UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2019



o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-25131

BLUCORA, INC.

(Exact name of registrant as specified in its charter)



Delaware			91-1718107
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
6333 State Hwy 161, ~~6th~~4th Floor, Irving, Texas			75038
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (972) ~~870-6000~~870-6400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ý Yes o No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ý Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	oý	Accelerated filer	ýo
Non-accelerated filer	o~~(Do not check if a smaller reporting company)~~	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

BCOR

NASDAQ Global Select Market

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


		Outstanding at
Class		~~Outstanding at~~May 1, 2019
~~Class~~		~~October 19, 2017~~
Common Stock, Par Value $0.0001	~~46,125,990~~48,390,443

TABLE OF CONTENTS



PART I—FINANCIAL INFORMATION			Page
Item 1.	Financial Statements	34
	Unaudited Condensed Consolidated Balance Sheets	34
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	45
	Unaudited Condensed Consolidated Statements of Stockholders' Equity	6
	Unaudited Condensed Consolidated Statements of Cash Flows	57
	Notes to Unaudited Condensed Consolidated Financial Statements	68
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3431
Item 4.	Controls and Procedures	3531

PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	3531
Item 1A.	Risk Factors	3531
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3834
Item 3.	Defaults Upon Senior Securities	3835
Item 4.	Mine Safety Disclosures	3835
Item 5.	Other Information	3835
Item 6.	Exhibits	3935

Signatures			4036

Trademarks, Trade Names and Service Marks

This report includes certain trademarks, trade names and service marks of Blucora, Inc.(referred to throughout this report as "Blucora," the "Company", "we," "us," or "our"), including Blucora, HD Vest and TaxAct. Each one of these trademarks, trade names or service marks is either (i) our registered trademark, (ii) a trademark for which we have a pending application, (iii) a trade name or service mark for which we claim common law rights or (iv) a registered trademark or application for registration which we have been authorized by a third party to use.

Solely for convenience, the trademarks, service marks and trade names included in this report are without the ®, ™ or other applicable symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. This report may also include additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names included in this report are, to our knowledge, the property of their respective owners.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve risks and uncertainties. The statements in this report that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Words such as“anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue,” and "could" or, in each case, their negative variables and similar expressions identify forward-looking statements, but the absence of these words does not mean that the statement is not forward-looking. These forward-looking statements include, but are not limited to, statements regarding:

•our ability to effectively compete within our industry;

•our ability to attract and retain customers, as well as our ability to provide strong customer service;

•our ability to realize all of the anticipated benefits of the acquisition of 1st Global, as well as our ability to integrate the operations of 1st Global;

•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;

•our ability to generate strong investment performance for our customers and the impact of the financial markets on our customers’ portfolios;

•political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation industries;

•our ability to attract and retain productive financial advisors;

•our ability to respond to rapid technological changes, including our ability to successfully release new products and services or improve upon existing products and services;

•our expectations concerning the revenues we generate from fees associated with the financial products that we distribute;

•our ability to manage leadership and employee transitions;

•our ability to comply with regulations applicable to the wealth management and tax preparation industries, including increased costs associated with new or changing regulations;

•our expectations concerning the benefits that may be derived from our new clearing platform and our investment advisory platform;

•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 and licensing partners;

•our beliefs and expectations regarding the seasonality of our business;

•risks associated with litigation;

•our ability to attract and retain qualified employees;

•our assessments and estimates that determine our effective tax rate;

•the impact of new or changing tax legislation on our business and our ability to attract and retain customers;

•our ability to develop, establish and maintain strong brands;

•our ability to protect our intellectual property and the impact of any claim that we have infringed on the intellectual property rights of others; and

•our ability to effectively integrate companies or assets that we acquire.

Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors, many of which are beyond our control, that may cause our results, levels of activity, performance, achievements, and prospects to be materially different from those expressed or implied by such forward-looking statements. These risks, uncertainties, and other factors include, among others, the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as supplemented by those identified under Part II, Item 1A, "Risk Factors" and elsewhere in this report, as well as in the Company's other filings with the Securities and Exchange Commission. You should not rely on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We do not undertake any obligation to update any forward-looking statement to reflect new information, events, or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as required by law.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BLUCORA, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

September 30,
2017 December 31,
2016
ASSETS
Current assets:
Cash and cash equivalents $ 78,558
$ 51,713
Cash segregated under federal or other regulations 313
2,355
Available-for-sale investments —
7,101
Accounts receivable, net of allowance 6,952
10,209
Commissions receivable 16,432
16,144
Other receivables 592
4,004
Prepaid expenses and other current assets, net 4,777
6,321
Total current assets 107,624
97,847
Long-term assets:
Property and equipment, net 9,552
10,836
Goodwill, net 549,064
548,741
Other intangible assets, net 336,872
362,178
Other long-term assets 2,557
3,057
Total long-term assets 898,045
924,812
Total assets $ 1,005,669
$ 1,022,659
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 3,161
$ 4,536
Commissions and advisory fees payable 16,564
16,587
Accrued expenses and other current liabilities 18,768
18,528
Deferred revenue 7,118
12,156
Current portion of long-term debt, net 2,560
2,560
Total current liabilities 48,171
54,367
Long-term liabilities:
Long-term debt, net 344,232
248,221
Convertible senior notes, net —
164,176
Deferred tax liability, net 59,118
111,126
Deferred revenue 1,031
1,849
Other long-term liabilities 8,530
10,205
Total long-term liabilities 412,911
535,577
Total liabilities 461,082
589,944

Redeemable noncontrolling interests 16,162
15,696

Commitments and contingencies (Note 9)

Stockholders’ equity:
Common stock, par $0.0001—authorized shares, 900,000; issued and outstanding shares,
46,077 and 41,845 5
4
Additional paid-in capital 1,552,609
1,510,152
Accumulated deficit (1,024,222 ) (1,092,756 )
Accumulated other comprehensive income (loss) 33
(381 )
Total stockholders’ equity 528,425
417,019
Total liabilities and stockholders’ equity $ 1,005,669
$ 1,022,659

~~See accompanying notes to Unaudited Condensed Consolidated Financial Statements.~~

~~BLUCORA, INC.~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(In thousands, except per share data)~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Revenue:
Wealth management services revenue $ 86,809
$ 80,088
$ 254,772
$ 233,496
Tax preparation services revenue 3,362
3,149
156,936
135,614
Total revenue 90,171
83,237
411,708
369,110
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue 59,607
54,921
172,444
158,213
Tax preparation services cost of revenue 1,314
1,319
7,543
6,549
Amortization of acquired technology 50
49
145
765
Total cost of revenue 60,971
56,289
180,132
165,527
Engineering and technology 5,051
4,588
14,041
12,842
Sales and marketing 13,680
11,965
84,974
75,715
General and administrative 12,207
11,638
39,405
35,899
Depreciation 867
968
2,680
2,906
Amortization of other acquired intangible assets 8,615
8,297
25,192
24,929
Restructuring 106
—
2,726
—
Total operating expenses 101,497
93,745
349,150
317,818
Operating income (loss) (11,326 ) (10,508 ) 62,558
51,292
Other loss, net (5,241 ) (11,453 ) (39,149 ) (29,883 )
Income (loss) from continuing operations before income taxes (16,567 ) (21,961 ) 23,409
21,409
Income tax benefit (expense) (166 ) 8,537
(5,952 ) (8,899 )
Income (loss) from continuing operations (16,733 ) (13,424 ) 17,457
12,510
Discontinued operations, net of income taxes —
(40,528 ) —
(57,981 )
Net income (loss) (16,733 ) (53,952 ) 17,457
(45,471 )
Net income attributable to noncontrolling interests (164 ) (167 ) (466 ) (426 )
Net income (loss) attributable to Blucora, Inc. $ (16,897 ) $ (54,119 ) $ 16,991
$ (45,897 )
Net income (loss) per share attributable to Blucora, Inc. - basic:
Continuing operations $ (0.37 ) $ (0.33 ) $ 0.39
$ 0.29
Discontinued operations —
(0.97 ) —
(1.40 )
Basic net income (loss) per share $ (0.37 ) $ (1.30 ) $ 0.39
$ (1.11 )
Net income (loss) per share attributable to Blucora, Inc. - diluted:
Continuing operations $ (0.37 ) $ (0.33 ) $ 0.36
$ 0.29
Discontinued operations —
(0.97 ) —
(1.37 )
Diluted net income (loss) per share $ (0.37 ) $ (1.30 ) $ 0.36
$ (1.08 )
Weighted average shares outstanding:
Basic 45,459
41,635
43,749
41,404
Diluted 45,459
41,635
46,813
42,329
Other comprehensive income (loss):
Net income (loss) $ (16,733 ) $ (53,952 ) $ 17,457
$ (45,471 )
Unrealized gain on available-for-sale investments, net of tax —
—
1
10
Foreign currency translation adjustment 223
(77 ) 413
246
Other comprehensive income (loss) 223
(77 ) 414
256
Comprehensive income (loss) (16,510 ) (54,029 ) 17,871
(45,215 )
Comprehensive income attributable to noncontrolling interests (164 ) (167 ) (466 ) (426 )
Comprehensive income (loss) attributable to Blucora, Inc. $ (16,674 ) $ (54,196 ) $ 17,405
$ (45,641 )


	March 31, 2019		December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	149,762	$	84,524
Cash segregated under federal or other regulations	1,527		842

Accounts receivable, net of allowance	24,113		15,721
Commissions receivable	14,382		15,562
Other receivables	7,450		7,408
Prepaid expenses and other current assets, net	10,840		7,755

Total current assets	208,074		131,812
Long-term assets:
Property and equipment, net	12,322		12,389
Right-of-use assets, net	5,942		—
Goodwill, net	548,770		548,685
Other intangible assets, net	286,562		294,603


Other long-term assets	11,047		10,236
Total long-term assets	864,643		865,913
Total assets	$	1,072,717	$	997,725
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,230	$	3,798
Commissions and advisory fees payable	13,655		15,199
Accrued expenses and other current liabilities	48,675		18,980
Lease liabilities	6,493		46
Deferred revenue	6,424		10,257



Total current liabilities	85,477		48,280
Long-term liabilities:
Long-term debt, net	260,570		260,390

Deferred tax liability, net	39,422		40,394
Deferred revenue	7,890		8,581

Lease liabilities	2,118		100
Other long-term liabilities	6,186		7,440
Total long-term liabilities	316,186		316,905
Total liabilities	401,663		365,185

Redeemable noncontrolling interests	2,517		24,945

Commitments and contingencies (Note 7)

Stockholders’ equity:
Common stock, par $0.0001—authorized shares, 900,000; issued and outstanding shares,
48,255 and 48,044, respectively	5		5
Additional paid-in capital	1,570,026		1,569,725
Accumulated deficit	(901,155)		(961,689)
Accumulated other comprehensive loss	(339)		(446)
Total stockholders’ equity	668,537		607,595
Total liabilities and stockholders’ equity	$	1,072,717	$	997,725

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

BLUCORA, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)


	Three months ended March 31,
	2019		2018
Revenue:
Wealth management services revenue	$	89,532	$	92,082
Tax preparation services revenue	136,236		113,883
Total revenue	225,768		205,965
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue	61,374		63,064
Tax preparation services cost of revenue	4,201		4,353
Amortization of acquired technology	—		50
Total cost of revenue	65,575		67,467
Engineering and technology	6,529		5,131
Sales and marketing	55,572		55,253
General and administrative	18,874		14,866
Depreciation	1,061		1,915
Amortization of other acquired intangible assets	8,044		8,307

Restructuring	—		289
Total operating expenses	155,655		153,228
Operating income	70,113		52,737
Other loss, net	(3,958)		(5,228)
Income before income taxes	66,155		47,509
Income tax expense	(3,985)		(1,963)


Net income	62,170		45,546
Net income attributable to noncontrolling interests	—		(205)
Net income attributable to Blucora, Inc.	$	62,170	$	45,341
Net income per share attributable to Blucora, Inc.:
Basic	$	1.29	$	0.97
Diluted	$	1.25	$	0.93




Weighted average shares outstanding:
Basic	48,161		46,641
Diluted	49,542		48,665
Other comprehensive income (loss):
Net income	$	62,170	$	45,546

Foreign currency translation adjustment	107		(137)



Other comprehensive income (loss)	107		(137)
Comprehensive income	62,277		45,409
Comprehensive income attributable to noncontrolling interests	—		(205)
Comprehensive income attributable to Blucora, Inc.	$	62,277	$	45,204

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

BLUCORA, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except per share data)


	Redeemable Noncontrolling Interests							Additional- paid-in capital		Accumulated deficit		Accumulated other comprehensive loss
				Common stock
				Shares		Amount								Total
Balance as of December 31, 2017	$	18,033	46,367	$	5	$	1,555,560	$	(1,014,174)	$	(4)	$	541,387
Common stock issued for stock options and restricted stock units	—		462	—		2,534		—		—		2,534
Common stock issued for employee stock purchase plan	—		—	—		703		—		—		703
Other comprehensive loss	—		—	—		—		—		(137)		(137)
Stock-based compensation	—		—	—		2,958		—		—		2,958
Tax payments from shares withheld for equity awards	—		—	—		(1,493)		—		—		(1,493)
Impact of adoption of new revenue recognition accounting standard	—		—	—		—		1,851		—		1,851
Net income	205		—	—		—		45,341		—		45,341
Balance as of March 31, 2018	$	18,238	46,829	$	5	$	1,560,262	$	(966,982)	$	(141)	$	593,144


	Redeemable Noncontrolling Interests							Additional- paid-in capital		Accumulated deficit		Accumulated other comprehensive loss
				Common stock
				Shares		Amount								Total
Balance as of December 31, 2018	$	24,945	48,044	$	5	$	1,569,725	$	(961,689)	$	(446)	$	607,595
Common stock issued for stock options and restricted stock units	—		211	—		283		—		—		283
Other comprehensive income	—		—	—		—		—		107		107
Stock-based compensation	—		—	—		2,443		—		—		2,443
Tax payments from shares withheld for equity awards	—		—	—		(2,425)		—		—		(2,425)
Reclassification of mandatorily redeemable noncontrolling interests	(22,428)		—	—		—		—		—		—
Impact of adoption of new leases accounting standard	—		—	—		—		(1,636)		—		(1,636)
Net income	—		—	—		—		62,170		—		$	62,170
Balance as of March 31, 2019	$	2,517	48,255	$	5	$	1,570,026	$	(901,155)	$	(339)	$	668,537

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

BLUCORA, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Three months ended March 31,
	2019		2018
Operating Activities:
Net income	$	62,170	$	45,546


Adjustments to reconcile net income to net cash from operating activities:
Stock-based compensation	2,443		2,955
Depreciation and amortization of acquired intangible assets	9,354		10,359



Reduction of right-of-use lease assets	904		—
Deferred income taxes	(972)		(749)
Amortization of premium on investments, net, and debt issuance costs	172		202
Accretion of debt discounts	38		47
Loss on debt extinguishment	—		776






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

Accounts receivable	(8,395)		(1,961)
Commissions receivable	1,180		(240)
Other receivables	(42)		2,588
Prepaid expenses and other current assets	(3,085)		(319)
Other long-term assets	(841)		(1,109)
Accounts payable	6,432		3,290
Commissions and advisory fees payable	(1,544)		(278)
Deferred revenue	(4,524)		(4,213)
Accrued expenses and other current and long-term liabilities	6,946		556
Net cash provided by operating activities	70,236		57,450
Investing Activities:

Purchases of property and equipment	(1,243)		(940)





Net cash used by investing activities	(1,243)		(940)
Financing Activities:



Payments on credit facilities	—		(40,000)




Proceeds from stock option exercises	283		2,534
Proceeds from issuance of stock through employee stock purchase plan	—		703
Tax payments from shares withheld for equity awards	(2,425)		(1,493)
Contingent consideration payments for business acquisition	(943)		(1,313)
Net cash used by financing activities	(3,085)		(39,569)







Effect of exchange rate changes on cash, cash equivalents, and restricted cash	15		(6)
Net increase in cash, cash equivalents, and restricted cash	65,923		16,935
Cash, cash equivalents, and restricted cash, beginning of period	85,366		62,311
Cash, cash equivalents, and restricted cash, end of period	$	151,289	$	79,246




Cash paid for income taxes	$	1,031	$	457
Cash paid for interest	$	3,624	$	4,188

Nine months ended September 30,
2017 2016
Operating Activities:
Net income (loss) $ 17,457
$ (45,471 )
Less: Discontinued operations, net of income taxes —
(57,981 )
Net income from continuing operations 17,457
12,510
Adjustments to reconcile net income from continuing operations to net cash from operating activities:
Stock-based compensation 8,434
10,616
Depreciation and amortization of acquired intangible assets 28,553
29,080
Restructuring (non-cash) 1,499
—
Deferred income taxes (473 ) (12,484 )
Amortization of premium on investments, net 10
164
Amortization of debt issuance costs 891
1,440
Accretion of debt discounts 1,893
3,599
(Gain) loss on debt extinguishment 19,764
(641 )
Revaluation of acquisition-related contingent consideration liability —
391
Other —
18
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable 3,259
793
Commissions receivable (288 ) 1,034
Other receivables 2,384
19,656
Prepaid expenses and other current assets 1,720
6,003
Other long-term assets 432
(1,174 )
Accounts payable (1,375 ) 1,151
Commissions and advisory fees payable (23 ) (1,600 )
Deferred revenue (5,856 ) (1,805 )
Accrued expenses and other current and long-term liabilities 949
19,786
Net cash provided by operating activities from continuing operations 79,230
88,537
Investing Activities:
Business acquisition, net of cash acquired —
(1,788 )
Purchases of property and equipment (3,809 ) (2,648 )
Proceeds from sales of investments 249
—
Proceeds from maturities of investments 7,252
11,808
Purchases of investments (409 ) (5,147 )
Net cash provided by investing activities from continuing operations 3,283
2,225
Financing Activities:
Proceeds from credit facilities 367,212
—
Payments on convertible notes (172,827 ) (20,667 )
Payments on credit facilities (285,000 ) (105,000 )
Proceeds from stock option exercises 38,228
1,141
Proceeds from issuance of stock through employee stock purchase plan 1,428
1,402
Tax payments from shares withheld for equity awards (6,744 ) (1,447 )
Contingent consideration payments for business acquisition (946 ) —
Net cash used by financing activities from continuing operations (58,649 ) (124,571 )
Net cash provided (used) by continuing operations 23,864
(33,809 )

Net cash provided by operating activities from discontinued operations —
12,359
Net cash provided by investing activities from discontinued operations 1,028
43,230
Net cash used by financing activities from discontinued operations —
(9,000 )
Net cash provided by discontinued operations 1,028
46,589

Effect of exchange rate changes on cash, cash equivalents, and restricted cash 86
(15 )
Net increase in cash, cash equivalents, and restricted cash 24,978
12,765
Cash, cash equivalents, and restricted cash, beginning of period 54,868
59,830
Cash, cash equivalents, and restricted cash, end of period $ 79,846
$ 72,595

Cash paid for income taxes from continuing operations $ 1,013
$ 2,079
Cash paid for interest from continuing operations $ 14,205
$ 23,455

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

BLUCORA, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: ~~The Company and Basis~~Description of ~~Presentation~~the Business

Description of the business: Blucora, Inc. (the "~~Company"~~Company,""Blucora," "we," "our," or~~"Blucora"~~ "us") operates two businesses: a Wealth Management business and ~~an online~~a digital Tax Preparation business. The Wealth Management business consists of the operations of HDV Holdings, Inc. and its subsidiaries ("HD Vest"). HDV Holdings, Inc. is the parent company of the Wealth Management business and owns all outstanding shares of HD Vest, Inc., which serves as a holding company for the various financial services subsidiaries. Those subsidiaries include HD Vest Investment Securities, Inc. (an introducing broker-dealer), HDH.D. Vest Advisory Services, Inc. (a registered investment advisor), and HDH.D. Vest Insurance Agency, LLC (an insurance broker) (collectively referred to as the "Wealth Management business" or the "Wealth Management segment"). The Tax Preparation business consists of the operations of TaxAct, Inc. and its subsidiary ("TaxAct") and provides digital tax preparation solutions for consumers, small business owners, and tax professionals through its website www.TaxAct.com (collectively referred to as the "Tax Preparation business" or the "Tax Preparation segment").

