SOURCE: Blucora

Blucora Registered Trademark Logo

February 12, 2015 16:05 ET

Blucora Reports Fourth Quarter and Full Year 2014 Results

BELLEVUE, WA--(Marketwired - February 12, 2015) - Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the fourth quarter and full year ended December 31, 2014.

"Our results in the fourth quarter were consistent with our expectations and reflect focused execution and responses at our business units," said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. "We have the leadership and operating plans in place to deliver improved performance in 2015. Our medium-term objectives are unchanged: profitable growth, continued diversification, and financial discipline."

  
  
Summary Financial Performance: Q4 and Full Year 2014 
($ in millions except per share amounts) 
  
   Q4      Q4       Full Year      Full Year     
   2014      2013   Change   2014      2013  Change  
Revenues  $108.1      $167.3   (35 )% $580.7      $574.0  1 %
 Search and Content  $65.3      $125.6   (48 )% $326.3      $428.5  (24 )%
 Tax Preparation  $2.5      $2.0   23 % $103.7      $91.2  14 %
 E-Commerce  $40.3      $39.7   2 % $150.7      $54.3  178 %
Adjusted EBITDA  $5.6      $22.6   (75 )% $102.9      $114.2  (10 )%
Non-GAAP Net Income  $2.0      $18.1   (89 )% $82.4      $97.7  (16 )%
Non-GAAP Diluted EPS  $0.05      $0.40   (88 )% $1.92      $2.25  (15 )%
GAAP Net Income (Loss)  $(68.0 )(1 ) $(1.1 ) 5,899 % $(35.5 )(1 ) $24.4  (246 )%
GAAP Diluted Income (Loss) Per Share  $(1.67 )(1 ) $(0.03 ) 5,467 % $(0.86 )(1 ) $0.56  (254 )%
See reconciliation of non-GAAP to GAAP measures in table below. 
(1) Amount includes a $62.8 million non-cash impairment of goodwill and intangible assets, related to our E-Commerce segment. 
 
 

Segment Information

Tax Preparation

Tax Preparation segment loss for the fourth quarter of 2014 was $3.1 million, which is consistent with the seasonality of the business. Tax Preparation segment income for the full year 2014 was $49.7 million.

E-Commerce

E-Commerce segment income for the fourth quarter and full year 2014 were $2.9 million, or 7 percent of segment revenue, and $12.0 million, or 8 percent of segment revenue, respectively. The fourth quarter financial results for the E-Commerce segment were negatively impacted by the West Coast port slowdowns, which have persisted into the first quarter of 2015.

Search and Content

Search and Content segment income for the fourth quarter and full year 2014 were $9.8 million and $55.8 million, respectively.

Corporate Operating Expenses

Unallocated corporate operating expenses for the fourth quarter and full year 2014 were $4.0 million and $14.6 million, respectively.

Other

Blucora ended 2014 with cash, cash equivalents, and short-term investments of $301.3 million and net cash of $6.1 million (net of outstanding debt principal).

For the full year 2014, the Company repurchased 2.3 million shares for approximately $38.6 million. The Company has approximately $36.5 million authorized under the current plan.

First Quarter Outlook

For the first quarter of 2015, the Company expects revenues to be between $168.0 million and $179.0 million, Adjusted EBITDA to be between $45.0 million and $49.0 million, Non-GAAP Net Income to be between $35.9 million and $39.6 million, or $0.85 to $0.94 per diluted share, and GAAP Net Income to be between $18.2 million and $20.9 million, or $0.43 to $0.50 per share.

This guidance contemplates the estimated impact caused by the West Coast port slowdowns. This situation is fluid and, therefore, results may differ from expectations.

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 fourth quarter and full year results, its outlook for the first quarter of 2015, Tax Preparation segment guidance for the first half of 2015, and other business matters. 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.

