BCOR
$27.49
Blucora
$.17
.62%
Earnings Details
3rd Quarter September 2018
Wednesday, October 31, 2018 6:35:00 AM
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Summary

Blucora Beats

Blucora (BCOR) reported a 3rd Quarter September 2018 loss of $0.11 per share on revenue of $95.4 million. The consensus estimate was a loss of $0.19 per share on revenue of $94.3 million. The Earnings Whisper number was for a loss of $0.14 per share. Revenue grew 5.8% on a year-over-year basis.

The company said it expects 2018 non-GAAP earnings of $1.83 to $1.91 per share on revenue of $559.0 million to $562.5 million. The company's previous guidance was earnings of $1.80 to $1.92 per share on revenue of $553.5 million to $563.0 million and the current consensus earnings estimate is $1.91 per share on revenue of $559.9 million for the year ending December 31, 2018.

Blucora Inc is engaged in operating Internet business. It operates an internet Search & Content business, an online Tax Preparation business, and an E-Commerce business providing search services to users, online tax preparation service & sales services.

Results
Reported Earnings
($0.11)
Earnings Whisper
($0.14)
Consensus Estimate
($0.19)
Reported Revenue
$95.4 Mil
Revenue Estimate
$94.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Blucora Announces Third Quarter 2018 Results

IRVING, Texas, Oct. 31, 2018 (GLOBE NEWSWIRE) -- Blucora, Inc. (NASDAQ: BCOR), a leading provider of tax-smart financial solutions that empower people’s goals, today announced financial results for the third quarter ended September 30, 2018.

Third Quarter Highlights and Recent Developments

  • Increased total revenue by 6% year-over-year
  • Advisory Assets up 13% year-over-year to $13.5 billion, Total Client Assets up 9% year-over-year to $46 billion
  • Completed clearing firm conversion with expected benefit to segment income of more than $120 million over 10 years
  • Announced new President of TaxAct, Curtis Campbell and President of Tax-Smart Innovation, Mike Hogan
  • Announced Todd Mackay as Interim CEO of HD Vest, to succeed Bob Oros

“We’re pleased to report continued growth in revenue and assets while further improving our business positioning,” commented John Clendening, Blucora’s President and Chief Executive Officer.  “In wealth management we achieved record levels of Advisory and Total Client Assets, while completing a critical clearing firm conversion that will allow us to better serve our financial advisors and their clients and capture significant financial and productivity benefits.  In tax preparation, we advanced our plans to provide even more value to customers in the upcoming tax season through improved products and partner offerings. And we just announced the appointment of Curtis Campbell as the new President of TaxAct, and Mike Hogan to the newly created position of President of Tax-Smart Innovation, adding strong new talent to our company to build on our recent success across the business.”

Summary Financial Performance: Q3 2018
($ in millions except per share amounts)

 Q3 Q3  
 2018 2017 Change
Revenue:     
Wealth Management$91.9  $86.8  6 %
Tax Preparation$3.5  $3.4  4 %
Total Revenue$95.4  $90.2  6 %
Segment Income (Loss):     
Wealth Management$12.9  $12.4  4 %
Tax Preparation$(6.9) $(6.2) 11 %
Total Segment Income$6.0  $6.2  (4)%
Unallocated Corporate Operating Expenses$(4.6) $(4.6)  %
GAAP:     
Operating Loss$(10.7) $(11.3) (6)%
Net Loss Attributable to Blucora, Inc.$(14.0) $(16.9) (17)%
Diluted Net Loss Per Share Attributable to Blucora, Inc. (EPS)*$(0.37) $(0.37)  %
Non-GAAP:     
Adjusted EBITDA$1.4  $1.6  (14)%
Net Loss$(4.4) $(5.5) (20)%
Diluted Net Loss Per Share (EPS)$(0.09) $(0.12) (25)%
* 2018 GAAP EPS includes noncontrolling interest redemption impact of $(0.08) as discussed in "Note 7: Redeemable Noncontrolling Interests" in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.
See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.

Full Year 2018 Outlook

For the full year 2018, the Company expects revenues to be between $559.0 million and $562.5 million, GAAP net income attributable to Blucora, Inc. to be between $44.5 million and $48.0 million, or $0.70 to $0.82 per diluted share (including a $0.15 impact related to the estimated redemption value of the noncontrolling interest in HD Vest), Adjusted EBITDA to be between $116.0 million and $119.0 million, and Non-GAAP net income to be between $90.5 million and $94.0 million, or $1.83 to $1.91 per diluted share.

The fiscal 2018 outlook for GAAP net income or loss attributable to Blucora assumes an estimated tax rate of approximately 2% to 6%.

