SOURCE: Blucora

Blucora Registered Trademark Logo

July 30, 2015 16:05 ET

Blucora Announces Second Quarter Results

BELLEVUE, WA--(Marketwired - July 30, 2015) - Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the second quarter ended June 30, 2015.

"Results in the quarter were consistent with our expectations," said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. "For the first half of 2015, we are pleased with TaxACT's revenue and segment income results, reflecting strong performance in a competitive season. Pressures in our Search and Content segment are contributing to overall declines year-on-year. We remain focused on operating our businesses with discipline, managing expenses and allocating capital wisely during this period of transition."

Summary Financial Performance: Q2 2015
($ in millions except per share amounts)

  Q2  Q2   
  2015  2014  Change
Revenues $ 119.0  $ 141.6  (16 )%
 Search and Content $ 52.1  $ 79.8  (35 )%
 Tax Preparation $ 30.9  $ 26.5  17  %
 E-Commerce $ 35.9  $ 35.3  2  %
Adjusted EBITDA $ 25.0  $ 29.8  (16 )%
Non-GAAP Net Income $ 20.0  $ 23.9  (17 )%
Non-GAAP Diluted EPS $ 0.48  $ 0.55  (13 )%
GAAP Net Income $ 4.3  $ 8.7  (51 )%
GAAP Diluted EPS $ 0.10  $ 0.20  (50 )%
See reconciliations of non-GAAP to GAAP measures in tables below.        
      
      

Segment Information

Tax Preparation

Tax Preparation segment income for the second quarter of 2015 was $19.9 million or 64 percent of segment revenue, up 16% compared to the second quarter of 2014.

Search and Content

Search and Content segment income for the second quarter of 2015 was $6.8 million or 13 percent of segment revenue.

E-Commerce

E-Commerce segment income for the second quarter of 2015 was $2.6 million or 7 percent of segment revenue.

Corporate Operating Expenses

Unallocated corporate operating expenses for the second quarter of 2015 were $4.3 million, compared to $3.8 million for the second quarter of 2014.

Third Quarter Outlook

For the third quarter of 2015, the Company expects revenues to be between $82.5 million and $90.3 million, Adjusted EBITDA to be between $(1.0) million and $1.6 million, Non-GAAP net loss to be between $5.7 million and $2.6 million, or $(0.14) to $(0.06) per diluted share, and GAAP net loss to be between $11.2 million and $9.4 million, or $(0.27) to $(0.23) 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 of 2015. 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. Named one of Fortune® Magazine's 100 Fastest-Growing Companies for the past two years, 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.

Source: Blucora

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 June 30,  Six months ended June 30,
  2015  2014  2015  2014
Revenues:           
 Services revenue $ 83,030    $ 106,270    $ 222,844    $ 285,314  
 Product revenue, net  35,946     35,299     70,958     72,438  
   Total revenues  118,976     141,569     293,802     357,752  
Operating expenses:               
 Cost of revenues:               
  Services cost of revenue (1)  30,771     56,233     65,712     127,526  
  Product cost of revenue  25,255     23,137     49,355     48,166  
   Total cost of revenues (2)  56,026     79,370     115,067     175,692  
 Engineering and technology (2)  5,168     4,817     10,385     8,952  
 Sales and marketing (2)  27,287     22,287     81,483     78,123  
 General and administrative (2)  11,014     10,425     21,423     19,057  
 Depreciation  1,187     1,135     2,325     2,193  
 Amortization of intangible assets  6,118     5,761     12,236     11,345  
   Total operating expenses  106,800     123,795     242,919     295,362  
Operating income  12,176     17,774     50,883     62,390  
Other loss, net (3)  (4,577 )   (3,724 )   (8,303 )   (7,793 )
Income before income taxes  7,599     14,050     42,580     54,597  
Income tax expense  (3,348 )   (5,313 )   (15,229 )   (19,873 )
Net income $ 4,251    $ 8,737    $ 27,351    $ 34,724  
Net income per share:               
 Basic $ 0.10    $ 0.21    $ 0.67    $ 0.83  
 Diluted $ 0.10    $ 0.20    $ 0.65    $ 0.79  
Weighted average shares outstanding:               
 Basic  40,918     41,570     40,953     41,866  
 Diluted  41,936     43,084     41,918     43,803  

(1) Includes amortization of acquired intangible assets of $1.9 million for the three months ended June 30, 2015 and 2014 and $3.7 million and $3.8 million for the six months ended June 30, 2015 and 2014, respectively.
(2) Stock-based compensation expense was allocated among the following captions (in thousands):

    
    
  Three months ended June 30,  Six months ended June 30,
  2015  2014  2015  2014
Cost of revenues $ 58  $ 113  $ 107  $ 272
Engineering and technology  514   315   806   744
Sales and marketing  518   722   948   1,641
General and administrative  2,258   1,808   4,186   3,709
 Total stock-based compensation expense $ 3,348  $ 2,958  $ 6,047  $ 6,366

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

    
    
