BCOR
$24.95
Blucora
$.05
.20%
Earnings Details
2nd Quarter June 2017
Thursday, July 27, 2017 6:30:22 AM
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Summary

Blucora Beats

Blucora (BCOR) reported 2nd Quarter June 2017 earnings of $0.76 per share on revenue of $139.2 million. The consensus earnings estimate was $0.67 per share on revenue of $136.5 million. The Earnings Whisper number was $0.69 per share. Revenue grew 15.9% on a year-over-year basis.

The company said it expects a non-GAAP third quarter loss of $0.24 to $0.14 per share on revenue of $88.8 million to $91.3 million. The current consensus estimate is a loss of $0.16 per share on revenue of $89.3 million for the quarter ending September 30, 2017. The company said it expects 2017 earnings of $1.25 to $1.45 per share on revenue of $500.0 million to $506.5 million. The company's previous guidance was earnings of $1.28 to $1.45 per share on revenue of $493.0 million to $506.0 million and the current consensus earnings estimate is $1.38 per share on revenue of $499.9 million for the year ending December 31, 2017.

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
$0.76
Earnings Whisper
$0.69
Consensus Estimate
$0.67
Reported Revenue
$139.2 Mil
Revenue Estimate
$136.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Blucora Announces Second Quarter 2017 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 second quarter ended June 30, 2017.

Second Quarter Highlights and Recent Developments

-- Increased revenue and operating income by 16% and 34%, respectively, year-over-year

-- HD Vest achieved record levels in AUA of $41.4 billion and AUM of $11.6 billion

Grew TaxAct revenue and segment income by 16% for the six months ending June 30, 2017 vs. prior-year period

Achieved 2.7x net leverage ratio following successful refinancing and $35 million in net debt reduction

-- Executed agreement with new clearing partner at HD Vest

"Blucora continued its positive momentum in the second quarter, with strong double-digit growth in revenue and segment income across both businesses, and achieved its stated net leverage goal," said John Clendening, Blucora’s President and Chief Executive Officer. "HD Vest set new records in several categories, including total assets under administration (AUA), fee-based assets under management (AUM) and AUM as a percentage of AUA. TaxAct completed a strong tax season, as expected, and has turned its attention to enhancing its competitive positioning for next season."

"In addition to our strong performance in the second quarter, I am pleased to announce today that HD Vest has selected Fidelity Clearing & Custody Solutions as its new clearing provider. We believe this relationship, which is expected to go into effect in mid-2018, will provide new capabilities, enable a better advisor experience, and allow us to capture significant financial benefits over the long-term."

Summary Financial Performance: Q2 2017
($ in millions except per share amounts)
Q2
Q2
2017
2016
Change
Revenue
$
139.2
$
120.1
16
%
Wealth Management
$
85.3
$
76.1
12
%
Tax Preparation
$
53.9
$
44.0
22
%
Segment Income
$
48.9
$
39.7
23
%
Wealth Management
$
12.4
$
9.9
25
%
Tax Preparation
$
36.5
$
29.8
23
%
Unallocated Corporate Operating Expenses
$
(6.5
)
$
(4.5
)
45
%
GAAP:
Operating Income
$
30.0
$
22.4
34
%
Net Income (Loss) Attributable to Blucora, Inc.
$
3.3
$
(14.4
)
123
%
Diluted Net Income (Loss) Per Share Attributable to Blucora, Inc. (EPS) $
0.07
$
(0.34
)
121
%
Non-GAAP:
Adjusted EBITDA
$
42.5
$
35.3
20
%
Net Income
$
32.9
$
23.4
41
%
Diluted Net Income Per Share (EPS)
$
0.70
$
0.55
27
%
See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.

Third Quarter and Full Year 2017 Outlook

For the third quarter of 2017, the Company expects revenues to be between $88.8 million and $91.3 million, GAAP net loss attributable to Blucora, Inc. to be between $18.7 million and $14.8 million, or $(0.42) to $(0.33) per diluted share, Adjusted EBITDA to be between $(2.9) million and $0.9 million, and Non-GAAP net loss to be between $10.9 million and $6.3 million, or $(0.24) to $(0.14) per diluted share.

For the full year 2017, the Company expects revenues to be between $500.0 million and $506.5 million, GAAP net income (loss) attributable to Blucora, Inc. to be between $(3.8) million and $4.6 million, or $(0.09) to $0.10 per diluted share, Adjusted EBITDA to be between $94.1 million and $102.3 million, and Non-GAAP net income to be between $58.7 million and $67.8 million, or $1.25 to $1.45 per diluted share.

