SOURCE: Blucora

Blucora Registered Trademark Logo

August 07, 2014 16:05 ET

Blucora Announces Second Quarter Results

BELLEVUE, WA--(Marketwired - August 07, 2014) - Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the second quarter ended June 30, 2014.

"We made progress in the second quarter," said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. "We are driving stability at InfoSpace through operational changes and focused execution. We were pleased to welcome Bernard Luthi as the new President of Monoprice, and TaxACT capped a strong season with impressive results and important advancements across our product offerings."

 
Summary Financial Performance: Q2 2014
($ in millions except per share amounts)
   Q2
 2014
 Q2
 2013
 Change
Revenues  $141.6  $117.2  21%
 Search and Content  $ 79.8  $ 94.5  -16%
 Tax Preparation  $ 26.5  $ 22.7  17%
 E-Commerce  $ 35.3  N/A  N/A
          
Adjusted EBITDA  $29.8  $29.2  2%
Non-GAAP Net Income  $23.9  $24.6  -3%
Non-GAAP Diluted EPS  $0.55  $0.58  -5%
          
GAAP Net Income  $ 8.7  $8.4  4%
GAAP Diluted EPS  $0.20  $0.20  0%
       
See reconciliation of non-GAAP to GAAP measures in table below.
 

Segment Information

Tax Preparation
Tax preparation segment income for the second quarter of 2014 was $17.2 million or approximately 65 percent of segment revenue for the second quarter 2014.

Search and Content
During the second quarter of 2014, the Company acquired the assets and operations of HowStuffWorks, a trusted digital information resource. As a result, the Company renamed the segment to reflect the addition of HowStuffWorks.

Search and Content segment income for the second quarter of 2014 was $14.0 million or 18 percent of segment revenue for the second quarter 2014.

E-Commerce
E-Commerce segment income for the second quarter of 2014 was $2.4 million or 7 percent of segment revenue for the second quarter 2014. 

Corporate Operating Expenses
Unallocated corporate operating expenses for the second quarter of 2014 were $3.8 million, compared to $3.1 million for the second quarter of 2013.

Third Quarter Outlook
For the third quarter of 2014, the Company expects revenues to be between $112.5 million and $122.5 million, Adjusted EBITDA to be between $7.0 million and $10.0 million, Non-GAAP Net Income to be between $3.2 million and $6.0 million, or $0.07 to $0.14 per diluted share, and GAAP Net Loss to be between $6.3 million and $4.2 million, or ($0.15) to ($0.10) per share. 

Conference Call and Webcast
A conference call and live webcast will be held today at 2 p.m. Pacific time / 5 p.m. Eastern time during which the Company will further discuss second quarter results and its outlook for the third quarter 2014. The live webcast and supplemental materials are included in a current report on form 8-K filed today and can be accessed in the Investor Relations section of the Blucora corporate website at http://www.blucora.com. A replay of the call will also be available on our website.

About Blucora®
Blucora, Inc. (NASDAQ: BCOR) operates a diverse group of Internet businesses. Its mission is to deliver long-term value to its customers, partners and shareholders through financial discipline, operational expertise, and technology innovation. Recently named one of Fortune® Magazine's 100 Fastest-Growing Companies, Blucora's online businesses reach millions of users worldwide every day. Blucora is headquartered in Bellevue, Washington. For more information, please visit www.Blucora.com. Follow and subscribe to Blucora on Twitter, LinkedIn, and YouTube.

