Blucora Reports Third Quarter Results

  Blucora Reports Third Quarter Results

Business Wire

BELLEVUE, Wash. -- November 5, 2013

Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the third
quarter ended September 30, 2013.

“Our businesses performed well in the third quarter,” said Bill Ruckelshaus,
President and Chief Executive Officer of Blucora. “InfoSpace is executing
through changes in the search marketplace and TaxACT is readying for the
coming tax season. We were also thrilled to add Monoprice to our Company in
the third quarter. I am pleased with the focus of our teams and optimistic
about the many opportunities in front of us at Blucora.”


Summary Financial Performance: 3Q 2013

($ in millions except per share amounts)
                                Q3 2013          Q3 2012          Growth
Revenues                         $124.1           $92.9            34%
                                                                     
Search                           $107.7            $91.4             18%
Tax Preparation                  $1.7              $1.5              20%
E-Commerce                       $14.6             N/A               N/A
                                                                     
Adjusted EBITDA                  $16.6             $12.1             37%
Non-GAAP Net Income              $13.0             $10.4             24%
Non-GAAP Diluted EPS             $0.30             $0.25             21%
                                                                     
Net Loss*                        $(6.5)            $(2.4)            N/A
GAAP Diluted EPS (Loss)*         $(0.16)           $(0.06)           N/A
                                                                     
* Net Loss and GAAP Diluted EPS includes a $4.0 million and $4.3 million
non-cash loss on derivative instrument in 3Q13 and 3Q12, respectively; and
3Q13 includes an additional $5.3 million in non-recurring charges. See
reconciliation of non-GAAP to GAAP measures in table below.


Segment Information

During the third quarter of 2013, Blucora acquired Monoprice, an online
provider of self-branded consumer electronics and accessories for both
consumers and businesses. As a result of the acquisition, the Company has
changed its reporting to reflect how it measures the operating performance of
its businesses. Blucora will now report three segments: Search, Tax
Preparation, and E-Commerce.

The operating segments exclude allocations for corporate operating expenses
(certain general, administrative, and other overhead costs), depreciation,
amortization of intangible assets, and other charges and non-operating gains
or losses.

Search

Performance in the third quarter of 2013 reflects growth in InfoSpace owned
and operated properties and the addition of new search distribution partners.
Segment revenue for the third quarter of 2013 was $107.7 million, up 18
percent over the third quarter of 2012.

Segment income was $21.3 million, up 30 percent over prior year.

Tax Preparation

Tax Preparation revenue for the third quarter of 2013 was $1.7 million, up 20
percent over the same period last year. Segment loss for the third quarter was
$1.6 million.

E-Commerce

Blucora completed the acquisition of Monoprice on August 22, 2013. Third
quarter results include Monoprice from the acquisition close date through
September 30, 2013. E-Commerce revenue for the third quarter of 2013 was $14.6
million. E-Commerce segment income was $0.9 million or 6 percent of segment
revenue, and reflects certain purchase accounting adjustments.

Corporate Operating Expenses

Unallocated corporate operating expenses for the third quarter of 2013, which
includes costs associated with the acquisition of Monoprice, were $4.0
million.

Fourth Quarter Outlook

For the fourth quarter of 2013, the Company expects revenues to be between
$156.0million and $164.0 million, Adjusted EBITDA to be between $19.5 million
and $22.0million, Non-GAAP Net Income to be between $15.0 million and $17.5
million, or $0.34 to $0.39 per diluted share, and Net Income to be between
$2.0 million and $3.5million, or $0.04 to $0.08per 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 will be held today at 2p.m. Pacific time (5p.m. Eastern
time) during which the Company will further discuss third quarter results and
its outlook including tax preparation segment guidance for the first half of
2014. The live webcast and supplemental materials are included in a current
report on form 8-K 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 (NASDAQ: BCOR), one of FORTUNE® Magazine’s 100 Fastest-Growing
Companies in 2013,owns a portfolio of leading Internet businesses. InfoSpace
provides online search and monetization solutions to a network of more than
100 partners globally. TaxACT provides digital DIY tax preparation services to
individual consumers and professional preparers. Monoprice is an online
provider of self-branded consumer electronics and accessories for both
consumers and businesses. TheBlucorateam brings decades of experience
operating and investing in digitally-enabled businesses. More information
aboutBlucoramay be found at www.blucora.com. Follow and subscribe to Blucora
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; 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 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 (1)
(Unaudited)
(Amounts in thousands, except per share data)
                                                                             
                   Three months ended                Nine months ended
                   September 30,     September 30,   September     September
                                                     30,           30,
                     2013             2012          2013         2012
Revenues:
Services           $  109,491        $  92,870       $ 392,010     $ 309,449
revenue
Product revenue      14,630           -             14,630       -
                                                                             
