BCOR
$27.48
Blucora
$.44
1.63%
Earnings Details
4th Quarter December 2018
Thursday, February 14, 2019 6:30:00 AM
Tweet Share Watch
Summary

Blucora Guides Below Estimates

Blucora (BCOR) reported a 4th Quarter December 2018 loss of $0.22 per share on revenue of $101.3 million. The consensus estimate was a loss of $0.23 per share on revenue of $102.3 million. Revenue grew 3.5% on a year-over-year basis.

The company said it expects first quarter non-GAAP earnings of $1.19 to $1.26 per share on revenue of $213.5 million to $218.5 million. The current consensus earnings estimate is $1.31 per share on revenue of $220.0 million for the quarter ending March 31, 2019.

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
($0.22)
Earnings Whisper
-
Consensus Estimate
($0.23)
Reported Revenue
$101.3 Mil
Revenue Estimate
$102.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Blucora Reports Fourth Quarter and Full Year 2018 Results

IRVING, Texas, Feb. 14, 2019 (GLOBE NEWSWIRE) -- Blucora, Inc. (NASDAQ: BCOR), a leading provider of technology-enabled financial solutions to consumers, small businesses and tax professionals, today announced financial results for the fourth quarter and full year ended December 31, 2018.

2018 Highlights and Recent Developments

  • Increased total revenue by 10% year-over-year
  • Grew GAAP Net income by 87%, Adjusted EBITDA by 19%, Non-GAAP net income by 36%
  • Achieved record advisory net flows at HD Vest, approaching $1 billion
  • Recorded 21st consecutive year of revenue growth at TaxAct, growing 16% year-over-year
  • Utilized strong cash flow generation to eliminate $80 million in debt, reducing net leverage ratio to 1.5x from 2.8x 
  • Completed clearing transition expected to generate more than $120 million in incremental HD Vest segment income over 10-year term

“Strong net flows in the fourth quarter helped cap an excellent year for Blucora,” said John Clendening, Blucora’s President and Chief Executive Officer.  “For the full year 2018 we generated outstanding financial results, achieving double-digit growth in revenue, earnings and cash flow, while hitting records in key metrics such as advisory flows.  At the same time, we strengthened our balance sheet, our platform and our team, laying the groundwork to capture the significant opportunities we see ahead.”


Summary Financial Performance: Q4 and Full Year 2018
($ in millions except per share amounts)

 Q4 Q4   Full Year Full Year  
 2018 2017 Change 2018 2017 Change
Revenue           
Wealth Management$97.2  $93.8  4 % $373.2  $348.6  7 %
Tax Preparation$4.1  $4.0  2 % $187.3  $160.9  16 %
  Total Revenue$101.3  $97.8  3 % $560.5  $509.5  10 %
Segment Income (Loss)           
Wealth Management$14.1  $14.2  (1)% $53.1  $50.9  4 %
Tax Preparation$(8.7) $(10.5) (17)% $87.2  $72.9  20 %
  Total Segment Income$5.4  $3.7  44 % $140.3  $123.8  13 %
Unallocated Corporate Operating Expenses$6.1  $5.1  21 % $20.5  $22.9  (11)%
GAAP:           
Operating Income (Loss)$(13.5) $(14.5) (7)% $67.7  $48.0  41 %
Net Income (Loss) Attributable to Blucora. Inc.$(16.0) $10.0  (259)% $50.6  $27.0  87 %
Diluted Net Income (Loss) Per Share Attributable to Blucora. Inc.*$(0.38) $0.21  (281)% $0.90  $0.57  58 %
Non-GAAP:           
Adjusted EBITDA$(0.8) $(1.3) (44)% $119.8  $100.9  19 %
Net Income (Loss)$(7.5) $(5.7) 32 % $94.0  $69.1  36 %
Diluted Net Income (Loss) per Share$(0.16) $(0.12) 33 % $1.90  $1.46  30 %
* 2018 GAAP EPS includes noncontrolling interest redemption impacts of $(0.05) and (0.13) for Q4 2018 and Full Year 2018, respectively.

See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.

