Blucora Announces Fourth Quarter and Full Year 2013 Results

  Blucora Announces Fourth Quarter and Full Year 2013 Results

Business Wire

BELLEVUE, Wash. -- February 20, 2014

Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the fourth
quarter and full year ended December 31, 2013.

“We are pleased with our results for the fourth quarter and full year,” said
Bill Ruckelshaus, President and Chief Executive Officer of Blucora.“Our
businesses participate in large and growing markets and they are well
positioned going forward.”


Summary Financial Performance: Q4 and Full Year 2013
($ in millions except per share amounts)
               Q4 2013       Q4       Growth    FY 2013   FY      Growth
                               2012                            2012
Revenue         $ 167.3       $97.5    72%       $574.0    $406.9  41%
Search          $ 125.6        $96.3     30%        $428.5     $344.8   24%
Tax             $ 2.0          $ 1.2     75%        $ 91.2     $ 62.1   47%
Preparation
E-Commerce      $ 39.7         N/A       N/A        $          N/A      N/A
                                                    54.3^(1)
                                                                        
Adjusted        $ 22.6         $12.1     86%        $114.2     $80.4    42%
EBITDA
Non-GAAP Net    $ 18.1         $10.0     81%        $ 97.7     $70.8    38%
Income
Non-GAAP        $ 0.40         $0.24     67%        $ 2.25     $1.70    32%
Diluted EPS
                                                                        
GAAP Net                                            $
Income          $ (1.1)^(2)    $ 3.8     -130%      24.4^(2)   $ 22.5   8%
(Loss)
GAAP Diluted
Income          $              $0.04     -175%      $          $ 0.54   4%
(Loss) Per      (0.03)^(2)                          0.56^(2)
Share

1) Blucora completed the acquisition of Monoprice on August 22, 2013. Full
year 2013 e-commerce revenue excludes results prior to the acquisition.

2) GAAP Net Income (Loss) and GAAP Diluted Income (Loss) Per Share includes a
$5.7 million and $11.7 million non-cash loss on a derivative instrument in
Q413 and full year 2013, respectively. See reconciliation of non-GAAP to GAAP
measures below.


Segment Information

Tax Preparation

Tax Preparation segment loss for the fourth quarter of 2013 was $3.0 million,
which is consistent due to the seasonality of the business. Tax Preparation
segment income for the full year 2013 was $40.6 million.

E-Commerce

E-Commerce segment income was $4.1 million or 10 percent of segment revenue
for the fourth quarter of 2013. E-Commerce segment income for the full year
2013 was $5.0 million, which represents stub period results from the Monoprice
acquisition date (August 22, 2013).

Search

Search segment income for the fourth quarter and full year 2013 was $25.0
million and $82.5 million, up 44 percent and 33 percent over the fourth
quarter and full year 2012, respectively.

Corporate Operating Expenses

Unallocated corporate operating expenses for the fourth quarter and full year
2013 were $3.5 million and $13.8 million, respectively.

Other

Blucora ended 2013 with cash, cash equivalents and short-term investments of
$333.7 million and net cash of $11.1 million (excluding outstanding debt
principal).

For the full year 2013, the Company repurchased 417,000 shares for
approximately $10.0 million. The Company has approximately $40.0 million
approved for future share repurchases under the current plan.

First Quarter Outlook

For the first quarter of 2014, the Company expects revenues to be between
$213.0million and $222.0 million, Adjusted EBITDA to be between $51.0 million
and $54.0million, Non-GAAP Net Income to be between $45.0 million and $48.0
million, or $1.00 to $1.06 per diluted share, and GAAP Net Income to be
between $22.0 million and $24.5million, or $0.49 to $0.54per diluted share.

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 fourth
quarter and full year results, its outlook for the first quarter 2014, tax
preparation segment guidance for the first half of 2014, and other business
matters. The live webcast and supplemental materials are included in a current
report on form 8-K filed today and can be accessed in the Investor Relations
section of the Blucora corporate website at http://www.blucora.com. A replay
of the call will also be available on our website.

About Blucora™

Blucora, Inc. (NASDAQ: BCOR) operates a diverse group of Internet
businesses.Its mission is to deliver long-term value to its customers,
partners and shareholders through financial discipline, operational expertise,
and technology innovation. Recently named one of Fortune® Magazine’s 100
Fastest-Growing Companies, 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.

