SOURCE: Blucora

Blucora Registered Trademark Logo

February 11, 2016 16:01 ET

Blucora Reports Fourth Quarter and Full Year 2015 Results

BELLEVUE, WA--(Marketwired - February 11, 2016) -  Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the fourth quarter and full year ended December 31, 2015.

2015 Highlights and Recent Developments

  • Blucora completed the acquisition of HD Vest on December 31, 2015, which reported a 5% increase in revenue and a 7% increase in income for 2015.
  • TaxAct posted a 13% increase in revenue and a 15% increase in segment income for 2015, marking the fourth consecutive year of double-digit top and bottom line growth under Blucora's ownership.
  • TaxAct introduced a new forms based pricing structure for the current tax season, offering Free State and Federal for simple returns.
  • TaxAct recently debuted a robust new set of enhancements to its Preparer's editions and a new client portal.
  • HD Vest recruiting at highest levels in more than eight years at the firm and exited the year with 4,600 advisors up 2% and marks the third consecutive year of advisor growth.

"Blucora made transformational changes in 2015," said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. "Our acquisition of HD Vest last year was guided by two principal beliefs. First, the HD Vest market opportunity is compelling, the Company has a differentiated business model, and a proven team. Second, there are meaningful opportunities in bringing HD Vest and TaxAct under common ownership to create a more strategically focused Blucora going forward. With the HD Vest acquisition now complete, our attention is fixed on executing in the current season at TaxAct, integrating HD Vest and laying the groundwork for future cross-collaboration between our two businesses. Our divestiture processes for Monoprice and Infospace are proceeding as planned."

The following presentation represents pro forma financial information and includes HD Vest. In addition, it excludes the Search and Content and E-Commerce segments which have been classified as discontinued operations for all periods presented. The Company believes that this presentation most accurately reflects the financial performance of the Company on a go-forward basis.

                   
Pro Forma Summary Financial Performance: Q4 and Full Year 2015  
($ in millions except per share amounts)  
   
    Q4     Q4           Full Year     Full Year        
    2015     2014     Change     2015     2014     Change  
Pro Forma Revenues   $ 85.0     $ 81.6     4 %   $ 437.4     $ 408.6     7 %
  Wealth Management     82.1       79.1     4 %     319.7       304.9     5 %
  Tax Preparation     2.9       2.5     14 %     117.7       103.7     13 %
Pro Forma Segment Income     7.7       7.3     6 %     100.0       90.0     11 %
  Wealth Management     12.2       10.4     18 %     43.0       40.3     7 %
  Tax Preparation     (4.5 )     (3.1 )   47 %     57.0       49.7     15 %
Pro Forma Unallocated Corporate Operating Expenses     4.3       4.3     - %     17.8       14.2     25 %
Pro Forma Adjusted EBITDA   $ 3.5     $ 3.0     15 %   $ 82.2     $ 75.8     9 %
Pro Forma Non-GAAP:                                            
  Income (Loss) from Continuing Operations   $ (8.0 )   $ (8.5 )   (6 )%   $ 37.0     $ 30.1     23 %
  Diluted Income (Loss) per Share from Continuing Operations   $ (0.19 )   $ (0.21 )   (10 )%   $ 0.88     $ 0.70     26 %
Pro Forma GAAP:                                            
  Income (Loss) from Continuing Operations   $ (13.9 )   $ (13.8 )   1 %   $ (11.5 )   $ (15.5 )   (26 )%
  Diluted Income (Loss) per Share from Continuing Operations   $ (0.34 )   $ (0.34 )   - %   $ (0.28 )   $ (0.37 )   (24 )%
                                               

See reconciliation of pro forma non-GAAP to GAAP measures in table below.

First Quarter and Full Year 2016 Outlook

For the first quarter of 2016, the Company expects revenues to be between $162.5 million and $167.0 million, Adjusted EBITDA to be between $49.0 million and $52.0 million, Non-GAAP income from continuing operations to be between $36.7 million and $39.9 million, or $0.88 to $0.96 per diluted share, and GAAP income from continuing operations to be between $14.4 million and $16.6 million, or $0.35 to $0.40 per diluted share.

For the full year 2016, the Company expects revenues to be between $444.0 million and $462.5 million, Adjusted EBITDA to be between $86.0 million and $91.5 million, Non-GAAP income from continuing operations to be between $40.6 million and $47.5 million, or $0.96 to $1.12 per diluted share, and GAAP loss from continuing operations to be between $(7.5) million and $(2.2) million, or $(0.18) to $(0.05) per diluted share.