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  Years ended  
December 31, December 31, 
   2014   2013   2014   2013  
Revenues:                 
 Services revenue  $67,790   $127,667   $429,989   $519,677  
 Product revenue, net   40,323    39,673    150,731    54,303  
   Total revenues   108,113    167,340    580,720    573,980  
Operating expenses:                     
 Cost of revenues:                     
  Services cost of revenue (1)   40,873    83,005    218,153    302,279  
  Product cost of revenue   28,573    27,559    102,344    38,181  
   Total cost of revenues (2)   69,446    110,564    320,497    340,460  
 Engineering and technology (2)   5,748    3,731    20,670    11,682  
 Sales and marketing (2)   21,849    27,273    118,124    98,682  
 General and administrative (2)   10,568    8,485    39,120    29,847  
 Depreciation   1,074    1,001    4,352    2,739  
 Amortization of intangible assets   6,118    5,600    23,581    16,121  
 Impairment of goodwill and intangible assets   62,817    -    62,817    -  
   Total operating expenses   177,620    156,654    589,161    499,531  
Operating income (loss)   (69,507 )  10,686    (8,441 )  74,449  
Other loss, net (3)   (3,765 )  (9,196 )  (14,766 )  (29,623 )
Income (loss) before income taxes   (73,272 )  1,490    (23,207 )  44,826  
Income tax benefit (expense)   5,239    (2,624 )  (12,340 )  (20,427 )
Net income (loss)  $(68,033 ) $(1,134 ) $(35,547 ) $24,399  
Net income (loss) per share:                     
 Basic  $(1.67 ) $(0.03 ) $(0.86 ) $0.59  
 Diluted  $(1.67 ) $(0.03 ) $(0.86 ) $0.56  
Weighted average shares outstanding:                     
 Basic   40,820    41,566    41,396    41,201  
 Diluted   40,820    41,566    41,396    43,480  
(1) Includes amortization of acquired intangible assets of $1.9 million for the three months ended December 31, 2014 and 2013 and $7.5 million and $7.7 million for the years ended December 31, 2014 and 2013, respectively.
(2) Stock-based compensation expense was allocated among the following captions (in thousands):
 
  Three months ended  Years ended
December 31,December 31,
  2014  2013  2014  2013
Cost of revenues $104  $121  $477  $662
Engineering and technology  257   409   1,569   1,351
Sales and marketing  332   683   2,047   2,335
General and administrative  2,217   1,824   7,791   7,179
 Total stock-based compensation expense $2,910  $3,037  $11,884  $11,527
(3) Other loss, net was allocated among the following captions (in thousands):
 
   Three months ended   Years ended  
 December 31,  December 31, 
   2014   2013   2014   2013  
Interest income  $(85 ) $(94 ) $(352 ) $(300 )
Interest expense   2,717    2,756    11,202    9,463  
Amortization of debt issuance costs   290    267    1,143    1,108  
Accretion of debt discounts   938    866    3,691    2,838  
Loss on debt extinguishment and modification expense   -    -    -    1,593  
Loss on derivative instrument   -    5,721    -    11,652  
Impairment of equity investment in privately-held company   -    -    -    3,711  
Decrease in pre-acquisition liability   -    -    (665 )  -  
Decrease in fair value of earn-out contingent liability   (15 )  (300 )  (15 )  (300 )
Other   (80 )  (20 )  (238 )  (142 )
 Other loss, net  $3,765   $9,196   $14,766   $29,623  
                  
 
Blucora, Inc. 
Preliminary Condensed Consolidated Balance Sheets 
(Unaudited) 
(Amounts in thousands) 
 
   December 31,  
   2014   2013  
ASSETS           
Current assets:           
 Cash and cash equivalents  $46,444   $130,225  
 Available-for-sale investments   254,854    203,480  
 Accounts receivable, net   30,988    48,081  
 Other receivables   3,295    8,292  
 Inventories   29,246    28,826  
 Prepaid expenses and other current assets, net   13,477    9,774  
   Total current assets   378,304    428,678  
Property and equipment, net   15,942    16,108  
Goodwill, net   304,658    348,957  
Other intangible assets, net   168,919    178,064  
Other long-term assets   4,891    6,223  
Total assets  $872,714   $978,030  
LIABILITIES AND STOCKHOLDERS' EQUITY           
Current liabilities:           
  Accounts payable  $37,755   $61,268  
  Accrued expenses and other current liabilities   21,505    31,109  
  Deferred revenue   7,884    7,510  
  Short-term portion of long-term debt, net   7,914    7,903  
  Convertible senior notes, net (1)   -    181,583  
   Total current liabilities   75,058    289,373  
Long-term liabilities:           
 Long-term debt, net   85,835    113,193  
 Convertible senior notes, net (1)   185,177    -  
 Deferred tax liability, net   42,963    56,861  
 Deferred revenue   1,915    1,814  
 Other long-term liabilities   2,741    2,719  
  Total long-term liabilities   318,631    174,587  
  Total liabilities   393,689    463,960  
            
