Due to the cash settlement feature of the principal amount of the Notes, the Company only includes the impact of the premium feature in its diluted earnings per common share calculation when the average stock price exceeds the conversion price of the Notes, which did not occur for the three or nine months ended September 30, 2013.

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7. Commitments and Contingencies

The Company’s contractual commitments changed from the commitments and obligations disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, outside of the ordinary course of the Company’s business and other than those previously disclosed in the Quarterly Reports on Form 10-Q for the first quarter and the second quarter of 2013, due to the acquisition of Monoprice. The Company’s contractual commitments are as follows for the years ending December 31 (in thousands):

	2013		2014		2015		2016		2017		2018		Thereafter			Total
Operating lease commitments	$	554	$	2,596	$	2,309	$	1,793	$	1,830	$	1,676	$	2,353		$	13,111
Purchase commitments		71		646		437		92		62		—		—			1,308
Debt commitments		—		—		—		—		—		65,384		201,250	1		266,634
Total	$	625	$	3,242	$	2,746	$	1,885	$	1,892	$	67,060	$	203,603		$	281,053

¹  For further detail regarding the Notes, which are due April 1, 2019, unless earlier purchased, redeemed, or converted in accordance with their terms, see “Note 8: Debt”.

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.

8. Debt

Term Debt. On January 31, 2012, in conjunction with closing the Company’s acquisition of the TaxACT business, TaxACT 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. On January 31, 2012, TaxACT borrowed $95 million of term debt with an original maturity of January 31, 2017 and $5 million under the revolving credit facility. A portion of any excess cash flows, as the term is defined in the credit agreement, were to be used to make a mandatory prepayment on the term loan within sixty days of June 30^th, beginning June 30, 2013, and in each succeeding year, 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 could be prepaid without penalty. During 2012, TaxACT repaid an aggregate of $25.5 million of the debt, including the balance of revolving credit facility. In April 2013, TaxACT repaid an additional $10.0 million of the outstanding debt, and in August 2013, the remaining amount of $64.5 million was repaid in connection with the refinancing of this credit agreement as discussed further below.

The interest rate on amounts borrowed under the term loan and the revolving loan was variable and payable as of the end of each interest period, based upon, at the election of TaxACT, the Alternate Base Rate or the LIBOR Rate, plus the Applicable Margin (as such terms are defined in the credit agreement). The Applicable Margin was dependent on the consolidated Total Leverage Ratio (as defined in the credit agreement) of TaxACT Holdings and ranged 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.

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 was terminated for break-even on September 10, 2013.

Credit Facility. On August 30, 2013, TaxACT and TaxACT Holdings entered into an agreement with a syndicate of lenders for the purpose of refinancing the previous credit agreement entered into by TaxACT and TaxACT Holdings on January 31, 2012 on more favorable terms. The new credit facility consists of revolving credit loans, up to $10.0 million in swingline loans, and up to $5.0 million under a letter of credit, which in the aggregate represent a $100.0 million revolving credit commitment that reduces to $90.0 million on August 30, 2014, to $80.0 million on August 30, 2015, and to $70.0 million on August 30, 2016. The final maturity date of the credit facility is August 30, 2018. TaxACT’s obligations under the credit facility are guaranteed by TaxACT Holdings, and are secured by the assets of the TaxACT business and the TaxACT equity owned by TaxACT Holdings.

TaxACT initially borrowed approximately $65.4 million under the revolving credit loans, which was used to pay off the $64.5 million principal balance of the term loan as described above and to pay accrued interest, certain expenses and fees related to the agreement. The Company has the right to permanently reduce, without premium or penalty, (i) the entire credit facility at any time or (ii) portions of the credit facility, from time to time, in an aggregate principal amount not less than $3 million or any whole multiple of $1 million in excess thereof. The interest rate on amounts borrowed under the credit facility is variable and payable as of the end of each interest period, based upon, at the election of TaxACT, either (i) LIBOR plus a margin of between 1.75% and 2.5%, or (ii) a Base Rate plus a margin of between 0.75% and 1.5%, in each case with the applicable margin within the range dependent upon TaxACT’s

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ratio of leverage to EBITDA over the previous four quarters. The credit facility includes financial and operating covenants with respect to certain ratios, including (a) leverage ratio and (b) fixed charge coverage ratio, which are defined further in the agreement, as well as certain restrictions on TaxACT’s payments to the Company. As of September 30, 2013, the Company was in compliance with all of the financial and operating covenants. As of September 30, 2013, the credit facility’s gross carrying value of $65.4 million approximates its fair value as it is a variable rate instrument and the current applicable margin approximates current market conditions.

In accordance with the relevant accounting guidance, the Company performed an analysis by creditor to determine whether the refinancing would be recorded as an extinguishment or a modification of debt, and as a result of this analysis, recognized a loss on partial extinguishment of debt comprised of the following (in thousands):

Fees paid to creditors in connection with the refinance, including arrangement fee, classified as extinguishment	$	567
Deferred financing costs on extinguished debt		726
Debt discount on extinguished debt		300
Total	$	1,593

In accordance with the debt extinguishment accounting guidance, the Company recorded $28,000 in deferred debt issuance costs, which will be amortized over the term of the new credit facility using the effective interest method as an adjustment to interest expense. The Company also determined that the remaining portion of the refinancing was a modification under the related accounting guidance, and the Company determined a new effective interest rate based on the carrying amount of the original debt and the revised cash flows. Approximately $606,000, which is comprised of $429,000 in deferred financing costs and $177,000 in unamortized debt discount related to the prior credit agreement, will be amortized as an adjustment to interest expense over the remaining term of the new credit facility using the effective interest method. Similarly, additional creditor-related fees incurred of $92,000 related to the modification will be amortized over the term of the new debt using the effective interest method.

Convertible Senior Notes. On March 15, 2013, the Company issued $201.25 million aggregate principal amount of its 4.25% Convertible Senior Notes (the “Notes”), inclusive of the underwriters’ exercise in full of their over-allotment option of $26.25 million. The Notes mature on April 1, 2019 unless earlier purchased, redeemed, or converted in accordance with the terms and bear interest at a rate of 4.25% per year, which began to accrue on March 15, 2013 and is payable semi-annually in arrears on April 1 and October 1 of each year beginning on October 1, 2013. Based upon the above, annual interest payments for fiscal year 2013, fiscal years 2014 through 2018, and fiscal year 2019 will be $4.7 million, $8.6 million, and $4.3 million, respectively. The Company received net proceeds from the offering of approximately $194.8 million after adjusting for debt issuance costs, including the underwriting discount.

The Notes were issued under an indenture dated March 15, 2013 (the “Indenture”) by and between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee. There are no financial or operating covenants relating to the Notes.

On or before June 30, 2013, holders could not convert the Notes under any circumstances. After June 30, 2013 and prior to the close of business on the business day immediately preceding October 1, 2018, holders may convert all or a portion of the Notes at their option, in multiples of $1,000 principal amount, only under the following circumstances:

• during any fiscal quarter commencing after the calendar quarter ending on June 30, 2013 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

• during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sales price of the Company’s common stock and the conversion rate on each trading day;

• if the Company calls any or all of the Notes for redemption;

• upon the occurrence of specified corporate events, including a merger or a sale of all or substantially all of the Company’s assets.

On or after October 1, 2018 until the close of business on the second scheduled trading day immediately preceding the maturity date of April 1, 2019, holders may convert their Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

- 16 -

The conversion rate for the Notes is initially 46.1723 shares per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $21.66 per share of the Company’s common stock). The conversion rate is subject to customary adjustment for certain events as described in the Indenture.

At the time the Company issued the Notes, the Company was only permitted to settle conversions with shares of its common stock. The Company received shareholder approval at its annual meeting in May 2013 to allow for “flexible settlement”, which provides the Company with the option to settle conversions in cash, shares of common stock, or any combination thereof. The Company’s intention is to satisfy conversion of the Notes with cash for the principal amount of the debt and shares of common stock for any related conversion premium.

The Company may not redeem the Notes prior to April 6, 2016. After April 6, 2016, the Company may, at its option, redeem for cash all or part of the Notes plus accrued and unpaid interest up to, but not including the redemption date. If the Company undergoes a fundamental change, (as described in the Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or part of their Notes in principal amounts of $1,000 or an integral multiple thereof. The fundamental change repurchase price will be equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. However, if a fundamental change occurs and a holder elects to convert the Notes, the Company will, under certain circumstances, increase the applicable conversion rate for the Notes surrendered for conversion by a number of additional shares of common stock based on the date on which the fundamental change occurs or becomes effective and the price paid per share of the Company’s common stock in the fundamental change as specified in the Indenture.

The Notes are unsecured and unsubordinated obligations of the Company and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes, and equal in right of payment to any of the Company’s existing and future unsecured indebtedness that is not subordinated. The Notes are effectively junior in right of payment to any of the Company’s secured indebtedness (to the extent of the value of assets securing such indebtedness) and structurally junior to all existing and future indebtedness and other liabilities, including trade payables, of the Company’s subsidiaries. The Indenture does not limit the amount of debt that the Company or its subsidiaries may incur, including senior secured indebtedness.

The Notes may be settled in combination of cash or shares of common stock given the flexible settlement option. As a result, the Notes contain liability and equity components which were bifurcated and accounted for separately. The liability component of the Notes, as of the issuance date, was calculated by estimating the fair value of a similar liability issued at a 6.5% effective interest rate, which was determined by considering the rate of return investors would require in the Company’s debt structure. The amount of the equity component was calculated by deducting the fair value of the liability component from the principal amount of the Notes, resulting in the initial recognition of $22.3 million as the debt discount recorded in additional paid in capital for the Notes. The carrying amount of the Notes will be accreted to the principal amount over the remaining term to maturity and the Company will record a corresponding interest expense.

As of September 30, 2013, the net carrying amount of the Notes was as follows (in thousands):

	September 30, 2013
Principal Amount	$	201,250
Unamortized discount		(20,525	)
Net Carrying Value	$	180,725

The Company incurred debt issuance costs of $6.4 million related to the Notes and allocated $5.7 million of debt issuance costs to the liability component of the Notes. These costs will be amortized to interest expense over the six year term of the Notes or the date of conversion, if any.

The following table sets forth total interest expense related to the Notes (in thousands):

	Three months ended September 30, 2013			Nine months ended September 30, 2013
Contractual interest expense (Cash)	$	2,139		$	4,657
Amortization of debt issuance costs (Non-cash)		216			465
Accretion of debt discount (Non-cash)		843			1,816
Total interest expense	$	3,198		$	6,938
Effective interest rate of the liability component		7.32	%		7.32	%

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The fair value of the principal amount of the Notes as of September 30, 2013 was $252.8 million, based on the last trading price as of that date.

Line of Credit. Monoprice has a short-term credit line up to $8.0 million borrowing capacity, which matures on July 31, 2014. The line of credit bears interest at an average monthly LIBOR rate plus 2.25%. The outstanding balance of the line of credit was zero at the date of acquisition on August 22, 2013 and at September 30, 2013. This line of credit is collateralized by the general business assets of Monoprice. Monoprice is subject to restrictive covenants related to the line-of-credit agreement pertaining to maintenance of current ratio, debt service coverage ratio, and debt-to-worth ratio.

9. Derivative Instruments and Hedging Activities

The Company recognizes derivative instruments as either assets or liabilities on its unaudited condensed consolidated balance sheets at fair value. The Company records changes in the fair value of the derivative instruments as gains or losses in the unaudited condensed consolidated statements of comprehensive income (loss) in other loss, net, or to accumulated other comprehensive income (loss) in the unaudited condensed consolidated balance sheets.

The presentation of derivative instruments on the unaudited condensed consolidated balance sheets is summarized below (in thousands):

		Fair value of derivative instruments
	Balance sheet location	As of September 30, 2013		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		14,495		8,564
Total derivative liabilities		$	14,495	$	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. As noted in “Note 8: Debt”, above, the interest rate swap was terminated at break-even on September 10, 2013.

The effect of the derivative instrument not designated as hedging instruments on income is summarized below for the three and nine months ended September 30, 2013 and 2012 (in thousands):

		Loss recognized in other loss, net
		Three months ended				Nine months ended
Derivative not designated as hedging instrument	Statement of Comprehensive Income (Loss) location	September 30, 2013		September 30, 2012		September 30, 2013		September 30, 2012
Equity contract (the Warrant)	Other loss, net	$	3,956	$	4,335	$	5,931	$	4,274

At September 30, 2013, the estimated fair value of the Warrant derivative instrument was $14.5 million. The Company values the Warrant, classified within Level 3, by using the Black-Scholes option pricing model which takes into account a variety of factors, including historical stock price volatility, risk-free interest rates, remaining maturity, and the closing price of our common stock. The Company believes the assumption that has the greatest impact on the determination of fair value is the closing price of our common stock.

The following table illustrates the potential impact of a change in stock price on the fair value of the derivative at September 30, 2013:

	–10%		September 30, 2013 closing stock price		+10%
Effect of a 10% change in stock price:
Variable changed
Closing stock price	$	20.68	$	22.98	$	25.28
Estimated fair value (in thousands)	$	12,365			$	16,661

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If our stock price increased or decreased by 10% (all other Black-Scholes variables held constant) our reported net income for the nine months ending September 30, 2013 would have been $23.4 million and $27.7 million, respectively.

10. Segment Information

The Company changed its segment reporting structure as a result of the January 31, 2012 acquisition of the TaxACT business and again as a result of the Monoprice acquisition on August 22, 2013. The Search segment is the InfoSpace business, the Tax Preparation segment is the TaxACT business and the E-Commerce segment is the Monoprice 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 does not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, depreciation, amortization of intangible assets, other loss, net and income tax expense to the reportable segments. Such amounts are reflected in the table under the heading “Corporate-level activity.” 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 the three and nine months ended September 30, 2013 and 2012 are presented below (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Revenue
Search	$	107,742		$	91,408		$	302,840		$	248,511
Tax Preparation		1,749			1,462			89,170			60,938
E-Commerce		14,630			—			14,630			—
Total revenue		124,121			92,870			406,640			309,449
Operating income (loss)
Search		21,319			16,356			57,501			44,807
Tax Preparation		(1,605	)		(1,561	)		43,617			32,528
E-Commerce		906			—			906			—
Corporate-level activity		(14,493	)		(11,061	)		(38,261	)		(36,899	)
Total operating income		6,127			3,734			63,763			40,436
Other loss, net		(13,118	)		(5,196	)		(20,427	)		(7,681	)
Income tax benefit (expense)		510			(936	)		(17,803	)		(14,049	)
Net income (loss)	$	(6,481	)	$	(2,398	)	$	25,533		$	18,706

11. Stock Repurchase Program

On February 6, 2013, the Company’s Board of Directors approved a stock repurchase plan whereby the Company may purchase 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. During the three and nine months ended September 30, 2013, the Company purchased 123,600 and 191,300 shares, respectively, in open-market transactions at a total cost, exclusive of purchase and administrative costs, of $2.5 million and $3.5 million, respectively, and at an average price of $19.97 per share and $18.38 per share, respectively. As of September 30, 2013, the Company may repurchase up to an additional $46.5 million of its common stock under the repurchase program.

12. Reclassifications to Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)

In the three and nine months ended September 30, 2013, the Company revised the presentation of its Consolidated Statement of Comprehensive Income (Loss) as outlined below:

As a result of the Monoprice acquisition in August 2013, the Company revised the classification of credit cards fees previously reported in services cost of revenue to sales and marketing. The Company assessed the related materiality of the reclassification and concluded that it is immaterial to any of our previously issued financial statements and therefore, have revised the three and nine months ended September 30, 2012 from the amounts previously reported in that period’s quarterly report on Form 10-Q to conform with the 2013 presentation. The revision of classification had no effect on our reported net revenues, operating income (loss) or cash flows for the three or nine months ended September 30, 2013 or 2012.

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13. 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. 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 February 2013, the FASB issued an update to the authoritative guidance related to the reporting of amounts reclassified out of accumulated other comprehensive income. This new requirement about presenting information about amounts reclassified out of accumulated other comprehensive income and their corresponding effect on net income will present, in one place, information about significant amounts reclassified and, in some cases, cross-references to related footnote disclosures. The Company adopted this guidance in the first quarter of 2013, and the adoption of these disclosure requirements did not have a material impact on its consolidated financial statements.

In July 2013, the FASB issued guidance on the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. This new guidance is effective on a prospective basis for fiscal years and interim reporting periods within those years, beginning after December 15, 2013. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

14. Subsequent Events

On October 2, 2013, TaxACT Holdings acquired 100% of the equity of Balance Financial, Inc. (“Balance”) for $4.9 million in cash. The acquisition of the Balance business is strategic to TaxACT and was funded from the revolving credit loan under the TaxACT credit facility. For further discussion of the credit facility, see “Note 8: Debt”.

Item 2.—Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report on Form 10-Q 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 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, businesses, or assets; 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, prospects, and other characterizations of future events or circumstances, 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 Part II, Item 1A, “Risk Factors” and elsewhere in this report. You should not rely on forward-looking statements included herein, which speak only as of the date of this Quarterly Report on Form 10-Q or the date specified herein. We do not undertake any obligation to update publicly any forward-looking statement to reflect new information, events, or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

OVERVIEW

Blucora, Inc. (the “Company”, “Blucora”, or “we”) operates three primary businesses: an internet search business, an online tax preparation business and an e-commerce business. Our Search business, InfoSpace, consists primarily of a B2B offering that provides our search technology, aggregated content, and services to our distribution partners for use on those partners’ web properties. The Search business also offers search services directly to consumers through our own internet search properties. The Tax Preparation business consists of the operations of the TaxACT tax preparation online services and software business that we acquired on January 31, 2012. The E-Commerce business consists of the operations of Monoprice, Inc. (“Monoprice”), which we acquired on August 22, 2013.

Search

The majority of our revenues are generated by our Search segment. The InfoSpace Search business primarily offers search services through the web properties of its distribution partners. Such services 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

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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. Our 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, and those providers are referred to 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 distribution partner sites or our own branded websites. 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 the 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.

Tax Preparation

On January 31, 2012, we acquired TaxACT Holdings, Inc. (“TaxACT Holdings”) and its wholly-owned subsidiary, TaxACT, Inc. (“TaxACT”), previously named 2nd Story Software, Inc., 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. The TaxACT business’s basic federal tax preparation online software service is “free for everyone,” meaning that any taxpayer can use the services to file his or her federal income taxes without paying for upgraded services. TaxACT is the generally accepted 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.

E-Commerce

On August 22, 2013, we acquired Monoprice, an online provider of self-branded electronics and accessories for both consumers and businesses for $183.3 million in cash, which is subject to a final working capital adjustment during the fourth quarter of 2013. Monoprice generates revenue by importing and selling self-branded consumer electronics and accessories through its website, www.monoprice.com. Monoprice is a differentiated e-commerce company focused on delivering premium quality products on par with well-known national brands at prices far below the retail national average along with top-tier service and rapid product delivery.

Acquisition

As previously discussed, on August 22, 2013, we completed the acquisition of Monoprice pursuant to the terms of the Stock Purchase Agreement dated as of July 31, 2013. As a result of the acquisition, Blucora owns 100% of Monoprice. The preliminary acquisition consideration paid by Blucora was equal to $183.3 million, which was funded from available cash and is subject to a final working capital adjustment during the fourth quarter of 2013.

Seasonality

Our Tax Preparation segment is highly seasonal. Revenue from our Tax Preparation segment tends to be highest during our first and second quarters as a result of significantly higher sales of income tax preparation products and services during the period from January through April. During the third and fourth quarter, the Tax Preparation segment typically reports losses because revenue from the segment is minimal while core operating expenses continue at relatively consistent levels.

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Comparability

We have revised certain amounts for the three and nine months ended September 30, 2012 from the amounts previously reported in that period’s quarterly report on Form 10-Q. We revised the classification of credit card fees previously reported in services cost of revenue to sales and marketing expenses. The revision of classification had no effect on our reported net revenues, operating income (loss) or cash flows for the three or nine months ended September 30, 2013 or 2012. Refer to “Note 12: Reclassifications to Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)” in the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this report) for further details.

Subsequent Event

On October 2, 2013, TaxACT Holdings acquired 100% of the equity of Balance Financial, Inc. (“Balance”) for $4.9 million in cash. The acquisition of the Balance business was strategic to TaxACT and was funded from the revolving credit loan under the TaxACT credit facility. For further discussion of the credit facility, see “Note 8: Debt” in the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this report).

RESULTS OF OPERATIONS

Summary

(In thousands, except percentages)	Three Months Ended September 30,				Percentage Change			Nine Months Ended September 30,				Percentage Change
	2013		2012					2013		2012
Revenue	$	124,121	$	92,870		34	%	$	406,640	$	309,449		31	%
Operating income	$	6,127	$	3,734		64	%	$	63,763	$	40,436		58	%

The following table presents our revenues, by revenue source, for the periods presented (in thousands):

(In thousands, except percentages)	Three Months Ended September 30,				Percentage Change			Nine Months Ended September 30,				Percentage Change
	2013		2012					2013		2012
Services revenue	$	109,491	$	92,870		18	%	$	392,010	$	309,449		27	%
Product revenue	$	14,630	$	0				$	14,630	$	0
Total revenue	$	124,121	$	92,870		34	%	$	406,640	$	309,449		31	%

Three months ended September 30, 2013 compared with three months ended September 30, 2012

Total revenues for the third quarter 2013 increased, due to a $16.6 million increase in services revenue related primarily to growth in our Search business and the addition of $14.6 million of product revenue related to our recent acquisition of Monoprice which is included in our financial results from the date of acquisition, August 22, 2013, through September 30, 2013.

Operating income increased primarily due to the increase in revenue, partially offset by changes in operating expenses. Key changes in operating expenses were:

• Cost of revenues increased $13.6 million, or 20%, related primarily to Monoprice, which was acquired on August 22, 2013 and represented $10.6 million in product cost of revenue in the current quarter. The remaining increase primarily relates to cost of search services as a result of increased Search distribution revenue and the resulting revenue share to our distribution partners.

• Sales and marketing expenses increased $10.4 million, or 134%, primarily reflecting an $8.0 million increase in online marketing by our Search segment and $2.2 million in sales and marketing expenses related to Monoprice, which was acquired on August 22, 2013.

• General and administrative expenses increased $3.1 million, or 59%, due primarily to a $1.9 million increase in personnel expense, including stock based compensation, and a $760,000 increase in professional services which increased primarily due to transaction expenses associated with the Monoprice Acquisition. The $1.9 million increase in personnel expense primarily relates to a $1.1 million increase in stock-based compensation driven by a $526,000 current period expense related to stock options which vested upon closing of the Monoprice acquisition (for further detail see “Note 5: Stock Based Compensation” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report) as well as higher current year expense related to increased award activity, and to a lesser extent awards issued to Monoprice employees in the current quarter.

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Also contributing to the $1.9 million increase is an $844,000 increase in salaries and benefits, of which $451,000 relates in part to increased corporate headcount in the current year to support segment operations, as well as, an increase in other employee-related expenses. The remaining increase relates to the addition of Monoprice in the current quarter and to a lesser extent increased headcount at TaxACT.

Nine months ended September 30, 2013 compared with nine months ended September 30, 2012

Total revenues increased due to an increase in services revenue of $82.6 million and the addition of $14.6 million of product revenue related to our recent acquisition of Monoprice, which is included in our financial results from the date of acquisition, August 22, 2013, through September 30, 2013. The increase in services revenue is due to a $54.3 million increase in revenue related to our Search business and $28.2 million related to our Tax Preparation business due to the current year containing nine months of TaxACT results whereas the prior year contains only eight months of results due to the timing of the acquisition on January 31, 2012, as well as revenue growth in the current year due to an increase in e-filings.

Operating income increased due to the increase in revenue, partially offset by changes in operating expenses. Key changes in operating expenses were:

• Cost of revenue increased $37.6 million overall, or 20%, due primarily to a $27.0 million increase in the Search segment’s cost of revenue and data center operations primarily as a result of higher Search distribution revenue in that segment and the resulting revenue share to our distribution partners and $10.6 million in product cost of revenue due to the acquisition of Monoprice in the current quarter.

• Sales and marketing expenses increased $33.9 million or 91%, due to a $14.7 million increase in our Search segment in support of our online marketing, as well as the current year containing nine months of TaxACT results whereas the prior year contains only eight months of results due to the timing of the acquisition on January 31, 2012. This increase is amplified by the fact that a relatively high percentage of tax season advertising occurs in January, a month that is included in 2013 results, but not in 2012 results. Further contributing to the increase is $2.2 million in sales and marketing expenses related to Monoprice, which is new in the current quarter.

• General and administrative expenses decreased $343,000 or 2% due primarily to a $1.0 million decrease in personnel expenses, including stock based compensation. Stock based compensation decreased $3.0 million due to $5.2 million in expense recognized in the nine months ended September 30, 2012 related to the modification of the Warrant and the vesting of non-employee stock options due to the acquisition of the TaxACT business. Such decrease was offset by a $526,000 current period expense related to stock options which vested upon closing of the Monoprice acquisition (for further details, see “Note 5: Stock-Based Compensation” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report), as well as higher current year expense as the current year period contains nine months of stock-based compensation associated with TaxACT employees whereas the prior year period contains only eight months, overall increased award activity, and the issuance of awards to Monoprice employees in the current year. Offsetting the $3.0 million decrease in stock based compensation is an increase in salaries and benefits of $2.0 million of which $1.2 million primarily relates to increased corporate headcount in the current year to support segment operations, $574,000 relates to increased headcount at TaxACT, and to a lesser extent the addition of Monoprice in the current quarter.

SEGMENT REVENUE/OPERATING INCOME (LOSS)

The revenue and operating income (loss) amounts in this section are presented on a basis consistent with accounting principles generally accepted in the U.S. (“GAAP”) and include certain reconciling items attributable to each of the segments. Segment information appearing in “Note 10: Segment Information”, of the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this report) is presented on a basis consistent with our current internal management financial reporting. Certain corporate-level activity, such as general and administrative costs (including personnel and overhead costs), stock-based compensation, depreciation, amortization of intangible assets, other loss, net, and income tax expense are not allocated to segment operating results and is analyzed separately.

Following the completion of the Monoprice acquisition on August 22, 2013, we determined that we have three reportable segments: Search, Tax Preparation, and E-Commerce.

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Search

(In thousands, except percentages)	Three Months Ended September 30,						Percentage Change			Nine Months Ended September 30,						Percentage Change
	2013			2012						2013			2012
Revenue	$	107,742		$	91,408			18	%	$	302,840		$	248,511			22	%
Operating income	$	21,319		$	16,356			30	%	$	57,501		$	44,807			28	%
Segment margin		20	%		18	%					19	%		18	%

Search Revenue. Our ability to increase search revenue is dependent on our ability to attract and retain distribution partners and users of our owned and operated properties, which relies on providing a satisfying end user experience. In addition, providing an attractive monetization proposition, as well as support and service, for distribution partners, continues to be a key driver in our ability to grow distribution revenue.

Search Operating Income. Because we share revenue with our distribution partners, the Search segment’s cost of revenue will increase if search services revenue generated through our distribution partners’ web properties increases. The cost of revenue can be impacted by the mix of revenue generated by our distribution partners as well. In addition, we manage our online marketing by projecting a desired return on our marketing expenditures and attempting to market according to that projected return.

The following table presents our Search revenue by source, and as a percentage of total Search revenue, for the three and nine months ended September 30, 2013 and 2012 (in thousands, except for percentages):

	Three months ended September 30,										Nine months ended September 30,
	2013		Percent of Revenue			2012		Percent of Revenue			2013		Percent of Revenue			2012		Percent of Revenue
Search Revenue:
Revenue from existing distribution partners (launched prior to the then-current year)	$	75,749		70	%	$	68,659		75	%	$	238,901		79	%	$	198,540		80	%
Revenue from new distribution partners (launched during the then-current year)		11,585		11	%		12,031		13	%		17,469		6	%		20,144		8	%
Revenue from distribution partners		87,334		81	%		80,690		88	%		256,370		85	%		218,684		88	%
Revenue from owned and operated properties		20,408		19	%		10,718		12	%		46,470		15	%		29,827		12	%
Total Search Revenue	$	107,742				$	91,408				$	302,840				$	248,511

Three months ended September 30, 2013 compared with three months ended September 30, 2012

The increase in Search revenue is primarily due to an increase in revenue generated by our owned and operated properties, which increased $9.7 million or 90%. This increase is due to continued investment in online marketing to drive end users to our owned and operated properties offset, in part, by continued user attrition, resulting in fewer paid clicks.

Search revenue generated by our distribution partners increased by $6.6 million or 8%. We expected Google policy changes implemented in the first quarter, which affect our distribution partners that acquire end-users of our search services through downloadable applications, to have had a larger negative impact on our distribution revenue in 2013. While revenue from partners subject to the downloadable application policy changes has declined in the second half of 2013, revenue from the rest of our partner network has increased. We expect year over year revenue in our distribution partner network to increase in the fourth quarter of 2013 due to growth in revenue from new distribution partners launched in 2013.

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Revenue from Google accounts for approximately 88% and 89% of our Search segment revenue for the three and nine months ended September 30, 2013, respectively.

We generated 31% and 48% of Search revenue through our top five distribution partners in the third quarter of 2013 and the third quarter of 2012, respectively. The web properties of our top five distribution partners for the third quarter of 2013 generated 43% of Search revenue in the third quarter of 2012.

The increase in Search operating income is primarily due to the increase in revenue offset, in part by higher operating expenses. Search services cost of revenue increased $2.7 million, or 4%, primarily driven by the increase in distribution revenue and the resulting revenue share to our distribution partners. The remaining increase in operating expenses is primarily due to an $8.0 million increase in spending on our online marketing.

Nine months ended September 30, 2013 compared with nine months ended September 30, 2012

The increase in our Search revenue is primarily due to increased revenue generated by our distribution partners which increased by $37.7 million, or 17%, driven by a $40.3 million increase in revenue from existing partners offset by a $2.7 million decrease in revenue from new partners.

Search revenue generated from our owned and operated properties increased by $16.6 million, or 56%. This increase is due to continued investment in online marketing to drive end users to our owned and operated properties offset, in part, by continued user attrition, resulting in fewer paid clicks.

The increase in Search operating income is primarily due to the increase in revenue offset, in part, by higher operating expenses. Search services cost of revenue increased $26.0 million or 15% primarily driven by the increase in distribution revenue and the resulting revenue share to our distribution partners. The remaining increase in search segment operating expenses for the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012 was primarily due to a $14.7 million increase in spending on our online marketing, a $1.0 million increase in data center operations primarily related to moving the data center, and a $530,000 increase in sales and marketing personnel expenses in support of our continued growth.

Tax Preparation

(In thousands, except percentages)	Three Months Ended September 30,						Percentage Change			Nine Months Ended September 30,						Percentage Change
	2013			2012						2013			2012
Revenue	$	1,749		$	1,462			20	%	$	89,170		$	60,938			46	%
Operating income (loss)	$	(1,605	)	$	(1,561	)		(3	)%	$	43,617		$	32,528			34	%
Segment margin		(92	)%		(107	)%					49	%		53	%

Tax Preparation Revenue. 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.

Three months ended September 30, 2013 compared with three months ended September 30, 2012

The Tax Preparation revenue and operating loss are comparable for the three months ended September 30, 2013 as compared to the three months ended September 30, 2012.

Nine months ended September 30, 2013 compared with nine months ended September 30, 2012

The increase in Tax Preparation revenue and operating income primarily relates to the timing of the acquisition of TaxACT on January 31, 2012. The current year period contains nine months of TaxACT results whereas the prior year period contains only eight months of the results of the Tax Preparation segment. Tax Preparation revenue also increased due to an increase in e-filings in the current year.

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E-Commerce

On August 22, 2013, we completed the acquisition of Monoprice, an online provider of self-branded electronics and accessories for both consumers and businesses. Unless otherwise indicated, the figures in this quarterly report on Form 10-Q reflect the results from the date of acquisition, August 22, 2013, through September 30, 2013. The E-Commerce segment generates revenue by importing and selling self-branded consumer electronics and accessories for both consumers and businesses through its website, www.monoprice.com.

(In thousands, except percentages)	Three months ended September 30,
	2013
Revenue	$	14,630
Operating income	$	906
Segment margin		6	%

Corporate-Level Activity

(In thousands)	Three months ended September 30,				Change from		Nine months ended September 30,				Change from
	2013		2012		2012		2013		2012		2012
Operating expenses	$	4,025	$	2,695	$	1,330	$	10,358	$	9,026	$	1,332
Stock-based compensation		3,252		2,195		1,057		8,490		10,923		(2,433	)
Depreciation		1,126		988		138		3,119		2,895		224
Amortization of intangible assets		6,090		5,183		907		16,294		14,055		2,239
Total corporate-level activity	$	14,493	$	11,061	$	3,432	$	38,261	$	36,899	$	1,362

Certain corporate-level activity is not allocated to our segments, including certain general and administrative costs (including personnel and overhead costs), stock-based compensation, depreciation, and amortization of intangible assets. For further detail refer to segment information appearing in “Note 10: Segment Information”, of the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1 of this report).

Three months ended September 30, 2013 compared with three months ended September 30, 2012

Operating expenses included in corporate-level activity increased primarily due to a $663,000 increase in professional services primarily related to transaction expenses associated with the Monoprice acquisition and $451,000 which relates in part to increased corporate headcount in the current year to support segment operations, as well as an increase in other employee-related expenses.

Stock-based compensation increased due to $526,000 in current period expense related to stock options which vested upon closing of the Monoprice acquisition (for further detail see “Note 5: Stock Based Compensation” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report) as well as higher current year expense related to increased award activity and the issuance of awards to Monoprice employees during the current period.

Depreciation and amortization of intangible assets increased due to the acquisition of Monoprice in the current year quarter.

Nine months ended September 30, 2013 compared with nine months ended September 30, 2012

Operating expenses included in corporate-level activity increased primarily due to a $1.2 million increase in personnel expenses primarily related to increased headcount to support segment operations.

Stock-based compensation decreased due primarily to $5.2 million in expense recognized in the nine months ended September 30, 2012 related to the modification of the Warrant and the vesting of non-employee stock options due to the acquisition of the TaxACT business offset by current year expense of $526,000 related to stock options which vested upon closing of the Monoprice acquisition (for further detail on both items see “Note 5: Stock-Based Compensation” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report) as well as higher current year expense as the current year period contains nine months of stock-based compensation associated with TaxACT employees whereas the prior year period contains only eight months, overall increased award activity, and the issuance of awards to Monoprice employees in the current year.

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Depreciation and amortization of intangible assets increased primarily due to nine months of depreciation and amortization expense related to TaxACT intangibles in 2013 compared to the eight months recognized in 2012, due to the timing of the acquisition in January 2012 and, to a lesser extent, depreciation and amortization related to the acquisition of Monoprice on August 22, 2013.

OPERATING EXPENSES

Cost of Revenues

(In thousands, except percentages)	Three Months Ended September 30,						Percentage Change			Nine Months Ended September 30,						Percentage Change
	2013			2012						2013			2012
Services cost of revenue	$	72,935		$	69,918			4	%	$	219,274		$	192,308			14	%
Percentage of services revenue		67	%		75	%					56	%		62	%
Product cost of revenue	$	10,622		$	—					$	10,622		$	—
Percentage of product revenue		73	%		—						73	%		—
Total cost of revenues	$	83,557		$	69,918					$	229,896		$	192,308

We record the cost of revenues for product and services sales when the related revenue is recognized. Services cost of revenue consists of costs related to revenue sharing arrangements with our distribution partners, usage-based content fees, royalties, bank product service fees, amortization of acquired intangible assets, certain costs associated with the operation of the data centers that serve our Search and Tax Preparation businesses, which include personnel expenses (which include salaries, benefits and other employee related costs, and stock-based compensation expense), the cost of temporary help and contractors to augment our staffing, bandwidth costs, and depreciation. Product cost of revenue includes product costs, outbound shipping and handling costs, packaging supplies, and provisions for inventory obsolescence. Shipping charges to receive products from our suppliers are included in our inventory, and recognized as cost of revenues upon sale of products to our customers.