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 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 June 30,  Six months ended June 30,
   2014    2013    2014    2013  
Revenues:                        
 Services revenue  $ 106,270    $ 117,181    $ 285,314    $ 282,519  
 Product revenue, net   35,299     -     72,438     -  
   Total revenues   141,569     117,181     357,752     282,519  
Operating expenses:                        
 Cost of revenues:                        
  Services cost of revenue (1)   56,233     69,352     127,526     146,339  
  Product cost of revenue   23,137     -     48,166     -  
   Total cost of revenues (2)   79,370     69,352     175,692     146,339  
 Engineering and technology (2)   4,817     2,508     8,952     5,046  
 Sales and marketing (2)   22,287     14,695     78,123     53,179  
 General and administrative (2)   10,425     6,557     19,057     12,941  
 Depreciation   1,135     524     2,193     1,041  
 Amortization of intangible assets   5,761     3,168     11,345     6,337  
   Total operating expenses   123,795     96,804     295,362     224,883  
Operating income   17,774     20,377     62,390     57,636  
Other loss, net (3)   (3,724 )   (6,304 )   (7,793 )   (7,309 )
Income before income taxes   14,050     14,073     54,597     50,327  
Income tax expense   (5,313 )   (5,667 )   (19,873 )   (18,313 )
Net income  $ 8,737    $ 8,406    $ 34,724    $ 32,014  
Net income per share:                        
 Basic  $ 0.21    $ 0.20    $ 0.83    $ 0.78  
 Diluted  $ 0.20    $ 0.20    $ 0.79    $ 0.75  
Weighted average shares outstanding:                        
 Basic   41,570     41,050     41,866     40,981  
 Diluted   43,084     42,724     43,803     42,657  
                  

(1) Includes amortization of acquired intangible assets of $1.9 million and $1.9 million for the three months ended June 30, 2014 and 2013, respectively, and $3.8 million and $3.9 million for the six months ended June 30, 2014 and 2013, respectively.

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

   Three months ended June 30,  Six months ended June 30,
   2014  2013  2014  2013
Cost of revenues  $ 113  $ 228  $ 272  $ 447
Engineering and technology   315   319   744   572
Sales and marketing   722   526   1,641   1,003
General and administrative   1,808   1,680   3,709   3,216
 Total stock-based compensation expense  $ 2,958  $ 2,753  $ 6,366  $ 5,238
              

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

   Three months ended June 30,  Six months ended June 30,
   2014    2013    2014    2013  
Interest income  $ (88 )  $ (109 )  $ (196 )  $ (164 )
Interest expense   2,764     2,890     5,779     4,038  
Amortization of debt issuance costs   284     476     565     583  
Accretion of debt discounts   916     949     1,822     1,110  
Loss on derivative instrument   -     2,323     -     1,975  
Other   (152 )   (225 )   (177 )   (233 )
 Other loss, net  $ 3,724    $ 6,304    $ 7,793    $ 7,309  
                  
                  
 
Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
 
   June 30,
 2014
 December 31,
 2013
ASSETS
      
Current assets:            
 Cash and cash equivalents  $ 69,764    $ 130,225  
 Available-for-sale investments   208,856     203,480  
 Accounts receivable, net   35,680     48,081  
 Other receivables   3,915     8,292  
 Inventories   30,564     28,826  
 Prepaid expenses and other current assets, net   8,656     9,774  
  Total current assets   357,435     428,678  
Property and equipment, net   16,330     16,108  
Goodwill   364,054     348,957  
Other intangible assets, net   188,323     178,064  
Other long-term assets   5,575     6,223  
Total assets  $ 931,717    $ 978,030  
 LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities:            
 Accounts payable  $ 43,257    $ 61,268  
 Accrued expenses and other current liabilities   23,714     31,109  
 Deferred revenue   5,880     7,510  
 Short-term portion of long-term debt, net   7,912     7,903  
 Convertible senior notes, net (1)   -     181,583  
  Total current liabilities   80,763     289,373  
Long-term liabilities:            
 Long-term debt, net   57,242     113,193  
 Convertible senior notes, net (1)   183,347     -  
 Deferred tax liability, net   38,443     56,861  
 Deferred revenue   2,889     1,814  
 Other long-term liabilities   2,669     2,719  
  Total long-term liabilities   284,590     174,587  
  Total liabilities   365,353     463,960  
             
Stockholders' equity:            
 Common stock   4     4  
 Additional paid-in capital   1,481,523     1,466,043  
 Accumulated deficit   (917,253 )   (951,977 )
 Accumulated other comprehensive income   2,090     -  
  Total stockholders' equity   566,364     514,070  
Total liabilities and stockholders' equity  $ 931,717    $ 978,030  
               

(1) The convertibility of the Notes is determined at the end of each reporting period. If the Notes are determined to be convertible, they remain convertible until the end of the subsequent quarter and are classified in "Current liabilities"; otherwise, they are classified in "Long-term liabilities." Depending upon the price of our common stock or the trading price of the Notes within the reporting period, the Notes could be convertible during one reporting period but not convertible during a comparable reporting period.

