SOURCE: Blucora

Blucora Registered Trademark Logo

October 29, 2015 16:05 ET

Blucora Announces Third Quarter Results

BELLEVUE, WA--(Marketwired - October 29, 2015) - Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the third quarter ended September 30, 2015.

"We are pleased to report third quarter results in line with expectations, highlighted by strong year-over-year performance at our TaxACT business," said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. "As we announced earlier this month, Blucora has initiated a strategic transformation to build on the success of our TaxACT business and to position Blucora in the financial services and technology industry. By acquiring broker-dealer HD Vest, divesting InfoSpace and Monoprice, and reducing corporate operating expenses, the new Blucora will be strategically focused in growing markets and better positioned to drive results and enhance shareholder value."

Summary Financial Performance: Q3 2015  
($ in millions except per share amounts)  
   
  Q3     Q3      
  2015     2014   Change  
Revenues $ 84.8   $ 114.9   (26 )%
 Search and Content $ 43.1   $ 74.4   (42 )%
 Tax Preparation $ 2.9   $ 2.5   16 %
 E-Commerce $ 38.8   $ 38.0   2 %
Adjusted EBITDA $ (1.6 ) $ 10.7   (115 )%
Non-GAAP Net Income (Loss) $ (5.5 ) $ 6.5   (184 )%
Non-GAAP Diluted Income (Loss) Per Share $ (0.13 ) $ 0.15   (187 )%
GAAP Net Loss $ (10.6 ) $ (2.2 ) 374 %
GAAP Diluted Loss Per Share $ (0.26 ) $ (0.05 ) 420 %

See reconciliations of non-GAAP to GAAP measures in tables below.

Segment Information

Search and Content

Search and Content segment income for the third quarter of 2015 was $4.5 million or 11 percent of segment revenue.

Tax Preparation

Tax Preparation segment loss for the third quarter of 2015 was $2.5 million.

E-Commerce

E-Commerce segment income for the third quarter of 2015 was $2.2 million or 6 percent of segment revenue.

Corporate Operating Expenses

Unallocated corporate operating expenses for the third quarter of 2015 were $5.8 million and included $1.5 million of one -time charges primarily related to transaction expenses, compared to $3.5 million for the third quarter of 2014.