Three months ended September 30, 2013 compared with three months ended September 30, 2012

Services cost of revenue as a percentage of services revenue decreased from 75% to 67% primarily due to the increasing proportion of our Search segment’s revenues being generated from our owned and operated properties, which have a higher margin than our distribution partners’ web properties, as well as the mix of revenue generated by distribution partners.

Product cost of revenue represents costs related to Monoprice from the period of acquisition, August 22, 2013, through September 30, 2013.

Nine months ended September 30, 2013 compared with nine months ended September 30, 2012

Services cost of revenue as a percentage of services revenue decreased from 62% to 56% due primarily to the increasing proportion of our Search segment’s revenues being generated from our owned and operated properties, which have a higher margin than our distribution partners’ web properties, as well as the mix of revenue generated by distribution partners. In addition, services cost of revenue as a percentage of revenue further decreased due to TaxACT revenue increasing driven by higher unit sales while cost of revenue decreased due to a decrease in bank service fees on our bank card product and a decrease in royalties.

Product cost of revenue represents costs related to Monoprice from the period from acquisition, August 22, 2013, through September 30, 2013.

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Engineering and Technology

(In thousands, except percentages)	Three months ended September 30,						Change from		Nine months ended September 30,						Change from
	2013			2012			2012		2013			2012			2012
Engineering and technology	$	2,905		$	2,410		$	495	$	7,951		$	7,431		$	520
Percentage of revenues		2	%		3	%				2	%		2	%

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), as well as the cost of temporary help and contractors to augment our staffing, software support and maintenance, bandwidth and hosting, and professional service fees.

Three months ended September 30, 2013 compared with three months ended September 30, 2012

Engineering and technology expenses were comparable for the three months ended September 30, 2013 and 2012.

Nine months ended September 30, 2013 compared with nine months ended September 30, 2012

Engineering and technology expenses were comparable for the nine months ended September 30, 2013 and 2012.

Sales and Marketing

(In thousands, except percentages)	Three months ended September 30,						Change from		Nine months ended September 30,						Change from
	2013			2012			2012		2013			2012			2012
Sales and marketing	$	18,230		$	7,796		$	10,434	$	71,409		$	37,492		$	33,917
Percentage of revenues		15	%		8	%				18	%		12	%

Sales and marketing expenses consist principally of marketing expenses associated with our TaxACT and Monoprice websites (which includes the following channels: television, radio, online display and text, and email), our owned and operated web search properties (which consist of traffic acquisition, including our online marketing, which includes fees paid to search engines to drive traffic to an owned and operated website, agency fees, brand promotion expense, and market research expense), personnel costs (which include salaries, benefits and other employee-related costs, and stock-based compensation expense) for personnel engaged in marketing and selling activities, and fulfillment expenses primarily associated with our E-Commerce business. Fulfillment expenses include direct operating expenses (including personnel costs) relating to our purchasing, customer and technical support, receiving, inspection and warehouse functions, as well as the cost of temporary help and contractors, and credit card processing fees.

Three months ended September 30, 2013 compared with three months ended September 30, 2012

The increase in sales and marketing expense is primarily attributable to an $8.0 million increase in marketing by our Search segment in support of our online marketing, and $2.2 million in sales and marketing expenses related to the Acquisition of Monoprice on August 22, 2013.

Nine months ended September 30, 2013 compared with nine months ended September 30, 2012

The increase in sales and marketing expenses relates to a $14.7 million increase in our Search segment in support of our online marketing, as well as the current year containing nine months of TaxACT results whereas the prior year contains only eight months of results due to the timing of the acquisition on January 31, 2012. The TaxACT timing difference is amplified by the fact that a relatively high percentage of tax season advertising occurs in January, a month that is included in 2013 results, but not in 2012 results. Further contributing to the increase is $2.2 million in sales and marketing expenses related to Monoprice which is new in the current quarter.

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General and administrative

(In thousands, except percentages)	Three months ended September 30,						Change from		Nine months ended September 30,						Change from
	2013			2012			2012		2013			2012			2012
General and administrative	$	8,421		$	5,283		$	3,138	$	21,362		$	21,705		$	(343	)
Percentage of revenues		7	%		6	%				5	%		7	%

General and administrative (“G&A”) expenses consist primarily of personnel expenses (which include salaries, stock-based compensation expense, and benefits and other employee related costs), as well as the cost of temporary help and contractors to augment our staffing, professional service fees (which include legal, audit, and tax fees), general business development and management expenses, occupancy and general office expenses, and taxes and insurance expenses.

Three months ended September 30, 2013 compared with three months ended September 30, 2012

The increase in G&A expenses is due primarily to a $1.9 million increase in personnel expense, including stock based compensation, and a $760,000 increase in professional services, which increased primarily related to transaction expenses associated with the Monoprice acquisition. The $1.9 million increase in personnel expense primarily relates to a $1.1 million increase in stock-based compensation driven by a $526,000 current period expense related to stock options which vested upon closing of the Monoprice acquisition (for further detail see “Note 5: Stock Based Compensation” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report) as well as higher current year expense related to increased award activity and the issuance of awards to Monoprice employees during the current period. Also contributing to the $1.9 million increase is an $844,000 increase in salaries and benefits of which $451,000 relates in part to increased corporate headcount in the current year to support segment operations, as well as an increase in other employee-related expenses. The remaining increase relates to the addition of Monoprice in the current quarter and to a lesser extent increased headcount at TaxACT.

Nine months ended September 30, 2013 compared with nine months ended September 30, 2012

The decrease in G&A expenses is primarily attributable to a net decrease in stock-based compensation of $3.0 million related to $5.2 million in expense recognized in the nine months ended September 30, 2012 related to the modification of the Warrant and the vesting of non-employee stock options due to the acquisition of the TaxACT business offset by a $526,000 current period expense related to stock options which vested upon closing of the Monoprice acquisition (for further details, see “Note 5: Stock-Based Compensation” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report), as well as higher current year expense as the current year period contains nine months of stock-based compensation associated with TaxACT employees whereas the prior year period contains only eight months, overall increased award activity, and the issuance of awards to Monoprice employees in the current year. Offsetting the $3.0 million decrease in stock based compensation is an increase in salaries and benefits of $1.9 million of which $1.2 million primarily relates to increased corporate headcount in the current year to support segment operations, $574,000 relates to increased headcount at TaxACT, and to a lesser extent the addition of Monoprice in the current quarter.

Depreciation and Amortization of Intangible Assets

(In thousands, except percentages)	Three months ended September 30,						Change from		Nine months ended September 30,						Change from
	2013			2012			2012		2013			2012			2012
Depreciation	$	697		$	560		$	137	$	1,738		$	1,627		$	111
Amortization of intangible assets		4,184			3,169			1,015		10,521			8,450			2,071
Total depreciation and amortization of intangible assets	$	4,881		$	3,729		$	1,152	$	12,259		$	10,077		$	2,182
Percentage of revenues		4	%		4	%				3	%		3	%

Depreciation of property and equipment includes depreciation of computers, software, office equipment and fixtures, machinery and equipment and leasehold improvements not recognized in cost of revenues. Amortization of definite-lived intangible assets represents the amortization of customer relationships, which are amortized over their estimated lives.

Three months ended September 30, 2013 compared with three months ended September 30, 2012

The increase in depreciation and amortization of intangible assets is primarily due to the Monoprice acquisition on August 22, 2013.

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Nine months ended September 30, 2013 compared with nine months ended September 30, 2012

The increase in depreciation and amortization is due to nine months of depreciation and amortization expense related to TaxACT in 2013 compared to the eight months recognized in 2012 due to the timing of the acquisition in January 2012 and, to a lesser extent, depreciation and amortization related to the acquisition of Monoprice on August 22, 2013.

Other Loss, Net

(In thousands)	Three months ended September 30,						Change from			Nine months ended September 30,						Change from
	2013			2012			2012			2013			2012			2012
Interest income	$	(42	)	$	(18	)	$	(24	)	$	(206	)	$	(79	)	$	(127	)
Interest expense		2,669			794			1,875			6,707			2,647			4,060
Amortization of debt issuance costs		258			83			175			841			746			95
Accretion of debt discount		862			34			828			1,972			294			1,678
Loss on derivative instrument		3,956			4,335			(379	)		5,931			4,274			1,657
Impairment of equity investment in privately-held company		3,711			—			3,711			3,711			—			3,711
Loss on debt extinguishment and modification expense		1,593			—			1,593			1,593			—			1,593
Other		111			(32	)		143			(122	)		(201	)		79
Other loss, net	$	13,118		$	5,196		$	7,922		$	20,427		$	7,681		$	12,746

The increases in interest expense, amortization of debt issuance costs, and accretion of debt discount for the three and nine months ended September 30, 2013 as compared to the three and nine months ended September 30, 2012 were primarily due to interest expense, amortization of debt issuance costs, and accretion of debt discount on the $201.25 million Notes issued on March 15, 2013 offset by slight decreases in the same categories from the TaxACT credit facility.

Loss on derivative relates to the change in fair value recorded on the Warrant. The Company believes the assumption that has the greatest impact on the determination of fair value is the closing price of our common stock (for further detail, see “Note 9: Derivative Instruments and Hedging Activity” of the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report). For the three and nine months ended September 30, 2013 and 2012, we recorded net losses on the derivative due to an increase in the fair value of the warrant.

During three months ended September 30, 2013, in connection with our review of our equity method investments for other than temporary impairment, we determined that our equity investment in a privately-held company had experienced a decline in value which was other than temporary, and we wrote down the $3.7 million carrying value of the investment to zero, resulting in a loss.

Loss on debt extinguishment and modification expense related to the accounting for the refinancing of the TaxACT debt on more favorable terms (for further detail, see “Note 8: Debt” of the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report).

Income Tax Benefit (Expense)

We recorded income tax benefit of $510,000 and expense of $17.8 million in the three and nine months ended September 30, 2013, respectively. In 2013, income tax expense differed from the taxes at the statutory rates primarily due to the non-deductible loss on the warrant derivative and an increase in the valuation allowance against deferred tax assets that are capital in nature. In the three and nine months ended September 30, 2012, we recorded income tax expense of $936,000 and $14.0 million respectively. In 2012, income tax expense differed from the taxes at the statutory rates primarily due to the non-deductible loss on the derivative and non-deductible stock compensation.

NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA. We define Adjusted EBITDA as net income, determined in accordance 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, gains or losses on derivative instruments, other than

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temporary impairment losses on equity investments, losses on debt extinguishments and modifications, foreign currency gains or losses, 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 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 three and nine months ended September 30, 2013 and 2012 below (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013		2012
Net income (loss)	$	(6,481	)	$	(2,398	)	$	25,533	$	18,706
Depreciation and amortization of intangible assets		7,216			6,171			19,413		16,950
Stock-based compensation		3,252			2,195			8,490		10,923
Other loss, net		13,118			5,196			20,427		7,681
Income tax benefit/expense		(510	)		936			17,803		14,049
Adjusted EBITDA	$	16,595		$	12,100		$	91,666	$	68,309

Three months ended September 30, 2013 compared with three months ended September 30, 2012

The increase in Adjusted EBITDA is due primarily to a $5.0 million increase in segment operating income from our Search segment and $906,000 in segment operating income for our new E-Commerce segment as a result of the acquisition of Monoprice on August 22, 2013. Offsetting the increases in segment operating income is a $1.3 million increase in corporate-level operating expenses not allocated to the segments driven by a $663,000 increase in professional services related to transaction expenses associated with the Monoprice acquisition and $451,000 in personnel expenses which relates in part to increased corporate headcount in the current year to support segment operations, as well as an increase in other employee-related expenses.

Nine months ended September 30, 2013 compared with nine months ended September 30, 2012

The increase in Adjusted EBITDA is due to increases in segment operating income of $12.7 million, $11.1 million, and $906,000 related to our Search, Tax Preparation, and E-Commerce segments, respectively. The E-Commerce segment is new in the current quarter due to the acquisition of Monoprice on August 22, 2013. Offsetting the increases in segment operating income is a $1.2 million increase in corporate personnel expenses not allocated to the segments primarily related to increased headcount to support segment operations.

Non-GAAP net income. We define non-GAAP net income differently for this report than we have defined it in the past, due to the refinance of the term debt and impairment of equity investment in privately-held company. For this report, we define non-GAAP net income as net income, determined in accordance with GAAP, excluding the effects of loss from discontinued operations, net of taxes, stock-based compensation expense, amortization of acquired intangible assets, accretion of debt discount on the Notes, gain or loss on derivative instrument, other than temporary impairment losses on equity investments, losses on debt extinguishments and modification expenses, and the related 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 if unutilized in 2020.

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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. 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 three and nine months ended September 30, 2013 and 2012 below (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Net income (loss)	$	(6,481	)	$	(2,398	)	$	25,533		$	18,706
Stock-based compensation		3,252			2,195			8,490			10,923
Amortization of acquired intangible assets		6,090			5,183			16,294			14,055
Accretion of debt discount on convertible notes		843			—			1,816			—
Loss on derivative instrument		3,956			4,335			5,931			4,274
Impairment of equity investment in privately-held company		3,711			—			3,711			—
Loss on debt extinguishment and modification expense		1,593			—			1,593			—
Cash tax impact of adjustments to GAAP net income		(1	)		(15	)		(181	)		(102	)
Non-cash income tax expense		7			1,121			16,412			12,899
Non-GAAP net income	$	12,970		$	10,421		$	79,599		$	60,755
Net income (loss) - diluted	$	(0.16	)	$	(0.06	)	$	0.60		$	0.45
Stock-based compensation - diluted		0.08			0.05			0.20			0.27
Amortization of acquired intangible assets - diluted		0.14			0.12			0.38			0.34
Accretion of debt discount on convertible notes - diluted		0.02			—			0.04			—
Loss on derivative instrument - diluted		0.09			0.11			0.13			0.10
Impairment of equity investment in privately-held company- diluted		0.09			—			0.09			—
Loss on debt extinguishment and modification expense-diluted		0.04			—			0.04			—
Cash tax impact of adjustments to GAAP net income - diluted		(0.00	)		(0.00	)		(0.00	)		(0.00	)
Non-cash income tax expense per share - diluted		0.00			0.03			0.38			0.31
Non-GAAP earnings per share - diluted	$	0.30		$	0.25		$	1.86		$	1.47
Weighted average shares outstanding used in computing diluted non-GAAP income per share and its components		43,142			42,048			42,878			41,425

Our new definition of non-GAAP net income does not impact presentation of this non-GAAP financial measure for prior periods.

Three months ended September 30, 2013 compared with three months ended September 30, 2012

The increase in non-GAAP net income for the third quarter of 2013 as compared to the third quarter of 2012 is primarily due to a $5.0 million increase in the Search segment income driven by growth in that segment in the current quarter compared to the prior year quarter and $906,000 in segment operating income for our new E-Commerce segment as a result of the acquisition of Monoprice on August 22, 2013. Offsetting the increases in segment operating income is a $2.2 million increase in interest expense related to the Notes issued in March 2013, offset by decreased interest on TaxACT’s term debt, a $1.3 million increase in corporate-level operating expenses not allocated to the segments driven by a $663,000 increase in professional services related to transaction expenses associated with the Monoprice acquisition and $451,000 in personnel expenses due in equal parts to increased headcount and other employee-related expenses to support segment operations.

Nine months ended September 30, 2013 compared with nine months ended September 30, 2012

The increase in non-GAAP net income for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012, was primarily due to a $12.7 million and $11.1 million increase in Search and Tax Preparation segment income, respectively, driven by growth in the Search segment and the timing of the acquisition on January 31, 2012 of the TaxACT business,

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as well as $906,000 in segment operating income for our new E-Commerce segment due to the acquisition of Monoprice on August 22, 2013. Offsetting the increases in segment operating income is a $4.7 million in increased interest expense related to the Notes issued in March 2013, partially offset by decreased interest on TaxACT’s term debt, a $1.3 million increase in corporate personnel expenses not allocated to the segments primarily related to increased headcount to support segment operations.

LIQUIDITY AND CAPITAL RESOURCES

Cash, Cash Equivalents, and Short-Term Investments

Our principal source of liquidity is our cash, cash equivalents, and short-term investments. As of September 30, 2013, we had cash and marketable investments of $248.4 million, consisting of cash and cash equivalents of $97.8 million and available-for-sale short-term investments of $150.6 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, and municipal bonds. All of our investments held at September 30, 2013 have minimal default risk and short-term maturities.

We have financed our operations primarily from cash provided by operating activities; accordingly, we believe that the cash generated from our operations and the cash and cash equivalents we have on hand will be sufficient to meet our operating requirements for the foreseeable future.

On January 31, 2012, we acquired TaxACT Holdings and its subsidiary, TaxACT. 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. There are no restrictive covenants associated with the credit facility. During 2012, we repaid $25.5 million, including all the balance of the revolving credit facility portion of the debt. In April 2013, we repaid an additional $10.0 million of the debt outstanding. In August 2013, TaxACT Holdings and TaxACT refinanced their obligations under the credit facility under a new credit facility, consisting of a $100.0 million revolving credit commitment, for the purpose of refinancing the previous credit agreement on more favorable terms. The credit facility reduces to $90.0 million on August 30, 2014, to $80.0 million on August 30, 2015, and to $70.0 million on August 30, 2016. The final maturity date of the credit facility is August 30, 2018. TaxACT initially borrowed approximately $65.4 million under the credit facility, which was used to pay off the previous credit facility. TaxACT Holdings executed the credit agreement solely as a guarantor and granted a security interest in 100% of the outstanding equity in TaxACT as collateral for the credit facility. We are not a party to the credit agreement, and have not guaranteed any of the obligations of our subsidiaries under the credit facility (for further detail, see “Note 8: Debt” of the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report).

In March 2013, we issued $201.25 million principal amount of 4.25% Notes, due April 1, 2019, unless earlier purchased, redeemed, or converted in accordance with their terms (for further detail, see “Note 8: Debt” of the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report). The Notes bear interest at a rate of 4.25% per year, which began to accrue on March 15, 2013 and is payable semi-annually in arrears on April 1 and October 1 of each year beginning on October 1, 2013. We received net proceeds from the offering of approximately $194.8 million after adjusting for debt issuance costs, including the underwriting discount. There are no financial or operating covenants relating to the Notes.

In August 2013, we acquired Monoprice for $183.3 million in cash, subject to specified final working capital adjustment in the fourth quarter of 2013. The acquisition of Monoprice was funded from our available cash.

In addition to our operating requirements, we will require cash to pay interest on the credit facility and on the Notes and to make principal payments on the credit facility and on the Notes at maturity or upon conversion. As of May 2013, we are permitted to settle any conversion obligation under the Notes in cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. We intend to satisfy any conversion premium by issuing shares of our common stock. We plan to use our cash to fund operations in our current businesses, acquire new businesses or assets, to repay amounts associated with our debt, or for common stock repurchases. During the three and nine months ended September 30, 2013, we purchased 123,600 and 191,300 shares of our common stock in open market transactions at a total cost of $2.5 million and $3.5 million, respectively. As of September 30, 2013, we may repurchase an additional $46.5 million of our common stock under our repurchase program.

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 II, Item 1A of this 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.”

Use of Cash

As of September 30, 2013, we had $248.4 million in cash, cash equivalents, and short-term investments. We may use these amounts in the future on investment in our current businesses, in acquiring new businesses or assets, for repayment of debt, or share repurchases. Such businesses or assets may not be related to Search, Tax Preparation or E-Commerce and such acquisitions will result in us incurring further transaction related costs.

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Contractual Obligations and Commitments

The Company’s contractual commitments changed from the commitments and obligations disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, outside of the ordinary course of the Company’s business and other than those previously disclosed in the Quarterly Reports on Form 10-Q for the first quarter and the second quarter of 2013, due to the acquisition of Monoprice. The Company’s contractual commitments are as follows for the years ending December 31 (in thousands):

	2013		2014		2015		2016		2017		2018		Thereafter			Total
Operating lease commitments	$	554	$	2,596	$	2,309	$	1,793	$	1,830	$	1,676	$	2,353		$	13,111
Purchase commitments		71		646		437		92		62		—		—			1,308
Debt commitments		—		—		—		—		—		65,384		201,250	1		266,634
Total	$	625	$	3,242	$	2,746	$	1,885	$	1,892	$	67,060	$	203,603		$	281,053

¹  For further detail regarding the Notes, which are due April 1, 2019, unless earlier purchased, redeemed, or converted in accordance with their terms, see “Note 8: Debt” of the Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

Off-balance sheet arrangements

We have no off-balance sheet arrangements other than operating leases. We do not believe that our 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 were comprised of the following for the nine months ended September 30, 2013 and 2012 (in thousands):

	Nine months ended September 30,
	2013			2012
Net cash provided by operating activities	$	65,388		$	38,960
Net cash used by investing activities		(242,460	)		(124,011	)
Net cash provided by financing activities		206,615			99,561
Net increase in cash and cash equivalents	$	29,543		$	14,510

Net cash provided by operating activities. Net cash provided by operating activities was $65.4 million and $39.0 million for the nine months ended September 30, 2013 and 2012, respectively. Our operating cash flows result primarily from net income offset by certain adjustments not affecting current period cash flows (including stock-based compensation, depreciation and amortization of intangible assets, impairment loss on equity investment in privately-held company, accretion of debt discount, amortization of debt issuance costs, and loss on debt extinguishment and modification expense) and the effect of changes in our operating assets and liabilities, including decreases in prepaids and other current assets related to TaxACT’s prepaid advertising utilized during their tax season from January through April, partially offset by increased accounts receivable related to increased Search segment sales and the impact of our acquisition of Monoprice in August 2013.

Net cash used by investing activities. Net cash used by investing activities was $242.5 million and $124.0 million for the nine months ended September 30, 2013 and 2012. For the nine months ended September 30, 2013, cash used by investing activities primarily consisted of $180.5 million in business acquisitions, net of cash acquired, $234.8 million for purchases of investments, a $4.0 million equity investment in a privately-held company, and $3.1 million in purchases of property and equipment, partially offset by $151.6 million in proceeds from the maturities of our investments and $25.8 million from sales of our investments. For the nine months ended September 30, 2012, cash used by investing activities primarily consisted of $279.4 million in business acquisitions, net of cash acquired and purchases of investments of $59.1 million. Partially offsetting cash used by investing activities were proceeds of $184.9 million from the sales of marketable investments and $32.1 million from the maturities of our marketable investments.

Net cash provided by financing activities. Net cash provided by financing activities was $206.6 million and $99.6 million for the nine months ended September 30, 2013 and 2012. For the nine months ended September 30, 2013, cash provided by financing

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activities primarily consisted of net proceeds from the issuance of the Notes of $194.8 million, $24.6 million of excess tax benefits from stock-based award activity, primarily due to utilizing equity net operating loss carryforwards from prior years, and $2.8 million from the exercise of options and the issuance of stock through our employee stock purchase plan, offset by repayment of debt of $10.0 million, purchases of our common stock under our stock repurchase plan of $3.5 million, and $2.0 million in tax payments from shares withheld upon vesting of restricted stock units. For the nine months ended September 30, 2012, net cash provided by financing activities consisted of net loan proceeds of $96.7 million, proceeds of $20.9 million from excess tax benefits from stock-based award activity, primarily due to utilizing equity net operating loss carryforwards from prior years, and $8.4 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 $934,000 in tax payments from shares withheld upon vesting of restricted stock units.

Critical Accounting Policies and Estimates

The preparation of our financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. Our critical accounting policies, estimates, and methodologies for the quarter ended September 30, 2013 are consistent with those in Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, 2012, along with those presented below.

Revenue recognition: We recognize revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists, we have 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 we recognize.

We also evaluate 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 we pay to suppliers. In making that evaluation, we consider indicators such as whether we are the primary obligor in the arrangement and assume the risks and rewards as a principal in the customer transaction, including the credit risk, and whether we can set the sales price and select suppliers. GAAP clearly indicate that the evaluation of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity.

Search services revenue recognition: The majority of our revenues are generated from our web search services. The Search business does not generate its own search content for its web search services, 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, and those providers are referred to as “Search Customers”. 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. This revenue is recorded in the 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 our owned and operated websites and our distribution partners’ web properties.

We earn revenue from our Search Customers by providing paid search results generated from our owned and operated web properties and from our distribution partners’ web properties based on separately negotiated and agreed-upon terms with each distribution partner. Consequently, we record search services revenue on a gross basis.

Tax preparation revenue recognition: We derive service revenue from the sale of tax preparation online services, ancillary service offerings, packaged tax preparation 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, e-filing services, and other value-added services. This revenue is recorded in the 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 four revenue recognition criteria described above are met.

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We recognize revenue from the sale of our packaged software products when legal title transfers. This is generally when our 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. Other value-added service revenue consists of revenue from revenue sharing and royalty arrangements with third party partners. Revenue for these transactions 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 our determination of when collectability is probable.

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 described above are met for each element.

VSOE generally exists when we sell the deliverable separately. 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.

E-Commerce revenue recognition: We recognize product revenue from product sales when all four revenue recognition criteria as outlined above have been met. Because we either (i) have a general practice of refunding customer losses for products damaged while in-transit despite selling terms indicating title transfers at the point of shipment or (ii) have FOB-destination shipping terms specifically set out in certain arrangements, delivery is deemed to have occurred at the pint in time when the product is received by the customer. All amounts billed to a customer in a sale transaction related to shipping and handling, if any, represents revenues earned for the goods provided, and these amounts have been classified as “product revenue”. Costs related to such shipping and handling billings are classified as “product cost of revenue”.

We provide our customers with a thirty-day right of return. Return allowances, which reduce revenue, are estimated using historical experience.

Cost of revenues: We record the cost of revenues for sales of products and services when the related revenue is recognized. Services cost of revenue 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, bank service fees, and royalties. Product cost of revenue includes product costs, outbound shipping and handling costs, packaging supplies, and provisions for inventory obsolescence. Shipping charges to receive products from our suppliers are included in inventory, and recognized as product cost of revenue upon sale of products to customers.

Sales and marketing expenses: Sales and marketing expenses consist principally of marketing expenses associated with our TaxACT and Monoprice websites (which include the following channels: television, radio, online display and text and email), our owned and operated web search properties (which consist of traffic acquisition, including our online marketing, which includes fees paid to search engines to drive traffic to an owned and operated website, agency fees, brand promotion expense and market research expense), personnel costs (which include salaries, benefits and other employee related costs, and stock-based compensation expense) for personnel engaged in marketing and selling activities, and fulfillment expenses primarily associated with our E-Commerce business. Fulfillment expenses include direct operating expenses (including personnel costs) relating to our purchasing, customer and technical support, receiving, inspection, and warehouse functions, as well as the cost of temporary help and contractors, and credit card processing fees.

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Inventories: Inventories, consisting of merchandise purchased for resale for our E-Commerce business, are accounted for using the first-in-first-out (“FIFO”) method of accounting, and are valued at the lower of cost or market. Inventory quantities on hand are reviewed regularly, and allowances are maintained for obsolete, slow moving and nonsalable inventory.

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.

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 in the case of our credit facility.

Debt issuance costs related to the Notes issued in 2013 were allocated to the liability and equity components of the instrument. The debt issuance costs allocated to the liability are amortized to interest expense through the earlier of the maturity date of the Notes or the date of conversions, if any. The debt issuance costs allocated to the equity component of the Notes were recorded as an offset to additional paid in capital.

Deferred debt issuance costs related to our refinancing transaction during the three months ended September 30, 2013 will be amortized over the term of the new credit facility using the effective interest method as an adjustment to interest expense.

Supplier Concentration: A material part of Monoprice’s business is dependent on two vendors. During the period from August 22, 2013, the date of the acquisition to September 30, 2013, these unrelated vendors accounted for $1.3 million or 16% and $742,000 or 9%, respectively, of Monoprice’s inventory purchases and at September 30, 2013 accounted for $1.1 million or 12% and $843,000 or 10%, respectively, of related accounts payable.

Impairment of Equity Method Investments: We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate, in management’s judgment, that the carrying value of such investment may have experienced a decline in value. When evidence of an other-than-temporary decline has occurred, we compare the estimated fair value of the investment to the carrying value of the investment to determine whether an impairment has occurred.

For the three months ended September 30, 2013, in connection with our review of our equity method investments for other than temporary impairment, we determined that our equity investment in a privately-held company had experienced a decline in value which was other than temporary, due to recurring losses from operations, significant personnel reductions and a change in the underlying business model. Our impairment loss calculations require management to apply judgment in estimating future cash flows and assessing the probability of differing estimated outcomes. We assess the fair value of our equity method investments using commonly accepted techniques to the extent applicable, and may use more than one method. Accordingly, this equity investment in privately-held company with a carrying value of $3.7 million was written down to zero, resulting in a loss of $3.7 million, which was included in “other loss, net” in our condensed consolidated statements of operations for the three and nine month periods ended September 30, 2013.

Recent Accounting Pronouncements

Changes to GAAP are established by the FASB in the form of ASUs to the FASB’s Accounting Standards Codification. We consider the applicability and impact of all recent ASUs.

In February 2013, the FASB issued an update to the authoritative guidance related to the reporting of amounts reclassified out of accumulated other comprehensive income. This new requirement about presenting information about amounts reclassified out of accumulated other comprehensive income and their corresponding effect on net income will present, in one place, information about significant amounts reclassified and, in some cases, cross-references to related footnote disclosures. We adopted this guidance in the first quarter of 2013, and the adoption of these disclosure requirements did not have a material impact on our consolidated financial statements.

In July 2013, the FASB issued guidance on the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. This new guidance is effective on a prospective basis for fiscal years and interim reporting periods within those years, beginning after December 15, 2013. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

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Item 3.—Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our exposure to market risk from those that were disclosed in our Annual Report on Form 10-K as filed with the SEC on March  8, 2013, other than those previously disclosed in the 10-Q filings for the first quarter and second quarter of 2013.

Item  4.—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 Quarterly Report on Form 10-Q. 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 September 30, 2013 to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, 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.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the third quarter of 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended), other than indicated below:

During the quarter ended September 30, 2013, we acquired all of the outstanding stock of Monoprice. We are still assessing the internal controls of Monoprice but do not believe those controls have materially affected, or are likely to materially affect, our internal controls over financial reporting.

PART II—OTHER INFORMATION

Item 1.—Legal Proceedings

See the litigation disclosure under the subheading “Litigation” in “Note 7: Commitments and Contingencies” to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form  10-Q.

ITEM 1A. Risk Factors

RISKS COMMON TO ALL 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, software, and e-commerce industries are characterized by rapidly changing technology, evolving industry standards, and frequent new product introductions. Our competitors in the Search, Tax Preparation, and E-Commerce 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.

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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 and cloud service could be susceptible to damage or disruption, which could have a material adverse effect on our business. Our Search and E-Commerce businesses rely on third-party co-location facilities and cloud service providers. Although these third party services provide some redundancy, not all of our systems and operations have backup redundancy. Our TaxACT business has a disaster recovery center that we 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. Our E-Commerce business and its partners collect and retain certain information regarding its customers, including certain payment information, purchase information, e-mail addresses, and shipping addresses.

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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.

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 our Search, Tax Preparation and E-Commerce 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.

We regularly consider acquisition opportunities, and our financial and operating results may suffer if we are unsuccessful in completing any such acquisitions on favorable terms.

An important component of our strategy for future growth is to acquire new technologies and businesses. We may seek to acquire companies or assets that complement our existing businesses. We may also consider acquisitions of companies and assets that are not related to search, tax preparation or e-commerce. We regularly explore such opportunities in the ordinary course of our business and 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. There can be no guarantee that any of the opportunities that we evaluate will result in the purchase by us of any business or asset being evaluated, or that if successful we will be able to successfully integrate such acquisition.

If we are successful in our pursuit of any acquisition opportunities, we intend to use available cash, debt and/or equity financings, and/or other capital or ownership structures designed to diversify our capital sources and attract a competitive cost of capital, all of which may change our leverage profile. There are a number of factors that impact our ability to succeed in acquiring the companies and assets we identify, including competition for these companies and assets, sometimes from larger or better-funded competitors. As a result, our success in completing acquisitions is not guaranteed, and if we are successful, the purchase price and expected margins of these acquisitions, may vary significantly. If actual experience with respect to these factors differs from our assumptions, we could overpay for one or more of the potential transactions. Our expectation is that, to the extent we are successful, any acquisitions will be additive to our business and meet our return and investment hurdles, taking into account potential benefits of diversification or operational synergies. However, these new business additions and acquisitions involve a number of risks and may not achieve our expectations; and therefore we could be adversely affected by any such new business additions or acquisitions. 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.

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

Even if we are successful in identifying and completing acquisitions of new businesses or technologies, the process of integrating such 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, and impairment charges to goodwill and other intangible assets related to certain acquisitions;

• 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;

• 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 acquisitions of the TaxACT and Monoprice businesses, is not successful, we may experience adverse financial or competitive effects.

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

The trading price of our common stock has been highly volatile. Between October 1, 2011 and September 30, 2013, our stock price ranged from $8.04 to $23.61. On October 29, 2013, the closing price of our common stock was $25.06. Our stock price could decline or fluctuate significantly 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, tax preparation, or e-commerce 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.

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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.

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 any of our businesses 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 existing businesses, 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 discussion above under “Note 9: Derivative Instruments and Hedging Activities.”);

• 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 on our Search business, lower acceptance rates on premium products and services offered by our Tax Preparation business, and reduced sales for our E-Commerce business;

• 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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We recently sold $201.25 million aggregate principal amount of 4.25% Convertible Senior Notes, which may impact our financial results, result in the dilution of existing stockholders, and restrict our ability to take advantage of future opportunities.

In March of 2013, we sold $201.25 million aggregate principal amount of 4.25% Convertible Senior Notes due 2019. The accounting for the Notes will result in our having to recognize interest expense significantly more than the stated interest rate of the Notes and may result in volatility to our financial results. Upon issuance of the Notes, we were required to establish a separate initial value for the conversion option and to bifurcate this value from the value attributable to the balance of the Notes, or the debt component. As a result, for accounting purposes, we were required to treat the Notes as having been issued with a discount to their face principal amount, which is referred to as debt discount. We are accreting the debt discount to interest expense ratably over the term of the Notes, which results in an effective interest rate in our consolidated statement of comprehensive income that is in excess of the stated coupon rate of the Notes. This will reduce our earnings and could adversely affect the price at which our common stock trades, but will have no effect on the amount of cash interest paid to holders or on our cash flows.

Our intent is to settle conversions of the Notes with cash for the principal amount of the debt and shares of common stock for any related conversion premium. Shares associated with the conversion premium will be included in diluted earnings per share when the average stock price exceeds the conversion price of the Notes and could adversely affect our diluted earnings per share and the price at which our common stock trades.

The conditional conversion feature of the Notes, if triggered, and the requirement to repurchase the Notes upon a fundamental change may adversely affect our financial condition and financial results. In the event the conditional conversion feature of the Notes is triggered, holders of Notes will be entitled to convert the Notes at any time during specified periods at their option. If we undergo a fundamental change, (as described in the Indenture), subject to certain conditions, holders of the Notes may require us to repurchase for cash all or part of their Notes at a price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest.

