Blucora Announces First Quarter Results and Preliminary Tax Season Update Strong operating performance for TaxACT, full season gains in DDIY market share Business Wire BELLEVUE, Wash. -- May 02, 2013 Blucora, Inc. (NASDAQ:BCOR) today announced financial results for the first quarter ended March 31, 2013. “Blucora is off to a strong start in 2013 in both the online search and tax preparation segments of the business,” said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. “We are especially pleased with the growth of TaxACT and our success in building DDIY market share in a highly-competitive and unpredictable tax season. The TaxACT results reflect the team’s strong execution, successful product enhancements this season and our ability to drive consumer demand.” Highlights *TaxACT consumer DDIY federal e-files were 5.3 million, up approximately 8% versus the same period last year *TaxACT pro forma revenue expected to grow approximately 9% for the six months through June 30, 2013 versus the same period last year *Search segment revenue and income up 34% and 37%, respectively, versus the first quarter of 2012 *Blucora issued $201.25 million of convertible senior notes Summary Financial Performance: 1Q 2013 ($ in millions except per share amounts) Q1 2013 Q1 2012* Growth Revenues $165.3 $115.7 43% Search $100.6 $75.3 34% Tax Preparation $ 64.7 $ 40.4 60% Adjusted EBITDA $45.9 $31.7 45% Non-GAAP Net Income $42.0 $28.5 47% Non-GAAP Diluted EPS $0.95 $0.70 36% Net Income $23.6 $11.4 107% GAAP Diluted EPS $0.53 $0.28 89% * Q1 2012 results include results for TaxACT from the acquisition on January 31, 2012 through March 31, 2012. See reconciliation of non-GAAP to GAAP measures below. Segment Information Search Search segment revenue for the first quarter of 2013 reflects strong growth from search distribution and in our owned and operated properties, up 35 percent and 27 percent, respectively, over the first quarter of 2012. Search segment income for the first quarter of 2013 was $18.3 million, up 37 percent over the first quarter of 2012. Tax Preparation TaxACT Season-to-date Federal Tax season ended Accepted E-Files* April 16, 2013 April 18, 2012 % change TaxACT desktop e-files 270 256 5% TaxACT online e-files 4,865 4,490 8% TaxACT sub-total e-files 5,135 4,746 8% TaxACT Free File Alliance e-files 147 160 (8)% TaxACT total e-files 5,282 4,906 8% *Tax Season begins on the first day the IRS begins accepting e-files and continues through tax day +1. Tax preparation segment income for the first quarter of 2013 was $30.8 million, up 39 percent over the first quarter of 2012. The first quarter of 2012 excludes TaxACT operating results before January 31, 2012, as the Company acquired TaxACT on that date. For the six months through June 30, 2013, TaxACT expects pro forma revenue growth of approximately 9 percent and pro forma segment income to be up approximately 7 - 8 percent compared to the same period last year. TaxACT consumer DDIY federal e-files for the tax season were approximately 5.3 million, up approximately 8 percent compared to the same period last year. According to IRS statistics through April 19, total consumer DDIY federal e-files for the tax season were up 1.8 million, or 4 percent compared to the same period last year. TaxACT professional preparer filings for the tax season grew approximately 10 percent compared to the same period last year. Combined TaxACT offerings assisted approximately 6.5 million filers this tax season. Corporate Operating Expenses Unallocated corporate operating expenses for the first quarter of 2013 were $3.2 million, down 16 percent from the first quarter of 2012. Second Quarter Outlook For the second quarter of 2013, the Company expects revenues to be between $113.0million and $117.5 million, Adjusted EBITDA to be between $27.0 million and $28.5million, Non-GAAP Net Income to be between $22.0 million and $23.5 million, or $0.51 to $0.55 per diluted share, and Net Income to be between $9.0 and $10.0million, or $0.21 to $0.23per diluted share. The Company's forward-looking guidance does not reflect potential gains or losses from derivative instruments. Conference Call and Webcast A conference call and live webcast will be held today at 2p.m. Pacific time / 5p.m. Eastern time during which the Company will further discuss first quarter results and its outlook including tax preparation segment guidance for the second quarter of 2013, search segment guidance for the second quarter 2013, and search segment expectations for 2013. The 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 for one year and are may be accessed under the “Events & Presentations” section of the Investor Center. You may also listen to the conference call audio on the Blucora YouTube Channel at www.YouTube.com/Blucora. About Blucora™ Blucora operates two leading Internet businesses. OurInfoSpacebusiness provides online search and monetization solutions to a network of more than 100 partners globally. Through TaxACT, we provide online tax preparation solutions to consumers and professional preparers. The Blucora team brings decades of experience operating and investing in desktop, online, and mobile businesses. We are passionate about the power of the Internet to improve the lives of consumers, and our businesses operate at the forefront of digital migration trends in their respective markets. More information about Blucora may be found atwww.blucora.com. Follow and subscribe to us on Twitter, LinkedIn andYouTube. 