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Blucora Reports Fourth Quarter and Full Year 2016 Results

BELLEVUE, Wash., Feb. 16, 2017 (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, 2016.

/EIN News/ -- “Our business results exceeded our expectations in the fourth quarter,” said John Clendening, President and Chief Executive Officer of Blucora.  “HD Vest was the primary driver, as segment income was up 13 percent versus last year.  We are pleased with the focus of our teams and the significant progress we made on our multi-stage business transformation.”

2016 Highlights and Recent Developments

  • Exceeded $10 billion in fee-based assets under management, up 7 percent versus prior year
  • Increased Tax Preparation revenue and segment income by 18 percent and 17 percent, respectively, versus prior year
  • Repaid $172 million in debt, in part driven by the sales of Infospace and Monoprice
  • Strengthened leadership team with the appointment of Sanjay Baskaran as President of TaxAct and Bob Oros as HD Vest chief executive officer

Clendening added, “Looking ahead, we continue to build momentum at HD Vest and are strategically investing in technology and upgrading trading platforms to enhance our capabilities.  To enable long-term growth in Tax Preparation, we are in the early stages of re-establishing TaxAct as the challenger brand in the digital space, with a strong user experience at a superior value for customers.  Blucora now consists of HD Vest and TaxAct as our operational foundation, a simplified, streamlined and synergistic business.  With new leadership and an energized team, we are taking the steps necessary to deliver value for Blucora shareholders in 2017 and beyond.”

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: Q4 and Full Year 2016
($ in millions except per share amounts)
                       
  Q4   Q4       Full Year   Full Year    
  2016   2015   Change   2016   2015   Change
  As reported   Pro forma       As reported   Pro forma    
Revenue $ 86.8     $ 85.0     2 %   $ 455.9     $ 437.4     4 %
Wealth Management $ 83.0     $ 82.1     1 %   $ 316.5     $ 319.7     (1 )%
Tax Preparation $ 3.8     $ 2.9     31 %   $ 139.4     $ 117.7     18 %
Segment Income (Loss) $ 7.7     $ 7.7     %   $ 113.2     $ 100.0     13 %
Wealth Management $ 13.8     $ 12.2     13 %   $ 46.3     $ 43.0     8 %
Tax Preparation $ (6.1 )   $ (4.5 )   35 %   $ 66.9     $ 57.0     17 %
Unallocated Corporate Operating Expenses $ 4.9     $ 4.3     15 %   $ 19.0     $ 17.8     7 %
GAAP:                      
Operating Income (Loss) $ (14.2 )   $ (12.0 )   18 %   $ 37.1     $ 23.2     60 %
Net Loss Attributable to Blucora, Inc. $ (19.3 )   $ (48.4 )   (60 )%   $ (65.2 )   $ (38.9 )   68 %
Diluted Net Loss Per Share Attributable to Blucora, Inc. $ (0.46 )   $ (1.18 )   (61 )%   $ (1.53 )   $ (0.93 )   65 %
Non-GAAP:                      
Adjusted EBITDA $ 2.8     $ 3.5     (19 )%   $ 94.2     $ 82.2     15 %
Net Income (Loss) $ (7.5 )   $ (8.0 )   (6 )%   $ 45.1     $ 37.0     22 %
Diluted Net Income (Loss) per Share $ (0.18 )   $ (0.19 )   (5 )%   $ 1.06     $ 0.88     20 %
See reconciliation of as reported and pro forma non-GAAP to GAAP measures in tables below.

First Quarter Outlook

For the first quarter of 2017, the Company expects revenues to be between $176.3 million and $181.5 million, GAAP income from continuing operations to be between $14.5 million and $15.2 million, or $0.32 to $0.34 per diluted share, Adjusted EBITDA to be between $51.0 million and $54.5 million, and Non-GAAP income from continuing operations to be between $40.2 million and $43.9 million, or $0.90 to $0.98 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 fourth quarter and full year results, its outlook for the first quarter, tax season update and other business matters.  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®

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, 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
December 31,
      Years ended
December 31,
 