Total revenues        124,121           92,870        406,640      309,449
                                                                             
Operating
expenses:
Cost of
revenues:
Services cost
of revenue
(includes
amortization of
acquired              72,935            69,918         219,274       192,308
intangible
assets of
$1,906, $2,014,
$5,773 and
$5,605)
Product cost of      10,622           -             10,622       -
revenue
                                                                             
Total cost of         83,557            69,918        229,896      192,308
revenues (1)
                                                                             
Engineering and       2,905             2,410          7,951         7,431
technology (1)
Sales and             18,230            7,796          71,409        37,492
marketing (1)
General and
administrative        8,421             5,283          21,362        21,705
(1)
Depreciation          697               560            1,738         1,627
Amortization of
intangible           4,184            3,169         10,521       8,450
assets
                                                                             
Total operating      117,994          89,136       342,877     269,013
expenses
                                                                             
Operating             6,127             3,734          63,763        40,436
income
Other loss, net      (13,118  )       (5,196  )     (20,427 )    (7,681  )
(2)
                                                                             
Income (loss)
before income         (6,991   )        (1,462  )      43,336        32,755
taxes
Income tax
benefit              510              (936    )     (17,803 )    (14,049 )
(expense)
                                                                             
Net income         $  (6,481   )     $  (2,398  )    $ 25,533      $ 18,706
(loss)
                                                                             
Income (loss)
per share:
Basic              $  (0.16    )     $  (0.06   )    $ 0.62        $ 0.47
Diluted            $  (0.16    )     $  (0.06   )    $ 0.60        $ 0.45
                                                                             
Weighted
average shares
outstanding:
Basic                 41,088            40,511         41,048        40,108
Diluted               41,088            40,511         42,878        41,425
                                                                             
(1) In the nine months ended September 30, 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 and
nine months ended September 30, 2013 and 2012 is allocated among the
following captions (in thousands):
                                                                             
                   Three months ended                Nine months ended
                   September 30,     September 30,   September     September
                                                     30,           30,
Stock-Based           2013              2012           2013          2012
Compensation
Cost of            $  94             $  183          $ 541         $ 331
revenues
Engineering and       370               332            942           894
technology
Sales and             649               587            1,652         1,389
marketing
General and          2,139            1,093         5,355        8,309
administrative
Total
stock-based        $  3,252          $  2,195        $ 8,490       $ 10,923
compensation
expense
                                                                             
(2) Other loss, net for the three and nine months ended September 30, 2013
and 2012 is allocated among the following captions (in thousands):
                                                                             
                   Three months ended                Nine months ended
                   September 30,     September 30,   September     September
                                                     30,           30,
                      2013              2012           2013          2012
Other Loss, Net
Interest income    $  (42      )     $  (18     )    $ (206    )   $ (79     )
Interest              2,669             794            6,707         2,647
expense
Amortization of
debt issuance         258               83             841           746
costs
Accretion of          862               34             1,972         294
debt discount
Loss on
derivative            3,956             4,335          5,931         4,274
instrument
Impairment of
equity
investment in         3,711             -              3,711         -
privately-held
company
Loss on debt
extinguishment
and                   1,593             -              1,593         -
modification
expense
Other                111              (32     )     (122    )    (201    )
Total other        $  13,118         $  5,196        $ 20,427      $ 7,681
loss, net
                                                                             


Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
                                                              
                                                 September 30,   December 31,
                                                  2013           2012
ASSETS
                                                                 
Current assets:
Cash and cash equivalents                        $ 97,821        $ 68,278
Short-term investments, available-for-sale         150,561         94,010
Accounts receivable, net of allowance of $31       46,896          34,932
and $10
Other receivables                                  8,943           3,942
Inventory                                          26,577          -
Prepaid expenses and other current assets, net    6,928          10,911
                                                                 
Total current assets                               337,726         212,073
                                                                 
Property and equipment, net                        15,165          7,533
Goodwill                                           343,139         230,290
Other intangible assets, net                       185,421         132,815
Other long-term assets                            6,043          2,582
                                                                 
Total assets                                     $ 887,494       $ 585,293
                                                                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                 
Current liabilities:
Accounts payable                                 $ 50,862        $ 37,687
Accrued expenses and other current liabilities     26,278          13,280
Deferred revenue                                   6,195           3,157
Short-term portion of long-term debt, net of       -               4,590
discount of $0 and $160
Derivative instruments                            14,495         8,974
                                                                 
Total current liabilities                          97,830          67,688
                                                                 
Long-term liabilities:
Long-term debt, net of discount of $264 and        65,120          69,278
$468
Convertible senior notes                           180,725         -
Deferred tax liability, net                        56,020          29,333
Deferred revenue                                   2,143           1,319
Other long-term liabilities                       2,022          2,225
                                                                 