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 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, 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 Annual Report on Form 10-K 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 ^(1) (Unaudited) (Amounts in thousands, except per share data) Three months ended March 31, March 31, 2013 2012 Revenues $ 165,338 $ 115,696 Cost of sales (includes amortization of acquired 78,675 59,547 intangible assets of $1,940 and $1,511) ^(1) Gross profit 86,663 56,149 Expenses and other loss, net: Engineering and 2,538 2,573 technology ^(1) Sales and marketing ^(1) 36,796 19,443 General and 6,384 11,066 administrative ^(1) Depreciation 517 535 Amortization of 3,169 2,113 intangible assets Other loss, net ^(2) 1,005 1,555 Total expenses and other 50,409 37,285 loss, net Income before income 36,254 18,864 taxes Income tax expense (12,646 ) (7,458 ) Net income $ 23,608 $ 11,406 Net income per share - $ 0.58 $ 0.29 Basic Net income per share - $ 0.53 $ 0.28 Diluted ^(3) Weighted average shares outstanding used in 40,911 39,692 computing basic net income per share Weighted average shares outstanding used in 44,294 40,978 computing diluted net income per share ^(1) In the three months ended March 31, 2012, an additional $5.2 million in stock-based compensation expense was recorded in association with the modification of the terms of a warrant and the vesting of a non-employee performance-based equity award, which were both triggered by the acquisition of the TaxACT business, and the related expense was allocated to general and administrative expense.Stock-based compensation expense for the three months ended March 31, 2013 and 2012 is allocated among the following captions (in thousands): Three months ended Stock-Based Compensation March 31, March 31, 2013 2012 Cost of sales $ 219 $ 80 Engineering and 253 256 technology Sales and marketing 477 414 General and 1,536 5,958 administrative Total stock-based $ 2,485 $ 6,708 compensation expense ^(2) Other loss, net for the three months ended March 31, 2013 and 2012 is allocated among the following captions (in thousands): Three months ended March 31, March 31, 2013 2012 Other Loss, Net Interest income $ (55 ) $ (9 ) Interest expense 1,148 844 Amortization of debt 107 331 issuance costs Accretion of debt 161 135 discount (Gain) loss on (348 ) 272 derivative instruments Other (8 ) (18 ) Total other loss, net $ 1,005 $ 1,555 ^(3) Calculation excludes the income effect of dilutive derivative instruments, as well as interest expense, amortization of debt issuance costs and accretion of debt discount on convertible debt, net of tax effect. Blucora, Inc. Preliminary Condensed Consolidated Balance Sheets (Unaudited) (Amounts in thousands) March 31, December 31, 2013 2012 ASSETS Current assets: Cash and cash equivalents $ 264,635 $ 68,278 Short-term investments, available-for-sale 137,042 94,010 Accounts receivable, net of allowance of $133 41,256 34,932 and $10 Other receivables 4,226 3,942 Prepaid expenses and other current assets, net 7,842 10,911 Total current assets 455,001 212,073 Property and equipment, net 9,269 7,533 Goodwill 230,290 230,290 Other intangible assets, net 127,706 132,815 Other long-term assets 11,255 2,582 Total assets $ 833,521 $ 585,293 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 41,043 $ 37,687 Accrued expenses and other current liabilities 20,440 13,280 Deferred revenue 3,121 3,157 Short-term portion of long-term debt, net of 6,948 4,590 discount of $177 and $160 Derivative instruments 8,564 8,974 Total current liabilities 80,116 67,688 Long-term liabilities: Long-term debt, net of discount of $422 and 66,949 69,278 $468 Convertible senior notes 179,041 - Deferred tax liability 31,602 29,333 Deferred revenue 2,477 1,319 Other long-term liabilities 2,283 2,225 Total long-term liabilities 282,352 102,155 Total liabilities 362,468 169,843 Stockholders' equity: Common stock 4 4 Additional paid-in capital 1,424,009 1,392,098 Accumulated deficit (952,768 ) (976,376 ) Accumulated other comprehensive loss (192 ) (276 ) Total stockholders' equity 471,053 415,450 Total liabilities and stockholders' equity $ 833,521 $ 585,293 Blucora, Inc. Preliminary Condensed Consolidated Statements of Cash Flows (Unaudited) (Amounts in thousands) Three months ended March 31, March 31, 2013 2012 Operating activities: Net income $ 23,608 $ 11,406 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation 2,485 2,422 Warrant-related stock-based compensation - 4,286 (Gain) loss on derivative instruments (348 ) 272 Depreciation and amortization of intangible 6,112 4,575 assets Excess tax benefits from stock-based award (17,842 ) (12,058 ) activity Deferred income taxes (6,668 ) (5,462 ) Unrealized amortization of premium or