  Three months ended June 30,  Six months ended June 30,
  2015  2014  2015  2014
Interest income $ (124 )  $ (88 )  $ (242 )  $ (196 )
Interest expense  2,492     2,764     5,260     5,779  
Amortization of debt issuance costs  295     284     643     565  
Accretion of debt discounts  958     916     2,089     1,822  
Realized loss on available-for-sale investments, net  353     -     417     -  
Other-than-temporary impairment loss on equity securities  964     -     964     -  
Gain on third party bankruptcy settlement  (366 )   (167 )   (842 )   (167 )
Other  5     15     14     (10 )
 Other loss, net $ 4,577    $ 3,724    $ 8,303    $ 7,793  
                 
                 

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

  June 30,
 2015
 December 31,
 2014
ASSETS     
Current assets:       
 Cash and cash equivalents $ 59,498    $ 46,444  
 Available-for-sale investments  237,389     254,854  
 Accounts receivable, net  26,688     30,988  
 Other receivables  1,046     3,295  
 Inventories  34,434     29,246  
 Prepaid expenses and other current assets, net  12,529     13,477  
  Total current assets  371,584     378,304  
Property and equipment, net  15,595     15,942  
Goodwill, net  304,658     304,658  
Other intangible assets, net  153,654     168,919  
Other long-term assets  4,238     4,891  
Total assets $ 849,729    $ 872,714  
LIABILITIES AND STOCKHOLDERS' EQUITY       
Current liabilities:       
 Accounts payable $ 31,274    $ 37,755  
 Accrued expenses and other current liabilities  24,391     21,505  
 Deferred revenue  6,074     7,884  
 Short-term portion of long-term debt, net  -     7,914  
  Total current liabilities  61,739     75,058  
Long-term liabilities:       
 Long-term debt, net  30,000     85,835  
 Convertible senior notes, net  187,075     185,177  
 Deferred tax liability, net  23,178     42,963  
 Deferred revenue  2,910     1,915  
 Other long-term liabilities  3,195     2,741  
  Total long-term liabilities  246,358     318,631  
  Total liabilities  308,097     393,689  
        
Stockholders' equity:       
 Common stock  4     4  
 Additional paid-in capital  1,501,793     1,467,658  
 Accumulated deficit  (960,173 )   (987,524 )
 Accumulated other comprehensive income (loss)  8     (1,113 )
  Total stockholders' equity  541,632     479,025  
Total liabilities and stockholders' equity $ 849,729    $ 872,714  
        
        

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

   Six months ended June 30,
   2015  2014
Operating Activities:        
 Net income  $ 27,351    $ 34,724  
 Adjustments to reconcile net income to net cash from operating activities:        
  Stock-based compensation   6,047     6,366  
  Depreciation and amortization of intangible assets   18,932     17,920  
  Excess tax benefits from stock-based award activity   (32,535 )   (34,369 )
  Deferred income taxes   (21,558 )   (18,172 )
  Amortization of premium on investments, net   902     2,221  
  Amortization of debt issuance costs   643     565  
  Accretion of debt discounts   2,089     1,822  
  Realized loss on available-for-sale investments, net   417     -  
  Other-than-temporary impairment loss on equity securities   964     -  
  Other   112     57  
 Cash provided (used) by changes in operating assets and liabilities:        
  Accounts receivable   4,245     12,347  
  Other receivables   2,249     4,362  
  Inventories   (5,188 )   (1,738 )
  Prepaid expenses and other current assets   2,048     874  
  Other long-term assets   (2 )   48  
  Accounts payable   (6,481 )   (18,011 )
  Deferred revenue   (815 )   (555 )
  Accrued expenses and other current and long-term liabilities   35,270     26,789  
   Net cash provided by operating activities   34,690     35,250  
Investing Activities:        
 Business acquisitions, net of cash acquired   -     (44,927 )
 Purchases of property and equipment   (2,105 )   (2,859 )
 Purchases of intangible assets   (696 )   -  
 Proceeds from sales of investments   15,008     21,546  
 Proceeds from maturities of investments   113,406     121,496  
 Purchases of investments   (112,090 )   (144,049 )
  Net cash provided (used) by investing activities   13,523     (48,793 )
Financing Activities:        
 Proceeds from credit facilities   20,000     4,000  
 Repayment of credit facilities   (83,940 )   (60,000 )
 Stock repurchases   (5,521 )   (25,785 )
 Excess tax benefits from stock-based award activity   32,535     34,369  
 Proceeds from stock option exercises   2,093     1,746  
 Proceeds from issuance of stock through employee stock purchase plan   608     665  
 Tax payments from shares withheld upon vesting of restricted stock units   (934 )   (1,913 )
  Net cash used by financing activities   (35,159 )   (46,918 )
Net increase (decrease) in cash and cash equivalents   13,054     (60,461 )
Cash and cash equivalents, beginning of period   46,444     130,225  
Cash and cash equivalents, end of period  $ 59,498    $ 69,764  
         
         

