OREANDA-NEWS.  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, 2016.

Second Quarter Highlights and Recent Developments

  • Increased Blucora operating income and Adjusted EBITDA by 99 percent and 36 percent, respectively, in the second quarter compared to the same period last year
  • Increased Tax Preparation revenue and segment income by 18 percent and 21 percent, respectively, for the six months through June 30, 2016 compared to the same period last year
  • Experienced a decline in Wealth Management revenue and segment income of 6 and 7 percent, respectively, in the second quarter compared to the same period last year
  • Signed definitive agreement to sell Infospace to OpenMail for $45 million
  • Repaid $20 million of debt, bringing the Company’s total debt reduction for the first half of the year to $88 million

“We continue to make significant progress toward our transformation,” said John Clendening, president and chief executive officer of Blucora. “We have pivoted TaxAct’s go-to-market strategy, realigned our price points and achieved another strong tax season with double-digit revenue and segment income growth. At HD Vest we are experiencing headwinds manifesting themselves in challenges in advisor driven revenue, especially transactional revenue. We are focused on driving advisor engagement through increased adoption of client financial plans, and utilization of the 1040 Analyst® tool.”

Clendening continued, “Throughout the second quarter, we continued our efforts to streamline our businesses and bolster our balance sheet through the agreement to sell Infospace and de-levering initiatives, including repaying $20 million of debt, bringing our total debt reduction for the first half of the year to $88 million. We remain focused on maximizing performance while positioning the Company for long term growth and shareholder value creation.”

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: Q2 2016
($ in millions except per share amounts)
 
  Q2   Q2    
  2016   2015   Change
  As reported   Pro forma    
Revenue $ 120.1     $ 111.7     7 %
Wealth Management $ 76.1     $ 80.8     (6 )%
Tax Preparation $ 44.0     $ 30.9     42 %
Segment Income $ 39.7     $ 30.5     30 %
Wealth Management $ 9.9     $ 10.6     (7 )%
Tax Preparation $ 29.8     $ 19.9     50 %
Unallocated Corporate Operating Expenses $ 4.5     $ 4.7     (4 )%
GAAP:          
Operating Income $ 22.4     $ 11.2     99 %
Net Income (Loss) Attributable to Blucora, Inc. $ (14.4 )   $ 2.3     (721 )%
Diluted Net Income (Loss) Per Share Attributable to Blucora, Inc. $ (0.34 )   $ 0.06     (667 )%
Non-GAAP:          
Adjusted EBITDA $ 35.3     $ 25.8     36 %
Net Income $ 23.4     $ 14.6     61 %
Diluted Net Income Per Share $ 0.55     $ 0.35     57 %
See reconciliations of as reported and pro forma non-GAAP to GAAP measures in tables below.
 

Other

During the second quarter of 2016, the Company repaid $20.0 million on the TaxAct - HD Vest credit facility.  As a result, at the end of the second quarter, Blucora’s net leverage ratio was lowered by 0.7x.

Third Quarter and Full Year 2016 Outlook

For the third quarter of 2016, the Company expects revenues to be between $77.0 million and $81.0 million, GAAP loss from continuing operations to be between $16.2 million and $14.8 million, or $(0.39) to $(0.36) per diluted share, Adjusted EBITDA to be between $(2.3) million and $(0.2) million, and Non-GAAP loss from continuing operations to be between $15.0 million and $12.6 million, or $(0.36) to $(0.30) per diluted share.

For the full year 2016, the Company expects revenues to be between $440.5 million and $451.5 million, GAAP loss from continuing operations to be between $5.5 million and $2.0 million, or $(0.13) to $(0.05) per diluted share, Adjusted EBITDA to be between $85.8 million and $90.5 million, and Non-GAAP income from continuing operations to be between $35.8 million and $40.9 million, or $0.84 to $0.96 per diluted share.

 

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.  

