Category: Services

Blucora Announces First Quarter 2016 Adjusted EBITDA up 11 Percent Year Over Year

BELLEVUE, WA -- 04/28/16 -- 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 first quarter ended March 31, 2016 and provided preliminary tax season update.

First Quarter Highlights and Recent Developments

"Our team continues to drive efforts to strengthen Blucora and execute on our strategic transformation into a technology-enabled financial solutions company," said John Clendening, president and chief executive officer of Blucora. "We began 2016 with good momentum punctuated by our strong financial performance during this year's tax season. Looking ahead, we are committed to our 2016 stated objectives of aggressively paying down debt, divesting our non-core businesses, reducing operating expenses, and delivering on our business performance goals. I am thrilled to lead a newly transformed Blucora, excited for what we can achieve together, and confident in our ability to enhance shareholder value."

Eric Emans, chief financial officer and treasurer of Blucora, noted that the Company has made progress toward its commitment to pay down debt. "We retired more than $65 million of debt in the quarter," he explained, "lowering our net leverage ratio and highlighting the Company's growth, predictable profit generation and strong free cash flow conversion. Debt repayment will remain the top priority for our capital allocation strategy throughout this year and into 2017."

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: Q1 2016                   
                  ($ in millions except per share amounts)                  
                                                                            
                                                   Q1          Q1           
                                                  2016        2015    Change
                                              ------------  --------- ------
                                               As reported  Pro forma       
Revenue                                       $      165.8 $    157.9     5%
  Wealth Management                           $       77.3 $     76.8     1%
  Tax Preparation                             $       88.5 $     81.1     9%
Segment Income                                                              
  Wealth Management                           $       10.9 $      8.6    26%
  Tax Preparation                             $       47.6 $     44.1     8%
Unallocated Corporate Operating Expenses      $        4.7 $      4.4     7%
Adjusted EBITDA                               $       53.8 $     48.4    11%
Non-GAAP:                                                                   
  Net Income                                  $       39.3 $     37.3     5%
  Diluted Net Income Per Share                $       0.94 $     0.89     6%
GAAP:                                                                       
  Net Income Attributable to Blucora, Inc.    $       22.7 $     18.4    23%
  Diluted Net Income Per Share Attributable                                 
   to Blucora, Inc.                           $       0.54 $     0.44    23%

See reconciliations of as reported and pro forma non-GAAP to GAAP measures in tables below.

(1) Net revenue represents Wealth Management segment revenue less Wealth Management services cost of revenue.

                                                                            
Tax Season Update                                                           
                                                                            
(in thousands, except %s)                       Tax seasons ended           
                                     ---------------------------------------
                                     April 19, 2016 April 16, 2015 % change 
                                     -------------- -------------- ---------
Consumer:                                                                   
  Online e-files                              4,613          5,058      (9)%
  Desktop e-files                               234            261     (10)%
                                     -------------- --------------          
    Sub-total e-files                         4,847          5,319      (9)%
  Free File Alliance e-files                    158            172      (8)%
                                     -------------- --------------          
    Total consumer e-files                    5,005          5,491      (9)%
Professional tax preparer:                                                  
  E-files                                     1,630          1,475       11%
                                     -------------- --------------          
Total e-files (consumer and                                                 
 preparer)                                    6,635          6,966      (5)%
                                     ============== ==============          

Tax season begins on the first day that the IRS begins accepting e-files and ends on tax day +1.

Other

During the first quarter of 2016, the Company repaid $40.0 million on the TaxAct - HD Vest credit facility and repurchased $28.4 million of the Convertible Senior Notes for cash of $20.7 million. As a result, at the end of the first quarter, Blucora's net leverage ratio was lowered by 1.1x.

Second Quarter and Full Year 2016 Outlook

For the second quarter of 2016, the Company expects revenues to be between $120.5 million and $124.5 million, Adjusted EBITDA to be between $33.7 million and $35.9 million, Non-GAAP income from continuing operations to be between $20.0 million and $22.7 million, or $0.48 to $0.54 per diluted share, and GAAP income from continuing operations to be between $4.5 million and $6.3 million, or $0.11 to $0.15 per diluted share.