Stockholders' equity:           
 Common stock   4    4  
 Additional paid-in capital   1,467,658    1,466,043  
 Accumulated deficit   (987,524 )  (951,977 )
 Accumulated other comprehensive loss   (1,113 )  -  
  Total stockholders' equity   479,025    514,070  
Total liabilities and stockholders' equity  $872,714   $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) 
  
   Years ended  
 December 31, 
   2014   2013  
Operating Activities:         
 Net income (loss)  $(35,547 ) $24,399  
 Adjustments to reconcile net income (loss) to net cash provided by operating activities:           
  Stock-based compensation   11,884    11,527  
  Depreciation and amortization of intangible assets   36,675    28,265  
  Impairment of goodwill and intangible assets   62,817    -  
  Excess tax benefits from stock-based award activity   (23,284 )  (29,400 )
  Deferred income taxes   (13,667 )  (10,849 )
  Amortization of premium on investments, net   3,772    3,007  
  Amortization of debt issuance costs   1,143    1,108  
  Accretion of debt discounts   3,691    2,838  
  Loss on debt extinguishment and modification expense   -    1,593  
  Loss on derivative instrument   -    11,652  
  Impairment loss on equity investment in privately-held company   -    3,711  
  Earn-out contingent liability adjustments   (15 )  (300 )
  Other   128    767  
 Cash provided (used) by changes in operating assets and liabilities:           
  Accounts receivable   17,001    (9,911 )
  Other receivables   4,983    1,741  
  Inventories   (420 )  (1,349 )
  Prepaid expenses and other current assets   (4,125 )  2,511  
  Other long-term assets   116    256  
  Accounts payable   (23,513 )  12,275  
  Deferred revenue   475    3,527  
  Accrued expenses and other current and long-term liabilities   13,620    37,688  
   Net cash provided by operating activities   55,734    95,056  
Investing Activities:           
  Business acquisitions, net of cash acquired   (44,927 )  (184,982 )
  Equity investment in privately-held company   -    (4,000 )
  Purchases of property and equipment   (5,213 )  (4,747 )
  Change in restricted cash   -    2,491  
  Proceeds from sales of investments   28,705    25,812  
  Proceeds from maturities of investments   255,994    213,616  
  Purchases of investments   (336,495 )  (351,883 )
   Net cash used by investing activities   (101,936 )  (303,693 )
Financing Activities:           
  Proceeds from issuance of convertible notes, net of debt issuance costs of $6,432   -    194,818  
  Proceeds from credit facilities   36,556    55,294  
  Repayment of credit facilities   (64,000 )  (10,000 )
  Debt issuance costs on credit facility   -    (28 )
  Stock repurchases   (38,650 )  (10,006 )
  Excess tax benefits from stock-based award activity   23,284    29,400  
  Proceeds from stock option exercises   6,730    2,826  
  Proceeds from issuance of stock through employee stock purchase plan   1,376    1,065  
  Proceeds from issuance of stock upon warrant exercise   -    9,620  
  Tax payments from shares withheld upon vesting of restricted stock units   (2,875 )  (2,405 )
   Net cash provided (used) by financing activities   (37,579 )  270,584  
Net increase (decrease) in cash and cash equivalents   (83,781 )  61,947  
Cash and cash equivalents, beginning of period   130,225    68,278  
Cash and cash equivalents, end of period  $46,444   $130,225  
         
 
Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
  
   Three months ended   Years ended  
 December 31,  December 31, 
   2014   2013   2014   2013  
Revenues:                 
 Search and Content  $65,271   $125,624   $326,270   $428,464  
 Tax Preparation   2,519    2,043    103,719    91,213  
 E-Commerce   40,323    39,673    150,731    54,303  
  Total revenues   108,113    167,340    580,720    573,980  
Operating income (loss):                     
 Search and Content   9,841    25,003    55,812    82,504  
 Tax Preparation   (3,058 )  (3,018 )  49,696    40,599  
 E-Commerce   2,851    4,061    12,043    4,967  
 Corporate-level activity (1)   (79,141 )  (15,360 )  (125,992 )  (53,621 )
  Total operating income (loss)   (69,507 )  10,686    (8,441 )  74,449  
Other loss, net   (3,765 )  (9,196 )  (14,766 )  (29,623 )
Income tax benefit (expense)   5,239    (2,624 )  (12,340 )  (20,427 )
Net income (loss)  $(68,033 ) $(1,134 ) $(35,547 ) $24,399  
(1) Corporate-level activity included the following (in thousands):
 
