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Blucora, Inc. (BCOR) SEC Filing 8-K Material Event for the period ending Wednesday, May 6, 2020

Blucora, Inc.

CIK: 1068875 Ticker: BCOR

Exhibit 99.1
 blucoralogo1.jpg
Blucora Announces First Quarter 2020 Results
IRVING, TX — May 6, 2020 — Blucora, Inc. (NASDAQ: BCOR), a leading provider of tax-smart financial solutions that empower people to achieve their goals, today announced financial results for the first quarter ended March 31, 2020.
First Quarter Highlights and Recent Developments
Increased total revenue by 17% year-over-year (y/y), including addition of 1st Global
Strong cash position through healthy cash flows and access to credit, ending the quarter with $168.2 million in cash and cash equivalents
Achieved $390 million of net flows in to Advisory Assets and $124 million into Total Client Assets
Total Client Assets ended the quarter at $61.0 billion, with $23.6 billion, or 38.7%, in Advisory Assets
New leadership additions and organizational realignment to support and accelerate our growth priorities
Recorded impairment of goodwill of approximately $271 million relating to wealth management business
“I’m extremely proud of our leadership team and employees, who have adapted quickly to ensure that we could operate productively and continue to meet the needs of our customers without interruption during the COVID-19 health crisis,” said Chris Walters, Blucora’s President and Chief Executive Officer. “We believe that our first quarter results reflect our wealth management business performing well with business continuity in place despite the COVID-19 outbreak and with results of that business for the first quarter ahead of expectations. That said, the pandemic’s impact on the economy and markets led us to perform a review the goodwill of our business units and record an impairment relating to our wealth management business. With respect to our tax preparation business, the extension of the tax season to July has pushed the tax preparation business’s volume, and associated revenue, into subsequent quarters.”
“Overall, we feel fortunate to have two strong businesses with ongoing demand in this challenging environment, and will continue to position the Company to best support our customers, advisors and stockholders today, and over the long-term. As part of this, I was pleased to announce recently that we now have a full leadership team in place and the operational structure that I believe will support and accelerate the execution of our priorities.”
Summary Financial Performance: Q1 2020
($ in millions except per share amounts)
Q1 2020Q1 2019Change
Revenue:
Wealth Management$145.0  $89.5  62 %
Tax Preparation$118.3  $136.2  (13)%
Total Revenue$263.3  $225.8  17 %
Segment Income:
Wealth Management$22.6  $11.5  96 %
Tax Preparation$37.8  $79.3  (52)%
Total Segment Income$60.4  $90.8  (34)%
Unallocated Corporate Operating Expenses$(7.0) $(7.1) (1)%
GAAP:  
Operating Income (Loss) (1) $(241.8) $70.1  (445)%
Net Income (Loss) Attributable to Blucora, Inc. (1) $(315.5) $62.2  (607)%
Diluted Net Income (Loss) Per Share Attributable to Blucora, Inc. $(6.60) $1.25  (623)%
Non-GAAP: (2) 
Adjusted EBITDA$53.3  $83.7  (36)%
Net Income  $43.6  $77.2  (44)%
Diluted Net Income per Share  $0.90  $1.56  (42)%
____________________________
(1)Included an impairment of goodwill of $270.6 million related to the Wealth Management business.
(2)See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.


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Outlook
The increased level of uncertainty around the near and longer-term impact of COVID-19, as well as the extension of the tax season into the 3rd quarter with a July 15 deadline, has delayed filing volume and makes it difficult to accurately predict the timing, volume and revenue of remaining tax-year 2019 filings. Due to these factors, and to maintain flexibility in an uncertain environment, the Company is withdrawing its prior first half 2020 tax preparation outlook and not providing additional outlook guidance at this time.

Conference Call and Webcast
A conference call and live webcast will be held today at 8:30 a.m. Eastern Time during which the Company will further discuss the first quarter, its outlook for full year 2020, its tax season update, and other business matters. We will also provide the prepared remarks for the conference call along with supplemental financial information to our results on the Investor Relations section of the Blucora corporate website at www.blucora.com prior to the call. The supplemental financial information has also been filed with the SEC on Form 8-K. A replay of the call will be available on our website.

About Blucora®

Blucora, Inc. (NASDAQ: BCOR) is on the forefront of financial technology, pioneering tax-smart financial solutions that empower people’s goals. Blucora operates in two segments including (i) wealth management, through its Avantax Wealth Management business (formerly operating under the HD Vest and 1st Global brands), the leading tax-focused broker-dealer, with $61 billion in total client assets as of March 31, 2020, and (ii) tax preparation, through its TaxAct business, a market leader in tax preparation software with approximately 3 million consumer and professional users in 2019. With integrated tax and wealth management, Blucora is uniquely positioned to assist our customers in achieving better long-term outcomes via holistic, tax-advantaged solutions. For more information on Blucora, visit www.blucora.com.

