• Blucora Announces Second Quarter 2018 Results

    Source: Nasdaq GlobeNewswire / 01 Aug 2018 06:30:22   America/New_York

    IRVING, Texas, Aug. 01, 2018 (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 second quarter ended June 30, 2018.

    Second Quarter Highlights and Recent Developments

    • Increased revenue and operating income by 13% and 29%, respectively, year-over-year (y/y)
    • Grew TaxAct revenue by 17% y/y for the first half of 2018, with 57.3% segment margin
    • Posted record level of advisory assets (formerly referred to as assets under management) at HD Vest of $12.9 billion, or 28.8% of total client assets (formerly referred to as assets under administration)
    • Achieved 1.5x net leverage ratio on continued strong cash generation and debt reduction 

    “Strong tax preparation results helped drive continued double-digit growth in revenue and earnings with healthy cash flow," said John Clendening, Blucora's President and Chief Executive Officer.  "We once again utilized that cash flow to reduce debt, further strengthen our balance sheet and accelerate earnings growth.  Our wealth management business also continued its upward momentum demonstrating strong revenue growth and record asset levels.”

    Summary Financial Performance: Q2 2018
    ($ in millions except per share amounts)

     Q2 Q2  
     2018 2017 Change
    Revenue:     
    Wealth Management$92.0  $85.3  8%
    Tax Preparation$65.8  $53.9  22%
    Total Revenue$157.8  $139.2  13%
    Segment Income:     
    Wealth Management$13.0  $12.4  4%
    Tax Preparation$44.1  $36.5  21%
    Total Segment Income$57.1  $48.9  17%
    Unallocated Corporate Operating Expenses$(4.2) $(6.5) (34)%
    GAAP:     
    Operating Income$38.8  $30.0  29%
    Net Income Attributable to Blucora, Inc.$34.9  $3.3  957%
    Diluted Net Income Per Share Attributable to Blucora, Inc. (EPS)$0.71  $0.07  914%
    Non-GAAP:     
    Adjusted EBITDA$52.8  $42.5  24%
    Net Income$47.7  $32.9  45%
    Diluted Net Income Per Share (EPS)$0.97  $0.70  39%
    See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.

    Third Quarter and Full Year 2018 Outlook

    For the third quarter of 2018, the Company expects revenues to be between $92.0 million and $95.5 million, GAAP net loss attributable to Blucora, Inc. to be between $18.5 million and $22.5 million, or $0.39 to $0.47 per diluted share, Adjusted EBITDA loss to be between $2.0 million and $5.0 million, and Non-GAAP net loss to be between $8.0 million and $11.0 million, or $0.17 to $0.23 per diluted share.

    For the full year 2018, the Company expects revenues to be between $553.5 million and $563.0 million, GAAP net income attributable to Blucora, Inc. to be between $42.5 million and $46.0 million, or $0.86 to $0.93 per diluted share, Adjusted EBITDA to be between $114.5 million and $119.5 million, and Non-GAAP net income to be between $89.0 million and $94.5 million, or $1.80 to $1.92 per diluted share.

    The third quarter and fiscal 2018 outlook for GAAP net income or loss attributable to Blucora assumes an estimated tax rate of approximately 2% to 6%.