The third quarter and fiscal 2017 outlook for GAAP net income or loss attributable to Blucora assumes an estimated tax rate of approximately 15%. Our actual tax rate may differ significantly from this estimated tax rate due to our projected near break even pre-tax income, and the adoption of Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Accounting ("ASU 2016-09"). In addition, our GAAP net income or loss attributable to Blucora outlook excludes any impact to tax expense for discrete items, which are affected by ASU 2016-09, and variable stock-based compensation related to grants to non-employee advisors, and including these items in our actual results when they occur may cause our actual results to differ significantly from the outlook provided.

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 second quarter results, its outlook for the third quarter and full year 2017 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 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, respectively, 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 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. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: risks associated with the Company’s strategic transformation and the successful execution of its strategic initiatives, operating plans and marketing strategies; general economic, political, industry, and market conditions; the Company’s ability to attract and retain productive advisors; the Company’s ability to successfully make technology enhancements and introduce new products and services; information technology and cybersecurity risks; the effect of current, pending and future legislation, regulation and regulatory actions, such as the new Department of Labor rule and any changes in tax laws; dependence on third parties to distribute products and services; litigation risks; the Company’s ability to hire, retain and motivate key employees; the Company’s ability to protect its intellectual property; and financing risks, including risks related to the Company’s existing debt obligations. 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.

Blucora, Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended June 30,
Six months ended June 30,
2017
2016
2017
2016
Revenue:
Wealth management services revenue
$
85,296
$
76,117
$
167,963
$
153,408
Tax preparation services revenue
53,866
43,991
153,574
132,465
Total revenue
139,162
120,108
321,537
285,873
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue
56,963
51,023
112,837
103,292
Tax preparation services cost of revenue
2,411
2,023
6,229
5,230
Amortization of acquired technology
47
49
95
716
Total cost of revenue
59,421
53,095
119,161
109,238
Engineering and technology
4,242
3,959
8,990
8,254
Sales and marketing
22,296
19,913
71,294
63,750
General and administrative
13,715
11,508
27,198
24,261
Depreciation
873
963
1,813
1,938
Amortization of other acquired intangible assets
8,289
8,316
16,577
16,632
Restructuring
331
--
2,620
--
Total operating expenses
109,167
97,754
247,653
224,073
Operating income
29,995
22,354
73,884
61,800
Other loss, net
(24,200
)
(10,916
)
(33,908
)
(18,430
)
Income from continuing operations before income taxes
5,795
11,438
39,976
43,370
Income tax expense
(2,315
)
(5,793
)
(5,786
)
(17,436
)
Income from continuing operations
3,480
5,645
34,190
25,934
Discontinued operations, net of income taxes
--
(19,975
)
--
(17,453
)
Net income (loss)
3,480
(14,330
)
34,190
8,481
Net income attributable to noncontrolling interests
(176
)
(115
)
(302
)
(259
)
Net income (loss) attributable to Blucora, Inc.
$
3,304
$
(14,445 )
$
33,888
$
8,222
Net income (loss) per share attributable to Blucora, Inc. - basic:
Continuing operations
$
0.08
$
0.13
$
0.79
$
0.62
Discontinued operations
--
(0.48
)
--
(0.42
)
Basic net income (loss) per share
$
0.08
$
(0.35
)
$
0.79
$
0.20
Net income (loss) per share attributable to Blucora, Inc. - diluted:
Continuing operations
$
0.07
$
0.13
$
0.73
$
0.61
Discontinued operations
--
(0.47
)
--
(0.41
)
Diluted net income (loss) per share
$
0.07
$
(0.34
)
$
0.73
$
0.20
Weighted average shares outstanding:
Basic
43,644
41,405
42,895
41,288
Diluted
46,937
42,298
46,182
41,954

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

Three months ended June 30,
Six months ended June 30,
2017
2016
2017
2016
Cost of revenue
$
88
$
23
$
134
$
65
Engineering and technology
224
322
509
733
Sales and marketing
581
426
1,272
1,027
General and administrative
1,844
2,252
3,387
5,427
Restructuring
538
--
981
--
Total stock-based compensation expense $
3,275
$
3,023
$
6,283
$
7,252