Source: Blucora

Blucora Contact:
Bill Michalek (972) 870-6463
VP, Investor Relations

This release 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. When used in this release, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecasts,” “projects” and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: the impact of the recent coronavirus outbreak on our results of operations and our business, including the impact of the resulting economic downturn and the extension of tax filing deadlines and other related relief; our ability to effectively implement our future business plans and growth strategy; our ability to effectively compete within our industry; our ability to attract and retain financial advisors, qualified employees, clients, and customers, as well as our ability to provide strong customer/client service; our ability to close, finance, and realize all of the anticipated benefits of our recent or pending acquisitions, as well as our ability to integrate the operations of recently acquired businesses, and the potential impact of such acquisitions on our existing indebtedness and leverage; our future capital requirements and the availability of financing, if necessary; our ability to meet our current and future debt service obligations, including our ability to maintain compliance with our debt covenants; downgrade of the Company’s credit ratings; our ability to generate strong investment performance for our clients and the impact of the financial markets on our clients’ portfolios; the impact of new or changing legislation and regulations (or interpretations thereof) on our business, including our ability to successfully address and comply with such legislation and regulations (or interpretations thereof) and increased costs, reductions of revenue, and potential fines, penalties or disgorgement to which we may be subject as a result thereof; risks, burdens, and costs, including fines, penalties or disgorgement, associated with our business being subjected to regulatory inquiries, investigations or initiatives; risks associated with legal proceedings, including litigation and regulatory proceedings; our ability to manage leadership and employee transitions, including costs and time burdens on management and our board of directors related thereto; political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation industries; our ability to respond to rapid technological changes, including our ability to successfully release new products and services or improve

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upon existing products and services; the compromising of confidentiality, availability or integrity of information, including cyberattacks; our expectations concerning the revenues we generate from fees associated with the financial products that we distribute; risks related to goodwill and other intangible asset impairment; our ability to develop, establish, and maintain strong brands; risks associated with the use and implementation of information technology and the effect of security breaches, computer viruses, and computer hacking attacks; our ability to comply with laws and regulations regarding privacy and protection of user data; our ability to maintain our relationships with third-party partners, providers, suppliers, vendors, distributors, contractors, financial institutions, industry associations, and licensing partners, and our expectations regarding and reliance on the products, tools, platforms, systems, and services provided by these third parties; our beliefs and expectations regarding the seasonality of our business; our assessments and estimates that determine our effective tax rate; and our ability to protect our intellectual property and the impact of any claim that we have infringed on the intellectual property rights of others. A more detailed description of these and certain other factors that could affect actual results is included in the Company’s filings with 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 hereof. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as may be required by law.

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Blucora, Inc.
Condensed Consolidated Statements of Operations
(Unaudited) (Amounts in thousands, except per share data)

 Three months ended March 31,
 20202019
Revenue:
Wealth management services revenue$144,989  $89,532  
Tax preparation services revenue118,331  136,236  
Total revenue263,320  225,768  
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue102,342  61,374  
Tax preparation services cost of revenue4,013  4,201  
Total cost of revenue106,355  65,575  
Engineering and technology8,515  6,529  
Sales and marketing79,710  55,572  
General and administrative24,728  17,077  
Acquisition and integration5,682  1,797  
Depreciation1,796  1,061  
Amortization of other acquired intangible assets7,748  8,044  
Impairment of goodwill 270,625  —  
Total operating expenses505,159  155,655  
Operating income (loss) (241,839) 70,113  
Other loss, net (1) (6,135) (3,958) 
Income (loss) before income taxes (247,974) 66,155  
Income tax expense  (67,520) (3,985) 
Net income (loss) attributable to Blucora, Inc. $(315,494) $62,170  
Net income (loss) per share attributable to Blucora, Inc.: 
Basic$(6.60) $1.29  
Diluted$(6.60) $1.25  
Weighted average shares outstanding:  
Basic47,827  48,161  
Diluted47,827  49,542  
____________________________
(1)Other loss, net consisted of the following (in thousands):
Three months ended March 31,
20202019
Interest expense$5,316  $3,776  
Amortization of debt issuance costs313  172  
Accretion of debt discounts68  38  
Total interest expense  5,697  3,986  
Interest income(14) (140) 
Other452  112  
Other loss, net  $6,135  $3,958  