Tax Season Update
“For this tax season we’ve unveiled a number of advances and new benefits for customers to make the tax filing experience easier and more rewarding,” Clendening continued. “In addition to bringing back some of our most popular features like our personalized deduction maximizer and $100,000 accuracy guarantee, some improvements customers are seeing this year include:

  • A newly refreshed and modern website that allows customers to quickly identify the product that best fits their needs;
  • Ten Minute taxes, a streamlined and intuitive process to guide filers with simple returns to complete their returns in just ten minutes or less;
  • Refund Marketplace, which rewards filers with bonus money, up to a maximum of $599, when they allocate a portion of their refund to gift cards from an assortment of national retailers;
  • A redesigned BluPrint financial assessment, which can turn insights from your tax return in to actionable recommendations to save real money; and 
  • Many other improvements including more data import and product partners.”

“Based on early tax season data, we continue to expect first-half 2019 tax preparation revenue growth of approximately 7.5-10% versus the comparable period last year, with segment margin in the 56.7% to 57.7%. range.”

First Quarter Outlook
For the first quarter of 2019, the Company expects revenues to be between $213.5 million and $218.5 million, GAAP net income to be between $48.0 million and $50.5 million, or $0.95 to $1.00 per diluted share, Adjusted EBITDA to be between $68.5 million and $72.5 million, and Non-GAAP income to be between $60.0 million and $63.5 million, or $1.19 to $1.26 per diluted share.

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 fourth quarter and full year results, its outlook for the first quarter, tax season update 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®
Blucora, Inc. (NASDAQ: 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.

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; 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; political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation industries; our ability to attract and retain productive financial advisors; 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 December 31, Years ended December 31,
 2018 2017 2018 2017
Revenue:       
Wealth management services revenue$97,190  $93,848  $373,174  $348,620 
Tax preparation services revenue4,068  4,001  187,282  160,937 
Total revenue101,258  97,849  560,456  509,557 
Operating expenses:       
Cost of revenue:       
Wealth management services cost of revenue66,054  63,415  253,580  235,859 
Tax preparation services cost of revenue1,858  2,475  10,040  10,018 
Amortization of acquired technology  50  99  195 
    Total cost of revenue (1)67,912  65,940  263,719  246,072 
Engineering and technology (1)5,107  5,573  19,332  19,614 
Sales and marketing (1)16,642  17,824  111,361  102,798 
General and administrative (1)16,229  13,263  60,124  52,668 
Depreciation762  780  4,468  3,460 
Amortization of other acquired intangible assets8,103  8,615  33,487  33,807 
Restructuring (1)(3) 375  288  3,101 
    Total operating expenses114,752  112,370  492,779  461,520 
Operating income (loss)(13,494) (14,521) 67,677  48,037 
Other loss, net (2)(3,947) (5,402) (15,797) (44,551)
Income (loss) before income taxes(17,441) (19,923) 51,880  3,486 
Income tax benefit1,741  31,842  (311) 25,890 
Net income (loss)(15,700) 11,919  51,569  29,376 
Net income attributable to noncontrolling interests(281) (1,871) (935) (2,337)
Net income (loss) attributable to Blucora, Inc.$(15,981) $10,048  $50,634  $27,039 
Net income (loss) per share attributable to Blucora, Inc.:       
Basic$(0.38) $0.22  $0.94  $0.61 
Dilued$(0.38) $0.21  $0.90  $0.57 
Weighted average shares outstanding:       
Basic48,002  46,231  47,394  44,370 
Diluted48,002  48,406  49,381  47,211 


(1) Stock-based compensation expense was allocated among the following captions (in thousands):
 Three months ended December 31, Years ended December 31,
 2018 2017 2018 2017
Cost of revenue$527  $228  $1,467  $774 
Engineering and technology176  250  766  984 
Sales and marketing589  575  2,424  2,376 
General and administrative2,402  2,166  8,596  7,519 
Restructuring  70    1,148 
Total stock-based compensation expense$3,694  $3,289  $13,253  $12,801 


(2) Other loss, net consisted of the following (in thousands):
 Three months ended December 31, Years ended December 31,
 2018 2017 2018 2017
Interest income$(132) $(34) $(349) $(110)
Interest expense3,838  4,465  15,610  21,211 
Amortization of debt issuance costs174  198  833  1,089 
Accretion of debt discounts38  54  163  1,947 
Loss on debt extinguishment and modification expense  681  1,534  20,445 
Other29  38  (1,994) (31)
Other loss, net$3,947  $5,402  $15,797  $44,551 
                