For the full year 2016, the Company expects revenues to be between $452.0 million and $465.5 million, Adjusted EBITDA to be between $90.0 million and $94.0 million, Non-GAAP income from continuing operations to be between $39.9 million and $44.4 million, or $0.95 to $1.06 per diluted share, and GAAP loss from continuing operations to be between $5.0 million and $1.3 million, or $(0.12) to $(0.03) 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 first quarter results and its outlook for the second 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 athttp://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 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 ability to successfully integrate acquired businesses; future acquisitions; the successful execution of the Company's strategic initiatives, technology enhancements, operating plans, and marketing strategies; and the condition of our cash investments. 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 March 31,
                                                ----------------------------
                                                     2016           2015    
                                                -------------- -------------
Revenue:                                                                    
  Wealth management services revenue            $       77,291 $           -
  Tax preparation services revenue                      88,474        81,068
                                                -------------- -------------
      Total revenue                                    165,765        81,068
Operating expenses:                                                         
  Cost of revenue:                                                          
    Wealth management services cost of revenue          52,269             -
    Tax preparation services cost of revenue             3,207         2,137
    Amortization of acquired technology                    667         1,862
                                                -------------- -------------
      Total cost of revenue (1)                         56,143         3,999
  Engineering and technology (1)                         4,295         1,090
  Sales and marketing (1)                               43,837        33,018
  General and administrative (1)                        12,753         7,146
  Depreciation                                             975           351
  Amortization of other acquired intangible                                 
   assets                                                8,316         3,186
                                                -------------- -------------
      Total operating expenses                         126,319        48,790
                                                -------------- -------------
Operating income                                        39,446        32,278
Other loss, net (2)                                    (7,514)       (2,995)
                                                -------------- -------------
Income from continuing operations before income                             
 taxes                                                  31,932        29,283
Income tax expense                                    (11,643)       (9,868)
                                                -------------- -------------
Income from continuing operations                       20,289        19,415
Discontinued operations, net of income taxes             2,522         3,685
                                                -------------- -------------
Net income                                              22,811        23,100
Net income attributable to noncontrolling                                   
 interests                                               (144)             -
                                                -------------- -------------
Net income attributable to Blucora, Inc.        $       22,667 $      23,100
                                                ============== =============
Net income per share attributable to Blucora,                               
 Inc. - basic:                                                              
  Continuing operations                         $         0.49 $        0.47
  Discontinued operations                                 0.06          0.09
                                                -------------- -------------
  Basic net income per share                    $         0.55 $        0.56
                                                ============== =============
Net income per share attributable to Blucora,                               
 Inc. - diluted:                                                            
  Continuing operations                         $         0.48 $        0.46
  Discontinued operations                                 0.06          0.09
                                                -------------- -------------
  Diluted net income per share                  $         0.54 $        0.55
                                                ============== =============
Weighted average shares outstanding:                                        
  Basic                                                 41,171        40,987
  Diluted                                               41,610        41,899

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

                                               Three months ended March 31, 
                                               -----------------------------
                                                    2016           2015     
                                               -------------- --------------
Cost of revenue                                $           42 $           29
Engineering and technology                                411            133
Sales and marketing                                       601            195
General and administrative                              3,175          1,548
                                               -------------- --------------
  Total stock-based compensation expense       $        4,229 $        1,905
                                               ============== ==============

(2) Other loss, net was allocated among the following captions (in thousands):

                                                Three months ended March 31,
                                                ----------------------------
                                                     2016          2015     
                                                -------------- -------------
Interest income                                 $         (25) $       (122)
Interest expense                                         9,191         2,388
Amortization of debt issuance costs                        610           276
Accretion of debt discounts                              1,406           940
Gain on debt extinguishment and modification                                
 expense                                               (3,843)             -
Gain on third party bankruptcy settlement                 (18)         (476)
Other                                                      193          (11)
                                                -------------- -------------
  Other loss, net                               $        7,514 $       2,995
                                                ============== =============
                                                                            
