BCOR
$14.47
Blucora Inc Cmn
$.12
.84%
Earnings Details
3rd Quarter September 2016
Thursday, October 27, 2016 6:30:19 AM
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Summary

Blucora Sees Revenue Above Estimates

Blucora Inc Cmn (BCOR) reported a 3rd Quarter September 2016 loss of $0.27 per share on revenue of $83.2 million. The consensus estimate was a loss of $0.34 per share on revenue of $77.8 million. Revenue fell 1.8% compared to the same quarter a year ago.

The company said it expects a fourth quarter loss of $0.30 to $0.23 per share on revenue of $82.2 million to $85.5 million. The current consensus estimate is a loss of $0.27 per share on revenue of $81.6 million for the quarter ending December 31, 2016.

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
($0.27)
Earnings Whisper
-
Consensus Estimate
($0.34)
Reported Revenue
$83.2 Mil
Revenue Estimate
$77.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Blucora Announces Third Quarter 2016 Results

Blucora, Inc. (BCOR), a leading provider of technology-enabled financial solutions to consumers, small businesses and tax professionals, today announced financial results for the third quarter ended September 30, 2016.

Third Quarter Highlights and Recent Developments

Exceeded $10.0 billion in assets under management up 9 percent in the third quarter versus prior year; third quarter net flows of $132.0 million marks best quarter of net flows since first quarter 2015

Achieved better than expected performance from advisor-driven revenue; transaction revenue up 18 percent sequentially

-- Closed the sale of Infospace to OpenMail for $45.2 million

Repaid $45.0 million of debt, bringing Blucora’s total debt reduction for the nine months ended September 30, 2016 to $133.4 million

Strengthened executive team with appointment of Mathieu Stevenson as Chief Marketing Officer and Pamela Turay as Chief Human Resources Officer

John Clendening, president and chief executive officer of Blucora, noted that "during the third quarter, we continued to execute the strategic initiatives we outlined last quarter, including successfully divesting the Infospace business and continuing to de-lever. We are making strong progress on our transformation strategy as we organize around our new operating model and solidify our position as a technology-enabled financial solutions company," said Clendening. "We are taking the actions necessary to maximize the performance of our businesses, and are seeing positive results from these efforts. We are committed to investing in our people, our capability, and our technology to enable us to capture the substantial growth opportunities ahead in both the HD Vest and TaxAct businesses," he explained.

The following presentation includes pro forma financial information and HD Vest. In addition, it excludes the Search and Content and E-Commerce segments which have been classified as discontinued operations for all periods presented. The Company believes that this presentation most accurately reflects the financial performance of the Company on a go-forward basis.

Summary Financial Performance: Q3 2016
($ in millions except per share amounts)
Q3
Q3
2016
2015
Change
As reported
Pro forma
Revenue
$
83.2
$
82.9
--
%
Wealth Management
$
80.1
$
80.0
--
%
Tax Preparation
$
3.1
$
2.9
10
%
Segment Income
$
7.2
$
8.9
(19
)%
Wealth Management
$
11.6
$
11.5
1
%
Tax Preparation
$
(4.4
)
$
(2.5
)
72
%
Unallocated Corporate Operating Expenses
$
4.9
$
4.4
11
%
GAAP:
Operating Loss
$
(10.5
)
$
(10.3
)
2
%
Net Loss Attributable to Blucora, Inc.
$
(54.1
)
$
(11.3
)
381
%
Diluted Net Loss Per Share Attributable to Blucora, Inc. $
(1.30
)
$
(0.27
)
381
%
Non-GAAP:
Adjusted EBITDA
$
2.3
$
4.5
(48
)%
Net Loss
$
(10.1
)
$
(7.0
)
46
%
Diluted Net Loss Per Share
$
(0.24
)
$
(0.17
)
41
%
See reconciliations of as reported and pro forma non-GAAP to GAAP measures in tables below.