    2016       2015       2016       2015  
Revenue:                              
Wealth management services revenue $ 83,050     $     $ 316,546     $  
Tax preparation services revenue 3,751     2,865     139,365     117,708  
Total revenue 86,801     2,865     455,911     117,708  
Operating expenses:              
Cost of revenue:              
Wealth management services cost of revenue 55,783         213,996      
Tax preparation services cost of revenue 1,819     1,487     8,368     6,167  
Amortization of acquired technology 47     1,910     812     7,546  
Total cost of revenue (1) 57,649     3,397     223,176     13,713  
Engineering and technology (1) 4,938     1,636     17,780     5,107  
Sales and marketing (1) 13,645     3,030     89,360     45,854  
General and administrative (1) 11,497     19,869     47,396     43,563  
Depreciation 975     420     3,881     1,521  
Amortization of other acquired intangible assets 8,402     3,191     33,331     12,757  
Restructuring (1) 3,870         3,870      
Total operating expenses 100,976     31,543     418,794     122,515  
Operating income (loss) (14,175 )   (28,678 )   37,117     (4,807 )
Other loss, net (2) (9,898 )   (3,433 )   (39,781 )   (12,542 )
Loss from continuing operations before income taxes (24,073 )   (32,111 )   (2,664 )   (17,349 )
Income tax benefit 10,184     9,767     1,285     4,623  
Loss from continuing operations (13,889 )   (22,344 )   (1,379 )   (12,726 )
Discontinued operations, net of income taxes (3) (5,140 )   (34,470 )   (63,121 )   (27,348 )
Net loss (19,029 )   (56,814 )   (64,500 )   (40,074 )
Net income attributable to noncontrolling interests (232 )       (658 )    
Net loss attributable to Blucora, Inc. $ (19,261 )   $ (56,814 )   $ (65,158 )   $ (40,074 )
Net loss per share attributable to Blucora, Inc. - basic:              
Continuing operations $ (0.34 )   $ (0.55 )   $ (0.05 )   $ (0.31 )
Discontinued operations (0.12 )   (0.84 )   (1.52 )   (0.67 )
Basic net loss per share $ (0.46 )   $ (1.39 )   $ (1.57 )   $ (0.98 )
Net loss per share attributable to Blucora, Inc. - diluted:              
Continuing operations $ (0.34 )   $ (0.55 )   $ (0.05 )   $ (0.31 )
Discontinued operations (0.12 )   (0.84 )   (1.52 )   (0.67 )
Diluted net loss per share $ (0.46 )   $ (1.39 )   $ (1.57 )   $ (0.98 )
Weighted average shares outstanding:              
Basic 41,766     40,979     41,494     40,959  
Diluted 41,766     40,979     41,494     40,959  


(1) Stock-based compensation expense was allocated among the following captions (in thousands):   
                       
  Three months ended
December 31,

    Years ended
December 31,

 
  2016     2015     2016     2015  
Cost of revenue $             49     $     25     $             166     $     96  
Engineering and technology 473     148     1,640     484  
Sales and marketing 860     161     2,548     771  
General and administrative 2,130     2,386     9,774     7,343  
Restructuring (364 )       (364 )    
Total stock-based compensation expense $ 3,148     $ 2,720     $ 13,764     $ 8,694  


(2) Other loss, net consisted of the following (in thousands):
 
                       
  Three months ended
December 31,

    Years ended
December 31,

 
  2016     2015     2016     2015  
Interest income $             (27 )   $     (179 )     $           (81 )   $     (609 )
Interest expense 7,028     2,211     32,424     9,044  
Amortization of debt issuance costs 400     291     1,840     1,133  
Accretion of debt discounts 1,091     993     4,690     3,866  
Loss on debt extinguishment and modification expense 1,677     398     1,036     398  
Gain on third party bankruptcy settlement (44 )   (62 )   (172 )   (1,128 )
Other (227 )   (219 )   44     (162 )
Other loss, net $ 9,898     $ 3,433     $ 39,781     $ 12,542  
 
(3) Discontinued operations included loss on sale of discontinued operations before income taxes of $73.8 million and goodwill and trade name impairments totaling $59.0 million for the years ended December 31, 2016 and 2015, respectively.


Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
       
  December 31,
  2016   2015
ASSETS      
Current assets:      
Cash and cash equivalents $ 51,713     $ 55,473  
Cash segregated under federal or other regulations 2,355     3,557  
Available-for-sale investments 7,101     11,301  
Accounts receivable, net of allowance 10,209     7,884  
Commissions receivable 16,144     16,328  
Other receivables 4,004     24,407  
Prepaid expenses and other current assets, net 6,321     10,062  
Current assets of discontinued operations     211,663  
Total current assets 97,847     340,675  
Long-term assets:      
Property and equipment, net 10,836     11,308  
Goodwill, net 548,741     548,959  
Other intangible assets, net 362,178     396,295  
Other long-term assets 3,057     2,311  
Total long-term assets 924,812     958,873  
Total assets $ 1,022,659     $ 1,299,548  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 4,536     $ 4,689  
Commissions and advisory fees payable 16,587     16,982  
Accrued expenses and other current liabilities 18,528     13,006  
Deferred revenue 12,156     11,521  
Current portion of long-term debt, net 2,560     31,631  
Current liabilities of discontinued operations     88,275  
Total current liabilities 54,367     166,104  
Long-term liabilities:      
Long-term debt, net 248,221     353,850  
Convertible senior notes, net 164,176     185,918  
Deferred tax liability, net 111,126     103,520  
Deferred revenue 1,849     1,902  
Other long-term liabilities 10,205     10,932  
Total long-term liabilities 535,577     656,122  
Total liabilities 589,944     822,226  
       
Redeemable noncontrolling interests 15,696     15,038  
       
Stockholders’ equity:      
Common stock 4     4  
Additional paid-in capital 1,510,152     1,490,405  
Accumulated deficit (1,092,756 )   (1,027,598 )
Accumulated other comprehensive loss (381 )   (527 )
Total stockholders’ equity 417,019     462,284  
Total liabilities and stockholders’ equity $ 1,022,659     $ 1,299,548  


Blucora, Inc.  
Preliminary Condensed Consolidated Statements of Cash Flows  
(Unaudited)  
(Amounts in thousands)  
               
    Years ended
December 31,
 
    2016       2015  
Operating Activities:              
Net loss $ (64,500 )   $ (40,074 )
Less: Discontinued operations, net of income taxes (63,121 )   (27,348 )
Net loss from continuing operations (1,379 )   (12,726 )
Adjustments to reconcile net loss from continuing operations to net cash from operating activities:      
Stock-based compensation 13,764     8,694  
Depreciation and amortization of acquired intangible assets 38,688     22,590  
Excess tax benefits from stock-based award activity (15,957 )   (7,967 )
Deferred income taxes (18,055 )   (12,607 )
Amortization of premium on investments, net 174     1,589  
Amortization of debt issuance costs 1,840     1,133  
Accretion of debt discounts 4,690     3,866  
Loss on debt extinguishment and modification expense 1,036     398  
Revaluation of acquisition-related contingent consideration liability 391      
Other 19     203  
Cash provided (used) by changes in operating assets and liabilities:      
Cash segregated under federal or other regulations 1,202      
Accounts receivable (2,340 )   (1,862 )
Commissions receivable 184      
Other receivables 22,875     651  
Prepaid expenses and other current assets 3,741     (493 )
Other long-term assets (887 )   (15 )
Accounts payable (153 )   369  
Commissions and advisory fees payable (395 )    
Deferred revenue 582     1,875  
Accrued expenses and other current and long-term liabilities 21,195     10,643  
Net cash provided by operating activities from continuing operations 71,215     16,341  
Investing Activities:      
Business acquisitions, net of cash acquired (1,788 )   (573,366 )
Purchases of property and equipment (3,812 )   (1,512 )
Change in restricted cash     150  
Proceeds from sales of investments     156,506  
Proceeds from maturities of investments 12,807     296,455  
Purchases of investments (8,767 )   (214,257 )
Net cash used by investing activities from continuing operations (1,560 )   (336,024 )
Financing Activities:      
Proceeds from credit facility, net of debt issuance costs and debt discount of $9,730 and $12,000 in 2015     378,270  
Repurchase of convertible notes (20,667 )    
Repayment of credit facility (140,000 )   (51,940 )
Repayment of note payable with related party (3,200 )    
Stock repurchases     (7,735 )
Excess tax benefits from stock-based award activity 15,957     7,967  
Proceeds from stock option exercises 2,216     2,409  
Proceeds from issuance of stock through employee stock purchase plan 1,402     1,193  
Tax payments from shares withheld for equity awards (1,752 )   (1,545 )
Net cash provided (used) by financing activities from continuing operations (146,044 )   328,619  
Net cash provided (used) by continuing operations (76,389 )   8,936  
       