 
 
 
Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
 
   Six months ended June 30,
   2014  2013
Operating Activities:            
 Net income  $ 34,724    $ 32,014  
 Adjustments to reconcile net income to net cash provided by operating activities:            
  Stock-based compensation   6,366     5,238  
  Depreciation and amortization of intangible assets   17,920     12,197  
  Excess tax benefits from stock-based award activity   (34,369 )   (27,036 )
  Deferred income taxes   (18,172 )   (10,632 )
  Amortization of premium on investments, net   2,221     1,311  
  Amortization of debt issuance costs   565     583  
  Accretion of debt discounts   1,822     1,110  
  Loss on derivative instrument   -     1,975  
  Other   57     237  
 Cash provided (used) by changes in operating assets and liabilities:            
  Accounts receivable   12,347     (591 )
  Other receivables   4,362     (180 )
  Inventories   (1,738 )   -  
  Prepaid expenses and other current assets   874     4,383  
  Other long-term assets   48     (94 )
  Accounts payable   (18,011 )   (2,641 )
  Deferred revenue   (555 )   1,088  
  Accrued expenses and other current and long-term liabilities   26,789     30,214  
   Net cash provided by operating activities   35,250     49,176  
Investing Activities:            
  Business acquisition, net of cash acquired   (44,927 )   -  
  Purchases of property and equipment   (2,859 )   (2,047 )
  Change in restricted cash   -     287  
  Equity investment in privately-held company   -     (4,000 )
  Proceeds from sales of investments   21,546     8,710  
  Proceeds from maturities of investments   121,496     53,398  
  Purchases of investments   (144,049 )   (167,434 )
   Net cash used by investing activities   (48,793 )   (111,086 )
Financing Activities:            
  Proceeds from issuance of convertible notes, net of debt issuance costs of $6,432   -     194,818  
  Proceeds from credit facilities   4,000     -  
  Repayment of credit facilities   (60,000 )   (10,000 )
  Stock repurchases   (25,785 )   (1,051 )
  Excess tax benefits from stock-based award activity   34,369     27,036  
  Proceeds from stock option exercises   1,746     1,244  
  Proceeds from issuance of stock through employee stock purchase plan   665     461  
  Tax payments from shares withheld upon vesting of restricted stock units   (1,913 )   (1,442 )
   Net cash provided (used) by financing activities   (46,918 )   211,066  
Net increase (decrease) in cash and cash equivalents   (60,461 )   149,156  
Cash and cash equivalents, beginning of period   130,225     68,278  
Cash and cash equivalents, end of period  $ 69,764    $ 217,434  
               
         
 
Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
 
   Three months ended June 30,  Six months ended June 30,
  2014 2013 2014 2013
Revenues:                        
 Search and Content  $ 79,818    $ 94,497    $ 186,583    $ 195,098  
 Tax Preparation   26,452     22,684     98,731     87,421  
 E-Commerce   35,299     -     72,438     -  
  Total revenues   141,569     117,181     357,752     282,519  
Operating income:                        
 Search and Content   14,032     17,912     33,262     36,182  
 Tax Preparation   17,211     14,438     54,613     45,222  
 E-Commerce   2,378     -     5,856     -  
 Corporate-level activity (1)   (15,847 )   (11,973 )   (31,341 )   (23,768 )
  Total operating income   17,774     20,377     62,390     57,636  
Other loss, net   (3,724 )   (6,304 )   (7,793 )   (7,309 )
Income tax expense   (5,313 )   (5,667 )   (19,873 )   (18,313 )
Net income  $ 8,737    $ 8,406    $ 34,724    $ 32,014  

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

   Three months ended June 30,  Six months ended June 30,
   2014  2013  2014  2013
Operating expenses  $ 3,833  $ 3,135  $ 7,055  $ 6,333
Stock-based compensation   2,958   2,753   6,366   5,238
Depreciation   1,414   990   2,809   1,993
Amortization of intangible assets   7,642   5,095   15,111   10,204
 Total corporate-level activity  $ 15,847  $ 11,973  $ 31,341  $ 23,768
                     
