Blucora Reports First Quarter Results and Preliminary Tax

New Post Public Reply Private Reply Replies (0) Message Board

News Desk 2018

Apr 30, 2015 at 5:00 PM

Blucora Reports First Quarter Results and Preliminary Tax Season Update

BELLEVUE, WA --(Marketwired - April 30, 2015) - Blucora, Inc. ( NASDAQ : BCOR ) today announced financial results for the first quarter ended March 31, 2015.

"Blucora results in the first quarter reflect strong in-season performance from TaxACT and continued pressures at Infospace," said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. "We are pleased to report consolidated performance in the quarter was in line with our expectations. Regaining our momentum through operational execution is the number one priority in 2015. Blucora remains well positioned with a diversified portfolio of businesses, capable leadership and a strong financial position that provides for future flexibility."


Summary Financial Performance: Q1 2015
($ in millions except per share amounts)

		Q1		Q1
		2015		2014		Change
Revenues		$	174.8	$	216.2	(19	)%
	Search and Content	$	58.7	$	106.8	(45	)%
	Tax Preparation	$	81.1	$	72.3	12	%
	E-Commerce	$	35.0	$	37.1	(6	)%
Adjusted EBITDA		$	50.8	$	56.9	(11	)%
Non-GAAP Net Income		$	43.0	$	50.0	(14	)%
Non-GAAP Diluted EPS		$	1.03	$	1.12	(8	)%
GAAP Net Income		$	23.1	$	26.0	(11	)%
GAAP Diluted EPS		$	0.55	$	0.58	(5	)%
See reconciliations of non-GAAP to GAAP measures in tables below.

Segment Information

Tax Preparation

Tax Preparation segment income for the first quarter of 2015 was $44.1 million or 54 percent of segment revenue for the first quarter of 2015.

For the six months ended June 30, 2015, TaxACT expects revenue growth of approximately 13 percent and segment income growth of 16 to 17 percent versus the prior year comparable period, with combined consumer and professional preparer e-file growth of 1 percent. The combined TaxACT offerings assisted approximately 7 million filers this tax season.

TaxACT professional preparer filings for the tax season grew approximately 8 percent compared to the same period last year. TaxACT consumer DDIY federal e-files for the tax season were approximately 5.5 million, consistent with the same period last year, as follows:


(in thousands, except %s)		Tax seasons ended April 16,
		2015	2014	% change
Online e-files		5,058	5,067	-
Desktop e-files		261	246	6	%
	Sub-total e-files	5,319	5,313	-
Free File Alliance e-files		172	210	(18	)%
	Total e-files	5,491	5,523	(1	)%
Tax season begins on the first day that the IRS begins accepting e-files and ends on tax day +1.

Search and Content

Search and Content segment income for the first quarter of 2015 was $8.4 million or 14 percent of segment revenue for the first quarter of 2015.

E-Commerce

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

Corporate Operating Expenses

Unallocated corporate operating expenses for the first quarter of 2015 were $4.3 million, compared to $3.2 million for the first quarter of 2014.

Second Quarter Outlook

For the second quarter of 2015, the Company expects revenues to be between $114.0 million and $123.5 million, Adjusted EBITDA to be between $20.8 million and $24.8 million, Non-GAAP net income to be between $16.1 million and $20.0 million, or $0.38 to $0.48 per diluted share, and GAAP net income to be between $2.5 million and $5.4 million, or $0.06 to $0.13 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 first quarter results and its outlook for the second 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.

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 March 31,
				2015			2014
Revenues:
	Services revenue			$	139,814		$	179,044
	Product revenue, net				35,012			37,139
			Total revenues		174,826			216,183
Operating expenses:
	Cost of revenues:
		Services cost of revenue ⁽¹⁾			34,941			71,293
		Product cost of revenue			24,100			25,029
			Total cost of revenues ⁽²⁾		59,041			96,322
	Engineering and technology ⁽²⁾				5,217			4,135
	Sales and marketing ⁽²⁾				54,196			55,836
	General and administrative ⁽²⁾				10,409			8,632
	Depreciation				1,138			1,058
	Amortization of intangible assets				6,118			5,584
			Total operating expenses		136,119			171,567
Operating income					38,707			44,616
Other loss, net ⁽³⁾					(3,726	)		(4,069	)
Income before income taxes					34,981			40,547
Income tax expense					(11,881	)		(14,560	)
Net income				$	23,100		$	25,987
Net income per share:
	Basic			$	0.56		$	0.62
	Diluted			$	0.55		$	0.58
Weighted average shares outstanding:
	Basic				40,987			42,162
	Diluted				41,899			44,521

