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Blucora: 2016 Adjusted Ebitda Up 11 Percent Year Over Year

The following excerpt is from the company's SEC filing.

Strong Tax Season Performance Drives 18 Percent Increase in TaxAct Revenue for the Full Season

BELLEVUE, WA — (Marketwired) —

April 28, 2016

— Blucora, Inc. (NASDAQ: BCOR), a leading provider of technology-enabled financial solutions to consumers, small businesses and tax professionals, today announced financial results for the

first quarter

ended

March 31, 2016

and provided preliminary tax season update.

First Quarter Highlights and Recent Developments

Blucora named John S. Clendening as president and chief executive officer

TaxAct revenu e and segment income expected to grow approximately 18 percent and 20 percent respectively for the six months through June 30, 2016 compared to the same period last year

HD Vest net revenue

grew 5 percent and segment income grew 26 percent in the first quarter compared to the same period last year

Blucora paid down principal of Term B loan by 10 percent ($40M) and repurchased $28.4 million of convertible debt

“Our team continues to drive efforts to strengthen Blucora and execute on our strategic transformation into a technology-enabled financial solutions company,” said John Clendening, president and chief executive officer of Blucora. “We began 2016 with good momentum punctuated by our strong financial performance during this year’s tax season. Looking ahead, we are committed to our 2016 stated objectives of aggressively paying down debt, divesting our non-core businesses, reducing operating expenses, and delivering on our business performance goals. I am thrilled to lead a newly transformed Blucora, excited for what we can achieve together, and confident in our ability to enhance shareholder value.”

Eric Emans, chief financial officer and treasurer of Blucora, noted that the Company has made progress toward its commitment to pay down debt. “We retired more than $65 million of debt in the quarter,” he explained, “lowering our net leverage ratio and highlighting the Company’s growth, predictable profit generation and strong free cash flow conversion. Debt repayment will remain the top priority for our capital allocation strategy throughout this year and into 2017.”

The following presentation includes pro forma financial information and HD Vest. In addition, it excludes the Search and Content and E-Commerce segments which have been classified as discontinued operations for all periods presented. The Company believes that this presentation most accurately reflects the financial performance of the Company on a go-forward basis.

Summary Financial Performance:

($ in millions except per share amounts)

Change

As reported

Pro forma

Wealth Management

Tax Preparation

Segment Income

Unallocated Corporate Operating Expenses

Adjusted EBITDA

Non-GAAP:

Net Income

Diluted Net Income Per Share

Net Income Attributable to Blucora, Inc.

Diluted Net Income Per Share Attributable to Blucora, Inc.

See reconciliations of as reported and pro forma non-GAAP to GAAP measures in tables below.

Net revenue represents Wealth Management segment revenue less Wealth Management services cost of revenue.

Tax Season Update

(in thousands, except %s)

Tax seasons ended

April 19, 2016

April 16, 2015

% change

Consumer:

Online e-files

Desktop e-files

Sub-total e-files

Free File Alliance e-files

Total consumer e-files

Professional tax preparer:

E-files

Total e-files (consumer and preparer)

Tax season begins on the first day that the IRS begins accepting e-files and ends on tax day +1.

During the first quarter of 2016, the Company repaid

$40.0 million

on the TaxAct - HD Vest credit facility and repurchased

of the Convertible Senior Notes for cash of

$20.7 million

. As a result, at the end of the first quarter, Blucora’s net leverage ratio was lowered by 1.1x.

Second Quarter

and Full Year

Outlook

For the

second quarter

, the Company expects revenues to be between

$120.5 million

$124.5 million

, Adjusted EBITDA to be between

$33.7 million

$35.9 million

Non-GAAP income from continuing operations

$20.0 million

$22.7 million

per diluted share, and

$4.5 million

$6.3 million

per diluted share.

For the full year

$452.0 million

$465.5 million

$90.0 million

$94.0 million

$39.9 million

$44.4 million

GAAP loss from continuing operations

$5.0 million

$1.3 million

$(0.12)

$(0.03)

per diluted share.

Conference Call and Webcast

A conference call and live webcast will be held today at 5:30 a.m. Pacific Time / 8:30 a.m. Eastern Time during which the Company will further discuss

results and its outlook for the

. We have also provided supplemental financial information to our results that can be accessed in the Investor Relations section of the Blucora corporate website at

http://www.blucora.com

and filed with the SEC on Form 8-K. A replay of the call and management's prepared remarks will also be available on our website.