accretion 391 (327 ) of discount on investments, net Amortization of debt issuance costs 107 331 Accretion of debt discount 161 135 Other 55 26 Cash provided (used) by changes in operating assets and liabilities: Accounts receivable (6,225 ) 2,971 Other receivables (284 ) 657 Prepaid expenses and other current assets 3,587 (1,564 ) Other long-term assets (114 ) 1,863 Accounts payable 3,122 (3,713 ) Deferred revenue 1,122 2,054 Accrued expenses and other current and long-term 22,486 11,174 liabilities Net cash provided by operating activities 31,755 19,048 Investing activities: Business acquisition, net of cash acquired - (279,386 ) Equity investment in privately-held company (4,000 ) - Purchases of property and equipment (1,543 ) (193 ) Change in restricted cash 231 767 Proceeds from sales of investments - 163,883 Proceeds from maturities of investments 18,718 20,020 Purchases of investments (62,077 ) - Net cash used by investing activities (48,671 ) (94,909 ) Financing activities: Proceeds from issuance of convertible debt, net 195,213 - of debt issuance costs of $6,037 Proceeds from loan, net of debt issuance costs of - 96,704 $2,343 and debt discount of $953 Repayment of debt - (15,000 ) Excess tax benefits from stock-based award 17,842 12,058 activity Proceeds from stock option exercises 293 2,063 Proceeds from issuance of stock through employee 461 189 stock purchase plan Tax payments from shares withheld upon vesting of (536 ) (210 ) restricted stock units Net cash provided by financing activities 213,273 95,804 Net increase in cash and cash equivalents 196,357 19,943 Cash and cash equivalents: Beginning of period 68,278 81,897 End of period $ 264,635 $ 101,840 Blucora, Inc. Preliminary Segment Information (Unaudited) (Amounts in thousands) Three months ended March 31, March 31, 2013 2012 Search: Revenue $ 100,601 $ 75,295 Cost of revenue ^(1) 70,618 53,106 Operating expenses 11,713 8,816 Search segment income 18,270 13,373 Search segment margin 18 % 18 % Tax Preparation: Revenue 64,737 40,401 Cost of revenue ^(1) 2,214 2,579 Operating expenses 31,739 15,687 Tax Preparation segment 30,784 22,135 income Tax Preparation segment 48 % 55 % margin Total segment: Total revenue 165,338 115,696 Total cost of revenue 72,832 55,685 Total segment operating 43,452 24,503 expenses Total segment income 49,054 35,508 Total segment margin 30 % 31 % Corporate: Operating expense 3,198 3,806 Stock-based 2,485 6,708 compensation Depreciation 1,003 951 Amortization of 5,109 3,624 intangible assets Other loss, net 1,005 1,555 Income tax expense 12,646 7,458 Total corporate 25,446 24,102 Net income $ 23,608 $ 11,406 ^(1) Amounts do not include amortization of acquired intangible assets and certain costs associated with customer service and the operation of the data centers that serve our businesses, which include personnel expenses (which include salaries, benefits and other employee related costs, and stock-based compensation expense), the cost of temporary help and contractors to augment our staffing, bandwidth costs and depreciation.Such amounts are reflected under the heading "Corporate". Blucora, Inc. Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measure Preliminary Adjusted EBITDA Reconciliation ^(1) (Unaudited) (Amounts in thousands) Three months ended March 31, March 31, 2013 2012 Net income ^(2) $ 23,608 $ 11,406 Depreciation and amortization of 6,112 4,575 intangible assets Stock-based compensation 2,485 6,708 Other loss, net ^(3) 1,005 1,555 Income tax expense 12,646 7,458 Adjusted EBITDA $ 45,856 $ 31,702 Blucora, Inc. Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measure Preliminary Non-GAAP Net Income Reconciliation ^(1) (Unaudited) (Amounts in thousands, except per share amounts) Three months ended March 31, March 31, 2013 2012 Net income ^(2) $ 23,608 $ 11,406 Stock-based compensation 2,485 6,708 Amortization of acquired intangible 5,109 3,624 assets Accretion of debt discount on convertible 132 - notes (Gain) loss on derivative instruments (348 ) 272 Cash tax impact of adjustments to GAAP (163 ) (90 ) net income Non-cash income tax expense ^(1) 11,174 6,597 Non-GAAP net income ^(4) $ 41,997 $ 28,517 Per share amounts Net income - diluted ^(5) 0.53 0.28 Stock-based compensation - diluted 0.06 0.16 Amortization of intangible assets - 0.11 0.09 diluted Accretion of debt discount on convertible 0.00 - notes - diluted (Gain) loss on derivative instruments - 0.00 0.01 diluted Cash tax impact of adjustments to GAAP 0.00 0.00 net income - diluted Non-cash income tax expense per share - 0.25 0.16 diluted Non-GAAP net income per share - diluted $ 0.95 $ 0.70 Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance (Amounts in thousands) Ranges for the three months ending June 30, 2013 Net income $ 9,000 $ 10,000 Depreciation and amortization of acquired 6,100 6,100 intangible assets Stock-based compensation 2,800 2,800 Accretion of debt discount 800 800 Other loss (income), net ^(6) 3,400 3,400 Income tax expense 4,900 5,400 Adjusted EBITDA $ 27,000 $ 28,500 Preliminary Non-GAAP Net Income Reconciliation for Forward-Looking Guidance (Amounts in thousands) Ranges