Prior to 2017, the Company also operated an internet Search and Content business and an E-Commerce business through 2016. The Search and Content business operated through the InfoSpace LLC subsidiary (~~"InfoSpace"), and the E-Commerce business consisted of the operations of Monoprice, Inc. ("Monoprice"~~).

~~On October 14, 2015, the Company announced its plans to focus on the technology-enabled financial solutions market (the~~ ~~"Strategic Transformation"~~). Strategic Transformation refers to the Company's transformation into a technology-enabled financial solutions company comprised of TaxAct and HD Vest (see "Note 3: Business Combinations") and the divestitures of the Search and Content and E-Commerce businesses in 2016 (see "Note 4: Discontinued Operations"). As part of the Strategic Transformation and "One Company" operating model, the Company announced on October 27, 2016 plans to relocate its corporate headquarters by June 2017 from Bellevue, Washington to Irving, Texas. The actions to relocate corporate headquarters were intended to drive efficiencies and improve operational effectiveness (see "Note 5: Restructuring"). The restructuring is now substantially complete and it is expected to be completed by early 2018.

Segments:The Company has two reportable ~~segments:~~segments: the Wealth Management segment, which is the HD Vest business, and the Tax Preparation ~~segment.~~segment, which is the TaxAct business.

Reclassification: The Company reclassified certain amounts on its consolidated ~~statements of cash flows~~balance sheets related to ~~excess tax benefits generated from stock-based compensation~~loans given to several HD Vest advisors and ~~restricted cash, both in connection with~~ the ~~implementation of new accounting pronouncements. See the~~ ~~"Recent accounting pronouncements"~~ ~~section of "Note 2: Summary of Significant Accounting Policies" for additional information.~~Company's finance leases.

Note 2: Summary of Significant Accounting Policies

Interim financial information: The accompanying consolidated financial statements have been prepared by the Company under the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial reporting. These consolidated financial statements are unaudited and, in management’s opinion, include all adjustments, consisting of normal recurring adjustments and accruals, necessary for a fair presentation of the consolidated financial position, results of operations, and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018. Interim results are not necessarily indicative of results for a full year.

Cash, cash equivalents, and restricted cash: The following table presents cash, cash equivalents, and restricted cash as reported on the consolidated balance sheets that equal the total amounts on the consolidated statements of cash flows (in thousands):


	March 31,						December 31,
	2019		2018		2018
Cash and cash equivalents	$	149,762	$	77,107	$	84,524
Cash segregated under federal or other regulations	1,527		1,314		842
Restricted cash included in "Prepaid expenses and other current assets, net"	—		275		—
Restricted cash included in "Other long-term assets"	—		550		—
Total cash, cash equivalents, and restricted cash	$	151,289	$	79,246	$	85,366

September 30, December 31,
2017 2016 2016 2015
Cash and cash equivalents $ 78,558
$ 71,165
$ 51,713
$ 55,473
Cash segregated under federal or other regulations 313
630
2,355
3,557
Restricted cash included in "Prepaid expenses and other current assets, net" 425
100
250
100
Restricted cash included in "Other long-term assets" 550
700
550
700
Total cash, cash equivalents, and restricted cash $ 79,846
$ 72,595
$ 54,868
$ 59,830

Cash segregated under federal and other regulations is held in a ~~segregated~~separate bank account for the exclusive benefit of the Company’s Wealth Management ~~business~~ customers. Restricted cash included in prepaid expenses and other current assets, net and other long-term assets represents amounts pledged as collateral for certain of the Company's banking and lease arrangements.

Fair value of financial instruments: The Company measures its cash equivalents ~~available-for-sale investments, and contingent consideration liability~~ at fair value. The Company considers the carrying values of accounts receivable, commissions receivable, other receivables, prepaid expenses, other current assets, accounts payable, commissions and advisory fees payable, accrued expenses, and other current liabilities to approximate fair values primarily due to their short-term ~~natures.~~natures.

Cash equivalents and debt securities are classified within Level 2 (see "Note 6: Fair Value Measurements") of the fair value hierarchy because the Company values them utilizing market observable inputs. Unrealized gains and losses are included in "Accumulated other comprehensive income (loss)" on the consolidated balance sheets, and amounts reclassified out of comprehensive income into net income are determined on the basis of specific identification.

~~The Company has a contingent consideration liability that is related to the Company's 2015 acquisition of SimpleTax Software Inc. ("SimpleTax"~~) and is classified within Level 3 (see "Note 6: Fair Value Measurements") of the fair value hierarchy because the Company values it utilizing significant inputs not observable in the market. Specifically, the Company has determined the fair value of the contingent consideration liability based on a probability-weighted discounted cash flow analysis, which includes assumptions related to estimating revenues, the probability of payment, and the discount rate. The change in the fair value of the contingent consideration liability is recognized in "General and administrative" expense on the consolidated statements of comprehensive income for the period in which the fair value changes.

Concentration of credit risk: Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, short-term investments, trade accounts receivable, and commissions receivable. These instruments are generally unsecured and uninsured.

For cash equivalents, short-term investments, and commissions receivable, the Company attempts to manage exposure to counterparty credit risk by only entering into agreements with major financial institutions and investment sponsors that are expected to be able to fully perform under the terms of the agreement.

Accounts receivable are typically unsecured and are derived from revenues earned from customers primarily located in the United States operating in a variety of geographic ~~areas.~~areas. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.

Recent accounting pronouncements: Changes to GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of accounting standards updates ("ASUs") to the FASB’s Accounting Standards Codification ("ASC"). The Company considers the applicability and impact of all recent ASUs. ASUs and ASCs not listed below were assessed and either were determined to not be ~~either not~~ applicable or are expected to have minimal impact on the Company’s consolidated financial position and results of operations. The Company currently is evaluating, or has adopted, ASUs and ASCs that impact the following areas:

~~Revenue recognition~~Share-Based Payments (ASU 2018-07) - In ~~May 2014,~~June 2018, the FASB issued ~~guidance codified in ASC 606, "Revenue from Contracts with Customers," which amends the guidance in former ASC 605 "Revenue Recognition." The core principle of the guidance is~~an ASU that ~~an entity should recognize revenue~~requires companies to ~~depict the transfer of promised goods or services~~account for share-based payments granted to ~~customers in an amount that reflects the consideration~~non-employees similarly to ~~which the entity expects~~share-based payments granted to ~~be entitled in exchange~~employees. This ASU was effective for those goods or services. This will be achieved in a five-step process. Enhanced disclosures also will be required. This guidance is effective on a retrospective basis--either to each reporting period presented or with the cumulative effect of initially applying this guidance recognized at the date of initial application--for annual reporting periods, including interim reporting periods within those annual reporting periods, beginning

~~after December 15, 2017. Early adoption is permitted only as of annual reporting periods~~fiscal years beginning after December 15, ~~2016,~~2018, including the interim ~~reporting~~ periods within ~~that reporting period.~~

~~The~~those fiscal years. Early adoption of this ASU was permitted. In the third quarter of 2018, the Company ~~will~~decided to early adopt the requirements of the new standard on, effective January 1, 2018, utilizing the ~~modified retrospective transition~~alternative adoption method. ~~Upon adoption, the Company will recognize the cumulative effect of adopting this ASU as an adjustment to the opening balance of retained earnings. Prior periods will not be retrospectively adjusted.~~ The ~~Company expects that the~~ adoption of this ASU ~~will not have a material~~had an insignificant impact ~~to its consolidated financial statements, including~~on the ~~presentation of revenues in~~Company's unaudited 2018 quarterly results for the ~~statement of comprehensive income.~~three months ended March 31, 2018.

Leases (ASU 2016-02) - In February 2016, the FASB issued ~~an ASU on lease accounting, whereby~~guidance codified in ASC 842, "Leases" ("ASC 842"), which supersedes the guidance in ASC 840 "Leases." Under ASC 842, lease assets and liabilities, whether arising from leases that are considered operating or finance (capital) ~~and have a term of twelve months or less,~~ will be recognized on the balance sheet. ~~Enhanced qualitative disclosures also will be required.~~ Lease liabilities are measured as the present value of unpaid lease payments for operating leases where the Company is the lessee, and a corresponding right-of-use ("ROU") asset is recognized for the right to use the leased assets.

This guidance isbecame effective on a modified retrospective ~~basis--with~~basis-with various practical expedients related to leases that commenced before the effective ~~date--for~~date-for annual reporting periods, including interim reporting periods within those annual reporting periods, beginning after December 15, 2018. ~~Early adoption is permitted.~~ Prior comparable periods are presented in accordance with accounting guidance under ASC 840 "Leases" and were not restated.

The Company adopted ASC 842 on January 1, 2019 for all open leases with a term greater than one year as of the adoption date, using the modified retrospective method of adoption with a cumulative effect adjustment to retained earnings. The Company elected the package of practical expedients, for which there is no requirement to reassess lease existence, classification and initial direct costs, the hindsight practical expedient, for which the Company used hindsight in determining certain lease terms, and the short-term lease expedient, for which the Company considered all open leases with a term greater than one year as of the adoption date. The adoption resulted in $6.6 million of additional operating lease assets, $9.1 million of additional operating lease liabilities, and a $1.6 million adjustment to the opening balance of retained earnings as a result of reevaluating certain of the Company's lease terms as of the adoption date. The Company also reclassified, upon adoption, $0.9 million of other lease-related balances to reduce the measurement of lease assets.

The Company's lease terms are comprised of contractual terms but may include extension or termination options reasonably assured to be exercised at lease inception, which are included in the recognition of ROU assets and lease liabilities. The Company’s leases do not contain residual value guarantees or material variable lease payments. The Company does not have any material restrictions or covenants imposed by leases that would impact the Company’s ability to pay dividends or cause the Company to incur additional financial obligations.

The Company’s leases are not complex; therefore, there were no significant assumptions or judgments made in applying the requirements of ASC 842, including the determination of whether the contracts contained a lease, the allocation of consideration in the contracts between lease and non-lease components, and the determination of the discount rates for the leases.

Measurement of Credit Losses (ASU 2016-13) - In June 2016, the FASB issued an ASU that requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2019, including the interim periods within those fiscal years. The Company is currently ~~is evaluating~~assessing the impact of adopting this ASU, but based on a preliminary assessment, does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.

~~Stock-based compensation (ASU 2016-09)~~

Note 3: Segment Information and Revenues

The Company has two reportable segments: the Wealth Management segment and the Tax Preparation segment. The Company’s Chief Executive Officer is its chief operating decision maker and reviews financial information presented on a disaggregated basis. This information is used for purposes of allocating resources and evaluating financial performance.

Information on reportable segments currently presented to the Company’s chief operating decision maker and a reconciliation to consolidated net income are presented below (in thousands):


	Three Months Ended March 31,
	2019		2018
Revenue:
Wealth Management	$	89,532	$	92,082
Tax Preparation	136,236		113,883
Total revenue	225,768		205,965
Operating income (loss):
Wealth Management	11,540		13,075
Tax Preparation	79,272		58,806
Corporate-level activity	(20,699)		(19,144)
Total operating income	70,113		52,737
Other loss, net	(3,958)		(5,228)
Income tax expense	(3,985)		(1,963)
Net income	$	62,170	$	45,546

Revenues by major category within each segment are presented below (in thousands):


	Three Months Ended March 31,
	2019		2018
Wealth Management:
Commission	$	37,160	$	42,870
Advisory	39,757		39,301
Asset-based	9,693		7,172
Transaction and fee	2,922		2,739
Total Wealth Management revenue	$	89,532	$	92,082
Tax Preparation:
Consumer	$	123,942	$	101,912
Professional	12,294		11,971
Total Tax Preparation revenue	$	136,236	$	113,883

Wealth Management revenue recognition: Wealth Management revenue consists primarily of commission revenue, advisory revenue, asset-based revenue, and transaction and fee revenue. The Company's Wealth Management revenues are earned from customers primarily located in the United States.

Wealth management revenue details are as follows:

Commission revenue - ~~In March 2016,~~Commission revenue represents amounts generated by purchases and sales of securities and various investment products by the ~~FASB issued an ASU~~Company's clients. The Company serves as the registered broker/dealer or insurance agent for those trades. The Company generates two types of commission revenues: transaction-based sales commissions that occur on ~~employee share-based payment accounting. The ASU requires that excess tax benefits~~the trade date, which is when the Company's performance obligations have been substantially completed, and ~~deficiencies be recognized as income tax benefit or expense,~~trailing commissions, which are paid to the Company (typically in arrears on a quarterly basis) based on the clients' account balance, rather than ~~as additional paid-in capital. In addition,~~a per-transaction fee.

Advisory revenue - Advisory revenue includes fees charged to clients in advisory accounts where the ~~ASU requires that excess tax benefits be recorded in~~Company is the Registered Investment Advisor. These fees are based on the value of assets within these advisory accounts. Advisory revenues are deferred and recognized ratably over the period ~~that shares vest~~(typically quarterly) in which the performance obligations, which are defined in ASC 606 as promises to transfer goods or ~~settle, regardless of whether the benefit reduces taxes payable in the same period. Cash flows related to excess tax benefits will be included as an operating activity,~~services, have been completed.

Asset-based revenue - Asset-based revenue primarily includes fees from financial product manufacturer sponsorship programs, cash sweep programs and ~~no longer classified as a financing activity, in the statement of cash flows. This guidance was effective for annual reporting periods,~~other asset-based revenues, primarily including ~~interim reporting periods within those annual reporting periods, beginning after December 15, 2016. The guidance related to the recognition of excess tax benefits~~margin revenues, and deficiencies as income tax benefit or expense was effective on a prospective basis, and the guidance related to the timing of excess tax benefit recognition was effective using a modified retrospective transition method with a cumulative-effect adjustment to equity as of the beginning ofis recognized ratably over the period in which ~~the guidance is adopted. The cash flow presentation guidance was effective~~services are provided.

Transaction and fee revenue - Transaction and fee revenue primarily includes support fees charged to advisors, which are recognized over time as advisory services are provided, fees charged for executing certain transactions in client accounts, which are recognized on a ~~retrospective~~trade-date basis, and other fees related to services provided and other account charges as generally outlined in agreements with financial advisors, clients, and financial institutions, which are recognized as services are performed or ~~prospective basis.~~as earned, as applicable.

Details of Wealth Management revenues are (in thousands):



	Three Months Ended March 31, 2019										Three Months Ended March 31, 2018
	Recognized Upon Transaction		Recognized Over Time		Total		Recognized Upon Transaction		Recognized Over Time		Total
Commission revenue	$	15,684	$	21,476	$	37,160	$	18,345	$	24,525	$	42,870
Advisory revenue	—		39,757		39,757		—		39,301		39,301
Asset-based revenue	—		9,693		9,693		—		7,172		7,172
Transaction and fee revenue	770		2,152		2,922		961		1,778		2,739
Total	$	16,454	$	73,078	$	89,532	$	19,306	$	72,776	$	92,082

Tax Preparation revenue recognition: The Company ~~implemented this ASU on January 1, 2017~~derives revenue from the sale of Tax Preparation digital services, ancillary services, packaged tax preparation software, and ~~recorded~~arrangements that may include a ~~cumulative-effect adjustment~~combination of ~~$51.5 million~~these items. Ancillary services primarily include refund payment transfer and audit defense. The Company’s Tax Preparation revenues are earned from customers primarily located in the United States.

Tax Preparation revenue details are as follows:

Consumer revenue - Consumer revenue includes revenue associated with the Company’s digital software products, downloadable or shipped desktop software products, add-on services such as refund payment transfer services, bank or reloadable pre-paid debit card services, gift cards and audit defense services.

Digital revenues include revenues associated with the Company’s digital software products sold to ~~credit retained earnings~~customers and businesses primarily for ~~deferred~~the preparation of individual or business tax ~~assets~~returns, and are generally recognized when customers and businesses complete and file returns.

Desktop revenues primarily include revenues from all downloadable or shipped software products and are generally recognized when customers download the software or when the software ships.

Add-on services are revenues related to ~~net operating losses that arose from excess~~services such as refund payment transfer services, bank or reloadable pre-paid debit card services, gift cards and audit defense services, and are generally recognized as customers complete and file returns.

Professional revenue - Professionalrevenues include revenues associated with the Company’s desktop software products sold to tax ~~benefits, which~~return preparers who utilize the ~~Company has deemed realizable. In addition~~Company’s offerings to ~~this:~~

Atservice end-user customers and are generally recognized when customers download the ~~time of adoption and on~~software or when the software ships. Professional customers have the option to elect an unlimited e-filing package or a ~~prospective basis,~~pay-per-return package. As the primary impact of adoption was the recognition of excess tax benefits and deficiencies, including deferred tax assets related to net operating losses that arose from excess tax benefits which the Company has deemed realizable, in the income tax provision (rather than in additional paid-in capital). This caused income taxes to differ from taxes at the statutory rates in 2017. For the three months ended September 30, 2017, the Companyunlimited e-filing package can be re-used, those revenues are recognized over an estimated $7.0 million increase to the income tax provision, which resulted in a $7.0 million decrease to income from continuing operations and net income attributable to Blucora, a $0.15 decrease to basic earnings per share, and a $0.15 decrease to diluted earnings per share. For the nine months ended September 30, 2017, the Company recognized an estimated $0.4 million increase to the income tax provision, which resulted in a $0.4 million decrease to income from continuing operations and net income attributable to Blucora, a $0.01 decrease to basic earnings per share, and a $0.01 decrease to diluted earnings per share.