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,
  2016   2015   2016   2015
Revenue:              
Wealth management services revenue $ 76,117     $ —     $ 153,408     $ —  
Tax preparation services revenue 43,991     30,900     132,465     111,968  
Total revenue 120,108     30,900     285,873     111,968  
Operating expenses:              
Cost of revenue:              
Wealth management services cost of revenue 51,023     —     103,292     —  
Tax preparation services cost of revenue 2,023     1,373     5,230     3,510  
Amortization of acquired technology 49     1,863     716     3,725  
Total cost of revenue (1) 53,095     3,236     109,238     7,235  
Engineering and technology (1) 3,959     1,130     8,254     2,220  
Sales and marketing (1) 19,913     7,693     63,750     40,711  
General and administrative (1) 11,508     7,653     24,261     14,799  
Depreciation 963     356     1,938     707  
Amortization of other acquired intangible assets 8,316     3,185     16,632     6,371  
Total operating expenses 97,754     23,253     224,073     72,043  
Operating income 22,354     7,647     61,800     39,925  
Other loss, net (2) (10,916 )   (3,034 )   (18,430 )   (6,029 )
Income from continuing operations before income taxes 11,438     4,613     43,370     33,896  
Income tax expense (5,793 )   (2,202 )   (17,436 )   (12,070 )
Income from continuing operations 5,645     2,411     25,934     21,826  
Discontinued operations, net of income taxes (19,975 )   1,840     (17,453 )   5,525  
Net income (loss) (14,330 )   4,251     8,481     27,351  
Net income attributable to noncontrolling interests (115 )   —     (259 )   —  
Net income (loss) attributable to Blucora, Inc. $ (14,445 )   $ 4,251     $ 8,222     $ 27,351  
Net income (loss) per share attributable to Blucora, Inc. - basic:              
Continuing operations $ 0.13     $ 0.06     $ 0.62     $ 0.53  
Discontinued operations (0.48 )   0.04     (0.42 )   0.14  
Basic net income (loss) per share $ (0.35 )   $ 0.10     $ 0.20     $ 0.67  
Net income (loss) per share attributable to Blucora, Inc. - diluted:              
Continuing operations $ 0.13     $ 0.06     $ 0.61     $ 0.52  
Discontinued operations (0.47 )   0.04     (0.41 )   0.13  
Diluted net income (loss) per share $ (0.34 )   $ 0.10     $ 0.20     $ 0.65  
Weighted average shares outstanding:              
Basic 41,405     40,918     41,288     40,953  
Diluted 42,298     41,936     41,954     41,918  
                       

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

  Three months ended June 30,   Six months ended June 30,
  2016   2015   2016   2015
Cost of revenue $ 23     $ 19     $ 65     $ 48  
Engineering and technology 322     91     733     224  
Sales and marketing 426     185     1,027     380  
General and administrative 2,252     1,700     5,427     3,248  
Total stock-based compensation expense $ 3,023     $ 1,995     $ 7,252     $ 3,900  
                               

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

  Three months ended June 30,   Six months ended June 30,
  2016   2015   2016   2015
Interest income $ (11 )   $ (138 )   $ (36 )   $ (260 )
Interest expense 8,381     2,242     17,572     4,630  
Amortization of debt issuance costs 417     280     1,027     556  
Accretion of debt discounts 1,094     958     2,500     1,898  
(Gain) loss on debt extinguishment and modification expense 997     —     (2,846 )   —  
Gain on third party bankruptcy settlement (26 )   (366 )   (44 )   (842 )
Other 64     58     257     47  
Other loss, net $ 10,916     $ 3,034     $ 18,430     $ 6,029  
Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
 
  June 30,
 2016		   December 31,
 2015
ASSETS      
Current assets:      
Cash and cash equivalents $ 74,273     $ 55,473  
Cash segregated under federal or other regulations 2,025     3,557  
Available-for-sale investments 7,821     11,301  
Accounts receivable, net of allowance 6,474     7,884  
Commissions receivable 14,808     16,328  
Other receivables 4,947     24,407  
Prepaid expenses and other current assets, net 5,192     10,062  
Current assets of discontinued operations 157,251     211,663  
Total current assets 272,791     340,675  
Long-term assets:      
Property and equipment, net 10,923     11,308  
Goodwill, net 551,030     548,959  
Other intangible assets, net 378,994     396,295  
Other long-term assets 2,147     2,311  
Total long-term assets 943,094     958,873  
Total assets $ 1,215,885     $ 1,299,548  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 3,198     $ 4,689  
Commissions and advisory fees payable 15,002     16,982  
Accrued expenses and other current liabilities 12,282     13,006  
Deferred revenue 6,157     11,521  
Current portion of long-term debt, net 3,200     31,631  
Current liabilities of discontinued operations 58,288     88,275  
Total current liabilities 98,127     166,104  
Long-term liabilities:      
Long-term debt, net 326,252     353,850  
Convertible senior notes, net 161,892     185,918  
Deferred tax liability, net 89,197     103,520  
Deferred revenue 3,009     1,902  
Other long-term liabilities 10,976     10,932  
Total long-term liabilities 591,326     656,122  
Total liabilities 689,453     822,226  
       
Redeemable noncontrolling interests 15,297     15,038  
       
Stockholders’ equity:      
Common stock 4     4  
Additional paid-in capital 1,530,701     1,490,405  
Accumulated deficit (1,019,376 )   (1,027,598 )
Accumulated other comprehensive loss (194 )   (527 )
Total stockholders’ equity 511,135     462,284  
Total liabilities and stockholders’ equity $ 1,215,885     $ 1,299,548  
Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
 