                                                                            
                               Blucora, Inc.                                
             Preliminary Condensed Consolidated Balance Sheets              
                                 (Unaudited)                                
                           (Amounts in thousands)                           
                                                                            
                                                   March 31,   December 31, 
                                                      2016         2015     
                                                  ------------ -------------
                     ASSETS                                                 
Current assets:                                                             
  Cash and cash equivalents                       $     67,955 $      55,473
  Cash segregated under federal or other                                    
   regulations                                           3,686         3,557
  Available-for-sale investments                        11,642        11,301
  Accounts receivable, net of allowance                 10,840         7,884
  Commissions receivable                                15,062        16,328
  Other receivables                                      4,261        24,407
  Prepaid expenses and other current assets, net         7,320        10,062
  Current assets of discontinued operations            197,275       211,663
                                                  ------------ -------------
    Total current assets                               318,041       340,675
Long-term assets:                                                           
  Property and equipment, net                           11,093        11,308
  Goodwill, net                                        551,027       548,959
  Other intangible assets, net                         387,359       396,295
  Other long-term assets                                 2,216         2,311
                                                  ------------ -------------
    Total long-term assets                             951,695       958,873
                                                  ------------ -------------
    Total assets                                  $  1,269,736 $   1,299,548
                                                  ============ =============
      LIABILITIES AND STOCKHOLDERS' EQUITY                                  
Current liabilities:                                                        
  Accounts payable                                $      9,906 $       4,689
  Commissions and advisory fees payable                 15,277        16,982
  Accrued expenses and other current liabilities        17,063        13,006
  Deferred revenue                                       7,945        11,521
  Current portion of long-term debt, net                 3,200        31,631
  Current liabilities of discontinued operations        73,830        88,275
                                                  ------------ -------------
    Total current liabilities                          127,221       166,104
Long-term liabilities:                                                      
  Long-term debt, net                                  344,891       353,850
  Convertible senior notes, net                        160,781       185,918
  Deferred tax liability, net                           98,501       103,520
  Deferred revenue                                       2,868         1,902
  Other long-term liabilities                           10,490        10,932
                                                  ------------ -------------
    Total long-term liabilities                        617,531       656,122
                                                  ------------ -------------
    Total liabilities                                  744,752       822,226
                                                                            
Redeemable noncontrolling interests                     15,182        15,038
                                                                            
Stockholders' equity:                                                       
  Common stock                                               4             4
  Additional paid-in capital                         1,514,923     1,490,405
  Accumulated deficit                              (1,004,931)   (1,027,598)
  Accumulated other comprehensive loss                   (194)         (527)
                                                  ------------ -------------
    Total stockholders' equity                         509,802       462,284
                                                  ------------ -------------
Total liabilities and stockholders' equity        $  1,269,736 $   1,299,548
                                                  ============ =============
                                                                            
                                                                            
                               Blucora, Inc.                                
        Preliminary Condensed Consolidated Statements of Cash Flows         
                                 (Unaudited)                                
                           (Amounts in thousands)                           
                                                                            