   
As Reported Summary Financial Performance: Q4 and Full Year 2015  
($ in millions except per share amounts)  
   
    Q4     Q4           Full Year     Full Year        
    2015     2014     Change     2015     2014     Change  
Revenues                                            
  Tax Preparation   $ 2.9     $ 2.5     14 %   $ 117.7     $ 103.7     13 %
Segment Income                                            
  Tax Preparation   $ (4.5 )   $ (3.1 )   47 %   $ 57.0     $ 49.7     15 %
Adjusted EBITDA   $ (8.8 )   $ (7.3 )   20 %   $ 39.2     $ 35.5     11 %
Non-GAAP:                                            
  Income (Loss) from Continuing Operations   $ (11.5 )   $ (9.5 )   21 %   $ 28.2     $ 23.3     21 %
  Diluted Income (Loss) per Share from Continuing Operations   $ (0.28 )   $ (0.23 )   22 %   $ 0.67     $ 0.54     24 %
GAAP:                                            
  Income (Loss) from Continuing Operations   $ (22.3 )   $ (11.7 )   91 %   $ (12.7 )   $ (5.5 )   130 %
  Diluted Income (Loss) per Share from Continuing Operations   $ (0.55 )   $ (0.29 )   90 %   $ (0.31 )   $ (0.13 )   138 %
                                               

See reconciliation of non-GAAP to GAAP measures in table below.

Other

For the full year 2015, the Company repurchased 0.6 million shares for approximately $7.7 million. The Company has approximately $28.7 million authorized under the current plan.

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 and full year of 2016, and other business matters. We have also provided supplemental financial information to our results that can be accessed in the Investor Relations section of the Blucora corporate website at http://www.blucora.com and filed with the SEC on Form 8-K. A replay of the call and management's prepared remarks will also be available on our website.

About Blucora®
Blucora, Inc. (NASDAQ: BCOR) is a leading provider of technology-enabled financial solutions to consumers, small businesses and tax professionals. Our products and services in tax preparation and wealth management, through TaxAct and HD Vest, help consumers manage their financial lives. TaxAct is an affordable digital tax preparation solution for individuals, business owners and tax professionals. HD Vest Financial Services ® supports an independent network of tax professionals who provide comprehensive financial planning solutions. For more information on Blucora or its businesses, please visit www.blucora.com.

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 December 31,     Years ended December 31,  
    2015     2014     2015     2014  
Services revenue   $ 2,865     $ 2,519     $ 117,708     $ 103,719  
                                 
Operating expenses:                                
  Cost of revenue:                                
    Services cost of revenue     1,487       1,176       6,167       5,880  
    Amortization of acquired technology     1,910       1,862       7,546       7,450  
      Total cost of revenue (1)     3,397       3,038       13,713       13,330  
  Engineering and technology (1)     1,636       1,028       5,107       3,758  
  Sales and marketing (1)     3,030       2,857       45,854       42,671  
  General and administrative (1)     19,869       7,113       43,563       25,315  
  Depreciation     420       334       1,521       1,300  
  Amortization of other acquired intangible assets     3,191       3,186       12,757       12,742  
      Total operating expenses     31,543       17,556       122,515       99,116  
Operating income (loss)     (28,678 )     (15,037 )     (4,807 )     4,603  
Other loss, net (2)     (3,433 )     (3,333 )     (12,542 )     (13,489 )
Loss from continuing operations before income taxes     (32,111 )     (18,370 )     (17,349 )     (8,886 )
Income tax benefit     9,767       6,675       4,623       3,342  
Loss from continuing operations     (22,344 )     (11,695 )     (12,726 )     (5,544 )
Loss from discontinued operations, net of income taxes (3)     (34,470 )     (56,338 )     (27,348 )     (30,003 )
Net loss   $ (56,814 )   $ (68,033 )   $ (40,074 )   $ (35,547 )
Net loss per share - basic:                                
  Continuing operations   $ (0.55 )   $ (0.29 )   $ (0.31 )   $ (0.13 )
  Discontinued operations     (0.84 )     (1.38 )     (0.67 )     (0.73 )
  Basic net loss per share   $ (1.39 )   $ (1.67 )   $ (0.98 )   $ (0.86 )
Net loss per share - diluted:                                
  Continuing operations   $ (0.55 )   $ (0.29 )   $ (0.31 )   $ (0.13 )
  Discontinued operations     (0.84 )     (1.38 )     (0.67 )     (0.73 )
  Diluted net loss per share   $ (1.39 )   $ (1.67 )   $ (0.98 )   $ (0.86 )
Weighted average shares outstanding:                                
  Basic     40,979       40,820       40,959       41,396  
  Diluted     40,979       40,820       40,959       41,396  
                                 