The payment of the interest and the repayment of principal at maturity, conversion, or under a fundamental change, will require the use of a substantial amount of our cash, and if such cash is not available, we may be required to sell other assets or enter into alternate financing arrangements at terms that may or may not be desirable. The existence of the Notes and the obligations we incurred by issuing them may restrict our ability to take advantage of certain future opportunities, such as engaging in future debt or equity financing activities, which may reduce or impair our ability to acquire new businesses or invest in our existing businesses.

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

Our indirect subsidiary, TaxACT, incurred debt as part of our acquisition of TaxACT’s business, which was refinanced with a new credit agreement on August 30, 2013 and of which $65.4 million remains outstanding. This debt is non-recourse debt that is guaranteed by TaxACT Holdings, Blucora’s direct subsidiary, and TaxACT’s direct parent. This debt may adversely affect our financial condition and future financial results by, among other things:

• increasing TaxACT’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 TaxACT’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 TaxACT if TaxACT is unable to meet its debt obligations;

• increasing our interest payment obligations in the event that interest rates rise dramatically; and

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

This credit facility imposes restrictions on TaxACT, including restrictions on TaxACT’s ability to create liens on its assets and on our ability to incur indebtedness, and requires TaxACT to maintain compliance with specified financial ratios. TaxACT’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.

We may incur additional debt in the future to finance additional acquisitions, including potential post-acquisition closing financing for our recent Monoprice acquisition. Such debt may result in risks similar to those discussed above related to the TaxACT debt, or in other risks specific to the credit agreement entered into for that debt.

Existing cash and cash equivalents, short-term investments, and cash generated from operations may not be sufficient to meet our anticipated cash needs for servicing debt, 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 servicing debt, 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 March of 2013, we sold

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$201.25 million aggregate principal amount of 4.25% Convertible Senior Notes due 2019. In addition, as of September 30, 2013, TaxACT had $65.4 million outstanding under the credit agreement it entered into on August 30, 2013. Servicing this debt will require the dedication of a portion of our expected cash flow from operations, thereby reducing the amount of our cash flow available for other purposes. In addition, our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our businesses may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

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.

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 technology industry 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 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 remove or redesign our products or services, require us to pay damages for infringement, or require us to enter into royalty or licensing agreements. Our technology, services, and products 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 products or 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

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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.

Legislation and regulation may impact our business operations, restrict our opportunities, increase our costs, and create potential liability.

All of our businesses are subject to laws and regulations relating to how they conduct their operations and we anticipate that additional applicable laws and regulations will be enacted in the future. Many of these laws and regulations restrict the operations and opportunities of our businesses and result in compliance costs. In addition, interpretations of these laws and regulations are not always clear, and failure to comply with them in the manner that a government regulator or court interprets could result in liability. For example, all of our businesses have privacy compliance obligations, and 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. Additional applicable legal and regulatory requirements for each of our businesses are discussed below under the sections of these Risk Factors that are specific to those businesses. It is not possible to predict whether or when additional applicable legislation or regulation may be adopted and certain proposals, if adopted, could materially and adversely affect our business. Our failure or inability to comply with applicable laws and regulations could materially impact our operations and financial results.

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, 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 our 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

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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.

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, 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.

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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 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 online marketing.

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.

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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 76% of our total Company revenues in the third quarter of 2013. 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.

The success of our Search business depends on our ability to negotiate extensions of our Search Customer agreements on favorable terms. We are currently in the process of negotiating a renewal of our agreement with Google, which runs to March 31, 2014. Our agreement with Yahoo! recently renewed, and now runs to December 31, 2014. If we cannot negotiate extensions of our current agreements or new agreements on favorable terms (including revenue share rates, our continued ability to offer combine search results from different partners as part of our metasearch service, and other operational aspects of our search services), the financial results of our Search business will suffer.

A substantial portion of our search services revenue is dependent on our relationships with a small number of distribution partners, 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. We generated approximately 27% and 47% of our total Company revenues through relationships with our top five distribution partners in the third quarter of 2013 and the third quarter of 2012, respectively. Our agreements with many of our distribution partners come up for renewal in 2013 and 2014, and some of our distributors have the right to immediately terminate their agreements in the event of certain breaches or events. There can be no assurance that these relationships will continue or will be renewed on terms that are as favorable as current terms. If we are unable to maintain relationships with our distribution partners on favorable terms, our business and financial results could be materially adversely affected.

A significant percentage of our Search business’s revenue is generated by our distribution partner network. Given the nature of our relationships with our distribution partners, we have limited insight into the methods that our partners use to drive search traffic, which may result in unanticipated volatility in our financial results.

We operate a distribution partner network of greater than 100 distribution partners, which generates the majority of our Search revenue. We have contractual relationships with each partner in the network, but many of these relationships are not exclusive and may not provide us with the ability to have full insight into the methods that our partners use to drive search traffic or their business models. As a result, partners can vary their traffic serviced by our search services, and we may not be able to foresee or control this variation. Additionally, our ability to grow our revenue depends on both our ability to attract new distribution partners and retain existing distribution partners and on our partners’ ability to acquire and retain new users that use our search services. For example, a distribution partner may increase or decrease marketing initiatives in ways that we did not predict, and if that partner’s traffic is significantly correlated to marketing, such increase or decrease in marketing may result in a significant increase or decrease in search traffic. Without full insight into a partner’s business model and related revenue drivers, our ability to accurately predict the traffic driven, and revenue generated, by that partner is limited, in part, to historical patterns. The historical revenue patterns of partners may not be consistent with actual and forecasted results due to unknown factors that impact the partner’s business model and/or any related changes to such model.

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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.

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

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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.

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 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.

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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.

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.

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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.

RISKS RELATED TO OUR E-COMMERCE BUSINESS

The electronics and accessories market is highly competitive, and failure to effectively compete will adversely affect our financial results.

The electronics and accessories market in which our Monoprice business sells products is highly competitive. All of Monoprice’s products face competition from many sellers of similar products, some of which are much larger and well-known than Monoprice. We attempt to offer products that provide similar quality and technology as those offered by our competitors, but at a lower price, and we attempt to do so with customer service and support that equals or exceeds that of many of our competitors. Many of our competitors have significant competitive advantages over us that may adversely affect our ability to successfully compete on price, quality, technology, service, or support, including larger scale, advanced research facilities, extensive experience in the industry, proprietarily intellectual property, greater financial resources, more advanced and extensive supply chain and distribution capacity, better service and support capability, and stronger relationships with suppliers and resellers. If we are unable to successfully compete on price, quality, technology, service, or support, we may not be able to attract and retain customers.

We also face competition in attracting the attention of customers in a cost-effect manner. Many of our competitors have better brand recognition, have stronger distribution networks, and spend significantly more than us on marketing efforts. Our financial results depend on our ability to effectively attract customers at a cost that allows us to continue to offer low prices and maintain our margins, and if our efforts are not effective and cost-efficient, our financial results will suffer.

If we fail to accurately forecast customer demand, our inventory may either exceed demand or be insufficient to meet demand, which could harm our financial results.

We rely on our supplier network to manufacture our products, and as a result, we must forecast demand for our products well in advance of the sale of those products when placing orders from our suppliers. If our orders exceed eventual demand, we will have excess inventory, which will increase our inventory carrying costs, may increase risk that those products will become obsolete prior to sale, and may result in write-offs and/or significant price reductions of that inventory. If our orders are insufficient to meet demand, we may not be able to adequately replace that inventory to meet all customer orders in a timely manner, resulting in back-orders, potential lost sales, and negative customer experiences. Significant failure to accurately forecast customer demand may thus impact our short- and long-term financial results.

Our ability to be competitive depends on our ability to introduce new and updated products with sufficient speed to satisfy customers and thus maintain and grow our market share.

The electronics and accessories market is subject to frequent new product introductions, rapid advancements in technology, changes in industry standards, and evolving consumer preferences. Many of our electronics and accessories have short life cycles and/or must be updated frequently. Our future success depends on our ability to develop, introduce, and deliver on a timely basis, and in sufficient quantity, new products and enhancements to current products. The success of any new product or any update to a current product will depend on several factors, including our ability to:

• Accurately predict features that are compelling to customers;

• Acquire or develop technology to incorporate those features in our products;

• Ensure that the design of products is appealing to consumers;

• Arrange for the manufacture and delivery of a sufficient amount of the products on a timely and cost-effective basis; and

• Ensure that the products are of sufficient quality to maintain customer satisfaction.

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If we cannot successfully execute on the above factors, our offerings may not match customer demand, with the result that our inventory may become obsolete, we may not be able to maintain or grow sales, our reputation may suffer, and we may be unable to attract and retain customers.

Our ability to maintain and grow market share depends on our ability to offer quality products at price well below the average market price for such products.

We attempt to offer electronics and accessories at a price below our competitors’ prices for similar products, while still maintaining similar quality. Our ability to continue to offer quality products at lower prices depends on our ability to adequately source such products at sufficient quality, quantity, and cost and on our ability to keep other operating expenses proportionally low. Because prices for electronics and accessories tend to decline over time, our continued success will depend on our ability to offer some of our products at even lower prices in the future and on our ability to identify new products or product categories that we can offer at similar low prices. If we cannot continue to offer current products, and introduce new products, at such quality, quantity, and low cost, we will be unable to maintain or grow our revenues and our financial results will suffer.

We depend on international third-party manufacturers to supply our electronics and accessories and risks related to the manufacture and shipping of our products could adversely affect our operations and financial results.

We outsource most of the manufacturing of our electronics and accessories to suppliers in Asia. We rely on the performance of these suppliers, and any problems with such performance could result in cost overruns, delayed deliveries, shortages, poor quality control, intellectual property issues (both theft of our intellectual property and infringement by our suppliers of the intellectual property of others), and compliance issues. Performance problems by our suppliers could result from many events, including the following: suppliers’ willful or unintentional breach of supply agreements; their failure to comply with applicable laws and regulations; labor unrest at their facilities; civil unrest; natural or human disasters at production or shipping facilities; equipment or other facility failures; their inability to acquire sufficient quantities or qualities of components or raw materials at expected prices; infrastructure problems in their countries (e.g., power or transportation infrastructure problems); their bankruptcy, insolvency, or other financial problems; and requests or requirements by their other customers that may conflict with our requirements. In addition, because most of our products are shipped from Asia, we face risks related to such shipping, including performance failures by our shipping partners and those of our suppliers, natural disasters, shipping equipment failure, and export and import regulation compliance issues.

The performance of our manufacturers, suppliers, and shippers is largely outside of our control. As the result of any performance failures, we may lose sales, or we may be required to adjust product designs, change production schedules, or develop suitable alternative contract manufacturers, suppliers, or shippers, which could result in delays in the delivery of products to our customers and/or increased costs. Any such delays, disruptions, or quality problems could adversely impact our ability to sell our products, harm our reputation, impair our customer relationships, and adversely affect our operations and financial results.

Our electronics and accessories could experience quality or safety defects that could result in damage to our reputation, require us to provide replacement products, or cause us to institute product recalls.

We expect that all of our electronics and accessories will meet or exceed all applicable standards for quality and safety. We monitor and attempt to address any quality or safety issues during the design and manufacturing processes, but some problems or defects may not be identified until after introduction and shipment of products. Resolving such problems or defects may result in increased costs related to production and shipment of replacement parts or products, increased customer support requirements, and redesign and manufacture or products. If we are unable to fix defects in a timely manner or adequately address quality control issues, our relationships with our customers may be impaired, our reputation may suffer, and we may lose customers. If the problems or defects result in a significant safety hazard, we may be forced to institute a product recall, resulting in negative publicity, loss of reputation, administrative costs, distraction of personnel from regular duties, and recall, refund, and replacement expenses. In addition, such product recalls may result in disputes with suppliers and customers or lead to adverse proceedings such as arbitration or litigation, which can be costly and expensive.

Product liability claims or regulatory actions could adversely affect our financial results or harm our reputation.

As the seller of consumer products, we face the possibility that there will be claims for losses or injuries caused by some of our products. In addition to the risk of substantial monetary judgments and penalties that could have a material effect on our financial condition and results of operations, product liability claims or regulatory actions could result in negative publicity that could harm our reputation in the marketplace. We also could be required to recall and possibly discontinue the sale of possible defective or unsafe products, which could result in adverse publicity and significant expenses. Although we maintain product liability insurance coverage, potential product liability claims may exceed the amount of coverage or could be excluded under the terms of the policy.

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If our products or operations, or those of our suppliers fail to comply with domestic and international government regulations, or if these regulations result in restrictions on our business, our results could be negatively impacted.

Our products and operations, and the operations of our suppliers and partners, must comply with various domestic and international laws, regulations, and standards, which are complicated and subject to interpretation. Failure by us or our partners to comply with existing or evolving laws or regulations, including export and import restrictions and barriers, or to obtain domestic or foreign regulatory approvals or certificates on a timely basis could result in restrictions on our operations or in our inability to obtain or sell certain products, with the result that our business may be adversely impacted.

We require that all of our suppliers comply with our design and product content specifications, ethical and human rights requirements, applicable laws (including product safety, security, labor, and environmental laws), and otherwise be certified as meeting our supplier code of conduct. While we do conduct a monitoring program to attempt to ensure compliance by our suppliers, our program cannot ensure 100% compliance. Any failure by our suppliers to comply with our supplier code of conduct, or with any other applicable standard, law, or regulation, could result in our inability or unwillingness to continue working with that supplier, additional monitor costs, and/or negative publicity and damage to our brand and reputation.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share repurchase activity during the third quarter was as follows (in thousands, except per share data):

Q3 Fiscal Months	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs			Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
July 1 to July 31, 2013		—	$	—		—			—
August 1 to August 31, 2013		—		—		—			—
September 1 to September 30, 2013		124		19.97		124	(1)		46,500	(1)
Total		124	$	19.97		124	(1)	$	46,500	(1)

(1) On February 13, 2013, the Company announced that its Board of Directors authorized a program to repurchase up to $50 million of the Company’s common stock beginning in 2013. The repurchase program is authorized through February 5, 2015.

ITEM 3. Defaults Upon Senior Securities

Not applicable with respect to the current reporting period.

ITEM 4. Mine Safety Disclosures

None.

ITEM 5. Other Information

Not applicable with respect to the current reporting period.

ITEM 6. Exhibits

Exhibits filed or furnished herewith are listed in the accompanying Index to Exhibits.

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SIGNATURES

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

BLUCORA, INC.
By	/s/ Eric M. Emans
	Eric M. Emans
	Chief Financial Officer (Principal Financial Officer)
	Dated: November 5, 2013

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INDEX TO EXHIBITS

Exhibit Number	Exhibit Description	Form		Date of First Filing		Exhibit Number		Filed Herewith
2.1	Stock Purchase Agreement between Blucora, Inc., Monoprice, Inc., and the Shareholders, dated as of July 31, 2013		8-K		August 1, 2013		2.1
10.1*	Employment Agreement between Blucora, Inc., Monoprice, Inc., and Ajay Kumar, dated August 22, 2013								X
10.2	Credit Agreement among TaxACT, Inc., as Borrower, TaxACT Holdings, Inc., as a Guarantor, and Wells Fargo Bank, N.A., as administrative agent and a lender, BMO Harris Bank, N.A., Silicon Valley Bank, Bank of America, N.A., and RBS Citizens, N.A., each as lenders, dated August 30, 2013.		8-K		September 6, 2013		10.1
10.3	Lease Agreement between Monoprice, Inc. and Sixth and Rochester, LLC, dated June 2, 2009								X
10.4	First Amendment to Lease Agreement between Monoprice, Inc. and Sixth and Rochester, LLC, dated August 25, 2009								X
10.5	Second Amendment to Lease Agreement between Monoprice, Inc. and Sixth and Rochester, LLC, dated September 23, 2009								X
10.6	Third Amendment to Lease Agreement between Monoprice, Inc. and Sixth and Rochester, LLC, dated October 16, 2009								X
10.7*	Restricted Cash Agreement between Ajay Kumar and Monoprice, Inc., dated July 31, 2013								X
31.1	Certification of Principal Executive Officer 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								X
31.2	Certification of Principal Financial Officer 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								X
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002								X
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002								X
101	The following financial statements from the Company’s 10-Q for the fiscal quarter ended September 30, 2013, formatted in XBRL: (i) Unaudited Condensed Consolidated Balance Sheets (ii) Unaudited Condensed Consolidated Statements of Operations, (iii), Unaudited Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Unaudited Condensed Consolidated Financial Statements.								X

* Indicates a management contract or compensatory plan or arrangement.

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made and entered into effective as of August 22, 2013 (the “Effective Date”), by and between Ajay Kumar (the “Executive”), Blucora, Inc. (the “Company”), and Monoprice, Inc. (“Monoprice”).

RECITALS

WHEREAS, Monoprice became a wholly owned subsidiary of the Company on August 22, 2013, as a result of the Company’s purchase of all the outstanding equity interests of Monoprice pursuant to a Stock Purchase Agreement dated July 31, 2013 (such transaction, the “Acquisition”).

WHEREAS, prior to the Acquisition, the Executive was employed by Monoprice as its Chief Executive Officer pursuant to an employment letter agreement dated July 9, 2011 (the “Prior Agreement”);

WHEREAS, the Company desires to continue the employment of Executive with Monoprice, a wholly owned subsidiary of the Company, as its President (the “Operating Unit”);

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) “Additional Employee Agreements” means the Noncompetition and Nonsolicitation Agreement between Executive and Blucora dated as of July 31, 2013, and the Supplementary Terms of Employment attached hereto as Exhibit A.

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

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

(d) “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 Additional Employee Agreements; (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(d)(iii), the Board must give the Executive notice and 60 days to cure the substantial nonperformance.

(e) “Change of Control” means the occurrence of any of the following:

(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.

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

(g) “Company Transaction” means a Change of Control or a Significant Operating Unit Transaction.

(h) “Compensation Committee” means the Compensation Committee of the Board.

(i) “Constructive Termination” means the occurrence, on a date that is prior to the two-month

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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 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 Rancho Cucamonga, California 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.

(j) “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.

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

(l) “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 Rancho Cucamonga, California 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.

(m) “Release” means a full release of claims against the Company substantially in the form attached hereto as Exhibit B; 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

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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.

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

(o) “Significant Operating Unit Transaction” means a merger or consolidation of the Operating Unit with or into any other company, entity or person or a sale or disposition by the Company, in one transaction or a series of related transactions, of all or substantially all the Operating Unit’s assets (a “Transaction”), other than a Transaction with a subsidiary or another corporation or other entity that is or becomes as a result of the Transaction controlled by the Company.

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

2. Duties and Scope of Employment

The Company, either directly or through Monoprice, shall employ the Executive in the position of President of the Operating Unit. The Executive shall report directly to the Chief Executive Officer. 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 Chief Executive Officer. Upon termination of the Executive’s employment for any reason, unless otherwise requested by the Chief Executive Officer, the Executive will be deemed to have resigned from all positions held at the Company and its affiliates voluntarily, without any further action by the Executive, as of the end of the Executive’s employment, and the Executive, at the Chief Executive Officer’s request, will execute any documents necessary to reflect his resignation.

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 Company’s Chief Executive Officer; provided, however, that notwithstanding anything to the contrary in the Additional Employee Agreements, 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.

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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 $357,690, 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 beginning with calendar year 2014, 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 50% of Base Salary. The Executive’s existing bonus arrangements with the Operating Unit for calendar year 2013 shall remain unchanged.

(c) 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 Operating Unit, 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 group medical, life, disability, and retirement plans that are made generally available to employees of the Operating Unit, 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.

(d) 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.

(e) Restricted Stock Units. Effective on the Effective Date, the Executive shall be granted 50,000 time-vested restricted stock units and 150,000 (at maximum achievement) performance-vested restricted stock units (the time-vested and the performance vested RSUs together referred to as the “RSU Grant”), which shall vest in accordance with the terms set forth in the Restricted Stock Unit Letter Agreements approved by the Compensation Committee with respect to such RSU Grant (the “Restricted Stock Unit Agreement”) and shall otherwise be subject to the terms and conditions of the 1996 Plan and the Restricted Stock Unit Agreement; provided, however, that notwithstanding the foregoing, in the event of a conflict between the terms and conditions of the Restricted Stock Unit Agreement and this Agreement, the terms and conditions of this Agreement shall prevail.

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.

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(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 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 one times the Executive’s 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); 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).

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(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 one times the Executive’s Base Salary in effect as of the Termination Date and his then current 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) 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); 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 time-vesting equity awards (including any portion of earned performance-vesting awards that remain subject to time vesting) shall become fully vested and all restrictions thereon shall lapse, (B) all of the Executive’s then-outstanding unearned performance-vesting awards shall become earned and fully vested assuming 100% achievement of performance objectives and all restrictions thereon shall lapse and (C) 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 (if any) shall remain exercisable until the first to occur of 12 months following the Termination Date and each such stock option’s original expiration date.

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.

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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 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 Additional Employee Agreements that are 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

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“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 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. Additional Employee Agreements

The Additional Employee Agreements are incorporated herein by reference. The Additional Employee Agreements shall survive the termination of this Agreement and/or the Executive’s employment with the Company.

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10. Arbitration

(a) Executive agrees that any dispute and/or claim between the Company (including without limitation its officers, directors, employees agents or shareholders and its subsidiaries) and Executive that underlies, relates to and/or results from Executive’s employment relationship with the Company or the termination of that relationship or any of the terms of this Agreement, including the Additional Employee Agreements, that cannot be resolved by mutual agreement of the Company and Executive 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. This arbitration provision includes, but is 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. This arbitration provision does not affect Executive’s right to pursue worker’s compensation or unemployment compensation benefits for which he may be eligible in accordance with state law, nor does it affect Executive’s right to file and/or to cooperate in the investigation of an administrative charge of discrimination.

(b) Notwithstanding this arbitration provision, either Executive or the Company 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.

(c) The Company, as further consideration for Executive’s 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

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.

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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;

(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

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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 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.

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(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.

(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.

BLUCORA, INC.
By:	/s/ William J. Ruckelshaus
Name: William J. Ruckelshaus
Title:   President and Chief Executive Officer

MONOPRICE, INC.
By:	/s/ Linda Schoemaker
Name: Linda Schoemaker
Title:   Secretary

EXECUTIVE:

/S/ Ajay Kumar

Ajay Kumar

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Exhibit A

BLUCORA

California Supplementary Terms of Employment – Managerial/Professional

In consideration of my employment by Blucora, 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 original offer letter and/or my employment agreement with the company:

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 signed by the Chief Executive Officer of Blucora. 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 Chief Executive Officer. 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. I will also return any keys, pass cards, identification cards or any other property belonging to Blucora.

4. Obligation to Disclose This Agreement: For a period of one (1) year after termination of my

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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 my manager at Blucora.

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. I understand that the provisions of this Agreement requiring assignment of Inventions to the Company do not apply to any invention which qualifies fully under the provisions of California Labor Code Section 2870 (attached hereto as Exhibit C). I will advise the Company promptly in writing of any inventions that I conceive, develop or reduce to practice during my employment that I believe meet the criteria in California Labor Code Section 2870 and not otherwise disclosed on Exhibit B (discussed below).

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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.

8. 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.

9. 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.

Section IV – Unfair Competition

10. Following Termination of Employment: During the Post-Employment Year, I agree that I will not, (a) solicit, directly or indirectly, any employee, consultant or other independent contractor to terminate or limit his/her relationship as a service provider to Blucora. In this regard, I acknowledge that the identity, skills, experience and compensation of the employees, consultants, and other independent contractors of Blucora, together with the identity, contact information, and pricing arrangements of its clients, vendors and business partners, are valuable trade secrets of Blucora and qualify as Blucora Confidential Information, and (b) solicit, induce, or attempt to influence directly or indirectly, any customer, business partner, supplier or vendor of Blucora to terminate or limit his/her/its business relationship with Blucora.

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Section V – Arbitration

11. 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 mutual agreement by 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.

12. 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.

13. 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.

14. 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.

15. Injunctive or Other Relief: I understand that, pursuant to this Agreement, I 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

16. 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.

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17. 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.

18. Entire Agreement: This Agreement, together with the Employment Agreement and the Noncompetition and Nonsolicitation Agreement between the parties hereto, 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.

19. 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/ Ajay Kumar            

Name of Employee: Ajay Kumar

Date: August 22, 2013

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EXHIBIT B

GENERAL RELEASE OF ALL CLAIMS

This General Release and Waiver of Claims (this “Release”) is executed by Ajay Kumar (“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 the Employment Agreement between Executive and the Company dated as of August 22, 2013 (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 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 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

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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.

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.

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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.

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

Dated:

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EX-10.3

Exhibit 10.3

LEASE AGREEMENT

(Single Tenant Facility)

ARTICLE ONE: BASIC TERMS.

This Article One contains the Basic Terms of this Lease between the Landlord and Tenant named below. Other Articles and Sections of the Lease referred to in this Article One explain and define the Basic Terms and are to be read in conjunction with the Basic Terms. This Lease is subject to Landlord’s existing Tenant and Tenant’s lender mutually terminating the existing lease and Landlord’s Waiver and Consent with Landlord and vacating the Property prior to the Commencement Date of this Lease. If Tenant and Tenant’s lender do not terminate the existing lease and Landlord’s Waiver and Consent by the Commencement Date set forth herein, this Lease shall terminate. This Lease is also subject to approval by Landlord’s lender.

Section 1.01.	Date of Lease: June 2, 2009
Section 1.02.	Landlord (include legal entity):	Sixth and Rochester, LLC,   a California limited liability company

Address of Landlord:	c/o Panattoni Development Company, Inc.
	34 Tesla, Suite 200
	Irvine, CA 92618
	Attn: Jennie Reno
	E-mail: jreno@panattoni.com

Section 1.03.   Tenant (include legal entity):   MONOPRICE, INC.,   a California corporation

Address of Tenant:	Monoprice, Inc.
	11701 6th Street
	Rancho Cucamonga, CA
	Attn: Sean Lee
	E-mail: sean@monoprice.com

Section 1.04. Property The Property is that certain approximate One Hundred Seventy-Two Thousand, Nine Hundred Ninety-Eight (172,998) rentable square foot single tenant building known as 11701 6^th Street (the “Property”), depicted in Exhibit A (the “Project”), located in the City of Rancho Cucamonga, State of California. The Project includes the building (“Building”).

Section 1.05. Lease Term: Five (5) years ten (10) months beginning on the later of October 1, 2009, or Substantial Completion (as defined in the Work Letter) of the Tenant Improvements subject to force majeure and Tenant Delay (as defined in the Tenant Work Letter) (“Commencement Date”), and ending on the last day of the seventieth (70^th) month after the

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Commencement Date (“Expiration Date”). In the event Landlord does not obtain possession of the Property from the existing Tenant by August, 15, 2009, Tenant may terminate this Lease and receive a return of any Security Deposit and prepaid Rent. In the event Landlord regains possession from the existing Tenant prior to August 15, 2009, Tenant shall not have the right to terminate this Lease.

Section 1.06. Permitted Uses (See Article Five): General office, bulk storage, warehousing and distribution of products and other related permitted uses, in accordance with all applicable laws, codes, ordinances, restrictions, regulations and the CC&R’s, if any (as hereinafter defined in Article 15) (“Permitted Use”).

Section 1.07. Tenant’s Guarantor (if none, so state): NONE (Subject to receipt and approval of Tenant’s Financial Statements).

Section 1.08. Brokers (See Article fourteen)

Landlord’s Broker: None

Tenant’s Broker: Collier International

Section 1.09. Commission payable to Landlord’s Broker (See Article Fourteen): Pursuant to separate written agreement with Landlord.

Section 1.10. Initial Security Deposit (See Section 3.02): An amount equal to the last month’s Base Rent in the amount of $ 53,629.38.

Section 1.11. Vehicle parking Spaces Allocated to Tenant: Tenant shall be entitled to use all vehicle parking spaces allocated to the Property.

Section 1.12. Rent and Other Charges Payable by Tenant:

(a) BASE RENT: Tenant shall pay to Landlord, without demand, offset or delay, except as provided elsewhere in this Lease, when due, base rent (“Base Rent”) in monthly installments in advance on or before the first day of each calendar month throughout the Lease Term commencing ten (10) months after the Commencement Date based on the following schedule:

Months of Lease Term	Rentable Square Feet		Base Rent Per Square Foot Per Month		Monthly Base Rent		Annual Base Rent
1-10		172,998		Abated		-0-		-0-
11-23		172,998	$	0.29	$	50,169.42	$	602,033.04
24-46		172,998	$	0.30	$	51,889.40	$	622,672.80
47-70		172,998	$	0.31	$	53,629.38	$	643,552.56

(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02); (ii) Utilities (See Section 4.03); (iii) Insurance Premiums (See Section 4.04); (iv) Impounds for Insurance Premiums and Property Taxes (See Section 4.07); (v) Maintenance, Repairs and Alterations (See Article Six); (vi) any Association fees and dues; and (vii) Management fees (see Section 4.08).

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Section 1.13. Landlord’s Share of Profit on Assignment or Sublease (See Section 9.05): Fifty percent (50%) of the profit (the “Landlord’s Share”).

Section 1.14. Exhibits: The following Exhibits are attached to and made a part of this Lease: (If none, so state): Addendum, Exhibit A – Site Plan; Exhibit B – Space Plan; Exhibit C – Tenant Work Letter; Exhibit D – Subordination, Non-Disturbance and Attornment Agreement; Exhibit E – Tenant Estoppel Certificate.

ARTICLE TWO. LEASE TERM.

Section 2.01. Lease of Property for Lease Term. Landlord leases the Property to Tenant and Tenant leases the Property from Landlord for the Lease Term. The Lease Term is for the period stated in Section 1.05 above and shall begin and, unless earlier terminated in accordance with the terms hereof, end on the dates specified in Section 1.05 above, unless the beginning or end of the Lease Term is changed under any provision of this Lease. The “Commencement Date” shall be the date specified in Section 1.05 above for the beginning of the Lease Term, unless advanced or delayed under any provision of this Lease.

Section 2.02. Delay in Commencement. Landlord shall not be liable to Tenant if Landlord does not deliver possession of the Property to Tenant on the Commencement Date. Landlord’s non-delivery of the Property to Tenant on that date shall not affect this Lease or the obligations of Tenant under this Lease except that the Commencement Date shall be delayed until Landlord delivers possession of the Property to Tenant and the Lease Term shall be extended for a period equal to the delay in delivery of possession of the Property to Tenant, plus the number of days necessary to end the Lease Term on the last day of a month. If delivery of possession of the Property to Tenant is delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to this Lease setting forth the actual Commencement Date and expiration date of the Lease. Failure to execute such amendment shall not affect the actual Commencement Date and expiration date of the Lease. If the Commencement Date is delayed past October 1, 2009, subject to force majeure and Tenant Delay, Tenant shall receive a dollar-for-dollar credit for Base Rent and Additional Rent at Tenant’s present facility for each day after October 1, 2009, that the Commencement Date is delayed, and any such credit shall be provided to Tenant as additional “Abated Rent”. The aforementioned credit shall be in addition to the “Abated” Rent set forth above in the matrix in Section 1.12(a).

Section 2.03 Early Occupancy. Tenant may occupy the Property on August 1, 2009. Prior to any early occupancy of the Property, Tenant shall: (i) obtain Landlord’s prior written consent, which consent will not be unreasonably withheld, (ii) provide Landlord with evidence of Tenant’s compliance with all of its insurance requirements hereunder, (iii) pay to Landlord all monetary amounts required to be paid by Tenant upon execution of the Lease (as set forth in Sections 3.01 and 3.02 below). If Tenant occupies the Property prior to the Commencement Date, Tenant’s occupancy of the Property shall be subject to all of the provisions of this Lease. Early occupancy of the Property shall not advance the expiration date of this Lease. Tenant shall

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not pay Base Rent and all other charges specified in this Lease for the early occupancy period. Tenant shall not interfere with the work of Landlord’s contractors, if any. Any materials of Tenant stored in the Property shall be at Tenant’s sole risk and Landlord will have no obligation to secure the Property prior to the Commencement Date. Tenant shall access the Property during any period of early occupancy at Tenant’s sole risk. Landlord shall not be liable for any destruction, theft, vandalism or any other damage to any personal property placed, kept or stored by or on behalf of Tenant or permitted to be placed, kept or stored by Tenant during any period of early occupancy. Tenant shall be granted occupancy after the current tenant and/or its lender have vacated the Property.

Section 2.04. Holding Over. Tenant shall vacate the Property upon the expiration or earlier termination of this Lease. Tenant shall reimburse Landlord for and indemnify Landlord against all damages which Landlord incurs from Tenant’s delay in vacating the Property. If Tenant does not vacate the Property upon the expiration or earlier termination of the Lease and Landlord thereafter accepts rent from Tenant, Tenant’s occupancy of the Property shall be a “month to month” tenancy, subject to all of the terms of this Lease applicable to a month-to-month tenancy terminable by either party upon thirty (30) days written notice, except that the Base Rent then in effect shall be increased by twenty-five percent (25%).

ARTICLE THREE: BASE RENT.

Section 3.01. Time and Manner of Payment. Upon execution of this Lease, by Tenant, Tenant shall pay Landlord the Base Rent in the amount stated in Section 1.12(a) above for the eleventh (11^th) month of the Lease Term. On the first day of the twelfth (12^th) month of the Lease Term and each month thereafter, Tenant shall pay Landlord the Base Rent, in advance, without offset, deduction or prior demand. The Base Rent shall be payable at Landlord’s address set forth in Section 1.02, or at such other place as Landlord may designate in writing.

Section 3.02. Security Deposit; Increases.

(a) Upon the execution of this Lease, Tenant shall deposit with Landlord a cash Security Deposit in the amount set forth in Section 1.10 above. Landlord may apply all or part of the Security Deposit to any unpaid rent or other charges due from Tenant or to cure any other defaults of Tenant. If Landlord uses any part of the Security Deposit, Tenant shall restore the Security Deposit to its full amount within ten (10) days after Landlord’s written request. Tenant’s failure to do so shall be a material default under this Lease. No interest shall be paid on the Security Deposit. Landlord shall not be required to keep the Security Deposit separate from its other accounts and no trust relationship is created with respect to the Security Deposit.

(b) Each time the Base Rent is increased, Tenant shall deposit additional funds with Landlord sufficient to increase the Security Deposit to an amount which bears the same relationship to the adjusted Base Rent as the initial Security Deposit bore to the initial Base Rent, within ten (10 days after Landlord’s written request for the deposit of such additional funds.

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Section 3.03. Termination; Advance Payments. Upon termination of this Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any other termination not resulting from Tenant’s default, and after Tenant has vacated the Property in the manner required by this Lease, Landlord shall refund or credit to Tenant (or Tenant’s successor) the unused portion of the Security Deposit, if any, any advance rent or other advance payments made by Tenant to Landlord, and any amounts paid for real property taxes and other reserves which apply to any time periods after termination of the Lease.

ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT.

Section 4.01. Additional Rent. All charges payable by Tenant other than Base Rent are called “Additional Rent”. Unless this Lease provides otherwise, Tenant shall pay all Additional Rent commencing on the first day of the sixth (6^th) month after the Commencement Date. The term “rent” shall mean Base Rent and Additional Rent.

Section 4.02. Real Property Taxes and Other Payments.