Company Restructuring

"As we continue to implement our new ’One Company’ operating model," Clendening stated, "we plan to move our corporate headquarters from Bellevue, WA to Irving, TX by June 2017. We’ve moved from our prior holding company model to an operating company model, in which the corporate team adds value by directly contributing to business unit results. The best way to foster this is by co-locating the corporate team with one of the operating units. In addition to increasing impact, this approach will also enable us to maximize cost savings. Together, these steps will facilitate value creation for our shareholders."

Eric Emans, Chief Financial Officer and Treasurer, does not intend to move to the Irving office. Accordingly, Blucora has retained Heidrick & Struggles, a leading executive search firm, to help identify and recruit candidates. Eric remains fully committed to the company and its shareholders, and plans to stay on until long after a successor has been named, well into 2017, in order to ensure a smooth transition. Clendening added, "Eric has been a terrific partner and I’m delighted that he has agreed to remain actively involved in the management of the company through this transition."

The Company expects to incur cash restructuring charges of $5.6 million to $8.7 million that primarily relate to employee severance costs and costs associated with the exit of our Bellevue facility. We also expect to record non-cash restructuring charges of $1.9 million to $2.6 million for total restructuring charges of $7.5 million to $11.3 million. Additionally, we expect to incur transition-related costs of $3.0 million to $4.0 million related to the transitioning of roles from Bellevue, WA to Irving, TX primarily related to overlap in staffing and recruiting search fees. The majority of these costs will be recorded over the next three quarters.

Fourth Quarter and Full Year 2016 Outlook

For the fourth quarter of 2016, the Company expects revenues to be between $82.2 million and $85.5 million, GAAP loss from continuing operations to be between $17.7 million and $15.6 million, or $(0.42) to $(0.37) per diluted share, Adjusted EBITDA to be between $(1.5) million and $0.8 million, and Non-GAAP loss from continuing operations to be between $12.7 million and $9.7 million, or $(0.30) to $(0.23) per diluted share.

For the full year 2016, the Company expects revenues to be between $451.3 million and $454.6 million, GAAP loss from continuing operations to be between $5.2 million and $3.1 million, or $(0.13) to $(0.07) per diluted share, Adjusted EBITDA to be between $89.9 million and $92.2 million, and Non-GAAP income from continuing operations to be between $39.9 million and $42.9 million, or $0.93 to $1.00 per diluted share.

Conference Call and Webcast

A conference call and live webcast will be held today at 5:30 a.m. Pacific Time / 8:30 a.m. Eastern Time during which the Company will further discuss third quarter results and its outlook for the fourth quarter of 2016. We have also provided supplemental financial information to our results that can be accessed in the Investor Relations section of the Blucora corporate website at http://www.blucora.com and filed with the SEC on Form 8-K. A replay of the call and management’s prepared remarks will also be available on our website.

About Blucora(R)

Blucora, Inc. (BCOR) is a leading provider of technology-enabled financial solutions to consumers, small businesses and tax professionals. Our products and services in tax preparation and wealth management, through TaxAct and HD Vest, help consumers manage their financial lives. TaxAct is an affordable digital tax preparation solution for individuals, business owners and tax professionals. HD Vest Financial Services supports an independent network of tax professionals who provide comprehensive financial planning solutions. For more information on Blucora or its businesses, please visit www.blucora.com.

This announcement 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. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: general economic, industry, and market sector conditions; the effect of current, pending and future legislation, regulation and regulatory actions, including the DOL rule; the availability of products to sell; the timing and extent of market acceptance of developed products and services and related costs; our dependence on companies to distribute our products and services; the successful execution of the Company’s strategic initiatives, technology enhancements, operating plans, and marketing strategies; the condition of our cash investments; and the Company’s ability to control operating risks, information technology system risks and cybersecurity risks. A more detailed description of these and certain other factors that could affect actual results is included in Blucora, Inc.’s most recent Quarterly Report on Form 10-Q and subsequent reports filed with or furnished to 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. Blucora, Inc. undertakes no obligation to update any forward-looking statements to reflect new information, events, or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