Conference Call and Webcast
A conference call and live webcast will be held today at 8:30 a.m. Eastern Time during which the Company will further discuss third quarter results, its outlook for the full year 2018 and other business matters. We will also provide the prepared remarks for the conference call along with supplemental financial information to our results on the Investor Relations section of the Blucora corporate website at http://www.blucora.com prior to the call.  The supplemental financial information has also been filed with the SEC on Form 8-K.  A replay of the call will be available on our website.

About Blucora®
Blucora, Inc. (NASDAQ: BCOR) is on the forefront of financial technology, pioneering tax-smart financial solutions that empower people’s goals. Blucora operates through two primary businesses, HD Vest, the No.1 tax-focused broker-dealer with $46 billion in total client assets as of September 30, 2018, and TaxAct, the No. 3 tax preparation software by market share with approximately 4 million consumer and professional users. With integrated tax and wealth management, Blucora is uniquely positioned to provide better long-term outcomes for customers with holistic, tax-advantaged solutions. For more information on Blucora or its businesses, please visit www.blucora.com.

Source: Blucora

Blucora Contact:
Bill Michalek (972) 870-6463
VP, Investor Relations

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


Blucora, Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share data)

 Three Months Ended September 30, Nine months ended September 30,
 2018 2017 2018 2017
Revenue:       
Wealth management services revenue$91,887  $86,809  $275,984  $254,772 
Tax preparation services revenue3,498  3,362  183,214  156,936 
   Total revenue95,385  90,171  459,198  411,708 
Operating expenses:       
Cost of revenue:       
Wealth management services cost of revenue62,313  59,607  187,526  172,444 
Tax preparation services cost of revenue1,370  1,314  8,182  7,543 
Amortization of acquired technology  50  99  145 
   Total cost of revenue (1)63,683  60,971  195,807  180,132 
Engineering and technology (1)4,246  5,051  14,225  14,041 
Sales and marketing (1)15,675  13,680  94,719  84,974 
General and administrative (1)13,404  12,207  43,895  39,405 
Depreciation798  867  3,706  2,680 
Amortization of other acquired intangible assets8,271  8,615  25,384  25,192 
Restructuring (1)  106  291  2,726 
   Total operating expenses106,077  101,497  378,027  349,150 
Operating income (loss)(10,692) (11,326) 81,171  62,558 
Other loss, net (2)(3,863) (5,241) (11,850) (39,149)
Income (loss) before income taxes(14,555) (16,567) 69,321  23,409 
Income tax benefit (expense)818  (166) (2,052) (5,952)
Net income (loss)(13,737) (16,733) 67,269  17,457 
Net income attributable to noncontrolling interests(227) (164) (654) (466)
Net income (loss) attributable to Blucora, Inc.$(13,964) $(16,897) $66,615  $16,991 
Net income (loss) per share attributable to Blucora, Inc.:       
Basic$(0.37) $(0.37) $1.34  $0.39 
Diluted$(0.37) $(0.37) $1.28  $0.36 
Weighted average shares outstanding:       
Basic47,712  45,459  47,191  43,749 
Diluted47,712  45,459  49,292  46,813 

(1) Stock-based compensation expense was allocated among the following captions (in thousands):

 Three Months Ended September 30, Nine months ended September 30,
 2018 2017 2018 2017
Cost of revenue$413  $412  $940  $546 
Engineering and technology178  225  590  734 
Sales and marketing617  529  1,835  1,801 
General and administrative1,666  1,966  6,194  5,353 
Restructuring  97    1,078 
Total stock-based compensation expense$2,874  $3,229  $9,559  $9,512 

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

 Three Months Ended September 30, Nine months ended September 30,
 2018 2017 2018 2017
Interest income$(119) $(31) $(217) $(76)
Interest expense3,744  4,781  11,772  16,746 
Amortization of debt issuance costs172  177  659  891 
Accretion of debt discounts38  53  125  1,893 
Loss on debt extinguishment  183  1,534  19,764 
Other28  78  (2,023) (69)
Other loss, net$3,863  $5,241  $11,850  $39,149 


Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)

 September 30,
2018
 December 31,
2017
ASSETS   
Current assets:   
Cash and cash equivalents$88,274  $59,965 
Cash segregated under federal or other regulations317  1,371 
Accounts receivable, net of allowance6,056  10,694 
Commissions receivable16,762  16,822 
Other receivables626  3,180 
Prepaid expenses and other current assets, net5,571  7,365 
Total current assets117,606  99,397 
Long-term assets:   
Property and equipment, net11,111  9,831 
Goodwill, net548,915  549,037 
Other intangible assets, net302,715  328,205 
Other long-term assets15,363  15,201 
Total long-term assets878,104  902,274 
Total assets$995,710  $1,001,671 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$2,158  $4,413 
Commissions and advisory fees payable15,186  17,813 
Accrued expenses and other current liabilities16,473  19,577 
Deferred revenue5,997  9,953 
Total current liabilities39,814  51,756 
Long-term liabilities:   
Long-term debt, net260,208  338,081 
Deferred tax liability, net42,356  43,433 
Deferred revenue500  804 
Other long-term liabilities6,923  8,177 
Total long-term liabilities309,987  390,495 
Total liabilities349,801  442,251 
    
