UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

  
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20212022
OR
☐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
bcor-20220630_g1.jpg
Blucora, Inc.
(Exact name of registrant as specified in its charter)
Delaware91-1718107
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3200 Olympus Blvd, Suite 100, Dallas, Texas 75019
(Address of principal executive offices) (Zip Code)
(972) 870-6400
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareBCORNASDAQ Global Select Market

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 every Interactive Data File required to be submitted 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 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☐ýAccelerated filerý☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
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 Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ý No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of July 28, 2021, 48,671,126August 2, 2022, 47,746,176 shares of the registrant’s Common Stock were outstanding.


TABLE OF CONTENTS
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This report includes some of the trademarks, trade names, and service marks of Blucora, Inc. (referred to throughout this report as “Blucora,” the “Company,” “we,” “us,” or “our”), including Blucora, Avantax Wealth Management, Avantax Planning Partners, Avantax Retirement Plan Services, HD Vest, 1st Global, HKFS, 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 that 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.
References to our or our subsidiaries’ website addresses or the website addresses of third parties in this report do not constitute incorporation by reference of the information contained on such websites and should not be considered part of this report.

Blucora, Inc. | Q2 20212022 Form 10-Q 2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Many of the forward-looking statements are located in Part I, Item 2 of this Form 10-Q under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” “may,” “will,” “would,” “could,” “should,” “estimates,” “predicts,” “potential,” “continues,” “target,” “outlook,” and similar terms and expressions, but the absence of these words does not mean that the statement is not forward-looking. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to:
•our ability to effectively compete within our industries;
•our ability to generate strong performance for our clients and the impact of the financial markets on our clients’ portfolios;
•our expectations concerning the revenues we generate from fees associated with the financial products that we distribute;
•our ability to attract and retain financial professionals, employees, clients, and customers, as well as our ability to provide strong customer/client service;
•the impact of the continuing COVID-19 pandemic on our results of operations and our business, including the impact of the resulting economic and market disruption, the extension of tax filing deadlines and other related government actions;
•our abilityactions, and changes in customer behavior related to effectively compete within our industries;
•our ability to attract and retain financial professionals, qualified employees, clients, and customers, as well as our ability to provide strong customer/client service;
•our ability to close, finance, and realize all of the anticipated benefits of acquisitions, as well as our ability to integrate the operations of recently acquired businesses, and the potential impact of such acquisitions on our existing indebtedness and leverage;foregoing;
•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;
•any downgrade of the Company’s credit ratings;
•our ability to generate strong performance for our clients and the impact of the financial markets on our clients’ portfolios;
•the impact of new or changing legislation and regulations (or interpretations thereof) on our business, including our ability to successfully address and comply with such legislation and regulations (or interpretations thereof) and increased costs, reductions of revenue, and potential fines, penalties, or disgorgement to which we may be subject as a result thereof;
•risks, burdens, and costs, including fines, penalties, or disgorgement, associated with our business being subjected to regulatory inquiries, investigations, or initiatives, including those of the Financial Industry Regulatory Authority, Inc. and the Securities and Exchange Commission (the “SEC”);
•risks associated with legal proceedings, including litigation and regulatory proceedings;
•our ability to close, finance, and realize all of the anticipated benefits of acquisitions, as well as our ability to integrate the operations of recently acquired businesses, and the potential impact of such acquisitions on our existing indebtedness and leverage;
•our ability to retain employees and acquired client assets following acquisitions;
•any compromise of confidentiality, availability or integrity of information, including cyberattacks;
•our ability to manage leadership and employee transitions, including costs and time burdens on management and our board of directors related thereto;
•political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation software industries;
•our ability to maintain our relationships with third-party partners, providers, suppliers, vendors, distributors, contractors, financial institutions, industry associations, and licensing partners, and our expectations regarding and reliance on the products, tools, platforms, systems, and services provided by these third parties;
•our ability to respond to rapid technological changes, including our ability to successfully release new products and services or improve upon existing products and services;
•the compromising of confidentiality, availability or integrity of information, including cyberattacks;
•our expectations concerning the revenues we generate from fees associated with the financial products that we distribute;
•risks related to goodwill and otheracquired intangible asset impairment;
Blucora, Inc. | Q2 2022 Form 10-Q 3

•our ability to develop, establish, and maintain strong brands;
•risks associated with the use and implementation of information technology and the effect of security breaches, computer viruses, and computer hacking attacks;
•our ability to comply with laws and regulations regarding privacy and protection of user data;
Blucora, Inc. | Q2 2021 Form 10-Q 3

•our ability to maintain our relationships with third-party partners, providers, suppliers, vendors, distributors, contractors, financial institutions, industry associations, and licensing partners, and our expectations regarding and reliance on the products, tools, platforms, systems, and services provided by these third parties;
•our beliefs and expectations regarding the seasonality of our business;
•our assessments and estimates that determine our effective tax rate; and
•our ability to protect our intellectual property and the impact of any claim that we have infringed on the intellectual property rights of others.others; and
•the effects on our business of actions of activist stockholders.
Forward-looking statements are not guarantees of future performance and 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, the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as supplemented by those identified under Part II, Item 1A, “Risk Factors” and elsewhere in this Form 10-Q,2021, as well as in our other filings with the SEC. All forward-looking statements speak only as of the date of this Form 10-Q. We do not undertake any obligation and do not intend to update or revise any forward-looking statement to reflect new information, events, or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, except as required by law.




Blucora, Inc. | Q2 20212022 Form 10-Q 4


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)amounts)
June 30,
2022		December 31,
2021
June 30,
2021		December 31,
2020		(Unaudited)
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$232,409 $150,125 Cash and cash equivalents$171,297 $134,824 
Cash segregated under federal or other regulations591 637 
Accounts receivable, net of allowance18,784 12,736 
Accounts receivable, netAccounts receivable, net20,351 21,906 
Commissions and advisory fees receivableCommissions and advisory fees receivable26,662 26,132 Commissions and advisory fees receivable21,214 25,073 
Other receivables1,045 717 
Prepaid expenses and other current assets, net13,972 10,321 
Prepaid expenses and other current assetsPrepaid expenses and other current assets17,697 18,476 
Total current assetsTotal current assets293,463 200,668 Total current assets230,559 200,279 
Long-term assets:Long-term assets:Long-term assets:
Property and equipment, net65,004 58,500 
Property, equipment, and software, netProperty, equipment, and software, net75,741 73,638 
Right-of-use assets, netRight-of-use assets, net21,245 23,455 Right-of-use assets, net19,879 20,466 
Goodwill, netGoodwill, net454,821 454,821 Goodwill, net454,821 454,821 
Other intangible assets, net308,743 322,179 
Acquired intangible assets, netAcquired intangible assets, net291,540 302,289 
Other long-term assetsOther long-term assets13,613 4,569 Other long-term assets26,547 20,450 
Total long-term assetsTotal long-term assets863,426 863,524 Total long-term assets868,528 871,664 
Total assetsTotal assets$1,156,889 $1,064,192 Total assets$1,099,087 $1,071,943 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$10,164 $9,290 Accounts payable$6,962 $8,216 
Commissions and advisory fees payableCommissions and advisory fees payable19,170 19,021 Commissions and advisory fees payable13,814 17,940 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities80,359 56,419 Accrued expenses and other current liabilities54,707 65,678 
Deferred revenue—current5,084 12,298 
Lease liabilities—current3,768 2,304 
Current portion of long-term debt, net1,788 1,784 
Current deferred revenueCurrent deferred revenue6,328 13,180 
Current lease liabilitiesCurrent lease liabilities5,025 4,896 
Current portion of long-term debtCurrent portion of long-term debt1,812 1,812 
Total current liabilitiesTotal current liabilities120,333 101,116 Total current liabilities88,648 111,722 
Long-term liabilities:Long-term liabilities:Long-term liabilities:
Long-term debt, netLong-term debt, net552,828 552,553 Long-term debt, net553,476 553,134 
Deferred tax liability, net29,700 30,663 
Deferred revenue—long-term5,784 6,247 
Lease liabilities—long-term34,765 36,404 
Long-term lease liabilitiesLong-term lease liabilities31,795 33,267 
Deferred tax liabilities, netDeferred tax liabilities, net19,125 20,124 
Long-term deferred revenueLong-term deferred revenue4,859 5,322 
Other long-term liabilitiesOther long-term liabilities30,972 24,919 Other long-term liabilities11,731 6,752 
Total long-term liabilitiesTotal long-term liabilities654,049 650,786 Total long-term liabilities620,986 618,599 
Total liabilitiesTotal liabilities774,382 751,902 Total liabilities709,634 730,321 
Commitments and contingencies (Note 7)00
Commitments and contingencies (Note 8)Commitments and contingencies (Note 8)00
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
Common stock, par value $0.0001 per share—900,000 authorized shares; 49,962 shares issued and 48,656 shares outstanding at June 30, 2021; 49,483 shares issued and 48,177 shares outstanding at December 31, 20205 5 
Common stock, par value $0.0001 per share—900,000 shares authorized; 50,921 shares issued and 47,740 shares outstanding as of June 30, 2022; 50,137 shares issued and 48,831 shares outstanding at December 31, 2021Common stock, par value $0.0001 per share—900,000 shares authorized; 50,921 shares issued and 47,740 shares outstanding as of June 30, 2022; 50,137 shares issued and 48,831 shares outstanding at December 31, 20215 5 
Additional paid-in capitalAdditional paid-in capital1,609,193 1,598,230 Additional paid-in capital1,628,591 1,619,805 
Accumulated deficitAccumulated deficit(1,198,292)(1,257,546)Accumulated deficit(1,175,744)(1,249,789)
Treasury stock, at cost—1,306 shares at June 30, 2021 and December 31, 2020(28,399)(28,399)
Treasury stock, at cost—3,181 shares as of June 30, 2022 and 1,306 shares as of December 31, 2021Treasury stock, at cost—3,181 shares as of June 30, 2022 and 1,306 shares as of December 31, 2021(63,399)(28,399)
Total stockholders’ equityTotal stockholders’ equity382,507 312,290 Total stockholders’ equity389,453 341,622 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$1,156,889 $1,064,192 Total liabilities and stockholders’ equity$1,099,087 $1,071,943 

See accompanying notes to unaudited condensed consolidated financial statements.notes.
Blucora, Inc. | Q2 20212022 Form 10-Q 5

BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)OPERATIONS
(In(Unaudited) (In thousands, except per share data)amounts)

 Three months ended June 30,Six months ended June 30,
 2021202020212020
Revenues:
Wealth management services revenue$162,395 $115,884 $316,886 $260,873 
Tax software services revenue91,917 45,238 215,809 163,569 
Total revenue254,312 161,122 532,695 424,442 
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue113,910 83,868 222,533 186,210 
Tax software services cost of revenue4,429 3,054 10,007 7,067 
Total cost of revenue118,339 86,922 232,540 193,277 
Engineering and technology7,231 7,377 14,359 15,892 
Sales and marketing34,848 40,057 112,410 119,767 
General and administrative23,832 20,200 48,517 44,928 
Acquisition and integration18,169 2,824 26,272 8,506 
Depreciation3,204 1,675 5,504 3,471 
Amortization of other acquired intangible assets7,063 6,673 14,238 14,421 
Impairment of goodwill0 0 0 270,625 
Total operating expenses212,686 165,728 453,840 670,887 
Operating income (loss)41,626 (4,606)78,855 (246,445)
Other loss, net(8,024)(5,288)(15,907)(11,423)
Income (loss) before income taxes33,602 (9,894)62,948 (257,868)
Income tax benefit (expense)(1,994)59,539 (3,694)(7,981)
Net income (loss)$31,608 $49,645 $59,254 $(265,849)
Net income (loss) per share:
Basic$0.65 $1.04 $1.22 $(5.55)
Diluted$0.64 $1.03 $1.20 $(5.55)
Weighted average shares outstanding:
Basic48,508 47,941 48,384 47,884 
Diluted49,385 48,092 49,241 47,884 
Comprehensive income (loss):
Net income (loss)$31,608 $49,645 $59,254 $(265,849)
Other comprehensive income0 0 0 272 
Comprehensive income (loss)$31,608 $49,645 $59,254 $(265,577)













See accompanying notes to unaudited condensed consolidated financial statements.
Blucora, Inc. | Q2 2021 Form 10-Q 6

BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Additional paid-in capitalAccumulated deficitAccumulated other comprehensive loss
Common stockTreasury stock
SharesAmountSharesAmountTotal
Balance as of December 31, 202049,483 $5 $1,598,230 $(1,257,546)$0 (1,306)$(28,399)$312,290 
Common stock issued for stock options and restricted stock units132 — 63 — — — — 63 
Stock-based compensation— — 5,520 — — — — 5,520 
Tax payments from shares withheld for equity awards— — (865)— — — — (865)
Net income— — — 27,646 — — — 27,646 
Balance as of March 31, 202149,615 $5 $1,602,948 $(1,229,900)$0 (1,306)$(28,399)$344,654 
Common stock issued for stock options, restricted stock units, and employee stock purchase plan347 — 1,989 — — — — 1,989 
Stock-based compensation— — 4,720 — — — — 4,720 
Tax payments from shares withheld for equity awards— — (464)— — — — (464)
Net income— — — 31,608 — — — 31,608 
Balance as of June 30, 202149,962 $5 $1,609,193 $(1,198,292)$0 (1,306)$(28,399)$382,507 
Additional paid-in capitalAccumulated deficitAccumulated other comprehensive loss
Common stockTreasury stock
SharesAmountSharesAmountTotal
Balance as of December 31, 201949,059 $5 $1,586,972 $(914,791)$(272)(1,306)$(28,399)$643,515 
Common stock issued for stock options and restricted stock units89 — — — — — — 0 
Stock-based compensation— — (1,201)— — — — (1,201)
Tax payments from shares withheld for equity awards— — (917)— — — — (917)
Cumulative translation adjustment— — — — 272 — — 272 
Net loss— — — (315,494)— — — (315,494)
Balance as of March 31, 202049,148 $5 $1,584,854 $(1,230,285)$0 (1,306)$(28,399)$326,175 
Common stock issued for stock options, restricted stock units, and employee stock purchase plan192 — 1,226 — — — — 1,226 
Stock-based compensation— — 3,904 — — — — 3,904 
Tax payments from shares withheld for equity awards— — (89)— — — — (89)
Net income— — — 49,645 — — — 49,645 
Balance as of June 30, 202049,340 $5 $1,589,895 $(1,180,640)$0 (1,306)$(28,399)$380,861 

 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Revenue:
Wealth Management$162,669 $162,395 $329,072 $316,886 
Tax Software94,214 91,917 235,364 215,809 
Total revenue256,883 254,312 564,436 532,695 
Operating expenses:
Cost of revenue:
Wealth Management113,644 113,910 233,518 222,533 
Tax Software6,873 4,429 16,299 10,007 
Total cost of revenue120,517 118,339 249,817 232,540 
Engineering and technology8,620 7,231 17,124 14,359 
Sales and marketing47,508 34,848 131,911 112,410 
General and administrative26,646 23,832 55,721 48,517 
Acquisition and integration(6,792)18,169 (5,126)26,272 
Depreciation3,137 3,204 6,068 5,504 
Amortization of acquired intangible assets6,462 7,063 13,093 14,238 
Total operating expenses206,098 212,686 468,608 453,840 
Operating income50,785 41,626 95,828 78,855 
Interest expense and other, net(8,117)(8,024)(15,958)(15,907)
Income before income taxes42,668 33,602 79,870 62,948 
Income tax expense(3,243)(1,994)(5,825)(3,694)
Net income$39,425 $31,608 $74,045 $59,254 
Net income per share:
Basic$0.83 $0.65 $1.54 $1.22 
Diluted$0.81 $0.64 $1.50 $1.20 
Weighted average shares outstanding:
Basic47,582 48,508 48,048 48,384 
Diluted48,690 49,385 49,220 49,241 


















See accompanying notes to unaudited condensed consolidated financial statements.notes.
Blucora, Inc. | Q2 20212022 Form 10-Q 6

BLUCORA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited) (In thousands)

Common stockAdditional paid-in capitalAccumulated deficitTreasury stock
SharesAmountSharesAmountTotal
Balance as of December 31, 202150,137 $5 $1,619,805 $(1,249,789)1,306 $(28,399)$341,622 
Common stock issued pursuant to stock incentive and employee stock purchase plans247 — 96 — — — 96 
Stock repurchases— — — — 1,645 (30,537)(30,537)
Stock-based compensation— — 4,641 — — — 4,641 
Tax payments from shares withheld for equity awards— — (1,569)— — — (1,569)
Net income— — — 34,620 — — 34,620 
Balance as of March 31, 202250,384 $5 $1,622,973 $(1,215,169)2,951 $(58,936)$348,873 
Common stock issued pursuant to stock incentive and employee stock purchase plans537 — 2,402 — — — 2,402 
Stock repurchases— — — — 230 (4,463)(4,463)
Stock-based compensation— — 3,683 — — — 3,683 
Tax payments from shares withheld for equity awards— — (467)— — — (467)
Net income— — — 39,425 — — 39,425 
Balance as of June 30, 202250,921 $5 $1,628,591 $(1,175,744)3,181 $(63,399)$389,453 
Common stockAdditional paid-in capitalAccumulated deficitTreasury stock
SharesAmountSharesAmountTotal
Balance as of December 31, 202049,483 $5 $1,598,230 $(1,257,546)1,306 $(28,399)$312,290 
Common stock issued pursuant to stock incentive and employee stock purchase plans132 — 63 — — — 63 
Stock-based compensation— — 5,520 — — — 5,520 
Tax payments from shares withheld for equity awards— — (865)— — — (865)
Net income— — — 27,646 — — 27,646 
Balance as of March 31, 202149,615 $5 $1,602,948 $(1,229,900)1,306 $(28,399)$344,654 
Common stock issued pursuant to stock incentive and employee stock purchase plans347 — 1,989 — — — 1,989 
Stock-based compensation— — 4,720 — — — 4,720 
Tax payments from shares withheld for equity awards— — (464)— — — (464)
Net income— — — 31,608 — — 31,608 
Balance as of June 30, 202149,962 $5 $1,609,193 $(1,198,292)1,306 $(28,399)$382,507 













See accompanying notes.
Blucora, Inc. | Q2 2022 Form 10-Q 7

BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In(Unaudited) (In thousands)
 Six months ended June 30,
 20212020
Operating activities:
Net income (loss)$59,254 $(265,849)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Stock-based compensation10,770 2,703 
Depreciation and amortization of acquired intangible assets21,583 19,253 
Impairment of goodwill0 270,625 
Reduction of right-of-use lease assets1,420 3,196 
Deferred income taxes(963)8,784 
Amortization of debt issuance costs740 644 
Accretion of debt discounts561 138 
Change in fair value of acquisition-related contingent consideration17,800 0 
Accretion of lease liability1,046 901 
Other481 670 
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable(5,948)184 
Commissions and advisory fees receivable(530)5,586 
Other receivables(406)(2,809)
Prepaid expenses and other current assets(3,651)1,435 
Other long-term assets(9,239)3,162 
Accounts payable874 2,942 
Commissions and advisory fees payable149 (5,210)
Lease liabilities(431)(2,572)
Deferred revenue(7,677)(8,299)
Accrued expenses and other current and long-term liabilities11,438 (1,110)
Net cash provided by operating activities97,271 34,374 
Investing activities:
Purchases of property and equipment(13,544)(19,072)
Asset acquisitions(881)0 
Net cash used by investing activities(14,425)(19,072)
Financing activities:
Proceeds from credit facilities, net of debt issuance costs and debt discounts(502)55,000 
Payments on credit facilities(906)(65,625)
Proceeds from stock option exercises284 25 
Proceeds from issuance of stock through employee stock purchase plan1,845 1,201 
Tax payments from shares withheld for equity awards(1,329)(1,006)
Net cash used by financing activities(608)(10,405)
Net increase in cash, cash equivalents, and restricted cash82,238 4,897 
Cash, cash equivalents, and restricted cash, beginning of period150,762 86,450 
Cash, cash equivalents, and restricted cash, end of period$233,000 $91,347 
Supplemental cash flow information:
Cash paid for income taxes$596 $1,189 
Cash paid for interest$14,324 $9,702 
Non-cash investing activities:
Purchases of property and equipment through leasehold incentives (investing)$0 $9,726 

 Six Months Ended June 30,
 20222021
Operating activities:
Net income$74,045 $59,254 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of acquired intangible assets22,769 21,583 
Stock-based compensation11,423 10,770 
Change in the fair value of acquisition-related contingent consideration(5,320)17,800 
Reduction of right-of-use lease assets715 1,420 
Deferred income taxes(999)(963)
Amortization of debt discount and issuance costs1,379 1,301 
Accretion of lease liabilities1,020 1,046 
Other non-cash items2,574 481 
Changes in operating assets and liabilities, net of acquisitions and disposals:
Accounts receivable, net1,666 (5,948)
Commissions and advisory fees receivable3,859 (530)
Prepaid expenses and other current assets1,776 (4,057)
Other long-term assets(8,804)(9,239)
Accounts payable(1,254)874 
Commissions and advisory fees payable(4,316)149 
Lease liabilities(2,491)(431)
Deferred revenue(7,315)(7,677)
Accrued expenses and other current and long-term liabilities(5,064)11,438 
Net cash provided by operating activities85,663 97,271 
Investing activities:
Purchases of property, equipment, and software(11,790)(13,544)
Asset acquisitions(1,858)(881)
Net cash used by investing activities(13,648)(14,425)
Financing activities:
Proceeds from credit facilities, net of debt discount and issuance costs— (502)
Payments on credit facilities(906)(906)
Acquisition-related contingent consideration payments(98)— 
Stock repurchases(35,000)— 
Proceeds from stock option exercises174 284 
Proceeds from issuance of stock through employee stock purchase plan2,324 1,845 
Tax payments from shares withheld for equity awards(2,036)(1,329)
Net cash used by financing activities(35,542)(608)
Net increase in cash, cash equivalents, and restricted cash36,473 82,238 
Cash, cash equivalents, and restricted cash, beginning of period134,824 150,762 
Cash, cash equivalents, and restricted cash, end of period$171,297 $233,000 
Supplemental cash flow information:
Cash paid for income taxes$1,958 $596 
Cash paid for interest$14,301 $14,324 







See accompanying notes to unaudited condensed consolidated financial statements.notes.
Blucora, Inc. | Q2 20212022 Form 10-Q 8

BLUCORA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Description of the Business
Blucora, Inc. (the “Company,” “Blucora,” “we,” “our,” or “us”) operates 2 primary businesses: the Wealth Management business and the digital Tax Software business.
Wealth Management
TheOur Wealth Management business consists of the operations of Avantax Wealth Management and Avantax Planning Partners (collectively, the “Wealth Management business” or the “Wealth Management segment”).
Avantax Wealth Management provides tax-focused wealth management solutions for financial professionals, tax professionals, certified public accounting (“CPA”) firms, and their clients. Avantax Wealth Management offers its services through its registered broker-dealer, registered investment advisor (“RIA”), and insurance agency subsidiaries and is thea leading U.S. tax-focused independent broker-dealer. Avantax Wealth Management works with a nationwide network of financial professionals that operate as independent contractors. Avantax Wealth Management provides these financial professionals with an integrated platform of technical, practice, compliance, operations, sales, and product support tools that enable them to offer tax-advantaged planning, investing, and wealth management services to their clients.
Avantax Planning Partners operates asis an in-house/employee-based RIA, insurance agency, and wealth management business that partners with CPA firms in order to provide their consumer and small business clients with holistic financial planning and advisory services, as well as retirement plan solutions through Avantax Retirement Plan Services. Avantax Planning Partners formerly operated as Honkamp Krueger Financial Services, Inc. (“HKFS”). OnWe acquired HKFS in July 1, 2020 we acquired all of the issued and outstanding common stock of HKFS (the “HKFS Acquisition”). The operations and subsequently rebranded it in order to create tighter brand alignment through one common and recognizable brand. Any reference to Avantax Planning Partners in this Form 10-Q is inclusive of HKFS are included in our operating results as part of the Wealth Management segment from the date of the HKFS Acquisition.HKFS.
Tax Software
TheOur Tax Software business consists of the operations of TaxAct, Inc. (“TaxAct,” the “Tax Software business,” or the “Tax Software segment”) and provides digital tax preparation services packaged tax software, and ancillary services for consumers, small business owners, and tax professionals through its website www.TaxAct.com and its mobile applications. We had referred to this business as the “Tax Preparation business” and “Tax Preparation segment” in previous filings.
The
Our Tax Software segment is highly seasonal with a significant portion of its annual revenue typically earned in the first two quarters of the fiscal year. During the third and fourth quarters of the fiscal year, the Tax Software segment typically reports losses because revenue from the segment is minimal while core operating expenses continue.
In March 2020 and as a result of the COVID-19 pandemic, the Internal Revenue Service (“IRS”) extended the filing deadline for federal tax returns from April 15, 2020 to July 15, 2020. This filing extension resulted in the shifting of a significant portion of Tax Software segment revenue that is usually earned in the first and second quarters of 2020 to the third quarter of 2020.
As a result of the continued impact of the COVID-19 pandemic, the IRS delayed the start of the 2021 tax season and extended the filing and payment deadline for tax year 2020 federal tax returns from April 15, 2021 to May 17, 2021. In addition, the IRS further extended the federal filing and payment deadline for Texas, Louisiana, and Oklahoma to June 15, 2021. This extension resulted in the shifting of a significant portion of Tax Software segment revenue that would typically have been expected to be earned in the first quarter of 2021 to the second quarter of 2021.
Segments
We have 2 reportable segments: (1) the Wealth Management segment and (2) the Tax Software segment.

