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.

Contact Information:

Blucora Contact:
Stacy Ybarra
425-709-8127
stacy.ybarra@blucora.com

Blucora Announces Second Quarter Results

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