The Company applied the cash flow presentation guidance on a retrospective basis, restating the consolidated statements of cash flows to present excess tax benefits as an operating activity (rather than a financing activity). For the three months ended September 30, 2016, this resulted in a decrease to cash provided by operating activities from continuing operations of $5.6 million and a corresponding decrease to cash used by financing activities from continuing operations for the amount historically presented in the "excess tax benefits from stock-based award activity" line item in the consolidated statements of cash flows. For the nine months ended September 30, 2016, this resulted in an increase to cash provided by operating activities from continuing operations of $21.4 million and a corresponding increase to cash used by financing activities from continuing operations for the amount historically presented in the "excess tax benefits from stock-based award activity" line item in the consolidated statements of cash flows. The restatement had no impact on total cash flows for the period presented.

The ASU also clarifies that payments made to tax authorities on an employee's behalf for withheld shares should be presented as a financing activity in the statement of cash flows, allows the repurchase of more of an employee's shares for tax withholding purposes without triggering liability accounting, and provides an accounting policy election to account for forfeitures as they occur. The cash flow presentation requirements for payments made to tax authorities on an employee's

behalf had no impact to any periods presented, since such cash flows historically have been presented as a financing activity. The Company is not planning to change tax withholdings and will continue to estimate forfeitures in determining the amount of compensation cost to be recognized in each period.

~~Statement of cash flows and restricted cash (ASU 2016-18)~~ - In November 2016, the FASB issued an ASU on the classification and presentation of changes in restricted cash on the statement of cash flows. The ASU requires that the statement of cash flows explains the change during the period in the total of cash, cash equivalents, and restricted cash; therefore, the amounts described as restricted cash should be included with cash and cash equivalents when reconciling the beginning and end of period total amounts on the statement of cash flows. This guidance is effective for annual reporting periods, including interim reporting periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted. The guidance is effective on a retrospective basis. The Company elected to early adopt this guidance as of January 1, 2017. The reclassification was not material to the periods presented and had no impact on total cash flows, income from continuing operations, or net income attributable to Blucora for the periods presented. See the ~~"Cash, cash equivalents, and restricted cash"~~ ~~section of this note for additional information.~~

~~Note 3: Business Combinations~~

~~HD Vest:~~ On December 31, 2015 and pursuant to the Purchase Agreement dated October 14, 2015, the Company acquired HD Vest for $613.7 million, after a $1.8 million final working capital adjustment in the first quarter of 2016. HD Vest provides wealth management solutions for financial advisors and their clients. In connection with the acquisition, certain members of HD Vest management rolled over a portion of the proceeds they would have otherwise received at the closing into shares of the acquisition subsidiary through which the Company consummated the purchase of HD Vest. A portion of those shares were sold to the Company in exchange for a promissory note. After giving effect to the rollover shares and related purchase of the rollover shares for the promissory note, the Company indirectly owns 95.52% of HDV Holdings, Inc., with the remaining 4.48% noncontrolling interest held collectively by the rollover management members and subject to put and call arrangements exercisable beginning in 2019.

The Purchase Agreement dictated that the Company placed into escrow $20.0 million of additional consideration that was contingent upon HD Vest's 2015 earnings performance. The contingent consideration threshold was not achieved; therefore, the amount was excludedfiling timeline. Revenues from the ~~purchase price~~pay-per-return package are recognized when customers complete and ~~recorded as a receivable in "Other receivables" as~~file returns.

Details of ~~December 31, 2015 for the amount that was returned to the Company from the escrow agent in the first quarter of 2016.~~

~~Note 4: Discontinued Operations~~

~~On November 17, 2016, the Company closed on an agreement with YFC-Boneagle Electric Co., Ltd. ("YFC"~~), under which YFC acquired the E-Commerce business for $40.5 million, which included a working capital adjustment. Of this amount, $39.5 million was received in the fourth quarter of 2016 and $1.0 million was received in the second quarter of 2017--both amounts were included in investing activities from discontinued operations in the consolidated statements of cash flows. The Company used all of the proceeds to pay down debt.

~~On August 9, 2016, the Company closed on an agreement with OpenMail LLC ("OpenMail"~~), under which OpenMail acquired substantially all of the assets and assumed certain specified liabilities of the Search and Content business for $45.2 million, which included a working capital adjustment, and was included in investing activities from discontinued operations in the consolidated statements of cash flows. The Company used all of the proceeds to pay down debt.

~~Summarized financial information for discontinued operations is as follows~~Tax Preparation revenues are (in thousands):



	Three Months Ended March 31, 2019										Three Months Ended March 31, 2018
	Recognized Upon Transaction		Recognized Over Time		Total		Recognized Upon Transaction		Recognized Over Time		Total
Consumer	$	123,015	$	927	$	123,942	$	101,912	$	—	$	101,912
Professional	10,842		1,452		12,294		10,396		1,575		11,971
Total	$	133,857	$	2,379	$	136,236	$	112,308	$	1,575	$	113,883

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Major classes of items in net income (loss):
Revenues $ —
$ 53,721
$ —
$ 209,108
Operating expenses —
(50,952 ) —
(192,874 )
Other loss, net —
(415 ) —
(844 )
Income from discontinued operations before income taxes —
2,354
—
15,390
Loss on sale of discontinued operations before income taxes —
(29,509 ) —
(68,034 )
Discontinued operations, before income taxes —
(27,155 ) —
(52,644 )
Income tax expense —
(13,373 ) —
(5,337 )
Discontinued operations, net of income taxes $ —
$ (40,528 ) $ —
$ (57,981 )

~~Note 5: Restructuring~~

The following table summarizes the activity in the restructuring liability (in thousands), resulting from the relocation of corporate headquarters to Irving, Texas as part of the Strategic Transformation:

Employee-Related Termination Costs Contract Termination Costs Fixed Asset Impairments Stock-Based Compensation Other Costs Total
Balance as of December 31, 2016 $ 4,234
$ —
$ —
$ —
$ —
$ 4,234
Restructuring charges (30 ) (241 ) 1,878
981
32
2,620
Payments (434 ) (161 ) —
—
(32 ) (627 )
Non-cash —
1,457
(1,878 ) (981 ) —
(1,402 )
Balance as of June 30, 2017 3,770
1,055
—
—
—
4,825
Restructuring charges (3 ) 97
12
106
Payments (2,447 ) (256 ) —
—
(12 ) (2,715 )
Non-cash —
—
—
(97 ) —
(97 )
Balance as of September 30, 2017 $ 1,320
$ 799
$ —
$ —
$ —
$ 2,119

Employee-related termination costs primarily include severance benefits, under both ongoing and one-time benefit arrangements that are payable at termination dates throughout 2017, with the majority paid in the second half of 2017. Contract termination costs and fixed asset impairments were incurred in connection with the Bellevue facility's operating lease and related fixed assets, which are described further in the next two paragraphs, respectively. Stock-based compensation primarily includes the impact of equity award modifications associated with employment contracts for certain individuals impacted by the relocation, as well as forfeitures that were recorded for severed employees. Other costs include office moving costs.

The Company has a non-cancelable operating lease that runs through 2020 for its former corporate headquarters in Bellevue, Washington, which the Company occupied until May 2017. In March 2017, the Company agreed to a sublease for the entire Bellevue facility, which was effective June 1, 2017 and expires on September 30, 2020, consistent with the underlying operating lease. Under that sublease agreement, the Company will not recover all of its remaining lease rental obligations (including common area maintenance costs and real estate taxes) and, therefore, recognized a loss on sublease of $1.1 million. See "Note 9: Commitments and Contingencies" for additional information on the sublease. The Company also wrote-off its $1.5 million deferred rent liability (a non-cash item), related to various lease incentives that had been provided originally by the landlord, and incurred broker commissions related to the sublease agreement. All of these items were recorded as contract termination costs in the first quarter of 2017.

The Company began receiving sublease offers in the first quarter of 2017, at which point it was indicated that the remaining lease rental obligations, and the related value for the leasehold improvements and the office furniture and equipment, would not be fully recovered. As a result and given the nature of these fixed assets, the Company fully impaired the $1.9 million carrying value of those assets in the first quarter of 2017.

Note 6:4: Fair Value Measurements

In accordance with ASC 820, "Fair Value Measurements and ~~Disclosures",~~Disclosures," certain of the Company's assets and liabilities, which are carried at fair value, are classified in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs, other than Level 1, or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data and reflect the Company’s own assumptions.

The fair value hierarchy of the Company’s assets and liabilities carried at fair value and measured on a recurring basis was as follows (in thousands):


			Fair value measurements at the reporting date using
	March 31, 2019		Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)


Cash equivalents: money market and other funds	$	23,317	$	23,317	$	—	$	—

















Total assets at fair value	$	23,317	$	23,317	$	—	$	—

Fair value measurements at the reporting date using
September 30, 2017
Quoted prices in
active markets
using identical
assets
(Level 1)
Significant other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)
Cash equivalents: money market and other funds $ 10,827

$ —

$ 10,827

$ —
Total assets at fair value $ 10,827

$ —

$ 10,827

$ —
Acquisition-related contingent consideration liability $ 2,704
$ —
$ —
$ 2,704
Total liabilities at fair value $ 2,704
$ —
$ —
$ 2,704

Fair value measurements at the reporting date using
December 31, 2016
Quoted prices in
active markets
using identical
assets
(Level 1)

Significant other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)
Cash equivalents:
U.S government securities $ 2,749
$ —
$ 2,749
$ —
Money market and other funds 4,090
—
4,090
—
Commercial paper 1,999
—
1,999
—
Taxable municipal bonds 1,301
—
1,301
—
Total cash equivalents 10,139
—
10,139
—
Available-for-sale investments:
Debt securities:
U.S. government securities 2,000
—
2,000
—
Commercial paper 1,998
—
1,998
—
Time deposits 807
—
807
—
Taxable municipal bonds 2,296
—
2,296
—
Total debt securities 7,101
—
7,101
—
Total assets at fair value $ 17,240
$ —
$ 17,240
$ —

Acquisition-related contingent consideration liability $ 3,421
$ —
$ —
$ 3,421
Total liabilities at fair value $ 3,421
$ —
$ —
$ 3,421


			Fair value measurements at the reporting date using
	December 31, 2018		Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents: money market and other funds	$	23,181	$	23,181	$	—	$	—




















Total assets at fair value	$	23,181	$	23,181	$	—	$	—

Acquisition-related contingent consideration liability	$	1,275	$	—	$	—	$	1,275
Total liabilities at fair value	$	1,275	$	—	$	—	$	1,275

A reconciliation of Level 3 items measured at fair value on a recurring basis is as follows (in thousands):


Acquisition-related contingent consideration liability:
Balance as of December 31, 2018	$	1,275

Payment	(1,331)

Foreign currency transaction loss	56
Balance as of March 31, 2019	$	—

Acquisition-related contingent consideration liability:
Balance as of December 31, 2016 $ 3,421
Payment (946 )
Foreign currency transaction loss 229
Balance as of September 30, 2017 $ 2,704

~~The contingent consideration liability is related to~~Cash equivalents are classified within Level 1 of the ~~Company's 2015 acquisition of SimpleTax. The full contractual obligation under~~fair value hierarchy because the ~~contingent consideration arrangement was accrued during the year ended December 31, 2016. Payments~~Company values them utilizing quoted prices in active markets. Unrealized gains and losses are contingent upon product availability and revenue performance over a three-year period ending December 31, 2018 and are expected to occur annually over that period. The first payment was made in the first quarter of 2017 and classified as a financing activity on the consolidated statements of cash flows. The remaining payments are expected through 2019. The foreign currency transaction loss was included in ~~"Other loss, net" on the consolidated statements of~~"Accumulated other comprehensive income. As of September 30, 2017, $1.3 million of the contingent consideration liability was included in "Accrued expenses and other current liabilities" and $1.4 million in "Other long-term liabilities"loss" on the consolidated balance ~~sheets.~~sheets, and amounts reclassified out of comprehensive income into net income are determined on the basis of specific identification.

~~The contractual maturities of the debt securities classified as available-for-sale at December 31, 2016 were less than one year.~~

~~The cost and fair value of available-for-sale investments were as follows (in thousands):~~

Amortized
cost

Gross unrealized
gains

Gross unrealized
losses

Fair
value
Balance as of December 31, 2016 $ 7,102
$ —
$ (1 ) $ 7,101

~~The Company had non-recurring Level 3 fair value measurements in 2017 and 2016 related to the redemption and repurchase of its Convertible Senior Notes. See "Note 7: Debt" for details.~~

Note 7:5: Debt

The Company’s debt consisted of the following as of the periods indicated in the table below (in thousands):


	March 31, 2019														December 31, 2018
	Principal amount		Discount		Debt issuance costs		Net carrying value		Principal amount		Discount		Debt issuance costs		Net carrying value
Senior secured credit facilities	$	265,000	$	(932)	$	(3,498)	$	260,570	$	265,000	$	(970)	$	(3,640)	$	260,390

September 30, 2017 December 31, 2016

Principal
amount
Discount Debt issuance costs
Net
carrying
value

Principal
amount
Discount Debt issuance costs
Net
carrying
value
Senior secured credit facility $ 350,000
$ (1,681 ) $ (4,727 ) $ 343,592
$ —
$ —
$ —
$ —
TaxAct - HD Vest 2015 credit facility —
—
—
—
260,000
(7,124 ) (5,295 ) 247,581
Convertible Senior Notes —
—
—
—
172,859
(6,913 ) (1,770 ) 164,176
Note payable, related party 3,200
—
—
3,200
3,200
—
—
3,200
Total debt $ 353,200
$ (1,681 ) $ (4,727 ) $ 346,792
$ 436,059
$ (14,037 ) $ (7,065 ) $ 414,957

Senior secured credit ~~facility:~~ Onfacilities: In May ~~22,~~ 2017, ~~Blucora~~the Company entered into ana credit agreement with a syndicate of lenders ~~for the purposes~~in order to provide a term loan and revolving line of ~~refinancing the~~ credit ~~facility previously entered into in 2015~~ for ~~the purposes of financing the HD Vest acquisition (the~~ ~~"TaxAct - HD Vest 2015 credit facility"), redeeming its Convertible Senior Notes that were outstanding at the time (the~~ ~~"Notes"), and providing future~~ working capital, capital expenditures and ~~capital expenditure flexibility. Consequently, the TaxAct - HD Vest 2015~~general business purposes (the "Blucora senior secured credit ~~facility was repaid in full and the commitments under the TaxAct - HD Vest revolving credit facility were terminated.~~facilities"). The Blucora senior secured credit ~~facility consists~~facilities provide for up to $425.0 million of borrowings, consisting of a committed $50.0 million revolving credit ~~loan, which includes~~facility (including a letter of credit ~~sub-facility,~~sub-facility) and a $375.0 million term loan ~~for an aggregate $425.0 million credit facility. The final maturity dates of the revolving credit loan and term loan are~~facility that mature on May 22, 2022 and May 22, 2024, respectively. Obligations under the Blucora senior secured credit ~~facility~~facilities are guaranteed by certain of Blucora's subsidiaries and secured by the assets of ~~Blucora~~the Company and ~~those~~its subsidiaries.

The Blucora ~~borrowed $375.0 million under the term loan when it entered into the~~ senior secured credit ~~facility.~~ facilities include financial and operating covenants, including a consolidated total net leverage ratio, which are set forth in detail in the credit facility agreement. As of March 31, 2019, the Company was in compliance with all of the financial and operating covenants under the credit facility agreement.

Principal payments on the term loan are payable quarterly in an amount equal to 0.25% of the initial outstanding principal. ~~The~~In November 2017, the credit facility agreement was amended in order to refinance and reprice the initial term loan, such that the applicable interest rate margin is 3.00% for Eurodollar Rate loans and 2.00% for ABR loans.

Depending on the ~~term loan is variable at the London Interbank Offered Rate ("LIBOR"), subject to a floor of 1.00%, plus a margin~~

~~of 3.75%, payable at the end of each interest period. Through September 30, 2017, Blucora has made prepayments of $25.0 million towards the term loan.~~

Blucora may borrow under the revolving credit loan in an aggregate principal amount not less than $2.0 million or any whole multiple of $1.0 million in excess thereof. Principal payments on the revolving credit loan are payable at maturity. The interest rate on the revolving credit loan is variable, with initial draws at LIBOR plus a margin of 3.00%. Subsequent draws on the revolving credit loan also have variable interest rates, based upon LIBOR plus a margin of between 2.75% and 3.00%. In each case, the applicable margin within the range depends upon Blucora'sCompany’s Consolidated First Lien Net Leverage Ratio (as defined in the credit ~~agreement~~facility agreement), the applicable interest rate margin on the revolving credit facility is from 2.75% to 3.00% for ~~the credit facility) over the previous four quarters.~~Eurodollar Rate loans and 1.75% to 2.00% for ABR loans. Interest is payable at the end of each interest period. ~~Blucora has~~As of March 31, 2019, the Company had not borrowed any amounts under the revolving credit ~~loan.~~facility.

~~Blucora~~The Company also has the right to ~~permanently reduce and/~~prepay the term loan or ~~prepay,~~outstanding amounts under the revolving credit facility without any premium or penalty (other than customary ~~LIBOR~~Eurodollar breakage costs),. Prepayments on the entire credit facility at any time or portions of the credit facility in an aggregate principal amount not less than $5.0 million ($2.0 million in the case of prepayments) or any whole multiple of $1.0 million in excess thereof, except for prepayments through November 22, 2017, which require aterm loan are subject to certain prepayment ~~of a premium equal to 1.00% of the total principal amount prepaid. Beginning on December 31, 2018, Blucora will~~minimums. The Company may be required to make annual prepayments ~~if certain levels~~on the term loan in an amount equal to a percentage of excess cash flow ~~are achieved.~~

~~The credit facility includes financial and operating covenants, including a consolidated total net leverage ratio, which are set forth in detail~~of the Company during the applicable fiscal year from 0% to 50%, depending on the Consolidated First Lien Net Leverage Ratio (as defined in the credit ~~agreement.~~ facility agreement) for such fiscal year.

As of ~~September 30, 2017, Blucora was in compliance with all of~~March 31, 2019, the ~~financial and operating covenants.~~

~~As of September 30, 2017, the credit~~term loan facility's principal amount approximated its fair value as it is a variable rate instrument and the current applicable margin approximates current market conditions.

~~In connection with the refinancing, the Company performed an analysis by creditor and determined that the refinancing qualified as an extinguishment. As~~See "Note 12: Subsequent Events" for a result, the Company recognized a loss on debt extinguishment during the three months ended June 30, 2017, which was recorded in "Other loss, net" on the consolidated statements of comprehensive income and consisteddiscussion of the ~~following (in thousands):~~

Loss on debt extinguishment - TaxAct - HD Vest 2015 credit facility $ 9,593
Loss on debt extinguishment - Convertible Senior Notes 6,715
Total loss on debt extinguishment $ 16,308

~~The amount for the TaxAct - HD Vest 2015 credit facility included the write-off of the remaining unamortized discount and debt issuance costs. For the Notes, the Company allocated the cash paid first~~Company's recent amendment to the liability component of the Notes based on the fair value of the redeemed Notes. The fair value was based on a discounted cash flow analysis of the Notes' principal and related interest payments, using a discount rate that approximated the current market rate for similar debt without conversion rights. The difference between the fair value and net carrying value of the repurchased Notes was recognized as a loss and recorded in "Other loss, net" on the consolidated statements of comprehensive income. No amount was allocated to the equity component of the Notes, since the fair value of the liability component exceeded the cash paid.