Total long-term liabilities                       306,030        102,155
                                                                 
Total liabilities                                  403,860         169,843
                                                                 
Stockholders' equity:
Common stock                                       4               4
Additional paid-in capital                         1,434,471       1,392,098
Accumulated deficit                                (950,843  )     (976,376  )
Accumulated other comprehensive income (loss)     2              (276      )
                                                                 
Total stockholders' equity                        483,634        415,450
                                                                 
Total liabilities and stockholders' equity       $ 887,494       $ 585,293
                                                                             


Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
                                               
                                                 Nine months ended
                                                 September 30,  September 30,
                                                   2013           2012
Operating activities:
Net income                                       $  25,533       $  18,706
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock-based compensation                            8,490           6,637
Warrant-related stock-based compensation            -               4,286
Loss on derivative instrument                       5,931           4,274
Depreciation and amortization of intangible         19,413          16,950
assets
Excess tax benefits from stock-based award          (24,596  )      (20,882  )
activity
Deferred income taxes                               (8,209   )      (7,398   )
Unrealized amortization of premium on               857             (335     )
investments, net
Loss on equity investment in privately-held         289             -
company
Impairment loss on equity investment in             3,711           -
privately-held company
Amortization of debt issuance costs                 841             746
Accretion of debt discount                          1,972           294
Loss on debt extinguishment and modification        1,593           -
expense
Interest expenses incurred but not paid due to      199             -
refinance
Other                                               120             (21      )
Cash provided (used) by changes in operating
assets and liabilities:
Accounts receivable                                 (8,756   )      (907     )
Other receivables                                   1,090           504
Inventory                                           900             -
Prepaid expenses and other current assets           6,694           705
Other long-term assets                              (2,296   )      (612     )
Accounts payable                                    1,873           (2,344   )
Deferred revenue                                    2,563           3,183
Accrued expenses and other current and             27,176         15,174
long-term liabilities
Net cash provided by operating activities           65,388          38,960
                                                                 
Investing activities:
Business acquisition, net of cash acquired          (180,500 )      (279,386 )
Equity investment in privately-held company         (4,000   )      -
Purchases of property and equipment                 (3,066   )      (2,776   )
Change in restricted cash                           2,491           168
Proceeds from sales of investments                  25,825          184,934
Proceeds from maturities of investments             151,561         32,125
Purchases of investments                           (234,771 )     (59,076  )
Net cash used by investing activities               (242,460 )      (124,011 )
                                                                 
Financing activities:
Proceeds from issuance of convertible debt,         194,818         -
net of debt issuance costs of $6,432
Proceeds from loan, net of debt issuance costs      -               96,704
of $2,343 and debt discount of $953
Debt issuance costs on credit facility              (28      )      -
Repayment of debt                                   (10,000  )      (25,504  )
Stock repurchases                                   (3,525   )      -
Excess tax benefits from stock-based award          24,596          20,882
activity
Proceeds from stock option exercises                1,700           7,812
Proceeds from issuance of stock through             1,065           601
employee stock purchase plan
Tax payments from shares withheld upon vesting     (2,011   )     (934     )
of restricted stock units
Net cash provided by financing activities           206,615         99,561
                                                                 
Net increase in cash and cash equivalents           29,543          14,510
                                                                 
Cash and cash equivalents:
Beginning of period                                68,278         81,897
End of period                                    $  97,821       $  96,407
                                                                             


Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
                                                              
                   Three months ended              Nine months ended
                   September 30,   September 30,   September 30,   September
                                                                   30,
                     2013           2012           2013          2012
                                                                   
Revenue
Search             $  107,742      $  91,408       $  302,840      $ 248,511
Tax Preparation       1,749           1,462           89,170         60,938
E-Commerce           14,630         -              14,630        -
Total revenue         124,121         92,870          406,640        309,449
                                                                   
Operating income
(loss)
Search                21,319          16,356          57,501         44,807
Tax Preparation       (1,605   )      (1,561   )      43,617         32,528
E-Commerce            906             -               906            -
Corporate-level      (14,493  )     (11,061  )     (38,261  )    (36,899 )
activity
Total operating       6,127           3,734           63,763         40,436
income
                                                                   
Other loss, net       (13,118  )      (5,196   )      (20,427  )     (7,681  )
Income tax
benefit              510            (936     )     (17,803  )    (14,049 )
(expense)
Net income         $  (6,481   )   $  (2,398   )   $  25,533       $ 18,706
(loss)
                                                                             