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,
2016
2015
2016
2015
Revenue:
Wealth management services revenue
$
80,088
$
--
$
233,496
$
--
Tax preparation services revenue
3,149
2,875
135,614
114,843
Total revenue
83,237
2,875
369,110
114,843
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue
54,921
--
158,213
--
Tax preparation services cost of revenue
1,319
1,170
6,549
4,680
Amortization of acquired technology
49
1,911
765
5,636
Total cost of revenue
56,289
3,081
165,527
10,316
Engineering and technology
4,588
1,251
12,842
3,471
Sales and marketing
11,965
2,113
75,715
42,824
General and administrative
11,638
8,895
35,899
23,694
Depreciation
968
394
2,906
1,101
Amortization of other acquired intangible assets
8,297
3,195
24,929
9,566
Total operating expenses
93,745
18,929
317,818
90,972
Operating income (loss)
(10,508
)
(16,054
)
51,292
23,871
Other loss, net
(11,453
)
(3,080
)
(29,883
)
(9,109
)
Income (loss) from continuing operations before income taxes
(21,961
)
(19,134
)
21,409
14,762
Income tax benefit (expense)
8,537
6,926
(8,899
)
(5,144
)
Income (loss) from continuing operations
(13,424
)
(12,208
)
12,510
9,618
Discontinued operations, net of income taxes
(40,528
)
1,597
(57,981
)
7,122
Net income (loss)
(53,952
)
(10,611
)
(45,471
)
16,740
Net income attributable to noncontrolling interests
(167
)
--
(426
)
--
Net income (loss) attributable to Blucora, Inc.
$
(54,119 )
$
(10,611 )
$
(45,897 )
$
16,740
Net income (loss) per share attributable to Blucora, Inc. - basic:
Continuing operations
$
(0.33
)
$
(0.30
)
$
0.29
$
0.23
Discontinued operations
(0.97
)
0.04
(1.40
)
0.18
Basic net income (loss) per share
$
(1.30
)
$
(0.26
)
$
(1.11
)
$
0.41
Net income (loss) per share attributable to Blucora, Inc. - diluted:
Continuing operations
$
(0.33
)
$
(0.30
)
$
0.29
$
0.23
Discontinued operations
(0.97
)
0.04
(1.37
)
0.17
Diluted net income (loss) per share
$
(1.30
)
$
(0.26
)
$
(1.08
)
$
0.40
Weighted average shares outstanding:
Basic
41,635
40,950
41,404
40,952
Diluted
41,635
40,950
42,329
41,911

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

Three months ended September 30,
Nine months ended September 30,
2016
2015
2016
2015
Cost of revenue
$
52
$
23
$
117
$
71
Engineering and technology
434
112
1,167
336
Sales and marketing
661
230
1,688
610
General and administrative
2,217
1,709
7,644
4,957
Total stock-based compensation expense $
3,364
$
2,074
$
10,616
$
5,974