About Blucora®

Blucora, Inc. (NASDAQ: BCOR) is a leading provider of technology-enabled financial solutions to consumers, small businesses and tax professionals. Our products and services in tax preparation and wealth management, through TaxAct and HD Vest, help consumers manage their financial lives. TaxAct is an affordable digital tax preparation solution for individuals, business owners and tax professionals. HD Vest Financial Services

supports an independent network of tax professionals who provide comprehensive financial planning solutions. For more information on Blucora or its businesses, please visit

Source: Blucora

Blucora Contact:

Stacy Ybarra, 425-709-8127

stacy.ybarra@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 availability of products to sell; the timing and extent of market acceptance of developed products and services and related costs; our dependence on companies to distribute our products and services; the ability to successfully integrate acquired businesses; future acquisitions; the successful execution of the Company’s strategic initiatives, technology enhancements, operating plans, and marketing strategies; and the condition of our cash investments. A more detailed description of these and certain other factors that could affect actual results is included in Blucora, Inc.’s most recent Quarterly Report on Form 10-Q and subsequent reports filed with or furnished to the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Blucora, Inc. undertakes no obligation to update any forward-looking statements to reflect new information, events, or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

Preliminary Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands, except per share data)

Three months ended March 31,

Revenue:

Wealth management services revenue

77,291

Tax preparation services revenue

88,474

81,068

Total revenue

165,765

Operating expenses:

Cost of revenue:

Wealth management services cost of revenue

52,269

Tax preparation services cost of revenue

Amortization of acquired technology

Total cost of revenue

56,143

Engineering and technology

Sales and marketing

43,837

33,018

General and administrative

12,753

Depreciation

Amortization of other acquired intangible assets

Total operating expenses

126,319

48,790

Operating income

39,446

32,278

Other loss, net

(7,514

(2,995

Income from continuing operations before income taxes

31,932

29,283

Income tax expense

(11,643

(9,868

20,289

19,415

Discontinued operations, net of income taxes

Net income

22,811

23,100

Net income attributable to noncontrolling interests

Net income attributable to Blucora, Inc.

22,667

Net income per share attributable to Blucora, Inc. - basic:

Continuing operations

Basic net income per share

Net income per share attributable to Blucora, Inc. - diluted:

Diluted net income per share

Weighted average shares outstanding:

41,171

40,987

41,610

41,899

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

Total stock-based compensation expense

Interest income

Interest expense

Amortization of debt issuance costs

Accretion of debt discounts

Gain on debt extinguishment and modification expense

(3,843

Gain on third party bankruptcy settlement

Preliminary Condensed Consolidated Balance Sheets

(Amounts in thousands)

December 31,

ASSETS

Current assets:

Cash and cash equivalents

67,955

55,473

Cash segregated under federal or other regulations

Available-for-sale investments

11,642

11,301

Accounts receivable, net of allowance

10,840

Commissions receivable

15,062

16,328

Other receivables

24,407

Prepaid expenses and other current assets, net

10,062

Current assets of discontinued operations

197,275

211,663

Total current assets

318,041

340,675

Long-term assets:

Property and equipment, net

11,093

11,308

Goodwill, net

551,027

548,959

Other intangible assets, net

387,359

396,295

Other long-term assets

Total long-term assets

951,695

958,873

Total assets

1,269,736

1,299,548

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Commissions and advisory fees payable

15,277

16,982

Accrued expenses and other current liabilities

17,063

13,006

Deferred revenue

11,521

Current portion of long-term debt, net

31,631

Current liabilities of discontinued operations

73,830

88,275

Total current liabilities

127,221

166,104

Long-term liabilities:

Long-term debt, net

344,891

353,850

Convertible senior notes, net

160,781

185,918

Deferred tax liability, net

98,501

103,520

Other long-term liabilities

10,490

10,932

Total long-term liabilities

617,531

656,122

Total liabilities

744,752

822,226

Redeemable noncontrolling interests

15,182

15,038

Stockholders’ equity:

Common stock

Additional paid-in capital

1,514,923

1,490,405

Accumulated deficit

(1,004,931

(1,027,598

Accumulated other comprehensive loss

Total stockholders’ equity

509,802

462,284

Total liabilities and stockholders’ equity

Preliminary Condensed Consolidated Statements of Cash Flows

Operating Activities:

Less: Discontinued operations, net of income taxes

Net income from continuing operations

Adjustments to reconcile net income from continuing operations to net cash from operating activities:

Depreciation and amortization of acquired intangible assets

10,105

Excess tax benefits from stock-based award activity

(16,865

(22,081

Deferred income taxes

(5,127

(14,277

Amortization of premium on investments, net

Cash provided (used) by changes in operating assets and liabilities:

(2,967

(4,726

20,146

(1,705

(2,610

Accrued expenses and other current and long-term liabilities

18,809

27,579

Net cash provided by operating activities from continuing operations

51,727

28,187

Investing Activities:

Purchases of property and equipment

Proceeds from sales of investments

Proceeds from maturities of investments

68,243

Purchases of investments

(66,833

Net cash provided (used) by investing activities from continuing operations

(1,080

Financing Activities:

Repurchase of convertible notes

(20,667

Repayment of credit facilities

(40,000

(25,000

Stock repurchases

(4,445

Proceeds from stock option exercises

Proceeds from issuance of stock through employee stock purchase plan

Tax payments from shares withheld upon vesting of restricted stock units

Net cash used by financing activities from continuing operations

(42,481

(5,575

Net cash provided by continuing operations

26,763

Net cash provided by operating activities from discontinued operations

Net cash used by investing activities from discontinued operations

(1,135

Net cash used by financing activities from discontinued operations

(3,607

(10,220

Net cash provided (used) by discontinued operations

(8,629

Net increase in cash and cash equivalents

12,482

18,134

Cash and cash equivalents, beginning of period

41,968

Cash and cash equivalents, end of period

60,102

Preliminary Segment Information

Operating income:

10,906

47,573

44,145

Corporate-level activity

(19,033

(11,867

Total operating income

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

Amortization of acquired intangible assets

Total corporate-level activity

Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

Preliminary Adjusted EBITDA Reconciliation

Operating income

53,780

39,769

Preliminary Non-GAAP

(Amounts in thousands, except per share amounts)

Accretion of debt discount on Convertible Senior Notes

Accelerated accretion of debt discount on Convertible Senior Notes

Gain on Convertible Senior Notes repurchased

(7,724

(2,522

(3,685

Impact of noncontrolling interests

Cash tax impact of adjustments to GAAP net income

Non-cash income tax expense

10,579

Non-GAAP net income

39,286

37,085

Per diluted share:

Weighted average shares outstanding used in computing per diluted share amounts

Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

(As Reported and Pro Forma)

Preliminary Adjusted EBITDA Reconciliation (As Reported and Pro Forma)

34,198

11,329

48,416

18,415

10,185

37,315

Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance

Ranges for the three months ending

Ranges for the year ending

June 30, 2016

December 31, 2016

Income (loss) from continuing operations

(5,000

(1,300

18,700

17,700

39,200

38,900

12,800

12,300

39,900

39,400

Income tax (benefit) expense

(2,800

33,700

35,900

90,000

94,000

Income from Continuing Operations

34,200

34,100

(7,700

Cash tax impact of adjustments to income (loss) from continuing operations

Non-cash income tax (benefit) expense

(5,900

(4,000

20,000

22,700

44,400

Notes to Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

We define Adjusted EBITDA differently for this report than we have defined it in the past, due to the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016 and the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015. We define Adjusted EBITDA as

, determined in accordance with GAAP, excluding the effects of depreciation, amortization of acquired intangible assets (including acquired technology), and stock-based compensation.

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

. 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

differently for this report than we have defined it in the past, due to the impact of noncontrolling interests from the HD Vest acquisition that we began recognizing in the first quarter of 2016 and the discontinued operations treatment of our Search and Content and E-Commerce businesses as determined in the fourth quarter of 2015. For this report, we define non-GAAP

attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets (included acquired technology), accretion of debt discount and accelerated accretion of debt discount on the Convertible Senior Notes, gain on Convertible Senior Notes repurchased, discontinued operations, the impact of noncontrolling interests, and the related cash tax impact of those adjustments, and non-cash income taxes. We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which primarily consist of U.S. federal net operating losses. The majority of these net operating losses will expire, if unutilized, between 2020 and 2024.

We believe that non-GAAP

and non-GAAP

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

per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP

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

. 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.

As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited).

Other loss, net primarily includes items such as interest income, interest expense, amortization of debt issuance costs, accretion of debt discounts, gain/loss on debt extinguishment and modification expense, and gain on third party bankruptcy settlement.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

Quarterly report [Sections 13 or 15(d)] - April 28, 2016
Blucora releases salary data. CEO sees compensation rise 5% - April 25, 2016

Blucora's President and CEO just declared 0 ownership of the company. - April 6, 2016