News Column

Blucora Announces First Quarter Results and Preliminary Tax Season Update

May 1, 2014

BELLEVUE, Wash.--(BUSINESS WIRE)-- Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the first quarter ended March 31, 2014.

“Blucora executed well in the first quarter, with solid performance at TaxACT and focused attention at Monoprice and InfoSpace,” said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. “The multi-year vision for Blucora is proceeding according to schedule. This year brings an important opportunity to address near-term challenges at our businesses, while continuing to invest against our long view and allocate resources where we see potential for compelling returns.”

 
Summary Financial Performance: Q1 2014

($ in millions except per share amounts)

      Q1 2014     Q1 2013     Growth
Revenues $216.2     $165.3     31%
Search $106.8$100.6 6%
Tax Preparation $ 72.3$ 64.7 12%
E-Commerce $ 37.1 N/A N/A
 
Adjusted EBITDA $56.9$45.9 24%
Non-GAAP Net Income $50.0$42.0 19%
Non-GAAP Diluted EPS $1.12$0.95 18%
 
GAAP Net Income $26.0$23.6 10%
GAAP Diluted EPS $0.58$0.53 9%
 
See reconciliation of non-GAAP to GAAP measures in table below.
 


Segment Information

Tax Preparation

Tax preparation segment income for the first quarter of 2014 was $37.4 million or approximately 52 percent of revenue for the first quarter 2014.

For the six months ended June 30, 2014, TaxACT expects revenue growth of approximately 12 percent and segment income growth of 18 to 19 percent versus the prior year comparable period, with combined consumer and professional preparer e-file growth of more than 5 percent. The combined TaxACT offerings assisted approximately 6.9 million filers this tax season.

TaxACT professional preparer filings for the tax season grew approximately 9 percent compared to the same period last year. TaxACT consumer DDIY federal e-files for the tax season were approximately 5.5 million, up approximately 5 percent compared to the same period last year (see table below).

 

Consumer DDIY E-files

 

TaxACT Season-to-Date Federal Accepted E-Files* (in thousands)

         

 

Tax season ended
April 16, 2014     April 16, 2013% change
TaxACT online e-files 5,067 4,865 4%
TaxACT desktop e-files 246270-9%
TaxACT sub-total e-files 5,313 5,135 3%
TaxACT Free File Alliance e-files 210147 43%
TaxACT total e-files 5,5235,282 5%

*Tax Season begins on the first day the IRS begins accepting e-files through tax day +1.

                   
 


Search

Search segment income for the first quarter was $19.2 million or 18 percent of segment revenue for the first quarter 2014, up 5 percent compared to the first quarter of 2013.

E-Commerce

E-Commerce segment income was $3.5 million or 9 percent of segment revenue for the first quarter of 2014.

Corporate Operating Expenses

Unallocated corporate operating expenses for the first quarter of 2014 were $3.2 million, flat compared to the first quarter of 2013.

Second Quarter Outlook

For the second quarter of 2014, the Company expects revenues to be between $135.0 million and $145.5 million, Adjusted EBITDA to be between $26.0 million and $29.0 million, Non-GAAP Net Income to be between $20.3 million and $23.2 million, or $0.46 to $0.53 per diluted share, and GAAP Net Income to be between $6.2 million and $8.3 million, or $0.14 to $0.19 per diluted 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, its outlook for the second quarter 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, 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, March 31,
2014 2013
Revenues:
Services revenue $ 179,044 $ 165,338
Product revenue, net   37,139     -  
Total revenues 216,183 165,338
Operating expenses:
Cost of revenues:

Services cost of revenue (includes amortization of acquired intangible assets of $1,885 and $1,940)

71,293 76,987
Product cost of revenue   25,029     -  
Total cost of revenues (1) 96,322 76,987
Engineering and technology (1) 4,135 2,538
Sales and marketing (1) 55,836 38,484
General and administrative (1) 8,632 6,384
Depreciation 1,058 517
Amortization of intangible assets   5,584     3,169  

Total operating expenses

171,567 128,079
Operating income 44,616 37,259
Other loss, net (2)   (4,069 )   (1,005 )
Income before income taxes 40,547 36,254
Income tax expense   (14,560 )   (12,646 )
Net income $ 25,987   $ 23,608  
Net income per share:
Basic $ 0.62   $ 0.58  
Diluted (3) $ 0.58   $ 0.53  
Weighted average shares outstanding:
Basic 42,162 40,911
Diluted 44,521 44,294
 