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Blucora, Inc.
Condensed Consolidated Balance Sheets
(Unaudited) (Amounts in thousands)
March 31,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents$168,198  $80,820  
Cash segregated under federal or other regulations1,170  5,630  
Accounts receivable, net of allowance25,343  16,266  
Commissions receivable17,719  21,176  
Other receivables6,141  2,902  
Prepaid expenses and other current assets, net13,387  12,349  
Total current assets231,958  139,143  
Long-term assets:
Property and equipment, net31,807  18,706  
Right-of-use assets, net29,224  10,151  
Goodwill, net391,084  662,375  
Other intangible assets, net282,462  290,211  
Deferred tax asset, net—  9,997  
Other long-term assets4,397  6,989  
Total long-term assets738,974  998,429  
Total assets$970,932  $1,137,572  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$30,085  $10,969  
Commissions and advisory fees payable17,940  19,905  
Accrued expenses and other current liabilities59,760  36,144  
Deferred revenue—current4,425  12,014  
Lease liabilities—current2,187  3,272  
Current portion of long-term debt, net56,229  11,228  
Total current liabilities170,626  93,532  
Long-term liabilities:
Long-term debt, net381,521  381,485  
Deferred tax liability, net47,502  —  
Deferred revenue—long-term6,941  7,172  
Lease liabilities—long-term31,509  5,916  
Other long-term liabilities6,658  5,952  
Total long-term liabilities474,131  400,525  
Total liabilities644,757  494,057  
Stockholders’ equity:
Common stock, par $0.0001—900,000 authorized shares; 49,148 shares issued and 47,842 shares outstanding at March 31, 2020; 49,059 shares issued and 47,753 shares outstanding at December 31, 2019
  
Additional paid-in capital1,584,854  1,586,972  
Accumulated deficit(1,230,285) (914,791) 
Accumulated other comprehensive loss  —  (272) 
Treasury stock, at cost—1,306 shares at March 31, 2020 and December 31, 2019
(28,399) (28,399) 
Total stockholders’ equity326,175  643,515  
Total liabilities and stockholders’ equity$970,932  $1,137,572  



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

 Three months ended March 31,
 20202019
Operating activities:
Net income (loss) $(315,494) $62,170  
Adjustments to reconcile net income (loss) to net cash from operating activities: 
Stock-based compensation(1,201) 2,443  
Depreciation and amortization of acquired intangible assets10,168  9,354  
Impairment of goodwill270,625  —  
Reduction of right-of-use lease assets  1,625  904  
Deferred income taxes57,898  (972) 
Amortization of debt issuance costs  313  172  
Accretion of debt discounts68  38  
Other919  —  
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable(9,066) (8,395) 
Commissions receivable3,457  1,180  
Other receivables(3,239) (42) 
Prepaid expenses and other current assets(1,715) (3,085) 
Other long-term assets2,560  (841) 
Accounts payable17,744  6,432  
Commissions and advisory fees payable(1,965) (1,544) 
Lease liabilities(1,289) —  
Deferred revenue(7,820) (4,524) 
Accrued expenses and other current and long-term liabilities23,276  6,946  
Net cash provided by operating activities  46,864  70,236  
Investing activities:
Purchases of property and equipment(7,715) (1,243) 
Net cash used by investing activities  (7,715) (1,243) 
Financing activities:
Proceeds from credit facilities  55,000  —  
Payments on credit facilities(10,313) —  
Proceeds from stock option exercises—  283  
Tax payments from shares withheld for equity awards(918) (2,425) 
Contingent consideration payments for business acquisition—  (943) 
Net cash provided (used) by financing activities 43,769  (3,085) 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash  —  15  
Net increase in cash, cash equivalents, and restricted cash  82,918  65,923  
Cash, cash equivalents, and restricted cash, beginning of period86,450  85,366  
Cash, cash equivalents, and restricted cash, end of period$169,368  $151,289  



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Blucora, Inc.
Segment Information
(Unaudited) (Amounts in thousands)
Three Months Ended March 31,
20202019
Revenue:
Wealth Management (1)$144,989  $89,532  
Tax Preparation (1)118,331  136,236  
Total revenue263,320  225,768  
Operating income:
Wealth Management22,598  11,540  
Tax Preparation37,753  79,272  
Corporate-level activity (2)(302,190) (20,699) 
Total operating income (loss)(241,839) 70,113  
Other loss, net(6,135) (3,958) 
Income tax expense(67,520) (3,985) 
Net income (loss) attributable to Blucora, Inc.$(315,494) $62,170  
____________________________
(1)Revenues by major category within each segment are presented below (in thousands):
Three Months Ended March 31,
20202019
Wealth Management:
Advisory$78,757  $39,757  
Commission50,580  37,160  
Asset-based10,579  9,693  
Transaction and fee5,073  2,922  
Total Wealth Management revenue$144,989  $89,532  
Tax Preparation:
Consumer$103,821  $123,942  
Professional14,510  12,294  
Total Tax Preparation revenue$118,331  $136,236  
(2)Corporate-level activity included the following (in thousands):
Three months ended March 31,
 20202019
Operating expenses$7,016  $7,105  
Stock-based compensation(1,201) 2,443  
Acquisition and integration costs5,682  1,797  
Executive transition costs9,184  —  
Headquarters relocation costs716  —  
Depreciation2,420  1,310  
Amortization of acquired intangible assets
7,748  8,044  
Impairment of goodwill
270,625  —  
Total corporate-level activity$302,190  $20,699  