Net cash provided by operating activities from discontinued operations 14,047     14,108  
Net cash provided (used) by investing activities from discontinued operations 83,608     (540 )
Net cash provided (used) by financing activities from discontinued operations (25,000 )   (8,982 )
Net cash provided by discontinued operations 72,655     4,586  
       
Effect of exchange rate changes on cash and cash equivalents (26 )   (17 )
Net increase (decrease) in cash and cash equivalents (3,760 )   13,505  
Cash and cash equivalents, beginning of period 55,473     41,968  
Cash and cash equivalents, end of period $ 51,713     $ 55,473  


Blucora, Inc.  
Preliminary Segment Information  
(Unaudited)  
(Amounts in thousands)  
                               
    Three months ended
December 31,
      Years ended
December 31,
 
    2016       2015       2016       2015  
Revenue:                              
Wealth Management (1) $ 83,050     $     $ 316,546     $  
Tax Preparation (1) 3,751     2,865     139,365     117,708  
Total revenue 86,801     2,865     455,911     117,708  
Operating income (loss):              
Wealth Management 13,838         46,296      
Tax Preparation (6,090 )   (4,509 )   66,897     56,984  
Corporate-level activity (2) (21,923 )   (24,169 )   (76,076 )   (61,791 )
Total operating income (loss) (14,175 )   (28,678 )   37,117     (4,807 )
Other loss, net (9,898 )   (3,433 )   (39,781 )   (12,542 )
Income tax benefit 10,184     9,767     1,285     4,623  
Discontinued operations, net of income taxes (5,140 )   (34,470 )   (63,121 )   (27,348 )
Net loss $ (19,029 )   $ (56,814 )   $ (64,500 )   $ (40,074 )


(1) Revenues by major category within each segment are presented below (in thousands):  
                               
  Three months ended
December 31,
    Years ended
December 31,
 
    2016       2015       2016       2015  
Wealth Management:                              
Commission $ 39,055     $     $ 150,125     $  
Advisory 33,658         129,417      
Asset-based 5,964         22,653      
Transaction and fee 4,373         14,351      
Total Wealth Management revenue $ 83,050         $ 316,546      
Tax Preparation:              
Consumer $ 3,611     $ 2,715     $ 126,289     $ 105,367  
Professional 140     150     13,076     12,341  
Total Tax Preparation revenue $ 3,751     $ 2,865     $ 139,365     $ 117,708  


                       
(2) Corporate-level activity included the following (in thousands):  
                       
  Three months ended
December 31,
    Years ended
December 31,
 
  2016     2015     2016     2015  
Operating expenses $             4,933     $     4,279     $             18,999     $
    17,750  
Stock-based compensation 3,512     2,720     14,128     8,694  
Acquisition-related costs     9,674     391     10,988  
CEO separation-related costs     1,769         1,769  
Depreciation 1,159     626     4,545     2,287  
Amortization of acquired intangible assets 8,449     5,101     34,143     20,303  
Restructuring 3,870         3,870      
Total corporate-level activity $ 21,923     $ 24,169     $ 76,076     $ 61,791  


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,
 
  2016     2015     2016     2015  
Operating income (loss) (2) $             (14,175 )   $     (28,678 )   $             37,117     $     (4,807 )
Stock-based compensation 3,512     2,720     14,128     8,694  
Depreciation and amortization of acquired intangible assets 9,608     5,727     38,688     22,590  
Acquisition-related costs     9,674     391     10,988  
CEO separation-related costs     1,769         1,769  
Restructuring 3,870         3,870      
Adjusted EBITDA $ 2,815     $ (8,788 )   $ 94,194     $ 39,234  