    Conference Call and Webcast

    A conference call and live webcast will be held today at 8:30 a.m. Eastern Time during which the Company will further discuss second quarter results, its outlook for the third quarter and full year 2018 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 ability to successfully transition our wealth management business to a new clearing platform and our expectations concerning the benefits that may be derived therefrom; 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 June 30, Six months ended June 30,
     2018 2017 2018 2017
    Revenue:       
    Wealth management services revenue$92,015  $85,296  $184,097  $167,963 
    Tax preparation services revenue65,833  53,866  179,716  153,574 
    Total revenue157,848  139,162  363,813  321,537 
    Operating expenses:       
    Cost of revenue:       
    Wealth management services cost of revenue62,452  56,963  125,519  112,837 
    Tax preparation services cost of revenue2,459  2,411  6,812  6,229 
    Amortization of acquired technology49  47  99  95 
    Total cost of revenue (1)64,960  59,421  132,430  119,161 
    Engineering and technology (1)4,848  4,242  9,979  8,990 
    Sales and marketing (1)23,791  22,296  79,044  71,294 
    General and administrative (1)15,625  13,715  30,491  27,198 
    Depreciation993  873  2,908  1,813 
    Amortization of other acquired intangible assets8,806  8,289  17,113  16,577 
    Restructuring (1)2  331  291  2,620 
    Total operating expenses119,025  109,167  272,256  247,653 
    Operating income38,823  29,995  91,557  73,884 
    Other loss, net (2)(2,759) (24,200) (7,987) (33,908)
    Income before income taxes36,064  5,795  83,570  39,976 
    Income tax expense(907) (2,315) (2,870) (5,786)
    Net income35,157  3,480  80,700  34,190 
    Net income attributable to noncontrolling interests(222) (176) (427) (302)
    Net income attributable to Blucora, Inc.$34,935  $3,304  $80,273  $33,888 
    Net income per share attributable to Blucora, Inc.:       
    Basic$0.74  $0.08  $1.71  $0.79 
    Diluted$0.71  $0.07  $1.64  $0.73 
    Weighted average shares outstanding:       
    Basic47,221  43,644  46,931  42,895 
    Diluted49,434  46,937  49,049  46,182 

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

     Three Months Ended June 30, Six months ended June 30,
     2018 2017 2018 2017
    Cost of revenue$574  $88  $833  $134 
    Engineering and technology202  224  412  509 
    Sales and marketing702  581  1,218  1,272 
    General and administrative2,555  1,844  4,528  3,387 
    Restructuring  538    981 
    Total stock-based compensation expense$4,033  $3,275  $6,991  $6,283 

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

     Three Months Ended June 30, Six months ended June 30,
     2018 2017 2018 2017
    Interest income$(58) $(25) $(98) $(45)
    Interest expense3,847  5,529  8,028  11,965 
    Amortization of debt issuance costs284  327  487  714 
    Accretion of debt discounts40  755  87  1,840 
    Loss on debt extinguishment758  17,801  1,534  19,581 
    Other(2,112) (187) (2,051) (147)
    Other loss, net$2,759  $24,200  $7,987  $33,908 


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

     June 30,
    2018
     December 31,
    2017
    ASSETS   
    Current assets:   
    Cash and cash equivalents$89,840  $59,965 
    Cash segregated under federal or other regulations1,117  1,371 
    Accounts receivable, net of allowance6,595  10,694 
    Commissions receivable16,820  16,822 
    Other receivables38  3,180 
    Prepaid expenses and other current assets, net6,754  7,365 
    Total current assets121,164  99,397 
    Long-term assets:   
    Property and equipment, net9,308  9,831 
    Goodwill, net548,838  549,037 
    Other intangible assets, net310,983  328,205 
    Other long-term assets15,806  15,201 
    Total long-term assets884,935  902,274 
    Total assets$1,006,099  $1,001,671 
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current liabilities:   
    Accounts payable$4,472  $4,413 
    Commissions and advisory fees payable17,158  17,813 
    Accrued expenses and other current liabilities16,181  19,577 
    Deferred revenue2,661  9,953 
    Total current liabilities40,472  51,756 
    Long-term liabilities:   
    Long-term debt, net260,029  338,081 
    Deferred tax liability, net42,652  43,433 
    Deferred revenue501  804 
    Other long-term liabilities6,871  8,177 
    Total long-term liabilities310,053  390,495 
    Total liabilities350,525  442,251 
        
    Redeemable noncontrolling interests18,460  18,033 
        
    Stockholders’ equity:   
    Common stock5  5 
    Additional paid-in capital1,569,412  1,555,560 
    Accumulated deficit(932,050) (1,014,174)
    Accumulated other comprehensive loss(253) (4)
    Total stockholders’ equity637,114  541,387 
    Total liabilities and stockholders’ equity$1,006,099  $1,001,671 