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

             
    Three months ended December 31,     Years ended December 31,  
    2015     2014     2015     2014  
Cost of revenue   $ 25     $ 37     $ 96     $ 254  
Engineering and technology     148       119       484       516  
Sales and marketing     161       192       771       829  
General and administrative     2,386       1,779       7,343       7,095  
  Total stock-based compensation expense   $ 2,720     $ 2,127     $ 8,694     $ 8,694  
                                 
(2) Other loss, net was allocated among the following captions (in thousands):  
   
    Three months ended December 31,     Years ended December 31,  
    2015     2014     2015     2014  
Interest income   $ (179 )   $ (87 )   $ (609 )   $ (355 )
Interest expense     2,211       2,308       9,044       9,476  
Amortization of debt issuance costs     291       272       1,133       1,059  
Accretion of debt discounts     993       923       3,866       3,594  
Loss on debt extinguishment and modification expense     398       -       398       -  
Gain on third party bankruptcy settlement     (62 )     (119 )     (1,128 )     (286 )
Other     (219 )     36       (162 )     1  
  Other loss, net   $ 3,433     $ 3,333     $ 12,542     $ 13,489  
                                   

(3) Loss from discontinued operations included goodwill and trade name impairments, totaling $59.0 million and $62.6 million for the years ended December 31, 2015 and 2014, respectively.

   
Blucora, Inc.  
Preliminary Condensed Consolidated Balance Sheets  
(Unaudited)  
(Amounts in thousands)  
   
    December 31,  
    2015     2014  
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 55,473     $ 41,968  
  Cash segregated under federal or other regulations     3,557       -  
  Available-for-sale investments     11,301       251,620  
  Accounts receivable, net     7,884       292  
  Commissions receivable     16,328       -  
  Other receivables     24,407       1,890  
  Prepaid expenses and other current assets, net     10,062       6,466  
  Current assets of discontinued operations     211,663       72,253  
    Total current assets     340,675       374,489  
Long-term assets:                
  Property and equipment, net     11,308       6,542  
  Goodwill, net     548,959       188,541  
  Other intangible assets, net     396,295       92,119  
  Long-term assets of discontinued operations     -       202,707  
  Other long-term assets     2,311       1,377  
    Total long-term assets     958,873       491,286  
    Total assets   $ 1,299,548     $ 865,775  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 4,689     $ 419  
  Commissions and advisory fees payable     16,982       -  
  Accrued expenses and other current liabilities     13,006       7,227  
  Deferred revenue     11,521       6,320  
  Current portion of long-term debt, net     31,631       -  
  Current liabilities of discontinued operations     88,275       61,092  
    Total current liabilities     166,104       75,058  
Long-term liabilities:                
  Long-term debt, net     353,850       51,940  
  Convertible senior notes, net     185,918       181,063  
  Deferred tax liability, net     103,520       20,282  
  Deferred revenue     1,902       1,915  
  Long-term liabilities of discontinued operations     -       53,764  
  Other long-term liabilities     10,932       2,728  
    Total long-term liabilities     656,122       311,692  
    Total liabilities     822,226       386,750  
   
Redeemable non-controlling interests     15,038       -  
   
Stockholders' equity:                
  Common stock     4       4  
  Additional paid-in capital     1,490,405       1,467,658  
  Accumulated deficit     (1,027,598 )     (987,524 )
  Accumulated other comprehensive loss     (527 )     (1,113 )
    Total stockholders' equity     462,284       479,025  
    Total liabilities and stockholders' equity   $ 1,299,548     $ 865,775  
                 
                 
   
Blucora, Inc.  
Preliminary Condensed Consolidated Statements of Cash Flows  
(Unaudited)  
(Amounts in thousands)  
   