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,
 
  2016     2015     2016     2015  
Net loss attributable to Blucora, Inc.(2) $             (19,261 )   $     (56,814 )   $             (65,158 )   $     (40,074 )
Discontinued operations, net of income taxes 5,140     34,470     63,121     27,348  
Stock-based compensation 3,512     2,720     14,128     8,694  
Amortization of acquired intangible assets 8,449     5,101     34,143     20,303  
Accretion of debt discount on Convertible Senior Notes 917     993     3,666     3,866  
Accelerated accretion of debt discount on Convertible Senior Notes         1,628      
Gain on Convertible Senior Notes repurchased         (7,724 )    
Write-off of debt issuance costs on closed TaxAct 2013 credit facility     398         398  
Acquisition-related costs     9,674     391     10,988  
CEO separation-related costs     1,769         1,769  
Restructuring 3,870         3,870      
Impact of noncontrolling interests 232         658      
Cash tax impact of adjustments to GAAP net income (69 )   61     175     (236 )
Non-cash income tax benefit (1) (10,262 )   (9,827 )   (3,802 )   (4,857 )
Non-GAAP net income (loss) $ (7,472 )   $ (11,455 )   $ 45,096     $ 28,199  
               
Per diluted share:              
Net loss attributable to Blucora, Inc.(2) $ (0.46 )   $ (1.39 )   $ (1.53 )   $ (0.96 )
Discontinued operations, net of income taxes 0.12     0.84     1.48     0.66  
Stock-based compensation 0.08     0.07     0.33     0.21  
Amortization of acquired intangible assets 0.21     0.13     0.80     0.49  
Accretion of debt discount on Convertible Senior Notes 0.02     0.02     0.09     0.09  
Accelerated accretion of debt discount on Convertible Senior Notes         0.04      
Gain on Convertible Senior Notes repurchased         (0.18 )    
Write-off of debt issuance costs on closed TaxAct 2013 credit facility     0.01         0.01  
Acquisition-related costs     0.24     0.01     0.26  
CEO separation-related costs     0.04         0.04  
Restructuring 0.09         0.09      
Impact of noncontrolling interests 0.01         0.02      
Cash tax impact of adjustments to GAAP net income (0.00 )   0.00     0.00     (0.01 )
Non-cash income tax benefit (0.25 )   (0.24 )   (0.09 )   (0.12 )
Non-GAAP net income (loss) $ (0.18 )   $ (0.28 )   $ 1.06     $ 0.67  
Weighted average shares outstanding used in computing per diluted share amounts 41,766     40,979     42,686     41,861  


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) (1)  
(Unaudited)  
(Amounts in thousands)  
                       
  Three months ended
December 31,
    Years ended
December 31,
 
  2016     2015     2016     2015  
  As reported     Pro forma     As reported     Pro forma  
Operating income (loss) $             (14,175 )   $     (11,983 )   $             37,117     $     23,176  
Stock-based compensation 3,512     4,034     14,128     13,591  
Depreciation and amortization of acquired intangible assets 9,608     11,406     38,688     45,464  
Acquisition-related costs         391      
Restructuring 3,870         3,870      
Adjusted EBITDA $ 2,815     $ 3,457     $ 94,194     $ 82,231  


Preliminary Non-GAAP Net Income (Loss) Reconciliation (As Reported and Pro Forma) (1)  
(Unaudited)  
(Amounts in thousands, except per share amounts)  
                       