Blucora, Inc. | Q2 2021 Form 10-Q 9

Note 2: Summary of Significant Accounting Policies
Interim financial informationFinancial Information
The accompanying unaudited condensed consolidated financial statements have been prepared by us under the rules and regulations of the SEC for interim financial reporting. These condensed 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 condensed 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 conformity with United States generally accepted accounting principles (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020.2021. 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 condensed consolidated balance sheets and the condensed consolidated statements of cash flows (in thousands):
June 30, 2021December 31, 2020
Cash and cash equivalents$232,409 $150,125 
Cash segregated under federal or other regulations591 637 
Total cash, cash equivalents, and restricted cash$233,000 $150,762 
We generally invest our available cash in high-quality marketable investments. These investments include money market funds invested in securities issued by agencies of the U.S. government. We may invest, from time-to-time, in other vehicles, such as debt instruments issued by the U.S. federal government and its agencies, international governments, municipalities, and publicly held corporations, as well as commercial paper and insured time deposits with commercial banks. Specific holdings can vary from period to period depending upon our cash requirements. Such investments are reported at fair value on the condensed consolidated balance sheets.
Cash segregated under federal and other regulations is held in a separate bank account for the exclusive benefit of our Avantax Wealth Management clients and is considered restricted cash.
Goodwill
Goodwill represents the cost of an acquisition less the fair value of the net identifiable assets of the acquired business. We evaluate goodwill for impairment annually, as of November 30, or more frequently when events or circumstances indicate it is more likely than not that the fair value of one or more of our reporting units is less than its carrying amount. To determine whether it is necessary to perform a goodwill impairment test, we first assess qualitative factors to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We may elect to perform a goodwill impairment test without completing a qualitative assessment.
Beginning in March 2020, the COVID-19 pandemic had a significant negative impact on the U.S. and global economy and caused substantial disruption in the U.S. and global securities markets, and as a result, negatively impacted certain key Wealth Management business drivers, such as client asset levels and interest rates. These macroeconomic and Company-specific factors, in totality, served as a triggering event that resulted in the testing of the goodwill of the Wealth Management reporting unit and the Tax Software reporting unit for potential impairment.
As part of the goodwill impairment test, we compared the estimated fair values of the Wealth Management and Tax Software reporting units to their respective carrying values. Estimated fair value was calculated using Level 3 inputs and utilized a blended valuation method that factored in the income approach and the market approach. The income approach estimated fair value by using the present value of future discounted cash flows. Significant estimates used in the discounted cash flow model included our forecasted cash flows, our long-term rates of growth, and our weighted average cost of capital. The weighted average cost of capital factors in the relevant risk associated with business-specific characteristics and the uncertainty related to the ability to achieve our projected cash flows. The market approach estimated fair value by taking income-based valuation multiples for a set of comparable companies and applying the valuation multiple to each reporting unit’s income.
Blucora, Inc. | Q2 20212022 Form 10-Q 109

ForA summary of our significant accounting policies is included in Note 2 to the Wealth Management reporting unit,Consolidated Financial Statements in our Annual Report on Form 10-K for the carrying value of the reporting unit exceeded its fair value by $270.6 million. Therefore, we recorded an impairment of goodwill of $270.6 million in the first quarter of 2020. For the Tax Software reporting unit, the carrying value of the reporting unit was significantly below its fair value, and therefore, the goodwill of the Tax Software reporting unit was not considered impaired.
Whileyear ended December 31, 2021. There have been no goodwill impairment triggering events were identified during the six months ended June 30, 2021, the Wealth Management reporting unit is considered to be at risk for a future impairment of its goodwill in the event of a further decline in general economic, market, or business conditions, or any significant unfavorable changes in our forecasted revenue, expenses, cash flows, weighted average cost of capital, and/or market valuation multiples. We will continue to monitor for events and circumstances that could negatively impact the key assumptions in determining the fair value of the Wealth Management reporting unit.

significant accounting policies since December 31, 2021.
Note 3: Segment Information and RevenuesRevenue
We have 2 reportable segments: (1) the Wealth Management segment and (2) the Tax Software segment. Our Chief Executive Officer is the 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.
We do not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, acquisition and integration costs, depreciation, amortization of acquired intangible assets, acquisition and integration costs, executive transition costs, headquarters relocation costs,or contested proxy and other legal and consulting costs or impairment of goodwill to the reportable segments. Such amounts are reflected in the table below under the heading “Corporate-level activity.” In addition, we do not allocate interest expense and other, loss, net, or income taxes to the reportable segments. We do not report assets or capital expenditures by segment to the chief operating decision maker.
Information on reportable segments currently presented to our chief operating decision maker and a reconciliation to consolidated net income (loss) are presented below (in thousands):
Three months ended June 30,Six months ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Revenue:Revenue:Revenue:
Wealth ManagementWealth Management$162,395 $115,884 $316,886 $260,873 Wealth Management$162,669 $162,395 $329,072 $316,886 
Tax SoftwareTax Software91,917 45,238 215,809 163,569 Tax Software94,214 91,917 235,364 215,809 
Total revenueTotal revenue254,312 161,122 532,695 424,442 Total revenue256,883 254,312 564,436 532,695 
Operating income (loss):Operating income (loss):Operating income (loss):
Wealth ManagementWealth Management21,396 11,731 40,792 34,329 Wealth Management15,873 21,396 32,294 40,792 
Tax SoftwareTax Software63,448 6,659 114,336 44,412 Tax Software53,859 63,448 111,889 114,336 
Corporate-level activityCorporate-level activity(43,218)(22,996)(76,273)(325,186)Corporate-level activity(18,947)(43,218)(48,355)(76,273)
Total operating income (loss)41,626 (4,606)78,855 (246,445)
Other loss, net(8,024)(5,288)(15,907)(11,423)
Income tax benefit (expense)(1,994)59,539 (3,694)(7,981)
Net income (loss)$31,608 $49,645 $59,254 $(265,849)
Total operating incomeTotal operating income50,785 41,626 95,828 78,855 
Interest expense and other, netInterest expense and other, net(8,117)(8,024)(15,958)(15,907)
Income before income taxesIncome before income taxes42,668 33,602 79,870 62,948 
Income tax expenseIncome tax expense(3,243)(1,994)(5,825)(3,694)
Net incomeNet income$39,425 $31,608 $74,045 $59,254 
Blucora, Inc. | Q2 20212022 Form 10-Q 1110

Revenues by major category within each segment are presented below (in thousands):
Three months ended June 30,Six months ended June 30,
2021202020212020
Wealth Management:
Advisory$96,508 $66,303 $187,627 $145,060 
Commission51,702 39,836 104,236 90,416 
Asset-based5,526 3,981 10,855 14,560 
Transaction and fee8,659 5,764 14,168 10,837 
Total Wealth Management revenue$162,395 $115,884 $316,886 $260,873 
Tax Software:
Consumer$88,846 $44,421 $199,413 $148,242 
Professional3,071 817 16,396 15,327 
Total Tax Software revenue$91,917 $45,238 $215,809 $163,569 
Wealth Management revenue recognitionRevenue Recognition
Wealth management revenue primarily consists of advisory revenue, commission revenue, asset-based revenue, and transaction and fee revenue.
TheRevenues by major category within the Wealth Management segment and the timing of Wealth Management revenue recognition was as follows (in thousands):
Three months ended June 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Advisory revenue$0 $96,508 $96,508 $0 $66,303 $66,303 
Commission revenue21,076 30,626 51,702 14,803 25,033 39,836 
Asset-based revenue0 5,526 5,526 0 3,981 3,981 
Transaction and fee revenue1,192 7,467 8,659 1,137 4,627 5,764 
Total Wealth Management revenue$22,268 $140,127 $162,395 $15,940 $99,944 $115,884 
Six months ended June 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Advisory revenue$0 $187,627 $187,627 $0 $145,060 $145,060 
Commission revenue43,443 60,793 104,236 38,184 52,232 90,416 
Asset-based revenue0 10,855 10,855 0 14,560 14,560 
Transaction and fee revenue2,566 11,602 14,168 2,996 7,841 10,837 
Total Wealth Management revenue$46,009 $270,877 $316,886 $41,180 $219,693 $260,873 
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Recognized upon transaction:
Commission$17,881 $21,076 $38,505 $43,443 
Transaction and fee1,262 1,192 2,506 2,566 
Total revenue recognized upon transaction$19,143 $22,268 $41,011 $46,009 
Recognized over time:
Advisory$104,155 $96,508 $211,324 $187,627 
Commission24,954 30,626 51,985 60,793 
Asset-based6,964 5,526 12,627 10,855 
Transaction and fee7,453 7,467 12,125 11,602 
Total revenue recognized over time$143,526 $140,127 $288,061 $270,877 
Total Wealth Management revenue:
Advisory$104,155 $96,508 $211,324 $187,627 
Commission42,835 51,702 90,490 104,236 
Asset-based6,964 5,526 12,627 10,855 
Transaction and fee8,715 8,659 14,631 14,168 
Total Wealth Management revenue$162,669 $162,395 $329,072 $316,886 
Tax Software revenue recognitionRevenue Recognition
We generate Tax Software revenue from the sale of digital tax preparation digital services, packaged tax preparation software, ancillary services, and multiple element arrangements that may include a combination of these items.
TheRevenues by major category within the Tax Software segment and the timing of Tax Software revenue recognition was as follows (in thousands):
Three months ended June 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Consumer revenue$88,846 $0 $88,846 $44,420 $1 $44,421 
Professional revenue2,128 943 3,071 187 630 817 
Total Tax Software revenue$90,974 $943 $91,917 $44,607 $631 $45,238 
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Recognized upon transaction:
Consumer$90,963 $88,846 $216,224 $199,413 
Professional2,164 2,128 15,948 14,255 
Total revenue recognized upon transaction$93,127 $90,974 $232,172 $213,668 
Recognized over time:
Consumer$64 $— $64 $— 
Professional1,023 943 3,128 2,141 
Total revenue recognized over time$1,087 $943 $3,192 $2,141 
Total Tax Software revenue:
Consumer$91,027 $88,846 $216,288 $199,413 
Professional3,187 3,071 19,076 16,396 
Total Tax Software revenue$94,214 $91,917 $235,364 $215,809 
Note 4: Asset Acquisitions
During the six months ended June 30, 2022, we completed acquisitions in our Wealth Management business that met the criteria to be accounted for as asset acquisitions. Total initial purchase consideration, including acquisition costs and fixed deferred payments, was $2.2 million. This purchase consideration was allocated to the
Blucora, Inc. | Q2 20212022 Form 10-Q 1211

Six months ended June 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Consumer revenue$199,413 $0 $199,413 $148,241 $1 $148,242 
Professional revenue14,255 2,141 16,396 13,181 2,146 15,327 
Total Tax Software revenue$213,668 $2,141 $215,809 $161,422 $2,147 $163,569 
acquired assets, primarily customer relationship intangibles. Customer relationship intangibles are amortized on a straight-line basis over an amortization period of 15 years.