                                                Three months ended March 31,
                                                ----------------------------
                                                     2016          2015     
                                                -------------- -------------
Operating Activities:                                                       
  Net income                                    $       22,811 $      23,100
  Less: Discontinued operations, net of income                              
   taxes                                                 2,522         3,685
                                                -------------- -------------
  Net income from continuing operations                 20,289        19,415
  Adjustments to reconcile net income from                                  
   continuing operations to net cash from                                   
   operating activities:                                                    
    Stock-based compensation                             4,229         1,905
    Depreciation and amortization of acquired                               
     intangible assets                                  10,105         5,586
    Excess tax benefits from stock-based award                              
     activity                                         (16,865)      (22,081)
    Deferred income taxes                              (5,127)      (14,277)
    Amortization of premium on investments, net             79           483
    Amortization of debt issuance costs                    610           276
    Accretion of debt discounts                          1,406           940
    Gain on debt extinguishment and                                         
     modification expense                              (3,843)             -
    Other                                                   13             -
  Cash provided (used) by changes in operating                              
   assets and liabilities:                                                  
    Cash segregated under federal or other                                  
     regulations                                         (129)             -
    Accounts receivable                                (2,967)       (4,726)
    Commissions receivable                               1,266             -
    Other receivables                                   20,146         1,612
    Prepaid expenses and other current assets            2,709         3,570
    Other long-term assets                                  95            26
    Accounts payable                                     5,217         8,175
    Commissions and advisory fees payable              (1,705)             -
    Deferred revenue                                   (2,610)         (296)
    Accrued expenses and other current and                                  
     long-term liabilities                              18,809        27,579
                                                -------------- -------------
      Net cash provided by operating activities                             
       from continuing operations                       51,727        28,187
Investing Activities:                                                       
    Purchases of property and equipment                  (677)         (259)
    Proceeds from sales of investments                       -         3,000
    Proceeds from maturities of investments                  -        68,243
    Purchases of investments                             (403)      (66,833)
                                                -------------- -------------
      Net cash provided (used) by investing                                 
       activities from continuing operations           (1,080)         4,151
Financing Activities:                                                       
    Repurchase of convertible notes                   (20,667)             -
    Repayment of credit facilities                    (40,000)      (25,000)
    Stock repurchases                                        -       (4,445)
    Excess tax benefits from stock-based award                              
     activity                                           16,865        22,081
    Proceeds from stock option exercises                 1,088         1,616
    Proceeds from issuance of stock through                                 
     employee stock purchase plan                          562           608
    Tax payments from shares withheld upon                                  
     vesting of restricted stock units                   (329)         (435)
                                                -------------- -------------
      Net cash used by financing activities                                 
       from continuing operations                     (42,481)       (5,575)
Net cash provided by continuing operations               8,166        26,763
Net cash provided by operating activities from                              
 discontinued operations                                 8,402         2,726
Net cash used by investing activities from                                  
 discontinued operations                                 (479)       (1,135)
Net cash used by financing activities from                                  
 discontinued operations                               (3,607)      (10,220)
                                                -------------- -------------
Net cash provided (used) by discontinued                                    
 operations                                              4,316       (8,629)
                                                -------------- -------------
Net increase in cash and cash equivalents               12,482        18,134
Cash and cash equivalents, beginning of period          55,473        41,968
                                                -------------- -------------
Cash and cash equivalents, end of period        $       67,955 $      60,102
                                                ============== =============
                                                                            
                                                                            
                               Blucora, Inc.                                
                      Preliminary Segment Information                       
                                 (Unaudited)                                
                           (Amounts in thousands)                           
                                                                            
                                                Three months ended March 31,
                                                ----------------------------
                                                     2016          2015     
                                                -------------- -------------
Revenue:                                                                    
  Wealth Management                             $       77,291 $           -
  Tax Preparation                                       88,474        81,068
                                                -------------- -------------
    Total revenue                                      165,765        81,068
Operating income:                                                           
  Wealth Management                                     10,906             -
  Tax Preparation                                       47,573        44,145
  Corporate-level activity (1)                        (19,033)      (11,867)
                                                -------------- -------------
    Total operating income                              39,446        32,278
Other loss, net                                        (7,514)       (2,995)
Income tax expense                                    (11,643)       (9,868)
Discontinued operations, net of income taxes             2,522         3,685
                                                -------------- -------------
Net income                                      $       22,811 $      23,100
                                                ============== =============