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, and the completion of the audit of our financial statements for
2013. 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               Year ended
                   December 31,      December 31,    December      December
                   2013             2012            31,          31,
                                                     2013          2012
Revenues:
Services           $  127,667        $  97,470       $ 519,677     $ 406,919
revenue
Product              39,673          -            54,303      -       
revenue, net
                                                                   
Total revenues        167,340           97,470        573,980      406,919
                                                                   
Operating
expenses:
Cost of
revenues:
Services cost
of revenue
(includes
amortization of
acquired              83,005            73,637         302,279       265,945
intangible
assets of
$1,895, $1,975,
$7,668, and
$7,580)
Product cost of      27,559          -            38,181      -       
revenue
                                                                   
Total cost of         110,564           73,637        340,460      265,945
revenues ^(1)
                                                                   
Engineering and       3,731             2,538          11,682        9,969
technology ^(1)
Sales and             27,273            8,152          98,682        45,644
marketing ^(1)
General and
administrative        8,485             5,713          29,847        27,418
^(1)
Depreciation          1,001             492            2,739         2,119
Amortization of
intangible           5,600           3,169        16,121      11,619  
assets
                                                                   
Total operating      156,654         93,701      499,531    362,714 
expenses
                                                                   
Operating             10,686            3,769          74,449        44,205
income
Other income
(loss), net ^        (9,196   )       1,004        (29,623 )    (6,677  )
(2)
                                                                   
Income before         1,490             4,773          44,826        37,528
income taxes
Income tax           (2,624   )       (953    )     (20,427 )    (15,002 )
expense
                                                                   
Net income         $  (1,134   )     $  3,820       $ 24,399     $ 22,526  
(loss)
                                                                   
Income (loss)
per share:
Basic              $  (0.03    )     $  0.09        $ 0.59       $ 0.56    
Diluted            $  (0.03    )     $  0.04        $ 0.56       $ 0.54    
                                                                   
Weighted
average shares
outstanding:
Basic                 41,566            40,789         41,201        40,279
Diluted               41,566            42,411         43,480        41,672
                                                                   

^(1) In the year ended December 31, 2012, $5.2 million in stock-based
compensation was recorded in association with the modification of the terms of
a warrant and the vesting of non-employee performance-based stock options upon
completion of the TaxACT acquisition, and the related expense was allocated to
general and administrative expense.Stock-based compensation expense was
allocated among the following captions (in thousands):

                   Three months ended                Year ended
Stock-Based        December 31,      December 31,    December      December
Compensation       2013              2012            31,           31,
                                                     2013          2012
Cost of            $  121            $  227          $ 662         $ 558
revenues
Engineering and       409               286            1,351         1,180
technology
Sales and             683               520            2,335         1,909
marketing
General and          1,824           1,267        7,179       9,576   
administrative
Total
stock-based        $  3,037         $  2,300       $ 11,527     $ 13,223  
compensation
expense
                                                                   

^(2) Other (income) loss, net was allocated among the following captions (in
thousands):

                   Three months ended                Year ended
                   December 31,      December 31,    December      December
                   2013              2012            31,           31,
                                                     2013          2012
Other (Income)
Loss, Net
Interest income    $  (94      )     $  (52     )    $ (300    )   $ (131    )
Interest              2,756             875            9,463         3,522
expense
Amortization of
debt issuance         267               74             1,108         820
costs
Accretion of          866               31             2,838         325
debt discounts
Loss on debt
extinguishment
and                   -                 -              1,593         -
modification
expense
(Gain) loss on
derivative            5,721             (1,928  )      11,652        2,346
instrument
Impairment of
equity
investment in         -                 -              3,711         -
privately-held
company
Decrease in
fair value of
earn-out              (300     )        -              (300    )     -
contingent
liability
Other                (20      )       (4      )     (142    )    (205    )
Total other
(income) loss,     $  9,196         $  (1,004  )    $ 29,623     $ 6,677   
net
                                                                 


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

                                                December 31,   December 31,
                                                 2013            2012
ASSETS
                                                                 
Current assets:
Cash and cash equivalents                        $ 130,225       $ 68,278
Short-term investments, available-for-sale         203,480         94,010
Accounts receivable, net of allowance of $62       48,081          34,932
and $10
Other receivables                                  8,292           3,942
Inventories                                        28,826          -
Prepaid expenses and other current assets, net    9,774         10,911    
                                                                 
Total current assets                               428,678         212,073
                                                                 
Property and equipment, net                        16,108          7,533
Goodwill                                           348,957         230,290
Other intangible assets, net                       178,064         132,815
Other long-term assets                            6,223         2,582     
                                                                 
Total assets                                     $ 978,030      $ 585,293   
                                                                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                 
Current liabilities:
Accounts payable                                 $ 61,268        $ 37,687
Accrued expenses and other current liabilities     31,109          13,280
Deferred revenue                                   7,510           3,157
Short-term portion of long-term debt, net          7,903           4,590
Convertible senior notes, net                      181,583         -
Derivative instruments                            -             8,974     
                                                                 