~~TaxAct - HD Vest 2015 credit facility:~~ The Company had repayment activity of $64.0 million and $105.0 million during the nine months ended September 30, 2017 and 2016, respectively. These repayments resulted in the acceleration of a portion of the unamortized discount and debt issuance costs, which were recorded in "Other loss, net" on the consolidated statements of comprehensive income.

~~Convertible Senior Notes:~~ ~~In June 2017, the Company redeemed almost all of the outstanding Notes for cash with proceeds from the~~Blucora senior secured credit ~~facility.~~facilities.

During the nine months ended September 30, 2016, the Company repurchased $28.4 million of the Notes for cash of $20.7 million. Similar to the analysis performed for the Notes that were redeemed in June 2017, the Company allocated the cash paid first to the liability component of the Notes based on the fair value of the repurchased Notes. The difference between the fair value and net carrying value of the repurchased Notes was recognized as a gain, since the Notes were repurchased below par value, and recorded in "Other loss, net" on the consolidated statements of comprehensive income. No amount was allocated to the equity component of the Notes, since the fair value of the liability component exceeded the cash paid.

~~The following table sets forth total interest expense, prior to the refinancing, related to the Notes (in thousands):~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Contractual interest expense (Cash) $ —
$ 1,836
$ 3,141
$ 5,782
Amortization of debt issuance costs (Non-cash) —
231
401
704
Accretion of debt discount (Non-cash) —
901
1,567
2,749
Total interest expense $ —
$ 2,968
$ 5,109
$ 9,235

~~Note payable, related party:~~ The note payable is with the former President of HD Vest and arose in connection with the acquisition of HD Vest. Certain members of HD Vest management rolled over a portion of the proceeds they would have otherwise received at the acquisition's closing into shares of the acquisition subsidiary through which the Company consummated the purchase of HD Vest. The former President of HD Vest sold a portion of his shares to the Company in exchange for the note. The note will be paid over a three-year period, with 50% paid in year one ($3.2 million was paid in December 2016), 40% paid in year two, and 10% paid in year three. The note bears interest at a rate of 5% per year, with a principal amount that approximates its fair value.

Note 8:6: Redeemable Noncontrolling Interests

~~A reconciliation~~In connection with the 2015 acquisition of ~~redeemable noncontrolling~~HD Vest, the former management of HD Vest retained an ownership interest in that business. The Company is party to put and call arrangements that became exercisable beginning in the first quarter of 2019 with respect to those interests. These put and call arrangements allow certain members of HD Vest management to require the Company to purchase their interests ~~is as follows (in thousands):~~

Balance as of December 31, 2016 $ 15,696
Net income attributable to noncontrolling interests 466
Balance as of September 30, 2017 $ 16,162

or allow the Company to acquire such interests, respectively. These arrangements can be settled for cash within ninety days after the Company files its Annual Report on Form 10-K for the year ended December 31, 2018, which occurred on March 1, 2019. The redemption ~~amount at September 30, 2017 was $12.4 million.~~value of the arrangements is based upon several factors, including, among others, the Company's implied enterprise value, implied equity value and certain financial performance measures of the Company. The put and call arrangements do not meet the definition of a derivative instrument as the put and call agreements do not provide for net settlement.

As of March 31, 2019, $22.4 million of put arrangements had been exercised, and those arrangements became mandatorily redeemable. The $22.4 million of exercised arrangements were included in "Accrued expenses and other current liabilities" on the consolidated balance sheets. As of March 31, 2019, put and call arrangements of $2.5 million had not been exercised.

See "Note 12: Subsequent Events" for additional information.

Note 9:7: Commitments and Contingencies

Significant events ~~during~~since the ~~period covered by this Quarterly Report on Form 10-Q,~~year ended December 31, 2018, outside of the ordinary course of the Company’s business, include ~~debt activity (as discussed further in "Note 7: Debt"),~~ payment of ~~a portion of~~ the remaining SimpleTax acquisition-related contingent consideration liability ~~(as discussed further in "Note 6: Fair Value Measurements"), estimated~~and sublease income of ~~$3.8~~$2.0 million primarily related to the sublease agreement for the Company's former headquarters in Bellevue, facility (as discussed further in "Note 5: Restructuring"), purchase commitments with a vendor to provide cloud computation services of $11.3 million over the next four years, and a commitment to switch to a new clearing firm provider that has been selected by the Company by the third quarter of 2018.Washington. Additional information on the Company’s ~~Commitments~~commitments and ~~Contingencies~~contingencies can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

Litigation: From time to time, the Company is subject to various legal proceedings or claims that arise in the ordinary course of business. The Company accrues a liability when management believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. The ~~following~~Company is not currently party to any legal proceedings or claims for which it has incurred a ~~brief description of the more significant legal proceedings. Although the Company believes that resolving such claims, individually or in aggregate, will not have a material adverse impact~~liability on its ~~financial statements, these matters are subject to inherent uncertainties.~~consolidated balance sheets.

On December 12, 2016, a shareholder derivative action was filed by Jeffrey Tilden against the Company, as a nominal defendant, Andrew Snyder, who was a director of the Company at that time, certain companies affiliated with Mr. Snyder, a former officer of the Company, GCA Savvian Advisors, LLC (~~"GCA Savvian"~~), and certain other current and former members of the Blucora Board of Directors, in the Superior Court of the State of California in and for the County of San Francisco. The complaint asserts claims for breaches of fiduciary duty against certain current and former directors of the Company related to the Company’s share repurchases and the Company’s acquisitions of HD Vest and Monoprice. The complaint asserts a claim against GCA Savvian, the Company’s financial advisor in connection with the HD Vest acquisition, for aiding and abetting breaches of fiduciary duty. The complaint also asserts a claim for insider trading against Mr. Snyder, a former officer of the Company, and certain companies affiliated with Mr. Snyder. The derivative action does not seek monetary damages from the Company. The complaint seeks corporate governance reforms, declaratory relief, monetary damages from the other defendants, attorney’s fees and prejudgment interest.

On March 10, 2017, the Company filed a motion to dismiss for improper venue as a result of a forum selection provision in the Company’s bylaws that required the plaintiff to file his derivative fiduciary duty claims in Delaware. Other defendants also filed motions to quash the summons due to a lack of personal jurisdiction over them. On July 25, 2017, the Court granted the Company's motion to dismiss. The case has been stayed by the Court until November 22, 2017, after which the case will be dismissed without further order of the Court.

The Company has entered into indemnification agreements in the ordinary course of business with its officers and directors, and the agreement entered into with GCA Savvian in connection with the acquisition of HD Vest also contained indemnification provisions. Pursuant to these agreements, the Company may be obligated to advance payment of legal fees and costs incurred by the defendants pursuant to the Company’s obligations under these indemnification agreements and applicable Delaware law.

Note ~~10:~~8: Stockholders’ Equity

Stock-based compensation: The Company included the following amounts for stock-based compensation expense, which related to stock options, restricted stock units ("RSUs"), and the Company’s employee stock purchase plan ("ESPP"), in the following on the consolidated statements of comprehensive income (in thousands):


	Three months ended March 31,
	2019		2018
Cost of revenue	$	520	$	256
Engineering and technology	176		210
Sales and marketing	(193)		516
General and administrative	1,940		1,973



Total	$	2,443	$	2,955

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Cost of revenue $ 412
$ 52
$ 546
$ 117
Engineering and technology 225
434
734
1,167
Sales and marketing 529
661
1,801
1,688
General and administrative 1,966
2,217
5,353
7,644
Restructuring 97
—
1,078
—
Total in continuing operations 3,229
3,364
9,512
10,616
Discontinued operations —
(727 ) —
2,014
Total $ 3,229
$ 2,637
$ 9,512
$ 12,630

~~In the second quarter~~As of ~~2017,~~March 31, 2019, the Company had granted ~~350,000~~436,000 RSUs and non-qualified stock options to ~~certain~~certain HD Vest financial ~~advisors, who~~advisors. These advisors are considered non-employees. ~~These~~The RSUs and stock options fully vest ~~fully~~ three years from the date of grant. ~~The Company used~~Following the ~~Black-Scholes-Merton valuation method~~Company's early adoption of ASU 2018-07, effective January 1, 2018, these grants are accounted for similarly to calculate stock-based compensation, using assumptions for the risk-free interest rate, expected dividend yield, expected volatility, and expected life under the same methodology that is used for employee grants. Since these are non-employee grants, stock-based compensation expense will be remeasured at the end of each quarter. For the three and nine months ended September 30, 2017, stock-based compensation expense for these non-employees was $0.4 million and $0.5 million, respectively, and was recorded in "Cost of revenue" on the consolidated statements of comprehensive income.share-based payments granted to employees.

Total net shares issued for stock options exercised, RSUs vested, and shares purchased pursuant to the ESPP were as follows (in thousands):


	Three months ended March 31,
	2019	2018
Stock options exercised	79	320
RSUs vested	132	106
Shares purchased pursuant to ESPP	—	36
Total	211	462

Note 9: Leases

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Stock options exercised 1,243
—
3,651
140
RSUs vested 91
102
442
426
Shares purchased pursuant to ESPP 62
114
138
191
Total 1,396
216
4,231
757
The Company's leases are primarily related to office space. For the three months ended March 31, 2019, the Company recognized operating lease costs of approximately $1.0 million in "General and administrative" expense on the consolidated statements of comprehensive income. As of March 31, 2019, the Company's weighted-average remaining operating lease term was approximately 1.5 years, and its weighted-average operating lease discount rate was 5.3%.

The maturities of the Company's operating lease liabilities as of March 31, 2019 are below. The Company's finance lease liabilities as of March 31, 2019 were $0.1 million.


(in thousands, except percentages)
Undiscounted cash flows:
2019 (for the nine months remaining in 2019)	$	5,747
2020	2,766
2021	306
Total undiscounted cash flows	8,819
Imputed interest	(343)
Present value of cash flows	$	8,476

Short-term operating lease liabilities	$	6,446
Long-term operating lease liabilities	2,030
Total operating lease liabilities	$	8,476

Cash paid on operating lease liabilities was $0.9 million for the three months ended March 31, 2019. Lease liabilities from new ROU assets obtained during the three months ended March 31, 2019 were $0.2 million.

Note 10: Income Taxes

The Company recorded income tax expense of $4.0 million in the three months ended March 31, 2019. The Company's effective income tax rate differed from the 21% statutory rate in the three months ended March 31, 2019primarily due to the

release of valuation allowances and the effect of state income taxes.

The Company recorded income tax expense of $2.0 million in the three months ended March 31, 2018. Income taxes differed from the 21% statutory rate in three months ended March 31, 2018, primarily due to the release of valuation allowances.

Note 11: ~~Segment Information~~

The Company has two reportable segments: the Wealth Management segment and the Tax Preparation segment. The former Search and Content and E-Commerce segments are included in discontinued operations. The Company’s Chief Executive Officer is its chief operating decision maker and reviews financial information presented on a disaggregated basis. This information is used for purposes of allocating resources and evaluating financial performance.

~~Information on reportable segments currently presented to the Company’s chief operating decision maker and a reconciliation to consolidated net income are presented below (in thousands):~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Revenue:
Wealth Management $ 86,809
$ 80,088
$ 254,772
$ 233,496
Tax Preparation 3,362
3,149
156,936
135,614
Total revenue 90,171
83,237
411,708
369,110
Operating income (loss):
Wealth Management 12,425
11,628
36,684
32,458
Tax Preparation (6,238 ) (4,382 ) 83,410
72,987
Corporate-level activity (17,513 ) (17,754 ) (57,536 ) (54,153 )
Total operating income (loss) (11,326 ) (10,508 ) 62,558
51,292
Other loss, net (5,241 ) (11,453 ) (39,149 ) (29,883 )
Income tax benefit (expense) (166 ) 8,537
(5,952 ) (8,899 )
Discontinued operations, net of income taxes —
(40,528 ) —
(57,981 )
Net income (loss) $ (16,733 ) $ (53,952 ) $ 17,457
$ (45,471 )

~~Revenues by major category within each segment are presented below (in thousands):~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Wealth Management:
Commission $ 39,432
$ 38,962
$ 117,181
$ 111,070
Advisory 37,588
32,705
107,078
95,759
Asset-based 6,526
5,476
19,276
16,689
Transaction and fee 3,263
2,945
11,237
9,978
Total Wealth Management revenue $ 86,809
$ 80,088
$ 254,772
$ 233,496
Tax Preparation:
Consumer $ 3,149
$ 2,950
$ 143,239
$ 122,678
Professional 213
199
13,697
12,936
Total Tax Preparation revenue $ 3,362
$ 3,149
$ 156,936
$ 135,614

~~Note 12:~~ Net Income ~~(Loss)~~ Per Share

"Basic net income ~~(loss)~~ per share" is computed using the weighted average number of common shares outstanding during the period. "Diluted net income ~~(loss)~~ per share" is computed using the weighted average number of common shares outstanding plus the number of dilutive potential common shares outstanding during the period. Dilutive potential common shares consist of the incremental common shares issuable upon the exercise of outstanding stock options and the vesting of unvested RSUs. Dilutive potential common shares are excluded from the computation of earnings per share if their effect is antidilutive.

The computation of basic and diluted net income ~~(loss)~~ per share attributable to Blucora, Inc. is as follows (in thousands):

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Numerator:
Income (loss) from continuing operations $ (16,733 ) $ (13,424 ) $ 17,457
$ 12,510
Net income attributable to noncontrolling interests (164 ) (167 ) (466 ) (426 )
Income (loss) from continuing operations attributable to Blucora, Inc. (16,897 ) (13,591 ) 16,991
12,084
Loss from discontinued operations attributable to Blucora, Inc. —
(40,528 ) —
(57,981 )
Net income (loss) attributable to Blucora, Inc. $ (16,897 ) $ (54,119 ) $ 16,991
$ (45,897 )
Denominator:
Weighted average common shares outstanding, basic 45,459
41,635
43,749
41,404
Dilutive potential common shares —
—
3,064
925
Weighted average common shares outstanding, diluted 45,459
41,635
46,813
42,329
Net income (loss) per share attributable to Blucora, Inc. - basic:
Continuing operations $ (0.37 ) $ (0.33 ) $ 0.39
$ 0.29
Discontinued operations —
(0.97 ) —
(1.40 )
Basic net income (loss) per share $ (0.37 ) $ (1.30 ) $ 0.39
$ (1.11 )
Net income (loss) per share attributable to Blucora, Inc. - diluted:
Continuing operations $ (0.37 ) $ (0.33 ) $ 0.36
$ 0.29
Discontinued operations —
(0.97 ) —
(1.37 )
Diluted net income (loss) per share $ (0.37 ) $ (1.30 ) $ 0.36
$ (1.08 )
Shares excluded 5,798
10,246
1,160
6,317


	Three months ended March 31,
	2019		2018
Numerator:
Income	$	62,170	$	45,546
Net income attributable to noncontrolling interests	—		(205)




Net income attributable to Blucora, Inc.	$	62,170	$	45,341
Denominator:
Weighted average common shares outstanding, basic	48,161		46,641
Dilutive potential common shares	1,381		2,024
Weighted average common shares outstanding, diluted	49,542		48,665
Net income per share attributable to Blucora, Inc.:
Basic	$	1.29	$	0.97
Diluted	$	1.25	$	0.93
Shares excluded	256		902

Shares were excluded ~~primarily~~from the computation of diluted earnings per common share for these periods because their effect would have been anti-dilutive.

Note 12: Subsequent Events

Amendment to Credit Facilities: Incurrence of Additional Term Loan: On May 6, 2019, the Company amended the Blucora senior secured credit facilities, in order to, among other things: (i) provide for a term loan increase in the aggregate principal amount of $125.0 million in the form of a fungible increase to, and on substantially the same terms as, the Company's existing senior secured term loan under the Blucora senior secured credit facilities, (ii) increase the total amount of the revolving credit facility under the Blucora senior secured credit facilities by $15.0 million to an aggregate of $65.0 million and (iii) appoint JPMorgan Chase Bank, N.A. as successor administrative agent and successor collateral agent under the Blucora senior secured credit facilities and related loan documents, as discussed above.

While the terms of the $125.0 million increase in the size of the Company's term loan are substantially the same as those under the existing term loan, including terms with respect to the ~~anti-dilutive effect~~interest rate, guarantees, prepayments, collateral and maturity date, the Company is required to make principal amortization payments on such $125.0 million portion of the term loan on a ~~net loss (for~~quarterly basis on the ~~three months ended~~last business day of each March, June, September ~~30, 2017~~ and ~~2016)~~December, beginning on December 31, 2019, in an amount equal to $312,500 (subject to reduction for prepayments), with the remaining principal amount of such portion due on the maturity date of May 22, 2024.

As described below, the proceeds of the increase in the term loan were used to fund a portion of the purchase price of the Company's acquisition of 1st Global, Inc. and 1st Global Insurance Services, Inc. (together, “1st Global”), as well as to pay the fees and expenses associated with entering into the amendment to the Blucora senior secured credit facilities.

Acquisition of 1st Global: On May 6, 2019, the Company closed its previously announced acquisition of all of the issued and outstanding common stock ~~options~~of 1st Global for a cash purchase price of $180.0 million. The purchase price is subject to customary adjustment as well as certain indemnity escrows, in each case as described more fully in the stock purchase agreement governing the acquisition. The purchase price was paid with ~~an exercise price greater than~~a combination of (i) cash on hand and (ii) the ~~average price during~~proceeds from the ~~applicable periods.~~$125.0 million increase in the term loan under the Blucora senior secured credit facilities.

Redeemable Noncontrolling Interests: In the second quarter of 2019, the put and call arrangements (see "Note 6: Redeemable Noncontrolling Interests") that were not exercised as of March 31, 2019 were exercised, and all of the arrangements were settled in cash for the total amount of $24.9 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The statements in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally are identified by the words "anticipate," "believe," "plan," "project," "expect," "future," "intend," "may," "will," "should," "could," "would,""estimate," "predict," "potential," "continue," and similar expressions. These forward-looking statements include, but are not limited to: statements regarding projections of our future financial performance; trends in our businesses; our future business plans and growth strategy, including our "Strategic Transformation;" and the sufficiency of our cash balances and cash generated from operating, investing, and financing activities for our future liquidity and capital resource needs.

Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause our results, levels of activity, performance, achievements, and prospects to be materially different from those expressed or implied by such forward-looking statements. These risks, uncertainties, and other factors include, among others, those identified under Part II Item 1A, "Risk Factors," and elsewhere in this report. You should not rely on forward-looking statements included herein, which speak only as of the date of this Quarterly Report on Form 10-Q or the date specified herein. We do not undertake any obligation to update publicly any forward-looking statement to reflect new information, events, or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes included under Part 1I, Item 1 of this report and the section titled "Cautionary Statement Regarding Forward-Looking

Statements" in this report, as well as with our consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2018.