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

 December 31,
 2018 2017
ASSETS   
Current assets:   
Cash and cash equivalents$84,524  $59,965 
Cash segregated under federal or other regulations842  1,371 
Accounts receivable, net of allowance14,977  10,694 
Commissions receivable15,562  16,822 
Other receivables7,408  3,180 
Prepaid expenses and other current assets, net7,755  7,365 
Total current assets131,068  99,397 
Long-term assets:   
Property and equipment, net12,389  9,831 
Goodwill, net548,685  549,037 
Other intangible assets, net294,603  328,205 
Other long-term assets10,980  15,201 
Total long-term assets866,657  902,274 
Total assets$997,725  $1,001,671 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$3,798  $4,413 
Commissions and advisory fees payable15,199  17,813 
Accrued expenses and other current liabilities19,026  19,577 
Deferred revenue10,257  9,953 
Total current liabilities48,280  51,756 
Long-term liabilities:   
Long-term debt, net260,390  338,081 
Deferred tax liability, net40,394  43,433 
Deferred revenue8,581  804 
Other long-term liabilities7,540  8,177 
Total long-term liabilities316,905  390,495 
Total liabilities365,185  442,251 
    
Redeemable noncontrolling interests24,945  18,033 
    
Stockholders’ equity:   
Common stock5  5 
Additional paid-in capital1,569,725  1,555,560 
Accumulated deficit(961,689) (1,014,174)
Accumulated other comprehensive loss(446) (4)
Total stockholders’ equity607,595  541,387 
Total liabilities and stockholders’ equity$997,725  $1,001,671 
        


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

 Years ended December 31,
 2018 2017
Operating Activities:   
Net income$51,569  $29,376 
Adjustments to reconcile net income to net cash from operating activities:   
Stock-based compensation13,253  11,653 
Depreciation and amortization of acquired intangible assets38,590  38,139 
Restructuring (non-cash)  1,569 
Deferred income taxes(3,039) (16,159)
Amortization of premium on investments, net, and debt issuance costs833  1,099 
Accretion of debt discounts163  1,947 
Loss on debt extinguishment1,534  20,445 
Other72  30 
Cash provided (used) by changes in operating assets and liabilities:   
Accounts receivable(4,286) (483)
Commissions receivable1,260  (678)
Other receivables(3,851) (204)
Prepaid expenses and other current assets(815) (869)
Other long-term assets3,450  (12,281)
Accounts payable(615) (123)
Commissions and advisory fees payable(2,614) 1,226 
Deferred revenue9,930  (3,248)
Accrued expenses and other current and long-term liabilities114  1,407 
    Net cash provided by operating activities105,548  72,846 
Investing Activities:   
Purchases of property and equipment(7,633) (5,039)
Proceeds from sales of investments  249 
Proceeds from maturities of investments  7,252 
Purchases of investments  (409)
    Net cash provided (used) by investing activities(7,633) 2,053 
Financing Activities:   
Proceeds from credit facilities  365,836 
Payments on convertible notes  (172,827)
Payments on credit facilities(80,000) (290,000)
Repayment of note payable with related party  (3,200)
Proceeds from stock option exercises12,773  40,271 
Proceeds from issuance of stock through employee stock purchase plan2,100  1,429 
Tax payments from shares withheld for equity awards(8,362) (9,095)
Contingent consideration payments for business acquisition(1,315) (946)
Other  (30)
    Net cash provided by financing activities(74,804) (68,562)
Net cash provided by continuing operations23,111  6,337 
    
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 and cash equivalents(56) 78 
Net increase (decrease) in cash, cash equivalents, and restricted cash23,055  7,443 
Cash and cash equivalents, beginning of period62,311  54,868 
Cash and cash equivalents, end of period$85,366  $62,311 
        


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

 Three months ended December 31, Years ended December 31,
 2018 2017 2018 2017
Revenue:       
Wealth Management (1)$97,190  $93,848  $373,174  $348,620 
Tax Preparation (1)4,068  4,001  187,282  160,937 
Total revenue101,258  97,849  560,456  509,557 
Operating income (loss):       
Wealth Management14,133  14,232  53,053  50,916 
Tax Preparation(8,742) (10,489) 87,249  72,921 
Corporate-level activity (2)(18,885) (18,264) (72,625) (75,800)
Total operating income (loss)(13,494) (14,521) 67,677  48,037 
Other loss, net(3,947) (5,402) (15,797) (44,551)
Income tax benefit (expense)1,741  31,842  (311) 25,890 
Net income (loss)$(15,700) $11,919  $51,569  $29,376 