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

     Six months ended June 30,
     2018 2017
    Operating Activities:   
    Net income$80,700  $34,190 
    Adjustments to reconcile net income to net cash from operating activities:   
    Stock-based compensation6,991  5,302 
    Depreciation and amortization of acquired intangible assets20,338  18,865 
    Restructuring (non-cash)  1,402 
    Deferred income taxes(781) (681)
    Amortization of premium on investments, net, and debt issuance costs487  724 
    Accretion of debt discounts87  1,840 
    Loss on debt extinguishment1,533  19,581 
    Cash provided (used) by changes in operating assets and liabilities:   
    Accounts receivable4,096  2,956 
    Commissions receivable2  581 
    Other receivables3,142  2,544 
    Prepaid expenses and other current assets461  (545)
    Other long-term assets(764) 341 
    Accounts payable59  (795)
    Commissions and advisory fees payable(655) (444)
    Deferred revenue(5,746) (8,493)
    Accrued expenses and other current and long-term liabilities(3,393) 3,768 
    Net cash provided by operating activities106,557  81,136 
    Investing Activities:   
    Purchases of property and equipment(2,602) (1,911)
    Proceeds from sales of investments  249 
    Proceeds from maturities of investments  7,252 
    Purchases of investments  (409)
    Net cash provided (used) by investing activities(2,602) 5,181 
    Financing Activities:   
    Proceeds from credit facilities  367,212 
    Payments on convertible notes  (172,827)
    Payments on credit facilities(80,000) (275,000)
    Proceeds from stock option exercises10,386  23,996 
    Proceeds from issuance of stock through employee stock purchase plan704  662 
    Tax payments from shares withheld for equity awards(4,229) (5,267)
    Contingent consideration payments for business acquisition(1,315) (946)
    Net cash used by financing activities(74,454) (62,170)
    Net cash provided by continuing operations29,501  24,147 
        
    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, cash equivalents, and restricted cash(30) 43 
    Net increase in cash, cash equivalents, and restricted cash29,471  25,218 
    Cash, cash equivalents, and restricted cash, beginning of period62,311  54,868 
    Cash, cash equivalents, and restricted cash, end of period$91,782  $80,086 


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

     Three months ended June 30, Six months ended June 30,
     2018 2017 2018 2017
    Revenue:       
    Wealth Management (1)$92,015  $85,296  $184,097  $167,963 
    Tax Preparation (1)65,833  53,866  179,716  153,574 
    Total revenue157,848  139,162  363,813  321,537 
    Operating income:       
    Wealth Management12,954  12,406  26,029  24,259 
    Tax Preparation44,121  36,515  102,927  89,648 
    Corporate-level activity (2)(18,252) (18,926) (37,399) (40,023)
    Total operating income38,823  29,995  91,557  73,884 
    Other loss, net(2,759) (24,200) (7,987) (33,908)
    Income tax expense(907) (2,315) (2,870) (5,786)
    Net income$35,157  $3,480  $80,700  $34,190 

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

     Three months ended June 30, Six months ended June 30,
     2018 2017 2018 2017
    Wealth Management:       
    Commission$40,384  $38,154  $83,254  $77,749 
    Advisory40,058  35,914  79,359  69,490 
    Asset-based7,306  6,784  14,478  12,750 
    Transaction and fee4,267  4,444  7,006  7,974 
    Total Wealth Management revenue$92,015  $85,296  $184,097  $167,963 
    Tax Preparation:       
    Consumer$63,137  $51,848  $165,049  $140,090 
    Professional2,696  2,018  14,667  13,484 
    Total Tax Preparation revenue$65,833  $53,866  $179,716  $153,574 

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

     Three months ended June 30, Six months ended June 30,
     2018 2017 2018 2017
    Operating expenses$(4,238) $(6,463) $(9,779) $(13,236)
    Stock-based compensation(4,033) (2,737) (6,991) (5,302)
    Depreciation(1,124) (1,059) (3,126) (2,193)
    Amortization of acquired intangible assets(8,855) (8,336) (17,212) (16,672)
    Restructuring(2) (331) (291) (2,620)
    Total corporate-level activity$(18,252) $(18,926) $(37,399) $(40,023)


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

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

    (In thousands)Three Months Ended June 30, Six months ended June 30,
     2018 2017 2018 2017
    Net income attributable to Blucora, Inc.(2)$34,935  $3,304  $80,273  $33,888 
    Stock-based compensation4,033  2,737  6,991  5,302 
    Depreciation and amortization of acquired intangible assets9,979  9,395  20,338  18,865 
    Restructuring2  331  291  2,620 
    Other loss, net (3)2,759  24,200  7,987  33,908 
    Net income attributable to noncontrolling interests222  176  427  302 
    Income tax expense907  2,315  2,870  5,786 
    Adjusted EBITDA$52,837  $42,458  $119,177  $100,671 