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

                                                Three months ended March 31,
                                                ----------------------------
                                                     2016          2015     
                                                -------------- -------------
Operating expenses                              $        4,699 $       4,376
Stock-based compensation                                 4,229         1,905
Depreciation                                             1,122           538
Amortization of acquired intangible assets               8,983         5,048
                                                -------------- -------------
  Total corporate-level activity                $       19,033 $      11,867
                                                ============== =============
                                                                            
                                                                            
                               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 March 31,
                                                ----------------------------
                                                     2016          2015     
                                                -------------- -------------
Operating income (2)                            $       39,446 $      32,278
Stock-based compensation                                 4,229         1,905
Depreciation and amortization of acquired                                   
 intangible assets                                      10,105         5,586
                                                -------------- -------------
Adjusted EBITDA                                 $       53,780 $      39,769
                                                ============== =============
                                                                            
                                                                            
             Preliminary Non-GAAP Net Income Reconciliation (1)             
                                 (Unaudited)                                
              (Amounts in thousands, except per share amounts)              
                                                                            
                                                Three months ended March 31,            
                                                ----------------------------
                                                     2016           2015    
                                                 -------------  ------------
Net income attributable to Blucora, Inc.(2)     $       22,667 $      23,100
Stock-based compensation                                 4,229         1,905
Amortization of acquired intangible assets               8,983         5,048
Accretion of debt discount on Convertible                                   
 Senior Notes                                              963           940
Accelerated accretion of debt discount on                                   
 Convertible Senior Notes                                1,628             -
Gain on Convertible Senior Notes repurchased           (7,724)             -
Discontinued operations, net of income taxes           (2,522)       (3,685)
Impact of noncontrolling interests                         144             -
Cash tax impact of adjustments to GAAP net                                  
 income                                                    339          (34)
Non-cash income tax expense (1)                         10,579         9,811
                                                -------------- -------------
Non-GAAP net income                             $       39,286 $      37,085
                                                ============== =============
Per diluted share:                                                          
Net income attributable to Blucora, Inc.        $         0.54 $        0.55
Stock-based compensation                                  0.10          0.05
Amortization of acquired intangible assets                0.23          0.13
Accretion of debt discount on Convertible                                   
 Senior Notes                                             0.02          0.02
Accelerated accretion of debt discount on                                   
 Convertible Senior Notes                                 0.04             -
Gain on Convertible Senior Notes repurchased            (0.19)             -
Discontinued operations, net of income taxes            (0.06)        (0.09)
Impact of noncontrolling interests                        0.00             -
Cash tax impact of adjustments to GAAP net                                  
 income                                                   0.01          0.00
Non-cash income tax expense                               0.25          0.23
                                                -------------- -------------
Non-GAAP net income                             $         0.94 $        0.89
                                                ============== =============
Weighted average shares outstanding used in                                 
 computing per diluted share amounts                    41,610        41,899
                                                                            
                                                                            
                               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 March 31,
                                                ----------------------------
                                                     2016          2015     
                                                -------------- -------------
                                                  As reported    Pro forma  
Operating income                                $       39,446 $      34,198
Stock-based compensation                                 4,229         2,889
Depreciation and amortization of acquired                                   
 intangible assets                                      10,105        11,329
                                                -------------- -------------
Adjusted EBITDA                                 $       53,780 $      48,416
                                                ============== =============
                                                                            
                                                                            
 Preliminary Non-GAAP Net Income Reconciliation (As Reported and Pro Forma) 
                                    (1)                                     
                                 (Unaudited)                                
              (Amounts in thousands, except per share amounts)              
                                                                            