Our Business

Blucora ~~(the~~ , Inc. (collectively, with its direct and indirect subsidiaries on a consolidated basis, the "Company," "Blucora,""we," "our" or~~"we"~~ "us") operates two businesses: a Wealth Management business and ~~an online~~a digital Tax Preparation business.

The Wealth Management business consists of the operations of HDV Holdings, Inc. and its subsidiaries (collectively referred to as "HD Vest" or the "Wealth Management ~~Business"~~business"). HD Vest provides wealth management solutions for financial advisors and their clients. Specifically, HD Vest provides an integrated platform of brokerage, investment advisory and insurance services to assist in making each financial advisor a financial service center for his/her clients. HD Vest was founded to help tax and accounting professionals integrate financial services into their practices. HD Vest primarily recruits independent tax professionals with established tax practices and offers specialized training and support, which allows them to join the HD Vest platform as independent financial advisors. HD Vest generates revenue primarily through commissions, quarterly investment advisory fees based on total client assets ~~under management~~ and other fees.

The Tax Preparation business consists of the operations of TaxAct, Inc. and its subsidiary (collectively referred to as "TaxAct" or the "Tax Preparation business"). TaxAct provides digital do-it-yourself ("DDIY") tax preparation solutions for consumers, small business owners, and tax professionals. TaxAct generates revenue primarily through its ~~online~~digital service at www.TaxAct.com. The TaxAct website and the information contained therein or connected thereto is not intended to be incorporated by reference into this ~~Report.~~report.

~~Strategic Transformation~~Recent Developments

Amendment to Credit Facilities; Incurrence of Additional Term Loan

On ~~October 14, 2015,~~May 6, 2019, we amended our existing senior secured credit agreement, which provides for both a term loan and revolving line of credit for working capital, capital expenditures and general business purposes (the "Blucora senior secured credit facilities"), in order to, among other things: (i) provide for a term loan increase in the aggregate principal amount of $125.0 million in the form of a fungible increase to, and on substantially the same terms as, our existing senior secured term loan under the Blucora senior secured credit facilities, (ii) increase the total amount of the revolving credit facility under the Blucora senior secured credit facilities by $15.0 million to an aggregate of $65.0 million and (iii) appoint JPMorgan Chase Bank, N.A. as successor administrative agent and successor collateral agent under the Blucora senior secured credit facilities and related loan documents.

While the terms of the $125.0 million increase in the size of our term loan are substantially the same as those under the existing term loan, including terms with respect to the interest rate, guarantees, prepayments, collateral and maturity date, we are required to make principal amortization payments on such $125.0 million portion of the term loan on a quarterly basis on the last business day of each March, June, September and December, beginning on December 31, 2019, in an amount equal to $312,500 (subject to reduction for prepayments), with the remaining principal amount of such portion due on the maturity date of May 22, 2024.

As described below, the proceeds of the increase in the term loan were used to fund a portion of the purchase price of our acquisition of 1st Global, Inc. and 1st Global Insurance Services, Inc. (together, "1st Global"), as well as to pay the fees and expenses associated with entering into the amendment to the Blucora senior secured credit facilities.

Acquisition of 1st Global

On May 6, 2019, we closed our previously announced ~~our plans~~acquisition (the "Acquisition") of all of the issued and outstanding common stock of 1st Global for a cash purchase price of $180.0 million. The purchase price is subject to ~~acquire~~customary adjustments as well as certain indemnity escrows, in each case as described more fully in the stock purchase agreement governing the Acquisition. The purchase price was paid with a combination of (i) cash on hand and (ii) the proceeds from the $125.0 million increase in the term loan under the Blucora senior secured credit facilities.

1st Global is a tax-focused wealth management company that, as of March 31, 2019, served about 820 independent advisors with approximately $20.2 billion in total client assets and $9.8 billion in for-fee advisory assets. The Acquisition brings together two leaders in the tax-focused niche of the overall wealth management space. The complementary nature of the companies’ business models creates numerous synergies and growth opportunities for the combined company. 1st Global, the No. 2 tax-focused independent broker-dealer based on total revenue, specializes in servicing large, multi-partner accounting

firms, while HD Vest, ~~and focus~~the No. 1 tax-focused independent broker-dealer, focuses primarily on ~~the technology-enabled financial solutions market (the~~ ~~"Strategic Transformation"). The Strategic Transformation refers to our transformation~~converting individual tax preparers into ~~a technology-enabled financial solutions company comprised of TaxAct and HD Vest and the divestitures of our Search and Content business that was operated through our former InfoSpace LLC subsidiary ("InfoSpace") and our E-Commerce business that consisted of the operations of Monoprice, Inc. ("Monoprice"~~) in 2016. As part of the Strategic Transformation and our model of operating as "One Company", we announced on October 27, 2016 plans to relocate our corporate headquarters by June 2017 from Bellevue, Washington to Irving, Texas. The transformation is intended to drive efficiencies and improve operational effectiveness.

In connection with the relocation of our corporate headquarters, we have incurred restructuring costs of approximately $6.6 million. These costs are recorded within corporate-level activity for segment purposes. See "Note 5: Restructuring" of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I Item 1 of this report for additional information. We also have incurred costs that do not qualify for restructuring classification, such as recruiting and overlap in personnel expenses as we transition positions to Texas (~~"Strategic Transformation Costs"). The restructuring is now substantially complete and it is expected to be completed by early 2018.~~

For a discussion of the associated risks, see the sections under the heading "Risks Associated With our Strategic Transformation" in Part II Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2016.wealth advisors.

Seasonality

Our Tax Preparation ~~business~~segment is highly seasonal, with a significant portion of its annual revenue earned in the first four months of our fiscal year. During the third and fourth quarters, the Tax Preparation ~~business~~segment typically reports losses ~~in its operating income~~ because revenue from the ~~business~~segment is minimal while core operating expenses continue.

~~Comparability~~

We ~~reclassified certain amounts on our consolidated statements of cash flows related to excess tax benefits generated from stock-based compensation and restricted cash, both in connection with~~anticipate that the ~~implementation of new accounting pronouncements. See the~~ ~~"Recent accounting pronouncements"~~ ~~section of "Note 2: Summary of Significant Accounting Policies"~~seasonal nature of the ~~Notes to Unaudited Condensed Consolidated Financial Statements~~Tax Preparation business will continue in ~~Part I Item 1 of this report for additional information.~~the foreseeable future.

RESULTS OF OPERATIONS

Summary


(In thousands, except percentages)	Three months ended March 31,
	2019		2018		Change
Revenue	$	225,768	$	205,965	10	%
Operating income	$	70,113	$	52,737	33	%

(In thousands, except percentages) Three months ended September 30, Nine months ended September 30,
2017 2016 Percentage
Change 2017 2016 Percentage
Change
Revenue $ 90,171
$ 83,237
8 % $ 411,708
$ 369,110
12 %
Operating income (loss) $ (11,326 ) $ (10,508 ) 8 % $ 62,558
$ 51,292
22 %

Three months ended ~~September 30, 2017~~March 31, 2019 compared with three months ended ~~September 30, 2016~~March 31, 2018

Revenue increased approximately ~~$6.9~~$19.8 million due to ~~increases~~an increase of ~~$6.7~~$22.4 million ~~and $0.2~~in revenue related to our Tax Preparation business, offset by a decrease of $2.6 million in revenue related to our Wealth Management ~~and Tax Preparation businesses, respectively,~~business, as discussed in the following "Segment Revenue/Operating Income" section.

Operating ~~loss increased~~income increased approximately ~~$0.8~~$17.4 million, consisting of the ~~$6.9~~$19.8 million increase in revenue ~~and~~that was offset by ~~an $7.8~~a $2.4 million increase in operating expenses. Key changes in operating expenses were:

•$~~5.9~~1.0 million ~~increase~~ decrease in the Wealth Management segment’s operating expenses, primarily due to ~~higher~~a decrease in costs related to our 2018 clearing firm conversion and a decrease in commissions paid to our financial advisors, which fluctuated in proportion to the change in underlying commission and advisory revenues earned on client accounts.

•$~~2.1~~1.9 million increase in the Tax Preparation segment’s operating expenses, primarily due to ~~higher maintenance fees, development costs and personnel expenses resulting from overall increased headcount supporting most functions.~~

~~$0.2 million decrease in corporate-level expense activity primarily due to changes in headcount across most functions.~~

~~Nine months ended September 30, 2017 compared with nine months ended September 30, 2016~~

Revenue increased approximately $42.6 million due to increases of $21.3 million and $21.3 million in revenue related to our Wealth Management and Tax Preparation businesses, respectively, as discussed in the following "Segment Revenue/Operating Income" section.

~~Operating income increased approximately $11.3 million, consisting of the $42.6 million~~an increase in ~~revenue~~personnel costs supporting multiple functions and ~~offset by a $31.3 million~~an increase in ~~operating expenses. Key changes in operating~~software expenses ~~were:~~.

•$~~17.1~~1.6 million increase in the Wealth Management segment’s operating expenses due to higher commissions paid to our financial advisors, which fluctuated in proportion to the change in underlying commission and advisory revenues earned on client accounts, and higher net personnel expenses as we continue to standardize employee benefits across our businesses.

$10.9 million increase in the Tax Preparation segment’s operating expenses primarily due to higher spending on marketing, higher professional services fees mostly related to marketing and development projects, higher data center costs related to software support and maintenance fees, increases in growth initiative investments, and higher personnel expenses resulting from overall increased headcount supporting most functions.

~~$3.4 million~~ increase in corporate-level expense activity, primarily due to Strategic Transformation Costs and increased headcount supporting most functions, partially offset by lower stock-based compensation costs due to fewer grants in the current year and higher expense recognized in the prior year related to ~~HD Vest grants~~Acquisition costs and an increase in ~~2016, partially offset by activity within our Tax Preparation business due to prior forfeitures.~~consulting expenses.

SEGMENT REVENUE/OPERATING INCOME

The revenue and operating income amounts in this section are presented on a basis consistent with accounting principles generally accepted in the ~~U.S.~~United States ("GAAP") and include certain reconciling items attributable to each of the segments. Segment information appearing in "Note ~~11:~~3: Segment ~~Information"~~Information and Revenues" of the Notes to Unaudited Condensed Consolidated Financial

Statements in Part I, Item 1 of this report is presented on a basis consistent with our current internal management financial reporting. We have two reportable segments: Wealth Management and Tax Preparation. We do not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, depreciation, amortization of acquired intangible assets, restructuring, other loss, net, and income taxes to segment operating results. WeRather, we analyze ~~these separately.~~such general and administrative costsseparately under the heading "Corporate-level activity."

Wealth Management


(In thousands, except percentages)	Three months ended September 30,								Nine months ended September 30,								(In thousands, except percentages)	Three months ended March 31,
	2017			2016			Percentage Change		2017			2016			Percentage Change			2019			2018			Change
Revenue	$	86,809		$	80,088		8	%	$	254,772		$	233,496		9	%	Revenue	$	89,532		$	92,082		(3)	%
Operating income	$	12,425		$	11,628		7	%	$	36,684		$	32,458		13	%	Operating income	$	11,540		$	13,075		(12)	%
Segment margin	14		%	15		%			14		%	14		%			Segment margin	14		%	14		%

(In thousands) Three months ended September 30, Nine months ended September 30,
2017 2016 Change 2017 2016 Change
Write-off of debt discount and debt issuance costs on TaxAct - HD Vest 2015 credit facility (related to closure) $ —
$ —
$ —
$ 9,593
$ —
$ 9,593
Write-off of debt discount and debt issuance costs on the Notes (related to termination) —
—
—
6,715
—
6,715
Accelerated accretion of debt discount and amortization of debt issuance costs on credit facilities (related to prepayments) 183
2,205
(2,022 ) 3,456
5,039
(1,583 )
Gain on the Notes repurchased —
—
—
—
(7,724 ) 7,724
Accelerated accretion of debt discount on the Notes (related to repurchase) —
—
—
—
1,628
(1,628 )
Accelerated amortization of debt issuance costs on the Notes (related to repurchase) —
—
—
—
416
(416 )
Total (gain) loss on debt extinguishment $ 183
$ 2,205
$ (2,022 ) $ 19,764
$ (641 ) $ 20,405

~~Nine months ended September 30, 2017 compared with nine months ended September 30, 2016~~

Interest expense, amortization of debt issuance costs, accretion of debt discounts, and (gain) loss on debt extinguishment were affected by the same factors described above that impacted the quarterly period.

In the first quarter of 2016, we repurchased a portion of the Notes, which resulted in a net gain on debt extinguishment, consisting of a gain related to the repurchase of the Notes below par value and offset by the acceleration of a portion of the unamortized debt discount and issuance costs. In connection with the refinancing through the senior secured credit facility, we redeemed all of the Notes in the second quarter of 2017, which resulted in the write-off of the remaining unamortized debt discount and issuance costs as a loss on debt extinguishment.

Income Taxes

We recorded income tax expense of $4.0 million in the three months ended March 31, 2019. The Company's effective income tax rate differed from the 21% statutory rate in 2019 primarily due to the release of valuation allowances and the effect of state income taxes. We currently expect to continue to release portions of valuation allowances, which were previously recorded in connection with our net operating losses, to offset future federal income tax liabilities. The majority of these net operating losses will expire, if unutilized, between 2020 and 2024.

We recorded income tax expense of ~~$0.2 million and $6.0~~$2.0 million in the three ~~and nine~~ months ended ~~September 30, 2017, respectively. Income taxes~~March 31, 2018. The Company's effective income tax rate differed from ~~taxes at~~ the 21% statutory ~~rates~~rate in ~~2017~~2018 primarily due to the release of the current portion of valuation allowances.

Income tax expense for the three months ended March 31, 2019 differed from the comparable prior period, primarily due to the ~~January 1, 2017 implementation~~impact of ~~Accounting Standards Update ("ASU") 2016-09 on~~ stock-based compensation (see "Note 2: Summary of Significant Accounting Policies" of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I Item 1 of this report for additional information). We recorded income tax benefit of $8.5 million and income tax expense of $8.9 million in the three and nine months ended September 30, 2016, respectively. Income taxes differed from taxes at the statutory rates in 2016 primarily due to the domestic manufacturing deduction, offset by non-deductible compensation and state income taxes.compensation.

~~Discontinued Operations, Net of Income Taxes~~

(In thousands) Three months ended September 30, Nine months ended September 30,
2017 2016 Change 2017 2016 Change
Discontinued operations, net of income taxes $ —
$ (40,528 ) $ 40,528
$ —
$ (57,981 ) $ 57,981

On October 14, 2015, we announced our Strategic Transformation, which included plans to divest the Search and Content and E-Commerce businesses. Our results of operations reflect the Search and Content and E-Commerce businesses as discontinued operations for all periods presented. Amounts in discontinued operations include previously unallocated

depreciation, amortization, stock-based compensation, income taxes, and other corporate expenses that were attributable to the Search and Content and E-Commerce businesses. We completed both divestitures in 2016--specifically, Search and Content in the third quarter of 2016 and E-Commerce in the fourth quarter of 2016. See "Note 4: Discontinued Operations" of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I Item 1 of this report for additional information on discontinued operations.

NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA: 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, ~~(including acquired technology),~~ restructuring, other loss, net, the impact of noncontrolling interests, Acquisition and integration costs and income tax ~~expense, the effects of discontinued operations, and acquisition-related costs.~~(benefit) expense. Restructuring costs relate to the ~~move~~relocation of our corporate headquarters which was announced in the fourth quarter of 2016. Acquisition-related costs include professional services fees and other direct transaction costs and changes in the fair value of contingent consideration liabilities related to acquired companies. The SimpleTax acquisition that ~~was~~were completed in 2015 included contingent consideration, for which the fair value of that liability was revalued in the second quarter of 2016. For further detail, see "Note 7: Debt" of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I Item 1 of this report.2018.

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).~~income. Other companies may calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies. A reconciliation of our Adjusted EBITDA to net income ~~(loss)~~ attributable to Blucora, Inc., which we believe to be the most comparable GAAP measure, is presented below:


(In thousands)	Three months ended March 31,
	2019		2018
Net income attributable to Blucora, Inc.	$	62,170	$	45,341
Stock-based compensation	2,443		2,955
Depreciation and amortization of acquired intangible assets	9,354		10,359
Restructuring	—		289
Other loss, net	3,958		5,228
Net income attributable to noncontrolling interests	—		205
Acquisition and integration costs	1,797		—
Income tax expense	3,985		1,963


Adjusted EBITDA	$	83,707	$	66,340

(In thousands) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Net income (loss) attributable to Blucora, Inc. $ (16,897 ) $ (54,119 ) $ 16,991
$ (45,897 )
Stock-based compensation 3,132
3,364
8,434
10,616
Depreciation and amortization of acquired intangible assets 9,688
9,483
28,553
29,080
Restructuring 106
—
2,726
—
Other loss, net 5,241
11,453
39,149
29,883
Net income attributable to noncontrolling interests 164
167
466
426
Income tax expense (benefit) 166
(8,537 ) 5,952
8,899
Discontinued operations, net of income taxes —
40,528
—
57,981
Acquisition-related costs —
—
—
391
Adjusted EBITDA $ 1,600
$ 2,339
$ 102,271
$ 91,379

Three months ended ~~September 30, 2017~~March 31, 2019 compared with three months ended ~~September 30, 2016~~March 31, 2018

The decrease in Adjusted EBITDA was primarily due to an increase in segment operating loss of $1.9 million related to our Tax Preparation segment, an increase in segment operating income of $0.8 million related to our Wealth Management segment, and a $0.3 million decrease in corporate operating expenses not allocated to the segments primarily due to changes in headcount across most functions.

~~Nine months ended September 30, 2017 compared with nine months ended September 30, 2016~~

The increase in Adjusted EBITDA was primarily due to ~~increases~~an increase in segment operating income of ~~$10.4 million and $4.2~~$20.5 million related to our Tax Preparation ~~and Wealth Management segments, respectively,~~segment, offset by a ~~$3.8~~decrease in segment operating income of $1.5 million related to our Wealth Management segment and an increase in

~~corporate~~ corporate operating expenses ~~not allocated to the segments primarily due to Strategic Transformation Costs and increased headcount supporting most functions, partially offset by lower stock-based compensation costs.~~of $1.6 million.

Non-GAAP net ~~income (loss):~~income: We define non-GAAP net income ~~(loss)~~ as net income ~~(loss)~~ attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of ~~discontinued operations,~~ stock-based compensation, amortization of acquired intangible assets, ~~(including acquired technology), accretion of debt discount and accelerated accretion of debt discount on the Convertible Senior Notes (the~~ ~~"Notes"~~), gain on the Notes repurchased, write-off of debt discount and debt issuance costs on the Notes that were redeemed and the terminated TaxAct - HD Vest 2015 credit facility, acquisition-related costs (described further under ~~Adjusted EBITDA~~ ~~above),~~ restructuring costs (described further under Adjusted EBITDA above), the impact of noncontrolling interests, Acquisition and integration costs, the related cash tax impact of those adjustments, and non-cash income taxes. The write-off of debt discount and debt issuance costs on the terminated Notes and the closed TaxAct - HD Vest 2015 credit facility relates to the debt refinancing that occurred in the second quarter of 2017. 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.