(a) Real Property Taxes and Other Payments. Tenant shall pay all real property taxes on the Property (including any fees, taxes or assessments against, or as a result of, any tenant improvements installed on the Property by or for the benefit of Tenant) accruing during the Lease Term or, at Landlord’s election, reimburse Landlord monthly for all such Real Property Taxes. Landlord shall provide Tenant with written notice of taxes assessed within ten (10) business days of Landlord’s receipt of such tax assessments and/or tax billings from applicable taxing authorities. Subject to Paragraph 4.02(c) and Section 4.07 below, any payment by Tenant directly to the taxing authority shall be made at least twenty (20) days prior to the delinquency date of the taxes and after paying applicable Real Property Taxes, Tenant shall furnish Landlord with satisfactory evidence that the Real Property Taxes have been paid. Tenant will not be obligated to assume any tax obligations existing prior to the Commencement Date.

(b) Definition of “Real Property Tax.” “Real Property Tax” means: All Real Property Taxes, assessments and similar charges, including, without limitation (i) any fee, license fee, license tax, business license fee, commercial rental tax, levy charge, assessment, penalty or tax imposed by any taxing authority against the Property; (ii) any tax on the Landlord’s right to receive rent or income from the Property or against Landlord’s business of leasing the Property, but no such tax shall be due if it constitutes a portion of Landlord’s income taxes; (iii) water and sewer charges, any tax or charge for fire protection, streets, sidewalks, road maintenance, refuse or other services provided to the Property by any governmental agency; (iii) any tax imposed upon this transaction or based upon a re-assessment of the Property due to a change of ownership, as defined by applicable law, or other transfer of all or part of Landlord’s interest in the Property to include any payment due to, or occasioned by, Proposition 13; and (iv) any charge or fee replacing any tax previously included within the definition of Real Property Tax. “Real Property Tax” does not, however, include Landlord’s federal or state income, franchise, inheritance or estate taxes.

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(c) Personal Property Taxes.

(i) Tenant shall pay all taxes charged against trade fixtures, furnishings, equipment or any other personal property belonging to Tenant. Tenant shall have personal property taxed separately from the Property.

(ii) If any of Tenant’s personal property is taxed with the Property, Tenant shall pay Landlord the taxes for the personal property within fifteen (15) days after Tenant receives a written statement from Landlord for such personal property taxes.

(d) Tenant’s Right to Contest Taxes. Tenant may attempt to have the assessed valuation of the Property reduced or may initiate proceedings to contest the Real Property Taxes. If required by law, Landlord shall join in the proceedings brought by Tenant. However, Tenant shall pay all costs of the proceedings, including any costs or fees incurred by Landlord, including without limitation Landlord’s reasonable attorneys fees. Upon the final determination of any proceedings or contest, Tenant shall immediately pay the Real Property Taxes due, together with all costs, charges, interest and penalties incidental to the proceedings. If Tenant does not pay the Real Property Taxes when due and contests such Real Property Taxes, Tenant shall not be in default under this Lease for nonpayment of such Real Property Taxes if Tenant deposits funds with Landlord or opens an interest-bearing account reasonably acceptable to Landlord in the joint names of Landlord and Tenant. The amount of such deposit shall be sufficient to pay the Real Property Taxes plus a reasonable estimate of the interest, costs, charges and penalties which may accrue if Tenant’s action is unsuccessful, less any applicable tax impounds previously paid by Tenant to Landlord. The deposit shall be applied to the Real Property Taxes due, as determined at such proceedings. The Real Property Taxes shall be paid under protest from such deposit if such payment under protest is necessary to prevent the Property from being sold under a “tax sale” or similar enforcement proceeding.

Section 4.03. Utilities. Tenant shall pay, directly to the appropriate supplier, the cost of all natural gas, heat, light, power, sewer service, telephone, water, refuse disposal and other utilities and services supplied to the Property. However, if any services or utilities are jointly metered with other property, Landlord shall make a reasonable determination of Tenant’s proportionate share of the cost of such utilities and services and Tenant shall pay such share to Landlord within fifteen (15) days after receipt of Landlord’s written statement.

Section 4.04. Insurance Policies.

(a) Liability Insurance. During the Lease Term, Tenant shall maintain a policy of commercial general liability insurance (sometimes known as broad form comprehensive general liability insurance) insuring Tenant against liability for bodily injury, property damage (including loss of use of property) and personal injury arising out of the operation, use or occupancy of the Property. Tenant shall name Landlord and Panattoni Construction, Inc., a California corporation, as additional insured’s under such policy, and Tenant shall maintain a policy of at least TWO MILLION DOLLARS ($2,000,000.00) of umbrella coverage. The liability insurance obtained by Tenant under this Section 4.04(a) shall (i) be primary and non-contributing; (ii) contain cross-liability endorsements; and (iii) insure Landlord against Tenant’s performance under Section 5.05, if the matters giving rise to the indemnity under Section 5.05 result from the negligence of

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Tenant. Tenant shall be liable for the payment of any deductible amount. The amount and coverage of such insurance shall not limit Tenant’s liability nor relieve Tenant of any other obligations under this Lease. Landlord may also obtain comprehensive public liability insurance in an amount and with coverage determined by Landlord insuring Landlord against liability arising out of ownership, operation, use or occupancy of the Property. The policy obtained by Landlord shall not be contributory and shall not provide primary insurance.

(b) Property and Rental Income Insurance. During the Lease Term, Landlord shall maintain policies of insurance covering loss of or damage to the Property in the full amount of its replacement value. Such policy shall contain an inflation Guard Endorsement and shall provide protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, special extended perils (all risk), sprinkler leakage and any other perils which Landlord deems reasonably necessary. Landlord shall have the right to obtain flood and earthquake insurance if required by any lender holding a security interest in the Property at no cost to Tenant. Landlord shall not obtain insurance for Tenant’s fixtures or equipment or building improvements installed by Tenant on the Property. During the Lease Term, Landlord shall also maintain a rental income insurance policy, at Tenant’s expense, with loss payable to Landlord, in an amount equal to one (1) year’s Base Rent, plus estimated real property taxes and insurance premiums. Tenant shall be liable for the payment of any deductible amount under Tenant’s insurance policies maintained pursuant to this Section 4.04. Additionally, Tenant shall be liable for the payment of any deductible amount under Landlord’s insurance policies maintained pursuant to this Section 4.04 which deductible amount shall not exceed TWENTY-FIVE THOUSAND DOLLARS ($25,000.00). Tenant shall not do or permit anything to be done which invalidates any such insurance policies.

(c) Payment of Premiums. Subject to Section 4.07, Tenant shall pay all premiums for the insurance policies described in Sections 4.04(a) and (b) (whether obtained by Landlord or Tenant) within fifteen (15) days after Tenant’s receipt of a copy of the premium statement or other evidence of the amount due, except Landlord shall pay all premiums for non-primary comprehensive public liability insurance which Landlord elects to obtain as provided in Section 4.04(a). If insurance policies maintained by Landlord cover improvements on real property other than the Property, Landlord shall deliver to Tenant a statement of the premium applicable to the Property showing in reasonable detail how Tenant’s share of the premium was computed. If the Lease Term expires before the expiration of an insurance policy maintained by Landlord, Tenant shall be liable for Tenant’s prorated share of the insurance premiums. Before the Commencement Date, Tenant shall deliver to Landlord proof of insurance which Tenant is required to maintain under this Section 4.04. At least thirty (30) days prior to the expiration of any such policy, Tenant shall deliver to Landlord a renewal of such policy. As an alternative to providing a policy of insurance, Tenant shall have the right to provide Landlord a certificate of insurance, executed by an authorized officer of the insurance company, showing that the insurance which Tenant is required to maintain under this Section 4.04 is in full force and effect and containing such other information which Landlord reasonably requires. Landlord shall provide Tenant a schedule of current insurance premiums attributable to the Property.

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(d) General Insurance Provisions.

(i) Any insurance which Tenant is required to maintain under this Lease shall include a provision which requires the insurance carrier to give Landlord not less than thirty (30) days’ written notice prior to any cancellation or modification of such coverage.

(ii) If Tenant fails to deliver a policy, certificate or renewal to Landlord required under this Lease within the prescribed time period or if any such policy is canceled or modified during the Lease Term without Landlord’s consent, Landlord may obtain such insurance, in which case Tenant shall reimburse Landlord for the cost of such insurance within fifteen (15) days after receipt of a statement that indicates the cost of such insurance.

(iii) Tenant shall maintain all insurance required under this Lease with companies holding a “General Policy Rating” of A-12 or better, as set forth in the most current issue of “Best Key Rating Guide”. Landlord makes no representation as to the adequacy of such insurance to protect Landlord’s or Tenant’s interests.

(iv) Unless prohibited under any applicable insurance policies maintained, Landlord and Tenant each hereby waive any and all rights of recovery against the other, or against the officers, employees, agents or representatives of the other, for loss of or damage to its property or the property of others under its control, to the extent that such loss or damage is covered by any insurance policy in force (whether or not described in this Lease) at the time of such loss or damage. Upon obtaining the required policies of insurance, Landlord and Tenant shall give notice to the insurance carriers of this mutual waiver of subrogation.

Section 4.05. Late Charges. Tenant’s failure to pay rent promptly may cause Landlord to incur unanticipated costs. The exact amount of such costs are impractical or extremely difficult to ascertain. Such costs may include, but are not limited to, processing and accounting charges and late charges which may be imposed on Landlord by any ground lease, mortgage or trust deed encumbering the Property. Therefore, if Landlord does not receive any rent payment within ten (10) days after it becomes due, Tenant shall pay to Landlord a late charge equal to five percent (5%) of the overdue amount. The parties agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of such late payment.

Section 4.06. Interest on Past Due Obligations. Any amount owed by Tenant to Landlord which is not paid when due shall bear interest at the rate of ten percent (10%) per annum from the due date of such amount. However, interest shall not be payable on late charges to be paid by Tenant under this Lease. The payment of interest on such amounts shall not excuse or cure any default by Tenant under this Lease. If the interest rate specified in this Lease is higher than the rate permitted by law, the interest rate is hereby decreased to the maximum legal interest rate permitted by law.

Section 4.07. Impounds for Insurance Premiums and Real Property Taxes. If requested by any ground lessor or lender to whom Landlord has granted a security interest in the Property, or if Tenant is more than ten (10) days late in the payment of rent more than once in any consecutive twelve (12) month period, Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual real property taxes and insurance premiums payable by Tenant under this Lease, together with each payment of Base Rent. Landlord shall hold such payments in a non-interest

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bearing impound account. If unknown, Landlord shall reasonably estimate the amount of real property taxes and insurance premiums when due. Tenant shall pay any deficiency of funds in the impound account to Landlord upon written request. If Tenant defaults under this Lease, Landlord may apply any funds in the impound account to any obligation then due under this Lease.

Section 4.08. Management Fees. Tenant shall reimburse Landlord monthly for management fees and expenses incurred by Landlord in connection with the Property in an amount of two percent (2%) of annual Base Rent, prorated and payable monthly.

ARTICLE FIVE: USE OF PROPERTY.

Section 5.01. Permitted Uses. Tenant may use the Property only for the Permitted Uses set forth in Section 1.06 above.

Section 5.02. Manner of Use. Tenant shall not cause or permit the Property to be used in any way which constitutes a violation of any law, ordinance, or governmental regulation or order, which annoys or interferes with the rights of other tenants of Landlord, or which constitutes a nuisance or waste. Tenant shall obtain and pay for all permits, including a Certificate of Occupancy or the equivalent, required for Tenant’s occupancy or specific use of the Property and operation of Tenant’s business and shall promptly take all actions necessary to comply with all applicable statutes, ordinances, rules, regulations, orders and requirements regulating the use by Tenant of the Property, including the Occupational Safety and Health Act.

Section 5.03. Hazardous Materials. As used in this Lease, the term “Hazardous Material” or “Hazardous Substance” means any flammable items, explosives, radioactive materials, hazardous or toxic substances, material or waste or related materials, including any substances defined as or included in the definition of “hazardous substances”, “hazardous wastes”, “hazardous materials” or “toxic substances”, but excluding commonly used cleaning products (i.e. window and floor cleaners, bathroom cleaners, etc.) in ordinary quantities, now or subsequently regulated under any applicable federal, state or local laws or regulations, including, without limitation petroleum-based products, asbestos, PCBs and similar compounds, and including any different products and materials which are subsequently found to have adverse effects on the environment or the health and safety of persons. Tenant shall not cause or permit any Hazardous Material to be generated, produced, brought upon, used, stored, treated, released or disposed of in or about the Property by Tenant, its agents, employees, contractors, sublessees without the prior written consent of Landlord. Landlord shall be entitled to take into account such other factors or facts as Landlord may reasonably determine to be relevant in determining whether to grant or withhold consent to Tenant’s proposed activity with respect to Hazardous Material. In no event, however, shall Landlord be required to consent to the installation or use of any storage tanks on the Property. Landlord represents and warrants as to Landlord’s actual knowledge that as of the date of this Lease, Landlord is unaware of any Hazardous Materials and/or Hazardous Substances existing on, in or under the Property.

(a) Routine Reporting Requirements. Tenant shall promptly notify Landlord of, and shall promptly provide Landlord with true, correct, complete and legible copies of, all of the following environmental items relating to the Property which may be filed or prepared by or on

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behalf of, or delivered to or served upon, Tenant: reports filed pursuant to any self-reporting requirements, reports filed pursuant to any Environmental Laws or this Lease, all permit applications, permits, monitoring reports, workplace exposure and community exposure warnings or notices and all other reports, disclosures, plans or documents (even those which may be characterized as confidential) relating to water discharges, air, soil, sediment, and ground water pollution, waste generation or disposal, underground storage tanks or the use, storage or existence of Hazardous Substances. Landlord agrees that any materials that Tenant provides Landlord pursuant to this Section 4 shall be subject to the confidentiality requirements of Section 9 below.

(b) Incident Reporting Requirements. Tenant shall promptly notify Landlord of, and shall promptly provide Landlord with true, correct, complete and legible copies of, all the following environmental items relating to the Property which may be filed or prepared by or on behalf of, or delivered to or served upon, Tenant: all orders, reports, notices, listings and correspondence (even those which maybe considered confidential) of or concerning the release, investigation of, compliance, clean up, remedial and corrective actions, and abatement of Hazardous Substances on the Property whether or not required by Environmental Laws, including, but not limited to, reports and notices required by or given pursuant to any Environmental Laws, and all complaints, pleadings and other legal documents filed against Tenant related to Tenant’s use, handling, storage or disposal of Hazardous Substances on the Property. In the event of a release of any Hazardous Substances on the Property, Tenant shall promptly provide Landlord with copies of all reports and correspondence with or from all governmental agencies, authorities or any other persons relating to such release.

(c) Inspection: Compliance. Landlord and Landlord’s agents shall have the right, but not the obligation, to inspect, investigate, sample and/or monitor the Property, including any soil, water, groundwater or other sampling, and any other testing, digging, drilling or analyses, at any time to determine whether Tenant is complying with the terms of this Lease involving Hazardous Substances and in connection therewith, Tenant shall provide Landlord with full access to all relevant facilities, records and personnel upon at least one (1) day written notice to Tenant and without interfering with Tenant’s use of the Property. If Landlord reasonably determines that Tenant is not in compliance with the provisions of this Lease involving Hazardous Substances, after three (3) days prior written notice (i) Landlord and Landlord’s agents shall have the right, but not the obligation, without limitation upon any of Landlord’s other rights and remedies under this Lease, to immediately enter upon the Property and to discharge Tenant’s obligations in that regard at Tenant’s expense, notwithstanding any other provision of this Lease, and (ii) all sums reasonably and actually disbursed, deposited or incurred by Landlord in connection therewith, including, but not limited to, all actual out-of-pocket costs, expenses and actual and reasonable attorney fees, shall be due and payable by Tenant to Landlord, as an item of additional Rent, on demand by Landlord, together with interest thereon at the rate of ten percent (10%) per annum (the “Default Rate”) from the date which is twenty (20) days after such demand until paid by Tenant. In the event of any such entry and performance of such work, Landlord and Landlord’s agents shall endeavor to minimize interference with Tenant’s business but shall not be liable for any such interference.

(d) Actions and Proceedings. Landlord, at Landlord’s sole cost and expense, shall have the right, but not the obligation, to be present at any legal or administrative proceedings or

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actions initiated in connection with any claims or causes of action arising out of the storage, generation, use or disposal of Hazardous Substances on, under, from or about the Property caused by Tenant or any of Tenant’s agents, employees, contractors, licensees or invitees, after the Commencement Date, (any of such storage, generation, use or disposal described items (i) and (ii) hereinabove shall be sometimes referred to herein collectively as the “Tenant Environmental Activities”). Tenant has no responsibility for any Hazardous Substances existing on, in or under the Property as of Commencement Date, for which Landlord indemnifies Tenant. Landlord’s representative shall conduct an environmental inspection of the Property upon termination of the existing tenancy and prior to the Commencement Date and provide the results of such inspection promptly to Tenant. Such environmental inspection shall thereafter be the base line for the environmental condition of the Property upon Tenant’s vacation of the Property. In the event the environmental inspection of the Property performed prior to the Commencement Date discloses that the contamination will impair Tenant’s use of the Property, then Article 7 shall apply, and if the contamination is such that it would constitute a substantial or total destruction, Tenant shall have the right to terminate this Lease, and Tenant shall be entitled to a return of the Security Deposit and any prepaid Rent. In the event this Lease is a renewal or extension of a Lease which did not contain an environmental indemnity to Landlord by Tenant, upon execution of this Lease, Tenant agrees to indemnify Landlord for Tenant Environmental Activities from the date Tenant first occupied the Property. If the presence of any Hazardous Substances on, in or under the Property resulting from any Tenant Environmental Activities, results in (A) injury to any person or entity, (B) injury to or contamination of the Property or (C) injury to or contamination of any real or personal property wherever situated, Tenant, at its sole cost and expense, shall promptly take all actions necessary to return the Property to the condition existing prior to the introduction of such Hazardous Substances to the Property and to remedy or repair any such injury or contamination. Notwithstanding the foregoing, Tenant shall not, without Landlord’s prior written consent, which shall not be unreasonably withheld or delayed, take any remedial action in response to the presence of any Hazardous Substances on, under or about the Property, or enter into any settlement agreement, consent decree or other compromise with any governmental agency with respect to any Hazardous Substances claims; provided, however, Landlord’s prior written consent shall not be necessary in the event that the presence of Hazardous Substances on, under or about the Property (Y) poses an immediate threat to the health, safety or welfare of any individual or (Z) is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain Landlord’s consent before taking such action. However, Tenant shall immediately thereafter notify Landlord orally and in writing in the event of (Y) and (Z) above.

(e) Tenant’s Responsibility at Conclusion of Lease. Promptly upon the expiration or earlier termination of this Lease, Tenant shall represent to Landlord in writing that to the best of Tenant’s knowledge no Hazardous Substances exist on, in or under the Property as a result of Tenant Environmental Activities other than as specifically identified to Landlord by Tenant in writing. Landlord may, at any time prior to the expiration of the Lease Term, or upon the occurrence of a Tenant default as set forth in Section 10.02, by notice to Tenant, conduct or cause an outside consultant selected by Landlord to conduct an environmental evaluation of the Property, an executed copy of which evaluation shall be delivered to Tenant within thirty (30) days. If such environmental evaluation discloses the existence of Hazardous Substances on, under or about the Property as a result of any Tenant Environmental Activities, Tenant shall (i) pay for the reasonable cost of such evaluation, and (ii) at Landlord’s written request,

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immediately prepare and submit to Landlord within thirty (30) days after such request a comprehensive plan, subject to Landlord’s approval of the cleanup required, specifying within thirty (30) days after Landlord’s request therefore the actions to be taken by Tenant to return the Property to the condition existing prior to the introduction of such Hazardous Substances. Upon Landlord’s approval of such clean-up plan, Tenant shall, at Tenant’s sole cost and expense, without limitation on any rights and remedies of Landlord under this Lease, immediately implement such plan and proceed to clean up such Hazardous Substances, as required pursuant to the comprehensive plan, in accordance with all Environmental Laws and as required by such plan and this Lease.

Section 5.04. Signs and Auctions. Tenant shall not place any signs on the Property without Landlord’s prior written consent, which consent shall not be unreasonably withheld. Any such signage shall also be in accordance with the CC&R’s, and applicable City or County ordinances. All costs in connection with Tenant’s signage shall be at Tenant’s sole costs and expense, including without limitation, costs of installation, maintenance, repair, replacement and removal. Tenant shall not conduct or permit any auctions or sheriffs sales at the Property.

Section 5.05. Indemnity. Tenant shall indemnify Landlord against and hold Landlord harmless from any and all costs, claims or liability arising from: (a) the negligence or willful misconduct of Tenant or its agents, employees, contractors, licensees or invitees; (b) the conduct of Tenant’s business or anything else done or permitted by Tenant to be done in or about the Property, including any contamination of the Property or any other property resulting from the presence or use of Hazardous Material caused or permitted by Tenant; (c) any breach or default in the performance of Tenant’s obligations under this Lease; (d) any misrepresentation or breach of warranty by Tenant under this Lease. Tenant shall defend Landlord against any such cost, claim or liability at Tenant’s expense with counsel reasonably acceptable to Landlord. As a material part of the consideration to Landlord, Tenant assumes all risk of damage to property or injury to persons in or about the Property arising from any cause, and Tenant hereby waives all claims in respect thereof against Landlord, except for any claim arising out of Landlord’s gross negligence or willful misconduct. As used in this Section, the term “Tenant” shall include Tenant’s employees, agents, contractors, licensees and invitees.

Section 5.06. Landlord’s Access. Landlord or its agents may enter the Property at all reasonable times to show the Property to potential buyers, investors or tenants or other parties; to do any other act or to inspect and conduct tests in order to monitor Tenant’s compliance with all applicable environmental laws and all laws governing the presence and use of Hazardous Material; or for any other purpose Landlord deems necessary. Landlord shall give Tenant at least one (1) days prior notice of such entry, except in the case of an emergency. Landlord may place customary “For Sale” or “For Lease” signs on the Property.

Section 5.07. Quiet Possession. If Tenant pays the rent and complies with all other terms of this Lease, Tenant may occupy and enjoy the Property for the full Lease Term, subject to the provisions of this Lease.

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ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS

Section 6.01. Existing Conditions. Tenant accepts the Property in its current condition as of the execution of the Lease, subject to the obligations of Landlord set forth in Section 6.03 and subject to all recorded matters, laws, ordinances, and governmental regulations and orders. Except as provided herein, Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation as to the condition of the Property or the suitability of the Property for Tenant’s intended use. Tenant represents and warrants that Tenant has made its own inspection of and inquiry regarding the condition of the Property and is not relying on any representations of Landlord or any Broker with respect thereto.

Section 6.02. Exemption of Landlord from Liability. Landlord shall not be liable for any damage or injury to the person, business (or any loss of income therefrom), goods, wares, merchandise or other property of Tenant, Tenant’s employees, invitees, customers or any other person in or about the Property, whether such damage or injury is caused by or results from: (a) fire, steam, electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures or any other cause; (c) conditions arising in or about the Property or upon other portions of the Project, or from other sources or places; or (d) any act or omission of any other tenant of the Project. Landlord shall not be liable for any such damage or injury even though the cause of or the means of repairing such damage or injury are not accessible to Tenant. The provisions of this Section 6.02 shall not, however, exempt Landlord from liability for Landlord’s gross negligence or willful misconduct.

Section 6.03. Landlord’s Obligations. Subject to the provisions of this Section and Article Seven (Damage or Destruction) and Article Eight (Condemnation), Landlord shall have absolutely no responsibility to repair, maintain or replace any portion of the Property at any time, except that Landlord shall be responsible for repair of any structural elements in the Building, not caused by Tenant or its employees, agents or contractors, and for latent defects in the Building, at Landlord’s sole cost and expense. Landlord shall be responsible for replacement of the floor, roof and HVAC of the Building at Landlord’s sole cost and expense, unless such replacement is due to other than normal usage by Tenant, or its employees, agents or contractors. Landlord shall refurbish the landscaped areas and slurry coat portions of the parking lot, in Landlord’s reasonable discretion, at Landlord’s sole cost and expense. It is the intention of Landlord and Tenant that at all times Landlord shall maintain the portions of the Property which Landlord is obligated to maintain in an attractive, first-class and fully operative condition. Tenant waives the benefit of any present or future law which might give Tenant the right to repair the Property at Landlord’s expense or to terminate the Lease due to the condition of the Property.

Section 6.04. Tenant’s Obligations.

(a) Except as provided in Article Seven (Damage Destruction) and Article Eight (Condemnation), Tenant shall keep all portions of the Property (including nonstructural, interior, exterior, parking lot and landscaped areas or portions thereof, roof membrane and roof system, Building systems, HVAC and equipment) in good order, condition and repair (including interior repainting and refinishing, as needed, and including janitorial service to the Property), at Tenant’s expense. Tenant shall maintain a preventive maintenance contract approved by

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Landlord, providing for the regular inspection and maintenance of the HVAC system by a licensed heating and air conditioning contractor and the roof membrane by a licensed roof contractor. Tenant shall provide a copy of the preventive maintenance contract(s) to Landlord promptly upon request. Landlord may enter the Property pursuant to this Lease to verify that the HVAC system and roof membrane are being properly maintained. In no event shall any such preventive maintenance contract violate or void any applicable warranties. If any part of the Property is damaged by any act or omission of Tenant, Tenant shall pay Landlord the cost of repairing or replacing such damaged property, whether or not Landlord would otherwise be obligated to pay the cost of maintaining or repairing such property. It is the intention of Landlord and Tenant that at all times Tenant shall maintain the portions of the Property which Tenant is obligated to maintain in an attractive, first-class and fully operative condition.

(b) Tenant shall fulfill all of Tenant’s obligations under this Section 6.04, at Tenant’s sole expense. If Tenant fails to maintain, repair or replace the Property as required by this Section 6.04, Landlord may, upon ten (10) days’ prior notice to Tenant (except that no notice shall be required in the case of an emergency), enter the Property and perform such maintenance or repair (including replacement, as needed) on behalf of Tenant. In such case, Tenant shall reimburse Landlord for all costs incurred in performing such maintenance or repair immediately upon demand, together with interest at the rate of ten percent (10%) per annum.

Section 6.05. Alterations, Additions, and Improvements.

(a) Tenant shall not make any alterations, additions, or improvements to the Property without Landlord’s prior written consent, which consent will not be unreasonably withheld, except for non-structural alterations which do not exceed Ten Thousand Dollars ($10,000.00) in cost cumulatively over the Lease Term, which are not visible from the outside of any building of which the Property is part and which do not affect the structural portions of the Property. Landlord reserves the right at the expiration or earlier termination of the Lease Term to request those alterations, additions or improvements constructed without Landlord’s consent to be removed. Landlord may require Tenant to provide demolition and/or lien and completion bonds in form and amount satisfactory to Landlord. Tenant shall promptly remove any alterations, additions, or improvements constructed in violation of this Section 6.05(a) upon Landlord’s written request and repair any damage caused by such removal. All alterations, additions, and improvements shall be done in a good and workmanlike manner, in conformity with all applicable laws and regulations, and by a licensed contractor approved by Landlord, which approval shall not be unreasonably withheld and such contractor shall maintain liability, workmen’s compensation and other insurance in amounts as may be reasonably required and approved by Landlord. Tenant shall be responsible, at Tenant’s sole cost and expense, for obtaining any and all permits and approvals required for any such alterations, additions or improvements and shall deliver a copy of same to Landlord upon receipt by Tenant. Upon completion of any such work, Tenant shall provide Landlord with “as built” plans, copies of all construction contracts, and proof of payment for all labor and materials.

(b) Tenant shall pay when due all claims for labor and material furnished to the Property. Tenant shall give Landlord at least twenty (20) days’ prior written notice of the commencement of any work on the Property, regardless of whether Landlord’s consent to such work is required. Landlord may elect to record and post notices of non-responsibility on the Property.

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Section 6.06. Condition upon Termination. Upon the termination of the Lease, Tenant shall surrender the Property to Landlord, broom clean and in the same condition as received except for ordinary wear and tear which Tenant was not otherwise obligated to remedy under any provision of this Lease. However, Tenant shall not be obligated to repair any damage which Landlord is required to repair under Article Seven (Damage or Destruction). In addition, Landlord may require Tenant to remove any alterations, additions or improvements (whether or not made with Landlord’s consent) prior to the expiration of the Lease and to restore the Property to its prior condition, all at Tenant’s expense. All alterations, additions and improvements which Landlord has not required Tenant to remove shall become Landlord’s property and shall be surrendered to Landlord upon the expiration or earlier termination of the Lease, except that Tenant may remove any of Tenant’s machinery or equipment which can be removed without material damage to the Property. Tenant shall repair, at Tenant’s expense, any damage to the Property caused by the removal of any such machinery or equipment within ten (10) business days of the expiration or earlier termination of the Lease. In no event, however, shall Tenant remove any of the following materials or equipment (which shall be deemed Landlord’s property) without Landlord’s prior written consent or unless otherwise instructed by Landlord in writing: any power wiring or power panels; lighting or lighting fixtures; wall coverings; drapes, blinds or other window coverings; carpets or other floor coverings; heaters, air conditioners or any other heating or air conditioning equipment; fencing or security gates; or other similar building operating equipment and decorations.

ARTICLE SEVEN: DAMAGE OR DESTRUCTION

Section 7.01. Partial Damage to Property.

(a) Tenant shall notify Landlord in writing immediately upon the occurrence of any damage to the Property. If the Property is only partially damaged (i.e., less than fifty percent (50%) of the Property is untenantable as a result of such damage or less than fifty percent (50%) of Tenant’s operations are materially impaired) and if the proceeds received by Landlord from the insurance policies described in Section 4.04(b) are sufficient to pay for the necessary repairs, this Lease shall remain in effect and Landlord shall repair the damage as soon as reasonably possible. Landlord may elect (but is not required) to repair any damage to Tenant’s fixtures, equipment, or improvements.

(b) If the insurance proceeds received by Landlord are not sufficient to pay the entire cost of repair, or if the cause of the damage is not covered by the insurance policies which Landlord maintains under Section 4.04(b), Landlord may elect either to (i) repair the damage as soon as reasonably possible, in which case this Lease shall remain in full force and effect, or (ii) terminate this Lease as of the date the damage occurred. Landlord shall notify Tenant within thirty (30) days after receipt of notice of the occurrence of the damage whether Landlord elects to repair the damage or terminate the Lease. If Landlord elects to repair the damage, Tenant shall pay Landlord the “deductible amount” (if any) under Landlord’s insurance policies and, if the damage was due to an act or omission of Tenant, or Tenant’s employees, agents, contractors

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or invitees, the difference between the actual cost of repair and any insurance proceeds received by Landlord. If Landlord elects to terminate the Lease, Tenant may elect to continue this Lease in full force and effect, in which case Tenant shall repair any damage to the Property and any building in which the Property is located. Tenant shall pay the cost of such repairs, except that upon satisfactory completion of such repairs, Landlord shall deliver to Tenant any insurance proceeds received by Landlord for the damage repaired by Tenant. Tenant shall give Landlord written notice of such election within ten (10) days after receiving Landlord’s termination notice.

(c) If the damage to the Property occurs during the last six (6) months of the Lease Term and such damage will require more than thirty (30) days to repair, either Landlord or Tenant may elect to terminate this Lease as of the date the damage occurred, regardless of the sufficiency of any insurance proceeds. The party electing to terminate this Lease shall give written notification to the other party of such election within thirty (30) days after Tenant’s notice to Landlord of the occurrence of the damage.

Section 7.02. Substantial or Total Destruction. If the Property is substantially or totally destroyed by any cause whatsoever (i.e., the damage to the Property is greater than partial damage as described in Section 7.01), and regardless of whether Landlord receives any insurance proceeds, this Lease shall terminate as of the date the destruction occurred. Notwithstanding the preceding sentence, if the Property can be rebuilt within nine (9) months after the date of destruction, Landlord may elect to rebuild the Property at Landlord’s own expense, in which case this Lease shall remain in full force and effect. Landlord shall notify Tenant of such election within thirty (30) days after Tenant’s notice to Landlord of the occurrence of total or substantial destruction. If Landlord so elects, Landlord shall rebuild the Property at Landlord’s sole expense, except that if the destruction was caused by an act or omission of Tenant, Tenant shall pay Landlord the difference between the actual cost of rebuilding and any insurance proceeds received by Landlord.

Section 7.03. Temporary Reduction of Rent. If the Property is destroyed or damaged and Landlord or Tenant repairs or restores the Property pursuant to the provisions of this Article Seven, any rent payable during the period of such damage, repair and/or restoration shall be reduced according to the degree, if any, to which Tenant’s use of the Property is impaired. However, the reduction shall not exceed the sum of one year’s payment of Base Rent and Additional Rent. Except for such possible reduction in Base Rent and Additional Rent, Tenant shall not be entitled to any compensation, reduction, or reimbursement from Landlord as a result of any damage, destruction, repair, or restoration of or to the Property.

Section 7.04. Waiver. Tenant waives the protection of any statute, code or judicial decision which grants a tenant the right to terminate a lease in the event of the substantial or total destruction of the leased property. Tenant agrees that the provisions of Section 7.02 above shall govern the rights and obligations of Landlord and Tenant in the event of any substantial or total destruction to the Property.

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ARTICLE EIGHT: CONDEMNATION

If all or any portion of the Property is taken under the power of eminent domain or sold under the threat of that power (all of which are called “Condemnation”), this Lease shall terminate as to the part taken or sold on the date the condemning authority takes title or possession, whichever occurs first. If more than twenty percent (20%) of the floor area of the building in which the Property is located, or which is located on the Property, is taken, either Landlord or Tenant may terminate this Lease as of the date the condemning authority takes title or possession, by delivering written notice to the other within ten (10) days after receipt of written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority takes title or possession). If neither Landlord nor Tenant terminates this Lease, this Lease shall remain in effect as to the portion of the Property not taken, except that the Base Rent and Additional Rent shall be reduced in proportion to the reduction in the floor area of the Property. Any Condemnation award or payment shall be distributed in the following order: (a) first, to any ground lessor, mortgagee or beneficiary under a deed of trust encumbering the Property, the amount of its interest in the Property; (b) second, to Tenant, only the amount of any award specifically designated for loss of or damage to Tenant’s trade fixtures or removable personal property, Tenant’s loss of business goodwill, and relocation expenses, if specifically awarded by the condemning authority; (c) third, to Landlord, the remainder of such award, whether as compensation for reduction in the value of the leasehold, the taking of the fee, or otherwise. If this Lease is not terminated, Landlord shall repair any damage to the Property caused by the Condemnation, except that Landlord shall not be obligated to repair any damage for which Tenant has been reimbursed by the condemning authority. If the severance damages received by Landlord are not sufficient to pay for such repair, Landlord shall have the right to either terminate this Lease or make such repair at Landlord’s expense.

ARTICLE NINE: ASSIGNMENT AND SUBLETTING

Section 9.01. Landlord’s Consent Required. No portion of the Property or of Tenant’s interest in this Lease may be acquired by any other person or entity, whether by sale, assignment, mortgage, sublease, transfer, operation of law, or act of Tenant, without Landlord’s prior written consent, except as provided in Section 9.02 below. Landlord has the right to grant or withhold its consent as provided in Section 9.05 below. Any attempted transfer without consent shall be void and shall constitute a non-curable breach of this Lease. If Tenant is a partnership, any cumulative transfer of more than twenty percent (20%) of the partnership interests shall require Landlord’s consent. If Tenant is a corporation, any change in the ownership of a controlling interest of the voting stock of the corporation shall require Landlord’s consent.