  Three months ended
December 31,
    Years ended
December 31,
 
  2016     2015     2016     2015  
  As reported     Pro forma     As reported     Pro forma  
Net loss attributable to Blucora, Inc. $             (19,261 )   $     (48,363 )   $             (65,158 )   $     (38,884 )
Discontinued operations, net of income taxes 5,140     34,470     63,121     27,348  
Stock-based compensation 3,512     4,034     14,128     13,591  
Amortization of acquired intangible assets 8,449     10,238     34,143     40,851  
Accretion of debt discount on Convertible Senior Notes 917     993     3,666     3,866  
Accelerated accretion of debt discount on Convertible Senior Notes         1,628      
Gain on Convertible Senior Notes repurchased           (7,724 )    
Acquisition-related costs         391      
Restructuring 3,870         3,870      
Impact of noncontrolling interests 232         658      
Cash tax impact of adjustments to GAAP net income (69 )   (100 )   175     (400 )
Non-cash income tax benefit (10,262 )   (9,248 )   (3,802 )   (9,422 )
Non-GAAP net income (loss) $ (7,472 )   $ (7,976 )   $ 45,096     $ 36,950  
               
Per diluted share:              
Net loss attributable to Blucora, Inc. $ (0.46 )   $ (1.18 )   $ (1.53 )   $ (0.93 )
Discontinued operations, net of income taxes 0.12     0.84     1.48     $ 0.65  
Stock-based compensation 0.08     0.10     0.33     $ 0.32  
Amortization of acquired intangible assets 0.21     0.25     0.80     $ 0.98  
Accretion of debt discount on Convertible Senior Notes 0.02     0.02     0.09     $ 0.09  
Accelerated accretion of debt discount on Convertible Senior Notes         0.04     $  
Gain on Convertible Senior Notes repurchased         (0.18 )   $  
Acquisition-related costs         0.01     $  
Restructuring 0.09         0.09     $  
Impact of noncontrolling interests 0.01         0.02     $  
Cash tax impact of adjustments to GAAP net income (0.00 )   (0.00 )   0.00     $ (0.01 )
Non-cash income tax benefit (0.25 )   (0.22 )   (0.09 )   $ (0.22 )
Non-GAAP net income (loss) $ (0.18 )   $ (0.19 )   $ 1.06     $ 0.88  
Weighted average shares outstanding used
in computing per diluted share amounts
41,766     40,979     42,686     41,861  


Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance  
(Amounts in thousands)  
           
  Ranges for the three months ending  
  March 31, 2017  
Income from continuing operations $             14,500     $   15,200  
Stock-based compensation 3,200     3,100  
Depreciation and amortization of acquired intangible assets 9,800     9,600  
Restructuring 700     600  
Other loss, net (3) 9,400     9,500  
Income tax expense 13,400     16,500  
Adjusted EBITDA $ 51,000     $ 54,500  


Preliminary Non-GAAP Income from Continuing Operations Reconciliation for Forward-Looking Guidance  
(Amounts in thousands)  
           
  Ranges for the three months ending  
  March 31, 2017  
Income from continuing operations $             14,500     $   15,200  
Stock-based compensation 3,200     3,100  
Amortization of acquired intangible assets 8,500     8,400  
Accretion of debt discount on Convertible Senior Notes 900     900  
Restructuring 700     600  
Non-cash income tax expense 12,400     15,700  
Non-GAAP income from continuing operations $ 40,200     $ 43,900  

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

(1) We define Adjusted EBITDA differently for this report than we have defined it in the past, due to: (i) restructuring costs related to the upcoming move of our corporate headquarters which was announced in the fourth quarter of 2016, (ii) the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016, (iii) the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, (iv) separation-related costs in connection with the departure of our former chief executive office which was announced in the fourth quarter of 2015, and (v) 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 services 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, acquisition-related costs, CEO separation-related costs, and restructuring 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 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 differently for this report than we have defined it in the past, due to: (i) restructuring costs related to the upcoming move of our corporate headquarters which was announced in the fourth quarter of 2016, (ii) the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016, (iii) the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, (iv) separation-related costs in connection with the departure of our former chief executive office which was announced in the fourth quarter of 2015, and (v) 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 as net 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, gain on Convertible Senior Notes repurchased, write-off of debt issuance costs on closed TaxAct 2013 credit facility, acquisition-related costs, CEO separation-related costs, restructuring costs, 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 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 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.

(2) As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited).  Any difference in "per diluted share" between the Preliminary Condensed Consolidated Statements of Operations (unaudited) and non-GAAP table is due to using different weighted average shares outstanding in the event that there is GAAP net loss but non-GAAP net income and vice versa.

(3) 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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