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

     Three months ended June 30, Six months ended June 30,
     2018 2017 2018 2017
    Net income attributable to Blucora, Inc.(2)$34,935  $3,304  $80,273  $33,888 
    Stock-based compensation4,033  2,737  6,991  5,302 
    Amortization of acquired intangible assets8,855  8,336  17,212  16,672 
    Accretion of debt discount on the Notes  633    1,567 
    Write-off of debt discount and debt issuance costs on terminated Notes  6,715    6,715 
    Write-off of debt discount and debt issuance costs on terminated TaxAct - HD Vest 2015 credit facility  9,593    9,593 
    Restructuring2  331  291  2,620 
    Impact of noncontrolling interests222  176  427  302 
    Cash tax impact of adjustments to GAAP net income(903) (1,819) (1,216) (2,406)
    Non-cash income tax expense (1)582  2,941  1,980  6,101 
    Non-GAAP net income$47,726  $32,947  $105,958  $80,354 
    Per diluted share:       
    Net income attributable to Blucora, Inc.$0.71  $0.07  $1.64  $0.73 
    Stock-based compensation0.08  0.06  0.14  0.11 
    Amortization of acquired intangible assets0.19  0.19  0.34  0.36 
    Accretion of debt discount on the Notes  0.01    0.03 
    Write-off of debt discount and debt issuance costs on terminated Notes  0.14    0.15 
    Write-off of debt discount and debt issuance costs on terminated TaxAct - HD Vest 2015 credit facility  0.20    0.21 
    Restructuring  0.01  0.01  0.06 
    Impact of noncontrolling interests0.00  0.00  0.01  0.01 
    Cash tax impact of adjustments to GAAP net income(0.02) (0.04) (0.02) (0.05)
    Non-cash income tax expense0.01  0.06  0.04  0.13 
    Non-GAAP net income per share$0.97  $0.70  $2.16  $1.74 
    Weighted average shares outstanding used in computing per diluted share amounts49,434  46,937  49,049  46,182 


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

     Ranges for the three months ending Ranges for the year ending
     September 30, 2018 December 31, 2018
     Low High Low High
    Net income (loss) attributable to Blucora, Inc.$(22,500) $(18,500) $42,500  $46,000 
    Stock-based compensation3,800  3,700  14,400  14,300 
    Depreciation and amortization of acquired intangible assets9,500  9,400  39,300  39,200 
    Restructuring    300  300 
    Other loss, net (3)4,000  3,900  16,200  15,700 
    Impact of noncontrolling interests200  200  700  700 
    Income tax (benefit) expense  (700) 1,100  3,300 
    Adjusted EBITDA$(5,000) $(2,000) $114,500  $119,500 


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

     Ranges for the three months ending Ranges for the year ending
     September 30, 2018 March 31, 2018
     Low High Low High
    Net income (loss) attributable to Blucora, Inc.$(22,500) $(18,500) $42,500  $46,000 
    Stock-based compensation3,800  3,700  14,400  14,300 
    Amortization of acquired intangible assets8,300  8,300  33,700  33,700 
    Restructuring    300  300 
    Impact of noncontrolling interests200  200  700  700 
    Cash tax impact of adjustments to net income (loss)(300) (300) (1,600) (1,600)
    Non-cash income tax benefit(500) (1,400) (1,000) 1,100 
    Non-GAAP net income (loss)$(11,000) $(8,000) $89,000  $94,500 


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

    (1) We define Adjusted EBITDA as net income attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets (including acquired technology), restructuring, other loss, net, the impact of noncontrolling interests and income tax expense. 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.  Other companies may calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

    We define non-GAAP net income as net income attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets (including acquired technology), 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 terminated Notes and 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.  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 and non-GAAP net 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 and net income per share.  Other companies may calculate non-GAAP net income and non-GAAP net income per share differently, and, therefore, our non-GAAP net income and non-GAAP net income 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.

     

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