Fourth Quarter Outlook

For the fourth quarter of 2015, the Company expects revenues to be between $85.9 million and $91.9 million, Adjusted EBITDA to be between $(7.7) million and $(5.2) million, Non-GAAP net loss to be between $9.1 million and $6.5 million, or $(0.22) to $(0.16) per diluted share, and GAAP net loss to be between $16.0 million and $14.3 million, or $(0.39) to $(0.35) per diluted 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 third quarter results and its outlook for the fourth 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 September 30,   Nine months ended September 30,
    2015   2014   2015   2014
Revenues:                
 Services revenue $ 45,975 $ 76,885 $ 268,819 $ 362,199
 Product revenue, net   38,806   37,970   109,764   110,408
   Total revenues   84,781   114,855   378,583   472,607
Operating expenses:                
 Cost of revenues:                
  Services cost of revenue (1)   28,492   49,754   94,204   177,280
  Product cost of revenue   28,523   25,605   77,878   73,771
   Total cost of revenues (2)   57,015   75,359   172,082   251,051
 Engineering and technology (2)   5,418   5,970   15,803   14,922
 Sales and marketing (2)   16,933   18,152   98,416   96,275
 General and administrative (2)   12,513   9,495   33,936   28,552
 Depreciation   1,215   1,085   3,540   3,278
 Amortization of intangible assets   5,349   6,118   17,585   17,463
   Total operating expenses   98,443   116,179   341,362   411,541
Operating income (loss)   (13,662)   (1,324)   37,221   61,066
Other loss, net (3)   (3,275)   (3,208)   (11,578)   (11,001)
Income (loss) before income taxes   (16,937)   (4,532)   25,643   50,065
Income tax benefit (expense)   6,326   2,294   (8,903)   (17,579)
Net income (loss) $ (10,611) $ (2,238) $ 16,740 $ 32,486
Net income (loss) per share:                
 Basic $ (0.26) $ (0.05) $ 0.41 $ 0.78
 Diluted $ (0.26) $ (0.05) $ 0.40 $ 0.75
Weighted average shares outstanding:                
 Basic   40,950   41,034   40,952   41,589
 Diluted   40,950   41,034   41,911   43,303
(1) Includes amortization of acquired intangible assets of $1.9 million for the three months ended September 30, 2015 and 2014 and $5.6 million for the nine months ended September 30, 2015 and 2014, respectively.
(2) Stock-based compensation expense was allocated among the following captions (in thousands):
    Three months ended September 30,    Nine months ended September 30,
    2015   2014    2015   2014
Cost of revenues $ 48 $ 101  $ 155 $ 373
Engineering and technology   509   568    1,315   1,312
Sales and marketing   457   74    1,405   1,715
General and administrative   2,296   1,865    6,482   5,574
 Total stock-based compensation expense $ 3,310 $ 2,608  $ 9,357 $ 8,974
(3)  Other loss, net was allocated among the following captions (in thousands): 
    Three months ended September 30,     Nine months ended September 30,  
    2015    2014     2015    2014  
Interest income $ (138 )$ (71 ) $ (380 )$ (267 )
Interest expense   2,443    2,706     7,703    8,485  
Amortization of debt issuance costs   300    288     943    853  
Accretion of debt discounts   975    931     3,064    2,753  
Realized (gain) loss on available-for-sale investments, net   (105 )  (6 )   312    (6 )
Other-than-temporary impairment loss on equity securities   -    -     964    -  
Decrease in pre-acquisition liability   -    (665 )   -    (665 )
Gain on third party bankruptcy settlement   (224 )  -     (1,066 )  (167 )
Other   24    25     38    15  
 Other loss, net $ 3,275  $ 3,208   $ 11,578  $ 11,001  
  
Blucora, Inc.  
Preliminary Condensed Consolidated Balance Sheets  
(Unaudited)  
(Amounts in thousands)  
   
    September 30,      December 31,  
    2015      2014  
ASSETS             
Current assets:             
 Cash and cash equivalents $ 59,638   $ 46,444  
 Available-for-sale investments   232,705      254,854  
 Accounts receivable, net   23,157      30,988  
 Other receivables   1,230      3,295  
 Inventories   33,673      29,246  
 Prepaid expenses and other current assets, net   10,768      13,477  
  Total current assets   361,171      378,304  
Property and equipment, net   15,089      15,942  
Goodwill, net   308,827      304,658  
Other intangible assets, net   147,253      168,919  
Other long-term assets   4,134      4,891  
Total assets $ 836,474   $ 872,714  
   LIABILITIES AND STOCKHOLDERS' EQUITY             
Current liabilities:             
 Accounts payable $ 33,570   $ 37,755  
 Accrued expenses and other current liabilities   18,918      21,505  
 Deferred revenue   6,563      7,884  
 Short-term portion of long-term debt, net   -      7,914  
  Total current liabilities   59,051      75,058  
Long-term liabilities:             
 Long-term debt, net   30,000      85,835  
 Convertible senior notes, net   188,050      185,177  
 Deferred tax liability, net   15,024      42,963  
 Deferred revenue   2,382      1,915  
 Other long-term liabilities   6,225      2,741  
  Total long-term liabilities   241,681      318,631  
  Total liabilities   300,732      393,689  
   
Stockholders' equity:             
 Common stock   4      4  
 Additional paid-in capital   1,506,593      1,467,658  
 Accumulated deficit   (970,784 )    (987,524 )
 Accumulated other comprehensive loss   (71 )    (1,113 )
  Total stockholders' equity   535,742      479,025  
Total liabilities and stockholders' equity $ 836,474    $ 872,714  
 
Blucora, Inc. 
Preliminary Condensed Consolidated Statements of Cash Flows 
(Unaudited)    
(Amounts in thousands) 
  