    Years ended December 31,  
    2015     2014  
Operating Activities:                
  Net loss   $ (40,074 )   $ (35,547 )
  Less: Discontinued operations, net of income taxes     (27,348 )     (30,003 )
  Net loss from continuing operations     (12,726 )     (5,544 )
  Adjustments to reconcile net loss from continuing operations to cash from operating activities:                
    Stock-based compensation     8,694       8,694  
    Depreciation and amortization of acquired intangible assets     22,590       22,164  
    Excess tax benefits from stock-based award activity     (7,967 )     (6,398 )
    Deferred income taxes     (12,607 )     (9,858 )
    Amortization of premium on investments, net     1,589       3,772  
    Amortization of debt issuance costs     1,133       1,059  
    Accretion of debt discounts     3,866       3,594  
    Loss on debt extinguishment and modification expense     398       -  
    Other     203       77  
  Cash provided (used) by changes in operating assets and liabilities:                
    Accounts receivable     (1,862 )     47  
    Other receivables     651       367  
    Prepaid expenses and other current assets     (493 )     (3,457 )
    Other long-term assets     (15 )     191  
    Accounts payable     369       (258 )
    Deferred revenue     1,875       1,130  
    Accrued expenses and other current and long-term liabilities     10,643       4,548  
      Net cash provided by operating activities from continuing operations     16,341       20,128  
Investing Activities:                
    Business acquisitions, net of cash acquired     (573,366 )     -  
    Purchases of property and equipment     (1,512 )     (2,037 )
    Change in restricted cash     150       -  
    Proceeds from sales of investments     156,506       28,535  
    Proceeds from maturities of investments     296,455       255,994  
    Purchases of investments     (214,257 )     (336,495 )
      Net cash used by investing activities from continuing operations     (336,024 )     (54,003 )
Financing Activities:                
    Proceeds from credit facility     378,270       36,556  
    Repayment of credit facility     (51,940 )     (56,000 )
    Stock repurchases     (7,735 )     (38,650 )
    Excess tax benefits from stock-based award activity     7,967       6,398  
    Proceeds from stock option exercises     2,409       6,730  
    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     (1,545 )     (2,875 )
      Net cash provided (used) by financing activities from continuing operations     328,619       (46,465 )
Net cash provided (used) by continuing operations     8,936       (80,340 )
Net cash provided by operating activities from discontinued operations     14,108       41,406  
Net cash used by investing activities from discontinued operations     (540 )     (47,933 )
Net cash provided (used) by financing activities from discontinued operations     (8,982 )     8,886  
Net cash provided by discontinued operations     4,586       2,359  
Effect of exchange rate changes on cash and cash equivalents     (17 )     -  
Net increase (decrease) in cash and cash equivalents     13,505       (77,981 )
Cash and cash equivalents, beginning of period     41,968       119,949  
Cash and cash equivalents, end of period   $ 55,473     $ 41,968  
                 
                 
   
Blucora, Inc.  
Preliminary Segment Information  
(Unaudited)  
(Amounts in thousands)  
   
    Three months ended December 31,     Years ended December 31,  
    2015     2014     2015     2014  
Revenue:                                
  Tax Preparation   $ 2,865     $ 2,519     $ 117,708     $ 103,719  
Operating income (loss):                                
  Tax Preparation     (4,509 )     (3,058 )     56,984       49,696  
  Corporate-level activity (1)     (24,169 )     (11,979 )     (61,791 )     (45,093 )
    Total operating income (loss)     (28,678 )     (15,037 )     (4,807 )     4,603  
Other loss, net     (3,433 )     (3,333 )     (12,542 )     (13,489 )
Loss from continuing operations before income taxes     (32,111 )     (18,370 )     (17,349 )     (8,886 )
Income tax benefit     9,767       6,675       4,623       3,342  
Loss from continuing operations     (22,344 )     (11,695 )     (12,726 )     (5,544 )
Discontinued operations, net of income taxes     (34,470 )     (56,338 )     (27,348 )     (30,003 )
Net loss   $ (56,814 )   $ (68,033 )   $ (40,074 )   $ (35,547 )
(1) Corporate-level activity included the following (in thousands):  
   
    Three months ended December 31,     Years ended December 31,  
    2015     2014     2015     2014  
Operating expenses   $ 15,722     $ 4,278     $ 30,507     $ 14,235  
Stock-based compensation     2,720       2,127       8,694       8,694  
Depreciation     626       526       2,287       1,972  
Amortization of acquired intangible assets     5,101       5,048       20,303       20,192  
Total corporate-level activity   $ 24,169     $ 11,979     $ 61,791     $ 45,093  
                                 
                                 
   