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

Three months ended September 30,
Nine months ended September 30,
2016
2015
2016
2015
Interest income
$
(18
)
$
(170
)
$
(54
)
$
(430
)
Interest expense
7,824
2,203
25,396
6,833
Amortization of debt issuance costs
413
286
1,440
842
Accretion of debt discounts
1,099
975
3,599
2,873
(Gain) loss on debt extinguishment and modification expense 2,205
--
(641
)
--
Gain on third party bankruptcy settlement
(84
)
(224
)
(128
)
(1,066
)
Other
14
10
271
57
Other loss, net
$
11,453
$
3,080
$
29,883
$
9,109
Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
September 30,
December 31,
2016
2015
ASSETS
Current assets:
Cash and cash equivalents
$
71,165
$
55,473
Cash segregated under federal or other regulations 630
3,557
Available-for-sale investments
4,492
11,301
Accounts receivable, net of allowance
7,076
7,884
Commissions receivable
15,294
16,328
Other receivables
6,827
24,407
Prepaid expenses and other current assets, net
4,059
10,062
Current assets of discontinued operations
70,432
211,663
Total current assets
179,975
340,675
Long-term assets:
Property and equipment, net
10,711
11,308
Goodwill, net
549,582
548,959
Other intangible assets, net
370,640
396,295
Other long-term assets
3,380
2,311
Total long-term assets
934,313
958,873
Total assets
$
1,114,288
$
1,299,548
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
5,840
$
4,689
Commissions and advisory fees payable
15,382
16,982
Accrued expenses and other current liabilities
11,446
13,006
Deferred revenue
9,139
11,521
Current portion of long-term debt, net
3,200
31,631
Current liabilities of discontinued operations
37,539
88,275
Total current liabilities
82,546
166,104
Long-term liabilities:
Long-term debt, net
283,801
353,850
Convertible senior notes, net
163,024
185,918
Deferred tax liability, net
104,236
103,520
Deferred revenue
2,479
1,902
Other long-term liabilities
11,233
10,932
Total long-term liabilities
564,773
656,122
Total liabilities
647,319
822,226
Redeemable noncontrolling interests
15,464
15,038
Stockholders’ equity:
Common stock
4
4
Additional paid-in capital
1,525,267
1,490,405
Accumulated deficit
(1,073,495
)
(1,027,598
)
Accumulated other comprehensive loss
(271
)
(527
)
Total stockholders’ equity
451,505
462,284
Total liabilities and stockholders’ equity
$
1,114,288
$
1,299,548
Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
Nine months ended September 30,
2016
2015
Operating Activities:
Net income (loss)
$
(45,471 )
$
16,740
Less: Discontinued operations, net of income taxes
(57,981
)
7,122
Net income from continuing operations
12,510
9,618
Adjustments to reconcile net income from continuing operations to net cash from operating activities:
Stock-based compensation
10,616
5,974
Depreciation and amortization of acquired intangible assets
29,080
16,863
Excess tax benefits from stock-based award activity
(21,369
)
(28,632
)
Deferred income taxes
(12,484
)
(25,194
)
Amortization of premium on investments, net
164
1,250
Amortization of debt issuance costs
1,440
842
Accretion of debt discounts
3,599
2,873
Gain on debt extinguishment and modification expense
(641
)
--
Revaluation of acquisition-related contingent consideration liability
391
--
Other
18
60
Cash provided (used) by changes in operating assets and liabilities:
Cash segregated under federal or other regulations
2,927
--
Accounts receivable
793
136
Commissions receivable
1,034
--
Other receivables
19,656
1,166
Prepaid expenses and other current assets
6,003
4,665
Other long-term assets
(1,174
)
(63
)
Accounts payable
1,151
4,930
Commissions and advisory fees payable
(1,600
)
--
Deferred revenue
(1,805
)
(1,691
)
Accrued expenses and other current and long-term liabilities
19,786
28,149
Net cash provided by operating activities from continuing operations
70,095
20,946
Investing Activities:
Business acquisition, net of cash acquired
(1,788
)
(1,740
)
Purchases of property and equipment
(2,648
)
(866
)
Proceeds from sales of investments
--
16,507
Proceeds from maturities of investments
11,808
210,699
Purchases of investments
(5,147
)
(209,112
)
Net cash provided by investing activities from continuing operations
2,225
15,488
Financing Activities:
Repurchase of convertible notes
(20,667
)
--
Repayment of credit facilities
(105,000
)
(51,940
)
Stock repurchases
--
(7,068
)
Excess tax benefits from stock-based award activity
21,369
28,632
Proceeds from stock option exercises
1,141
2,374
Proceeds from issuance of stock through employee stock purchase plan
1,402
1,193
Tax payments from shares withheld for equity awards
(1,447
)
(1,193
)
Net cash used by financing activities from continuing operations
(103,202
)
(28,002
)
Net cash provided (used) by continuing operations
(30,882
)
8,432
Net cash provided by operating activities from discontinued operations
10,836
6,138
Net cash provided (used) by investing activities from discontinued operations
43,230
(206
)
Net cash used by financing activities from discontinued operations
(7,477
)
(5,020
)
Net cash provided by discontinued operations
46,589
912
Effect of exchange rate changes on cash and cash equivalents
(15
)
(6
)
Net increase in cash and cash equivalents
15,692
9,338
Cash and cash equivalents, beginning of period
55,473
41,968
Cash and cash equivalents, end of period
$
71,165
$
51,306
Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
Three months ended September 30,
Nine months ended September 30,
2016
2015
2016
2015
Revenue:
Wealth Management
$
80,088
$
--
$
233,496
$
--
Tax Preparation
3,149
2,875
135,614
114,843
Total revenue
83,237
2,875
369,110
114,843
Operating income (loss):
Wealth Management
11,628
--
32,458
--
Tax Preparation
(4,382
)
(2,542
)
72,987
61,493
Corporate-level activity
(17,754
)
(13,512
)
(54,153
)
(37,622
)
Total operating income (loss)
(10,508
)
(16,054
)
51,292
23,871
Other loss, net
(11,453
)
(3,080
)
(29,883
)
(9,109
)
Income tax benefit (expense)
8,537
6,926
(8,899
)
(5,144
)
Discontinued operations, net of income taxes (40,528
)
1,597
(57,981
)
7,122
Net income (loss)
$
(53,952 )
$
(10,611 )
$
(45,471 )
$
16,740