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

Three months ended June 30,
Six months ended June 30,
2017
2016
2017
2016
Interest income
$
(25
)
$
(11
)
$
(45
)
$
(36
)
Interest expense
5,529
8,381
11,965
17,572
Amortization of debt issuance costs 327
417
714
1,027
Accretion of debt discounts
755
1,094
1,840
2,500
(Gain) loss on debt extinguishment
17,801
997
19,581
(2,846
)
Other
(187
)
38
(147
)
213
Other loss, net
$
24,200
$
10,916
$
33,908
$
18,430
Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
June 30,
December 31,
2017
2016
ASSETS
Current assets:
Cash and cash equivalents
$
78,312
$
51,713
Cash segregated under federal or other regulations 799
2,355
Available-for-sale investments
--
7,101
Accounts receivable, net of allowance
7,254
10,209
Commissions receivable
15,563
16,144
Other receivables
432
4,004
Prepaid expenses and other current assets, net
7,041
6,321
Total current assets
109,401
97,847
Long-term assets:
Property and equipment, net
8,677
10,836
Goodwill, net
548,890
548,741
Other intangible assets, net
345,521
362,178
Other long-term assets
2,677
3,057
Total long-term assets
905,765
924,812
Total assets
$
1,015,166
$
1,022,659
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
3,741
$
4,536
Commissions and advisory fees payable
16,143
16,587
Accrued expenses and other current liabilities
21,484
18,528
Deferred revenue
4,753
12,156
Current portion of long-term debt, net
2,560
2,560
Total current liabilities
48,681
54,367
Long-term liabilities:
Long-term debt, net
353,848
248,221
Convertible senior notes, net
--
164,176
Deferred tax liability, net
58,905
111,126
Deferred revenue
759
1,849
Other long-term liabilities
8,628
10,205
Total long-term liabilities
422,140
535,577
Total liabilities
470,821
589,944
Redeemable noncontrolling interests
15,998
15,696
Stockholders’ equity:
Common stock
4
4
Additional paid-in capital
1,535,858
1,510,152
Accumulated deficit
(1,007,325
)
(1,092,756
)
Accumulated other comprehensive loss
(190
)
(381
)
Total stockholders’ equity
528,347
417,019
Total liabilities and stockholders’ equity
$
1,015,166
$
1,022,659
Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
Six months ended June 30,
2017
2016
Operating Activities:
Net income
$
34,190
$
8,481
Less: Discontinued operations, net of income taxes
--
(17,453
)
Net income from continuing operations
34,190
25,934
Adjustments to reconcile net income from continuing operations to net cash from operating activities:
Stock-based compensation
5,302
7,252
Depreciation and amortization of acquired intangible assets
18,865
19,597
Restructuring (non-cash)
1,402
--
Deferred income taxes
(681
)
(8,806
)
Amortization of premium on investments, net
10
155
Amortization of debt issuance costs
714
1,027
Accretion of debt discounts
1,840
2,500
(Gain) loss on debt extinguishment
19,581
(2,846
)
Revaluation of acquisition-related contingent consideration liability
--
391
Other
--
13
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable
2,956
1,395
Commissions receivable
581
1,520
Other receivables
2,544
19,460
Prepaid expenses and other current assets
(545
)
4,870
Other long-term assets
341
95
Accounts payable
(795
)
(1,491
)
Commissions and advisory fees payable
(444
)
(1,980
)
Deferred revenue
(8,493
)
(4,257
)
Accrued expenses and other current and long-term liabilities
3,768
26,057
Net cash provided by operating activities from continuing operations
81,136
90,886
Investing Activities:
Business acquisition, net of cash acquired
--
(1,788
)
Purchases of property and equipment
(1,911
)
(1,528
)
Proceeds from sales of investments
249
--
Proceeds from maturities of investments
7,252
4,000
Purchases of investments
(409
)
(659
)
Net cash provided by investing activities from continuing operations
5,181
25
Financing Activities:
Proceeds from credit facility
367,212
--
Payments on convertible notes
(172,827
)
(20,667
)
Payments on credit facility
(275,000
)
(60,000
)
Proceeds from stock option exercises
23,996
1,142
Proceeds from issuance of stock through employee stock purchase plan
662
562
Tax payments from shares withheld for equity awards
(5,267
)
(901
)
Contingent consideration payments for business acquisition
(946
)
--
Net cash used by financing activities from continuing operations
(62,170
)
(79,864
)
Net cash provided by continuing operations
24,147
11,047
Net cash provided by operating activities from discontinued operations
--
14,198
Net cash provided (used) by investing activities from discontinued operations
1,028
(970
)
Net cash used by financing activities from discontinued operations
--
(7,000
)
Net cash provided by discontinued operations
1,028
6,228
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
43
(7
)
Net increase in cash, cash equivalents, and restricted cash
25,218
17,268
Cash, cash equivalents, and restricted cash, beginning of period
54,868
59,830
Cash, cash equivalents, and restricted cash, end of period
$
80,086
$
77,098
Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
Three months ended June 30,
Six months ended June 30,
2017
2016
2017
2016
Revenue:
Wealth Management
$
85,296
$
76,117
$
167,963
$
153,408
Tax Preparation
53,866
43,991
153,574
132,465
Total revenue
139,162
120,108
321,537
285,873
Operating income:
Wealth Management
12,406
9,924
24,259
20,830
Tax Preparation
36,515
29,796
89,648
77,369
Corporate-level activity
(18,926
)
(17,366
)
(40,023
)
(36,399
)
Total operating income
29,995
22,354
73,884
61,800
Other loss, net
(24,200
)
(10,916
)
(33,908
)
(18,430
)
Income tax expense
(2,315
)
(5,793
)
(5,786
)
(17,436
)
Discontinued operations, net of income taxes --
(19,975
)
--
(17,453
)
Net income (loss)
$
3,480
$
(14,330 )
$
34,190
$
8,481