We are subject to variable contingent consideration payments related to our asset acquisitions that are not recognized as a liability on our condensed consolidated balance sheets until all contingencies related to the achievement of future financial targets are resolved and the consideration is paid. As of June 30, 2022, the maximum future fixed and contingent payments associated with all prior asset acquisitions were $19.2 million, with specified payment dates from 2022 through 2026.
Note 4:5: Debt
Our debt consisted of the following as of the periods indicated in the table below (in thousands):
 June 30, 2021December 31, 2020
 Principal
amount		DiscountDebt issuance costsNet 
carrying
value		Principal
amount		DiscountDebt issuance costsNet 
carrying
value
Senior secured credit facility$562,250 $(3,612)$(4,022)$554,616 $563,156 $(4,173)$(4,646)$554,337 
Less: Current portion of long-term debt, net(1,788)(1,784)
Long-term debt, net$552,828 $552,553 
June 30,
2022		December 31,
2021
Senior Secured Credit Facility
Principal outstanding$560,438 $561,344 
Unamortized debt issuance costs(2,714)(3,371)
Unamortized debt discount(2,436)(3,027)
Net carrying value$555,288 $554,946 
In May 2017, we entered into a credit agreement (as the same has been amended, the “Credit Agreement”) with a syndicate of lenders whichthat provides for a term loan facility (the “Term Loan”) and a revolving line of credit (including a letter of credit sub-facility) (the “Revolver”) for working capital, capital expenditures, and general business purposes (the(as amended, the “Senior Secured Credit Facility”). The Term Loan has a maturity date of May 22, 2024 (the
“Term Loan Maturity Date”). On April 26, 2021, to ensure adequate liquidity and flexibility to support the Company’s growth, we entered into Amendment No. 5 to the Credit Agreement (the “Credit Agreement Amendment”). Pursuant to the Credit Agreement Amendment, the Credit Agreement was amended to, among other things, refinance the existing $65.0 million Revolver and add $25.0 million of additional revolving credit commitments, for an aggregate principal amount of $90.0 million in revolving credit commitments (the “New Revolver”). The New Revolver has a maturity date of February 21, 2024 (the “New Revolver Maturity Date”).
The Company capitalized approximately $0.5 million of debt issuance costs paid in connection with the Credit Agreement Amendment, which are included in other long-term assets on the Company’s condensed consolidated balance sheets as part of the total deferred financing costs associated with the New Revolver.
As of June 30, 2021,2022, the Senior Secured Credit Facility provided for up to $765.0 million of borrowings and consisted of a committed $90.0 million under the New Revolver and a $675.0 million Term Loan that mature on February 21, 2024 and May 22, 2024, respectively. Obligations under the Senior Secured Credit Facility are guaranteed by certain of the Company’s subsidiaries and secured by substantially all the assets of the Company and certain of its subsidiaries (including certain subsidiaries acquired in the HKFS Acquisition and certain other material subsidiaries). The Senior Secured Credit Facility includes financial and operating covenants (including a Consolidated Total Net Leverage Ratio), which are set forth in detail in the Credit Agreement.
Loan. As of June 30, 2021,2022, we had $562.3$560.4 million in principal amount outstanding under the Term Loan and 0no amounts outstanding under the New Revolver. Based on aggregate loan commitments as of June 30, 2021,2022, approximately $90.0 million was available for future borrowingborrowings under the Senior Secured Credit Facility, subject to customary terms and conditions.
The interest rate on the Term Loan is variable at the London Interbank Offered Rate, plus the applicable interest rate margin of 4.0% for Eurodollar Rate Loans (as defined in the Credit Agreement) and 3.0% for ABR Loans (as defined in the Credit Agreement). As of June 30, 2021, the applicable interest rate on the Term Loan was 5.0%.
The Company is required to make mandatory annual prepayments on the Term Loan in certain circumstances, including in the event that the Company generates Excess Cash Flow (as defined in the Credit Agreement) in a given fiscal year. The Credit Agreement permits the Company to voluntarily prepay the Term Loan without premium or penalty. TheIn addition, the Company is required to make principal amortization payments on the Term Loan quarterly on the last business day of each March, June, September, and December, in an amount equal to approximately $0.5 million (subject to reduction for prepayments), with the remaining principal amount of the Term Loan due on the maturityTerm Loan Maturity Date. On August 5, 2022, and as provided for within our Senior Secured Credit Facility, we voluntarily prepaid $35.0 million of principal outstanding under our Term Loan. We also settled the accrued and unpaid interest on the applicable principal outstanding up to, but not including, the date of May 22, 2024.prepayment.
Blucora, Inc. | Q2 2021 Form 10-Q 13

The interest rate on the Term Loan is variable at the London Interbank Offered Rate (subject to a floor of 1.0%), plus the applicable interest rate margin of 4.0% for Eurodollar Rate Loans (as defined in the Credit Agreement) and 3.0% for ABR Loans (as defined in the Credit Agreement). As of June 30, 2022, the applicable interest rate on the Term Loan was 5.0%. Depending on the Consolidated First Lien Net Leverage Ratio (as defined in the Credit Agreement), the applicable interest rate margin on the New Revolver ranges from 2.0% to 2.5% for Eurodollar Rate Loans and 1.0% to 1.5% for ABR Loans. The Company is required to pay a commitment fee on the undrawn commitment under the New Revolver in a percentage that is dependent on the Consolidated First Lien Net
Blucora, Inc. | Q2 2022 Form 10-Q 12

Leverage Ratio that ranges from 0.35% to 0.4%. Interest is payable at the end of each interest period.period, typically quarterly.
Obligations under the Senior Secured Credit Facility are guaranteed by certain of the Company’s subsidiaries and secured by substantially all the assets of the Company and certain of its subsidiaries (including certain subsidiaries acquired in the acquisition of Avantax Planning Partners and certain other material subsidiaries). The Senior Secured Credit Facility includes financial and operating covenants (including a Consolidated Total Net Leverage Ratio), which are set forth in detail in the Credit Agreement.
Pursuant to the Credit Agreement Amendment, if the Company’s usage of the New Revolver exceeds 30% of the aggregate commitments under the New Revolver on the last day of any calendar quarter, the Company shall not permit the Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) to exceed (i) 4.75 to 1.00 for the period beginning on April 1, 2021 and ending on December 31, 2021, (ii) 4.25 to 1.00 for the period beginning on January 1, 2022 and ending on September 30, 2022, (iii) 4.00 to 1.00 for the period beginning on October 1, 2022 and ending on December 31, 2022, and (iv) 3.50 to 1.00 for the period beginning on January 1, 2023 and ending on February 21, 2024.

Except as described above, the New Revolver has substantially the same terms as the previous Revolver, including certain covenants and events of default. The Company was in compliance with the debt covenants of the Senior Secured Credit Facility as of June 30, 2022.
Note 5:6: Leases
Our leases are primarily related to office space and are classified as operating leases. Operating lease expense,cost, net of sublease income, is recognized in “General and administrative” expense (forfor those net lease expensecosts related to leases used in our operations)operations and within “Acquisition and integration” expense (forfor those net lease expensecosts related to thean unoccupied lease resulting from theassumed in a previous acquisition of 1st Global, Inc. and 1st Global Insurance Services, Inc. (together, “1st Global”) in 2019 (the “1st Global Acquisition”)) on the condensed consolidated statements of comprehensiveoperations.
Operating lease cost, net of sublease income, (loss).
Lease expense,and cash paid on operating lease liabilities and lease liabilities obtained from new right-of-use assets for the three and six months ended June 30, 20212022 and 20202021 were as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2021202020212020
Fixed lease expense$1,099 $2,050 $2,253 $4,086 
Variable lease expense102 286 245 587 
Lease expense, before sublease income1,201 2,336 2,498 4,673 
Sublease income(116)(329)(232)(655)
Total lease expense, net of sublease income$1,085 $2,007 $2,266 $4,018 
Additional lease information:
Cash paid on operating lease liabilities$228 $1,282 $445 $2,472 
Lease liabilities obtained from new right-of-use assets (1)
$93 $0 $93 $20,414 
__________________________
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Fixed lease cost$947 $1,099 $1,920 $2,253 
Variable lease cost363 102 765 245 
Operating lease cost, before sublease income1,310 1,201 2,685 2,498 
Sublease income(234)(116)(468)(232)
Total operating lease cost, net of sublease income$1,076 $1,085 $2,217 $2,266 
Additional lease information:
Cash paid on operating lease liabilities$1,262 $228 $2,491 $445 
Lease liabilities obtained from new right-of-use assets$128 $93 $128 $93 
(1)Lease liabilities obtained from new right-of-useRight-of-use assets for the six months ended June 30, 2020 resulted from the new corporate headquarters lease that commenced in January 2020.
As of June 30, 2021, our weighted-average remainingand operating lease term was approximately 10.8 years, and our weighted-average operating lease discount rate was 5.4%.
Blucora, Inc. | Q2 2021 Form 10-Q 14

Operating leasesliabilities were recorded on the condensed consolidated balance sheets as follows (in thousands):
June 30, 2021December 31, 2020
Lease liabilities—current$3,768 $2,304 
Lease liabilities—long-term34,765 36,404 
Total operating lease liabilities$38,533 $38,708 
June 30, 2022December 31, 2021
Right-of-use assets, net$19,879 $20,466 
Current lease liabilities$5,025 $4,896 
Long-term lease liabilities31,795 33,267 
Total operating lease liabilities$36,820 $38,163 
Weighted-average remaining lease term (in years)9.910.3
Weighted-average discount rate5.4 %5.4 %
Blucora, Inc. | Q2 2022 Form 10-Q 13

The scheduled maturities of our operating lease liabilities as of June 30, 2021 are2022 were as follows (in thousands):
Undiscounted cash flows:
Remainder of 2021$1,407 
20225,040 
20235,172 
20245,080 
20255,013 
Thereafter30,324 
Total undiscounted cash flows52,036 
Imputed interest(13,503)
 Present value of cash flows$38,533 

Undiscounted cash flows:
Remainder of 2022$2,583 
20235,226 
20245,121 
20255,023 
20264,193 
Thereafter26,130 
Total undiscounted cash flows48,276 
Imputed interest(11,456)
Present value of cash flows$36,820 
Note 6:7: Balance Sheet Components
Prepaid expenses and other current assets net, consisted of the following (in thousands):
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
Prepaid expensesPrepaid expenses$10,784 $9,643 Prepaid expenses$12,260 $13,138 
Other current assetsOther current assets3,188 678 Other current assets5,437 5,338 
Total prepaid expenses and other current assets, net$13,972 $10,321 
Total prepaid expenses and other current assetsTotal prepaid expenses and other current assets$17,697 $18,476 
Accrued expenses and other current liabilities consisted of the following (in thousands):
June 30, 2021December 31, 2020
Salaries and related expenses$18,801 $19,317 
HKFS Contingent Consideration liability (1)(2)
30,000 17,900 
Contingent liability from 1st Global Acquisition (2)
16,828 11,328 
Accrued vendor and advertising costs3,445 2,606 
Accrued taxes4,525 240 
Other current liabilities6,760 5,028 
Total accrued expenses and other current liabilities$80,359 $56,419 
June 30, 2022December 31, 2021
Salaries and related benefit expenses$17,151 $26,417 
HKFS Contingent Consideration liability (1)
22,980 28,300 
Accrued legal costs1,512 2,871 
Accrued vendor and advertising costs3,337 3,777 
Accrued taxes5,495 — 
Other4,232 4,313 
Total accrued expenses and other current liabilities$54,707 $65,678 
__________________________
(1)Represents the short-term portion of the HKFS Contingent Consideration liability. The long-term portion of the HKFS Contingent Consideration liability was classified in “Other long-term liabilities” on the condensed consolidated balance sheets.
(2)For more information on the Company’s contingent liabilities, see "Note 7—8—Commitments and Contingencies."