for the three months ending June 30, 2013 Net income $ 9,000 $ 10,000 Stock-based compensation 2,800 2,800 Amortization of intangible assets 5,100 5,100 Accretion of debt discount 800 800 Non-cash income tax expense 4,300 4,800 Non-GAAP net income $ 22,000 $ 23,500 ^(1) Blucora’s Adjusted EBITDA is calculated by adjusting net income determined in accordance with the accounting principles generally accepted in the United States of America ("GAAP"), excluding the effects of discontinued operations (which includes loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes), income taxes, depreciation, amortization of intangible assets, stock-based compensation expense, and other loss (income), net (which includes such items as interest expense, interest income, gains or losses on derivative instruments, foreign currency gains or losses, gains or losses from the disposal of assets, adjustments to the fair values of contingent liabilities related to business combinations, gains on resolution of contingencies, and litigation settlements), as detailed above. Blucora’s management believes that Adjusted EBITDA provides meaningful supplemental information regarding the Company’s performance. Blucora uses 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. Blucora believes that Adjusted EBITDA is a common measure used by investors and analysts to evaluate its performance, that it provides a more complete understanding of the results of operations and trends affecting the Company's 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 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, Blucora's Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Blucora defines non-GAAP net income differently for this report than the Company has defined it in the past, due to issuance of the senior convertible notes in March 2013. For this report, Blucora defines non-GAAP net income as net income, determined in accordance with GAAP, excluding the effects of loss from discontinued operations, net of taxes, stock-based compensation expense, amortization of acquired intangible assets, accretion of debt discount on convertible notes, gain or loss on derivative instruments, and the related cash tax impact of those adjustments, and non-cash income taxes from continuing operations as detailed in the accompanying table to the preliminary condensed consolidated financial statements (unaudited). The Company excludes the non-cash portion of income tax expense because of its ability to offset a substantial portion of its cash tax liabilities by using these deferred tax assets (which consist primarily of U.S. federal net operating losses). The Company’s management believes that excluding the non-cash portion of income tax expense from its GAAP net income provides meaningful supplemental information to investors and analysts regarding the Company’s performance and the valuation of its business because of its ability to offset a substantial portion of its cash tax liabilities by using these deferred tax assets. The majority of these deferred tax assets will expire if unutilized in 2020. Blucora’s management believes that non-GAAP net income and non-GAAP earnings per share provide meaningful supplemental information to management, investors and analysts regarding the Company's performance and the valuation of its business by excluding items in the statement of operations that management does not consider part of the Company's ongoing operations or have not been, or are not expected to be, settled in cash. Additionally, Blucora's management believes that non-GAAP net income and non-GAAP earnings per share are common measures used by investors and analysts to evaluate the Company's performance and the valuation of its 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 Blucora's 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 (income), net includes such items as interest expense, interest income, derivative instrument gains or losses, accretion of debt discount and amortization of debt issuance costs, foreign currency gains or losses, and gains or losses from the disposal of assets, ^(4) Our new definition of non-GAAP net income does not impact presentation of this non-GAAP financial measure for prior periods. ^(5) Calculation excludes the income effect of dilutive derivative instruments as well as interest expense, amortization of debt issuance costs and accretion of debt discount on convertible debt, net of tax effect. ^(6) Other loss (income), net includes such items as interest expense, interest income, derivative instrument gains or losses, foreign currency gains or losses, gains or losses from the disposal of assets, adjustments to the fair values of contingent liabilities related to business combinations, gains on resolution of contingencies, and litigation settlements. The Company's forward-looking guidance does not reflect potential gains or losses from derivative instruments. Contact: Blucora, Inc. Stacy Ybarra, 425-709-8127 firstname.lastname@example.org
Blucora Announces First Quarter Results and Preliminary Tax Season Update
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