Section 9.02. Tenant Affiliate. Tenant may assign this Lease or sublease the Property, without Landlord’s consent, to any corporation which controls, is controlled by or is under common control with Tenant, or to any corporation resulting from the merger of or consolidation with Tenant (“Tenant’s Affiliate”) so long as the net worth of Tenant’s Affiliate is equal to or greater than the net worth of Tenant as of the Commencement Date of this Lease. In such case, any Tenant’s Affiliate shall assume in writing all of Tenant’s obligations under this Lease.

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Section 9.03. No Release of Tenant. No transfer permitted by this Article Nine, whether with or without Landlord’s consent, shall release Tenant or change Tenant’s primary liability to pay the rent and to perform all other obligations of Tenant under this Lease. Landlord’s acceptance of rent from any other person is not a waiver of any provision of this Article Nine. Consent to one transfer is not a consent to any subsequent transfer. If Tenant’s transferee defaults under this Lease, Landlord may proceed directly against Tenant without pursuing remedies against the transferee. Landlord may consent to subsequent assignments or modifications of this Lease by Tenant’s transferee, without notifying Tenant or obtaining its consent. Such action shall not relieve Tenant’s liability under this Lease.

Section 9.04. Offer to Terminate. If Tenant desires to assign the Lease or sublease the Property, Tenant shall have the right to offer, in writing, to terminate the Lease as of a date specified in the offer. If Landlord elects in writing to accept the offer to terminate within twenty (20) days after notice of the offer, the Lease shall terminate as of the date specified and all the terms and provisions of the Lease governing termination shall apply. If Landlord does not so elect, the Lease shall continue in effect until otherwise terminated and the provisions of Section 9.05 with respect to any proposed transfer shall continue to apply.

Section 9.05. Landlord’s Consent.

(a) Tenant’s request for consent to any transfer described in Section 9.01 shall set forth in writing the details of the proposed transfer, including the name, business and financial condition of the prospective transferee, financial details of the proposed transfer (e.g., the term of and the rent and security deposit payable under any proposed assignment or sublease), and any other information Landlord deems relevant. Landlord shall have the right to withhold consent, if reasonable, or to grant consent, based on the following factors: (i) the business of the proposed assignee or subtenant and the proposed use of the Property: (ii) the net worth and financial reputation of the proposed assignee or subtenant: (iii) Tenant’s compliance with all of its obligations under the Lease: and (iv) such other factors as Landlord may reasonably deem relevant. If Landlord objects to a proposed assignment solely because of the net worth and/or financial reputation of the proposed assignee, Tenant may nonetheless sublease (but not assign), all or a portion of the Property to the proposed transferee, but only on the other terms of the proposed transfer.

(b) If Tenant assigns or subleases, the following shall apply:

(i) Tenant shall pay to Landlord as Additional Rent under the Lease the Landlord’s Share (stated in Section 1.13) of the Profit (defined below) on such transaction as and when received by Tenant, unless Landlord gives written notice to Tenant and the assignee or subtenant that Landlord’s Share shall be paid by the assignee or subtenant to Landlord directly. The “Profit” means (A) all amounts paid to Tenant for such assignment or sublease, including “key” money, monthly rent in excess of the monthly rent payable under the Lease, and all fees and other consideration paid for the assignment or sublease, including fees under any collateral agreements, less (B) costs and expenses directly incurred by Tenant in connection with the execution and performance of such assignment or sublease for real estate broker’s commissions and costs of renovation or construction of tenant improvements required under such assignment

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of sublease. Tenant is entitled to recover such cost and expenses before Tenant is obligated to pay the Landlord’s Share to Landlord. The Profit in the case of a sublease of less than all the Property is the rent allocable to the subleased space as a percentage on a square footage basis.

(ii) Tenant shall provide Landlord a written statement certifying all amounts to be paid from any assignment or sublease of the Property within thirty (30) days after the transaction documentation is signed, and Landlord may inspect Tenant’s books and records to verify the accuracy of such statement. On written request, Tenant shall promptly furnish to Landlord copies of all the transaction documentation, all of which shall be certified by Tenant to be complete, true and correct. Landlord’s receipt of Landlord’s Share shall not be consent to any further assignment or subletting. The breach of Tenant’s obligation under this Section 9.05(b) shall be a material default of the Lease.

Section 9.06. No Merger. No merger shall result from Tenant’s sublease of the Property under this Article Nine, Tenant’s surrender of this Lease or the termination of this Lease in any other manner. In any such event, Landlord may terminate any or all subtenancies or succeed to the interest of Tenant as sublandlord under any or all subtenancies.

ARTICLE TEN: DEFAULTS; REMEDIES

Section 10.01. Covenants and Conditions. Tenant’s performance of each of Tenant’s obligations under this Lease is a condition as well as a covenant. Tenant’s right to continue in possession of the Property is conditioned upon such performance. Time is of the essence in the performance of all covenants and conditions.

Section 10.02. Defaults. Tenant shall be in material default under this Lease:

(a) If Tenant abandons the Property or if Tenant’s vacation of the Property results in the cancellation of any insurance described in Section 4.04;

(b) If Tenant fails to pay rent or any other charge when due, provided however that Landlord must first provide Tenant with five (5) days written notice of such non-payment and an opportunity to cure one time in any twelve (12) month period in the event of such non-payment;

(c) If Tenant fails to perform any of Tenant’s non-monetary obligations under this Lease for a period of thirty (30) days after written notice from Landlord; provided that if more than thirty (30) days are required to complete such performance, Tenant shall not be in default if Tenant commences such performance within the thirty (30)-day period and thereafter diligently pursues its completion, except that any failure by Tenant to provide Landlord with the documents required in Section 11.03 or Section 11.04 shall not be subject to this 30-day cure period. However, Landlord shall not be required to give such notice if Tenant’s failure to perform constitutes a non-curable breach of this Lease. The notice required by this Section is intended to satisfy any and all notice requirements imposed by law on Landlord and is not in addition to any such requirement.

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(d) (i) If Tenant makes a general assignment or general arrangement for the benefit of creditors; (ii) if a petition for adjudication of bankruptcy or for reorganization or rearrangement is filed by or against Tenant and is not dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed to take possession of substantially all of Tenant’s assets located at the Property or of Tenant’s interest in this Lease and possession is not restored to Tenant within thirty (30) days; or (iv) if substantially all of Tenant’s assets located at the Property or of Tenant’s interest in this Lease is subjected to attachment, execution or other judicial seizure which is not discharged within thirty (30) days. If a court of competent jurisdiction determines that any of the acts described in this subsection (d) is not a default under this Lease, and a trustee is appointed to take possession (or if Tenant remains a debtor in possession) and such trustee or Tenant transfers Tenant’s interest hereunder, then Landlord shall receive, as Additional Rent, the excess, if any, of the rent (or any other consideration) paid in connection with such assignment or sublease over the rent payable by Tenant under this Lease.

(e) If any guarantor of the Lease revokes or otherwise terminates, or purports to revoke or otherwise terminate, any guaranty of all or any portion of Tenant’s obligations under the Lease. Unless otherwise expressly provided, no guaranty of the Lease is revocable.

Section 10.03. Remedies. On the occurrence of any material default by Tenant, Landlord may, at any time thereafter, with or without notice or demand and without limiting Landlord in the exercise of any right or remedy which Landlord may have:

(a) Terminate Tenant’s right to possession of the Property by any lawful means, and terminate this Lease in which event Tenant shall immediately surrender possession of the Property to Landlord. In such event, Landlord shall be entitled to recover from Tenant all damages incurred by Landlord by reason of Tenant’s default, including (i) the worth at the time of the award of the unpaid Base Rent, Additional Rent and other charges which Landlord had earned at the time of the termination; (ii) the worth at the time of the award of the amount by which the unpaid Base Rent, Additional Rent and other charges which Landlord would have earned after termination until the time of the award exceeds the amount of such rental loss that Tenant proves Landlord could have reasonably avoided; (iii) the worth at the time of the award of the amount by which the unpaid Base Rent, and other charges which Tenant would have paid for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves Landlord could have reasonably avoided; and (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under the Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, any costs or expenses Landlord incurs in maintaining or preserving the Property after such default, the cost of recovering possession of the Property, expenses of reletting, including necessary renovation or alteration of the Property, Landlord’s reasonable attorneys’ fee incurred in connection therewith, and any real estate commission paid or payable. As used in subparts (i) and (ii) above, the “worth at the time of the award” is computed by allowing interest on unpaid amounts at the rate of ten percent (10%) per annum, or such lesser amount as may then be the maximum lawful rate. As used in subpart (iii) above, the “worth at the time of the award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1%). If Tenant has abandoned the Property, Landlord shall have the option of (i) retaking possession of the Property and recovering from Tenant the amount specified in this Section 10.03(a), or (ii) proceeding under Section 10.03(b);

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(b) Terminate Tenant’s right to possession of the property by any lawful means or maintain Tenant’s right to possession and not terminate this lease, in which case this Lease shall continue in effect whether or not Tenant is in possession of the Property. In such event, Landlord shall be entitled to enforce all of Landlord’s rights and remedies under this Lease, including the right to recover the rent as it becomes due;

(c) Pursue any other remedy now or hereafter available to Landlord in equity or under the laws or judicial decisions of the state in which the Property is located.

This lease shall not terminate in the event of a material default by Tenant unless Landlord expressly terminates it.

Section 10.04. Repayment of “Free” Rent. If this Lease provides for a postponement of any monthly rental payments, a period of “free” rent or other rent concession, such postponed rent or “free” rent is called the “Abated Rent”. Tenant shall be credited with having paid all of the Abated Rent on the expiration of the Lease Term only if Tenant has fully, faithfully, and punctually performed all of Tenant’s obligations hereunder, including the payment of all rent (other than the Abated Rent) and all other monetary obligations and the surrender of the Property in the physical condition required by this Lease. Tenant acknowledges that its right to receive credit for the Abated Rent is absolutely conditioned upon Tenant’s full, faithful and punctual performance of its obligations under this Lease. If Tenant defaults and does not cure within any applicable grace period, the Abated Rent shall immediately become due and payable in full and this Lease shall be enforced as if there were no such rent abatement or other rent concession. In such case, Abated Rent shall be calculated based on the full initial rent payable under this Lease. Notwithstanding for foregoing, for each year that the Tenant remains lawfully in possession of the Property and has not been in default under this Lease, the obligation of Tenant to repay “free” rent to Landlord shall reduce by twenty percent (20%) per Lease year.

Section 10.05. Damages. In the event of the termination of the lease, Landlord’s damages for default shall include all costs and fees, including reasonable attorneys’ fees that Landlord incurs in connection with the filing, commencement, pursuing and/or defending of any action in any bankruptcy court or other court with respect to the Lease; or the pursuing of any action with respect to Landlord’s right to possession of the Property. All such damages suffered (apart from Base Rent and other rent payable hereunder) shall constitute pecuniary damages which must be reimbursed to Landlord prior to assumption of the Lease by Tenant or any successor to Tenant in any bankruptcy or other proceeding.

Section 10.06. Cumulative Remedies. Landlord’s exercise of any right or remedy shall not prevent it from exercising any other right or remedy.

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ARTICLE ELEVEN. PROTECTION OF LENDERS.

Section 11.01. Subordination. Landlord shall have the right to subordinate this Lease to any ground lease, deed of trust or mortgage encumbering the Property, any advances made on the security thereof and any renewals, modifications, consolidations, replacements or extensions thereof, whenever made or recorded. Tenant shall cooperate with Landlord and any existing lender, or a lender who is acquiring a security interest in the Property or the Lease. Tenant shall execute the Subordination, Non-Disturbance and Attornment Agreement with Landlord’s existing lender upon Lease execution, and which is attached hereto as Exhibit “D”, and made a part hereof by reference. Tenant shall execute such further documents and assurances as such future lender may require, provided that Tenant’s obligations under this Lease shall not be increased in any material way (the performance of ministerial acts shall not be deemed material), and Tenant shall not be deprived of its rights under this Lease. Tenant’s right to quiet possession of the Property during the Lease Term shall not be disturbed if Tenant pays the rent and performs all of Tenant’s obligations under this Lease and is not otherwise in default. If any ground lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of its ground lease, deed of trust or mortgage and gives written notice thereof to Tenant, this Lease shall be deemed prior to such ground lease, deed of trust or mortgage whether this Lease is dated prior or subsequent to the date of said ground lease, deed of trust or mortgage or the date of recording thereof.

Section 11.02. Attornment. If Landlord’s interest in the Property is acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or purchaser at a foreclosure sale, Tenant shall attorn to the transferee or successor to Landlord’s interest in the Property and recognize such transferee or successor as Landlord under this Lease. Tenant waives the protection of any statute or rule of law which gives or purports to give Tenant any right to terminate this Lease or surrender possession of the Property upon the transfer of Landlord’s interest.

Section 11.03. Signing of Documents. Tenant shall sign and deliver any instrument or documents necessary or appropriate to evidence any such attornment or subordination or agreement to do so. If Tenant fails to do so within ten (10) days after written request, Tenant hereby makes, constitutes and irrevocably appoints Landlord, or any transferee or successor of Landlord, the attorney-in-fact of Tenant to execute and deliver any such instrument or document.

Section 11.04. Estoppel Certificates.

(a) Upon either party’s written request, the other party shall execute, acknowledge and deliver to Landlord a written statement in the form attached hereto as Exhibit E, certifying: (i) that none of the terms or provisions of this Lease have been changed (or if they have been changed, stating how they have been changed); (ii) that this Lease has not been cancelled or terminated; (iii) the last date of payment of the Base Rent and other charges and the time period covered by such payment; (iv) that the party so executing is not in default under this Lease (or, if the party is claimed to be in default, stating why); and (v) such other representations or information with respect to parties or the Lease as the requesting party may reasonably request or which any prospective purchaser or encumbrancer of the Property may require. The responding party shall deliver such statement to the requesting party within twenty (20) days after the request. The parties may give any such statement to any prospective purchaser or encumbrancer of the Property, or any third party requesting such as statement, and such purchaser or encumbrancer or third party may rely conclusively upon such statement as true and correct.

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(b) If the responding party does not deliver such statement to the requesting party within such twenty (20) day period, the requesting party and any prospective purchaser or encumbrancer, or third party, may conclusively presume and rely upon the following facts: (i) that the terms and provisions of this Lease have not been changed except as otherwise represented by the requesting party; (ii) that this Lease has not been cancelled or terminated except as otherwise represented by the requesting party; (iii) that not more than one month’s Base Rent or other charges have been paid in advance; and (iv) that the requesting party is not in default under the Lease. In such event, the responding party shall be estopped from denying the truth of such facts.

Section 11.05. Tenant’s Financial Condition. Within ten (10) days after written request from Landlord, Tenant shall deliver to Landlord such financial statements as Landlord reasonably requires to verify the net worth of Tenant or any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall deliver to any lender or prospective purchaser designated by Landlord any financial statements required by such lender or prospective purchaser to facilitate the financing, refinancing or purchase of the Property. Tenant represents and warrants to Landlord that each such financial statement is a true and accurate statement as of the date of such statement. All financial statements shall be confidential and shall be used only for the purposes set forth in this Lease.

ARTICLE TWELVE: LEGAL COSTS

Section 12.01. Legal Proceedings. Tenant shall also indemnify Landlord against and hold Landlord harmless from all costs, expenses, demands and liability Landlord may incur if Landlord becomes or is made a party to any claim or action (a) instituted by Tenant against any third party, or by any third party against Tenant, or by or against any person holding any interest under or using the Property by license of or agreement with Tenant; (b) for foreclosure of any lien for labor or material furnished to or for Tenant or such other person; (c) otherwise arising out of or resulting from any act or transaction of Tenant or such other person; or (d) necessary to protect Landlord’s interest under this Lease in a bankruptcy proceeding, or other proceeding under Title 11 of the United States Code, as amended. Tenant’s defense of the aforementioned actions may be by counsel selected by Tenant and reasonably approved by Landlord. In the event of any litigation to enforce or interpret this Lease, the prevailing party shall be entitled to reasonable attorney’s fees and costs. This provision shall survive the termination of this Lease.

Section 12.02. Landlord’s Consent. Tenant shall pay Landlord’s reasonable attorneys’ fees incurred in connection with Tenant’s request for Landlord’s consent under Article Nine (Assignment and Subletting), or in connection with any other act which Tenant proposes to do and which requires Landlord’s consent, which attorneys’ fees shall not exceed one thousand dollars ($1,000).

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ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS

Section 13.01. Non-Discrimination. Tenant promises, and it is a condition to the continuance of this Lease, that there will be no discrimination against, or segregation of, any person or group of persons on the basis of race, color, sex, creed, national origin or ancestry in the leasing, subleasing, transferring, occupancy, tenure or use of the Property or any portion thereof.

Section 13.02. Landlord’s Liability; Certain Duties.

(a) As used in this Lease, the term “Landlord” means only the current owner or owners of the fee title to the Property or the leasehold estate under a ground lease of the Property at the time in question. Each Landlord is obligated to perform the obligations of Landlord under this Lease only during the time such Landlord owns such interest or title. Any Landlord who transfers its title or interest is relieved of all liability with respect to the obligations of Landlord under this Lease to be performed on or after the date of transfer. However, each Landlord shall deliver to its transferee all funds that Tenant previously paid if such funds have not yet been applied under the terms of this Lease.

(b) Tenant shall give written notice of any failure by Landlord to perform any of its obligations under this Lease to Landlord and to any ground lessor, mortgagee or beneficiary under any deed of trust encumbering the Property whose name and address have been furnished to Tenant in writing. Landlord shall not be in default under this Lease unless Landlord (or such ground lessor, mortgagee or beneficiary) fails to cure such non-performance within thirty (30) days after receipt of Tenant’s notice. However, if such non-performance reasonably requires more than thirty (30) days to cure, Landlord shall not be in default if such cure is commenced within such thirty (30) day period and thereafter diligently pursued to completion.

(c) Notwithstanding any term or provision herein to the contrary, the liability of Landlord for the performance of its duties and obligations under this Lease is limited to Landlord’s interest in the Property, and neither the Landlord nor its partners, shareholders, officers or other principals shall have any personal liability under this Lease.

Section 13.03. Severability. A determination by a court of competent jurisdiction that any provision of this Lease or any part thereof is illegal or unenforceable shall not cancel or invalidate the remainder of such provision or this Lease, which shall remain in full force and effect.

Section 13.04. Interpretation. The captions of the Articles or Sections of this Lease are to assist the parties in reading this Lease and are not a part of the terms or provisions of this Lease. Whenever required by the context of this Lease, the singular shall include the plural and the plural shall include the singular. The masculine, feminine and neuter genders shall each include the other. In any provision relating to the conduct, acts or omissions of Tenant, the term “Tenant” shall include Tenant’s agents, employees, contractors, invitees, successors or others using the Property with Tenant’s expressed or implied permission.

Section 13.05. Incorporation of Prior Agreements; Modifications. This Lease is the only agreement between the parties pertaining to the lease of the Property and no other agreements are effective. All amendments to this Lease shall be in writing and signed by all parties. Any other attempted amendment shall be void.

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Section 13.06. Notices. All notices required or permitted under this Lease shall be in writing and shall be personally delivered or sent by certified mail, return receipt requested, postage prepaid or by electronic mail transmission providing sending party retains evidence of such transmissions. Notices to Tenant shall be delivered to the address specified in Section 1.03 above, except that upon Tenant’s taking possession of the Property, the Property shall be Tenant’s address for notice purposes. Notices to Landlord shall be delivered to the address specified in Section 1.02 above. All notices shall be effective upon delivery. Either party may change its notice address upon written notice to the other party.

Section 13.07. Waivers. All waivers must be in writing and signed by the waiving party. Landlord’s failure to enforce any provision of this Lease or its acceptance of rent shall not be a waiver and shall not prevent Landlord from enforcing that provision or any other provision of this Lease in the future. No statement on a payment check from Tenant or in a letter accompanying a payment check shall be binding on Landlord. Landlord may, with or without notice to Tenant, negotiate such check without being bound to the conditions of such statement.

Section 13.08. No Recordation. Tenant shall not record this Lease without prior written consent from Landlord. However, either Landlord or Tenant may require that a “Short Form” memorandum of this Lease executed by both parties be recorded. The party requiring such recording shall pay all transfer taxes and recording fees.

Section 13.09. Binding Effect; Choice of Law. This Lease binds any party who legally acquires any rights or interest in this Lease from Landlord or Tenant. However, Landlord shall have no obligation to Tenant’s successor unless the rights or interests of Tenant’s successor are acquired in accordance with the terms of this Lease. The laws of the state in which the Property is located shall govern this Lease, and any dispute shall be resolved in the Superior Court of the County in which the Property is located.

Section 13.10. Corporate Authority; Partnership Authority; Limited Liability Company Authority. If Tenant is a corporation, each person signing this Lease on behalf of Tenant represents and warrants that he has full authority to do so and that this Lease binds the corporation. If Tenant is a partnership, each person or entity signing this Lease for Tenant represents and warrants that he or it is a general partner of the partnership, that he or it has full authority to sign for the partnership and that this Lease binds the partnership and all general partners of the partnership. Tenant shall give written notice to Landlord of any general partner’s withdrawal or addition. Within thirty (30) days after this Lease is signed, Tenant shall deliver to Landlord a copy of Tenant’s recorded statement of partnership or certificate of limited partnership. If Tenant is a limited liability company, each person or entity signing this Lease for Tenant represents and warrants that he or it is the manager or managing member of the limited liability company, that he or it has full authority to sign for the limited liability company, and that this Lease binds the limited liability company. Within thirty (30) days after this Lease is signed, Tenant shall deliver to Landlord evidence satisfactory to Landlord of the authority of the individual(s) signing this Lease.

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Section 13.11. Joint and Several Liability. All parties signing this Lease as Tenant shall be jointly and severally liable for all obligations of Tenant.

Section 13.12. Force Majeure. If Landlord cannot perform any of its obligations due to events beyond Landlord’s control, the time provided for performing such obligations shall be extended by a period of time equal to the duration of such events. Events beyond Landlord’s control include, but are not limited to, delays caused by Tenant or its agents, employees or contractors, acts of God, war, terrorism, civil commotion, labor disputes, strikes, fire, flood or other casualty, shortages of labor or material, government regulation or restriction, delays in issuance of applicable permits or other required governmental approvals, and weather conditions.

Section 13.13. Execution of Lease. This Lease may be executed in counterparts and, when all counterpart documents are executed, the counterparts shall constitute a single binding instrument. Landlord’s delivery of this Lease to Tenant shall not be deemed to be an offer to lease and shall not be binding upon either party until executed and delivered by both parties.

Section 13.14. Survival. All representations and warranties of Landlord and Tenant shall survive the termination of this Lease.

ARTICLE FOURTEEN: BROKERS

Section 14.01. Broker’s Fee. When this Lease is signed by and delivered to both Landlord and Tenant, Landlord shall pay a real estate commission to Landlord’s Broker named in Section 1.08 above, if any, as provided in the written agreement between Landlord and Landlord’s Broker, or the sum stated in Section 1.09 above for services rendered to Landlord by Landlord’s Broker. If a Tenant’s Broker is named in Section 1.08 above, Landlord’s Broker shall pay an appropriate portion of its commission to Tenant’s Broker if so provided in any agreement between Landlord’s Broker and Tenant’s Broker. Nothing contained in this Lease shall impose any obligation on Landlord to pay a commission or fee to any party other than Landlord’s Broker.

Section 14.02. Agency Disclosure; No Other Brokers. Landlord and Tenant each warrant that they have dealt with no other real estate broker(s) in connection with this transaction except the brokers set forth in Section 1.08 above. Landlord and Tenant hereby agree to indemnify and defend the other for any commission or fee claimed by any other party. The terms of this Section 14.02 shall survive the expiration or termination of this Lease.

ARTICLE FIFTEEN: COMPLIANCE

The parties hereto agree to comply with all applicable federal, state and local laws, regulations, codes, ordinances and administrative orders having jurisdiction over the parties, property or the subject matter of this Agreement, including, but not limited to, the 1964 Civil Rights Act and all amendments thereto, the Foreign Investment in Real Property Tax Act, the Comprehensive Environmental Response Compensation and Liability Act, and The Americans With Disabilities Act. Tenant shall comply with, and Tenant’s occupancy of the Property shall be subject to any Covenants, Conditions or Restrictions (“CC&R’s”), if any, recorded in the real property records against the Property.

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Landlord and Tenant have signed this Lease at the place and on the dates specified adjacent to their signatures below and have initialed all Exhibits which are attached to or incorporated by reference in this Lease.

“LANDLORD”
SIXTH AND ROCHESTER, LLC, a California limited liability company,
By:	PG 6th & R, LLC,
	a California limited liability company,
	Managing Member
	By:	Panattoni Investments, LLC,
		a California limited liability company,
		Managing Member,
		By:
			Carl D. Panattoni, Trustee of the
			Panattoni Living Trust, Dated April 8, 1998,
			Managing Member
Signed on June 10, 2009

TENANT”
MONOPRICE, INC., a California corporation
By:
Name:	JONG S LEE
Its:	CEO
Signed on June 5th, 2009

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ADDENDUM

This addendum (“Addendum”) is attached to and made a part of that certain Lease Agreement (Single-Tenant Facility) (“Lease”) dated June 2, 2009, by and between Sixth and Rochester, LLC, a California limited liability company (the “Landlord”), and Monoprice, Inc., a California corporation (the “Tenant”), and is made concurrently with the Lease. The terms and conditions of this Addendum supplement and, to the extent of any conflict, supersede the provisions of the Lease. Each initially capitalized term used and not defined in this Addendum shall have the meaning given it in the Lease.

1. Tenant Obligation for Permits:

(a) Tenant shall be solely responsible, at its expense, for obtaining all conditional use permits (if any) or any replacement permit required for Tenant’s specific use of the Property or improvements constructed by Tenant, to include without limitation, racking permits and high pile permits.

(b) Tenant’s city-approved commodity and/or use of the Property may require specific costs and/or work to be performed related to egress lighting, hose racks, in-rack sprinklers or any other fire and/or life safety requirements. Any and all such costs and work to be performed related thereto shall be the sole responsibility of Tenant and at Tenant’s sole cost and expense.

(c) There shall be no delay of the Commencement Date as a result of any failure or delay in obtaining any such permits or approvals or to perform such work.

2. ADA Compliance:

Notwithstanding any other provision of this Lease, the parties hereby agree that the Property may be subject to the terms and conditions of the Americans with Disabilities Act of 1990 as may be amended and any applicable state laws relating to the disabled (hereinafter collectively the “ADA”). The parties further agree and acknowledge that it shall be the sole responsibility of Landlord to comply with any and all provisions of the ADA with respect to the shell improvements and any improvements constructed by Landlord as of the Commencement Date. Tenant shall comply with any and all provisions of the ADA as such compliance may be required to construct future improvements to the Property and to operate the Property after Tenant’s occupancy or in connection with Tenant’s specific use. Each party further agrees to indemnify and hold each other harmless against any claims, which may arise out of the indemnifying party’s failure to comply with the ADA as required by this Section. Such indemnification shall include, but not necessarily be limited to reasonable attorney’s fees, court costs, and judgments as a result of said claims.

3. Improvements to be Constructed by Landlord:

Landlord, or Landlord’s contractor, shall construct Tenant’s improvements (“Tenant Work”) based on the work letter agreement (“Tenant Work Letter”) for the Tenant Work, attached hereto as Exhibit “C” and incorporated herein.

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4. Option to Extend:

(a) Extension Periods. The Lease Term may be extended, at the option of Tenant, for one (1) period of five (5) years, potentially for a total of five (5) years, each such period herein sometimes referred to as the “Extension Period”, provided that (i), prior to expiration of the Lease Term, Tenant provides the Landlord with no less than nine (9) months and no more than twelve (12) months prior written notice for said Extension Period, and (ii) Tenant is not then in material default of the Lease at the time Tenant submits notice to extend the Lease Term, beyond any applicable notice and grace periods. The Extension Period shall be on the same terms, covenants and conditions of this Lease, except for the payment of Base Rent that shall be as set forth in subsection (c) below. Tenant shall not be permitted to extend this Lease beyond the Extension Period. If Tenant fails to exercise an extension, then the Lease shall expire at the end of the then current term and Tenant shall have no further right to extend the Lease Term.

(b) In the event Tenant exercises a renewal option, upon Landlord’s request, Tenant shall execute and deliver to Landlord a Lease amendment within thirty (30) days after Tenant’s receipt of such request setting forth the Base Rent for the option period and the commencement and expiration of the upcoming Extension Period.

(c) The Rent during the Extension Period shall be at ninety-five percent (95%) of the then prevailing market rental rate for the Property. The parties will attempt in good faith to arrive at the fair market rental rate. In the event the parties cannot agree on the fair market rental rate within thirty (30) days of Tenant’s exercise of the option to extend, the parties shall each designate an MAI appraiser with a minimum of ten (10) years experience in the Ontario Airport Market place within ten (10) days of the date the parties determine they cannot agree on a fair market rental rate. The appraisers so selected shall mutually agree on a third MAI appraiser with the above qualifications. That appraiser shall appraise the Property and determine the fair market rent rate for the five-year (5-year) Extension Period taking into consideration the value of the Property, the rental market in the Ontario Airport Market place, rental for buildings of comparable quality and other relevant factors. If the appraisers cannot agree on the third MAI appraiser, then upon application, the Presiding Judge for the Superior Court for San Bernardino County covering the City of Rancho Cucamonga, California shall make such selection upon application of either party.

5. Preparation of Lease:

This Lease shall not be construed more strictly against one party than against the other merely by virtue of the fact that it may have been prepared by counsel for one of the parties, it being recognized that both Landlord and Tenant have contributed substantially and materially to the preparation of this Lease. The headings of various sections in this Lease are for convenience only and are not to be utilized in construing the content or meaning of the substantive provisions hereof. The terms “herein,” “hereof,” “hereunder” and any other similar terms used herein shall be deemed to refer to this Lease in its entirety. All references herein to a party’s best knowledge shall be deemed to mean the best knowledge of such party based on all appropriate

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and thorough inquiry. Unless specified to the contrary herein, all references herein to an exercise of discretion or judgment by Landlord, to the making of a determination or designation by Landlord, to the application of Landlord’s discretion or opinion, to the granting or withholding of Landlord’s consent or approval, to the consideration of whether a matter or thing is satisfactory or acceptable to Landlord, or otherwise involving the decision making of Landlord, shall be deemed to mean that Landlord shall decide unilaterally using its reasonable discretion or judgment and such approval shall not be unreasonably withheld or delayed. Each of the term “Landlord” and the term “Tenant” or any pronoun used in place thereof, shall indicate and include the masculine or feminine, the singular or plural number, individuals, firms or corporations, and their and each of their respective successors, executors, administrators and permitted assigns, who are a party to this Lease according to the context hereof. This Lease, together with its Addendum, exhibits, contains all the agreements of the parties hereto and supersedes any previous negotiations. There have been no representations made by the Landlord or understandings made between the parties other than those set forth in this Lease and its Addendum, and exhibits. This Lease may not be modified except by a written instrument executed by the parties hereto. If, for any reason whatsoever, any of the provisions hereof shall be unenforceable or ineffective, all of the other provisions shall be and remain in full force and effect.

6. Confidentiality:

Except as specifically provided herein, the parties hereby agree not to disclose any of the terms of this Lease to any person or entity not a party to this Lease, nor shall either party issue any press releases or make any public statements relating to the terms or provisions of this Lease; provided, however, either party may make necessary disclosures to potential lenders, attorneys, accountants and space planning consultants, economic development authorities and/or as may be required by applicable Laws or court order, so long as such parties agree to keep all of the terms of this Lease strictly confidential to the extent practicable. The obligations set forth in this Section shall survive the expiration or any earlier termination of this Lease.

Notwithstanding anything contained herein to the contrary, each party to this Lease (and each of its employees, representatives and other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction contemplated hereby (the “Transaction”) and all materials of any kind (including opinions and other tax analyses) that are provided to such party or parties relating to the tax treatment or tax structure of the Transaction, except that such disclosure is not permitted to the extent necessary for each party to comply with the federal or state securities laws. This authorization is not intended to permit disclosure of any other information and materials relating to the Transaction including, without limitation: (i) any portion of any materials to the extent not related to the tax treatment or tax structure of the Transaction, (ii) the existence or status of any negotiations, (iv) any pricing or financial information (except to the extent such pricing or financial information is related to the tax treatment or tax structure of the Transaction).

7. Lender Approval. This Lease remains subject to the review and approval of Landlord’s lender, which Landlord shall use good faith efforts to obtain. Landlord shall have no obligation to execute this Lease unless and until such lender approval is obtained.

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EX-10.4

Exhibit 10.4

FIRST AMENDMENT TO

LEASE AGREEMENT

(SINGLE TENANT FACILITY)

This First Amendment (“First Amendment”) is entered into this 25^th day of August, 2009, with regard to that certain Lease Agreement (Single Tenant Facility) dated June 2, 2009 (“Lease”), by and between SIXTH AND ROCHESTER, LLC, a California limited liability company (“Landlord”) and MONOPRICE, INC., a California corporation (“Tenant”) for that certain approximate 172,998 square foot building (“Property”) located in Rancho Cucamonga, State of California and more particularly described in the Lease.

WHEREAS, the parties desire to modify the Lease pursuant to the terms as herein set forth.

NOW, THEREFORE, in consideration of the mutual covenants set forth below, it is agreed as follows:

1. All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Lease.

2. The parties hereby acknowledge and agree that, on and after the full and mutual execution of this First Amendment, Tenant may access those certain portions of the Property depicted on Exhibit A, attached hereto and made a part hereof (“Storage Space”), in accordance with the terms of Section 2.03 of the Lease, for the purpose of dead storage of Tenant’s product and materials to be used in connection with its Permitted Use (as set forth and defined in Section 1.06 of the Lease). In no event shall the Storage Space exceed twenty thousand (20,000) square feet. This First Amendment shall satisfy Landlord’s consent requirements set forth in Section 2.03(i) of the Lease, provided, however that Tenant must also fulfill the terms of Section 2.03(ii) and (iii) prior to any early access.

3. This First Amendment is intended to modify the Lease and shall be deemed to amend any language in the Lease which is read or interpreted contrary to the provisions set forth herein. Any covenant or provision of the Lease which is not inconsistent with this First Amendment shall remain in full force and effect.

4. This First Amendment may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument. A facsimile signature on this First Amendment shall be binding as an original.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this First Amendment as of the day and year first above written.

LANDLORD:
SIXTH AND ROCHESTER, LLC, a California limited liability company,
By:	PG 6th & R, LLC,
	a California limited liability company,
	Managing Member
	By:	AAP DEVELOPMENT CA, LLC,
		a California limited liability company,
		Manager
		By:
			Adon A. Panattoni, Sole Member
TENANT:
MONOPRICE, INC., a California corporation
By:
Name:	JONG S LEE
Its:	CEO

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EX-10.5

Exhibit 10.5

SECOND AMENDMENT TO

LEASE AGREEMENT

(SINGLE TENANT FACILITY)

This Second Amendment (“Second Amendment”) is entered into this 23^rd day of September, 2009, with regard to that certain Lease Agreement (Single Tenant Facility) dated June 2, 2009 and that certain First Amendment to Lease Agreement (Single Tenant Facility) dated August 25, 2009 (collectively, the “Lease”), by and between SIXTH AND ROCHESTER, LLC, a California limited liability company (“Landlord”) and MONOPRICE, INC., a California corporation (“Tenant”) for that certain approximate 172,998 square foot building (“Property”) located in Rancho Cucamonga, State of California and more particularly described in the Lease.