Total current liabilities                          289,373         67,688
                                                                 
Long-term liabilities:
Long-term debt, net                                113,193         69,278
Deferred tax liability, net                        56,861          29,333
Deferred revenue                                   1,814           1,319
Other long-term liabilities                       2,719         2,225     
                                                                 
Total long-term liabilities                       174,587       102,155   
                                                                 
Total liabilities                                  463,960         169,843
                                                                 
Stockholders' equity:
Common stock                                       4               4
Additional paid-in capital                         1,466,043       1,392,098
Accumulated deficit                                (951,977  )     (976,376  )
Accumulated other comprehensive loss              -             (276      )
                                                                 
Total stockholders' equity                        514,070       415,450   
                                                                 
Total liabilities and stockholders' equity       $ 978,030      $ 585,293   



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

                                                  Year ended
                                                   December 31,  December 31,
                                                   2013           2012
Operating activities:
Net income                                         $ 24,399       $ 22,526
Adjustments to reconcile net income to net cash
provided by operating activities:
Stock-based compensation                             11,527         8,937
Warrant-related stock-based compensation             -              4,286
Loss on derivative instrument                        11,652         2,346
Depreciation and amortization of intangible          28,265         23,011
assets
Excess tax benefits from stock-based award           (29,400  )     (23,041  )
activity
Deferred income taxes                                (10,849  )     (8,738   )
Amortization of premium or accretion of discount     3,007          (194     )
on investments, net
Impairment loss on equity investment in              3,711          -
privately-held company
Amortization of debt issuance costs                  1,108          820
Accretion of debt discount                           2,838          325
Loss on debt extinguishment and modification         1,593          -
expense
Earn-out contingent liability adjustments            (300     )     -
Other                                                767            31
Cash provided (used) by changes in operating
assets and liabilities:
Accounts receivable                                  (9,911   )     (597     )
Other receivables                                    1,741          (665     )
Inventories                                          (1,349   )     -
Prepaid expenses and other current assets            2,511          (5,862   )
Other long-term assets                               256            1,981
Accounts payable                                     12,275         (1,600   )
Deferred revenue                                     3,527          4,170
Accrued expenses and other current and long-term    37,688       21,095   
liabilities
Net cash provided by operating activities            95,056         48,831
                                                                  
Investing activities:
Business acquisitions, net of cash acquired          (184,982 )     (279,386 )
Equity investment in privately-held company          (4,000   )     -
Purchases of property and equipment                  (4,747   )     (3,752   )
Change in restricted cash                            2,491          252
Proceeds from sales of investments                   25,812         203,493
Proceeds from maturities of investments              213,616        36,753
Purchases of investments                            (351,883 )    (122,433 )
Net cash used by investing activities                (303,693 )     (165,073 )
                                                                  
Financing activities:
Proceeds from issuance of convertible debt, net      194,818        -
of debt issuance costs of $6,432
Proceeds from credit facilities, net of debt
issuance costs and debt discount of $406 and         55,294         96,704
$300 in 2013 and $2,343 and $953 in 2012
Debt issuance costs on credit facility               (28      )     -
Repayment of debt                                    (10,000  )     (25,504  )
Stock repurchases                                    (10,006  )     -
Excess tax benefits from stock-based award           29,400         23,041
activity
Proceeds from issuance of common stock upon          9,620          -
warrant exercise
Proceeds from stock option exercises                 2,826          9,099
Proceeds from issuance of stock through employee     1,065          601
stock purchase plan
Tax payments from shares withheld upon vesting      (2,405   )    (1,318   )
of restricted stock units
Net cash provided by financing activities            270,584        102,623
                                                                  
Net increase (decrease) in cash and cash             61,947         (13,619  )
equivalents
                                                                  
Cash and cash equivalents:
Beginning of period                                 68,278       81,897   
End of period                                      $ 130,225     $ 68,278   



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

                     Three months ended           Year ended
                     December 31,  December 31,   December 31,  December 31,
                     2013           2012           2013           2012
                                                                  
Revenues:
Search               $  125,624     $  96,303      $  428,464     $  344,814
Tax Preparation         2,043          1,167          91,213         62,105
E-Commerce             39,673       -            54,303       -       
Total revenues          167,340        97,470         573,980        406,919
                                                                  
Operating income:
Search                  25,003         17,378         82,504         62,185
Tax Preparation         (3,018  )      (2,476  )      40,599         30,052
E-Commerce              4,061          -              4,967          -
Corporate-level        (15,360 )     (11,133 )     (53,621 )     (48,032 )
activity
Total operating         10,686         3,769          74,449         44,205
income
                                                                  
Other income (loss),    (9,196  )      1,004          (29,623 )      (6,677  )
net
Income tax expense     (2,624  )     (953    )     (20,427 )     (15,002 )
Net income (loss)    $  (1,134  )   $  3,820      $  24,399     $  22,526  