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 December 31,     Years ended December 31,  
    2015     2014     2015     2014  
Loss from continuing operations (2)   $ (22,344 )   $ (11,695 )   $ (12,726 )   $ (5,544 )
Stock-based compensation     2,720       2,127       8,694       8,694  
Depreciation and amortization of acquired intangible assets     5,727       5,574       22,590       22,164  
Acquisition-related transaction costs     9,674       -       10,988       -  
CEO separation-related costs     1,769       -       1,769       -  
Other loss, net (3)     3,433       3,333       12,542       13,489  
Income tax benefit     (9,767 )     (6,675 )     (4,623 )     (3,342 )
Adjusted EBITDA   $ (8,788 )   $ (7,336 )   $ 39,234     $ 35,461  
   
   
   
Preliminary Non-GAAP Income (Loss) from Continuing Operations Reconciliation (1)  
(Unaudited)  
(Amounts in thousands, except per share amounts)  
   
    Three months ended December 31,     Years ended December 31,  
    2015     2014     2015     2014  
Loss from continuing operations (2)   $ (22,344 )   $ (11,695 )   $ (12,726 )   $ (5,544 )
Stock-based compensation     2,720       2,127       8,694       8,694  
Amortization of acquired intangible assets     5,101       5,048       20,303       20,192  
Accretion of debt discount on Convertible Senior Notes     993       923       3,866       3,594  
Loss on debt extinguishment and modification expense     398       -       398       -  
Acquisition-related transaction costs     9,674       -       10,988       -  
CEO separation-related costs     1,769       -       1,769       -  
Cash tax impact of adjustments to GAAP net income     61       (5 )     (236 )     (151 )
Non-cash income tax benefit (1)     (9,827 )     (5,884 )     (4,857 )     (3,459 )
Non-GAAP income (loss) from continuing operations   $ (11,455 )   $ (9,486 )   $ 28,199     $ 23,326  
Per diluted share:                                
Loss from continuing operations
  $
(0.55
)
  $
(0.29
)
  $
(0.30
)
  $
(0.13
)
Stock-based compensation     0.07       0.05       0.21       0.20  
Amortization of acquired intangible assets     0.13       0.13       0.49       0.47  
Accretion of debt discount on Convertible Senior Notes     0.02       0.02       0.09       0.08  
Loss on debt extinguishment and modification expense     0.01       -       0.01       -  
Acquisition-related transaction costs     0.24       -       0.26       -  
CEO separation-related costs     0.04       -       0.04       -  
Cash tax impact of adjustments to GAAP net income     0.00       0.00       (0.01 )     0.00  
Non-cash income tax benefit     (0.24 )     (0.14 )     (0.12 )     (0.08 )
Non-GAAP income (loss) from continuing operations per share   $ (0.28 )   $ (0.23 )   $ 0.67     $ 0.54  
Weighted average shares outstanding used in computing per diluted share amounts, including the "Loss from continuing operations" amount     40,979       40,820       41,861       42,946  
                                 
                                 
   
Blucora, Inc.  
Reconciliations of Pro Forma Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures  
   
Preliminary Pro Forma Adjusted EBITDA Reconciliation  
(Unaudited)  
(Amounts in thousands)  
   
    Three months ended December 31,     Years ended December 31,  
    2015     2014     2015     2014  
Pro forma loss from continuing operations   $ (13,893 )   $ (13,779 )   $ (11,536 )   $ (15,498 )
Pro forma stock-based compensation     4,034       3,441       13,591       13,591  
Pro forma depreciation and amortization of acquired intangible assets     11,406       11,312       45,464       44,712  
Pro forma other loss, net (3)     10,608       10,670       41,934       42,672  
Pro forma income tax benefit     (8,698 )     (8,626 )     (7,222 )     (9,702 )
Pro forma adjusted EBITDA   $ 3,457     $ 3,018     $ 82,231     $ 75,775  
   
   
   
Preliminary Pro Forma Non-GAAP Income (Loss) from Continuing Operations Reconciliation  
(Unaudited)  
(Amounts in thousands, except per share amounts)  
   