WHEREAS, the parties desire to modify the Lease pursuant to the terms as herein set forth.

NOW, THEREFORE, in consideration of the mutual covenants set forth below, it is agreed as follows:

1. All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Lease.

2. The second sentence of Section 4.04(a) of the Lease is hereby deleted in its entirety and the following shall be inserted in its place and stead: “Tenant shall name Landlord as an additional insured under such policy and Tenant will also provide Landlord with an additional insured endorsement in form and content acceptable to Landlord. The initial amount of such insurance shall be ONE MILLION DOLLARS ($1,000,000.00) per occurrence/TWO MILLION DOLLARS ($2,000,000.00) in the aggregate with TWO MILLION DOLLARS ($2,000,000.00) of umbrella coverage.”

3. This Second Amendment is intended to modify the Lease and shall be deemed to amend any language in the Lease which is read or interpreted contrary to the provisions set forth herein. Any covenant or provision of the Lease which is not inconsistent with this Second Amendment shall remain in full force and effect.

4. This Second Amendment may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument. A facsimile signature on this Second Amendment shall be binding as an original.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the day and year first above written.

LANDLORD:
SIXTH AND ROCHESTER, LLC, a California limited liability company,
By:	PG 6th & R, LLC,
	a California limited liability company,
	Managing Member
	By:	AAP DEVELOPMENT CA, LLC,
		a California limited liability company,
		Manager
		By:
			Adon A. Panattoni, Sole Member
TENANT:
MONOPRICE, INC., a California corporation
By:
Name:	JONG S LEE
Its:	CEO

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EX-10.6

Exhibit 10.6

THIRD AMENDMENT TO

LEASE AGREEMENT

(SINGLE TENANT FACILITY)

This Third Amendment (“Third Amendment”) is entered into this 16^th day of October, 2009. with regard to that certain Lease Agreement (Single Tenant Facility) dated June 2, 2009, that certain First Amendment to Lease Agreement (Single Tenant Facility) dated August 25, 2009 and that certain Second Amendment to Lease Agreement (Single Tenant Facility) dated September 23, 2009 (collectively, the “Lease”), by and between SIXTH AND ROCHESTER, LLC, a California limited liability company (“Landlord”) and MONOPRICE, INC., a California corporation (“Tenant”) for that certain approximate 172.998 square foot building (“Property”) located in Rancho Cucamonga, State of California and more particularly described in the Lease.

WHEREAS, the parties desire to modify the Lease pursuant to the terms as herein set forth.

NOW, THEREFORE, in consideration of the mutual covenants set forth below, it is agreed as follows:

1. All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Lease.

2. The Commencement Date of the Lease (as set forth and defined in Section 1.05 of the Lease) is hereby established to be October 9, 2009. The parties hereby acknowledge and agree that, as of October 9. 2009. The Tenant Improvements have been Substantially Completed in accordance with the terms of the Lease.

3. This Third Amendment is intended to modify the Lease and shall be deemed to amend any language in the Lease which is read or interpreted contrary to the provisions set forth herein. Any covenant or provision of the Lease which is not inconsistent with this Third Amendment shall remain in full force and effect.

4. This Third Amendment may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument. A facsimile signature on this Third Amendment shall be binding as an original.

[Signature Page Follows]

- 1 -

IN WITNESS WHEREOF, the parties have executed this Third Amendment as of the day and year first above written.

LANDLORD:

SIXTH AND ROCHESTER, LLC,
a California limited liability company.
By:	PG 6th & R, LLC,
	a California limited liability company,
	Managing Member
	By:	AAP DEVELOPMENT CA, LLC,
		a California limited liability company,
		Manager
		By:
			Adon A. Panattoni, Sole Member

TENANT:
MONOPRICE, INC.,
a California corporation
By:
Name:	JONG S LEE
Its:	CEO

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EX-10.7

Exhibit 10.7

RESTRICTED CASH AGREEMENT

This Restricted Cash Agreement (the “Agreement”) is made and entered into effective as of July 31, 2013 (the “Effective Date”), by and between Ajay Kumar (“Kumar”) and Monoprice, Inc. (together with its successors and assigns, “Company”).

RECITALS

A. Blucora, Inc., a Delaware corporation (“Purchaser”), Company, and the stockholders of Company have entered into a Stock Purchase Agreement, dated as of even date herewith (the “Purchase Agreement”), setting forth certain terms and conditions under which Purchaser has agreed to purchase all of the issued and outstanding capital stock of Company.

B. Kumar and Company have entered into a bonus agreement dated as of July 24, 2013 (the “Bonus Agreement”) pursuant to which Company has agreed to pay Kumar a lump-sum cash bonus payment (the “Bonus”) upon the Closing, subject to the terms and conditions of the Bonus Agreement.

C. Company and Kumar agree that an amount equal to Two Million Dollars ($2,000,000) of the Bonus that would otherwise be payable to Kumar upon the Closing (the “Restricted Cash Amount”) will not be transferred or otherwise made available to Kumar upon the Closing, but rather will be administered and distributed by Company (or such person designated by Company) in accordance with the terms and conditions of this Agreement.

In consideration of the foregoing recitals, the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Kumar and Company agree as follows:

1. Definitions.

For purposes of this Agreement, the following terms have the following meanings:

(a) “Cause” means the occurrence of one or more of the following events: (i) willful and repeated failure or refusal to carry out the lawful directions and policies of Purchaser or the Board of Directors of Company or Purchaser which are consistent with Kumar’s position with Company; (ii) conviction of Kumar of a violation of state or federal criminal law involving the commission of a crime against Purchaser or a felony; (iii) (A) current use by Kumar of illegal substances, or (B) deception, fraud, misrepresentation or dishonesty by Kumar, in any such case described in clauses (A) and/or (B), which substantially impairs Company’s or Purchaser’s business, goodwill or reputation; or (iv) any material violation of the confidentiality, non-competition and/or non-solicitation provision to which Kumar is bound. Notwithstanding the foregoing or anything herein to the contrary, in the case of clauses (i) and (iv) of this definition, such events shall not constitute “Cause” if capable of being cured and cured by Kumar within twenty (20) calendar days after Kumar’s receipt of written notice from Purchaser (which Purchaser shall provide) specifying in reasonable detail the facts supporting Purchaser’s determination of Cause and the actions reasonably required from Kumar to cure such events.

Notwithstanding anything to the contrary in this Agreement, this definition of “Cause” will be superseded and replaced in its entirety with the definition of “Cause” under the Employment Agreement as of the first day that such Employment Agreement becomes effective.

(b) “Closing” has the meaning assigned to such term in the Purchase Agreement.

(c) “Closing Date” has the meaning assigned to such term in the Purchase Agreement.

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

(e) “Disability” means Kumar’s inability, due to a medically determinable physical or mental impairment, to perform the essential functions of Kumar’s position with Company or Purchaser, with or without reasonable accommodation, for a continuous period of 90 days or for 120 days within any 12-month period.

(f) “Employment Agreement” means any Employment Agreement entered into as of the Closing Date or thereafter between Kumar, Company, and Purchaser.

(g) “Good Reason” means the occurrence of any of the following without Kumar’s express prior written consent: (i) a material reduction of or to Kumar’s authority, duties, or responsibilities (as in effect immediately following the Closing Date); (ii) a material reduction by Company of Kumar’s base salary (as in effect immediately following the Closing Date); (iii) the requirement that Kumar relocate his primary work location more than 25 miles from Rancho Cucamonga, California or from any work location to which Company transfers Kumar during the course of his employment and to which such transfer Kumar has agreed in writing; or (iv) a material breach of this Agreement or the Employment Agreement by Company and/or Purchaser.

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

(h) “Installment” has the meaning set forth in Section 2(a).

(i) “Restricted Cash Amount” has the meaning set forth in the Recitals.

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

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2. Restricted Cash Amount; Interest Payments.

(a) Restricted Cash Amount. Except as otherwise provided in Section 3(a) and subject to Section 5(e), Company will pay or cause the Restricted Cash Amount to be paid to Kumar in the following installments (each, an “Installment”) and within twenty (20) days following the vesting date set forth opposite the applicable Installment (each, a “Vesting Date”), provided that Kumar remains continuously employed with Company through the applicable Vesting Date:

Amount of Installment	Vesting Date
$666,666	12-month Anniversary of the Closing Date
$666,667	18-month Anniversary of the Closing Date
$666,667	24-month Anniversary of the Closing Date

(b) Interest Payments. Except as otherwise provided in Section 3(a) and subject to Section 5(e), contemporaneously with the payment of each Installment, Company will pay or cause to be paid to Kumar a cash bonus (an “Interest Payment”) in an amount equal to the accrued interest on the unpaid Restricted Cash Amount (as determined from the Closing Date to the applicable Vesting Date) at a rate of 4% simple interest per annum, provided that Kumar remains continuously employed with Company through the applicable Vesting Date. For the avoidance of any doubt, the “Vesting Date” for each such Interest Payment shall be the Vesting Date for the Installment payable to Kumar on the same date as the applicable Interest Payment.

3. Termination of Employment.

(a) Termination by Company without Cause or by Kumar for Good Reason, Termination due to death or Disability. If, within 24 months following the Closing Date, Kumar’s employment with Company is terminated by Company without Cause, Kumar terminates employment with Company for Good Reason or Kumar’s employment terminates due to Kumar’s death or Disability, within twenty (20) days following such termination, Kumar shall receive a lump sum payment equal to any Installments and Interest Payments that remain unpaid on the date of such termination. For purposes of Section 2, the date of termination of Kumar’s employment under this Section 3(a) will be treated as the Vesting Date.

(b) Effect of Termination of Employment for Any Other Reason. If Kumar’s employment with Company terminates for any reason other than a reason described in Section 3(a), any unvested Installments and Interest Payments for which a Vesting Date has not occurred will be forfeited as of the date of such termination of employment. Notwithstanding the foregoing, if such termination occurs after a Vesting Date, but before the payment date specified in Section 2 for that Vesting Date, Kumar shall not forfeit the Installment or Interest Payment attributable to such Vesting Date.

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4. 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), taking into account Treasury Regulation Section 1.409A-3(i)(5)(iv)(B), 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 Kumar 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 (6) months and one day after the date of such “separation from service” of Kumar and (B) the date of Kumar’s death (the “Delay Period”), to the extent required under Section 409A. Within ten (10) business days following the expiration of the Delay Period, all payments delayed pursuant to this Section 4(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 Kumar 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;

(ii) for purposes of Section 409A, (A) Kumar’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 and (B) the Installments and Interest Payments will be treated as separate 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 thirty (30) days”), the actual date of payment within the specified period shall be within the sole discretion of Company; and

(iii) 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) Notwithstanding any provision of this Agreement to the contrary, (i) in no event will Purchaser, Company or any of their affiliates be liable for any additional tax, interest, or penalty that may be imposed on Kumar by Section 409A or damages for failing to comply with Section 409A and (ii) Kumar acknowledges and agrees that Kumar will not have any claim or right of action against Company, Purchaser or any of their affiliates, employees, officers, directors or agents in the event it is determined that any payment or benefit provided hereunder does not comply with Section 409A.

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5. 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 Kumar and by an authorized officer of Company (other than Kumar). 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 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) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the relevant matter hereof. In the event of any conflict between the provisions of the Bonus Agreement and this Agreement, the provisions of this Agreement shall prevail. The Bonus Agreement, except as expressly modified by this Agreement, shall remain in full force and effect.

(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 California 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) Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of all applicable income, employment and other taxes.

(f) Assignment. Company may assign its rights under this Agreement to any successor to all or substantially all of the business or the assets of Company or to an affiliate (as defined under the Securities Exchange Act of 1934) and an affiliate may assign its rights under this Agreement to another affiliate of Company or to 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 Kumar. The rights of Kumar 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 subsection shall be void, provided that Kumar’s right to receive payments hereunder may be transferred by will or the laws of descent and distribution.

(g) 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 Kumar, mailed notices shall be addressed to Kumar at the most recent home

5

address for Kumar indicated in Company’s personnel records. In the case of Company, mailed notices shall be addressed to in care of Company to Purchaser at its corporate headquarters and directed to the attention of Purchaser’s General Counsel.

(h) Key Man Life Insurance. Company may apply for and procure as owner and for its own benefit, life insurance on Kumar, in such amounts sufficient to secure its obligations under this Agreement. Kumar shall, at the request of Company, submit to such medical examinations, supply such information, and execute such documents as may be required by the insurance company or companies to whom Company has applied for such insurance (and shall otherwise cooperate with Company to facilitate the issuance of such life insurance).

(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.

[Signature Page Follows]

6

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

COMPANY:	MONOPRICE, INC.
	/s/ Sung Chung
	By: Sung Chung
	Title: Financial Controller
KUMAR:	/s/ Ajay Kumar
	Ajay Kumar
Acknowledged and agreed by
/s/ Jong Suk Lee	/s/ Seok Jin Hong
Jong Suk Lee	Seok Jin Hong

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 quarterly report on Form 10-Q 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.

Dated: November 5, 2013

/s/ William J. Ruckelshaus

William J. Ruckelshaus

Chief Executive Officer and President

(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 quarterly report on Form 10-Q 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.

Dated: November 5, 2013

/s/ Eric M. Emans

Eric M. Emans

Chief Financial Officer

(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 Quarterly Report on Form 10-Q of Blucora, Inc. for the quarter ended September 30, 2013 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 Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Blucora, Inc.

Dated: November 5, 2013	By:	/s/ William J. Ruckelshaus
	Name:	William J. Ruckelshaus
	Title:	Chief Executive Officer and President (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 Quarterly Report on Form 10-Q of Blucora, Inc. for the quarter ended September 30, 2013 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 Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Blucora, Inc.

Dated: November 5, 2013	By:	/s/ Eric M. Emans
	Name:	Eric M. Emans
	Title:	Chief Financial Officer (Principal Financial Officer)

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Segment Information

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Information

10. Segment Information

The Company changed its segment reporting structure as a result of the January 31, 2012 acquisition of the TaxACT business and again as a result of the Monoprice acquisition on August 22, 2013. The Search segment is the InfoSpace business, the Tax Preparation segment is the TaxACT business and the E-Commerce segment is the Monoprice 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 does not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, depreciation, amortization of intangible assets, other loss, net and income tax expense to the reportable segments. Such amounts are reflected in the table under the heading “Corporate-level activity.” 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 the three and nine months ended September 30, 2013 and 2012 are presented below (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Revenue
Search	$	107,742		$	91,408		$	302,840		$	248,511
Tax Preparation		1,749			1,462			89,170			60,938
E-Commerce		14,630			—			14,630			—
Total revenue		124,121			92,870			406,640			309,449
Operating income (loss)
Search		21,319			16,356			57,501			44,807
Tax Preparation		(1,605	)		(1,561	)		43,617			32,528
E-Commerce		906			—			906			—
Corporate-level activity		(14,493	)		(11,061	)		(38,261	)		(36,899	)
Total operating income		6,127			3,734			63,763			40,436
Other loss, net		(13,118	)		(5,196	)		(20,427	)		(7,681	)
Income tax benefit (expense)		510			(936	)		(17,803	)		(14,049	)
Net income (loss)	$	(6,481	)	$	(2,398	)	$	25,533		$	18,706

XML

Derivative Instruments and Hedging Activities - Summary of Fair Values of Outstanding Derivative Instruments (Detail) (Fair value of derivative instruments [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Summary of fair values of outstanding derivative instruments
Total derivative liabilities	$ 14,495	$ 8,974
Derivative designated as a hedging instrument [Member] | Interest rate contract (interest rate swap) [Member] | Current liabilities - derivative instruments [Member]
Summary of fair values of outstanding derivative instruments
Total derivative liabilities		410
Derivative not designated as hedging instrument [Member] | Equity contract (the Warrant) [Member] | Current liabilities - derivative instruments [Member]
Summary of fair values of outstanding derivative instruments
Total derivative liabilities	$ 14,495	$ 8,564

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Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenues:
Services revenue	$ 109,491	$ 92,870	$ 392,010	$ 309,449
Product revenue	14,630		14,630
Total revenues	124,121	92,870	406,640	309,449
Cost of revenues:
Services cost of revenue (includes amortization of acquired intangible assets of $1,906, $2,014, $5,773, and $5,605)	72,935	69,918	219,274	192,308
Product cost of revenue	10,622		10,622
Total cost of revenues	83,557	69,918	229,896	192,308
Engineering and technology	2,905	2,410	7,951	7,431
Sales and marketing	18,230	7,796	71,409	37,492
General and administrative	8,421	5,283	21,362	21,705
Depreciation	697	560	1,738	1,627
Amortization of intangible assets	4,184	3,169	10,521	8,450
Total operating expenses	117,994	89,136	342,877	269,013
Operating income	6,127	3,734	63,763	40,436
Other loss, net	(13,118)	(5,196)	(20,427)	(7,681)
Income (loss) before income taxes	(6,991)	(1,462)	43,336	32,755
Income tax benefit (expense)	510	(936)	(17,803)	(14,049)
Net income (loss)	(6,481)	(2,398)	25,533	18,706
Income (loss) per share:
Basic	$ (0.16)	$ (0.06)	$ 0.62	$ 0.47
Diluted	$ (0.16)	$ (0.06)	$ 0.60	$ 0.45
Weighted average shares outstanding:
Basic	41,088	40,511	41,048	40,108
Diluted	41,088	40,511	42,878	41,425
Other comprehensive income (loss):
Net income (loss)	(6,481)	(2,398)	25,533	18,706
Unrealized gain (loss) on investments, available-for-sale	(23)	9	13
Unrealized gain (loss) on derivative instrument	57	(20)	266	(298)
Reclassification adjustment for realized gain on investments, available-for-sale, net, included in net income			(1)	(26)
Other comprehensive income (loss)	34	(11)	278	(324)
Comprehensive income (loss)	$ (6,447)	$ (2,409)	$ 25,811	$ 18,382

XML

Acquisitions

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Acquisitions

3. Acquisitions

Monoprice. On August 22, 2013, the Company acquired all of the outstanding stock of Monoprice, an online provider of self-branded electronics and accessories for both consumers and businesses (see “Note 1: The Company and Basis of Presentation”). The preliminary acquisition consideration paid by the Company was equal to $183.3 million, which was funded from available cash and is subject to a final working capital adjustment during the fourth quarter of 2013. 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. Preliminary valuations are as follows (in thousands):

	Fair Value
Tangible assets acquired	$	49,515
Liabilities assumed		(23,122	)
Identifiable net assets acquired	$	26,393
Fair value adjustments to intangible assets
Customer relationships	$	30,900
Trade name		38,000
Fair value of intangible assets acquired	$	68,900
Purchase price:
Cash paid	$	183,319
Less identifiable net assets acquired		(26,393	)
Plus deferred tax liability related to intangible assets		24,823
Less fair value of intangible assets acquired		(68,900	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	112,849

The preliminary fair value determinations for assets acquired and liabilities assumed for this acquisition was based upon a preliminary valuation and certain of our estimates and assumptions are subject to change as we obtain additional information for our estimates in future periods. The primary areas of the acquisition accounting that are not yet finalized relate to income and non-income based taxes, certain contingent liability matters, indemnification assets, and residual goodwill. The Company incurred acquisition costs of $646,000 and $698,000 in the three and nine months ended September 30, 2013, which were recognized in general and administrative expenses as incurred. The Company did not assume any equity awards or plans from Monoprice. Following the completion of the acquisition, the Company issued 27,152 options and 126,259 restricted stock units (“RSUs”), which are at levels consistent with other awards to Blucora subsidiary employees, and 243,750 performance-based restricted stock units (“PSUs”) to Monoprice’s employees.

The Company’s estimates of the economic lives of the acquired intangible assets are two years for the business-to-consumer customer relationships, seven years for the business-to-business customer relationships, approximately six years for the personal property assets, and the trade name is estimated to have an indefinite-life. The Company plans to amortize the definite-lived intangible assets over their respective estimated lives. The goodwill and the trade name will be tested for impairment at least annually.

The gross contractual amount of trade accounts receivable acquired was $3.2 million, which the Company expects to be completely collectible. The Company recorded a fair value of $1.3 million for deferred revenue, which Monoprice, prior to the acquisition, had recorded at $2.0 million as of the acquisition date.

For the period from the August 22, 2013 acquisition date to September 30, 2013, the Company’s total revenues included $14.6 million in revenue from Monoprice’s sales. For the same period, Monoprice contributed $427,000 to the Company’s net loss.

The financial information in the table below summarizes the combined results of operations of Blucora and Monoprice on a pro forma basis for the three and nine months ended September 30, 2013 and 2012, 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 condensed combined consolidated statement of operations for the three months ended September 30, 2013 combines the historical results of operations of Blucora for the three months ended September 30, 2013 and the historical results of operations of Monoprice for the period from July 1, 2013 to the acquisition date. The pro forma condensed combined consolidated statement of operations for the nine months ended September 30, 2013 combines the historical results of operations of Blucora for the nine months ended September 30, 2013 and the historical results of operations of Monoprice for the period from January 1, 2013 to the acquisition date. The following amounts are in thousands:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013		2012
Revenues	$	145,852		$	122,411		$	496,559	$	394,879
Net income (loss)	$	(6,017	)	$	(1,351	)	$	26,771	$	20,055

TaxACT. As described in “Note 1: The Company and Basis of Presentation”, on January 31, 2012, the Company acquired all of the outstanding stock of TaxACT Holdings and its wholly-owned subsidiary, TaxACT. 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). For further discussion of the credit facility, see “Note 8: Debt”. The acquisition was intended to diversify the Company’s business model and expand its operations. The Company recorded $185.5 million in goodwill upon final valuation.

The financial information in the table below summarizes the combined results of operations of Blucora and the TaxACT Tax Preparation business on a pro forma basis for the nine months ended September 30, 2012, as though it had been combined as of the beginning of the period, compared to the consolidated results for the three and nine months ended September 30, 2013. 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 2012. The pro forma condensed combined consolidated statements of operations for the nine months ended September 30, 2012 combines the historical results of the Company for the nine months ended September 30, 2012 with the results of the TaxACT business for the month ended January 31, 2012. The following amounts are in thousands:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013		2012
Revenues	$	124,121		$	92,870		$	406,640	$	330,339
Net income (loss)	$	(6,481	)	$	(2,398	)	$	25,533	$	22,999

Goodwill. The goodwill arising from the acquisitions of Monoprice and TaxACT consists largely of the ability to attract new customers and develop new technologies post acquisition, which do not qualify for separate recognition. The Company does not expect that any of the goodwill arising from the acquisitions will be deductible for tax purposes. The following summarizes our goodwill activity by segment in the nine months ended September 30, 2013 (in thousands):

	Search		Tax Preparation		E-Commerce		Total
Goodwill – January 1, 2013	$	44,815	$	185,475	$	—	$	230,290
New acquisitions		—		—		112,849		112,849
Goodwill – September 30, 2013	$	44,815	$	185,475	$	112,849	$	343,139

Other intangibles, net. Intangible assets other than goodwill consisted of the following (in thousands):

	September 30, 2013							December 31, 2012
	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	$	(12,555	)	$	95	$	12,650	$	(12,369	)	$	281
Core technology		1,085		(1,085	)		—		1,085		(1,085	)		—
Tax Preparation customer relationships		101,400		(21,125	)		80,275		101,400		(11,619	)		89,781
Tax Preparation proprietary technology		29,800		(12,416	)		17,384		29,800		(6,829	)		22,971
E-Commerce B2C customer relationships		14,500		(780	)		13,720		—		—			—
E-Commerce B2B customer relationships		16,400		(235	)		16,165		—		—			—
Other		6,667		(6,667	)		—		6,667		(6,667	)		—
Total definite-lived intangible assets		182,502		(54,863	)		127,639		151,602		(38,569	)		113,033
Indefinite-lived intangible assets:
Tax Preparation trade names		19,499		—			19,499		19,499		—			19,499
E-Commerce trade names		38,000		—			38,000		—		—			—
Other		283		—			283		283		—			283
Total indefinite-lived intangible assets		57,782		—			57,782		19,782		—			19,782
Total	$	240,284	$	(54,863	)	$	185,421	$	171,384	$	(38,569	)	$	132,815

Amortization expense for the three and nine months ended September 30, 2013 is presented in the table below (in thousands):

	Three months ended September 30, 2013		Nine months ended September 30, 2013
Statement of operations location of amortization:
Services cost of revenue	$	1,906	$	5,773
Depreciation and amortization		4,184		10,521
Total	$	6,090	$	16,294

The weighted average amortization period for definite-lived intangible assets is 65 months.

Information about expected amortization of definite-lived intangible assets held as of September 30, 2013 in the next five years is presented in the table below (in thousands):

	2013		2014		2015		2016		2017		2018		Thereafter		Total
Services cost of revenue	$	1,895	$	7,513	$	7,450	$	621	$	—	$	—	$	—	$	17,479
Depreciation and amortization		5,583		22,268		19,676		15,018		15,018		15,018		17,579		110,160
Total	$	7,478	$	29,781	$	27,126	$	15,639	$	15,018	$	15,018	$	17,579	$	127,639

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Fair Value Measures (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Schedule of Fair Value Hierarchy of Company's Financial Assets and Liabilities 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 reporting date using
	September 30, 2013			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	$	1,700		$	—	$	1,700	$	—
Money market funds		40,155			—		40,155		—
Commercial paper		15,999			—		15,999		—
Time deposits		1,215			—		1,215		—
Taxable municipal bonds		1,383			—		1,383		—
Total cash equivalents		60,452			—		60,452		—
Available-for-sale securities:									—
U.S. government securities		42,299			—		42,299		—
Commercial paper		9,992			—		9,992		—
Time deposits		11,247			—		11,247		—
Taxable municipal bonds		87,023			—		87,023		—
Total available-for-sale securities		150,561			—		150,561		—
Total assets		211,013			—		211,013		—
Liabilities
Derivative instruments
Warrant (see Note 5)		(14,495	)		—		—		(14,495	)
Total liabilities		(14,495	)		—		—		(14,495	)
Total assets and liabilities at fair value	$	196,518		$	—	$	211,013	$	(14,495	)

				Fair value measurements at the reporting 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 5)		(8,564	)		—		—			(8,564	)
Interest rate swap (see Note 9)		(410	)		—		(410	)		—
Total liabilities		(8,974	)		—		(410	)		(8,564	)
Total assets and liabilities at fair value	$	122,697		$	—	$	131,261		$	(8,564	)

Maturity Information for Investments Available-for-Sale

Maturity information was as follows for investments classified as available-for-sale at September 30, 2013 (in thousands):

	Amortized Cost		Gross unrealized gains		Gross unrealized losses			Fair Value
Within one year	$	150,558	$	27	$	(24	)	$	150,561
Greater than one year		—		—		—			—
Total	$	150,558	$	27	$	(24	)	$	150,561

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

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Derivative Instruments and Hedging Activities - Summary of Potential Impact of Change in Stock Price on Fair Value of Derivative (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	Sep. 30, 2013
Effect of a 10% change in stock price:
Variable changed, Closing stock price, -10%	$ 20.68
Variable changed, Estimated fair value, -10%	$ 12,365
Closing stock price	$ 22.98
Variable changed, Closing stock price, +10%	$ 25.28
Variable changed, Estimated fair value, +10%	$ 16,661

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Stock Repurchase Program

9 Months Ended

Sep. 30, 2013

Equity [Abstract]

Stock Repurchase Program

11. Stock Repurchase Program

On February 6, 2013, the Company’s Board of Directors approved a stock repurchase plan whereby the Company may purchase 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. During the three and nine months ended September 30, 2013, the Company purchased 123,600 and 191,300 shares, respectively, in open-market transactions at a total cost, exclusive of purchase and administrative costs, of $2.5 million and $3.5 million, respectively, and at an average price of $19.97 per share and $18.38 per share, respectively. As of September 30, 2013, the Company may repurchase up to an additional $46.5 million of its common stock under the repurchase program.

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Debt - Credit Facility - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended		9 Months Ended							9 Months Ended
	Sep. 30, 2013	Jan. 31, 2012	Sep. 30, 2013 Minimum [Member]	Sep. 30, 2013 Maximum [Member]	Sep. 30, 2013 LIBOR Rate [Member] Minimum [Member]	Sep. 30, 2013 LIBOR Rate [Member] Maximum [Member]	Sep. 30, 2013 Tax Act [Member]	Jan. 31, 2012 Tax Act [Member]	Jan. 31, 2012 Revolving Debt [Member]	Sep. 30, 2013 Revolving Debt [Member] Tax Act [Member]	Aug. 30, 2013 Revolving Debt [Member] Tax Act [Member]	Sep. 30, 2013 Revolving Debt [Member] Tax Act [Member] August 30, 2014 [Member]	Sep. 30, 2013 Revolving Debt [Member] Tax Act [Member] August 30, 2015 [Member]	Sep. 30, 2013 Revolving Debt [Member] Tax Act [Member] August 30, 2016 [Member]
Debt Instrument [Line Items]
Credit agreement	$ 8.0	$ 105.0					$ 105.0	$ 105.0	$ 10.0		$ 100.0
Line of credit facility, remaining												90.0	80.0	70.0
Final maturity date of credit facility	Jul. 31, 2014									Aug. 30, 2018
Borrowed under revolving credit loan							65.4
The percentage points (margin) added to the reference rate			0.75%	1.50%	1.75%	2.50%
Line of credit facility outstanding	$ 65.4

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Segment Information - Information on Reportable Segments for Reconciliation to Consolidated Net Income (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenue
Total revenue	$ 124,121	$ 92,870	$ 406,640	$ 309,449
Operating income (loss)
Total operating income	6,127	3,734	63,763	40,436
Other loss, net	(13,118)	(5,196)	(20,427)	(7,681)
Income tax benefit (expense)	510	(936)	(17,803)	(14,049)
Net income (loss)	(6,481)	(2,398)	25,533	18,706
Search [Member]
Revenue
Total revenue	107,742	91,408	302,840	248,511
Operating income (loss)
Total operating income	21,319	16,356	57,501	44,807
Tax Preparation [Member]
Revenue
Total revenue	1,749	1,462	89,170	60,938
Operating income (loss)
Total operating income	(1,605)	(1,561)	43,617	32,528
E-Commerce [Member]
Revenue
Total revenue	14,630		14,630
Operating income (loss)
Total operating income	906		906
Corporate-level activity [Member]
Operating income (loss)
Total operating income	$ (14,493)	$ (11,061)	$ (38,261)	$ (36,899)

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Acquisition - Schedule of Amortization Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013
Finite Lived Intangible Assets, Future Amortization Expense [Line Items]
Amortization expense	$ 6,090	$ 16,294
Services cost of revenue [Member]
Finite Lived Intangible Assets, Future Amortization Expense [Line Items]
Amortization expense	1,906	5,773
Depreciation and amortization [Member]
Finite Lived Intangible Assets, Future Amortization Expense [Line Items]
Amortization expense	$ 4,184	$ 10,521

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Summary of Contractual Commitments

The Company’s contractual commitments are as follows for the years ending December 31 (in thousands):

	2013		2014		2015		2016		2017		2018		Thereafter			Total
Operating lease commitments	$	554	$	2,596	$	2,309	$	1,793	$	1,830	$	1,676	$	2,353		$	13,111
Purchase commitments		71		646		437		92		62		—		—			1,308
Debt commitments		—		—		—		—		—		65,384		201,250	1		266,634
Total	$	625	$	3,242	$	2,746	$	1,885	$	1,892	$	67,060	$	203,603		$	281,053

1 For further detail regarding the Notes, which are due April 1, 2019, unless earlier purchased, redeemed, or converted in accordance with their terms, see “Note 8: Debt”.