Non-GAAP net income (loss) per share: We define non-GAAP net income per share as non-GAAP net income divided by weighted average diluted share count.

We believe that non-GAAP net income ~~(loss)~~ and non-GAAP net income ~~(loss)~~ 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 ~~(loss)~~ and non-GAAP net income ~~(loss)~~ per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP net income ~~(loss)~~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 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. A reconciliation of our non-GAAP net income to net income attributable to Blucora, Inc., and non-GAAP net income per share to net income per share, which we believe to be the most comparable GAAP ~~measure,~~measures, is presented below:


(In thousands, except per share amounts)	Three months ended March 31,
	2019		2018
Net income attributable to Blucora, Inc.	$	62,170	$	45,341

Stock-based compensation	2,443		2,955
Amortization of acquired intangible assets	8,044		8,357







Restructuring	—		289
Impact of noncontrolling interests	—		205
Acquisition and integration costs	1,797		—
Cash tax impact of adjustments to GAAP net income	(411)		(313)
Non-cash income tax expense	3,151		1398
Non-GAAP net income	$	77,194	$	58,232
Per diluted share:
Net income attributable to Blucora, Inc.	$	1.25	$	0.93

Stock-based compensation	0.05		0.06
Amortization of acquired intangible assets	0.17		0.18







Restructuring	—		0.01
Impact of noncontrolling interests	—		0.00
Acquisition and integration costs	0.04		—
Cash tax impact of adjustments to GAAP net income	(0.01)		(0.01)
Non-cash income tax expense	0.06		0.03
Non-GAAP net income per share	$	1.56	$	1.20
Weighted average shares outstanding used in computing per diluted share amounts	49,542		48,665

(In thousands, except per share amounts) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Net income (loss) attributable to Blucora, Inc. $ (16,897 ) $ (54,119 ) $ 16,991
$ (45,897 )
Discontinued operations, net of income taxes —
40,528
—
57,981
Stock-based compensation 3,132
3,364
8,434
10,616
Amortization of acquired intangible assets 8,665
8,346
25,337
25,694
Impairment of goodwill and intangible assets —
—
—
—
Accretion of debt discount on the Notes —
901
1,567
2,749
Accelerated accretion of debt discount on the Notes repurchased —
—
—
1,628
Gain on the Notes repurchased —
—
—
(7,724 )
Write-off of debt discount and debt issuance costs on terminated Notes —
—
6,715
—
Write-off of debt discount and debt issuance costs on terminated TaxAct - HD Vest 2015 credit facility —
—
9,593
—
Acquisition-related costs —
—
—
391
Restructuring 106
—
2,726
—
Impact of noncontrolling interests 164
167
466
426
Cash tax impact of adjustments to GAAP net income (928 ) (17 ) (3,334 ) 244
Non-cash income tax (benefit) expense 224
(9,312 ) 6,325
6,460
Non-GAAP net income (loss) $ (5,534 ) $ (10,142 ) $ 74,820
$ 52,568
Per diluted share:
Net income (loss) attributable to Blucora, Inc. $ (0.37 ) $ (1.30 ) $ 0.36
$ (1.08 )
Discontinued operations, net of income taxes —
0.97
—
1.37
Stock-based compensation 0.07
0.08
0.18
0.25
Amortization of acquired intangible assets 0.20
0.21
0.55
0.60
Accretion of debt discount on the Notes —
0.02
0.03
0.06
Accelerated accretion of debt discount on the Notes repurchased —
—
—
0.04
Gain on the Notes repurchased —
—
—
(0.18 )
Write-off of debt discount and debt issuance costs on terminated Notes —
—
0.14
—
Write-off of debt discount and debt issuance costs on closed TaxAct - HD Vest 2015 credit facility —
—
0.20
—
Acquisition-related costs —
—
—
0.01
Restructuring —
—
0.06
—
Impact of noncontrolling interests 0.00
0.00
0.01
0.01
Cash tax impact of adjustments to GAAP net income (0.02 ) (0.00 ) (0.07 ) 0.01
Non-cash income tax (benefit) expense 0.00
(0.22 ) 0.14
0.15
Non-GAAP net income (loss) $ (0.12 ) $ (0.24 ) $ 1.60
$ 1.24
Weighted average shares outstanding used in computing per diluted share amounts 45,459
41,635
46,813
42,329

Three months ended ~~September 30, 2017~~March 31, 2019 compared with three months ended ~~September 30, 2016~~March 31, 2018

The ~~decrease~~increase in non-GAAP net ~~loss~~income was primarily due to an increase in segment operating ~~loss~~income of ~~$1.9~~$20.5 million related to our Tax Preparation segment ~~and an increase in segment operating income of $0.8 million related to our Wealth Management segment. Further contributing to the decrease in non-GAAP net loss was~~, a ~~$3.4~~$0.4 million decrease in interest expense, amortization of debt issuance costs and accretion of debt discounts, primarily related to lower balances in the TaxAct - HD Vest 2015 credit facility and the Notes due to pay-off of the entire TaxAct - HD Vest 2015 credit facility and redemption of all of the Notes, respectively, in the second quarter of 2017, and a ~~$2.0~~$0.8 million decrease in loss on debt extinguishment on the Blucora senior secured credit facilities, offset by a decrease in segment operating income of $1.5 million related to ~~the TaxAct - HD Vest 2015 credit facility. The decreases in non-GAAP net loss were offset by~~our Wealth Management segment and a ~~$0.3~~$1.6 million ~~decrease~~increase in corporate operating expenses not allocated to the segments, primarily due to ~~changes in headcount across most functions.~~acquisition-related costs.

~~Nine months ended September 30, 2017 compared with nine months ended September 30, 2016~~

The increase in non-GAAP net income was primarily due to increases in segment operating income of $10.4 million and $4.2 million related to our Tax Preparation and Wealth Management segments, respectively. Further contributing to the

increase in non-GAAP net income was a $9.7 million decrease in interest expense, amortization of debt issuance costs, and accretion of debt discounts, primarily related to lower balances in the TaxAct - HD Vest 2015 credit facility and the Notes due to pay-off of the entire credit facility and redemption of all of the Notes, respectively, in the second quarter of 2017, and a $2.3 million decrease in loss on debt extinguishment related to the TaxAct - HD Vest 2015 credit facility. The increases in non-GAAP net income were offset by a $3.8 million increase in corporate operating expenses not allocated to the segments primarily due to Strategic Transformation Costs and increased headcount supporting most functions, partially offset by lower stock-based compensation costs, and a $0.8 million increase in taxes due to an increase in non-GAAP income.

LIQUIDITY AND CAPITAL RESOURCES

Cash and Cash Equivalents ~~and Short-Term Investments~~

Our principal source of liquidity is our cash and cash ~~equivalents, and short-term investments.~~equivalents. As of ~~September 30, 2017,~~March 31, 2019, we had cash and ~~marketable investments~~cash equivalents of approximately ~~$78.6 million, consisting entirely of cash and cash equivalents.~~$149.8 million. Our HD Vest broker-dealer subsidiary operates in a highly regulated industry and is subject to various regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have substantial monetary and non-monetary impacts to HD Vest's operations. As of ~~September 30, 2017,~~March 31, 2019, HD Vest met all capital adequacy requirements to which it was subject.

We generally invest our excess cash in high-quality marketable investments. These investments generally include debt instruments issued by the U.S. federal government and its agencies, international governments, municipalities and publicly-held corporations, as well as commercial paper, insured time deposits with commercial banks, and money market funds invested in securities issued by agencies of the U.S., although specific holdings can vary from period to period depending upon our cash requirements. ~~Our~~We believe our financial instrument investments held at ~~September 30, 2017~~March 31, 2019 had minimal default risk and short-term maturities.

WeHistorically, we have financed our operations primarily from cash provided by operating activities. Accordingly, we believe that the cash generated from our operations and the cash and cash equivalents we have on hand will be sufficient to meet our operating, working capital, regulatory capital requirements at our broker-dealer subsidiary, and capital expenditure requirements for at least the next 12 months. However, the underlying levels of revenues and expenses that we project may not prove to be ~~accurate.~~accurate and we may be required to draw on our $65.0 million revolving credit facility to meet our capitalrequirements. For further discussion of the risks to our business related to liquidity, see the Risk Factor "Existing cash and cash equivalents, ~~short-term investments,~~ and cash generated from operations may not be sufficient to meet our anticipated cash needs for servicing debt, working capital, and capital expenditures" in Part III, Item 81A of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018, and the risk factors under the caption "Risks Related to our Financing Arrangements" in Part II, Item 1A in this Quarterly Report on Form 10-Q.

Use of Cash

We may use our cash and cash equivalents ~~and short-term investments~~ balance in the future on investment in our current businesses, for repayment of debt, for acquiring companies or assets that complement our Wealth Management and Tax Preparation businesses, orfor stock buybacks, for returning capital to ~~shareholders.~~stockholders, or for other utilizations which we deem to be in the best interests of stockholders.

OnIn May ~~22,~~ 2017, we entered into ana credit agreement with a syndicate of lenders for ~~a new~~the Blucora senior secured credit facility for the purposes of refinancing the TaxAct - HD Vest 2015 credit facility, redeeming the Notes, and providing future working capital and capital expenditure flexibility. Consequently, the TaxAct - HD Vest 2015 credit facility was repaid in full and the commitments under the TaxAct - HD Vest revolving credit facility were terminated.facilities. The Blucora senior secured credit ~~facility consists~~facilities in the initial aggregate committed amount of $425.0 million consist of a committed $50.0 million revolving credit ~~loan, which includes~~facility (including a letter of credit ~~sub-facility,~~sub-facility), and a $375.0 million term loan ~~for an aggregate $425.0 million credit~~ facility. The final maturity dates of the revolving credit loan and term loan are May 22, 2022 and May 22, 2024, respectively. ~~The~~In November 2017, the credit facility agreement was amended in order to refinance and reprice the initial term loan, such that the applicable interest ~~rates~~rate margin is 3.00% for Eurodollar Rate loans and 2.00% for ABR loans. Depending on Blucora’s Consolidated First Lien Net Leverage Ratio (as defined in the credit facility agreement), the applicable interest rate margin on the revolving credit ~~loan~~facility is from 2.75% to 3.00% for Eurodollar Rate loans and 1.75% to 2.00% for ABR loans. Obligations under the Blucora senior secured credit facilities are guaranteed by certain of Blucora's subsidiaries and secured by the assets of Blucora and those subsidiaries.

On May 6, 2019, we amended our existing existing senior secured credit agreement to, among other things, permit the incurrence of a $125.0 million increase in the term loan ~~are variable. The~~facility of the Blucora senior secured credit facilities and increase the size of our revolving credit facility ~~includes~~from $50.0 million to $65.0 million as described above under "Recent Developments" in Part I, Item 2 of this report.

The Blucora senior secured credit facilities include financial and operating covenants with respect to certain ratios, including a net leverage ratio, which are defined further in the credit facility agreement. We were in compliance with these covenants as of ~~September 30, 2017.~~March 31, 2019. We initially borrowed $375.0 million under the term ~~loan. Through the third quarter of 2017, we~~loan and have made prepayments of ~~$25.0 million~~$110.0 million towards the term ~~loan.~~loan since entering into the agreement, such that $265.0 million was outstanding under the term loan at March 31, 2019. We have not borrowed any amounts under the revolving credit ~~loan. For further detail, see "Note 7: Debt"~~loan and do not have any other debt outstanding. We may now be required to make annual prepayments of the ~~Notes~~term loan in an amount equal to ~~Unaudited Condensed~~a percentage of our excess cash flow during the applicable fiscal year from 0% to 50%, depending on the Consolidated ~~Financial Statements~~First Lien Net Leverage Ratio (as defined in ~~Part I Item 1 of this report.~~

~~Related to~~ the ~~TaxAct - HD Vest 2015~~ credit facility agreement) for such fiscal year. Currently, we ~~had repayment activity of $64.0 million~~do not expect an excess cash flow payment will be required in the fiscal year ending 2019. In the past we have used excess cash flows to make debt prepayments, and ~~$105.0 million during the nine months ended September 30, 2017 and 2016, respectively. Related~~we currently expect to ~~the Notes, we repurchased $28.4 million of the Notes' for cash of $20.7 million during the nine months ended September 30, 2016. For~~make further ~~detail, see "Note 7: Debt" of the Notes to Unaudited Condensed Consolidated Financial Statements~~prepayments in ~~Part I Item 1 of this report.~~2019.

On July 2, 2015, TaxAct acquired SimpleTax, which included additional consideration of up to C$4.6 million (with C$ indicating Canadian dollars and amounting to approximately $3.7 million based on the acquisition-date exchange rate). The related payments ~~are~~were contingent upon product availability and revenue performance over a three-year period and ~~are expected~~were to ~~occur~~be paid annually over that period. The ~~first~~third and final payment of $1.3 million was made in the first quarter of ~~2017,~~2019.

In connection with our 2015 acquisition of HD Vest, former management of that business has retained an ownership interest in HD Vest. We are party to put and call arrangements that became exercisable beginning in the ~~remaining payments~~first quarter of ~~$2.7 million are expected through 2019. For further detail, see "Note 6: Fair Value Measurements"~~2019 with respect to these interests. These put and call arrangements allow certain members of ~~the Notes~~HD Vest management to ~~Unaudited Condensed Consolidated Financial Statements in Part I Item 1 of this report.~~

~~Contractual Obligations and Commitments~~

The material events during 2017, outside of the ordinary course of our business, include debt activity (as discussed further in "Note 7: Debt"), payment of a portion of the acquisition-related contingent consideration liability (as discussed further in "Note 6: Fair Value Measurements"), estimated sublease income of $3.8 million primarily related to the sublease agreement for the Bellevue facility (as discussed further in "Note 5: Restructuring"), purchase commitments with a vendor to provide cloud computation services of $11.3 million over the next four years, and a commitment to switch to a new clearing firm provider that has been selected byrequire the Company byto purchase their interests or allow the ~~third quarter of 2018. Additional information on our Commitments and Contingencies~~Company to acquire such interests, respectively. These arrangements can be ~~found in our~~settled for cash within ninety days after the Company files its Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018. The redemption value of the arrangements is based upon several factors, including, among others, the Company's implied enterprise value, implied equity value and certain financial performance measures of the Company.

As of March 31, 2019, $22.4 million of put arrangements had been exercised, and those arrangements became mandatorily redeemable. As of March 31, 2019, put and call arrangements of $2.5 million had not been exercised. All of the put and call arrangements were settled in cash in the second quarter of 2019 for the aggregate amount of $24.9 million.

On May 6, 2019, we completed the Acquisition of 1st Global, which was paid with a combination of (i) $55.0 million of cash on hand and (ii) the proceeds from the $125.0 million increase in the term loan under the Blucora senior secured credit facilities.

Contractual Obligations and Commitments

The material changes in our contractual obligations and commitments through the first quarter of 2019, outside of the ordinary course of our business, include payment of the final portion of the SimpleTax acquisition-related contingent consideration liability and sublease income of $2.0 million, primarily related to the sublease of the Bellevue facility. Additional information on the Company’s Commitments and Contingencies can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Off-balance Sheet Arrangements

We have no off-balance sheet ~~arrangements other than operating leases.~~arrangements.

Cash Flows

Our cash flows were comprised of the following:


(In thousands)	Three months ended March 31,
	2019		2018
Net cash provided by operating activities	$	70,236	$	57,450
Net cash used by investing activities	(1,243)		(940)
Net cash used by financing activities	(3,085)		(39,569)


Effect of exchange rate changes on cash, cash equivalents, and restricted cash	15		(6)
Net increase in cash, cash equivalents, and restricted cash	$	65,923	$	16,935

(In thousands) Nine months ended September 30,
2017 2016
Net cash provided by operating activities from continuing operations $ 79,230
$ 88,537
Net cash provided by investing activities from continuing operations 3,283
2,225
Net cash used by financing activities from continuing operations (58,649 ) (124,571 )
Net cash provided (used) by continuing operations 23,864
(33,809 )
Net cash provided by discontinued operations 1,028
46,589
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 86
(15 )
Net increase in cash, cash equivalents, and restricted cash $ 24,978
$ 12,765

Net cash from ~~the~~ operating ~~activities of continuing operations:~~activities: Net cash from ~~the~~ operating activities ~~of continuing operations~~ consists of income, ~~from continuing operations,~~ offset by certain non-cash adjustments, and changes in our working capital.

Net cash provided by operating activities was ~~$79.2~~$70.2 million and ~~$88.5~~$57.5 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively. The activity in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 included a ~~$1.2~~$(3.9) million working capital contribution and approximately ~~$78.0~~$74.1 million of income ~~from continuing operations~~ (offset by non-cash adjustments). The working capital contribution was primarily driven by the impact of TaxAct's seasonality and the timing of TaxAct's spending on marketing campaigns for the current tax season.

The activity in the three months ended March 31, 2018 included a $(1.7) million working capital contribution and approximately $59.1 million of income (offset by non-cash adjustments). The working capital contribution primarily related to the impact of TaxAct's seasonality ~~HD Vest 2016 prepayments, recognition of deferred revenues in our Tax Preparation segment and restructuring activities.~~

The activity in the nine months ended September 30, 2016 included a $43.8 million working capital contribution and approximately $44.7 million of income from continuing operations (offset by non-cash adjustments). The working capital contribution was driven by accrued expenses and the ~~impact~~timing of ~~excess~~TaxAct's spending on marketing campaigns for the current tax benefits from stock-based activity primarily due to utilizing net operating loss carryforwards from prior years. In addition, in connection with the acquisition of HD Vest, we had placed into escrow $20.0 million of additional consideration that was contingent upon HD Vest's 2015 earnings performance, and that amount was returned to us in the first quarter of 2016 since it was not achieved (see "Note 3: Business Combinations" of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I Item 1 of this report for additional information).season.

Net cash from ~~the~~ investing ~~activities of continuing operations:~~ activities: Net cash from ~~the~~ investing activities ~~of continuing operations~~ primarily consists of cash outlays for business acquisitions, transactions (purchases of and proceeds from sales and

maturities) related to our investments, and purchases of property and equipment. Our investing activities can fluctuate from period-to-period primarily based upon the level of acquisition activity.

Net cash ~~provided~~used by investing activities was ~~$3.3~~$1.2 million and $0.9million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~net cash from investing activities was $2.3 million for the nine months ended September 30, 2016.~~2018, respectively. The activity in the ~~nine~~three months ended ~~September 30, 2017 primarily~~March 31, 2019 consisted of ~~net cash inflows on our available-for-sale investments of $7.1 million offset by~~ approximately ~~$3.8~~$1.2 million in purchases of property and equipment. The activity in the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2018 consisted of ~~a $1.8 million final working capital adjustment on the HD Vest acquisition and $2.6~~approximately $0.9 million in purchases of property and ~~equipment, offset by net cash inflows on our available-for-sale investments of $6.7 million.~~equipment.