                                                Three months ended March 31,            
                                                ----------------------------
                                                      2016          2015    
                                                -------------- -------------
                                                  As reported     Pro forma 
Net income attributable to Blucora, Inc.        $       22,667 $      18,415
Stock-based compensation                                 4,229         2,889
Amortization of acquired intangible assets               8,983        10,185
Accretion of debt discount on Convertible                                   
 Senior Notes                                              963           940
Accelerated accretion of debt discount on                                   
 Convertible Senior Notes                                1,628             -
Gain on Convertible Senior Notes repurchased           (7,724)             -
Discontinued operations, net of income taxes           (2,522)       (3,685)
Impact of noncontrolling interests                         144             -
Cash tax impact of adjustments to GAAP net                                  
 income                                                    339         (100)
Non-cash income tax expense                             10,579         8,671
                                                -------------- -------------
Non-GAAP net income                             $       39,286 $      37,315
                                                ============== =============
Per diluted share:                                                          
Net income attributable to Blucora, Inc.        $         0.54 $        0.44
Stock-based compensation                                  0.10          0.07
Amortization of acquired intangible assets                0.23          0.24
Accretion of debt discount on Convertible                                   
 Senior Notes                                             0.02          0.02
Accelerated accretion of debt discount on                                   
 Convertible Senior Notes                                 0.04             -
Gain on Convertible Senior Notes repurchased            (0.19)             -
Discontinued operations, net of income taxes            (0.06)        (0.09)
Impact of noncontrolling interests                        0.00             -
Cash tax impact of adjustments to GAAP net                                  
 income                                                   0.01          0.00
Non-cash income tax expense                               0.25          0.21
                                                -------------- -------------
Non-GAAP net income                             $         0.94 $        0.89
                                                ============== =============
Weighted average shares outstanding used in                                 
 computing per diluted share amounts                    41,610        41,899
                                                                            
                                                                            
  Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance   
                           (Amounts in thousands)                           
                                                                            
                                  Ranges for the three     Ranges for the   
                                     months ending          year ending     
                                     June 30, 2016       December 31, 2016  
                                 --------------------- ---------------------
Income (loss) from continuing                                               
 operations                      $    4,500 $    6,300 $  (5,000) $  (1,300)
Stock-based compensation              4,300      4,300     18,700     17,700
Depreciation and amortization of                                            
 acquired intangible assets           9,600      9,500     39,200     38,900
Other loss, net (3)                  12,800     12,300     39,900     39,400
Income tax (benefit) expense          2,500      3,500    (2,800)      (700)
                                 ---------- ---------- ---------- ----------
Adjusted EBITDA                  $   33,700 $   35,900 $   90,000 $   94,000
                                 ========== ========== ========== ==========
                                                                            
  Preliminary Non-GAAP Income from Continuing Operations Reconciliation for 
                          Forward-Looking Guidance                          
                           (Amounts in thousands)                           
                                                                            
                                  Ranges for the three     Ranges for the   
                                     months ending          year ending     
                                      June 30, 2016       December 31, 2016 
                                 --------------------- ---------------------
Income (loss) from continuing                                               
 operations                      $    4,500 $    6,300 $  (5,000) $  (1,300)
Stock-based compensation              4,300      4,300     18,700     17,700
Amortization of acquired                                                    
 intangible assets                    8,400      8,400     34,200     34,100
Accretion of debt discount on                                               
 Convertible Senior Notes             1,000      1,000      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)
Cash tax impact of adjustments                                              
 to income (loss) from                                                      
 continuing operations                    -          -        300        300
Non-cash income tax (benefit)                                               
 expense                              1,800      2,700    (5,900)    (4,000)
                                 ---------- ---------- ---------- ----------
Non-GAAP income from continuing                                             
 operations                      $   20,000 $   22,700 $   39,900 $   44,400
                                 ========== ========== ========== ==========
                                                                            

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 the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016 and the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015. We define Adjusted EBITDA as operating income, determined in accordance with GAAP, excluding the effects of depreciation, amortization of acquired intangible assets (including acquired technology), and stock-based compensation.

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

We define non-GAAP net income 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 and the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015. For this report, we define non-GAAP net income as net income attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets (included acquired technology), accretion of debt discount and accelerated accretion of debt discount on the Convertible Senior Notes, gain on Convertible Senior Notes repurchased, 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 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. 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).

(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
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