Redeemable noncontrolling interests22,224  18,033 
    
Stockholders’ equity:   
Common stock5  5 
Additional paid-in capital1,569,539  1,555,560 
Accumulated deficit(945,708) (1,014,174)
Accumulated other comprehensive loss(151) (4)
Total stockholders’ equity623,685  541,387 
Total liabilities and stockholders’ equity$995,710  $1,001,671 


Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)

 Nine months ended September 30,
 2018 2017
Operating Activities:   
Net income$67,269  $17,457 
Adjustments to reconcile net income to net cash from operating activities:   
Stock-based compensation9,559  8,434 
Depreciation and amortization of acquired intangible assets29,539  28,553 
Restructuring (non-cash)  1,499 
Deferred income taxes(1,073) (473)
Amortization of premium on investments, net, and debt issuance costs659  901 
Accretion of debt discounts125  1,893 
Loss on debt extinguishment1,534  19,764 
Cash provided (used) by changes in operating assets and liabilities:   
Accounts receivable4,636  3,259 
Commissions receivable60  (288)
Other receivables3,149  2,384 
Prepaid expenses and other current assets1,369  1,720 
Other long-term assets(902) 432 
Accounts payable(2,255) (1,375)
Commissions and advisory fees payable(2,627) (23)
Deferred revenue(2,411) (5,856)
Accrued expenses and other current and long-term liabilities(3,048) 949 
Net cash provided by operating activities105,583  79,230 
Investing Activities:   
Purchases of property and equipment(5,340) (3,809)
Proceeds from sales of investments  249 
Proceeds from maturities of investments  7,252 
Purchases of investments  (409)
Net cash provided (used) by investing activities(5,340) 3,283 
Financing Activities:   
Proceeds from credit facilities  367,212 
Payments on convertible notes  (172,827)
Payments on credit facilities(80,000) (285,000)
Proceeds from stock option exercises11,738  38,228 
Proceeds from issuance of stock through employee stock purchase plan1,608  1,428 
Tax payments from shares withheld for equity awards(5,983) (6,744)
Contingent consideration payments for business acquisition(1,315) (946)
Net cash used by financing activities(73,952) (58,649)
Net cash provided by continuing operations26,291  23,864 
    
Net cash provided by investing activities from discontinued operations  1,028 
Net cash provided by discontinued operations  1,028 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(11) 86 
Net increase in cash, cash equivalents, and restricted cash26,280  24,978 
Cash, cash equivalents, and restricted cash, beginning of period62,311  54,868 
Cash, cash equivalents, and restricted cash, end of period$88,591  $79,846 


Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)

 Three months ended September 30, Nine months ended September 30,
 2018 2017 2018 2017
Revenue:       
Wealth Management (1)$91,887  $86,809  $275,984  $254,772 
Tax Preparation (1)3,498  3,362  183,214  156,936 
Total revenue95,385  90,171  459,198  411,708 
Operating income (loss):       
Wealth Management12,891  12,425  38,920  36,684 
Tax Preparation(6,936) (6,238) 95,991  83,410 
Corporate-level activity (2)(16,647) (17,513) (53,740) (57,536)
Total operating income (loss)(10,692) (11,326) 81,171  62,558 
Other loss, net(3,863) (5,241) (11,850) (39,149)
Income tax benefit (expense)818  (166) (2,052) (5,952)
Net income (loss)$(13,737) $(16,733) $67,269  $17,457 

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

 Three months ended September 30, Nine months ended September 30,
 2018 2017 2018 2017
Wealth Management:       
Commission$41,015  $39,432  $124,269  $117,181 
Advisory41,443  37,588  120,802  107,078 
Asset-based6,979  6,526  21,457  19,276 
Transaction and fee2,450  3,263  9,456  11,237 
Total Wealth Management revenue$91,887  $86,809  $275,984  $254,772 
Tax Preparation:       
Consumer$3,246  $3,149  $168,295  $143,239 
Professional252  213  14,919  13,697 
Total Tax Preparation revenue$3,498  $3,362  $183,214  $156,936 

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

 Three months ended September 30, Nine months ended September 30,
 2018 2017 2018 2017
Operating expenses$(4,572) $(4,587) $(14,351) $(17,823)
Stock-based compensation(2,874) (3,132) (9,559) (8,434)
Depreciation(930) (1,023) (4,056) (3,216)
Amortization of acquired intangible assets(8,271) (8,665) (25,483) (25,337)
Restructuring  (106) (291) (2,726)
Total corporate-level activity$(16,647) $(17,513) $(53,740) $(57,536)


Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

Preliminary Adjusted EBITDA Reconciliation (1)
(Unaudited)
(Amounts in thousands)

(In thousands)Three Months Ended September 30, Nine months ended September 30,
 2018 2017 2018 2017
Net income (loss) attributable to Blucora, Inc.(2)$(13,964) $(16,897) $66,615  $16,991 
Stock-based compensation2,874  3,132  9,559  8,434 
Depreciation and amortization of acquired intangible assets9,201  9,688  29,539  28,553 
Restructuring  106  291  2,726 
Other loss, net (3)3,863  5,241  11,850  39,149 
Net income attributable to noncontrolling interests227  164  654  466 
Income tax (benefit) expense(818) 166  2,052  5,952 
Adjusted EBITDA$1,383  $1,600  $120,560  $102,271 



Preliminary Non-GAAP Net Income (Loss) and Non-GAAP Net Income Per Share Reconciliation (1)
(Unaudited)
(Amounts in thousands, except per share amounts)

 Three months ended September 30, Nine months ended September 30,
 2018 2017 2018 2017
Net income (loss) attributable to Blucora, Inc.(2)$(13,964) $(16,897) $66,615  $16,991 
Stock-based compensation2,874  3,132  9,559  8,434 
Amortization of acquired intangible assets8,271  8,665  25,483  25,337 
Accretion of debt discount on the Notes      1,567 
Write-off of debt discount and debt issuance costs on terminated Notes      6,715 
Write-off of debt discount and debt issuance costs on terminated TaxAct - HD Vest 2015 credit facility      9,593 
Restructuring  106  291  2,726 
Impact of noncontrolling interests227  164  654  466 
Cash tax impact of adjustments to GAAP net income(505) (928) (1,721) (3,334)
Non-cash income tax (benefit) expense (1)(1,333) 224  647  6,325 
Non-GAAP net income (loss)$(4,430) $(5,534) $101,528  $74,820 
Per diluted share:       
Net income (loss) attributable to Blucora, Inc.$(0.37) $(0.37) $1.28  $0.36 
Stock-based compensation0.06  0.07  0.19  0.18 
Amortization of acquired intangible assets0.18  0.20  0.52  0.55 
Accretion of debt discount on the Notes      0.03 
Write-off of debt discount and debt issuance costs on terminated Notes      0.14 
Write-off of debt discount and debt issuance costs on terminated TaxAct - HD Vest 2015 credit facility      0.20 
Restructuring    0.01  0.06 
Impact of noncontrolling interests0.08  0.00  0.08  0.01 
Cash tax impact of adjustments to GAAP net income(0.01) (0.02) (0.03) (0.07)
Non-cash income tax (benefit) expense(0.03) 0.00  0.01  0.14 
Non-GAAP net income (loss) per share$(0.09) $(0.12) $2.06  $1.60 
Weighted average shares outstanding used in computing per diluted share amounts47,712  45,459  49,292  46,813 


Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance
(Amounts in thousands)

 Ranges for the year ending
 December 31, 2018
 Low High
Net income (loss) attributable to Blucora, Inc.$44,500  $48,000 
Stock-based compensation13,200  13,100 
Depreciation and amortization of acquired intangible assets39,300  39,100 
Restructuring300  300 
Other loss, net (3)16,000  15,800 
Impact of noncontrolling interests1,100  1,100 
Income tax (benefit) expense1,600  1,600 
Adjusted EBITDA$116,000  $119,000 


Preliminary Non-GAAP Net Income (Loss) Reconciliation for Forward-Looking Guidance
(Amounts in thousands)

 Ranges for the year ending
 December 31, 2018
 Low High
Net income (loss) attributable to Blucora, Inc.$44,500  $48,000 
Stock-based compensation13,200  13,100 
Amortization of acquired intangible assets33,800  33,800 
Restructuring300  300 
Impact of noncontrolling interests1,100  1,100 
Cash tax impact of adjustments to net income (loss)(2,100) (2,100)
Non-cash income tax benefit(300) (200)
Non-GAAP net income (loss)$90,500  $94,000 


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

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

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

We define non-GAAP net income (loss) as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets (including acquired technology), accelerated accretion of debt discount on our Convertible Senior Notes that were outstanding for a portion of 2017 (the "Notes"), write-off of debt discount and debt issuance costs on terminated Notes and terminated TaxAct - HD Vest 2015 credit facility, restructuring costs (described further under Adjusted EBITDA above), the impact of noncontrolling interests, the related cash tax impact of those adjustments, and non-cash income taxes.  We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which primarily consist of U.S. federal net operating losses.  The majority of these net operating losses will expire, if unutilized, between 2020 and 2024. The aforementioned items are only included in non-GAAP net income (loss) in the periods they occurred.

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

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

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

Blucora.jpg

Source: Blucora, Inc.