⁽¹⁾	Includes amortization of acquired intangible assets of $1.9 million for the three months ended March 31, 2015 and 2014.
⁽²⁾	Stock-based compensation expense was allocated among the following captions (in thousands):


		Three months ended March 31,
		2015		2014
Cost of revenues		$	49	$	159
Engineering and technology			292		429
Sales and marketing			430		919
General and administrative			1,928		1,901
	Total stock-based compensation expense	$	2,699	$	3,408

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


		Three months ended March 31,
		2015			2014
Interest income		$	(118	)	$	(108	)
Interest expense			2,768			3,015
Amortization of debt issuance costs			348			281
Accretion of debt discounts			1,131			906
Gain on third party bankruptcy settlement			(476	)		-
Other			73			(25	)
	Other loss, net	$	3,726		$	4,069


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

			March 31, 2015			December 31, 2014
ASSETS
Current assets:
	Cash and cash equivalents		$	61,854		$	46,444
	Available-for-sale investments			249,586			254,854
	Accounts receivable, net			32,522			30,988
	Other receivables			1,404			3,295
	Inventories			34,015			29,246
	Prepaid expenses and other current assets, net			10,896			13,477
		Total current assets		390,277			378,304
Property and equipment, net				16,011			15,942
Goodwill, net				304,658			304,658
Other intangible assets, net				161,635			168,919
Other long-term assets				4,525			4,891
Total assets			$	877,106		$	872,714
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	40,432		$	37,755
	Accrued expenses and other current liabilities			27,999			21,505
	Deferred revenue			7,096			7,884
	Short-term portion of long-term debt, net			-			7,914
		Total current liabilities		75,527			75,058
Long-term liabilities:
	Long-term debt, net			54,940			85,835
	Convertible senior notes, net			186,117			185,177
	Deferred tax liability, net			26,624			42,963
	Deferred revenue			2,844			1,915
	Other long-term liabilities			3,258			2,741
		Total long-term liabilities		273,783			318,631
		Total liabilities		349,310			393,689

Stockholders' equity:
	Common stock			4			4
	Additional paid-in capital			1,493,361			1,467,658
	Accumulated deficit			(964,424	)		(987,524	)
	Accumulated other comprehensive loss			(1,145	)		(1,113	)
		Total stockholders' equity		527,796			479,025
Total liabilities and stockholders' equity			$	877,106		$	872,714


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

				Three months ended March 31,
				2015			2014
Operating Activities:
	Net income			$	23,100		$	25,987
	Adjustments to reconcile net income to net cash from operating activities:
		Stock-based compensation			2,699			3,408
		Depreciation and amortization of intangible assets			9,442			8,864
		Excess tax benefits from stock-based award activity			(25,861	)		(22,743	)
		Deferred income taxes			(17,461	)		(10,423	)
		Amortization of premium on investments, net			483			1,085
		Amortization of debt issuance costs			348			281
		Accretion of debt discounts			1,131			906
		Other			107			39
	Cash provided (used) by changes in operating assets and liabilities:
		Accounts receivable			(1,575	)		1,017
		Other receivables			1,891			3,695
		Inventories			(4,769	)		(687	)
		Prepaid expenses and other current assets			3,454			347
		Other long-term assets			24			75
		Accounts payable			2,677			(5,267	)
		Deferred revenue			141			199
		Accrued expenses and other current and long-term liabilities			32,358			19,812
			Net cash provided by operating activities		28,189			26,595
Investing Activities:
		Purchases of property and equipment			(1,002	)		(1,247	)
		Purchases of intangible assets			(696	)		-
		Proceeds from sales of investments			3,304			12,272
		Proceeds from maturities of investments			68,243			68,923
		Purchases of investments			(66,833	)		(72,415	)
			Net cash provided by investing activities		3,016			7,533
Financing Activities:
		Proceeds from credit facilities			18,000			4,000
		Repayment of credit facilities			(57,000	)		(48,000	)
		Stock repurchases			(4,445	)		-
		Excess tax benefits from stock-based award activity			25,861			22,743
		Proceeds from stock option exercises			1,616			86
		Proceeds from issuance of stock through employee stock purchase plan			608			665
		Tax payments from shares withheld upon vesting of restricted stock units			(435	)		(1,091	)
			Net cash used by financing activities		(15,795	)		(21,597	)
Net increase in cash and cash equivalents					15,410			12,531
Cash and cash equivalents, beginning of period					46,444			130,225
Cash and cash equivalents, end of period				$	61,854		$	142,756