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Net Income (Loss) per Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Summary of Dilutive Effect for Awards with Exercise Price Less Than Average Stock Price

The weighted average dilutive and anti-dilutive shares for the three and nine months ended September 30, 2013 and 2012 are as follows (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Weighted average common shares outstanding, basic		41,088		40,511		41,048		40,108
Dilutive stock options, RSUs, PSUs, MSUs, and Warrant		—		—		1,830		1,317
Weighted average common shares outstanding, diluted		41,088		40,511		42,878		41,425
Antidilutive awards with an exercise price less than the average price during the applicable period excluded from dilutive share calculation		98		26		766		246
Outstanding awards with an exercise price greater than the average price during the applicable period not included in dilutive share calculation		32		655		83		848
Outstanding awards with performance conditions not completed during the applicable period not included in dilutive share calculation		160		190		97		157
Outstanding awards excluded from dilutive share calculation due to anti-dilutive effect of a net loss		5,603		5,000		—		—

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Commitments and Contingencies - Summary of Contractual Commitments (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013
Commitments And Contingencies Disclosure [Abstract]
Operating lease commitments, 2013	$ 554
Operating lease commitments, 2014	2,596
Operating lease commitments, 2015	2,309
Operating lease commitments, 2016	1,793
Operating lease commitments, 2017	1,830
Operating lease commitments, 2018	1,676
Operating lease commitments, Thereafter	2,353
Operating lease commitments, Total	13,111
Purchase commitments, 2013	71
Purchase commitments, 2014	646
Purchase commitments, 2015	437
Purchase commitments, 2016	92
Purchase commitments, 2017	62
Purchase commitments, 2018
Purchase commitments, Thereafter
Purchase commitments, Total	1,308
Debt commitments, 2013
Debt commitments, 2014
Debt commitments, 2015
Debt commitments, 2016
Debt commitments, 2017
Debt commitments, 2018	65,384
Debt commitments, Thereafter	201,250
Debt commitments, Total	266,634
Total contractual commitments, 2013	625
Total contractual commitments, 2014	3,242
Total contractual commitments, 2015	2,746
Total contractual commitments, 2016	1,885
Total contractual commitments, 2017	1,892
Total contractual commitments, 2018	67,060
Total contractual commitments, Thereafter	203,603
Total contractual commitments	$ 281,053

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Acquisitions - Summary of Asset Acquired and Liabilities Assumed are Recorded at Their Fair Values as of Acquisition Date (Detail) (Monoprice, Inc. [Member], USD $) In Thousands, unless otherwise specified	Aug. 22, 2013
Business Acquisition [Line Items]
Tangible assets acquired	$ 49,515
Liabilities assumed	(23,122)
Identifiable net assets acquired	26,393
Fair value adjustments to intangible assets
Fair value of intangible assets acquired	68,900
Purchase price:
Cash paid	183,319
Less identifiable net assets acquired	(26,393)
Plus deferred tax liability related to intangible assets	24,823
Less fair value of intangible assets acquired	(68,900)
Excess of purchase price over net assets acquired, allocated to goodwill	112,849
Customer relationships [Member]
Fair value adjustments to intangible assets
Fair value of intangible assets acquired	30,900
Purchase price:
Less fair value of intangible assets acquired	(30,900)
Trade Name [Member]
Fair value adjustments to intangible assets
Fair value of intangible assets acquired	38,000
Purchase price:
Less fair value of intangible assets acquired	$ (38,000)

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Fair Value Measures - Schedule of Fair Value Hierarchy of Company's Financial Assets and Liabilities Carried at Fair Value and Measured on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Available-for-sale securities:
Total available-for-sale securities	$ 150,561	$ 94,010
Fair value measurements, Recurring [Member]
Cash equivalents:
Total cash equivalents	60,452	37,661
Available-for-sale securities:
Total available-for-sale securities	150,561	94,010
Total assets	211,013	131,671
Liabilities
Total liabilities	(14,495)	(8,974)
Total assets and liabilities at fair value	196,518	122,697
Fair value measurements, Recurring [Member] | Warrant [Member]
Liabilities
Derivative instruments	(14,495)	(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	1,700	6,900
Available-for-sale securities:
Total available-for-sale securities	42,299	41,402
Fair value measurements, Recurring [Member] | Money market funds [Member]
Cash equivalents:
Total cash equivalents	40,155	13,723
Fair value measurements, Recurring [Member] | Commercial paper [Member]
Cash equivalents:
Total cash equivalents	15,999	6,999
Available-for-sale securities:
Total available-for-sale securities	9,992	9,396
Fair value measurements, Recurring [Member] | Time deposits [Member]
Cash equivalents:
Total cash equivalents	1,215	1,245
Available-for-sale securities:
Total available-for-sale securities	11,247	7,169
Fair value measurements, Recurring [Member] | Taxable municipal bonds [Member]
Cash equivalents:
Total cash equivalents	1,383	8,794
Available-for-sale securities:
Total available-for-sale securities	87,023	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 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	60,452	37,661
Available-for-sale securities:
Total available-for-sale securities	150,561	94,010
Total assets	211,013	131,671
Liabilities
Total liabilities		(410)
Total assets and liabilities at fair value	211,013	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	1,700	6,900
Available-for-sale securities:
Total available-for-sale securities	42,299	41,402
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Money market funds [Member]
Cash equivalents:
Total cash equivalents	40,155	13,723
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Commercial paper [Member]
Cash equivalents:
Total cash equivalents	15,999	6,999
Available-for-sale securities:
Total available-for-sale securities	9,992	9,396
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Time deposits [Member]
Cash equivalents:
Total cash equivalents	1,215	1,245
Available-for-sale securities:
Total available-for-sale securities	11,247	7,169
Fair value measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Taxable municipal bonds [Member]
Cash equivalents:
Total cash equivalents	1,383	8,794
Available-for-sale securities:
Total available-for-sale securities	87,023	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	(14,495)	(8,564)
Total assets and liabilities at fair value	(14,495)	(8,564)
Fair value measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Warrant [Member]
Liabilities
Derivative instruments	(14,495)	(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 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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Debt - Analysis of Extinguishment or Modification of Debt (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Debt Disclosure [Abstract]
Fees paid to creditors in connection with the refinance, including arrangement fee classified as extinguishment	$ 567
Deferred financing costs on extinguished debt	726
Debt discount on extinguished debt	300
Total	$ 1,593

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The Company and Basis of Presentation - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2013 Segment
Number of Segments	3
Monoprice, Inc. [Member]
Date of acquisition	Aug. 22, 2013
Percentage of ownership	100.00%

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Stock-Based Compensation - Additional Information (Detail) (USD $)	1 Months Ended	9 Months Ended		3 Months Ended	9 Months Ended		3 Months Ended	1 Months Ended
	Oct. 31, 2011	Sep. 30, 2013	Aug. 31, 2011	Sep. 30, 2013 Awards vested [Member]	Sep. 30, 2013 Awards vested [Member]	Sep. 30, 2012 Awards vested [Member]	Mar. 31, 2012 Warrant [Member]	May 31, 2012 Performance-based stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares options granted	200,000							190,000
Stock-based compensation expense				$ 526,000	$ 526,000	$ 903,000	$ 4,300,000
Warrant issued to purchase common shares			1,000,000
Warrant exercise price			$ 9.62
Warrant expiry period		Aug. 23, 2014
Warrant expiry period, Maximum		Aug. 23, 2017

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation Expense

The Company has included the following amounts for stock-based compensation expense, including the cost related to RSUs, stock options, PSUs and market stock units (“MSUs,” a form of share price performance-based restricted stock unit) granted under the Company’s equity award plans including the Company’s employee stock purchase plan (“ESPP”) and the warrant issued in August 2011 (the “Warrant,”), in the accompanying unaudited condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2013 and 2012 (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Services cost of revenue	$	94	$	183	$	541	$	331
Engineering and technology		370		332		942		894
Sales and marketing		649		587		1,652		1,389
General and administrative		2,139		1,093		5,355		8,309
Total	$	3,252	$	2,195	$	8,490	$	10,923
Excluded and capitalized as part of internal-use software	$	34	$	21	$	68	$	66

Shares Issued under Share Based Compensation

The total net shares issued for RSUs and MSUs vested, options exercised, and shares purchased pursuant to the ESPP during the three and nine months ended September 30, 2013 and 2012 is presented below (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
RSUs vested		70		18		265		191
MSUs vested		—		—		29		30
Options exercised		39		243		157		817
Shares purchased pursuant to ESPP		48		38		84		62
Total		157		299		535		1,100

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Operating activities:
Net income	$ 25,533	$ 18,706
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	8,490	6,637
Warrant-related stock-based compensation		4,286
Loss on derivative instrument	5,931	4,274
Depreciation and amortization of intangible assets	19,413	16,950
Excess tax benefits from stock-based award activity	(24,596)	(20,882)
Deferred income taxes	(8,209)	(7,398)
Unrealized amortization of premium on investments, net	857	(335)
Loss on equity investment in privately-held company	289
Impairment loss on equity investment in privately-held company	3,711
Amortization of debt issuance costs	841	746
Accretion of debt discount	1,972	294
Loss on debt extinguishment and modification expense	1,593
Interest incurred but not paid due to refinance	199
Other	120	(21)
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable	(8,756)	(907)
Other receivables	1,090	504
Inventory	900
Prepaid expenses and other current assets	6,694	705
Other long-term assets	(2,296)	(612)
Accounts payable	1,873	(2,344)
Deferred revenue	2,563	3,183
Accrued expenses and other current and long-term liabilities	27,176	15,174
Net cash provided by operating activities	65,388	38,960
Investing activities:
Business acquisition, net of cash acquired	(180,500)	(279,386)
Equity investment in privately-held company	(4,000)
Purchases of property and equipment	(3,066)	(2,776)
Change in restricted cash	2,491	168
Proceeds from sales of investments	25,825	184,934
Proceeds from maturities of investments	151,561	32,125
Purchases of investments	(234,771)	(59,076)
Net cash used by investing activities	(242,460)	(124,011)
Financing activities:
Proceeds from issuance of convertible debt, net of debt issuance costs of $6,432	194,818
Proceeds from loan, net of debt issuance costs of $2,343 and debt discount of $953		96,704
Debt issuance costs on credit facility	(28)
Repayment of debt	(10,000)	(25,504)
Stock repurchases	(3,525)
Excess tax benefits from stock-based award activity	24,596	20,882
Proceeds from stock option exercises	1,700	7,812
Proceeds from issuance of stock through employee stock purchase plan	1,065	601
Tax payments from shares withheld upon vesting of restricted stock units	(2,011)	(934)
Net cash provided by financing activities	206,615	99,561
Net increase in cash and cash equivalents	29,543	14,510
Cash and cash equivalents:
Beginning of period	68,278	81,897
End of period	97,821	96,407
Cash paid for:
Income taxes	1,637	2,571
Interest	6,512	2,737
Supplemental disclosure of non-cash investing activities:
Purchases of property and equipment through leasehold incentives	$ 1,006

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The Company and Basis of Presentation

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

The Company and Basis of Presentation

1. The Company and Basis of Presentation

Description of the business: Blucora, Inc. (the “Company” or “Blucora”) operates three primary businesses: an internet search business, an online tax preparation business and an e-commerce business. The Company’s Search business, InfoSpace, provides search services to distribution partners’ web properties as well as to the Company’s owned and operated properties. The Tax Preparation business consists of the operations of the TaxACT tax preparation online services and software business that the Company acquired on January 31, 2012. The E-Commerce business consists of the operations of Monoprice, Inc. (“Monoprice”), which the Company acquired on August 22, 2013, and is a provider of self-branded consumer electronics and accessories.

On January 31, 2012, the Company acquired TaxACT Holdings, Inc. (“TaxACT Holdings”) and its wholly-owned subsidiary, TaxACT, Inc. (“TaxACT”), previously 2nd Story Software, Inc., 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 its online service at www.taxact.com.

On August 22, 2013, the Company completed the acquisition of Monoprice pursuant to the terms of the Stock Purchase Agreement dated as of July 31, 2013. As a result of the Acquisition, Blucora owns 100% of Monoprice, an online provider of self-branded electronics and accessories for both consumers and businesses. Monoprice generates revenue primarily through its website, www.monoprice.com.

Segments: The Company has three reporting segments: Search, Tax Preparation and E-Commerce. The Search segment is the InfoSpace business, the Tax Preparation segment is the TaxACT business, and the E-Commerce segment is the Monoprice business. Unless the context indicates otherwise, the Company uses the term “Search” to represent search services, the term “Tax Preparation” to represent services and products sold through the TaxACT business, and the term “E-Commerce” to represent products sold through the Monoprice business (see “Note 10: Segment Information”).

Seasonality: Blucora’s Tax Preparation segment is highly seasonal. Revenue from the Company’s Tax Preparation segment tends to be highest during its first and second quarters as a result of significantly higher sales of income tax preparation services and products during the period from January through April. During the third and fourth quarter, the Tax Preparation segment typically reports losses because revenue from the segment is minimal while core operating expenses continue at relatively consistent levels.

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Fair Value Measures

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measures

4. Fair Value Measures

Certain financial assets and liabilities are remeasured and reported at fair value each reporting period. 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 Company measures its cash equivalents, available-for-sale investments, and derivative instruments at fair value. The cash equivalents and available-for-sale investments are valued within Level 2 in the fair value hierarchy because the Company values its cash equivalents and marketable securities using alternative pricing sources utilizing market observable inputs. The Company classifies its interest rate swap derivative within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. As more fully discussed in “Note 8: Debt”, the interest rate swap was terminated for break-even on September 10, 2013. The Company classifies the Warrant derivative (see “Note 5: Stock-Based Compensation”) within Level 3 because it is valued using the Black-Scholes valuation model, which has significant unobservable inputs. Those unobservable inputs reflect the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. This valuation requires significant judgment.

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 reporting date using
	September 30, 2013			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	$	1,700		$	—	$	1,700	$	—
Money market funds		40,155			—		40,155		—
Commercial paper		15,999			—		15,999		—
Time deposits		1,215			—		1,215		—
Taxable municipal bonds		1,383			—		1,383		—
Total cash equivalents		60,452			—		60,452		—
Available-for-sale securities:									—
U.S. government securities		42,299			—		42,299		—
Commercial paper		9,992			—		9,992		—
Time deposits		11,247			—		11,247		—
Taxable municipal bonds		87,023			—		87,023		—
Total available-for-sale securities		150,561			—		150,561		—
Total assets		211,013			—		211,013		—
Liabilities
Derivative instruments
Warrant (see Note 5)		(14,495	)		—		—		(14,495	)
Total liabilities		(14,495	)		—		—		(14,495	)
Total assets and liabilities at fair value	$	196,518		$	—	$	211,013	$	(14,495	)

				Fair value measurements at the reporting 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 5)		(8,564	)		—		—			(8,564	)
Interest rate swap (see Note 9)		(410	)		—		(410	)		—
Total liabilities		(8,974	)		—		(410	)		(8,564	)
Total assets and liabilities at fair value	$	122,697		$	—	$	131,261		$	(8,564	)

Maturity information was as follows for investments classified as available-for-sale at September 30, 2013 (in thousands):

	Amortized Cost		Gross unrealized gains		Gross unrealized losses			Fair Value
Within one year	$	150,558	$	27	$	(24	)	$	150,561
Greater than one year		—		—		—			—
Total	$	150,558	$	27	$	(24	)	$	150,561

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

In the nine months ended September 30, 2013 and 2012, and at December 31, 2012, the Company did not measure the fair value of any of its assets or liabilities other than cash equivalents, available-for-sale investments, and derivative instruments. The Company’s management considers the carrying values of accounts receivable, other receivables, inventory, prepaid expenses and other current assets, accounts payable, accrued expenses, and other current liabilities to approximate fair values primarily due to their short-term nature.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

The Company’s critical accounting policies and methodologies during the quarter ended September 30, 2013 include those described in its Annual Report on Form 10-K for the year ended December 31, 2012, along with those presented below.

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 indicate that the evaluation of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity.

Search services revenue recognition: The majority of the Company’s revenues are generated from its web search services. The Search business does not generate its own search content for its web search services, 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, and those providers are referred to as “Search Customers”. 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 (i.e., when 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 service revenue from the sale of tax preparation online services, ancillary service offerings, packaged tax preparation 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, e-filing services, and other value-added 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. Other value-added service revenue consists of revenue from revenue sharing and royalty arrangements with third party partners. Revenue for these transactions 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 the Company’s determination of when collectability is probable.

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. 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.

E-Commerce revenue recognition: The Company recognizes product revenue from product sales when all four revenue recognition criteria, as outlined above, have been met. Because the Company either (i) has a general practice of refunding customer losses for products damaged while in-transit despite selling terms indicating title transfers at the point of shipment or (ii) has FOB-destination shipping terms specifically set out in certain arrangements, delivery is deemed to have occurred at the point in time when the product is received by the customer. All amounts billed to a customer in a sale transaction related to shipping and handling, if any, represents revenues earned for the goods provided, and these amounts have been classified as “product revenue”. Costs related to such shipping and handling billings are classified as “product cost of revenue”.

The Company provides its customers with a thirty-day right of return. Return allowances, which reduce revenue, are estimated using historical experience.

Cost of revenues: The Company records the cost of revenues for sales of products and services when the related revenue is recognized. Services cost of revenue 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 the Company’s 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, bank service fees, and royalties. Product cost of revenue includes product costs, inbound and outbound shipping and handling costs, packaging supplies, and provisions for inventory obsolescence. Shipping charges to receive products from the Company’s suppliers are included in inventory, and recognized as product cost of revenue upon sale of products to customers.

Sales and marketing expenses: Sales and marketing expenses consist principally of marketing expenses associated with the Company’s TaxACT and Monoprice websites (which include the following channels: television, radio, online display and text, and email), the Company’s owned and operated web search properties (which consist of traffic acquisition, including the Company’s online marketing, which includes fees paid to search engines to drive traffic to an owned and operated website, agency fees, brand promotion expense and market research expense), personnel costs (which include salaries, benefits and other employee-related costs, and stock-based compensation expense) for personnel engaged in marketing and selling activities, and fulfillment expenses primarily associated with the Company’s E-Commerce business. Fulfillment includes direct operating expenses (including personnel costs) relating to the Company’s purchasing, customer and technical support, receiving, inspection and warehouse functions, as well as the cost of temporary help and contractors, and credit card processing fees.

Inventories: Inventories, consisting of merchandise purchased for resale in the E-Commerce business, are accounted for using the first-in-first-out (“FIFO”) method of accounting, and are valued at the lower of cost or market. Inventory quantities on hand are reviewed regularly, and allowances are maintained for obsolete, slow moving, and nonsalable inventory.

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. 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.

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 in the case of the Company’s credit facility (see “Note 8: Debt”).

Debt issuance costs related to the Company’s Convertible Senior Notes (the “Notes”) issued in 2013 were allocated to the liability and equity components of the instrument. The debt issuance costs allocated to the liability component are amortized to interest expense through the earlier of the maturity date of the Notes or the date of conversion, if any. The debt issuance costs allocated to the equity component of the Notes were recorded as an offset to additional paid in capital (See “Note 8: Debt”).

Supplier Concentration: A material part of Monoprice’s business is dependent on two vendors. During the period from August 22, 2013, the date of the acquisition, to September 30, 2013, these unrelated vendors accounted for $1.3 million or 16% and $742,000 and 9%, respectively, of Monoprice’s inventory purchases and at September 30, 2013 accounted for $1.1 million or 12% and $843,000 or 10%, respectively, of Monoprice’s related accounts payable, respectively.

Impairment of Equity Method Investments: The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate, in management’s judgment, that the carrying value of such investment may have experienced a decline in value. When evidence of an other-than-temporary decline has occurred, the Company compares the estimated fair value of the investment to the carrying value of the investment to determine whether an impairment has occurred.

For the three months ended September 30, 2013, in connection with the Company’s review of its equity method investments for other than temporary impairment, the Company determined that its equity investment in a privately-held company had experienced a decline in value which was other than temporary, due to recurring losses from operations, significant personnel reductions and a change in the underlying business model. The Company’s impairment loss calculations require management to apply judgment in estimating future cash flows and assessing the probability of differing estimated outcomes. The Company assesses the fair value of its equity method investments using commonly accepted techniques to the extent applicable, and may use more than one method. Accordingly, this equity investment in a privately-held company with a carrying value of $3.7 million was written down to zero, resulting in a loss of $3.7 million, which was included in “other loss, net” in the Company’s condensed consolidated statements of operations for the three and nine month periods ended September 30, 2013.

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Fair Value Measures - Maturity Information for Investments Available-for-Sale (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 150,558	$ 94,029
Gross unrealized gains	27	36
Gross unrealized losses	(24)	(55)
Total available-for-sale securities	150,561	94,010
Within one year [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	150,558	94,029
Gross unrealized gains	27	36
Gross unrealized losses	(24)	(55)
Total available-for-sale securities	150,561	94,010
Greater than one year [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost
Gross unrealized gains
Gross unrealized losses
Total available-for-sale securities

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Debt (Tables)

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Analysis of Extinguishment or Modification of Debt

In accordance with the relevant accounting guidance, the Company performed an analysis by creditor to determine whether the refinancing would be recorded as an extinguishment or a modification of debt, and as a result of this analysis, recognized a loss on partial extinguishment of debt comprised of the following (in thousands):

Fees paid to creditors in connection with the refinance, including arrangement fee classified as extinguishment	$	567
Deferred financing costs on extinguished debt		726
Debt discount on extinguished debt		300
Total	$	1,593

Schedule of Net Carrying Value of Convertible Senior Notes

As of September 30, 2013, the net carrying amount of the Notes was as follows (in thousands):

	September 30, 2013
Principal Amount	$	201,250
Unamortized discount		(20,525	)
Net Carrying Value	$	180,725

Schedule of Total Interest Expense on Convertible Senior Notes

The following table sets forth total interest expense related to the Notes (in thousands):

	Three months ended September 30, 2013			Nine months ended September 30, 2013
Contractual interest expense (Cash)	$	2,139		$	4,657
Amortization of debt issuance costs (Non-cash)		216			465
Accretion of debt discount (Non-cash)		843			1,816
Total interest expense	$	3,198		$	6,938
Effective interest rate of the liability component		7.32	%		7.32	%

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Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	3 Months Ended	9 Months Ended		1 Months Ended
	Sep. 30, 2013	Sep. 30, 2013 Vendor	Jun. 30, 2013	Sep. 30, 2013 Vendor One [Member] Supplier Concentration Risk [Member]	Sep. 30, 2013 Vendor One [Member] Supplier Concentration Risk [Member] Inventory [Member]	Sep. 30, 2013 Vendor One [Member] Supplier Concentration Risk [Member] Accounts Payable [Member]	Sep. 30, 2013 Vendor Two [Member] Supplier Concentration Risk [Member]	Sep. 30, 2013 Vendor Two [Member] Supplier Concentration Risk [Member] Inventory [Member]	Sep. 30, 2013 Vendor Two [Member] Supplier Concentration Risk [Member] Accounts Payable [Member]
Concentration Risk [Line Items]
Number of vendors		2
Unrelated vendors accounted inventory purchases				$ 1,300,000			$ 742,000
Unrelated vendors, percentage					16.00%	12.00%		9.00%	10.00%
Unrelated vendors accounts payable				1,100,000			843,000
Equity investment in privately-held company, carrying value			3,700,000
Loss on equity investment in privately-held company	$ 3,711,000	$ 3,711,000

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Acquisitions - Schedule of Other Intangibles Net, Intangible Assets Other Than Goodwill (Detail) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Finite And Indefinite Lived Intangible Assets Acquired As Part Of Business Combination [Line Items]
Definite-lived intangible assets, Gross carrying amount	$ 182,502,000	$ 151,602,000
Total intangible assets, Gross carrying amount	240,284,000	171,384,000
Definite-lived intangible assets, Accumulated amortization	(54,863,000)	(38,569,000)
Definite-lived intangible assets, Other intangible assets, net	127,639,000	113,033,000
Total intangible assets, Other intangible assets, net	185,421,000	132,815,000
Indefinite-lived intangible assets, Gross carrying amount	57,782	19,782
Indefinite-lived intangible assets, Other intangible assets, net	57,782	19,782
Installed code base technology [Member]
Finite And Indefinite Lived Intangible Assets Acquired As Part Of Business Combination [Line Items]
Definite-lived intangible assets, Gross carrying amount	12,650,000	12,650,000
Definite-lived intangible assets, Accumulated amortization	(12,555,000)	(12,369,000)
Definite-lived intangible assets, Other intangible assets, net	95,000	281,000
Core technology [Member]
Finite And Indefinite Lived Intangible Assets Acquired As Part Of Business Combination [Line Items]
Definite-lived intangible assets, Gross carrying amount	1,085,000	1,085,000
Definite-lived intangible assets, Accumulated amortization	(1,085,000)	(1,085,000)
Definite-lived intangible assets, Other intangible assets, net
Other Finite Lived Intangible Assets [Member]
Finite And Indefinite Lived Intangible Assets Acquired As Part Of Business Combination [Line Items]
Definite-lived intangible assets, Gross carrying amount	6,667,000	6,667,000
Definite-lived intangible assets, Accumulated amortization	(6,667,000)	(6,667,000)
Definite-lived intangible assets, Other intangible assets, net
Other indefinite lived intangible assets [Member]
Finite And Indefinite Lived Intangible Assets Acquired As Part Of Business Combination [Line Items]
Indefinite-lived intangible assets, Gross carrying amount	283	283
Indefinite-lived intangible assets, Other intangible assets, net	283	283
Tax Preparation [Member] | Customer relationships [Member]
Finite And Indefinite Lived Intangible Assets Acquired As Part Of Business Combination [Line Items]
Definite-lived intangible assets, Gross carrying amount	101,400,000	101,400,000
Definite-lived intangible assets, Accumulated amortization	(21,125,000)	(11,619,000)
Definite-lived intangible assets, Other intangible assets, net	80,275,000	89,781,000
Tax Preparation [Member] | Proprietary technology [Member]
Finite And Indefinite Lived Intangible Assets Acquired As Part Of Business Combination [Line Items]
Definite-lived intangible assets, Gross carrying amount	29,800,000	29,800,000
Definite-lived intangible assets, Accumulated amortization	(12,416,000)	(6,829,000)
Definite-lived intangible assets, Other intangible assets, net	17,384,000	22,971,000
Tax Preparation [Member] | Trade names [Member]
Finite And Indefinite Lived Intangible Assets Acquired As Part Of Business Combination [Line Items]
Indefinite-lived intangible assets, Gross carrying amount	19,499	19,499
Indefinite-lived intangible assets, Other intangible assets, net	19,499	19,499
E-Commerce [Member] | Business-to-consumer customer relationships [Member]
Finite And Indefinite Lived Intangible Assets Acquired As Part Of Business Combination [Line Items]
Definite-lived intangible assets, Gross carrying amount	14,500,000
Definite-lived intangible assets, Accumulated amortization	(780,000)
Definite-lived intangible assets, Other intangible assets, net	13,720,000
E-Commerce [Member] | Business-to-business customer relationships [Member]
Finite And Indefinite Lived Intangible Assets Acquired As Part Of Business Combination [Line Items]
Definite-lived intangible assets, Gross carrying amount	16,400,000
Definite-lived intangible assets, Accumulated amortization	(235,000)
Definite-lived intangible assets, Other intangible assets, net	16,165,000
E-Commerce [Member] | Trade names [Member]
Finite And Indefinite Lived Intangible Assets Acquired As Part Of Business Combination [Line Items]
Indefinite-lived intangible assets, Gross carrying amount	38,000
Indefinite-lived intangible assets, Other intangible assets, net	$ 38,000

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Derivative Instruments and Hedging Activities - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Derivative [Line Items]
Change in fair value assumption change in stock price	10.00%
Impact on expected net income due to change in fair value assumption share price increase	$ 23.4
Impact on expected net income due to change in fair value assumption share price decrease	27.7
Warrant [Member] | Significant unobservable inputs (Level 3) [Member]
Derivative [Line Items]
Estimated fair value of the Warrant derivative instrument	$ 14.5

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Debt - Convertible Senior Notes - Additional Information (Detail) (USD $)	9 Months Ended				9 Months Ended
	Sep. 30, 2013 D	Jan. 31, 2012	Sep. 30, 2013 Monoprice, Inc. [Member]	Aug. 22, 2013 Monoprice, Inc. [Member]	Sep. 30, 2013 2019 Notes [Member]	Mar. 15, 2013 2019 Notes [Member]
Debt Instrument [Line Items]
Deferred debt issuance costs	$ 28,000
Deferred financing costs	429,000
Unamortized debt discount	177,000				20,525,000
Additional creditor-related fees incurred	92,000
Convertible senior notes, maturity date					Apr. 01, 2019
Principal amount					201,250,000	201,250,000
Convertible senior notes, stated interest rate						4.25%
Convertible senior notes, additional issued against over-allotment, principal amount						26,250,000
Convertible senior notes due year					2019
Convertible Senior Notes, Frequency of Periodic Payments					Semi-annually
Convertible senior notes, semi-annual due date first					--04-01
Convertible senior notes, semi-annual due date second					--10-01
Convertible Senior Notes, Date of first required payment					Oct. 01, 2013
Convertible senior loan, maturities, payments of interest, remainder of fiscal year 2013					4,700,000
Convertible senior loan, long-term debt, maturing payments of interest in fiscal years 2014 To 2018					8,600,000
Convertible senior loan, long-term debt, maturing payments of interest in fiscal years 2019					4,300,000
Convertible senior notes, proceeds from issuance, amount					194,800,000
Debt instrument, conversion terms	On or before June 30, 2013, holders could not convert the Notes under any circumstances. After June 30, 2013 and prior to the close of business on the business day immediately preceding October 1, 2018, holders may convert all or a portion of the Notes at their option, in multiples of $1,000 principal amount, only under the following circumstances: — during any fiscal quarter commencing after the calendar quarter ending on June 30, 2013 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; — during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sales price of the Company’s common stock and the conversion rate on each trading day; — if the Company calls any or all of the Notes for redemption; — upon the occurrence of specified corporate events, including a merger or a sale of all or substantially all of the Company’s assets.
Company's common stock for at least trading days	20
Consecutive trading days	30 days
Conversion price on each applicable trading day	130.00%
Convertible senior notes, conversion rate per $1000 face amount					46.1723
Convertible senior notes, conversion rate computation denominator					1,000
Convertible senior notes, conversion rate					$ 21.66
Convertible senior notes, repurchase price due to fundamental change as percentage of principal amount					100.00%
Convertible senior notes, adjustments to additional paid in capital, debt discount					6.50%
Debt discount recorded in additional paid in capital					22,300,000
Debt issuance costs	2,343,000				6,400,000
Debt issuance cost incurred					5,700,000
Fair value of debt instrument					252,800,000
Short-term credit line borrowing capacity	8,000,000	105,000,000
Line of credit, LIBOR rate	2.25%
Line of credit, outstanding amount			$ 0	$ 0
Line of credit, maturity date	Jul. 31, 2014

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Net Income (Loss) per Share - Summary of Dilutive Effect for Awards with Exercise Price Less Than Average Stock Price (Detail) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Weighted average common shares outstanding, basic	41,088	40,511	41,048	40,108
Dilutive stock options, RSUs, PSUs, MSUs, and Warrant			1,830	1,317
Weighted average common shares outstanding, diluted	41,088	40,511	42,878	41,425
Antidilutive awards with an exercise price less than the average price during the applicable period excluded from dilutive share calculation [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of Earnings per share, Amount	98	26	766	246
Outstanding awards with an exercise price greater than the average price during the applicable period not included in dilutive share calculation [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of Earnings per share, Amount	32	655	83	848
Outstanding awards with performance conditions not completed during the applicable period not included in dilutive share calculation [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of Earnings per share, Amount	160	190	97	157
Outstanding awards excluded from dilutive share calculation due to anti-dilutive effect of a net loss [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of Earnings per share, Amount	5,603	5,000

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Allowance for accounts receivable	$ 31	$ 10
Short-term portion of long-term debt, discount	0	160
Discount on long-term debt	$ 264	$ 468
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	900,000,000	900,000,000
Common stock, shares issued	41,175,868	40,832,393
Common stock, shares outstanding	41,175,868	40,832,393

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

The Company’s contractual commitments changed from the commitments and obligations disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, outside of the ordinary course of the Company’s business and other than those previously disclosed in the Quarterly Reports on Form 10-Q for the first quarter and the second quarter of 2013, due to the acquisition of Monoprice. The Company’s contractual commitments are as follows for the years ending December 31 (in thousands):

	2013		2014		2015		2016		2017		2018		Thereafter			Total
Operating lease commitments	$	554	$	2,596	$	2,309	$	1,793	$	1,830	$	1,676	$	2,353		$	13,111
Purchase commitments		71		646		437		92		62		—		—			1,308
Debt commitments		—		—		—		—		—		65,384		201,250	1		266,634
Total	$	625	$	3,242	$	2,746	$	1,885	$	1,892	$	67,060	$	203,603		$	281,053

1 For further detail regarding the Notes, which are due April 1, 2019, unless earlier purchased, redeemed, or converted in accordance with their terms, see “Note 8: Debt”.

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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Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Income Statement [Abstract]
Amortization of acquired intangible assets	$ 1,906	$ 2,014	$ 5,773	$ 5,605

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Stock Repurchase Program - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	1 Months Ended	3 Months Ended	9 Months Ended
	Feb. 28, 2013	Sep. 30, 2013	Sep. 30, 2013
Stockholders Equity Note [Abstract]
Repurchase of available common stock, Authorized Amount	$ 50
Stock Repurchase Program, Period in Force			24 months
Shares repurchased under Stock Repurchase Program		123,600	191,300
Stock repurchased value exclusive of purchase and administrative costs		2.5	3.5
Stock repurchase, average price per share		$ 19.97	$ 18.38
Stock repurchase program remaining authorized repurchase amount			$ 46.5

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 97,821	$ 68,278
Short-term investments, available-for-sale	150,561	94,010
Accounts receivable, net of allowance of $31 and $10	46,896	34,932
Other receivables	8,943	3,942
Inventories	26,577
Prepaid expenses and other current assets, net	6,928	10,911
Total current assets	337,726	212,073
Property and equipment, net	15,165	7,533
Goodwill	343,139	230,290
Other intangible assets, net	185,421	132,815
Other long-term assets	6,043	2,582
Total assets	887,494	585,293
Current liabilities:
Accounts payable	50,862	37,687
Accrued expenses and other current liabilities	26,278	13,280
Deferred revenue	6,195	3,157
Short-term portion of long-term debt, net of discount of $0 and $160		4,590
Derivative instruments	14,495	8,974
Total current liabilities	97,830	67,688
Long-term liabilities:
Long-term debt, net of discount of $264 and $468	65,120	69,278
Convertible senior notes	180,725
Deferred tax liability	56,020	29,333
Deferred revenue	2,143	1,319
Other long-term liabilities	2,022	2,225
Total long-term liabilities	306,030	102,155
Total liabilities	403,860	169,843
Commitments and contingencies (Note 7)
Stockholders' equity:
Common stock, par value, $0.0001 - authorized, 900,000,000 shares; 41,175,868 and 40,832,393 shares issued and outstanding at September 30, 2013 and December 31, 2012	4	4
Additional paid-in capital	1,434,471	1,392,098
Accumulated deficit	(950,843)	(976,376)
Accumulated other comprehensive income (loss)	2	(276)
Total stockholders' equity	483,634	415,450
Total liabilities and stockholders' equity	$ 887,494	$ 585,293

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Debt - Schedule of Net Carrying Value of Convertible Senior Notes (Detail) (USD $)	Sep. 30, 2013	Mar. 15, 2013
Debt Instrument [Line Items]
Unamortized discount	$ (177,000)
Net Carrying Value	180,725,000
2019 Notes [Member]
Debt Instrument [Line Items]
Principal amount	201,250,000	201,250,000
Unamortized discount	$ (20,525,000)

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Derivative Instruments and Hedging Activities (Tables)

9 Months Ended

Sep. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Summary of Fair Values of Outstanding Derivative Instruments

The presentation of derivative instruments on the unaudited condensed consolidated balance sheets is summarized below (in thousands):

		Fair value of derivative instruments
	Balance sheet location	As of September 30, 2013		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		14,495		8,564
Total derivative liabilities		$	14,495	$	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 three and nine months ended September 30, 2013 and 2012 (in thousands):

		Loss recognized in other loss, net
		Three months ended				Nine months ended
Derivative not designated as hedging instrument	Statement of Comprehensive Income (Loss) location	September 30, 2013		September 30, 2012		September 30, 2013		September 30, 2012
Equity contract (the Warrant)	Other loss, net	$	3,956	$	4,335	$	5,931	$	4,274

Summary of Potential Impact of Change in Stock Price on Fair Value of Derivative

The following table illustrates the potential impact of a change in stock price on the fair value of the derivative at September 30, 2013:

	-10%		September 30, 2013 closing stock price		+10%
Effect of a 10% change in stock price:
Variable changed
Closing stock price	$	20.68	$	22.98	$	25.28
Estimated fair value (in thousands)	$	12,365			$	16,661

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2013

Goodwill Arising from Acquisitions

The following summarizes our goodwill activity by segment in the nine months ended September 30, 2013 (in thousands):

	Search		Tax Preparation		E-Commerce		Total
Goodwill – January 1, 2013	$	44,815	$	185,475	$	—	$	230,290
New acquisitions		—		—		112,849		112,849
Goodwill – September 30, 2013	$	44,815	$	185,475	$	112,849	$	343,139

Schedule of Other Intangibles Net, Intangible Assets Other Than Goodwill

Other intangibles, net. Intangible assets other than goodwill consisted of the following (in thousands):

	September 30, 2013							December 31, 2012
	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	$	(12,555	)	$	95	$	12,650	$	(12,369	)	$	281
Core technology		1,085		(1,085	)		—		1,085		(1,085	)		—
Tax Preparation customer relationships		101,400		(21,125	)		80,275		101,400		(11,619	)		89,781
Tax Preparation proprietary technology		29,800		(12,416	)		17,384		29,800		(6,829	)		22,971
E-Commerce B2C customer relationships		14,500		(780	)		13,720		—		—			—
E-Commerce B2B customer relationships		16,400		(235	)		16,165		—		—			—
Other		6,667		(6,667	)		—		6,667		(6,667	)		—
Total definite-lived intangible assets		182,502		(54,863	)		127,639		151,602		(38,569	)		113,033
Indefinite-lived intangible assets:
Tax Preparation trade names		19,499		—			19,499		19,499		—			19,499
E-Commerce trade names		38,000		—			38,000		—		—			—
Other		283		—			283		283		—			283
Total indefinite-lived intangible assets		57,782		—			57,782		19,782		—			19,782
Total	$	240,284	$	(54,863	)	$	185,421	$	171,384	$	(38,569	)	$	132,815

Schedule of Amortization Expense

Amortization expense for the three and nine months ended September 30, 2013 is presented in the table below (in thousands):

	Three months ended September 30, 2013		Nine months ended September 30, 2013
Statement of operations location of amortization:
Services cost of revenue	$	1,906	$	5,773
Depreciation and amortization		4,184		10,521
Total	$	6,090	$	16,294

Schedule of Expected Amortization of Definite-Lived Intangible Assets

Information about expected amortization of definite-lived intangible assets held as of September 30, 2013 in the next five years is presented in the table below (in thousands):

	2013		2014		2015		2016		2017		2018		Thereafter		Total
Services cost of revenue	$	1,895	$	7,513	$	7,450	$	621	$	—	$	—	$	—	$	17,479
Depreciation and amortization		5,583		22,268		19,676		15,018		15,018		15,018		17,579		110,160
Total	$	7,478	$	29,781	$	27,126	$	15,639	$	15,018	$	15,018	$	17,579	$	127,639

Monoprice, Inc. [Member]

Summary of Asset Acquired and Liabilities Assumed are Recorded at Their Fair Values as of Acquisition Date

Preliminary valuations are as follows (in thousands):

	Fair Value
Tangible assets acquired	$	49,515
Liabilities assumed		(23,122	)
Identifiable net assets acquired	$	26,393
Fair value adjustments to intangible assets
Customer relationships	$	30,900
Trade name		38,000
Fair value of intangible assets acquired	$	68,900
Purchase price:
Cash paid	$	183,319
Less identifiable net assets acquired		(26,393	)
Plus deferred tax liability related to intangible assets		24,823
Less fair value of intangible assets acquired		(68,900	)
Excess of purchase price over net assets acquired, allocated to goodwill	$	112,849

Pro Forma Financial Information of Acquisitions

The following amounts are in thousands:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013		2012
Revenues	$	145,852		$	122,411		$	496,559	$	394,879
Net income (loss)	$	(6,017	)	$	(1,351	)	$	26,771	$	20,055

Tax Act [Member]

Pro Forma Financial Information of Acquisitions

The following amounts are in thousands:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013		2012
Revenues	$	124,121		$	92,870		$	406,640	$	330,339
Net income (loss)	$	(6,481	)	$	(2,398	)	$	25,533	$	22,999

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Stock-Based Compensation - Shares Issued under Share Based Compensation (Detail) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Net shares issued	157	299	535	1,100
RSUs vested [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Net shares issued	70	18	265	191
MSUs vested
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Net shares issued			29	30
Options exercised [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Net shares issued	39	243	157	817
Shares purchased pursuant to ESPP [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Net shares issued	48	38	84	62

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Derivative Instruments and Hedging Activities - Summary of Effect of Derivative Instrument Not Designated as Hedging Instruments on Income (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Summary of effect of derivative instrument not designated as hedging instruments on income
Loss recognized in other loss, net			$ 5,931	$ 4,274
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, net	$ 3,956	$ 4,335	$ 5,931	$ 4,274

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Acquisition - Schedule of Expected Amortization of Definite-Lived Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Finite Lived Intangible Assets, Future Amortization Expense [Line Items]
2013	$ 7,478
2014	29,781
2015	27,126
2016	15,639
2017	15,018
2018	15,018
Thereafter	17,579
Definite-lived intangible assets, Other intangible assets, net	127,639	113,033
Services cost of revenue [Member]
Finite Lived Intangible Assets, Future Amortization Expense [Line Items]
2013	1,895
2014	7,513
2015	7,450
2016	621
Definite-lived intangible assets, Other intangible assets, net	17,479
Depreciation and amortization [Member]
Finite Lived Intangible Assets, Future Amortization Expense [Line Items]
2013	5,583
2014	22,268
2015	19,676
2016	15,018
2017	15,018
2018	15,018
Thereafter	17,579
Definite-lived intangible assets, Other intangible assets, net	$ 110,160

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Acquisitions - Pro Forma Financial Information of Acquisitions (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Business Acquisition [Line Items]
Revenues	$ 124,121	$ 92,870	$ 406,640	$ 309,449
Net income (loss)	(6,481)	(2,398)	25,533	18,706
Monoprice, Inc. [Member]
Business Acquisition [Line Items]
Revenues	145,852	122,411	496,559	394,879
Net income (loss)	(6,017)	(1,351)	26,771	20,055
Tax Act [Member]
Business Acquisition [Line Items]
Revenues	124,121	92,870	406,640	330,339
Net income (loss)	$ (6,481)	$ (2,398)	$ 25,533	$ 22,999

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Acquisitions - Goodwill Arising from Acquisitions (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Business Acquisition [Line Items]
Goodwill Beginning of period	$ 230,290
New acquisitions	112,849
Goodwill Ending of period	343,139
Search [Member]
Business Acquisition [Line Items]
Goodwill Beginning of period	44,815
New acquisitions
Goodwill Ending of period	44,815
Tax Preparation [Member]
Business Acquisition [Line Items]
Goodwill Beginning of period	185,475
New acquisitions
Goodwill Ending of period	185,475
E-Commerce [Member]
Business Acquisition [Line Items]
Goodwill Beginning of period
New acquisitions	112,849
Goodwill Ending of period	$ 112,849

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Net Income (Loss) per Share

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Net Income (Loss) per Share

6. Net Income (Loss) per Share

Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income (loss) 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, the Warrant, vesting of unvested RSUs, MSUs, and PSUs, and the impact of shares that could be issued upon conversion or maturity of our convertible debt. Potentially dilutive shares are excluded from the computation of earnings per share if their effect is antidilutive.