   Three months ended  Years ended
December 31,December 31,
   2014  2013  2014  2013
Operating expenses  $4,037  $3,471  $14,616  $13,829
Stock-based compensation   2,910   3,037   11,884   11,527
Depreciation   1,387   1,357   5,581   4,476
Amortization of intangible assets   7,990   7,495   31,094   23,789
Impairment of goodwill and intangible assets   62,817   -   62,817   -
 Total corporate-level activity  $79,141  $15,360  $125,992  $53,621
              
 
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   Years ended
 December 31,  December 31,
   2014   2013   2014   2013
Net income (loss) (2)  $(68,033 ) $(1,134 ) $(35,547 ) $24,399
Stock-based compensation   2,910    3,037    11,884    11,527
Depreciation and amortization of intangible assets   9,377    8,852    36,675    28,265
Impairment of goodwill and intangible assets   62,817    -    62,817    -
Other loss, net (3)   3,765    9,196    14,766    29,623
Income tax (benefit) expense   (5,239 )  2,624    12,340    20,427
Adjusted EBITDA  $5,597   $22,575   $102,935   $114,241
                
 
Preliminary Non-GAAP Net Income Reconciliation(1) 
(Unaudited) 
(Amounts in thousands, except per share amounts) 
  
   Three months ended  Years ended  
December 31,  December 31, 
   2014   2013   2014   2013  
Net income (loss) (2)  $(68,033 ) $(1,134 ) $(35,547 ) $24,399  
Stock-based compensation   2,910    3,037    11,884    11,527  
Amortization of acquired intangible assets   7,990    7,495    31,094    23,789  
Impairment of goodwill and intangible assets   62,817    -    62,817    -  
Accretion of debt discount on Convertible Senior Notes   923    858    3,594    2,674  
Loss on debt extinguishment and modification expense   -    -    -    1,593  
Loss on derivative instrument   -    5,721    -    11,652  
Impairment of equity investment in privately-held company   -    -    -    3,711  
Decrease in non-cash pre-acquisition liability   -    -    (665 )  -  
Cash tax impact of adjustments to GAAP net income   (3 )  (8 )  (298 )  (189 )
Non-cash income tax (benefit) expense (1)   (4,635 )  2,126    9,545    18,538  
Non-GAAP net income  $1,969   $18,095   $82,424   $97,694  
                      
Per diluted share:                     
Net income (loss)  $(1.62 ) $(0.03 ) $(0.83 ) $0.56  
Stock-based compensation   0.07    0.07    0.28    0.26  
Amortization of acquired intangible assets   0.19    0.16    0.73    0.55  
Impairment of goodwill and intangible assets   1.50    -    1.46    -  
Accretion of debt discount on Convertible Senior Notes   0.02    0.02    0.08    0.06  
Loss on debt extinguishment and modification expense   -    -    -    0.03  
Loss on derivative instrument   -    0.13    -    0.27  
Impairment of equity investment in privately-held company   -    -    -    0.09  
Decrease in non-cash pre-acquisition liability   -    -    (0.01 )  -  
Cash tax impact of adjustments to GAAP net income   (0.00 )  (0.00 )  (0.01 )  (0.00 )
Non-cash income tax (benefit) expense   (0.11 )  0.05    0.22    0.43  
Non-GAAP net income per share  $0.05   $0.40   $1.92   $2.25  
Weighted average shares outstanding used in computing diluted non-GAAP net income per share and its components, including the "Net income (loss)" component   41,875    45,716    42,946    43,480  
                 
 
Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
 
   Ranges for the three months ending
   March 31, 2015
Net income  $18,200  $20,900
Stock-based compensation   3,200   2,900
Depreciation and amortization of intangible assets   9,500   9,500
Other loss, net (3)   4,100   4,100
Income tax expense   10,000   11,600
Adjusted EBITDA  $45,000  $49,000
       
 
Preliminary Non-GAAP Net Income Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
 
   Ranges for the three months ending
   March 31, 2015
Net income  $18,200  $20,900
Stock-based compensation   3,200   2,900
Amortization of acquired intangible assets   8,000   8,000
Accretion of debt discount on Convertible Senior Notes   300   300
Non-cash income tax expense   6,200   7,500
Non-GAAP net income  $35,900  $39,600
       

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 adjustments recorded in other loss, net that resulted from 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, loss on debt extinguishment and modification expense, loss on derivative instrument, other-than-temporary impairment loss on equity investments, 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, loss on debt extinguishment and modification expense, loss on derivative instrument, other-than-temporary impairment loss on equity investments, and adjustments to contingent liabilities related to business combinations.

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