Net cash from ~~the~~ financing ~~activities of continuing operations:~~ activities: Net cash from ~~the~~ financing activities ~~of continuing operations~~ primarily consists of transactions related to the issuance of debt and stock. Our financing activities can fluctuate from period-to-period based upon our financing needs and market conditions that present favorable financing opportunities.

Net cash used by financing activities was ~~$58.6~~$3.1 million and ~~$124.6~~$39.6 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively. The activity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 primarily consisted of ~~payments of $285.0 million in connection with the termination of the TaxAct - HD Vest credit facility, $172.8 million for redemption in full of the outstanding Notes, $6.7~~$2.4 million in tax payments from shares withheld for equity awards, and $0.9 million in contingent consideration paid related to the 2015 acquisition of SimpleTax. These cash outflows were offset by approximately ~~$367.2 million in proceeds from the senior secured credit facility that was entered into in May 2017 and $39.7~~$0.3 million in combined proceeds from the issuance of common stock related to stock option exercises and the employee stock purchase plan.

The activity for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2018 primarily consisted of payments of ~~$105.0~~$40.0 million ontowards the ~~TaxAct - HD Vest~~term loan under the Blucora senior secured credit ~~facility, the $20.7 million repurchase of the Notes, and $1.4~~facilities, $1.5 million in tax payments from shares withheld for equity ~~awards.~~awards, and $1.3 million in contingent consideration paid related to the 2015 acquisition of SimpleTax. These cash outflows were offset by ~~approximately $2.5~~$3.2 million in combined proceeds from the issuance of common stock related to stock option exercises and the employee stock purchase plan.

Critical Accounting Policies and Estimates

Our critical accounting policies, estimates, and methodologies ~~for the nine months ended September 30, 2017~~ are ~~consistent with those~~described in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

Recent Accounting Pronouncements

See "Note 2: Summary of Significant Accounting Policies" of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risk during the ~~nine~~three months ended ~~September 30, 2017, other than related to borrowings under the senior secured credit facility entered into on May 22, 2017.~~March 31, 2019. We borrowed $375.0 million under the term loan when we entered into the Blucora senior secured credit ~~facility,~~facilities, and ~~the~~as of March 31, 2019, we had $265.0 million outstanding. The interest rate on the term loan is variable at the London Interbank Offered Rate ("LIBOR"), subject to a floor of 1.00%, plus a margin of ~~3.75%~~3.00%. A hypothetical 100 basis point increase in LIBOR would result in a ~~$3.5~~$2.7 million increase, based upon our ~~September 30, 2017~~March 31, 2019 principal amount, in our annual interest expense until the scheduled maturity date in 2024. For additional information, see Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated (pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934), the effectiveness of our disclosure controls and procedures as of ~~September 30, 2017.~~March 31, 2019. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e)) were effective as of ~~September 30, 2017.~~March 31, 2019.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the ~~third~~first quarter of ~~2017~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

~~See "Note 9: Commitments and Contingencies"~~There are no material pending legal proceedings to which we are a party or of which any of our property is the ~~Notes to Unaudited Condensed Consolidated Financial Statements in Part I Item 1 of this report.~~subject.

Item 1A. Risk Factors

~~Refer to~~Our business and future results may be affected by a number of risks and uncertainties that should be considered carefully. In addition, this report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including the risks

described in Part I Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016 for a discussion of risk factors relating to~~2018 and the ~~Company’s business.~~ risks set forth below.

The Company believes that there has been no material change in its risk factors as previously disclosed in the Form 10-K other than as ~~follows:~~

~~Increased government regulation~~set forth below. The occurrence of ~~our business may harm our operating results.~~

We are subject to federal, state, and local laws and regulations that affect our activities, including, without limitation, areas of labor, advertising, tax, financial services, data privacy and security requirements, digital content, consumer protection, real estate, billing, promotions, quality of services, intellectual property ownership and infringement, anti-corruption, foreign exchange controls and cash repatriation restrictions, anti-competition, environmental, health, and safety. There have been significant new regulations and heightened focus by the government on many of these areas, as well as in areas such as insurance and healthcare (including, for example, the Affordable Care Act). As we complete our Strategic Transformation and expand our products and services and revise our business models, we may become subject to additional government regulation or increased regulatory scrutiny. Regulators may adopt new laws or regulations or their interpretation of existing laws or regulations may differ from ours as well as the laws of other jurisdictions in which we operate. The Trump Administration has called for a broad review of, and potentially significant changes to, U.S. fiscal and tax laws and regulations. These changes may include comprehensive tax reform as well as the rolling back or repeal of various financial regulations, including the Department of Labor (the ~~"DOL") fiduciary rule (the~~ ~~"Fiduciary Rule") and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the~~ ~~"Dodd-Frank Act"~~). We cannot predict whether, when or to what extent new U.S. federal laws, regulations, interpretations or rulings will be issued, nor is the impact of such changes on our Tax Preparation or Wealth Management businesses clear. It is possible that some policies adopted by the Trump administration will negatively affect us.

These regulatory requirements could impose significant limitations, require changes to our business, require notification to customers, clients, or employees of a security breach, restrict our use of personal information, or cause changes in customer purchasing behavior that may make our business more costly, less efficient, or impossible to conduct, and may require us to modify our current or future products or services, which may materially harm our future financial results.

The tax preparation industry continues to receive heightened attention from federal and state governments. New legislation, regulation, public policy considerations, changes in the cybersecurity environment, litigation by the government or private entities, or new interpretations of existing laws may result in greater oversight of the tax preparation industry, restrict the types of products and services that we can offer or the prices we can charge, or otherwise cause us to change the way we operate our Tax Preparation business or offer our tax preparation products and services. We may not be able to respond quickly to such regulatory, legislative and other developments, and these changes may in turn increase our cost of doing business and limit our revenue opportunities. In addition, if our practices are not consistent with new interpretations of existing laws, we may become subject to lawsuits, penalties, and other liabilities that did not previously apply. We are also required to comply with a variety of state revenue agency standards in order to successfully operate our tax preparation and electronic filing

~~services. Changes in state-imposed requirements by~~ one or more of the states, including the required use of specific technologies or technology standards, may significantly increase the costs of providing those services to our customers and may prevent us from delivering a quality product to our customers in a timely manner and at an acceptable price.

Our Wealth Management business is subject to certain additional financial industry regulations and supervision, including by the Securities and Exchange Commission, the DOL, the Financial Industry Regulatory Authority, state securities and insurance regulators, and other regulatory authorities. Our failure to comply with the laws, rules, and regulations promulgated by federal regulatory bodies and the regulatory authorities in each of the states and other jurisdictions in which we do businessevents listed below could result in the restriction of the ongoing conduct or growth, or even liquidation of, parts of our business and otherwise materially impact our financial condition, results of operations, and liquidity. These regulatory authorities continuously review legislative and regulatory initiatives and may adopt new or revised laws, regulations, or interpretations, and there can also be no assurance that other federal or state agencies will not attempt to further regulate our business. The Dodd-Frank Act, enacted into law in 2010, called for sweeping changes in the supervision and regulations of the wealth management industry. Regulators implementing the Dodd-Frank Act have adopted, proposed to adopt, and may in the future adopt regulations that could impact the manner in which we will market HD Vest products and services, manage HD Vest operations, and interact with regulators. As noted above, the Trump Administration has called for a broad review of, and potentially significant changes to, U.S. fiscal laws and regulations which may include the rolling back or even repeal of certain financial regulations, including but not limited to the Dodd-Frank Act. If such changes are enacted, they could have a negative impact on our business.

In April 2016, the DOL published the Fiduciary Rule and two new administrative class exemptions from the prohibited transaction exemptions, as well as amendments to previously granted exemptions under Employee Retirement Income Security Act of 1974, as amended (~~"ERISA"), which redefines the term "fiduciary" and who may be considered a fiduciary under ERISA,~~ ~~i.e.~~, financial institutions and financial advisors, and specifies how such fiduciaries must provide investment advice to individual retirement accounts or other accounts, the assets of which are subject to section 4975 of the Internal Revenue Code (collectively, the ~~"Covered Accounts"~~). Over the past several quarters, Covered Accounts made up approximately half of HD Vest's assets under administration. The new Fiduciary Rule focuses on conflicts of interest related to investment recommendations made by financial institutions and financial advisors to clients holding Covered Accounts. The rules bring virtually all of the investment products and services HD Vest currently provides to Covered Account owners within the scope of ERISA.

On February 3, 2017, President Trump issued a memorandum directing the Secretary of Labor to prepare an updated analysis of the likely impact of the Fiduciary Rule on investors’ access to retirement information and financial advice. As a result of the President’s memorandum, the DOL issued a final rule extending the applicability date of the Fiduciary Rule by 60 days, from April 10, 2017 to June 9, 2017, and requiring investment advice fiduciaries relying on certain prohibited transaction exemptions to adhere only to the Impartial Conduct Standards as conditions of those exemptions during a transition period from June 9, 2017 to January 1, 2018 (the ~~"Transition Period"~~).

On May 22, 2017, the DOL issued a temporary enforcement policy covering the Transition Period, during which the DOL will not pursue claims against investment advice fiduciaries who are working diligently and in good faith to comply with their fiduciary duties and to meet the conditions of the prohibited transaction exemptions, or otherwise treat investment advice fiduciaries as being in violation of their fiduciary duties. The Treasury Department and IRS confirmed a similar enforcement policy covering excise taxes and related reporting obligations with respect to transactions covered by the DOL’s enforcement policy.

On August 31, 2017, the DOL issued a proposed rule to delay the effective date of the Fiduciary Rule’s transaction exemptions to July 1, 2019. The purpose of the proposed delay is to permit the DOL to complete the analysis required by the President’s memorandum. The comment period for the proposed rule closed on September 15, 2017 but the DOL had not issued a final rule as of the date of this report. In the proposed rule, the DOL solicited comments on whether this delay should be extended beyond July 1, 2019 or made contingent upon other events, such as the conclusion of any additional substantive rulemaking affecting the Fiduciary Rule or the transaction exemptions. The proposed rule would also extend the Transition Period, and continue the DOL’s previously announced temporary enforcement policy, through the pendency of any delay. The DOL also solicited comments about whether application of the enforcement policy should be made contingent on any particular factors, such as a firm’s continued good faith efforts to comply with the Fiduciary Rule. We cannot predict what the DOL’s final rule will provide on these matters.

The Fiduciary Rule, should it remain unchanged, will require HD Vest to either: (1) subject Covered Accounts to a level fee arrangement under which (a) the firm and affiliates receive a fee based on a fixed percentage of the value of assets in the account and (b) no ERISA prohibited transactions are otherwise implicated; or (2) comply with one of the DOL prohibited

~~transaction exemptions that impose significant new and additional compliance and disclosure requirements, and restrict the manner in which HD Vest can earn revenue and pay its financial advisors.~~

Accordingly, it is uncertain whether the Fiduciary Rule will become applicable, when it will be applicable, and what form any final rule might take after the required review is completed. If the Fiduciary Rule is applied in its current form, it will impact how HD Vest (i) designs investment products and services for Covered Accounts, (ii) receives fees, (iii) compensates its financial advisors, and (iv) recruits and retains financial advisors. Additionally, the Fiduciary Rule will require HD Vest to change systems and implement new compliance programs and client disclosures. In addition, if HD Vest relies on the new Best Interest Contract prohibited transaction exemption, the firm will be required to adopt new "impartial conduct" policies and procedures and make contractual representations and warranties to clients that HD Vest will comply with such policies and procedures and abide by fiduciary standards. These requirements, coupled with ambiguity inherent in the Fiduciary Rule, will likely lead to increased regulatory scrutiny and litigation related to the provision of investment advice to Covered Accounts and ERISA investors. Our management has devoted and, if the Fiduciary Rule is applied in its current form, expects to continue to devote substantial time and resources to assess the new rule, implement required policies and procedures, and develop and execute a business strategy in light of the rule, diminishing the firm’s ability to focus on other initiatives. Depending on the scope of required changes, if HD Vest is not able to complete necessary modifications to its business practices and operational systems by the applicability date, its ability to process business for Covered Accounts will be negatively impacted. As a result, the Fiduciary Rule and related litigation and regulatory scrutiny could materially and adversely impact our financial condition and results of operations. In addition, investigations, claims, or other actions or proceedings by regulators or third-parties with respect to our compliance with the Fiduciary Rule may also have a material adverse effect on ~~our~~the Company’s business, prospects, results of operations, reputation, financial condition, ~~and results~~cash flows or ability to continue current operations without any direct or indirect impairment or disruption, which is referred to throughout these Risk Factors as a “Material Adverse Effect.”

RISKS ASSOCIATED WITH OUR BUSINESSES

We may fail to realize all of ~~operations.~~

the anticipated benefits of the Acquisition of 1st Global or those benefits may take longer to realize than expected. We may also encounter significant difficulties in integrating the operations of 1st Global.

Our ability to ~~comply with all applicable laws, rules and regulations, and interpretations is largely dependent~~realize the anticipated benefits of the Acquisition of 1st Global will depend, to a large extent, on our ~~establishment~~ability to integrate 1st Global’s business with ours, which will be a complex, costly and ~~maintenance~~time-consuming process. As a result, we will be required to devote significant management attention and resources to integrate our business practices and operations with those of ~~compliance, audit,~~1st Global. The integration process may disrupt our business and, ~~reporting~~if implemented ineffectively, could restrict the realization of the full expected benefits of the Acquisition. The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of the Acquisition could cause an interruption of, or a loss of momentum in, our operations and could result in a Material Adverse Effect.

As we integrate 1st Global’s business, we are likely to incur costs relating to selection and implementation of uniform procedures, systems, vendors and ~~procedures,~~platforms for our Wealth Management business, as well as costs associated with exiting certain relationships and agreements. These costs could be material.

In addition, the integration of 1st Global’s business may result in material unanticipated problems, expenses, liabilities, competitive responses and loss of advisors, customers and other business relationships. Additional integration challenges could include:

•diversion of management’s and our employees' attention to integration matters;

•difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the Acquisition;

•difficulties in the integration of operations and systems, including the use of our new clearing platform;

•difficulties in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures;

•difficulties in keeping advisors and clients who may have changing products or services;

•difficulties in the assimilation of employees;

•difficulties in managing the expanded operations of a significantly larger and more complex company;

•challenges in attracting and retaining key personnel; and

•the impact of potential liabilities we may be inheriting from 1st Global.

Additionally, following the integration of 1st Global, we may also receive greater regulatory scrutiny and could incur additional compliance costs. Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could result in a Material Adverse Effect and result in us becoming subject to additional litigation.

In addition, even if 1st Global’s business is integrated successfully, the full anticipated benefits of the Acquisition may not be realized, including the synergies, cost savings or sales or growth opportunities that are anticipated. These benefits may not be achieved within the anticipated time frame, or at all. Further, additional unanticipated costs may be incurred in the integration process. All of these factors could cause reductions in our earnings per share, decrease or delay the expected accretive effect of the Acquisition and negatively impact the price of shares of our common stock. As a result, it cannot be assured that the Acquisition will result in the realization of the full anticipated benefits and potential synergies.

We have incurred significant transaction costs and will continue to incur integration costs, which could also be significant, in connection with the Acquisition of 1st Global that could cause a Material Adverse Effect.

We have incurred significant transaction costs in connection with the Acquisition of 1st Global, including payment of certain fees and expenses incurred in connection with the Acquisition and the financing of the Acquisition. In addition, we expect to incur additional integration costs, which could be significant. These costs could adversely affect our results of

operations in the period in which such expenses are recorded or our cash flow in the period in which any related costs are actually paid.

If we are unable to attract and retain productive advisors, our financial results will be negatively impacted.

Our Wealth Management business derives a large portion of its revenues from commissions and fees generated by its advisors. Our ability to attract and retain productive advisors has contributed significantly to our growth and success. If we fail to attract new advisors or to retain and motivate our current advisors or 1st Global's advisors, our business may suffer.

The market for productive advisors is highly competitive, and we devote significant resources to attracting and retaining the most qualified ~~compliance, audit,~~advisors. In attracting and ~~risk management personnel. While~~retaining advisors, we ~~have adopted systems, policies,~~compete directly with a variety of financial institutions such as wirehouses, regional broker-dealers, banks, insurance companies and ~~procedures reasonably designed~~other independent broker-dealers. Financial industry competitors are increasingly offering guaranteed contracts, upfront payments, and greater compensation to ~~comply or facilitate compliance with all applicable laws, rules~~attract successful financial advisors. These can be important factors in a current advisor’s decision to leave us as well as in a prospective advisor’s decision to join us. We may also experience difficulty retaining advisors following the consummation of the Acquisition of 1st Global as our advisors and ~~regulations, and interpretations, these systems, policies, and procedures~~1st Global's advisors may not ~~be fully effective.~~like the products or services we offer as a combined company, may not like our compensation structure or they may not like the combined business. There can be no assurance that we will ~~not~~ be ~~subject~~successful in our efforts to ~~investigations, claims, or other actions or proceedings by regulators or third-parties~~attract and retain the advisors needed to achieve our growth objectives.

Moreover, the costs associated with ~~respect to our past or future compliance with applicable laws, rules,~~successfully attracting and ~~regulations, the outcome of which may have a material adverse effect on our financial condition~~retaining advisors could be significant, and ~~results of operations.~~

~~HD Vest distributes its products and services through financial advisors who affiliate with the firm as independent contractors. There can be~~there is no assurance that ~~legislative, judicial,~~we will generate sufficient revenues from those advisors’ business to offset such costs. Designing and implementing new or ~~regulatory (including tax) authorities will not introduce proposals or assert interpretations of~~modified compensation arrangements and equity structures to successfully attract and retain advisors is complicated. Changes to these arrangements could themselves cause instability within our existing ~~rules~~investment teams and ~~regulations that would change, or at least challenge, the classification of~~negatively impact our financial ~~advisors as independent contractors. Although we believe we~~results and ability to grow. We have ~~properly classified~~in the past issued and may in the future issue shares of common stock or other securities convertible into or exchangeable for shares of common stock to our advisors as independent contractors, the U.S. Internal Revenue Service or other U.S. federal or state authorities or similar authorities may determine that we have misclassified our advisors as independent contractors for employment tax or other purposesin order to attract and ~~as a result, seek additional taxes from us or attempt to impose fines and penalties, which could have a material adverse effect on our business model, financial condition, and results of operations.~~

~~Risks Related to our Financing Arrangements~~

~~We incurred debt in~~retain such individuals. In connection with the ~~repayment~~Acquisition of 1st Global, we have agreed to issue a substantial number of equity awards to our advisors and incoming advisors of 1st Global. The issuance of additional shares of our ~~credit facility used for~~common stock upon vesting or conversion of these awards may substantially dilute the ~~acquisition of HD Vest and the redemption~~ownership interests of our ~~convertible senior notes~~existing stockholders and reduce the number of shares of common stock available for issuance under our equity incentive plans.

In addition, the wealth management industry in general is experiencing a decline in the number of younger financial advisors entering the industry. We are not immune to that industry trend. If we are unable to replace advisors as they retire, or to assist retiring advisors with transitioning their practices to existing advisors, we could experience a decline in revenue and earnings.