    Three months ended December 31,     Years ended December 31,  
    2015     2014     2015     2014  
Pro forma loss from continuing operations   $ (13,893 )   $ (13,779 )   $ (11,536 )   $ (15,498 )
Pro forma stock-based compensation     4,034       3,441       13,591       13,591  
Pro forma amortization of acquired intangible assets     10,238       10,185       40,851       40,740  
Pro forma accretion of debt discount on Convertible Senior Notes     993       923       3,866       3,594  
Pro forma cash tax impact of adjustments to pro forma net income     (100 )     (100 )     (400 )     (400 )
Pro forma non-cash income tax benefit     (9,248 )     (9,176 )     (9,422 )     (11,902 )
Pro forma non-GAAP income (loss) from continuing operations   $ (7,976 )   $ (8,506 )   $ 36,950     $ 30,125  
Per diluted share:                                
Pro forma loss from continuing operations   $ (0.34 )   $ (0.34 )   $ (0.28 )   $ (0.36 )
Pro forma stock-based compensation     0.10       0.08       0.32       0.32  
Pro forma amortization of acquired intangible assets     0.25       0.25       0.98       0.95  
Pro forma accretion of debt discount on Convertible Senior Notes     0.02       0.02       0.09       0.08  
Pro forma cash tax impact of adjustments to pro forma net income     0.00       0.00       (0.01 )     (0.01 )
Pro forma non-cash income tax benefit     (0.22 )     (0.22 )     (0.22 )     (0.28 )
Pro forma non-GAAP income (loss) from continuing operations per share   $ (0.19 )   $ (0.21 )   $ 0.88     $ 0.70  
Weighted average shares outstanding used in computing per diluted share amounts, including the "Pro forma loss from continuing operations" amount     40,979       40,820       41,861       42,946  
                                 
                                 
   
Preliminary Adjusted EBITDA Reconciliation  
For Forward-Looking Guidance  
(Amounts in thousands)  
   
    Ranges for the three months ending   Ranges for the year ending  
    March 31, 2016   December 31, 2016  
Income (loss) from continuing operations   $ 14,400   $ 16,600   $ (7,500 )   $ (2,200 )
Stock-based compensation     3,500     3,400     16,800       15,800  
Depreciation and amortization of acquired intangible assets     10,400     10,300     40,500       39,200  
Other loss, net (3)     11,200     11,100     41,200       40,200  
Income tax (benefit) expense     9,500     10,600     (5,000 )     (1,500 )
Adjusted EBITDA   $ 49,000   $ 52,000   $ 86,000     $ 91,500  
   
   
   
Preliminary Non-GAAP Income from Continuing Operations Reconciliation  
For Forward-Looking Guidance  
(Amounts in thousands)  
   
    Ranges for the three months ending   Ranges for the year ending  
    March 31, 2016   December 31, 2016  
Income (loss) from continuing operations   $ 14,400   $ 16,600   $ (7,500 )   $ (2,200 )
Stock-based compensation     3,500     3,400     16,800       15,800  
Amortization of acquired intangible assets     9,000     9,000     35,000       34,000  
Accretion of debt discount on Convertible Senior Notes     1,000     1,000     4,200       4,200  
Non-cash income tax (benefit) expense     8,800     9,900     (7,900 )     (4,300 )
Non-GAAP income from continuing operations   $ 36,700   $ 39,900   $ 40,600     $ 47,500  
                             
                             

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 discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, as well as transaction costs related to the HD Vest acquisition and separation-related costs in connection with the upcoming departure of our chief executive officer both of which were announced in the fourth quarter of 2015. We define Adjusted EBITDA as income (loss) from continuing operations, 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 acquired intangible assets (including acquired technology), stock-based compensation, acquisition-related transaction costs, CEO separation- related costs, 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 income (loss) from continuing operations. 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 income (loss) from continuing operations differently for this report than we have defined it in the past, due to the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015, as well as transaction costs related to the HD Vest acquisition and separation-related costs in connection with the upcoming departure of our chief executive officer both of which were announced in the fourth quarter of 2015. For this report, we define non-GAAP income (loss) from continuing operations as income (loss) from continuing operations, determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets (including acquired technology), accretion of debt discount on the Convertible Senior Notes, loss on debt extinguishment and modification expense, acquisition-related transaction costs, CEO separation-related costs, 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 net operating losses will expire, if unutilized, between 2020 and 2024.

    We believe that non-GAAP income (loss) from continuing operations and non-GAAP income (loss) from continuing operations 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 income (loss) from continuing operations and non-GAAP income (loss) from continuing operations per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP income (loss) from continuing operations 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 income (loss) from continuing operations. Other companies may calculate non-GAAP income (loss) from continuing operations differently, and, therefore, our non-GAAP income (loss) from continuing operations 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, and gain on third party bankruptcy settlement.

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