Blucora, Inc. | Q2 2021 Form 10-Q 15

Note 7:8: Commitments and Contingencies
HKFS Contingent liability from 1st Global Acquisition
On May 6, 2019, we closed the 1st Global Acquisition. As part of the 1st Global Acquisition, we assumed a contingent liability related to a regulatory inquiry and recorded the contingent liability as part of the opening balance sheet. We evaluated a range of probable losses, resulting in a contingent liability reserve balance (including accrued interest) of $11.3 million at December 31, 2020.
In the second quarter of 2021, we re-evaluated the range of probable losses as a result of our on-going discussions with the SEC. While the regulatory inquiry, which is related to certain pre-acquisition matters, is still on-going, we increased our contingent liability reserve to $16.8 million as of June 30, 2021, and this $5.5 million increase to the contingent liability reserve was recognized in “Acquisition and integration” expense on the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2021.
As part of the 1st Global Acquisition, we purchased representation and warranty insurance from a third party to supplement the indemnification provisions of the stock purchase agreement, dated as of March 18, 2019, by and among 1G Acquisitions, LLC, an indirect wholly owned subsidiary of the Company, 1st Global, Inc. and 1st Global Insurance Services, Inc., certain selling stockholders named therein and joinder sellers (the “1st Global Sellers”) and SAB Representative, LLC, as the Sellers’ representative, pursuant to which, the 1st Global Sellers agreed, among other things, to indemnify us from certain losses arising from breaches of representation, warranties, and covenants. At this time, we cannot yet estimate with reasonable probability the recovery related to these matters from insurance or the 1st Global Sellers, if any.
Contingent consideration liability from HKFS AcquisitionConsideration Liability
On July 1, 2020, we closed the HKFS Acquisitionacquisition of Avantax Planning Partners, formerly “HKFS”, for an upfront cash purchase price of $104.4 million. The purchase price iswas subject to 2 post-closingvariable contingent consideration, or earn-out payments (the “HKFS Contingent Consideration”) by us.totaling a maximum of $60.0 million.
The amount of the HKFS Contingent Consideration to be paid is determined based on advisory asset levels and the achievement of certain performance goals (i) for the period beginning on July 1, 2020 and ending on July 1,June 30, 2021 and (ii) for the period beginning on July 1, 2021 and ending on July 1,June 30, 2022. Pursuant to the Stock Purchase Agreement, dated as of January 6, 2020, by and among the Company, HKFS, the selling stockholders named therein (the “Sellers”), and JRD Seller Representative, LLC, as the Sellers’ representative (as amended on April 7, 2020, June 30, 2020, and June 29, 2021) (the “HKFS Purchase Agreement”), the maximum aggregate amount that we would be required to pay for each earn-out period is $30.0 million. If the asset market values on the applicable measurement date fall below certain specified thresholds, we would not be required to make any earn-outno payment of consideration is owed to the Sellers for such period.
The HKFS Contingent Consideration liability was valued at $53.7 million on the condensed consolidated balance sheet as of June 30, 2021. Based on advisory asset levels and the achievement of performance goals for the first earn-out period, we will makepaid the full $30.0 million paymentto the Sellers in the third quarter of 2021. Based on ending advisory asset levels and the achievement of performance goals specified in the HKFS Purchase Agreement, the fair value of the HKFS Contingent Consideration for the second earn-out period was $23.0 million as of June 30, 2022 and is expected to
Blucora, Inc. | Q2 2022 Form 10-Q 14

be paid in the third quarter of 2022. For additional information on the valuation of the HKFS Contingent Consideration liability, see "Note 8—9—Fair Value Measurements."
Litigation
From time to time, we are subject to various legal proceedings, regulatory matters or fines, or claims that arise in the ordinary course of business. We accrue a liability when management believes both that it is both probable that a liability has been incurred and that the amount of loss can be reasonably estimated. Although we believe that resolving such claims, individually or in aggregate, will not have a material adverse impact on our financial statements, these matters are subject to inherent uncertainties.
Aside from the contingent liability related to the 1st Global Acquisition and the HKFS Contingent Consideration liability, weWe are not currently a party to any such matters for which we have recognized a material liability on our condensed consolidated balance sheets.sheet as of June 30, 2022.

We have entered into indemnification agreements in the ordinary course of business with our officers and directors. Pursuant to these agreements, we may be obligated to advance payment of legal fees and costs incurred by the defendants pursuant to our obligations under these indemnification agreements and applicable Delaware law.
Note 8—9: Fair Value Measurements
In accordance with Accounting Standards Codification 820, Fair Value Measurements and Disclosures, certainCertain of our assets and liabilities are carried at fair value and are valued using inputs that are classified in one of the following three categories:
•Level 1: Quoted market prices in active markets for identical assets or liabilities.
Blucora, Inc. | Q2 2021 Form 10-Q 16

•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 our own assumptions.
Assets and liabilities measuredLiabilities Measured on a recurring basisRecurring Basis
The fair value hierarchy of our financial assets and liabilities carried at estimated fair value and measured on a recurring basis waswere as follows (in thousands):
  Fair value measurements at the reporting date using
 June 30, 2021Quoted 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$4,292 $4,292 $0 $0 
Total assets at fair value$4,292 $4,292 $0 $0 
HKFS Contingent Consideration$53,700 $0 $0 $53,700 
Total liabilities at fair value$53,700 $0 $0 $53,700 
  Fair value measurements at the reporting date using
 December 31, 2020Quoted 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$4,290 $4,290 $0 $0 
Total assets at fair value$4,290 $4,290 $0 $— 
HKFS Contingent Consideration$35,900 $0 $0 $35,900 
Total liabilities at fair value$35,900 $0 $0 $35,900 
  Fair value measurements at the reporting date using
 June 30, 2022Quoted 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$4,302 $4,302 $— $— 
Deferred compensation assets2,554 2,554 — — 
Total assets at fair value$6,856 $6,856 $— $— 
HKFS Contingent Consideration liability$22,980 $— $— $22,980 
Deferred compensation liabilities2,554 2,554 — — 
Total liabilities at fair value$25,534 $2,554 $— $22,980 
  Fair value measurements at the reporting date using
 December 31, 2021Quoted 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$4,293 $4,293 $— $— 
Total assets at fair value$4,293 $4,293 $— $— 
HKFS Contingent Consideration liability$28,300 $— $— $28,300 
Total liabilities at fair value$28,300 $— $— $28,300 
Cash equivalents are classified within Level 1 of the fair value hierarchy because we value cash equivalentsthem utilizing quoted prices in active markets.
Blucora, Inc. | Q2 2022 Form 10-Q 15

We offer non-qualified deferred compensation plans to our executive officers, board of directors, and certain independent financial professionals. Participants in these plans direct the investment of their accounts among the available investment options, which are generally the same as those available under our 401(k) plan. We have elected to fund these obligations through a rabbi trust which mirrors the investment elections made by participants. The assets in the rabbi trust are held for the purpose of satisfying our obligations to participants, however, remain subject to the claims of our creditors in the event we become insolvent. Our obligations and corresponding investments held under these non-qualified deferred compensation plans primarily consist of money market and mutual funds and are classified within Level 1 of the fair value hierarchy because we value them utilizing quoted prices in active markets. These investments, and the corresponding deferred compensation liabilities, are included within “Other long-term assets” and “Other long-term liabilities”, respectively, on the condensed consolidated balance sheets.
The HKFS Contingent Consideration liability relates to the 2 post-closing earn-out payments resulting from the HKFS Acquisitionacquisition of Avantax Planning Partners, formerly “HKFS” (see "Note 7—“Note 8—Commitments and Contingencies"Contingencies”). AsThe fair value of the HKFS Contingent Consideration liability as of June 30, 2021,2022 was calculated in accordance with the amended HKFS Purchase Agreement and was based on advisory asset levels as of June 30, 2022 (the measurement date for the second earn-out payment). Prior to this measurement date, the estimated fair value of the HKFS Contingent Consideration liability was $53.7 million. The portion of the HKFS Contingent Consideration liability related to the first earn-out period was $30.0 million as of June 30, 2021, and this value was based on the earn-out payment (calculated in accordance with the amended HKFS Purchase Agreement and based on actual advisory asset levels as of June 30, 2021) we will make in the third quarter of 2021.
The estimated fair value of the portion of the HKFS Contingent Consideration liability related to the second earn-out period was $23.7 million as of June 30, 2021. The estimated fair value of the second earn-out payment was determined using a Monte Carlo simulation model in a risk neutral framework with the underlying simulated variable of advisory asset levels and the related achievement of certain advisory asset growth levels. The Monte Carlo simulation model utilized Level 3 inputs which included forecasted advisory asset levels at July 1, 2022, a risk-adjusted discount rate (which reflects the risk in the advisory asset projection) of 12.2%, volatility of 27.3%, and a credit spread of 1.8%. Significant increases to the discount rate, volatility, or credit spread inputs would have resulted in a significantly lower fair value measurement, with a similar inverse relationship existing for significant decreases to these inputs. A significant increase to the forecasted advisory assets levels would have resulted in a significantly higher fair value measurement, while a significant decrease to the forecasted advisory asset levels would have resulted in a significantly lower fair value measurement.
Blucora, Inc. | Q2 2021previously disclosed within our Annual Report on Form 10-Q 17

A reconciliation of the10-K. The HKFS Contingent Consideration liability was as follows (in thousands):
HKFS Contingent Consideration Liability
Balance as of December 31, 2020 (1)
$35,900 
Valuation change recognized as expense (2)
17,800 
Balance as of June 30, 2021 (1)
$53,700 
_________________________
(1)The short-term portion of the HKFS Contingent Consideration is recordedincluded in “Accrued expenses and other current liabilities” on the condensed consolidated balance sheets and will be paid in the third quarter of 2021. The long-term portion of the HKFS Contingent Consideration is recorded in “Other long-term liabilities” on the condensed consolidated balance sheets and is expected to be paid in the third quarter of 2022.
(2)A roll forward of the HKFS Contingent Consideration liability is as follows (in thousands):Recognized
HKFS Contingent Consideration liability
Balance as of December 31, 2020$35,900 
HKFS Contingent Consideration first earn-out payment(30,000)
Change in fair value22,400 
Balance as of December 31, 202128,300 
Change in fair value(5,320)
Balance as of June 30, 2022$22,980 
Changes in the fair value of this contingent consideration are reflected in “Acquisition and integration” expense on the condensed consolidated statementstatements of comprehensive income for the six months ended June 30, 2021. For the three months ended June 30, 2021, we recognized a valuation change of $11.5 million.

operations.
Fair valueValue of financial instrumentsFinancial Instruments
We consider the carrying values of accounts receivable, commissions and advisory fees receivable, other receivables, prepaid expenses, other current assets, financial professional loans, accounts payable, commissions and advisory fees payable, accrued expenses, and other current liabilities to approximate fair values primarily due to their short-term natures.
As of June 30, 2021,2022, the Term Loan’s principal amount was $562.3 million, which equaled its fair value. As of December 31, 2020, the Term Loan’s principal amount was $563.2$560.4 million, and the fair value of the Term Loan’s principal amount was $561.7$540.8 million. As of December 31, 2021, the Term Loan’s principal amount was $561.3 million, and the fair value of the Term Loan’s principal amount was $559.9 million. The fair value of the Term Loan’s principal amount was based on Level 2 inputs from a third-party market quotation.
As of June 30, 2021 and December 31, 2020, we had 0 amounts outstanding under the Revolver.
Blucora, Inc. | Q2 2022 Form 10-Q 16

Note 9:10: Interest Expense and Other, Loss, Net
“Other loss,Interest expense and other, net” on the condensed consolidated statements of comprehensive income (loss)operations consisted of the following (in thousands):
Three months ended June 30,Six months ended June 30,
2021202020212020
Interest expense$7,302 $4,840 $14,485 $10,156 
Amortization of debt issuance costs377 331 740 644 
Accretion of debt discounts284 70 561 138 
Total interest expense7,963 5,241 15,786 10,938 
Interest income0 (11)(2)(25)
Other61 58 123 510 
Other loss, net$8,024 $5,288 $15,907 $11,423 

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Interest expense$7,265 $7,302 $14,395 $14,485 
Amortization of debt issuance costs399 377 788 740 
Amortization of debt discount299 284 591 561 
Total interest expense7,963 7,963 15,774 15,786 
Interest income and other154 61 184 121 
Interest expense and other, net$8,117 $8,024 $15,958 $15,907 
Note 10:11: Income Taxes
Three months ended June 30,Six months ended June 30,
 2021202020212020
Income tax benefit (expense)$(1,994)$59,539 $(3,694)$(7,981)

For 2022, our provision for income taxes in interim periods is based on our estimated annual effective tax rate. We record cumulative adjustments in the quarter in which a change in the estimated annual effective rate is determined. The estimated annual effective tax rate does not include the effects of discrete events that may occur during the year. The effect of these events, if any, is recorded in the quarter in which the event occurs.
The CompanyWe recorded income tax expense of $3.2 million and $5.8 million for the three and six months ended June 30, 2022, respectively. We recorded income tax expense of $2.0 million and $3.7 million for the three and six months ended June 30, 2021, respectively. For 2021, the Company has prepared its interim tax provision by applying a year-to-date effective tax rate. For 2020, the Company prepared its interim tax provision by applying an estimated annual effective tax rate. We believe using the actual year-to-date effective tax rate in 2021 resulted in the best estimate of the annual effective tax rate.
The Company’sOur effective income tax rate for the three and six months ended June 30, 2022 and June 30, 2021 differed from the 21% statutory rate primarily due to the release of valuation allowances and the effect of state income taxes. We currently expect to continue to release portions ofmaintain a valuation allowances, which were previously recorded in
Blucora, Inc. | Q2 2021 Form 10-Q 18

connection with ourallowance for federal net operating loss carryforwards that we have concluded it is more likely than not that the related deferred tax benefits will not be realized. This valuation allowance does not prevent us from utilizing unexpired net operating losses to offset taxable income in future federal income tax liabilities.periods. The majority of these net operating losses will either be utilized or expire between 20212022 and 2024.
The Company recorded income tax benefit of $59.5 million and income tax expense of $8.0 million for the three and six months ended June 30, 2020, respectively. The Company’s effective income tax rate for the three and six months ended June 30, 2020 differed from the 21% statutory rate primarily due to expiring net operating loss tax benefits, an adjustment to the valuation allowance against deferred tax assets for net operating losses expected to expire in future years, and non-deductible officer compensation expense.
Blucora, Inc. | Q2 2022 Form 10-Q 17