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

Three months ended September 30,
Nine months ended September 30,
2016
2015
2016
2015
Operating expenses
$
4,907
$
4,433
$
14,066
$
13,471
Stock-based compensation
3,364
2,074
10,616
5,974
Acquisition-related costs
--
1,314
391
1,314
Depreciation
1,137
585
3,386
1,661
Amortization of acquired intangible assets 8,346
5,106
25,694
15,202
Total corporate-level activity
$
17,754
$
13,512
$
54,153
$
37,622
Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
Preliminary Adjusted EBITDA Reconciliation
(Unaudited)
(Amounts in thousands)
Three months ended September 30,
Nine months ended September 30,
2016
2015
2016
2015
Operating income (loss)
$
(10,508 )
$
(16,054 )
$
51,292
$
23,871
Stock-based compensation
3,364
2,074
10,616
5,974
Depreciation and amortization of acquired intangible assets 9,483
5,691
29,080
16,863
Acquisition-related costs
--
1,314
391
1,314
Adjusted EBITDA
$
2,339
$
(6,975
)
$
91,379
$
48,022
Preliminary Non-GAAP Net Income (Loss) Reconciliation
(Unaudited)
(Amounts in thousands, except per share amounts)
Three months ended September 30,
Nine months ended September 30,
2016
2015
2016
2015
Net income (loss) attributable to Blucora, Inc.
$
(54,119 )
$
(10,611 )
$
(45,897 )
$
16,740
Discontinued operations, net of income taxes
40,528
(1,597
)
57,981
(7,122
)
Stock-based compensation
3,364
2,074
10,616
5,974
Amortization of acquired intangible assets
8,346
5,106
25,694
15,202
Accretion of debt discount on Convertible Senior Notes
901
975
2,749
2,873
Accelerated accretion of debt discount on Convertible Senior Notes
--
--
1,628
--
Gain on Convertible Senior Notes repurchased
--
--
(7,724
)
--
Acquisition-related costs
--
1,314
391
1,314
Impact of noncontrolling interests
167
--
426
--
Cash tax impact of adjustments to GAAP net income
(17
)
(196
)
244
(297
)
Non-cash income tax (benefit) expense
(9,312
)
(6,984
)
6,460
4,970
Non-GAAP net income (loss)
$
(10,142 )
$
(9,919
)
$
52,568
$
39,654
Per diluted share:
Net income (loss) attributable to Blucora, Inc.
$
(1.30
)
$
(0.26
)
$
(1.08
)
$
0.40
Discontinued operations, net of income taxes
0.97
(0.04
)
1.37
(0.17
)
Stock-based compensation
0.08
0.05
0.25
0.14
Amortization of acquired intangible assets
0.21
0.13
0.60
0.37
Accretion of debt discount on Convertible Senior Notes
0.02
0.02
0.06
0.07
Accelerated accretion of debt discount on Convertible Senior Notes
--
--
0.04
--
Gain on Convertible Senior Notes repurchased
--
--
(0.18
)
--
Acquisition-related costs
--
0.03
0.01
0.03
Impact of noncontrolling interests
0.00
--
0.01
--
Cash tax impact of adjustments to GAAP net income
(0.00
)
(0.00
)
0.01
(0.01
)
Non-cash income tax (benefit) expense
(0.22
)
(0.17
)
0.15
0.12
Non-GAAP net income (loss)
$
(0.24
)
$
(0.24
)
$
1.24
$
0.95
Weighted average shares outstanding used in computing per diluted share amounts 41,635
40,950
42,329
41,911
Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
(As Reported and Pro Forma)
Preliminary Adjusted EBITDA Reconciliation (As Reported and Pro Forma)
(Unaudited)
(Amounts in thousands)
Three months ended September 30,
Nine months ended September 30,
2016
2015
2016
2015
As reported
Pro forma
As reported
Pro forma
Operating income (loss)
$
(10,508 )
$
(10,277 )
$
51,292
$
35,159
Stock-based compensation
3,364
3,379
10,616
9,557
Depreciation and amortization of acquired intangible assets 9,483
11,411
29,080
34,058
Acquisition-related costs
--
--
391
--
Adjusted EBITDA
$
2,339
$
4,513
$
91,379
$
78,774