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

			Three months ended March 31,
			2015			2014
Revenues:
	Search and Content		$	58,746		$	106,765
	Tax Preparation			81,068			72,279
	E-Commerce			35,012			37,139
		Total revenues		174,826			216,183
Operating income:
	Search and Content			8,398			19,230
	Tax Preparation			44,145			37,402
	E-Commerce			2,562			3,478
	Corporate-level activity ⁽¹⁾			(16,398	)		(15,494	)
		Total operating income		38,707			44,616
Other loss, net				(3,726	)		(4,069	)
Income tax expense				(11,881	)		(14,560	)
Net income			$	23,100		$	25,987

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


		Three months ended March 31,
		2015		2014
Operating expenses		$	4,257	$	3,222
Stock-based compensation			2,699		3,408
Depreciation			1,462		1,395
Amortization of intangible assets			7,980		7,469
	Total corporate-level activity	$	16,398	$	15,494


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 March 31,
	2015		2014
Net income ⁽²⁾	$	23,100	$	25,987
Stock-based compensation		2,699		3,408
Depreciation and amortization of intangible assets		9,442		8,864
Other loss, net ⁽³⁾		3,726		4,069
Income tax expense		11,881		14,560
Adjusted EBITDA	$	50,848	$	56,888


Preliminary Non-GAAP Net Income Reconciliation ⁽¹⁾
(Unaudited)
(Amounts in thousands, except per share amounts)

	Three months ended March 31,
	2015			2014
Net income ⁽²⁾	$	23,100		$	25,987
Stock-based compensation		2,699			3,408
Amortization of acquired intangible assets		7,980			7,469
Accretion of debt discount on Convertible Senior Notes		940			874
Cash tax impact of adjustments to GAAP net income		(142	)		(54	)
Non-cash income tax expense ⁽¹⁾		8,400			12,319
Non-GAAP net income	$	42,977		$	50,003

Per diluted share:
Net income	$	0.55		$	0.58
Stock-based compensation		0.07			0.07
Amortization of acquired intangible assets		0.19			0.17
Accretion of debt discount on Convertible Senior Notes		0.02			0.02
Cash tax impact of adjustments to GAAP net income		(0.00	)		(0.00	)
Non-cash income tax expense		0.20			0.28
Non-GAAP net income per share	$	1.03		$	1.12
Weighted average shares outstanding used in computing diluted non-GAAP net income per share and its components		41,899			44,521


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

	Ranges for the three months ending June 30, 2015
Net income	$	2,500	$	5,400
Stock-based compensation		3,600		3,600
Depreciation and amortization of intangible assets		9,600		9,500
Other loss, net ⁽³⁾		3,800		3,500
Income tax expense		1,300		2,800
Adjusted EBITDA	$	20,800	$	24,800


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

	Ranges for the three months ending June 30, 2015
Net income	$	2,500	$	5,400
Stock-based compensation		3,600		3,600
Amortization of acquired intangible assets		8,000		8,000
Accretion of debt discount on Convertible Senior Notes		1,000		1,000
Non-cash income tax expense		1,000		2,000
Non-GAAP net income	$	16,100	$	20,000

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, 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, adjustments to contingent liabilities related to business combinations, and gain on third party bankruptcy settlement.