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

 
Three months ended
March 31, March 31,
2014 2013
Cost of revenues $ 159 $ 219
Engineering and technology 429 253
Sales and marketing 919 477
General and administrative   1,901     1,536  
Total stock-based compensation expense $ 3,408   $ 2,485  
 

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

 
Three months ended
March 31, March 31,
2014 2013
 
Interest income $ (108 ) $ (55 )
Interest expense 3,015 1,148
Amortization of debt issuance costs 281 107
Accretion of debt discounts 906 161
Gain on derivative instrument - (348 )
Other   (25 )   (8 )
Other loss, net $ 4,069   $ 1,005  
 

(3)

  Calculation for the three months ended March 31, 2013 excludes the income effect of a dilutive derivative instrument, as well as interest expense, amortization of debt issuance costs and accretion of debt discount on Convertible Senior Notes, net of tax effect.
 
 
Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
         
March 31, December 31,
2014 2013
ASSETS
 
Current assets:
Cash and cash equivalents $ 142,756 $ 130,225
Available-for-sale investments 193,634 203,480
Accounts receivable, net 47,026 48,081
Other receivables 4,582 8,292
Inventories 29,513 28,826
Prepaid expenses and other current assets, net   10,364     9,774  
 
Total current assets 427,875 428,678
 
Property and equipment, net 16,110 16,108
Goodwill 348,957 348,957
Other intangible assets, net 170,595 178,064
Other long-term assets   5,851     6,223  
 
Total assets $ 969,388   $ 978,030  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 56,001 $ 61,268
Accrued expenses and other current liabilities 28,187 31,109
Deferred revenue 6,641 7,510
Short-term portion of long-term debt, net 7,910 7,903
Convertible senior notes, net (1)   -     181,583  
 
Total current liabilities 98,739 289,373
 
Long-term liabilities:
Long-term debt, net 69,218 113,193
Convertible senior notes, net (1) 182,457 -
Deferred tax liability, net 47,366 56,861
Deferred revenue 2,882 1,814
Other long-term liabilities   2,732     2,719  
 
Total long-term liabilities   304,655     174,587  
 
Total liabilities 403,394 463,960
 
Stockholders' equity:
Common stock 4 4
Additional paid-in capital 1,491,966 1,466,043
Accumulated deficit (925,990 ) (951,977 )
Accumulated other comprehensive income   14     -  
 
Total stockholders' equity   565,994     514,070  
 
Total liabilities and stockholders' equity $ 969,388   $ 978,030  
 

(1) The convertibility of the Notes is determined at the end of each reporting period. If the Notes are determined to be convertible, they remain convertible until the end of the subsequent quarter and are classified in “Current liabilities”; otherwise, they are classified in “Long-term liabilities.” Depending upon the price of our common stock or the trading price of the Notes within the reporting period, the Notes could be convertible during one reporting period but not convertible during a comparable reporting period.

 
 
Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
         
Three months ended
March 31, March 31,
2014 2013
Operating Activities:
Net income $ 25,987 $ 23,608
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation 3,408 2,485
Depreciation and amortization of intangible assets 8,864 6,112
Excess tax benefits from stock-based award activity (22,743 ) (17,842 )
Deferred income taxes (10,423 ) (6,668 )
Amortization of premium on investments, net 1,085 435
Amortization of debt issuance costs 281 107
Accretion of debt discounts 906 161
Gain on derivative instrument - (348 )
Other 39 55
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable 1,017 (6,225 )
Other receivables 3,695 (284 )
Inventories (687 ) -
Prepaid expenses and other current assets 347 3,587
Other long-term assets 75 (114 )
Accounts payable (5,267 ) 3,122
Deferred revenue 199 1,122
Accrued expenses and other current and long-term liabilities   19,812     22,486  
Net cash provided by operating activities 26,595 31,799
 
Investing Activities:
Purchases of property and equipment (1,247 ) (1,543 )
Change in restricted cash - 231
Equity investment in privately-held company - (4,000 )
Proceeds from sales of investments 12,272 -
Proceeds from maturities of investments 68,923 18,674
Purchases of investments   (72,415 )   (62,077 )
Net cash provided (used) by investing activities 7,533 (48,715 )
 