Note 11:12: Net Income (Loss) Per Share
“Basic net income (loss) per share” is calculated using the weighted average number of common shares outstanding during the applicable period. “Diluted net income (loss) per share” is calculated using the weighted average number of common shares outstanding plus the number of dilutive potential common shares outstanding during the applicable period. Dilutive potential common shares consist of the incremental common shares issuable upon the exercise of outstanding stock options and the vesting of unvestedoutstanding restricted stock units.units using the treasury stock method. Cash-settled restricted stock units are not settled in common shares and are therefore excluded from dilutive potential common shares. Dilutive potential common shares are excluded from the calculation of diluted net income (loss) per share if their effect is antidilutive. Certain of our performance-based restricted stock units are considered contingently issuable shares and are excluded from the diluted weighted average common shares outstanding computation because the related performance-based criteria were not achieved as of the end of the reporting period.
The calculationcalculations of basic and diluted net income (loss) per share iswere as follows (in thousands):
 Three months ended June 30,Six months ended June 30,
 2021202020212020
Numerator:
Net income (loss)$31,608 $49,645 $59,254 $(265,849)
Denominator:
Weighted average common shares outstanding—basic48,508 47,941 48,384 47,884 
Dilutive potential common shares (1)
877 151 857 0 
Weighted average common shares outstanding—diluted49,385 48,092 49,241 47,884 
Net income (loss) per share:
Basic$0.65 $1.04 $1.22 $(5.55)
Diluted$0.64 $1.03 $1.20 $(5.55)
Shares excluded (1)
1,248 2,349 1,269 2,722 
_________________________
Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Numerator:
Net income$39,425 $31,608 $74,045 $59,254 
Denominator:
Basic weighted average common shares outstanding47,582 48,508 48,048 48,384 
Dilutive potential common shares (1)
1,108 877 1,172 857 
Diluted weighted average common shares outstanding48,690 49,385 49,220 49,241 
Net income per share:
Basic$0.83 $0.65 $1.54 $1.22 
Diluted$0.81 $0.64 $1.50 $1.20 
Shares excluded (1)
960 1,248 935 1,269 
________________________
(1)Potential common shares were excluded from the calculation of diluted net income (loss) per share for these periods because their effect would have been anti-dilutive. For
Note 13: Subsequent Event
On August 5, 2022, and as provided for within our Senior Secured Credit Facility, we voluntarily prepaid $35.0 million of principal outstanding under our Term Loan. We also settled the six months ended June 30, 2020, all potential common shares were excluded fromaccrued and unpaid interest on the calculationapplicable principal outstanding up to, but not including, the date of diluted net loss per share as their effect would have been anti-dilutive due to the net loss recognized for the period.prepayment.




Blucora, Inc. | Q2 20212022 Form 10-Q 1918

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion provides an analysis of the Company’s financial condition, cash flows, and results of operations from management’s perspective and should be read in conjunction with our condensed consolidated financial statements and accompanying notes thereto included under Part I, Item 1 and the section titled “Cautionary Statement Regarding Forward-Looking Statements” in this Form 10-Q, as well as with our consolidated financial statements, accompanying notes thereto, and “Item 7. 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, 2020.2021.
Overview
Blucora, Inc. (the “Company,” “Blucora,” “we,” “our,” or “us”) is a leading provider of integrated tax-focused wealth management services and software, assisting consumers, small business owners, tax professionals, financial professionals, and certified public accounting (“CPA”) firms in achieving better long-term outcomes via holistic, tax-advantaged solutions.firms. Our mission is to empower people to improveenable financial success by changing the way individuals and families plan and achieve their financial wellnessgoals through data and technology-driventax-advantaged solutions. We conduct our operations through two primary businesses: (1) the Wealth Management business and (2) the Tax Software business. Our common stock is listed on the NASDAQ Global Select Market under the symbol “BCOR.”
Wealth Management
TheOur Wealth Management business consists of the operations of Avantax Wealth Management and Avantax Planning Partners (collectively, the “Wealth Management business” or the “Wealth Management segment”).
Avantax Wealth Management provides tax-focused wealth management solutions for financial professionals, tax professionals, CPA firms, and their clients. Avantax Wealth Management offers its services through its registered broker-dealer, registered investment advisor (“RIA”), and insurance agency subsidiaries and is thea leading U.S. tax-focused independent broker-dealer. Avantax Wealth Management works with a nationwide network of financial professionals that operate as independent contractors. Avantax Wealth Management provides these financial professionals with an integrated platform of technical, practice, compliance, operations, sales, and product support tools that enable them to offer tax-advantaged planning, investing, and wealth management services to their clients.
Avantax Planning Partners operates asis an in-house/employee-based RIA, insurance agency, and wealth management business that partners with CPA firms in order to provide their consumer and small business clients with holistic financial planning and advisory services, as well as retirement plan solutions through Avantax Retirement Plan Services. Avantax Planning Partners formerly operated as Honkamp Krueger Financial Services, Inc. (“HKFS”). OnWe acquired HKFS in July 1, 2020 we acquired all of the issued and outstanding common stock of HKFS (the “HKFS Acquisition”). The operations of HKFS are included and subsequently rebranded it in our operating results as part of the Wealth Management segment from the date of the HKFS Acquisition. On January 4, 2021, we announced the rebranding of HKFS to Avantax Planning Partners (the “Rebranding”). The Rebranding was designedorder to create tighter brand alignment bringing the Wealth Management business underthrough one common and recognizable brand.
As Any reference to Avantax Planning Partners in this Form 10-Q is inclusive of June 30, 2021, the Wealth Management business worked with a nationwide network of 3,606 financial professionals and supported $87.8 billion of total client assets, including $39.4 billion of advisory assets.HKFS.
Tax Software
TheOur Tax Software business consists of the operations of TaxAct, Inc. (“TaxAct,” the “Tax Software business,” or the “Tax Software segment”) and provides digital tax preparation services packaged tax software, and ancillary services for consumers, small business owners, and tax professionals through its website www.TaxAct.com and its mobile applications. We had referred to this business as the “Tax Preparation business” and “Tax Preparation segment” in previous filings.
COVID-19 PandemicMacroeconomic Environment
Beginning in March 2020, the COVID-19 pandemic has had a significant negative impact on the U.S. and global economy, caused substantial disruption in the U.S. and global securities markets, and as a result, negatively impacted both ourOur Wealth Management business is directly and Tax Software businesses. In addition,indirectly affected by macroeconomic conditions and the various precautionarystate of global financial markets. Recent geopolitical uncertainty resulting, in part, from Russia’s continued invasion of Ukraine and the measures and accommodations taken by many governmental authorities in the United States and around the world in order to limit the spread of COVID-19,response, including government sanctions, as well as rising inflation have contributed to significant volatility and decline in global financial markets during the societalfirst half of 2022. In response to inflationary pressures, the Federal Reserve implemented three interest rate increases during the first half of 2022, including a 75 basis point increase during its June 2022 meeting, the largest individual increase since 1994. As of June 30, 2022, the target range for the federal funds rate was between 1.5% and 1.75%, however the Federal Reserve has signaled that it expects additional rate increases during the second half of 2022 to increase this range to 3% or more by the end of 2022. These factors have had,all led to an increased risk of economic recession and could continue to have, an adverse effect on the U.S.potential for continued volatility and decline in global financial markets.
Volatility and decline in global financial markets and economy. The extent to whichits impact on client asset values and transaction activity have negatively impacted Wealth Management revenues during the COVID-19 pandemic may impact our results in the future will depend on future developments, which are highly uncertainthree and cannot be predicted, including the duration and scope of the COVID-19 pandemic, the emergence of new variants of the virus,six months ended June 30, 2022.
Blucora, Inc. | Q2 20212022 Form 10-Q 2019

the likelihood of a resurgence of positive cases, the effectiveness, availability and acceptance of vaccines, global economic conditions during and after the COVID-19 pandemic and governmental actions that haveThis negative impact has been taken, or may be taken in the future, in response to the COVID-19 pandemic.
In our Wealth Management business, the amount ofpartially offset by incremental cash sweep revenue we generate continues to be affected by the lowgenerated from an increasing interest rate environment. In March 2020,Based on the Federal Reserve lowered its target range for the federal funds rate, to 0.00-0.25%. As ourthe signaling by the Federal Reserve for additional rate increases during 2022, and current client asset values, we expect incremental cash sweep revenue is basedshould more than offset the negative impact that financial market volatility may have on a rate derived fromWealth Management revenues and operating income for the year ended December 31, 2022. However, if further financial market volatility results in continued decline in client asset values or if the Federal Reserve does not increase, or decreases, the federal funds rate, cash sweep revenue in all quarters subsequent to the first quarter of 2020 has been materially reduced. We expect continued low levels of cash sweep revenue in future periods in which the federal funds rate is at reduced levels, although we may experience an increase in cash sweep revenue should the federal funds rate increase.Wealth Management revenues and operating income would be negatively impacted.
COVID-19 Pandemic
In our Tax Software segment, our revenue and operating income generation is highly seasonal, with a significant portionthe typical seasonality of our annual revenue typically earned in the first two quarters of our fiscal year. During the third and fourth quarters, the Tax Software segment typically reports losses because revenuebusiness has been affected by changes to tax filing deadlines resulting from the segment is minimal while core operating expenses continue.
As a result of the COVID-19 pandemic, thepandemic. The Internal Revenue Service (“(“IRS”) extended the filing and payment deadline for tax year 2019 federal tax returns to July 15, 2020. This extension resulted in the shifting of a significant portion of Tax Software segment revenue that would typically have been expected to be earned in the first and second quarters of 2020 to the third quarter of 2020. In addition, sales and marketing expenses were elevated in 2020 due to incremental investment in March 2020 to address weak performance through the first two months of the tax season, as well as increased marketing required due to the extended tax season. Additionally, the IRS was selected by the U.S Congress as the vehicle for distribution of the first round of Economic Impact Payments (“EIP1”), which caused significant disruption to the 2020 tax season. As a result of the extension of the 2020 tax season and the EIP1 disruption, our results of operations for our Tax Software segment were negatively impacted in 2020 compared to prior years.
As a result of the continued impact of the COVID-19 pandemic, including disruptions associated with the distribution of the second and third rounds of Economic Impact Payments, the IRS delayed the start of the 2021tax year 2020 tax season and extended the filing and payment deadline for tax year 2020 federal tax returns from April 15, 2021 to May 17, 2021. In addition, the IRS extended the federal filing and payment deadline for Texas, Louisiana, and Oklahoma to June 15, 2021. Beyond federal filings, the majority of states also extended their filing and payment deadlines for tax year 2020 state tax returns. This extension resulted in the shifting of a significant portion of Tax Software segment revenue that would typically have been expected to be earned in the first quarter of 2021 to the second quarter of 2021.
The typical seasonality of our Tax Software business has been affected by these changes to the tax filing deadlines to May 17, 2021 for the 2020 tax year and to July 15, 2020 for the 2019 tax year. This change in seasonality has caused significant fluctuations in our quarterly and year-to-date financial results and has affected the comparability of our financial results. As a result, the results of operations for the Tax Software segment are not as comparable for the three and six months ended June 30, 20212022 and 20202021 as they would have been in previous years.
For additional information on the effects of the COVID-19 pandemic on our results of operations for the selected periods, see “Results of Operations” below. For more information on the risks related to the COVID-19 pandemic and its impact to our businesses, see Part I, Item 1A and Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020 under the subheading, “The current COVID-19 pandemic could have a Material Adverse Effect.”2021.