             
 
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 June 30,  Six months ended June 30,
  2014 2013 2014 2013
Net income (2)  $ 8,737  $ 8,406  $ 34,724  $ 32,014
Stock-based compensation   2,958   2,753   6,366   5,238
Depreciation and amortization of intangible assets   9,056   6,085   17,920   12,197
Other loss, net (3)   3,724   6,304   7,793   7,309
Income tax expense   5,313   5,667   19,873   18,313
Adjusted EBITDA  $ 29,788  $ 29,215  $ 86,676  $ 75,071
                     
             
 
Preliminary Non-GAAP Net Income Reconciliation(1)
(Unaudited)
(Amounts in thousands, except per share amounts)
 
   Three months ended June 30,  Six months ended June 30,
  2014 2013 2014 2013
Net income (2)  $ 8,737    $ 8,406    $ 34,724    $ 32,014  
Stock-based compensation   2,958     2,753     6,366     5,238  
Amortization of acquired intangible assets   7,642     5,095     15,111     10,204  
Accretion of debt discount on Convertible Senior Notes   890     841     1,764     973  
Loss on derivative instrument   -     2,323     -     1,975  
Cash tax impact of adjustments to GAAP net income   (197 )   (17 )   (251 )   (180 )
Non-cash income tax expense (1)   3,878     5,231     16,197     16,405  
Non-GAAP net income  $ 23,908    $ 24,632    $ 73,911    $ 66,629  
                         
Per diluted share:                        
Net income  $ 0.20    $ 0.20    $ 0.79    $ 0.75  
Stock-based compensation   0.07     0.07     0.15     0.12  
Amortization of acquired intangible assets   0.17     0.12     0.34     0.24  
Accretion of debt discount on Convertible Senior Notes   0.02     0.02     0.04     0.02  
Loss on derivative instrument   -     0.05     -     0.05  
Cash tax impact of adjustments to GAAP net income   (0.00 )   (0.00 )   (0.00 )   (0.00 )
Non-cash income tax expense   0.09     0.12     0.37     0.38  
Non-GAAP net income per share  $ 0.55    $ 0.58    $ 1.69    $ 1.56  
Weighted average shares outstanding used in computing diluted non-GAAP net income per share and its components   43,084     42,724     43,803     42,657  
                             
                 
 
Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
 
   Ranges for the three months ending
  September 30, 2014
Net loss $(6,300) $(4,200)
Stock-based compensation   3,500     3,300  
Depreciation and amortization of intangible assets   9,500     9,400  
Other loss, net (3)   3,900     3,900  
Income tax benefit   (3,600 )   (2,400 )
Adjusted EBITDA  $ 7,000    $ 10,000  
               
 
Preliminary Non-GAAP Net Income Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
 
  Ranges for the three months ending
  September 30, 2014
Net loss $(6,300) $(4,200)
Stock-based compensation   3,500     3,300  
Amortization of acquired intangible assets   8,000     8,000  
Accretion of debt discount on Convertible Senior Notes   900     900  
Non-cash income tax benefit   (2,900 )   (2,000 )
Non-GAAP net income  $ 3,200    $ 6,000  
               

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

(1) We define Adjusted EBITDA as net income, determined in accordance with the accounting principles generally accepted in the United States of America ("GAAP"), excluding the effects of income taxes, depreciation, amortization of intangible assets, stock-based compensation, and other loss, net (as described in note (3) below).

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, determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, accretion of debt discount on the Convertible Senior Notes, loss on debt extinguishment and modification expense, gains or losses on derivative instrument, other- than-temporary impairment losses on equity investments, the related cash tax impact of those adjustments, and non-cash income taxes. We exclude the non-cash portion of income tax expense because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which consist primarily of U.S. federal net operating losses. The majority of these deferred tax assets 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, loss on debt extinguishment and modification expense, gains or losses on derivative instrument, other-than-temporary impairment losses on equity investments, and adjustments to the fair values of contingent liabilities related to business combinations.

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