In addition, as some of our advisors grow their advisory assets, they may ~~incur future debt,~~decide to disassociate from us to establish their own RIAs and take customers and associated assets into those businesses. We seek to deter advisors from taking this route by continuously evaluating our technology, product offerings, and service, as well as our advisor compensation, fees, and pay-out policies, to ensure that we are competitive in the market and attractive to successful advisors. We may not be successful in dissuading such advisors from forming their own RIAs, which could cause a material volume of customer assets to leave our platform, which would reduce our revenues and could cause a Material Adverse Effect.

RISKS RELATED TO OUR FINANCING ARRANGEMENTS

We have incurred a significant amount of indebtedness, which may materially and adversely affect our financial condition and future financial results.

~~On May 22, 2017, we borrowed $375.0 million in~~We are party to the ~~form~~Blucora senior secured credit facilities, which consist of a term loan and revolving line of credit for future working capital, capital expenditures and general business purposes. As of March 31, 2019, we had $265.0 million of outstanding indebtedness under the term loan, and we had not borrowed any amounts under the revolving credit facility. On a ~~Credit Agreement~~pro forma basis after giving effect to ~~which~~the incurrence of an additional $125.0 million of indebtedness under the term loan to fund a portion of the purchase price of 1st Global, we would have had $390.0 million of outstanding indebtedness under the term loan and ~~most~~no amounts outstanding under the revolving credit facility as of ~~our direct and indirect domestic subsidiaries (in their capacity as guarantors), are parties.~~March 31, 2019. The final maturity date of the term loan is May 22, 2024. ~~The proceeds~~Under the terms of the ~~term loan were used to repay in full the~~revolving credit facility, ~~used for the acquisition of HD Vest and to redeem in full our convertible senior notes. We~~we may ~~also~~ borrow ~~an additional amount under this Credit Agreement of~~ up to ~~$50.0 million under a revolving credit arrangement.~~$65.0 million.

~~This borrowing~~Our level of indebtedness may materially and adversely affect our financial condition and future financial results by, among other things:

•increasing our vulnerability to downturns in our businesses, to competitive pressures, and to adverse economic and industry conditions;

•requiring the dedication of a portion of our expected cash from operations to service the indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures and complementary acquisitions;

•increasing our interest payment obligations in the event that interest rates rise; and

•limiting our flexibility in planning for, or reacting to, changes in our businesses and our industries.

~~Our Credit Agreement imposes~~The Blucora senior secured credit facilities impose certain restrictions on us, including restrictions on our ability to create liens, incur indebtedness and make investments. In addition, ~~our Credit Agreement includes~~the Blucora senior secured credit facilities include covenants, the breach of which may cause the outstanding indebtedness to be declared immediately due and payable. This borrowing, and our ability to repay it, may also negatively impact our ability to obtain additional financing in the future and may affect the terms of any such financing.

In addition, we or our subsidiaries, may incur additional debt in the future. Any additional debt may result in risks similar to those discussed above or in other risks specific to the credit agreements entered into for those debts.

Our level of indebtedness has increased substantially as a result of the Acquisition of 1st Global.

We incurred approximately $125.0 million of additional indebtedness to fund a portion of the purchase price of the Acquisition of 1st Global. The increase in our indebtedness will have the effect of, among other things, reducing our flexibility to respond to changing business and economic conditions. In addition, the amount of cash required to make principal and interest payments on our outstanding debt has increased by approximately $8.0 million on an annual basis as a result of the increase in our indebtedness, and thus the demands on our cash resources are significantly greater than prior to the Acquisition. Our increased indebtedness may reduce funds available for capital expenditures, stock repurchases and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels.

Ultimately, our ability to service our debt obligations will depend on our future performance, which will be affected by financial, business, economic and other factors, including our ability to achieve the expected benefits and cost savings from the Acquisition of 1st Global. There is no guarantee that we will be able to generate sufficient cash flow to pay our debt service obligations when due. If we are unable to meet our debt service obligations or we fail to comply with our financial and other restrictive covenants contained in the agreements governing our indebtedness, we may be required to refinance all or part of our debt, sell important strategic assets at unfavorable prices or borrow more money. We may not be able to, at any given time, refinance our debt, sell assets or borrow more money on terms acceptable to us or at all. Our inability to refinance our debt could result in a Material Adverse Effect.

OTHER RISKS

We cannot assure you we will repurchase any shares of our common stock pursuant to our newly authorized stock repurchase plan.

On March 19, 2019, we announced that our board of directors authorized a stock repurchase plan pursuant to which we may repurchase up to $100.0 million of our common stock. Pursuant to the plan, share repurchases may be made through a variety of methods, including open market or privately negotiated transactions. The timing and number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities. Our repurchase program does not obligate us to repurchase any specific number of shares and may be suspended or discontinued at any time. As a result, we may not repurchase a material number of shares, or any shares at all, under our stock repurchase plan. In addition, any repurchases of our stock pursuant to the stock repurchase plan may materially reduce the amount of cash we have available and may not materially enhance the long-term value of our business or our stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~None.~~The following table details our repurchases of common stock for the three months ended March 31, 2019:


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) ⁽¹⁾
January 1, 2019 - January 31, 2019	—	$	—	—	$	100.0
February 1, 2019 - February 28, 2019	—	—		—	$	100.0
March 1, 2019 - March 31, 2019	—	—		—	$	100.0
Total	—	$	—	—

⁽¹⁾ On March 19, 2019, we announced that our board of directors authorized the repurchase of up to $100.0 million of our common stock. The authorization does not have a specified expiration date and no shares have been repurchased under this authorization.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

The Company moved its headquarters moved to Irving, Texas from Bellevue, Washington in June 2017, and Eric M. Emans, the Company's Chief Financial Officer, has decided not to relocate with the Company. Consequently, on October 23, 2017, Mr. Emans informed the Company that he intends to resign effective as of November 1, 2017. Upon his termination of employment, Mr. Emans will receive severance compensation in accordance with his Amended and Restated Employment Agreement, which was filed as Exhibit 10.4 to the Company’s Form 10-Q on October 27, 2016.None.

In connection with this announcement, on October 25, 2017 the Company entered into a Consulting Agreement with Mr. Emans that will become effective on November 2, 2017. Pursuant to the Consulting Agreement, Mr. Emans will serve as a consultant to the Company to assist with the Chief Financial Officer transition and other matters that may be requested by the Company and will receive $50,500 per month through February 28, 2018 when the Consulting Agreement terminates. In addition, Mr. Emans will receive $550,000 upon termination or expiration of the Consulting Agreement. The Consulting Agreement also contains a customary confidentiality provision and customary covenants regarding non-competition, non-recruitment, non-solicitation and non-disparagement. The foregoing description of Mr. Emans’ Consulting Agreement does not purport to be complete and is qualified in its entirety by the Consulting Agreement, a copy of which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and is incorporated by reference herein.

Following Mr. Emans’ notice of resignation, on October 23, 2017, the Board of Directors of the Company appointed John Palmer, the Company's Vice President - Accounting, to serve as its Principal Accounting Officer and its Principal Financial Officer, effective as of Mr. Emans’ departure from the Company on November 1, 2017 and continuing until a new Chief Financial Officer has been hired. In connection with Mr. Palmer’s appointment as Principal Accounting and Financial Officer, Mr. Palmer will receive a cash bonus of $50,000 that will be paid upon the earlier of (i) the hiring of a new Chief Financial Officer or (ii) March 31, 2018. If a new Chief Financial Officer is not hired prior to March 31, 2018, Mr. Palmer will receive an additional $10,000 per month until the new Chief Financial Officer is hired.There is no family relationship between Mr. Palmer and any director, executive officer, or person chosen by the Company to become a director or executive officer. There are no transactions to which the Company or any of its subsidiaries is a party and in which Mr. Palmer has a direct or indirect material interest subject to disclosure under Item 404(a) of Regulation S-K, and there are no arrangements or understandings between Mr. Palmer and any other persons pursuant to which he was selected to serve as the Company’s Principal Accounting and Financial Officer.

Mr. Palmer, 51, has served as the Company’s Vice President - Accounting since February 2017. Prior to joining the Company, Mr. Palmer served as Vice President and Chief Accounting Officer at Sizmek, Inc., a global technology company that provides technology-enabled advertising services, from the time it was spun-off from Digital Generation, Inc. in February 2014 until February 2017. Mr. Palmer served as Vice President and Controller at Digital Generation, Inc. from March 2003 to February 2014. Prior to that, Mr. Palmer held a variety of controller positions for technology companies, including Entrust Technologies, Inc. and Nortel Networks, Inc. He began his career working at each of KPMG and Ernst & Young.

Item 6. Exhibits

Exhibit
Number

Exhibit Description

Form

Date of First Filing

Exhibit Number

Filed
Herewith

2.1#

Stock Purchase Agreement, dated as of March 18, 2019, by and among 1G Acquisitions, LLC, 1st Global, Inc., 1st Global Insurance Services, Inc., the sellers named therein and joinder sellers, SAB Representative, LLC, as the sellers’ representative, and Blucora, Inc., as guarantor

8-K

March 19, 2019

2.1

10.1

Second Amendment to Credit Agreement, dated May 6, 2019, among Blucora, Inc., as borrower, most of its direct and indirect domestic subsidiaries, as guarantors, and JPMorgan Chase Bank, N.A., as successor administrative agent and successor collateral agent, and each lender party to the Second Amendment

8-K

May 6, 2019

10.1

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Exchange Act rules 13a-14(a) and 15d-14(a))

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Exchange Act rules 13a-14(a) and 15d-14(a))

32.1*

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350)

32.2*

Certification of Principal Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350)

101

The following financial statements from the Company's 10-Q for the fiscal quarter ended March 31, 2019, formatted in XBRL: (i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations, (iii) Unaudited Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Unaudited Condensed Consolidated Financial Statements

# Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Blucora, Inc. hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.

* The certifications attached as Exhibits 32.1 and 32.2 are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Blucora, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

Exhibit
Number
Exhibit Description Form Date of First Filing Exhibit Number
Filed
Herewith
10.1
First Amendment to Employment Agreement dated September 5, 2017 between Blucora, Inc. and John S. Clendening
8-K September 5, 2017 10.1
10.2
Consulting Agreement Dated October 25, 2017 between Blucora, Inc, and Eric M. Emans
X
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
32.1
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
32.2
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
101 The following financial statements from the Company's 10-Q for the fiscal quarter ended September 30, 2017, formatted in XBRL: (i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations, (iii) Unaudited Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Unaudited Condensed Consolidated Financial Statements X

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		BLUCORA, INC.

		~~BLUCORA, INC.~~By:	/s/ Davinder Athwal

~~By:~~	~~/s/ Eric M. Emans~~
	~~Eric M. Emans~~ Davinder Athwal Chief Financial Officer (On behalf of the Registrant and as Principal Financial Officer)

		Date:	~~October 26, 2017~~May 8, 2019

~~- 40 -~~


(In thousands, except percentages and as otherwise indicated)	March 31,
	2019			2018			Change
Total Client Assets	$	46,164,603		$	44,383,024		4	%
Brokerage Assets	$	32,176,414		$	31,665,899		2	%
Advisory Assets	$	13,988,189		$	12,717,125		10	%
Percentage of Total Client Assets	30.3		%	28.7		%
Number of advisors (in ones)	3,553			3,920			(9)	%
Advisor-driven revenue per advisor	$	21.6		$	21.0		3	%



(In thousands, except percentages and as otherwise indicated)	September 30,
	2017			2016			Percentage Change
Total Assets Under Administration ("AUA")	$	42,696,862		$	38,482,620		11	%
Advisory Assets Under Management ("AUM")	$	11,984,320		$	10,204,448		17	%
Percentage of total AUA	28.1		%	26.5		%
Number of advisors (in ones)	4,392			4,568			(4	)%
Advisor-driven revenue per advisor	$	17.5		$	15.7		11	%


(In thousands, except percentages)	Three months ended September 30,						Nine months ended September 30,						(In thousands, except percentages)	Three months ended March 31,
	2017		2016		Percentage Change		2017		2016		Percentage Change			2019		2018		Change
By product category:													By product category:
Mutual funds	$	21,128	$	20,196	5	%	$	62,371	$	59,021	6	%	Mutual funds	$	19,241	$	22,964	(16)	%
Variable annuities	12,879		12,395		4	%	36,820		35,725		3	%	Variable annuities	11,358		13,464		(16)	%
Insurance	3,037		3,689		(18	)%	9,715		8,836		10	%	Insurance	3,730		3,387		10	%
General securities	2,388		2,682		(11	)%	8,275		7,488		11	%	General securities	2,831		3,055		(7)	%

Total commission revenue	$	39,432	$	38,962	1	%	$	117,181	$	111,070	6	%	Total commission revenue	$	37,160	$	42,870	(13)	%

By sales-based and trailing:
By type of commission:													By type of commission:
Sales-based	$	15,590	$	16,925	(8	)%	$	49,190	$	47,703	3	%	Sales-based	$	15,684	$	18,345	(15)	%
Trailing	23,842		22,037		8	%	67,991		63,367		7	%	Trailing	21,476		24,525		(12)	%
Total commission revenue	$	39,432	$	38,962	1	%	$	117,181	$	111,070	6	%	Total commission revenue	$	37,160	$	42,870	(13)	%


(In thousands)	Three months ended September 30,				Nine months ended September 30,					(In thousands)	Three months ended March 31,
	2017		2016		2017		2016				2019		2018
Balance, beginning of the period	$	11,551,288	$	9,814,232	$	10,397,071	$	9,692,244		Balance, beginning of the period	$	12,555,405	$	12,530,165
Net increase (decrease) in new advisory assets	94,408		131,982		613,848		(1,357		)
Net increase in new advisory assets										Net increase in new advisory assets	269,152		318,565
Market impact and other	338,624		258,234		973,401		513,561			Market impact and other	1,163,631		(131,605)
Balance, end of the period	$	11,984,320	$	10,204,448	$	11,984,320	$	10,204,448		Balance, end of the period	$	13,988,188	$	12,717,125



	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	78,558		$	51,713
Cash segregated under federal or other regulations	313			2,355
Available-for-sale investments	—			7,101
Accounts receivable, net of allowance	6,952			10,209
Commissions receivable	16,432			16,144
Other receivables	592			4,004
Prepaid expenses and other current assets, net	4,777			6,321
Total current assets	107,624			97,847
Long-term assets:
Property and equipment, net	9,552			10,836
Goodwill, net	549,064			548,741
Other intangible assets, net	336,872			362,178
Other long-term assets	2,557			3,057
Total long-term assets	898,045			924,812
Total assets	$	1,005,669		$	1,022,659
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,161		$	4,536
Commissions and advisory fees payable	16,564			16,587
Accrued expenses and other current liabilities	18,768			18,528
Deferred revenue	7,118			12,156
Current portion of long-term debt, net	2,560			2,560
Total current liabilities	48,171			54,367
Long-term liabilities:
Long-term debt, net	344,232			248,221
Convertible senior notes, net	—			164,176
Deferred tax liability, net	59,118			111,126
Deferred revenue	1,031			1,849
Other long-term liabilities	8,530			10,205
Total long-term liabilities	412,911			535,577
Total liabilities	461,082			589,944

Redeemable noncontrolling interests	16,162			15,696

Commitments and contingencies (Note 9)

Stockholders’ equity:
Common stock, par $0.0001—authorized shares, 900,000; issued and outstanding shares,
46,077 and 41,845	5			4
Additional paid-in capital	1,552,609			1,510,152
Accumulated deficit	(1,024,222		)	(1,092,756		)
Accumulated other comprehensive income (loss)	33			(381		)
Total stockholders’ equity	528,425			417,019
Total liabilities and stockholders’ equity	$	1,005,669		$	1,022,659



	Employee-Related Termination Costs			Contract Termination Costs			Fixed Asset Impairments			Stock-Based Compensation			Other Costs			Total
Balance as of December 31, 2016	$	4,234		$	—		$	—		$	—		$	—		$	4,234
Restructuring charges	(30		)	(241		)	1,878			981			32			2,620
Payments	(434		)	(161		)	—			—			(32		)	(627		)
Non-cash	—			1,457			(1,878		)	(981		)	—			(1,402		)
Balance as of June 30, 2017	3,770			1,055			—			—			—			4,825
Restructuring charges	(3		)							97			12			106
Payments	(2,447		)	(256		)	—			—			(12		)	(2,715		)
Non-cash	—			—			—			(97		)	—			(97		)
Balance as of September 30, 2017	$	1,320		$	799		$	—		$	—		$	—		$	2,119



			Fair value measurements at the reporting date using
	September 30, 2017		Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents: money market and other funds	$	10,827	$	—	$	10,827	$	—
Total assets at fair value	$	10,827	$	—	$	10,827	$	—
Acquisition-related contingent consideration liability	$	2,704	$	—	$	—	$	2,704
Total liabilities at fair value	$	2,704	$	—	$	—	$	2,704



			Fair value measurements at the reporting date using
	December 31, 2016		Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents:
U.S government securities	$	2,749	$	—	$	2,749	$	—
Money market and other funds	4,090		—		4,090		—
Commercial paper	1,999		—		1,999		—
Taxable municipal bonds	1,301		—		1,301		—
Total cash equivalents	10,139		—		10,139		—
Available-for-sale investments:
Debt securities:
U.S. government securities	2,000		—		2,000		—
Commercial paper	1,998		—		1,998		—
Time deposits	807		—		807		—
Taxable municipal bonds	2,296		—		2,296		—
Total debt securities	7,101		—		7,101		—
Total assets at fair value	$	17,240	$	—	$	17,240	$	—

Acquisition-related contingent consideration liability	$	3,421	$	—	$	—	$	3,421
Total liabilities at fair value	$	3,421	$	—	$	—	$	3,421



	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Balance as of December 31, 2016	$	7,102	$	—	$	(1	)	$	7,101



Loss on debt extinguishment - TaxAct - HD Vest 2015 credit facility	$	9,593
Loss on debt extinguishment - Convertible Senior Notes	6,715
Total loss on debt extinguishment	$	16,308


(In thousands, except percentages)								Three months ended March 31,
	Sources of Revenue	Primary Drivers	2019					2018					Change
Advisor-driven	Commission	- Transactions - Asset levels	$	37,160				$	42,870				(13)	%
		Advisory	- Advisory asset levels		39,757					39,301					1	%
Other revenue	Asset-based	- Cash balances - Interest rates - Number of accounts - Client asset levels	9,693					7,172					35	%
		Transaction and fee	- Account activity - Number of clients - Number of advisors - Number of accounts		2,922					2,739					7	%
	Total revenue				$	89,532				$	92,082				(3)	%
	Total recurring revenue				$	73,241				$	72,962				—	%
	Recurring revenue rate				81.8		%			79.2		%


(In thousands, except percentages)	Three months ended March 31,							Tax seasons ended
	2019	Change		2018	2019	Change		2018
Consumer e-files	2,244	(18)	%	2,742	3,115	(17)	%	3,772