    Nine months ended September 30,  
    2015    2014  
Operating Activities:           
 Net income $ 16,740  $ 32,486  
 Adjustments to reconcile net income to net cash from operating activities:           
  Stock-based compensation   9,357    8,974  
  Depreciation and amortization of intangible assets   27,706    27,298  
  Excess tax benefits from stock-based award activity   (35,612 )  (29,801 )
  Deferred income taxes   (30,904 )  (15,621 )
  Amortization of premium on investments, net   1,250    3,095  
  Amortization of debt issuance costs   943    853  
  Accretion of debt discounts   3,064    2,753  
  Realized (gain) loss on available-for-sale investments, net   312    (6 )
  Other-than-temporary impairment loss on equity securities   964    -  
  Other   161    78  
 Cash provided (used) by changes in operating assets and liabilities:           
  Accounts receivable   7,740    16,212  
  Other receivables   2,065    4,134  
  Inventories   (4,427 )  1,067  
  Prepaid expenses and other current assets   4,150    849  
  Other long-term assets   (219 )  43  
  Accounts payable   (4,185 )  (18,382 )
  Deferred revenue   (854 )  (48 )
  Accrued expenses and other current and long-term liabilities   32,689    17,174  
   Net cash provided by operating activities   30,940    51,158  
Investing Activities:           
  Business acquisition, net of cash acquired   (1,740 )  (44,927 )
  Purchases of property and equipment   (3,115 )  (4,247 )
  Purchases of intangible assets   (696 )  -  
  Proceeds from sales of investments   19,246    26,620  
  Proceeds from maturities of investments   210,699    195,296  
  Purchases of investments   (209,112 )  (237,063 )
   Net cash provided (used) by investing activities   15,282    (64,321 )
Financing Activities:           
  Proceeds from credit facilities   20,000    4,000  
  Repayment of credit facilities   (83,940 )  (62,000 )
  Stock repurchases   (7,068 )  (29,923 )
  Excess tax benefits from stock-based award activity   35,612    29,801  
  Proceeds from stock option exercises   2,374    2,447  
  Proceeds from issuance of stock through employee stock purchase plan   1,193    1,376  
  Tax payments from shares withheld upon vesting of restricted stock units   (1,193 )  (2,569 )
   Net cash used by financing activities   (33,022 )  (56,868 )
Effect of exchange rate changes on cash and cash equivalents   (6 )  -  
Net increase (decrease) in cash and cash equivalents   13,194    (70,031 )
Cash and cash equivalents, beginning of period   46,444    130,225  
Cash and cash equivalents, end of period $ 59,638  $ 60,194  
  
Blucora, Inc.  
Preliminary Segment Information  
(Unaudited)  
(Amounts in thousands)  
   
    Three months ended September 30,     Nine months ended September 30,  
    2015    2014     2015    2014  
Revenues:                      
 Search and Content $ 43,100  $ 74,416   $ 153,976  $ 260,999  
 Tax Preparation   2,875    2,469     114,843    101,200  
 E-Commerce   38,806    37,970     109,764    110,408  
  Total revenues   84,781    114,855     378,583    472,607  
Operating income (loss):                      
 Search and Content   4,533    12,709     19,745    45,971  
 Tax Preparation   (2,542 )  (1,859 )   61,493    52,754  
 E-Commerce   2,188    3,336     7,374    9,192  
 Corporate-level activity (1)   (17,841 )  (15,510 )   (51,391 )  (46,851 )
  Total operating income (loss)   (13,662 )  (1,324 )   37,221    61,066  
Other loss, net   (3,275 )  (3,208 )   (11,578 )  (11,001 )
Income tax benefit (expense)   6,326    2,294     (8,903 )  (17,579 )
Net income (loss) $ (10,611 )$ (2,238 ) $ 16,740  $ 32,486  