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Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures (1)
Adjusted EBITDA Reconciliation (1)
(Unaudited) (Amounts in thousands)
Three months ended March 31,
 20202019
Net income (loss) attributable to Blucora, Inc. (2)$(315,494) $62,170  
Stock-based compensation(1,201) 2,443  
Depreciation and amortization of acquired intangible assets
10,168  9,354  
Other loss, net6,135  3,958  
Acquisition and integration costs  5,682  1,797  
Impairment of goodwill270,625  —  
Executive transition costs9,184  —  
Headquarters relocation costs716  —  
Income tax expense67,520  3,985  
Adjusted EBITDA$53,335  $83,707  

Non-GAAP Net Income and Non-GAAP Net Income Per Share Reconciliation (1)
(Unaudited) (Amounts in thousands, except per share amounts)
Three months ended March 31,
 20202019
Net income (loss) attributable to Blucora, Inc. (2)$(315,494) $62,170  
Stock-based compensation
(1,201) 2,443  
Amortization of acquired intangible assets
7,748  8,044  
Acquisition and integration costs
5,682  1,797  
Impairment of goodwill  270,625  —  
Executive transition costs9,184  —  
Headquarters relocation costs716  —  
Cash tax impact of adjustments to GAAP net income
(736) (411) 
Non-cash income tax expense  67,037  3,151  
Non-GAAP net income  $43,561  $77,194  
Per diluted share:
Net income (loss) attributable to Blucora, Inc. (2) (3)$(6.54) $1.25  
Stock-based compensation
(0.02) 0.05  
Amortization of acquired intangible assets
0.16  0.17  
Acquisition and integration costs
0.12  0.04  
Impairment of goodwill  5.61  —  
Executive transition costs  0.19  —  
Headquarters relocation costs  0.01  —  
Cash tax impact of adjustments to GAAP net income
(0.02) (0.01) 
Non-cash income tax expense  1.39  0.06  
Non-GAAP net income per share  $0.90  $1.56  
Weighted average shares outstanding used in calculating per Non-GAAP net income per share
48,253  49,542  

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

(1)We define Adjusted EBITDA as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets, other loss, net, acquisition and integration costs, impairment of goodwill, executive transition costs, headquarters relocation costs, and income tax (benefit) expense. Acquisition and integration costs primarily relate to the completed acquisition of 1st Global and the pending acquisition of HKFS. Impairment of goodwill relates to the impairment of our Wealth Management reporting unit goodwill that was recognized in the first quarter of 2020. Executive transition costs relate to the departure of certain executive officers in the first quarter of 2020. Headquarters relocation costs relate to the ongoing process to move from our Dallas and Irving offices to our new headquarters in Coppell, TX.
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 (loss). 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 (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, acquisition and integration costs, impairment of goodwill, executive transition costs, headquarters relocation costs, the related cash tax impact of those adjustments, and non-cash income tax expense. 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 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 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 and non-GAAP net income per share 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 (loss) and net income (loss) per share. Other companies may calculate non-GAAP net income and non-GAAP net income per share differently, and, therefore, our non-GAAP net income and non-GAAP net income per share may not be comparable to similarly titled measures of other companies.
(2)As presented in the condensed consolidated statements of operations (unaudited).
(3)As presented in the condensed consolidated statements of operations, net loss per share attributable to Blucora, Inc. was $(6.60) for the three months ended March 31, 2020 and was calculated based on weighted average shares outstanding of 47,827,000, which excluded the effect of potentially dilutive shares due to the net loss earned for the period. For non-GAAP reconciliation purposes, net loss per share attributable to Blucora, Inc. of $(6.54) presented in the table above included the effect of potentially dilutive shares due to non-GAAP net income earned during the period.



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Ticker: BCOR
CIK: 1068875
Form Type: 8-K Corporate News
Accession Number: 0001068875-20-000089
Submitted to the SEC: Wed May 06 2020 6:41:48 AM EST
Accepted by the SEC: Wed May 06 2020
Period: Wednesday, May 6, 2020
Industry: Finance Services
Events:
  1. Earnings Release
  2. Financial Exhibit

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