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

  Three months ended June 30,  Six months ended June 30,
  2015  2014  2015  2014
Revenues:               
 Search and Content $ 52,130    $ 79,818    $ 110,876    $ 186,583  
 Tax Preparation  30,900     26,452     111,968     98,731  
 E-Commerce  35,946     35,299     70,958     72,438  
  Total revenues  118,976     141,569     293,802     357,752  
Operating income:               
 Search and Content  6,814     14,032     15,212     33,262  
 Tax Preparation  19,890     17,211     64,035     54,613  
 E-Commerce  2,624     2,378     5,186     5,856  
 Corporate-level activity (1)  (17,152 )   (15,847 )   (33,550 )   (31,341 )
  Total operating income  12,176     17,774     50,883     62,390  
Other loss, net  (4,577 )   (3,724 )   (8,303 )   (7,793 )
Income tax expense  (3,348 )   (5,313 )   (15,229 )   (19,873 )
Net income $ 4,251    $ 8,737    $ 27,351    $ 34,724  

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

    
  Three months ended June 30,  Six months ended June 30,
  2015  2014  2015  2014
Operating expenses $ 4,314  $ 3,833  $ 8,571  $ 7,055
Stock-based compensation  3,348   2,958   6,047   6,366
Depreciation  1,509   1,414   2,971   2,809
Amortization of intangible assets  7,981   7,642   15,961   15,111
 Total corporate-level activity $ 17,152  $ 15,847  $ 33,550  $ 31,341
             
             

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,
  2015  2014  2015  2014
Net income (2) $ 4,251  $ 8,737  $ 27,351  $ 34,724
Stock-based compensation  3,348   2,958   6,047   6,366
Depreciation and amortization of intangible assets  9,490   9,056   18,932   17,920
Other loss, net (3)  4,577   3,724   8,303   7,793
Income tax expense  3,348   5,313   15,229   19,873
Adjusted EBITDA $ 25,014  $ 29,788  $ 75,862  $ 86,676
            
            

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,
  2015  2014  2015  2014
Net income (2) $ 4,251    $ 8,737    $ 27,351    $ 34,724  
Stock-based compensation  3,348     2,958     6,047     6,366  
Amortization of acquired intangible assets  7,981     7,642     15,961     15,111  
Accretion of debt discount on Convertible Senior Notes  958     890     1,898     1,764  
Other-than-temporary impairment loss on equity securities  964     -     964     -  
Cash tax impact of adjustments to GAAP net income  (118 )   (197 )   (260 )   (251 )
Non-cash income tax expense (1)  2,577     3,878     10,977     16,197  
Non-GAAP net income $ 19,961    $ 23,908    $ 62,938    $ 73,911  
                
Per diluted share:               
Net income $ 0.10    $ 0.20    $ 0.65    $ 0.79  
Stock-based compensation  0.08     0.07     0.15     0.15  
Amortization of acquired intangible assets  0.19     0.17     0.38     0.34  
Accretion of debt discount on Convertible Senior Notes  0.02     0.02     0.05     0.04  
Other-than-temporary impairment loss on equity securities  0.03     -     0.02     -  
Cash tax impact of adjustments to GAAP net income  (0.00 )   (0.00 )   (0.01 )   (0.00 )
Non-cash income tax expense  0.06     0.09     0.26     0.37  
Non-GAAP net income per share $ 0.48    $ 0.55    $ 1.50    $ 1.69  
Weighted average shares outstanding used in computing diluted non-GAAP net income per share and its components  41,936     43,084     41,918     43,803  
                
                

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

  Ranges for the three months ending
  September 30, 2015
Net loss $ (11,200 )  $ (9,400 )
Stock-based compensation  3,800     3,800  
Depreciation and amortization of intangible assets  9,000     8,900  
Other loss, net (3)  3,700     3,600  
Income tax benefit  (6,300 )   (5,300 )
Adjusted EBITDA $ (1,000 )  $ 1,600  
        
        

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

  Ranges for the three months ending
  September 30, 2015
Net loss $ (11,200 )  $ (9,400 )
Stock-based compensation  3,800     3,800  
Amortization of acquired intangible assets  7,200     7,200  
Accretion of debt discount on Convertible Senior Notes  1,000     1,000  
Non-cash income tax benefit  (6,500 )   (5,200 )
Non-GAAP net loss $ (5,700 )  $ (2,600 )

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 impairment of goodwill and intangible assets recorded in the fourth quarter of 2014. 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, impairment of goodwill and 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 differently for this report than we have defined it in the past, due to the impairment of goodwill and intangible assets recorded in the fourth quarter of 2014 and amounts recorded in other loss, net that resulted from an other-than-temporary impairment loss recognized on equity securities in the second quarter of 2015 and adjustments related to finalizing Monoprice's 2013 federal and state tax returns in the third quarter of 2014. For this report, 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, impairment of goodwill and intangible assets, accretion of debt discount on the Convertible Senior Notes, other-than-temporary impairment loss on equity securities, changes in non-cash pre-acquisition liabilities, 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 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, realized gains and losses on available-for-sale investments, impairment losses on equity investments, adjustments to contingent liabilities related to business combinations, and gain on third party bankruptcy settlement.

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