The weighted average dilutive and anti-dilutive shares for the three and nine months ended September 30, 2013 and 2012 are as follows (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Weighted average common shares outstanding, basic		41,088		40,511		41,048		40,108
Dilutive stock options, RSUs, PSUs, MSUs, and Warrant		—		—		1,830		1,317
Weighted average common shares outstanding, diluted		41,088		40,511		42,878		41,425
Antidilutive awards with an exercise price less than the average price during the applicable period excluded from dilutive share calculation		98		26		766		246
Outstanding awards with an exercise price greater than the average price during the applicable period not included in dilutive share calculation		32		655		83		848
Outstanding awards with performance conditions not completed during the applicable period not included in dilutive share calculation		160		190		97		157
Outstanding awards excluded from dilutive share calculation due to anti-dilutive effect of a net loss		5,603		5,000		—		—

As more fully discussed in “Note 8: Debt”, in March 2013, we issued Convertible Senior Notes (the “Notes”) maturing in April 2019. The Company intends, upon conversion or maturity of the Notes, to satisfy any conversion premium by issuing shares of our common stock. Due to the cash settlement feature of the principal amount of the Notes, the Company only includes the impact of the premium feature in its diluted earnings per common share calculation when the average stock price exceeds the conversion price of the Notes, which did not occur for the three or nine months ended September 30, 2013.

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2013

Segment Reporting [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 the three and nine months ended September 30, 2013 and 2012 are presented below (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Revenue
Search	$	107,742		$	91,408		$	302,840		$	248,511
Tax Preparation		1,749			1,462			89,170			60,938
E-Commerce		14,630			—			14,630			—
Total revenue		124,121			92,870			406,640			309,449
Operating income (loss)
Search		21,319			16,356			57,501			44,807
Tax Preparation		(1,605	)		(1,561	)		43,617			32,528
E-Commerce		906			—			906			—
Corporate-level activity		(14,493	)		(11,061	)		(38,261	)		(36,899	)
Total operating income		6,127			3,734			63,763			40,436
Other loss, net		(13,118	)		(5,196	)		(20,427	)		(7,681	)
Income tax benefit (expense)		510			(936	)		(17,803	)		(14,049	)
Net income (loss)	$	(6,481	)	$	(2,398	)	$	25,533		$	18,706

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Stock-Based Compensation - Stock-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total	$ 3,252	$ 2,195	$ 8,490	$ 10,923
Excluded and capitalized as part of internal-use software	34	21	68	66
Services cost of revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total	94	183	541	331
Engineering and technology [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total	370	332	942	894
Sales and marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total	649	587	1,652	1,389
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total	$ 2,139	$ 1,093	$ 5,355	$ 8,309

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Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

9. Derivative Instruments and Hedging Activities

The Company recognizes derivative instruments as either assets or liabilities on its unaudited condensed consolidated balance sheets at fair value. The Company records changes in the fair value of the derivative instruments as gains or losses in the unaudited condensed consolidated statements of comprehensive income (loss) in other loss, net, or to accumulated other comprehensive income (loss) in the unaudited condensed consolidated balance sheets.

The presentation of derivative instruments on the unaudited condensed consolidated balance sheets is summarized below (in thousands):

		Fair value of derivative instruments
	Balance sheet location	As of September 30, 2013		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		14,495		8,564
Total derivative liabilities		$	14,495	$	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. As noted in “Note 8: Debt”, above, the interest rate swap was terminated at break-even on September 10, 2013.

The effect of the derivative instrument not designated as hedging instruments on income is summarized below for the three and nine months ended September 30, 2013 and 2012 (in thousands):

		Loss recognized in other loss, net
		Three months ended				Nine months ended
Derivative not designated as hedging instrument	Statement of Comprehensive Income (Loss) location	September 30, 2013		September 30, 2012		September 30, 2013		September 30, 2012
Equity contract (the Warrant)	Other loss, net	$	3,956	$	4,335	$	5,931	$	4,274

At September 30, 2013, the estimated fair value of the Warrant derivative instrument was $14.5 million. The Company values the Warrant, classified within Level 3, by using the Black-Scholes option pricing model which takes into account a variety of factors, including historical stock price volatility, risk-free interest rates, remaining maturity, and the closing price of our common stock. The Company believes the assumption that has the greatest impact on the determination of fair value is the closing price of our common stock.

The following table illustrates the potential impact of a change in stock price on the fair value of the derivative at September 30, 2013:

	-10%		September 30, 2013 closing stock price		+10%
Effect of a 10% change in stock price:
Variable changed
Closing stock price	$	20.68	$	22.98	$	25.28
Estimated fair value (in thousands)	$	12,365			$	16,661

If our stock price increased or decreased by 10% (all other Black-Scholes variables held constant) our reported net income for the nine months ending September 30, 2013 would have been $23.4 million and $27.7 million, respectively.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

5. Stock-Based Compensation

The Company has included the following amounts for stock-based compensation expense, including the cost related to RSUs, stock options, PSUs and market stock units (“MSUs,” a form of share price performance-based restricted stock unit) granted under the Company’s equity award plans including the Company’s employee stock purchase plan (“ESPP”) and the warrant issued in August 2011 (the “Warrant,”), in the accompanying unaudited condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2013 and 2012 (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Services cost of revenue	$	94	$	183	$	541	$	331
Engineering and technology		370		332		942		894
Sales and marketing		649		587		1,652		1,389
General and administrative		2,139		1,093		5,355		8,309
Total	$	3,252	$	2,195	$	8,490	$	10,923
Excluded and capitalized as part of internal-use software	$	34	$	21	$	68	$	66

In October 2011, the Company granted 200,000 stock options to a non-employee consultant who performed acquisition-related activities, and the award’s vesting was predicated on completing a “qualified acquisition” under the terms of the award. The completion of the acquisition of the TaxACT business on January 31, 2012 constituted a qualifying acquisition under the terms of the award, and the vesting of the award resulted in a charge of $903,000 to stock-based compensation expense in the nine months ended September 30, 2012, which was classified in general and administrative expenses.

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. The completion of the acquisition of Monoprice on August 22, 2013 constituted a qualifying acquisition under the terms of the awards, and the vestings of the awards resulted in a charge of $526,000 to stock-based compensation expense in the three and nine months ended September 30, 2013, which was classified in general and administrative expenses.

In August 2011, the Company issued a Warrant to purchase one million shares of common stock, exercisable at a price of $9.62 per share. The Warrant was originally scheduled to expire on August 23, 2014, but the acquisition of the TaxACT business on January 31, 2012 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 the Company. The extension of the Warrant’s term was a modification that resulted in a $4.3 million charge to stock-based compensation expense in the first quarter 2012 equal to the increase in the Warrant’s fair value and was recognized in general and administrative expenses. 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 was classified as a current liability (See “Note 9: Derivative Instruments and Hedging Activities”).

The total net shares issued for RSUs and MSUs vested, options exercised, and shares purchased pursuant to the ESPP during the three and nine months ended September 30, 2013 and 2012 is presented below (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
RSUs vested		70		18		265		191
MSUs vested		—		—		29		30
Options exercised		39		243		157		817
Shares purchased pursuant to ESPP		48		38		84		62
Total		157		299		535		1,100

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Condensed Consolidated Statements of Cash Flows (Parenthetical) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Debt issuance costs	$ 2,343
Debt discount	953
Convertible debt [Member]
Debt issuance costs	$ 6,432

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Debt - Schedule of Total Interest Expense on Convertible Senior Notes (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended		3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 2019 Notes [Member]	Sep. 30, 2013 2019 Notes [Member]
Debt Instrument [Line Items]
Contractual interest expense (Cash)			$ 2,139	$ 4,657
Amortization of debt issuance costs (Non-cash)	841	746	216	465
Accretion of debt discount (Non-cash)			843	1,816
Total interest expense			$ 3,198	$ 6,938
Effective interest rate of the liability component			7.32%	7.32%

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Debt - Term Debt - Additional Information (Detail) (USD $)	9 Months Ended	12 Months Ended		9 Months Ended			9 Months Ended				1 Months Ended		1 Months Ended			9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Jan. 31, 2012	Sep. 30, 2013 Minimum [Member]	Sep. 30, 2013 Maximum [Member]	Sep. 30, 2013 LIBOR Rate [Member]	Sep. 30, 2013 LIBOR Rate [Member] Minimum [Member]	Sep. 30, 2013 LIBOR Rate [Member] Maximum [Member]	Sep. 30, 2013 Alternative Base Rate Minimum [Member]	Sep. 30, 2013 Alternative Base Rate Maximum [Member]	Jan. 31, 2012 Long-term Debt [Member]	May 01, 2012 Long-term Debt [Member]	Aug. 31, 2013 Revolving Debt [Member]	Apr. 30, 2013 Revolving Debt [Member]	Jan. 31, 2012 Revolving Debt [Member]	Sep. 30, 2013 Term Loan [Member]	Jan. 31, 2012 Term Loan [Member]
Debt Instrument [Line Items]
Credit agreement	$ 8,000,000		$ 105,000,000												$ 10,000,000		$ 95,000,000
Term loan borrowed															5,000,000		95,000,000
Maturity date	Jul. 31, 2014										Jan. 31, 2017
Mandatory prepayment on term loan within requirement	A portion of any excess cash flows, as the term is defined in the credit agreement, were to be used to make a mandatory prepayment on the term loan within sixty days of June 30th, beginning June 30, 2013, and in each succeeding year, in the event that the leverage ratio is more than two-to-one on June 30thof that year.
Prepayment on the term loan	60 days
Leverage ratio																2
Repaid the debt		25,500,000											64,500,000	10,000,000
Interest rate description	The Applicable Margin was dependent on the consolidated Total Leverage Ratio (as defined in the credit agreement) of TaxACT Holdings and ranged 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.
Alternative Base Rate and LIBOR Rate				0.75%	1.50%		3.00%	4.50%	2.00%	3.50%
Amount outstanding under the term loan												$ 37,500,000
Interest rate hedge risk period associated with the term debt	90 days
LIBOR Rate portion						0.85%
Date of swap terminated for break-even	Sep. 10, 2013

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Acquisitions - Additional Information (Detail) (USD $)	3 Months Ended	9 Months Ended		1 Months Ended	3 Months Ended	9 Months Ended							1 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013	Jan. 31, 2012	Aug. 22, 2013 Monoprice, Inc. [Member]	Sep. 30, 2013 Monoprice, Inc. [Member]	Sep. 30, 2013 Monoprice, Inc. [Member]	Sep. 30, 2013 Monoprice, Inc. [Member] Business-to-consumer customer relationships [Member]	Sep. 30, 2013 Monoprice, Inc. [Member] Business-to-business customer relationships [Member]	Sep. 30, 2013 Monoprice, Inc. [Member] Personal property assets [Member]	Sep. 30, 2013 Monoprice, Inc. [Member] Shares purchased pursuant to ESPP [Member]	Sep. 30, 2013 Monoprice, Inc. [Member] RSUs vested [Member]	Sep. 30, 2013 Monoprice, Inc. [Member] Performance-based restricted stock units [Member]	Jan. 31, 2012 Tax Act [Member]	Sep. 30, 2013 Tax Act [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Date of acquisition						Aug. 22, 2013								Jan. 31, 2012
Cash paid for acquisition				$ 183,300,000									$ 287,500,000
Acquisition cost					646,000	698,000
Options, restricted stock units and performance stock units granted during the period to Monoprice employees										27,152	126,259	243,750
Definite-lived intangible assets, Weighted average amortization period		65 months					2 years	7 years	6 years
Gross contractual amount of trade accounts receivable acquired				3,200,000
Fair value of deferred revenue acquiree				1,300,000
Book value of deferred revenue prior to acquisition				2,000,000
Revenue	14,630,000	14,630,000			14,630,000
Contribution to Company's net loss						427,000
Maximum amount available under credit facility	8,000,000	8,000,000	105,000,000										105,000,000	105,000,000
Credit facility drawn													100,000,000	100,000,000
Excess of purchase price over net assets acquired, allocated to goodwill				$ 112,849,000										$ 185,500,000

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Subsequent Events - Additional Information (Detail) (Subsequent Event [Member], Balance Financial Inc [Member], USD $) In Millions, unless otherwise specified	0 Months Ended
	Oct. 02, 2013
Subsequent Event [Member] | Balance Financial Inc [Member]
Subsequent Event [Line Items]
Payment to acquire business, Gross	$ 4.9
Percentage of equity interest acquired	100.00%

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Reclassifications to Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2013

Equity [Abstract]

Reclassifications to Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)

12. Reclassifications to Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)

In the three and nine months ended September 30, 2013, the Company revised the presentation of its Consolidated Statement of Comprehensive Income (Loss) as outlined below:

As a result of the Monoprice acquisition in August 2013, the Company revised the classification of credit cards fees previously reported in services cost of revenue to sales and marketing. The Company assessed the related materiality of the reclassification and concluded that it is immaterial to any of our previously issued financial statements and therefore, have revised the three and nine months ended September 30, 2012 from the amounts previously reported in that period’s quarterly report on Form 10-Q to conform with the 2013 presentation. The revision of classification had no effect on our reported net revenues, operating income (loss) or cash flows for the three or nine months ended September 30, 2013 or 2012.

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Debt

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Debt

8. Debt

Term Debt. On January 31, 2012, in conjunction with closing the Company’s acquisition of the TaxACT business, TaxACT 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. On January 31, 2012, TaxACT borrowed $95 million of term debt with an original maturity of January 31, 2017 and $5 million under the revolving credit facility. A portion of any excess cash flows, as the term is defined in the credit agreement, were to be used to make a mandatory prepayment on the term loan within sixty days of June 30^th, beginning June 30, 2013, and in each succeeding year, 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 could be prepaid without penalty. During 2012, TaxACT repaid an aggregate of $25.5 million of the debt, including the balance of revolving credit facility. In April 2013, TaxACT repaid an additional $10.0 million of the outstanding debt, and in August 2013, the remaining amount of $64.5 million was repaid in connection with the refinancing of this credit agreement as discussed further below.

The interest rate on amounts borrowed under the term loan and the revolving loan was variable and payable as of the end of each interest period, based upon, at the election of TaxACT, the Alternate Base Rate or the LIBOR Rate, plus the Applicable Margin (as such terms are defined in the credit agreement). The Applicable Margin was dependent on the consolidated Total Leverage Ratio (as defined in the credit agreement) of TaxACT Holdings and ranged 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.

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 was terminated for break-even on September 10, 2013.

Credit Facility. On August 30, 2013, TaxACT and TaxACT Holdings entered into an agreement with a syndicate of lenders for the purpose of refinancing the previous credit agreement entered into by TaxACT and TaxACT Holdings on January 31, 2012 on more favorable terms. The new credit facility consists of revolving credit loans, up to $10.0 million in swingline loans, and up to $5.0 million under a letter of credit, which in the aggregate represent a $100.0 million revolving credit commitment that reduces to $90.0 million on August 30, 2014, to $80.0 million on August 30, 2015, and to $70.0 million on August 30, 2016. The final maturity date of the credit facility is August 30, 2018. TaxACT’s obligations under the credit facility are guaranteed by TaxACT Holdings, and are secured by the assets of the TaxACT business and the TaxACT equity owned by TaxACT Holdings.

TaxACT initially borrowed approximately $65.4 million under the revolving credit loans, which was used to pay off the $64.5 million principal balance of the term loan as described above and to pay accrued interest, certain expenses and fees related to the agreement. The Company has the right to permanently reduce, without premium or penalty, (i) the entire credit facility at any time or (ii) portions of the credit facility, from time to time, in an aggregate principal amount not less than $3 million or any whole multiple of $1 million in excess thereof. The interest rate on amounts borrowed under the credit facility is variable and payable as of the end of each interest period, based upon, at the election of TaxACT, either (i) LIBOR plus a margin of between 1.75% and 2.5%, or (ii) a Base Rate plus a margin of between 0.75% and 1.5%, in each case with the applicable margin within the range dependent upon TaxACT’s ratio of leverage to EBITDA over the previous four quarters. The credit facility includes financial and operating covenants with respect to certain ratios, including (a) leverage ratio and (b) fixed charge coverage ratio, which are defined further in the agreement, as well as certain restrictions on TaxACT’s payments to the Company. As of September 30, 2013, the Company was in compliance with all of the financial and operating covenants. As of September 30, 2013, the credit facility’s gross carrying value of $65.4 million approximates its fair value as it is a variable rate instrument and the current applicable margin approximates current market conditions.

In accordance with the relevant accounting guidance, the Company performed an analysis by creditor to determine whether the refinancing would be recorded as an extinguishment or a modification of debt, and as a result of this analysis, recognized a loss on partial extinguishment of debt comprised of the following (in thousands):

Fees paid to creditors in connection with the refinance, including arrangement fee classified as extinguishment	$	567
Deferred financing costs on extinguished debt		726
Debt discount on extinguished debt		300
Total	$	1,593

In accordance with the debt extinguishment accounting guidance, the Company recorded $28,000 in deferred debt issuance costs, which will be amortized over the term of the new credit facility using the effective interest method as an adjustment to interest expense. The Company also determined that the remaining portion of the refinancing was a modification under the related accounting guidance, and the Company determined a new effective interest rate based on the carrying amount of the original debt and the revised cash flows. Approximately $606,000, which is comprised of $429,000 in deferred financing costs and $177,000 in unamortized debt discount related to the prior credit agreement, will be amortized as an adjustment to interest expense over the remaining term of the new credit facility using the effective interest method. Similarly, additional creditor-related fees incurred of $92,000 related to the modification will be amortized over the term of the new debt using the effective interest method.

Convertible Senior Notes. On March 15, 2013, the Company issued $201.25 million aggregate principal amount of its 4.25% Convertible Senior Notes (the “Notes”), inclusive of the underwriters’ exercise in full of their over-allotment option of $26.25 million. The Notes mature on April 1, 2019 unless earlier purchased, redeemed, or converted in accordance with the terms and bear interest at a rate of 4.25% per year, which began to accrue on March 15, 2013 and is payable semi-annually in arrears on April 1 and October 1 of each year beginning on October 1, 2013. Based upon the above, annual interest payments for fiscal year 2013, fiscal years 2014 through 2018, and fiscal year 2019 will be $4.7 million, $8.6 million, and $4.3 million, respectively. The Company received net proceeds from the offering of approximately $194.8 million after adjusting for debt issuance costs, including the underwriting discount.

The Notes were issued under an indenture dated March 15, 2013 (the “Indenture”) by and between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee. There are no financial or operating covenants relating to the Notes.

On or before June 30, 2013, holders could not convert the Notes under any circumstances. After June 30, 2013 and prior to the close of business on the business day immediately preceding October 1, 2018, holders may convert all or a portion of the Notes at their option, in multiples of $1,000 principal amount, only under the following circumstances:

• during any fiscal quarter commencing after the calendar quarter ending on June 30, 2013 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

• during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sales price of the Company’s common stock and the conversion rate on each trading day;

• if the Company calls any or all of the Notes for redemption;

• upon the occurrence of specified corporate events, including a merger or a sale of all or substantially all of the Company’s assets.

On or after October 1, 2018 until the close of business on the second scheduled trading day immediately preceding the maturity date of April 1, 2019, holders may convert their Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

The conversion rate for the Notes is initially 46.1723 shares per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $21.66 per share of the Company’s common stock). The conversion rate is subject to customary adjustment for certain events as described in the Indenture.

At the time the Company issued the Notes, the Company was only permitted to settle conversions with shares of its common stock. The Company received shareholder approval at its annual meeting in May 2013 to allow for “flexible settlement”, which provides the Company with the option to settle conversions in cash, shares of common stock, or any combination thereof. The Company’s intention is to satisfy conversion of the Notes with cash for the principal amount of the debt and shares of common stock for any related conversion premium.

The Company may not redeem the Notes prior to April 6, 2016. After April 6, 2016, the Company may, at its option, redeem for cash all or part of the Notes plus accrued and unpaid interest up to, but not including the redemption date. If the Company undergoes a fundamental change, (as described in the Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or part of their Notes in principal amounts of $1,000 or an integral multiple thereof. The fundamental change repurchase price will be equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. However, if a fundamental change occurs and a holder elects to convert the Notes, the Company will, under certain circumstances, increase the applicable conversion rate for the Notes surrendered for conversion by a number of additional shares of common stock based on the date on which the fundamental change occurs or becomes effective and the price paid per share of the Company’s common stock in the fundamental change as specified in the Indenture.

The Notes are unsecured and unsubordinated obligations of the Company and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes, and equal in right of payment to any of the Company’s existing and future unsecured indebtedness that is not subordinated. The Notes are effectively junior in right of payment to any of the Company’s secured indebtedness (to the extent of the value of assets securing such indebtedness) and structurally junior to all existing and future indebtedness and other liabilities, including trade payables, of the Company’s subsidiaries. The Indenture does not limit the amount of debt that the Company or its subsidiaries may incur, including senior secured indebtedness.

The Notes may be settled in combination of cash or shares of common stock given the flexible settlement option. As a result, the Notes contain liability and equity components which were bifurcated and accounted for separately. The liability component of the Notes, as of the issuance date, was calculated by estimating the fair value of a similar liability issued at a 6.5% effective interest rate, which was determined by considering the rate of return investors would require in the Company’s debt structure. The amount of the equity component was calculated by deducting the fair value of the liability component from the principal amount of the Notes, resulting in the initial recognition of $22.3 million as the debt discount recorded in additional paid in capital for the Notes. The carrying amount of the Notes will be accreted to the principal amount over the remaining term to maturity and the Company will record a corresponding interest expense.

As of September 30, 2013, the net carrying amount of the Notes was as follows (in thousands):

	September 30, 2013
Principal Amount	$	201,250
Unamortized discount		(20,525	)
Net Carrying Value	$	180,725

The Company incurred debt issuance costs of $6.4 million related to the Notes and allocated $5.7 million of debt issuance costs to the liability component of the Notes. These costs will be amortized to interest expense over the six year term of the Notes or the date of conversion, if any.

The following table sets forth total interest expense related to the Notes (in thousands):

	Three months ended September 30, 2013			Nine months ended September 30, 2013
Contractual interest expense (Cash)	$	2,139		$	4,657
Amortization of debt issuance costs (Non-cash)		216			465
Accretion of debt discount (Non-cash)		843			1,816
Total interest expense	$	3,198		$	6,938
Effective interest rate of the liability component		7.32	%		7.32	%

The fair value of the principal amount of the Notes as of September 30, 2013 was $252.8 million, based on the last trading price as of that date.

Line of Credit. Monoprice has a short-term credit line up to $8.0 million borrowing capacity, which matures on July 31, 2014. The line of credit bears interest at an average monthly LIBOR rate plus 2.25%. The outstanding balance of the line of credit was zero at the date of acquisition on August 22, 2013 and at September 30, 2013. This line of credit is collateralized by the general business assets of Monoprice. Monoprice is subject to restrictive covenants related to the line-of-credit agreement pertaining to maintenance of current ratio, debt service coverage ratio, and debt-to-worth ratio.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

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 indicate that the evaluation 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 majority of the Company’s revenues are generated from its web search services. The Search business does not generate its own search content for its web search services, 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, and those providers are referred to as “Search Customers”. 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 (i.e., when 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 service revenue from the sale of tax preparation online services, ancillary service offerings, packaged tax preparation 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, e-filing services, and other value-added 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. Other value-added service revenue consists of revenue from revenue sharing and royalty arrangements with third party partners. Revenue for these transactions 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 the Company’s determination of when collectability is probable.

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. 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.

E-Commerce Revenue Recognition

E-Commerce revenue recognition: The Company recognizes product revenue from product sales when all four revenue recognition criteria, as outlined above, have been met. Because the Company either (i) has a general practice of refunding customer losses for products damaged while in-transit despite selling terms indicating title transfers at the point of shipment or (ii) has FOB-destination shipping terms specifically set out in certain arrangements, delivery is deemed to have occurred at the point in time when the product is received by the customer. All amounts billed to a customer in a sale transaction related to shipping and handling, if any, represents revenues earned for the goods provided, and these amounts have been classified as “product revenue”. Costs related to such shipping and handling billings are classified as “product cost of revenue”.

The Company provides its customers with a thirty-day right of return. Return allowances, which reduce revenue, are estimated using historical experience.

Cost of Revenues

Cost of revenues: The Company records the cost of revenues for sales of products and services when the related revenue is recognized. Services cost of revenue 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 the Company’s 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, bank service fees, and royalties. Product cost of revenue includes product costs, inbound and outbound shipping and handling costs, packaging supplies, and provisions for inventory obsolescence. Shipping charges to receive products from the Company’s suppliers are included in inventory, and recognized as product cost of revenue upon sale of products to customers.

Sales and Marketing Expenses

Sales and marketing expenses: Sales and marketing expenses consist principally of marketing expenses associated with the Company’s TaxACT and Monoprice websites (which include the following channels: television, radio, online display and text, and email), the Company’s owned and operated web search properties (which consist of traffic acquisition, including the Company’s online marketing, which includes fees paid to search engines to drive traffic to an owned and operated website, agency fees, brand promotion expense and market research expense), personnel costs (which include salaries, benefits and other employee-related costs, and stock-based compensation expense) for personnel engaged in marketing and selling activities, and fulfillment expenses primarily associated with the Company’s E-Commerce business. Fulfillment includes direct operating expenses (including personnel costs) relating to the Company’s purchasing, customer and technical support, receiving, inspection and warehouse functions, as well as the cost of temporary help and contractors, and credit card processing fees.

Inventories

Inventories: Inventories, consisting of merchandise purchased for resale in the E-Commerce business, are accounted for using the first-in-first-out (“FIFO”) method of accounting, and are valued at the lower of cost or market. Inventory quantities on hand are reviewed regularly, and allowances are maintained for obsolete, slow moving, and nonsalable inventory.

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. 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.

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 in the case of the Company’s credit facility (see “Note 8: Debt”).

Debt issuance costs related to the Company’s Convertible Senior Notes (the “Notes”) issued in 2013 were allocated to the liability and equity components of the instrument. The debt issuance costs allocated to the liability component are amortized to interest expense through the earlier of the maturity date of the Notes or the date of conversion, if any. The debt issuance costs allocated to the equity component of the Notes were recorded as an offset to additional paid in capital (See “Note 8: Debt”).

Supplier Concentration

Supplier Concentration: A material part of Monoprice’s business is dependent on two vendors. During the period from August 22, 2013, the date of the acquisition, to September 30, 2013, these unrelated vendors accounted for $1.3 million or 16% and $742,000 and 9%, respectively, of Monoprice’s inventory purchases and at September 30, 2013 accounted for $1.1 million or 12% and $843,000 or 10%, respectively, of Monoprice’s related accounts payable, respectively.

Impairment of Equity Method Investments

Impairment of Equity Method Investments: The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate, in management’s judgment, that the carrying value of such investment may have experienced a decline in value. When evidence of an other-than-temporary decline has occurred, the Company compares the estimated fair value of the investment to the carrying value of the investment to determine whether an impairment has occurred.

For the three months ended September 30, 2013, in connection with the Company’s review of its equity method investments for other than temporary impairment, the Company determined that its equity investment in a privately-held company had experienced a decline in value which was other than temporary, due to recurring losses from operations, significant personnel reductions and a change in the underlying business model. The Company’s impairment loss calculations require management to apply judgment in estimating future cash flows and assessing the probability of differing estimated outcomes. The Company assesses the fair value of its equity method investments using commonly accepted techniques to the extent applicable, and may use more than one method. Accordingly, this equity investment in a privately-held company with a carrying value of $3.7 million was written down to zero, resulting in a loss of $3.7 million, which was included in “other loss, net” in the Company’s condensed consolidated statements of operations for the three and nine month periods ended September 30, 2013.

Fair Value Measures, Policy

Certain financial assets and liabilities are remeasured and reported at fair value each reporting period. 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 Company measures its cash equivalents, available-for-sale investments, and derivative instruments at fair value. The cash equivalents and available-for-sale investments are valued within Level 2 in the fair value hierarchy because the Company values its cash equivalents and marketable securities using alternative pricing sources utilizing market observable inputs. The Company classifies its interest rate swap derivative within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. As more fully discussed in “Note 8: Debt”, the interest rate swap was terminated for break-even on September 10, 2013. The Company classifies the Warrant derivative (see “Note 5: Stock-Based Compensation”) within Level 3 because it is valued using the Black-Scholes valuation model, which has significant unobservable inputs. Those unobservable inputs reflect the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. This valuation requires significant judgment.

Net Income (Loss) per Share, Policy

Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income (loss) 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, the Warrant, vesting of unvested RSUs, MSUs and PSUs, and the impact of shares that could be issued upon conversion or maturity of our convertible debt. Potentially dilutive shares are excluded from the computation of earnings per share if their effect is antidilutive.

Derivative Instruments and Hedging Activities, Policy

The Company recognizes derivative instruments as either assets or liabilities on its unaudited condensed consolidated balance sheets at fair value. The Company records changes in the fair value of the derivative instruments as gains or losses in the unaudited condensed consolidated statements of comprehensive income (loss) in other loss, net, or to accumulated other comprehensive income (loss) in the unaudited condensed consolidated balance sheets.

Segment Information, Policy

The Company does not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, depreciation, amortization of intangible assets, other loss, net and income tax expense to the reportable segments. Such amounts are reflected in the table under the heading “Corporate-level activity.” 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.

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2013

Accounting Changes And Error Corrections [Abstract]

Recent Accounting Pronouncements

13. 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. 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 February 2013, the FASB issued an update to the authoritative guidance related to the reporting of amounts reclassified out of accumulated other comprehensive income. This new requirement about presenting information about amounts reclassified out of accumulated other comprehensive income and their corresponding effect on net income will present, in one place, information about significant amounts reclassified and, in some cases, cross-references to related footnote disclosures. The Company adopted this guidance in the first quarter of 2013, and the adoption of these disclosure requirements did not have a material impact on its consolidated financial statements.

In July 2013, the FASB issued guidance on the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. This new guidance is effective on a prospective basis for fiscal years and interim reporting periods within those years, beginning after December 15, 2013. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 29, 2013
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Trading Symbol	BCOR
Entity Registrant Name	BLUCORA, INC.
Entity Central Index Key	0001068875
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		41,195,692

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Subsequent Events

9 Months Ended

Sep. 30, 2013

Subsequent Events [Abstract]

Subsequent Events

14. Subsequent Events

On October 2, 2013, TaxACT Holdings acquired 100% of the equity of Balance Financial, Inc. (“Balance”) for $4.9 million in cash. The acquisition of the Balance business is strategic to TaxACT and was funded from the revolving credit loan under the TaxACT credit facility. For further discussion of the credit facility, see “Note 8: Debt”.