  Six months ended June 30,
  2016   2015
Operating Activities:      
Net income $ 8,481     $ 27,351  
Less: Discontinued operations, net of income taxes (17,453 )   5,525  
Net income from continuing operations 25,934     21,826  
Adjustments to reconcile net income from continuing operations to net cash from operating activities:      
Stock-based compensation 7,252     3,900  
Depreciation and amortization of acquired intangible assets 19,597     11,172  
Excess tax benefits from stock-based award activity (26,930 )   (27,565 )
Deferred income taxes (8,806 )   (17,994 )
Amortization of premium on investments, net 155     902  
Amortization of debt issuance costs 1,027     556  
Accretion of debt discounts 2,500     1,898  
Gain on debt extinguishment and modification expense (2,846 )   —  
Revaluation of acquisition-related contingent consideration liability 391     —  
Other 13     58  
Cash provided (used) by changes in operating assets and liabilities:      
Cash segregated under federal or other regulations 1,532     —  
Accounts receivable 1,395     103  
Commissions receivable 1,520     —  
Other receivables 19,460     1,099  
Prepaid expenses and other current assets 4,870     3,319  
Other long-term assets 95     16  
Accounts payable (1,491 )   1,264  
Commissions and advisory fees payable (1,980 )   —  
Deferred revenue (4,257 )   (930 )
Accrued expenses and other current and long-term liabilities 26,057     30,176  
Net cash provided by operating activities from continuing operations 65,488     29,800  
Investing Activities:      
Business acquisition, net of cash acquired (1,788 )   —  
Purchases of property and equipment (1,528 )   (625 )
Proceeds from sales of investments —     14,000  
Proceeds from maturities of investments 4,000     113,406  
Purchases of investments (659 )   (112,090 )
Net cash provided by investing activities from continuing operations 25     14,691  
Financing Activities:      
Repurchase of convertible notes (20,667 )   —  
Repayment of credit facilities (60,000 )   (51,940 )
Stock repurchases —     (5,521 )
Excess tax benefits from stock-based award activity 26,930     27,565  
Proceeds from stock option exercises 1,142     2,093  
Proceeds from issuance of stock through employee stock purchase plan 562     608  
Tax payments from shares withheld for equity awards (901 )   (934 )
Net cash used by financing activities from continuing operations (52,934 )   (28,129 )
Net cash provided by continuing operations 12,579     16,362  
Net cash provided by operating activities from discontinued operations 10,148     5,636  
Net cash used by investing activities from discontinued operations (970 )   (1,168 )
Net cash used by financing activities from discontinued operations (2,950 )   (7,030 )
Net cash provided (used) by discontinued operations 6,228     (2,562 )
Effect of exchange rate changes on cash and cash equivalents (7 )   —  
Net increase in cash and cash equivalents 18,800     13,800  
Cash and cash equivalents, beginning of period 55,473     41,968  
Cash and cash equivalents, end of period $ 74,273     $ 55,768  
Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
 
  Three months ended June 30,   Six months ended June 30,
  2016   2015   2016   2015
Revenue:              
Wealth Management $ 76,117     $ —     $ 153,408     $ —  
Tax Preparation 43,991     30,900     132,465     111,968  
Total revenue 120,108     30,900     285,873     111,968  
Operating income:              
Wealth Management 9,924     —     20,830     —  
Tax Preparation 29,796     19,890     77,369     64,035  
Corporate-level activity (1) (17,366 )   (12,243 )   (36,399 )   (24,110 )
Total operating income 22,354     7,647     61,800     39,925  
Other loss, net (10,916 )   (3,034 )   (18,430 )   (6,029 )
Income tax expense (5,793 )   (2,202 )   (17,436 )   (12,070 )
Discontinued operations, net of income taxes (19,975 )   1,840     (17,453 )   5,525  
Net income (loss) $ (14,330 )   $ 4,251     $ 8,481     $ 27,351  
                               

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

  Three months ended June 30,   Six months ended June 30,
  2016   2015   2016   2015
Operating expenses $ 4,460     $ 4,662     $ 9,159     $ 9,038  
Stock-based compensation 3,023     1,995     7,252     3,900  
Acquisition-related costs 391     —     391     —  
Depreciation 1,127     538     2,249     1,076  
Amortization of acquired intangible assets 8,365     5,048     17,348     10,096  
Total corporate-level activity $ 17,366     $ 12,243     $ 36,399     $ 24,110