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                  Year ended
                  December 31,     December 31,       December      December
                  2013            2012               31,          31,
                                                      2013          2012
Net income        $  (1,134  )     $  3,820           $ 24,399      $ 22,526
(loss) ^(2)
Depreciation
and
amortization of      8,852            6,061             28,265        23,011
intangible
assets
Stock-based          3,037            2,300             11,527        13,223
compensation
Other (income)       9,196            (1,004  )         29,623        6,677
loss, net ^(3)
Income tax          2,624          953             20,427      15,002 
expense
Adjusted EBITDA   $  22,575       $  12,130         $ 114,241    $ 80,439 
                                                                    

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                  Year ended
                  December 31,     December 31,       December      December
                  2013             2012               31,           31,
                                                      2013          2012
Net income        $  (1,134  )     $  3,820           $ 24,399      $ 22,526
(loss) ^(2)
Stock-based          3,037            2,300             11,527        13,223
compensation
Amortization of
acquired             7,495            5,144             23,789        19,199
intangible
assets
Accretion of
debt discount        858              -                 2,674         -
on convertible
notes
(Gain) loss on
derivative           5,721            (1,928  )         11,652        2,346
instrument
Impairment of
equity
investment in        -                -                 3,711         -
privately-held
company
Loss on debt
extinguishment
and                  -                -                 1,593         -
modification
expense
Cash tax impact
of adjustments       (8      )        9                 (189    )     (93    )
to GAAP net
income
Non-cash income
tax expense         2,126          660             18,538      13,559 
^(1)
Non-GAAP net      $  18,095       $  10,005         $ 97,694     $ 70,760 
income
                                                                    
Per share
amounts
Net income
(loss) -             (0.03   )        0.04       ^(4)   0.56          0.54
diluted
Stock-based
compensation -       0.07             0.06              0.26          0.32
diluted
Amortization of
acquired
intangible           0.16             0.12              0.55          0.46
assets -
diluted
Accretion of
debt discount        0.02             -                 0.06          -
on convertible
notes - diluted
Loss on
derivative           0.13             -          ^(4)   0.27          0.06
instrument -
diluted
Impairment of
equity
investment in        -                -                 0.09          -
privately-held
company -
diluted
Loss on debt
extinguishment
and                  -                -                 0.03          -
modification
expense -
diluted
Cash tax impact
of adjustments
to GAAP net          (0.00   )        0.00              (0.00   )     (0.00  )
income -
diluted
Non-cash income
tax expense -       0.05           0.02            0.43        0.32   
diluted
Non-GAAP net
income per        $  0.40         $  0.24           $ 2.25       $ 1.70   
share - diluted
                                                                    
Weighted
average shares
outstanding
used in
computing           45,716         42,411          43,480      41,672 
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
                  March 31, 2014
Net income        $  22,000        $  24,500
Depreciation
and
amortization of      9,000            9,000
intangible
assets
Stock-based          3,100            2,900
compensation
Other loss, net      4,100            4,100
^(3)
Income tax          12,800         13,500  
benefit
Adjusted EBITDA   $  51,000       $  54,000  
                                                                    

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

                  Ranges for the three months
                  ending
                  March 31, 2014
Net income        $  22,000        $  24,500
Stock-based          3,100            2,900
compensation
Amortization of
acquired             7,500            7,500
intangible
assets
Accretion of
debt discount        900              900
on convertible
notes
Non-cash income     11,500         12,200  
tax benefit
Non-GAAP net      $  45,000       $  48,000  
income


^(1) Blucora defines 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 discontinued operations (which
includes loss from discontinued operations and loss on sale of discontinued
operations, both net of taxes), income taxes, depreciation, amortization of
intangible assets, stock-based compensation, and other income/loss, net (as
described in note ^(3) below). 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 are significant and necessary components to the
operations of the Company's 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, Blucora's Adjusted EBITDA may not be comparable to similarly
titled measures of other companies.

Blucora defines non-GAAP net income as net income, determined in accordance
with GAAP, excluding the effects discontinued operations (which includes loss
from discontinued operations and loss on sale of discontinued operations, both
net of taxes), stock-based compensation, amortization of acquired intangible
assets, accretion of debt discount on convertible notes, losses on debt
extinguishment and modification expense, gains or losses on derivative
instrument, other- than-temporary impairment losses on equity investment, the
related cash tax impact of those adjustments, and non-cash income taxes from
continuing operations. 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 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.

Blucora’s management believes that non-GAAP net income and non-GAAP net income
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 net income 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 income/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, gains or
losses on derivative instrument, other-than-temporary impairment losses on
equity investments, and adjustments to the fair values of contingent
liabilities related to business combinations.

^(4) Calculation excludes the income effect of a dilutive derivative
instrument.

Contact:

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