Blucora, Inc. | Q2 20212022 Form 10-Q 2120


RESULTS OF OPERATIONS
Summary
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
($ in thousands)($ in thousands)Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
20212020$%20212020$% 20222021$%20222021$%
Revenue:Revenue:Revenue:
Wealth ManagementWealth Management$162,395 $115,884 $46,511 40 %$316,886 $260,873 $56,013 21 %Wealth Management$162,669 $162,395 $274 0.2 %$329,072 $316,886 $12,186 3.8 %
Tax SoftwareTax Software91,917 45,238 46,679 103 %215,809 163,569 52,240 32 %Tax Software94,214 91,917 2,297 2.5 %235,364 215,809 19,555 9.1 %
Total revenueTotal revenue$254,312 $161,122 $93,190 58 %$532,695 $424,442 $108,253 26 %Total revenue256,883 254,312 2,571 1.0 %564,436 532,695 31,741 6.0 %
Operating income (loss):Operating income (loss):Operating income (loss):
Wealth ManagementWealth Management$21,396 $11,731 $9,665 82 %$40,792 $34,329 $6,463 19 %Wealth Management15,873 21,396 (5,523)(25.8)%32,294 40,792 (8,498)(20.8)%
Tax SoftwareTax Software63,448 6,659 56,789 853 %114,336 44,412 $69,924 157 %Tax Software53,859 63,448 (9,589)(15.1)%111,889 114,336 (2,447)(2.1)%
Corporate-level activityCorporate-level activity(43,218)(22,996)(20,222)(88)%(76,273)(325,186)248,913 77 %Corporate-level activity(18,947)(43,218)24,271 56.2 %(48,355)(76,273)27,918 36.6 %
Operating income (loss)41,626 (4,606)46,232 1004 %78,855 (246,445)325,300 132 %
Other loss, net(8,024)(5,288)(2,736)(52)%(15,907)(11,423)(4,484)(39)%
Income (loss) before income taxes33,602 (9,894)43,496 440 %62,948 (257,868)320,816 124 %
Income tax benefit (expense)(1,994)59,539 (61,533)(103)%(3,694)(7,981)4,287 54 %
Net income (loss)$31,608 $49,645 $(18,037)(36)%$59,254 $(265,849)325,103 122 %
Total operating incomeTotal operating income50,785 41,626 9,159 22.0 %95,828 78,855 16,973 21.5 %
Interest expense and other, netInterest expense and other, net(8,117)(8,024)(93)(1.2)%(15,958)(15,907)(51)(0.3)%
Income before income taxesIncome before income taxes42,668 33,602 9,066 27.0 %79,870 62,948 16,922 26.9 %
Income tax expenseIncome tax expense(3,243)(1,994)(1,249)(62.6)%(5,825)(3,694)(2,131)(57.7)%
Net incomeNet income$39,425 $31,608 $7,817 24.7 %$74,045 $59,254 14,791 25.0 %
For the three months ended June 30, 20212022, compared to the three months ended June 30, 2020,2021, net income decreased $18.0increased $7.8 million primarily due to the following factors:
•Wealth Management segment operating income increased $9.7decreased $5.5 million primarily due to a $46.5 million increase in revenue partially offsetheadwinds caused by a $36.8 million increase in operating expenses. Wealth Management segment results in the second quarter of 2020 were negatively affected by suppressed client asset levelsmarket volatility, coupled with increased personnel costs to drive strategic investment growth through enhanced sales and transaction activity resulting from the COVID-19 pandemic and relatedservice capabilities that support our financial market disruption. In addition, Wealth Management segment operating income for the three months ended June 30, 2021 benefited from $3.3 million in incremental operating income resulting from the HKFS Acquisition.professionals.
•Tax Software segment operating income increased $56.8decreased $9.6 million primarily due to a $46.7 millionincreased investments in seasonal customer care support and tax experts and an increase in revenue, mostly resulting from the disparity in the tax filing and payment deadlines in 2021 versus 2020. In addition, operating expenses decreased $10.1 million primarily due to reduced salesstrategic advertising and marketing expenses.spend.
•Expenses within corporate-level activity increased $20.2decreased $24.3 million primarily due to a $15.3 million increase inreduced acquisition and integration costs, an increase of $2.5 million in expenses associated with contested proxy and other legal and consulting costs, a $1.7 million increase in depreciation expense, and a $1.3 million increase in stock-based compensation expense.
•Other loss, net increased $2.7 million primarily due to increased interest expense.costs.
•The Company recorded income tax expense of $2.0$3.2 million, an effective tax rate of 7.6%, for the three months ended June 30, 2021, which represented the Company’s state taxes on current period income. This2022, compared to income tax benefitexpense of $59.5$2.0 million, an effective tax rate of 5.9%, for the three months ended June 30, 2020.2021.
For the six months ended June 30, 20212022, compared to the six months ended June 30, 2020,2021, net income increased $325.1$14.8 million primarily due to the following factors:
•Wealth Management segment operating income increased $6.5decreased $8.5 million primarily due to a $56.0 million increase in revenue partially offsetheadwinds caused by a $49.6 million increase in operating expenses. Wealth Management segment operating income benefited from $6.6 million inmarket volatility, higher payout ratios to financial professionals, and incremental operating income resulting from the HKFS Acquisition, which was largely offset by a $6.2 million decrease in cash sweep revenue. In addition, Wealth Management segment results in the second quarter of 2020 were negatively affected by suppressed client asset levels and transaction activity resulting from the COVID-19 pandemic and related financial market disruption.personnel costs.
Blucora, Inc. | Q2 2021 Form 10-Q 22

•Tax Software segment operating income increased $69.9decreased $2.4 million primarily due to a $52.2 millionthe increase in revenue mostly resulting from the disparity in the tax filingcustomer care support costs and payment deadlines in 2021 versus 2020. In addition, operating expenses decreased $17.7 million primarily due to reduced salesstrategic advertising and marketing expenses.spend discussed above.
•Expenses within corporate-level activity decreased $248.9$27.9 million primarily due to the recognition of a $270.6 million goodwill impairment and $9.8 million in executive transition costs for the six months ended June 30, 2020. These decreases were partially offset by an increase of $17.8 million inreduced acquisition and integration expenses, an increase of $8.1 million in stock-based compensation expense, and the recognition of $5.7 million in expenses associated with contested proxy and other legal and consulting costs for the six months ended June 30, 2021.costs.
•The Company recorded income tax expense of $3.7$5.8 million, an effective tax rate of 7.3%, for the six months ended June 30, 2021, which represented the Company’s state taxes on current period income. This2022, compared to income tax expense of $8.0$3.7 million, an effective tax rate of 5.9%, for the six months ended June 30, 2020.2021.
Blucora, Inc. | Q2 20212022 Form 10-Q 2321

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 United States (“GAAP”) and include certain reconciling items attributable to our segments. We have two reportable segments: (1) the Wealth Management segment and (2) the Tax Software segment. Segment information is presented on a basis consistent with our current internal management financial reporting. We do not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, acquisition and integration costs, depreciation, amortization of acquired intangible assets, acquisition and integration costs, executive transition costs, headquarters relocation costs,or contested proxy and other legal and consulting costs or impairment of goodwill to the reportable segments. Such amounts are reflected in the table below under the heading “Corporate-level activity.” In addition, we do not allocate interest expense and other, loss, net, or income taxes to the reportable segments.
Wealth Management
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
($ in thousands)($ in thousands)Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
20212020$%20212020$% 20222021$%20222021$%
RevenueRevenue$162,395 $115,884 $46,511 40 %$316,886 $260,873 $56,013 21 %Revenue$162,669 $162,395 $274 0.2 %$329,072 $316,886 $12,186 3.8 %
Operating incomeOperating income$21,396 $11,731 $9,665 82 %$40,792 $34,329 $6,463 19 %Operating income$15,873 $21,396 $(5,523)(25.8)%$32,294 $40,792 $(8,498)(20.8)%
Segment marginSegment margin13 %10 %13 %13 %Segment margin9.8 %13.2 %9.8 %12.9 %
For the three months ended June 30, 20212022, compared to the three months ended June 30, 2020,2021, Wealth Management segment operating income increased $9.7decreased $5.5 million primarily due to the following factors:
•Wealth Management revenue increased $46.5$0.3 million primarily due to a $30.2increases of $7.6 million increaseand $1.4 million in advisory revenue,and asset-based revenues, respectively. These increases were partially offset by an $11.9$8.9 million increasedecrease in commission revenue. The significant financial market volatility and decline discussed in the Macroeconomic Environment section above was the primary driver of revenue and a $2.9 million increase in transaction and fee revenue. Revenue increases primarily resulted from increased client asset levels and transaction activity, which were favorable comparedheadwinds during the period. The impact of this volatility on our advisory revenue was not fully realized during the period due to the suppressed client asset levels and transaction activitytiming of market movements relative to when clients are billed. These revenue headwinds were partially offset by incremental cash sweep revenue generated from increases in the second quarter of 2020 resulting from the COVID-19 pandemic and related financial market disruption. In addition, Wealth Management revenue in the second quarter of 2021 increased due to $9.9 million of incremental revenue resulting from the HKFS Acquisition.federal funds rate.
•Wealth Management operating expenses increased $36.8$5.8 million primarily due to a $30.0$5.2 million increase in cost of revenue asincremental personnel costs. Increased personnel costs reflect our strategic investments to drive growth through enhanced sales and service capabilities that support our financial professionals.
•Segment margin compression for the three months ended June 30, 2022, was primarily a result of increased advisory feesthe market volatility discussed above, coupled with an increase in our fixed operating expenses. For the remainder of the year, we expect to incur incremental travel and commissions paidconference costs associated with reduced COVID-19 travel restrictions; however, we expect for segment margin to financial professionals, as well as incremental expenses resulting from the HKFS Acquisition andincrease due to increases in sales and marketing expenses in our legacy Avantax Wealth Management business.the federal funds rate.
For the six months ended June 30, 20212022, compared to the six months ended June 30, 2020,2021, Wealth Management segment operating income increased $6.5decreased $8.5 million primarily due to the following factors:
•Wealth Management revenue increased $56.0$12.2 million primarily due to increases of $23.7 million and $1.8 million in advisory and asset-based revenues, respectively, partially offset by a $42.6$13.7 million decrease in commission revenue. The increase in advisory revenue and a $13.8 million increase in commission revenue. Revenue increaseswas primarily resulted from increased client asset levels and the timing of market movements relative to when clients are billed. Commission revenue was negatively impacted by unfavorable transaction activity which were favorable compared to the suppressed client asset levels and transaction activityvolatility in the first half of 2020 resulting from the COVID-19 pandemic and relatedglobal financial market disruption. In addition, Wealth Management revenue for the six months ended June 30, 2021 increased due to $19.2 million of incremental revenue resulting from the HKFS Acquisition. These increases were partially offset by a $6.2 million decrease in cash sweep revenue due to a decline in interest rates at the end of the first quarter of 2020.markets, as discussed above.
•Wealth Management operating expenses increased $49.6$20.7 million primarily due to a $36.3$10.8 million increase in cost of revenue as a result ofresulting from increased advisory fees and commissions paid, tocoupled with $8.9 million of incremental personnel costs. Higher payout ratios reflect an expansion in the number of financial professionals as well as incremental expenses resulting fromconcentrated at higher payout levels, due in part to improved market performance during the HKFS Acquisitionsecond half of 2021, and increases ingreater retention and recruitment of higher producing financial professionals. Increased personnel costs reflect our strategic investments to drive growth through enhanced sales and marketing expenses inservice capabilities that support our legacy Avantax Wealth Management business.financial professionals.
•Refer to the discussion above for the three months ended June 30, 2022, for further information regarding segment margin compression and our expectations for the remainder of the year.
Blucora, Inc. | Q2 2022 Form 10-Q 22

Sources of revenueRevenue
Wealth Management revenue is derived from multiple sources. We track sources of revenue, primary drivers of each revenue source, and recurring revenue. In addition, we focus on several business and key financial metrics in evaluating the success of our business relationships, our resulting financial position, and operating performance.
Blucora, Inc. | Q2 2021 Form 10-Q 24

A summary of our sources of revenue and business and financial metrics is as follows:
Three months endedQTDSix months endedYTD
(In thousands, except percentages)June 30,ChangeJune 30,Change
Sources of RevenuePrimary Drivers20212020$20212020$
Financial professional-drivenAdvisory- Advisory asset levels$96,508 $66,303 $30,205 $187,627 $145,060 $42,567 
Commission- Transactions
- Asset levels
- Product mix		51,702 39,836 11,866 104,236 90,416 13,820 
Other revenueAsset-based- Cash balances
- Interest rates
- Number of accounts
- Client asset levels		5,526 3,981 1,545 10,855 14,560 (3,705)
Transaction and fee- Account activity
- Number of financial
  professionals
- Number of clients
- Number of accounts		8,659 5,764 2,895 14,168 10,837 3,331 
Total revenue$162,395 $115,884 $46,511 $316,886 $260,873 $56,013 
Total recurring revenue$138,900 $100,004 $38,896 $269,655 $219,259 $50,396 
Recurring revenue rate85.5 %86.3 %85.1 %84.0 %
($ in thousands)Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
Sources of RevenuePrimary Drivers20222021$20222021$
Financial professional-drivenAdvisory- Advisory asset levels$104,155 $96,508 $7,647 $211,324 $187,627 $23,697 
Commission- Transactions
- Asset levels
- Product mix		42,835 51,702 (8,867)90,490 104,236 (13,746)
Other revenueAsset-based- Cash balances
- Interest rates
- Number of accounts
- Client asset levels		6,964 5,526 1,438 12,627 10,855 1,772 
Transaction and fee- Account activity
- Number of financial
  professionals
- Number of clients
- Number of accounts		8,715 8,659 56 14,631 14,168 463 
Total revenue$162,669 $162,395 $274 $329,072 $316,886 $12,186 
Total recurring revenue$141,935 $138,900 $3,035 $285,672 $269,655 $16,017 
Recurring revenue rate87.3 %85.5 %86.8 %85.1 %
Recurring revenue consists of advisory fees, trailing commissions, fees from cash sweep programs, and certain transaction and fee revenue, all as described further under the headings “Advisory revenue,” “Commission revenue,” “Asset-based revenue,” and “Transaction and fee revenue,” respectively. Certain recurring revenues are associated with asset balances and fluctuate depending on market values and current interest rates. Accordingly, our recurring revenue can be negatively impacted by adverse external market conditions. However, we believe recurring revenue is meaningful despite these fluctuations because it is not dependent upon transaction volumes or other activity-based revenues, which are more difficult to predict, particularly in declining or volatile markets.
Blucora, Inc. | Q2 2021 Form 10-Q 25