Financing Activities:
Proceeds from issuance of convertible notes, net of debt issuance costs of $6,037 - 195,213
Proceeds from credit facilities 4,000 -
Repayment of credit facilities (48,000 ) -
Excess tax benefits from stock-based award activity 22,743 17,842
Proceeds from stock option exercises 86 293
Proceeds from issuance of stock through employee stock purchase plan 665 461
Tax payments from shares withheld upon vesting of restricted stock units   (1,091 )   (536 )
Net cash provided (used) by financing activities (21,597 ) 213,273
 
Net increase in cash and cash equivalents 12,531 196,357
Cash and cash equivalents, beginning of period   130,225     68,278  
Cash and cash equivalents, end of period $ 142,756   $ 264,635  
 
 
Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)
         
Three months ended
March 31, March 31,
2014 2013
 
Revenues:
Search $ 106,765 $ 100,601
Tax Preparation 72,279 64,737
E-Commerce   37,139     -  
Total revenues 216,183 165,338
 
Operating income:
Search 19,230 18,270
Tax Preparation 37,402 30,784
E-Commerce 3,478 -
Corporate-level activity (1)   (15,494 )   (11,795 )
Total operating income 44,616 37,259
 
Other loss, net (4,069 ) (1,005 )
Income tax expense   (14,560 )   (12,646 )
Net income $ 25,987   $ 23,608  
 

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

 
Three months ended
March 31, March 31,
2014 2013
Operating expenses $ 3,222 $ 3,198
Stock-based compensation 3,408 2,485
Depreciation 1,395 1,003
Amortization of intangible assets   7,469     5,109  
Total corporate-level activity $ 15,494   $ 11,795  
 
 
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,
2014 2013
Net income (2) $ 25,987 $ 23,608
Stock-based compensation 3,408 2,485
Depreciation and amortization of intangible assets 8,864 6,112
Other loss, net (3) 4,069 1,005
Income tax expense   14,560     12,646  
Adjusted EBITDA $ 56,888   $ 45,856  
 
Preliminary Non-GAAP Net Income Reconciliation (1)
(Unaudited)
(Amounts in thousands, except per share amounts)
Three months ended
March 31, March 31,
2014 2013
Net income (2) $ 25,987 $ 23,608
Stock-based compensation 3,408 2,485
Amortization of acquired intangible assets 7,469 5,109
Accretion of debt discount on Convertible Senior Notes 874 132
Gain on derivative instrument - (348 )
Cash tax impact of adjustments to GAAP net income (54 ) (163 )
Non-cash income tax expense (1)   12,319     11,174  
Non-GAAP net income $ 50,003   $ 41,997  
 
Per diluted share:
Net income $ 0.58 $ 0.53

(4)

Stock-based compensation 0.07 0.06
Amortization of acquired intangible assets 0.17 0.11
Accretion of debt discount on Convertible Senior Notes 0.02 0.00

(4)

Gain on derivative instrument - 0.00

(4)

Cash tax impact of adjustments to GAAP net income 0.00 0.00
Non-cash income tax expense   0.28     0.25  
Non-GAAP net income per share $ 1.12   $ 0.95  
 

Weighted average shares outstanding used in computing diluted non-GAAP net income per share and its components

 

  44,521     44,294  
 
Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
Ranges for the three months ending
June 30, 2014
Net income $

6,200

$ 8,300
Stock-based compensation 3,400 3,200
Depreciation and amortization of intangible assets 9,000 9,000
Other loss, net (3) 4,000 3,900
Income tax expense  

3,400

    4,600  
Adjusted EBITDA $

26,000

  $ 29,000  
 
Preliminary Non-GAAP Net Income Reconciliation for Forward-Looking Guidance
(Amounts in thousands)
Ranges for the three months ending
June 30, 2014
Net income $

6,200

$ 8,300
Stock-based compensation 3,400 3,200
Amortization of acquired intangible assets 7,500 7,500
Accretion of debt discount on Convertible Senior Notes 900 900
Non-cash income tax expense  

2,300

    3,300  
Non-GAAP net income $

20,300

  $ 23,200  
 

(1)

  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, 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 as net income, determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, accretion of debt discount on the Convertible Senior Notes, loss on debt extinguishment and modification expense, gains or losses on derivative instrument, other- than-temporary impairment losses on equity investments, the related cash tax impact of those adjustments, and non-cash income taxes. We exclude the non-cash portion of income tax expense 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, 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, as well as interest expense, amortization of debt issuance costs and accretion of debt discount on Convertible Senior Notes, net of tax effect.





Blucora, Inc.

Stacy Ybarra, 425-709-8127

stacy.ybarra@blucora.com


Source: Blucora, Inc.


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