Preliminary Non-GAAP Net Income (Loss) Reconciliation (As Reported and Pro Forma)
(Unaudited)
(Amounts in thousands, except per share amounts)
Three months ended September 30,
Nine months ended September 30,
2016
2015
2016
2015
As reported
Pro forma
As reported
Pro forma
Net income (loss) attributable to Blucora, Inc.
$
(54,119 )
$
(11,261 )
$
(45,897 )
$
9,479
Discontinued operations, net of income taxes
40,528
(1,597
)
57,981
(7,122
)
Stock-based compensation
3,364
3,379
10,616
9,557
Amortization of acquired intangible assets
8,346
10,243
25,694
30,613
Accretion of debt discount on Convertible Senior Notes
901
975
2,749
2,873
Accelerated accretion of debt discount on Convertible Senior Notes
--
--
1,628
--
Gain on Convertible Senior Notes repurchased
--
--
(7,724
)
--
Acquisition-related costs
--
--
391
--
Impact of noncontrolling interests
167
--
426
--
Cash tax impact of adjustments to GAAP net income
(17
)
(100
)
244
(300
)
Non-cash income tax (benefit) expense
(9,312
)
(8,600
)
6,460
(174
)
Non-GAAP net income (loss)
$
(10,142 )
$
(6,961
)
$
52,568
$
44,926
Per diluted share:
Net income (loss) attributable to Blucora, Inc.
$
(1.30
)
$
(0.27
)
$
(1.08
)
$
0.23
Discontinued operations, net of income taxes
0.97
(0.04
)
1.37
(0.17
)
Stock-based compensation
0.08
0.08
0.25
0.23
Amortization of acquired intangible assets
0.21
0.25
0.60
0.73
Accretion of debt discount on Convertible Senior Notes
0.02
0.02
0.06
0.07
Accelerated accretion of debt discount on Convertible Senior Notes
--
--
0.04
--
Gain on Convertible Senior Notes repurchased
--
--
(0.18
)
--
Acquisition-related costs
--
--
0.01
--
Impact of noncontrolling interests
0.00
--
0.01
--
Cash tax impact of adjustments to GAAP net income
(0.00
)
(0.00
)
0.01
(0.01
)
Non-cash income tax (benefit) expense
(0.22
)
(0.21
)
0.15
(0.01
)
Non-GAAP net income (loss)
$
(0.24
)
$
(0.17
)
$
1.24
$
1.07
Weighted average shares outstanding used in computing per diluted share amounts 41,635
40,950
42,329
41,911
Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
Ranges for the three months ending
Ranges for the year ending
December 31, 2016
December 31, 2016
Loss from continuing operations
$
(17,700 )
$
(15,600 )
$
(5,200 )
$
(3,100 )
Stock-based compensation
3,400
3,300
14,000
13,900
Depreciation and amortization of acquired intangible assets 9,600
9,500
38,700
38,600
Restructuring costs
5,200
4,400
5,200
4,400
Acquisition-related costs
--
--
400
400
Other loss, net
9,800
9,500
39,700
39,400
Income tax benefit
(11,800
)
(10,300
)
(2,900
)
(1,400
)
Adjusted EBITDA
$
(1,500
)
$
800
$
89,900
$
92,200
Preliminary Non-GAAP Income (Loss) from Continuing Operations Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
Ranges for the three months ending
Ranges for the year ending
December 31, 2016
December 31, 2016
Loss from continuing operations
$
(17,700 )
$
(15,600 )
$
(5,200 )
$
(3,100 )
Stock-based compensation
3,400
3,300
14,000
13,900
Amortization of acquired intangible assets
8,400
8,400
34,100
34,100
Accretion of debt discount on Convertible Senior Notes
900
900
3,700
3,700
Accelerated accretion of debt discount on Convertible Senior Notes --
--
1,600
1,600
Gain on Convertible Senior Notes repurchased
--
--
(7,700
)
(7,700
)
Restructuring costs
5,200
4,400
5,200
4,400
Acquisition-related costs
--
--
400
400
Cash tax impact of adjustments to loss from continuing operations
--
--
200
200
Non-cash income tax benefit
(12,900
)
(11,100
)
(6,400
)
(4,600
)
Non-GAAP income (loss) from continuing operations
$
(12,700 )
$
(9,700
)
$
39,900
$
42,900