(1) Revenues by major category within each segment are presented below (in thousands):
 Three months ended December 31, Years ended December 31,
 2018 2017 2018 2017
Wealth Management:       
Commission$39,932  $43,060  $164,201  $160,241 
Advisory43,551  38,616  164,353  145,694 
Asset-based9,999  7,021  31,456  26,297 
Transaction and fee3,708  5,151  13,164  16,388 
Total Wealth Management revenue$97,190  $93,848  $373,174  $348,620 
Tax Preparation:       
Consumer$3,912  $3,844  $172,207  $147,084 
Professional156  157  15,075  13,853 
Total Tax Preparation revenue$4,068  $4,001  $187,282  $160,937 


(2) Corporate-level activity included the following (in thousands):
 Three months ended December 31, Years ended December 31,
 2018 2017 2018 2017
Operating expenses$6,143  $5,084  $20,494  $22,907 
Stock-based compensation3,694  3,219  13,253  11,653 
Depreciation947  921  5,003  4,137 
Amortization of acquired intangible assets8,103  8,665  33,586  34,002 
Restructuring(3) 375  288  3,101 
Total corporate-level activity$18,884  $18,264  $72,624  $75,800 
                


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

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

 Three months ended December 31, Years ended December 31,
 2018 2017 2018 2017
Net income (loss) attributable to Blucora, Inc.$(15,981) $10,048  $50,634  $27,039 
Stock-based compensation3,694  3,219  13,253  11,653 
Depreciation and amortization of acquired intangible assets9,050  9,586  38,590  38,139 
Restructuring(3) 375  288  3,101 
Other loss, net3,947  5,402  15,797  44,551 
Net income attributable to noncontrolling interests281  1,871  935  2,337 
Income tax expense (benefit)(1,741) (31,842) 311  (25,890)
Adjusted EBITDA$(753) $(1,341) $119,808  $100,930 
                


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

 Three months ended December 31, Years ended December 31,
 2018 2017 2018 2017
Net income (loss) attributable to Blucora, Inc.(2)$(15,981) $10,048  $50,634  $27,039 
Stock-based compensation3,694  3,219  13,253  11,653 
Amortization of acquired intangible assets8,103  8,665  33,586  34,002 
Accretion and write-off of debt discount and debt issuance costs on previous debt      17,875 
Restructuring(3) 375  288  3,101 
Impact of noncontrolling interests281  1,871  935  2,337 
Cash tax impact of adjustments to GAAP net income(536) 3,328  (2,257) (6)
Non-cash income tax benefit (1)(3,050) (33,178) (2,403) (26,853)
Non-GAAP net income (loss)$(7,492) $(5,672) $94,036  $69,148 
        
Per diluted share:       
Net loss attributable to Blucora, Inc.(2)$(0.38) $0.21  $0.90  $0.57 
Stock-based compensation0.08  0.07  0.27  0.25 
Amortization of acquired intangible assets0.15  0.20  0.68  0.72 
Accretion and write-off of debt discount and debt issuance costs on previous debt      0.37 
Restructuring  0.01  0.01  0.07 
Impacts of noncontrolling interests0.06  0.04  0.14  0.05 
Cash tax impact of adjustments to GAAP net income(0.01) 0.07  (0.05) 0.00 
Non-cash income tax benefit(0.06) (0.72) (0.05) (0.57)
Non-GAAP net income (loss)$(0.16) $(0.12) $1.90  $1.46 
Weighted average shares outstanding used in computing per diluted share amounts48,002  46,231  49,381  47,211 
            


Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance (1)
(Amounts in thousands)

 Ranges for the three months ending
 March 31, 2019
 Low High
Net income (loss) attributable to Blucora, Inc.$48,000  $50,500 
Stock-based compensation4,300  3,900 
Depreciation and amortization of acquired intangible assets9,400  9,300 
Other loss, net (3)5,300  5,000 
Income tax expense1,500  3,800 
Adjusted EBITDA$68,500  $72,500 
        


Preliminary Non-GAAP Income Reconciliation for Forward-Looking Guidance (1)
(Amounts in thousands)

 Ranges for the three months ending
 March 31, 2019
 Low High
Net income (loss) attributable to Blucora, Inc.$48,000  $50,500 
Stock-based compensation4,300  3,900 
Amortization of acquired intangible assets8,100  8,100 
Cash tax impact of adjustments to net income (loss)(500) (500)
Non-cash income tax expense100  1,500 
Non-GAAP income$60,000  $63,500 
        


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, restructuring, other loss, net, the impact of noncontrolling interests and income tax (benefit) expense. For purposes of this definition, 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 (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) 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, 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 the terminated Notes and the 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.  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. 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 (loss) 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 (loss) 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.