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

Three months ended June 30,
Six months ended June 30,
2017
2016
2017
2016
Wealth Management:
Commission
$
38,154
$
35,252
$
77,749
$
72,108
Advisory
35,914
31,522
$
69,490
63,054
Asset-based
6,784
5,395
$
12,750
11,213
Transaction and fee
4,444
3,948
$
7,974
7,033
Total Wealth Management revenue $
85,296
$
76,117
$
167,963
$
153,408
Tax Preparation:
Consumer
$
51,848
$
42,257
$
140,090
$
119,728
Professional
2,018
1,734
13,484
12,737
Total Tax Preparation revenue
$
53,866
$
43,991
$
153,574
$
132,465

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

Three months ended June 30,
Six months ended June 30,
2017
2016
2017
2016
Operating expenses
$
6,463
$
4,460
$
13,236
$
9,159
Stock-based compensation
2,737
3,023
5,302
7,252
Acquisition-related costs
--
391
--
391
Depreciation
1,059
1,127
2,193
2,249
Amortization of acquired intangible assets 8,336
8,365
16,672
17,348
Restructuring
331
--
2,620
--
Total corporate-level activity
$
18,926
$
17,366
$
40,023
$
36,399
Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures
Preliminary Adjusted EBITDA Reconciliation
(Unaudited)
(Amounts in thousands)
(In thousands)
Three months ended June 30,
Six months ended June 30,
2017
2016
2017
2016
Net income (loss) attributable to Blucora, Inc.
$
3,304
$
(14,445 )
$
33,888
$
8,222
Stock-based compensation
2,737
3,023
5,302
7,252
Depreciation and amortization of acquired intangible assets 9,395
9,492
18,865
19,597
Restructuring
331
--
2,620
--
Other loss, net
24,200
10,916
33,908
18,430
Net income attributable to noncontrolling interests
176
115
302
259
Income tax expense
2,315
5,793
5,786
17,436
Discontinued operations, net of income taxes
--
19,975
--
17,453
Acquisition-related costs
--
391
--
391
Adjusted EBITDA
$
42,458
$
35,260
$
100,671
$
89,040
Preliminary Non-GAAP Net Income Reconciliation
(Unaudited)
(Amounts in thousands, except per share amounts)
Three months ended June 30,
Six months ended June 30,
2017
2016
2017
2016
Net income (loss) attributable to Blucora, Inc.
$
3,304
$
(14,445 )
$
33,888
$
8,481
Discontinued operations, net of income taxes
--
19,975
--
17,453
Stock-based compensation
2,737
3,023
5,302
7,252
Amortization of acquired intangible assets
8,336
8,365
16,672
17,348
Accretion of debt discount on Convertible Senior Notes
633
885
1,567
1,848
Accelerated accretion of debt discount on Convertible Senior Notes repurchased
--
--
--
1,628
Gain on Convertible Senior Notes repurchased
--
--
--
(7,724
)
Write-off of debt discount and debt issuance costs on terminated Convertible Senior Notes
6,715
--
6,715
--
Write-off of debt discount and debt issuance costs on closed TaxAct - HD Vest 2015 credit facility 9,593
--
9,593
--
Acquisition-related costs
--
391
--
391
Restructuring
331
--
2,620
--
Impact of noncontrolling interests
176
115
302
259
Cash tax impact of adjustments to GAAP net income
(1,819
)
(78
)
(2,406
)
261
Non-cash income tax expense
2,941
5,193
6,101
15,772
Non-GAAP net income
$
32,947
$
23,424
$
80,354
$
62,710
Per diluted share:
Net income (loss) attributable to Blucora, Inc.
$
0.07
$
(0.34
)
$
0.73
$
0.20
Discontinued operations, net of income taxes
--
0.47
--
0.41
Stock-based compensation
0.06
0.07
0.11
0.17
Amortization of acquired intangible assets
0.19
0.20
0.36
0.40
Accretion of debt discount on Convertible Senior Notes
0.01
0.02
0.03
0.04
Accelerated accretion of debt discount on Convertible Senior Notes repurchased
--
--
--
0.04
Gain on Convertible Senior Notes repurchased
--
--
--
(0.18
)
Write-off of debt discount and debt issuance costs on terminated Convertible Senior Notes
0.14
--
0.15
--
Write-off of debt discount and debt issuance costs on closed TaxAct - HD Vest 2015 credit facility 0.20
--
0.21
--
Acquisition-related costs
--
0.01
--
0.01
Restructuring
0.01
--
0.06
--
Impact of noncontrolling interests
0.00
0.00