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

We define Adjusted EBITDA differently for this report than we have defined it in the past, due to the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016, the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, and acquisition-related costs in connection with the HD Vest and SimpleTax acquisitions that we would not have otherwise incurred as part of our business operations. Acquisition-related costs include professional fees and other direct transaction costs and changes in the fair value of contingent consideration liabilities related to acquired companies. The HD Vest acquisition closed in the fourth quarter of 2015 and resulted in significant transaction costs. The SimpleTax acquisition included contingent consideration, for which the fair value of that liability was revalued in the second quarter of 2016. We define Adjusted EBITDA as operating income (loss), determined in accordance with GAAP, excluding the effects of depreciation, amortization of acquired intangible assets (including acquired technology), stock-based compensation, and acquisition-related costs.

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

We define non-GAAP net income (loss) differently for this report than we have defined it in the past, due to the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016, the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, and acquisition-related costs in connection with the HD Vest and SimpleTax acquisitions that we would not have otherwise incurred as part of our business operations. Acquisition-related costs are described further under the first paragraph in this note (1). For this report, 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), accretion of debt discount and accelerated accretion of debt discount on the Convertible Senior Notes, gain on Convertible Senior Notes repurchased, acquisition-related costs, discontinued operations, the impact of noncontrolling interests, and 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.

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) 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). 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.

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

Other loss, net primarily includes items such as interest income, interest expense, amortization of debt issuance costs, accretion of debt discounts, gain/loss on debt extinguishment and modification expense, and gain on third party bankruptcy settlement.

Blucora Contact:
Stacy Ybarra, 425-709-8127
stacy.ybarra@blucora.com

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