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

    Three months ended September 30,    Nine months ended September 30,
    2015   2014    2015   2014
Operating expenses $ 5,757 $ 3,524  $ 14,328 $ 10,579
Stock-based compensation   3,310   2,608    9,357   8,974
Depreciation   1,514   1,385    4,485   4,194
Amortization of intangible assets   7,260   7,993    23,221   23,104
 Total corporate-level activity $ 17,841 $ 15,510  $ 51,391 $ 46,851
 
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 September 30,     Nine months ended September 30,
    2015    2014     2015   2014
Net income (loss) (2) $ (10,611 )$ (2,238 ) $ 16,740 $ 32,486
Stock-based compensation   3,310    2,608     9,357   8,974
Depreciation and amortization of intangible assets   8,774    9,378     27,706   27,298
Other loss, net (3)   3,275    3,208     11,578   11,001
Income tax (benefit) expense   (6,326 )  (2,294 )   8,903   17,579
Adjusted EBITDA $ (1,578 )$ 10,662   $ 74,284 $ 97,338
 
Preliminary Non-GAAP Net Income Reconciliation (1)
(Unaudited)
(Amounts in thousands, except per share amounts)
 
    Three months ended September 30,     Nine months ended September 30,  
    2015    2014     2015    2014  
Net income (loss) (2) $ (10,611 )$ (2,238 ) $ 16,740  $ 32,486  
Stock-based compensation   3,310    2,608     9,357    8,974  
Amortization of acquired intangible assets   7,260    7,993     23,221    23,104  
Accretion of debt discount on Convertible Senior Notes   975    907     2,873    2,671  
Other-than-temporary impairment loss on equity securities   -    -     964    -  
Decrease in non-cash pre-acquisition liability   -    (665 )   -    (665 )
Cash tax impact of adjustments to GAAP net income   (166 )  (44 )   (426 )  (295 )
Non-cash income tax (benefit) expense (1)   (6,269 )  (2,017 )   4,708    14,180  
Non-GAAP net income (loss) $ (5,501 )$ 6,544   $ 57,437  $ 80,455  
Per diluted share:                      
Net income (loss) $ (0.26 )$ (0.05 ) $ 0.40  $ 0.75  
Stock-based compensation   0.08    0.06     0.22    0.21  
Amortization of acquired intangible assets   0.18    0.19     0.56    0.53  
Accretion of debt discount on Convertible Senior Notes   0.02    0.02     0.07    0.06  
Other-than-temporary impairment loss on equity securities   -    -     0.02    -  
Decrease in non-cash pre-acquisition liability   -    (0.02 )   -    (0.01 )
Cash tax impact of adjustments to GAAP net income   (0.00 )  (0.00 )   (0.01 )  (0.01 )
Non-cash income tax (benefit) expense   (0.15 )  (0.05 )   0.11    0.33  
Non-GAAP net income (loss) per share $ (0.13 )$ 0.15   $ 1.37  $ 1.86  
Weighted average shares outstanding used in computing per diluted share and its components   40,950    42,305     41,911    43,303  
 
Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance 
(Amounts in thousands) 
  
  Ranges for the three months ending
 
December 31, 2015
 
Net loss $ (16,000 ) $ (14,300 )
Stock-based compensation   4,300     4,200  
Depreciation and amortization of intangible assets   7,900     7,800  
Other loss, net (3)   3,600     3,500  
Income tax benefit   (7,500 )   (6,400 )
Adjusted EBITDA $ (7,700 ) $ (5,200 )
 
Preliminary Non-GAAP Net Income Reconciliation for Forward-Looking Guidance 
(Amounts in thousands) 
  
   
   Ranges for the three months ending
 
December 31, 2015
  
Net loss $ (16,000 ) $ (14,300 )
Stock-based compensation   4,300     4,200  
Amortization of acquired intangible assets   6,200     6,300  
Accretion of debt discount on Convertible Senior Notes   1,000     1,000  
Non-cash income tax benefit   (4,600 )   (3,700 )
Non-GAAP net loss $ (9,100 ) $ (6,500 )

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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