0.01
0.01
Cash tax impact of adjustments to GAAP net income
(0.04
)
(0.00
)
(0.05
)
0.01
Non-cash income tax expense
0.06
0.12
0.13
0.38
Non-GAAP net income
$
0.70
$
0.55
$
1.74
$
1.49
Weighted average shares outstanding used in computing per diluted share amounts
46,937
42,298
46,182
41,954
Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
Ranges for the three months ending
Ranges for the year ending
September 30, 2017
December 31, 2017
Low
High
Low
High
Net income (loss) attributable to Blucora, Inc.
$
(18,700 )
$
(14,800 )
$
(3,800 )
$
4,600
Stock-based compensation
3,400
3,300
12,100
11,900
Depreciation and amortization of acquired intangible assets 9,400
9,400
37,700
37,700
Restructuring
200
100
3,000
2,800
Other loss, net
5,300
4,900
44,600
43,800
Impact of noncontrolling interests
200
200
400
700
Income tax (benefit) expense
(2,700
)
(2,200
)
100
800
Adjusted EBITDA
$
(2,900
)
$
900
$
94,100
$
102,300
Preliminary Non-GAAP Net Income (Loss) Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
Ranges for the three months ending
Ranges for the year ending
September 30, 2017
December 31, 2017
Low
High
Low
High
Net income (loss) attributable to Blucora, Inc.
$
(18,700 )
$
(14,800 )
$
(3,800 )
$
4,600
Stock-based compensation
3,400
3,300
12,100
11,900
Amortization of acquired intangible assets
8,300
8,300
33,300
33,300
Accretion of debt discount on Convertible Senior Notes --
--
1,400
1,400
Loss on debt extinguishment
--
--
16,500
16,400
Restructuring
200
100
3,000
2,800
Impact of noncontrolling interests
200
200
400
700
Cash tax impact of adjustments to net income (loss)
(300
)
(200
)
(2,400
)
(2,400
)
Non-cash income tax benefit
(4,000
)
(3,200
)
(1,800
)
(900
)
Non-GAAP net income (loss)
$
(10,900 )
$
(6,300
)
$
58,700
$
67,800

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

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, amortization of acquired intangible assets (including acquired technology), restructuring, other loss, net, the impact of noncontrolling interests, income tax expense, the effects of discontinued operations, and acquisition-related costs. Restructuring costs relate to the move of our corporate headquarters, which was announced in the fourth quarter of 2016. Acquisition-related costs include professional services fees and other direct transaction costs and changes in the fair value of contingent consideration liabilities related to acquired companies. The SimpleTax acquisition that was completed in 2015 included contingent consideration, for which the fair value of that liability was revalued in the second quarter of 2016.

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 as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of discontinued operations, 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 (the "Notes"), gain on the Notes repurchased, write-off of debt discount and debt issuance costs on the Notes that were redeemed and the terminated TaxAct - HD Vest 2015 credit facility, acquisition-related costs (described further under Adjusted EBITDA above), restructuring costs (described further under Adjusted EBITDA above), the impact of noncontrolling interests, the related cash tax impact of those adjustments, and non-cash income taxes. The write-off of debt discount and debt issuance costs on the terminated Notes and the closed TaxAct - HD Vest 2015 credit facility relates to the debt refinancing that occurred in the second quarter of 2017. 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 and non-GAAP net income 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 and non-GAAP net income 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 (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, and gain/loss on debt extinguishment.

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

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