                                                               
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                Nine months ended
                   September 30,    September 30,    September      September
                                                     30,            30,
                     2013            2012            2013         2012
Net income         $  (6,481  )     $  (2,398  )     $  25,533      $ 18,706
(loss) (2)
Depreciation
and
amortization of       7,216            6,171            19,413        16,950
intangible
assets
Stock-based           3,252            2,195            8,490         10,923
compensation
Other loss, net       13,118           5,196            20,427        7,681
(3)
Income tax
expense              (510    )       936             17,803       14,049
(benefit)
Adjusted EBITDA    $  16,595        $  12,100        $  91,666      $ 68,309
                                                                    
                                                                    
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                Nine months ended
                   September 30,    September 30,    September      September
                                                     30,            30,
                     2013            2012            2013         2012
Net income         $  (6,481  )     $  (2,398  )     $  25,533      $ 18,706
(loss) (2)
Stock-based           3,252            2,195            8,490         10,923
compensation
Amortization of
acquired              6,090            5,183            16,294        14,055
intangible
assets
Accretion of
debt discount         843              -                1,816         -
on convertible
notes
Loss on
derivative            3,956            4,335            5,931         4,274
instrument
Impairment of
equity
investment in         3,711            -                3,711         -
privately-held
company
Loss on debt
extinguishment
and                   1,593            -                1,593         -
modification
expense
Cash tax impact
of adjustments        (1      )        (15     )        (181    )     (102   )
to GAAP net
income
Non-cash income      7               1,121           16,412       12,899
tax expense (1)
Non-GAAP net       $  12,970        $  10,421        $  79,599      $ 60,755
income (4)
                                                                    
Per share
amounts
Net income
(loss) -              (0.16   )        (0.06   )        0.60          0.45
diluted
Stock-based
compensation -        0.08             0.05             0.20          0.27
diluted
Amortization of
intangible            0.14             0.12             0.38          0.34
assets -
diluted
Accretion of
debt discount         0.02             -                0.04          -
on convertible
notes - diluted
Loss on
derivative            0.09             0.11             0.13          0.10
instrument -
diluted
Impairment of
equity
investment in         0.09             -                0.09          -
privately-held
company -
diluted
Loss on debt
extinguishment
and                   0.04             -                0.04          -
modification
expense -
diluted
Cash tax impact
of adjustments
to GAAP net           -                (0.00   )        (0.00   )     (0.00  )
income -
diluted
Non-cash income
tax expense per      0.00            0.03            0.38         0.31
share - diluted
Non-GAAP net
income per         $  0.30          $  0.25          $  1.86        $ 1.47
share - diluted
                                                                    
Weighted
average shares
outstanding
used in
computing            43,142          42,048          42,878       41,425
diluted
non-GAAP income
per share and
its components
                                                                    
                                                                    
Preliminary Adjusted EBITDA Reconciliation for
Forward-Looking Guidance
(Amounts in thousands)
                                                                    
                   Ranges for the three months
                   ending
                   December 31, 2013
Net income         $  2,000         $  3,500
Depreciation
and
amortization of       8,800            8,700
acquired
intangible
assets
Stock-based           3,300            3,200
compensation
Other loss, net       3,900            3,900
(5)
Income tax           1,500           2,700
benefit
Adjusted EBITDA    $  19,500        $  22,000
                                                                    
                                                                    
Preliminary Non-GAAP Net Income Reconciliation
for Forward-Looking Guidance
(Amounts in thousands)
                                                                    
                   Ranges for the three months
                   ending
                   December 31, 2013
Net loss           $  2,000         $  3,500
Stock-based           3,300            3,200
compensation
Amortization of
intangible            7,500            7,500
assets
Accretion of          900              900
debt discount
Non-cash income       1,300            2,400
tax benefit
Non-GAAP net       $  15,000        $  17,500
income
                                                                    
(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, other than temporary
impairment losses on equity investments, losses on debt extinguishments and
modifications, 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 it has
defined it in the past, due to the refinance of the term debt and impairment
of equity investments in privately-held company. 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
instrument, other than temporary impairment losses on equity investments,
losses on debt extinguishments and modification expenses, 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, net primarily includes such items as interest expense,
interest income, derivative instrument gains or losses, accretion of debt
discount, amortization of debt issuance costs, other than temporary impairment
losses on equity investments, and losses on debt extinguishments and
modification expenses.

(4) The Company’s new definition of non-GAAP net income does not impact
presentation of this non-GAAP financial measure for prior periods.

(5) Other loss, net primarily includes such items as interest expense,
interest income, derivative instrument gains or losses, accretion of debt
discount and amortization of debt issuance costs, other than temporary
impairment losses on equity investments, losses on debt extinguishments and
modification expenses. The Company's forward-looking guidance does not reflect
potential gains or losses from derivative instruments.
                                                                    

Contact:

Blucora, Inc.
Stacy Ybarra, 425-709-8127
stacy.ybarra@blucora.com