Business metricsMetrics
(In thousands, except percentages and as otherwise indicated)June 30,Change
20212020$%
Client assets balances:
Total client assets$87,814,790 $68,519,998 $19,294,792 28 %
Brokerage assets$48,373,805 $41,964,610 $6,409,195 15 %
Advisory assets$39,440,985 $26,555,388 $12,885,597 49 %
Advisory assets as a percentage of total client assets44.9 %38.8 %
Number of financial professionals (in ones):
Independent financial professionals (1)
3,579 3,862 (283)(7)%
In-house financial professionals (2)
27 — 27 N/A
Total number of financial professionals3,606 3,862 (256)(7)%
Advisory and commission revenue per financial professional (3)
$41.1 $27.5 $13.6 49 %
Quarterly production retention rate: (4)
TTM Financial professional-driven revenue (5)
$556,339 $492,498 
TTM Financial professional-driven revenue related to independent financial professionals who departed in the quarter (5)
9,881 11,445 
TTM Financial professional-driven revenue, less that related to independent financial professionals who departed in the quarter (5)
$546,458 $481,053 
Quarterly production retention rate (4)
98.2 %97.7 %
____________________________
($ in thousands)June 30,Change
20222021$%
Client assets balances:
Total client assets (1)
$76,522,066 $87,814,790 $(11,292,724)(12.9)%
Brokerage assets (1)
$39,776,018 $48,373,805 $(8,597,787)(17.8)%
Advisory assets (1)
$36,746,048 $39,440,985 $(2,694,937)(6.8)%
Advisory assets as a percentage of total client assets48.0 %44.9 %
Number of financial professionals (in ones):
Independent financial professionals (2)
3,315 3,579 (264)(7.4)%
In-house/employee financial professionals (3)
34 27 7 25.9 %
Total number of financial professionals3,349 3,606 (257)(7.1)%
Advisory and commission revenue per financial professional (4)
$43.9 $41.1 $2.8 6.8 %
___________________________
(1)In connection with our ongoing integration of acquisitions, we refined the methodology by which we calculate client assets to align the methodologies within our Wealth Management segment for calculating such metrics. Specifically, such changes to the methodology include alignment to one third party data aggregator for assets not placed in custody with our clearing firm and to one consistent set of logic for all assets and transaction types. We have not recast client assets for prior periods to conform to our current presentation as we believe the changes to the calculation to be immaterial.
(2)The number of independent financial professionals includes licensed financial professionals that work with Avantax Wealth Management and operate as independent contractors, as well as licensed referring representatives at CPA firms (approximately 162) that partner with Avantax Planning Partners.
(2)(3)The number of in-housein-house/employee financial professionals includes licensed financial planning consultants, all of which are employees ofaffiliated with Avantax Planning Partners.
(3)(4)Calculation based on advisory and commission revenue for the three months ended June 30, 20212022 and 2020,2021, respectively.
(4)Blucora, Inc.Quarterly production retention rate is a non-GAAP financial measure. We believe quarterly production retention rate is an important measure of our quarterly retention of financial professional-driven revenue (which consists of advisory revenue and commission revenue). Management uses quarterly production retention rate to measure the impact of financial professional departures on our business. Quarterly production retention rate is calculated by dividing (x) the difference of (i) total financial professional-driven revenue for the trailing-twelve-month period then ended minus (ii) financial professional-driven revenue for the trailing-twelve-month period then ended related to independent financial professionals that departed in the quarter by (y) total financial professional-driven revenue for the trailing-twelve-month period then ended. As quarterly production retention rate is a measure of retention during a quarter, it also includes quarterly production from independent financial professionals who departed in prior quarters in the trailing-twelve-month period, and therefore does not show production retention rate over longer periods of time. | Q2 2022 Form 10-Q 23
(5)
For the trailing-twelve-month period then ended.
Client assets.Assets. TotalHistorically we have calculated total client assets to include assets that we hold directly or indirectly on behalf of clients under a safekeeping or custody arrangement or for which we provide administrative services for clients. Beginning in the second quarter of 2022, the calculation of total client assets also includes assets for which financial professionals licensed with Avantax provide administrative services to clients. Because we did not have relationships with financial professionals that had clients for whom we did not provide administrative services prior to the second quarter of 2022, our calculation of total client assets for any prior period would not have changed under our current calculation. To the extent that we or they provide more than one service for a client’s assets, the value of the asset is only counted once in the total amount of total client assets. Total client assets include advisory assets, non-advisory brokerage accounts, annuities, and mutual fund positions held directly with fund companies. These assets are not reported on the Company’s condensed consolidated balance sheets.
Advisory assets include client assets for which we provide investment advisory and management services as a fiduciary under the Investment Advisers Act of 1940. Our compensation for providing such services is typically a fee basedfee-based on the value of the advisory assets for each advisory client. These assets are not reported on the Company’s condensed consolidated balance sheets.
Brokerage assets represent total client assets other than advisory assets.
Total client assets increased $19.3decreased $11.3 billion atas of June 30, 20212022 compared to June 30, 20202021 primarily due to $16.6$10.7 billion of favorableunfavorable market changechanges and reinvestment levels, following the pandemic-influenced market downturn in the first half of 2020. In addition, total client assets increased $4.5 billion as a result of the HKFS Acquisition. Partially offsetting these increases wereand net client outflows of $2.0$0.6 billion. The $0.6 billion which were primarilyof net client outflows included net client inflows of approximately $0.4 billion during the result of financial professional attrition.
Blucora, Inc. | Q2 2021 Form 10-Q 26

six months ended June 30, 2022.
Advisory assets as a percentage of total client assets increased to 44.9% at June 30, 2021 compared to 38.8% at June 30, 2020. This increase was primarily due to the HKFS Acquisition because over 90% of the client assets acquired were comprised of advisory assets. In addition, advisory assets as a percentage of total client assets increased in our legacy Avantax Wealth Management business.
While financial markets have substantially stabilized since the pandemic-influenced financial market conditions in 2020, we cannot predict with certainty the extent of the impact of the COVID-19 pandemic and future financial market fluctuations on our client assets. However, the continued volatility in the U.S. and global economy and uncertainty in financial markets due to the pandemic may cause declines in the amount of our total client assets. For more information on the risks associated with our Wealth Management business, see the “COVID-19 Pandemic” section within this Management’s Discussion and Analysis of Financial Condition and Results of Operations and “Item 1A. Risk Factors” under the subheading, “The current COVID-19 pandemic could have a Material Adverse Effect.” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020.
Financial professionals. The Wealth Management business worked with a nationwide network of 3,606 financial professionals48.0% as of June 30, 2021. Avantax Wealth Management offers its tax-focused wealth2022, compared to 44.9% as of June 30, 2021, primarily driven by net new advisory assets of $3.1 billion. Net new advisory assets benefited from organic growth and the conversion of off platform, direct to fund assets, when appropriate for the client, to fee-based advisory platforms that include ongoing management solutions through its network of financial professionals that operate as independent contractors. Avantax Planning Partners operates as an employee-based RIA and wealth management business and utilizes a team of in-house financial professionals who partner with CPA firms in order to provide their consumer and small business clients with holistic planning and financial advisory services.which generate higher margins.
Financial Professionals.The number of our financial professionals decreased by 7% at7.1% as of June 30, 20212022 compared to June 30, 2020,2021, with the decrease primarily due to attrition related to lower revenue-producing financial professionals, whichprofessionals. Advisory and commission revenue per financial professional increased 6.8% for the same period, primarily resulted fromdue to the retention of higher revenue-producing financial professionals leaving the wealth management industry and expected attrition in connection with acquisition integration.professionals. The decrease in the number of financial professionals was partially offset by our continued recruitment and onboarding of independent financial professionals and the addition of financial professionals as a result of the HKFS Acquisition, which (as of the HKFS Acquisition date) included the addition of 19 in-house financial professionals and 131 licensed referring representatives at CPA firms that partner with Avantax Planning Partners.professionals.
Advisory revenue.Revenue. Advisory revenue primarily includes fees charged to clients in advisory accounts for which we are the RIA. These fees are based on the value of assets within these advisory accounts. For advisory revenues generated by Avantax Wealth Management, advisory fees are typically billed quarterly, in advance, and the related advisory revenues are deferred and recognized ratably over the period in which our performance obligations have been completed. For advisory revenuesrevenue generated by Avantax Planning Partners, advisory fees are typically billed quarterly, in arrears, and the related advisory revenues are accrued and recognized ratably over the period in which our performance obligations were completed. Because advisory fees are based on advisory assets on the last day of each quarter, our revenues are impacted, in part, by the timing of market movements relative to when clients are billed.
Advisory asset balances were as follows:follows (in thousands):
(In thousands, except percentages)June 30,Change
20212020$%
Advisory assets—independent financial professionals (1)
$33,950,724 $26,555,388 $7,395,336 28 %
Advisory assets—in-house financial professionals (2) (4)
4,125,742 — 4,125,742 N/A
Retirement advisory assets—in-house financial professionals (3) (4)
1,364,519 — 1,364,519 N/A
Total advisory assets$39,440,985 $26,555,388 $12,885,597 49 %
_________________________
(1)Represents individual client and retirement advisory assets for which Avantax Wealth Management serves as the RIA.
(2)Represents individual client advisory assets for which Avantax Planning Partners serves as the RIA.
(3)Represents advisory assets for which Avantax Planning Partners provides retirement plan services and serves as the RIA.
(4)Advisory assets and retirement advisory assets related to our in-house professionals were zero as of June 30, 2020, because the HKFS Acquisition was not completed until July 2020.

June 30,Change
20222021$%
Advisory assets—independent financial professionals$31,073,772 $33,950,724 $(2,876,952)(8.5)%
Advisory assets—in-house/employee financial professionals4,424,316 4,125,742 298,574 7.2 %
Retirement advisory assets—in-house/employee financial professionals1,247,960 1,364,519 (116,559)(8.5)%
Total advisory assets$36,746,048 $39,440,985 $(2,694,937)(6.8)%
Blucora, Inc. | Q2 20212022 Form 10-Q 2724


The activity within our advisory assets was as follows:follows (in thousands):
(In thousands, except as otherwise indicated)Three months ended June 30,Six months ended June 30,


Three Months Ended June 30,Six Months Ended June 30,
2021202020212020 2022202120222021
Balance, beginning of the periodBalance, beginning of the period$36,774,871 $23,618,964 $35,603,557 $27,629,164 Balance, beginning of the period$40,921,292 $36,774,871 $42,179,051 $35,603,557 
Net increase (decrease) in new advisory assets863,564 (284,024)1,232,427 105,976 
Net new advisory assetsNet new advisory assets580,957 863,564 1,747,630 1,232,427 
Market impact and otherMarket impact and other1,802,550 3,220,448 2,605,001 (1,179,752)Market impact and other(4,756,201)1,802,550 (7,180,633)2,605,001 
Balance, end of the periodBalance, end of the period$39,440,985 $26,555,388 $39,440,985 $26,555,388 Balance, end of the period$36,746,048 $39,440,985 $36,746,048 $39,440,985 
Advisory revenueAdvisory revenue$96,508 $66,303 $187,627 $145,060 Advisory revenue$104,155 $96,508 $211,324 $187,627 
Average advisory fee rate (1)
Average advisory fee rate (1)
26 bps28 bps52 bps57 bps
Average advisory fee rate (1)
26 bps26 bps51 bps52 bps
_________________________
(1)For the three months ended June 30, 20212022 and June 30, 2020,2021, average advisory fee rate equals advisory revenue for the relevant quarterly period divided by the advisory asset balance at the beginning of the relevant quarterly period. For the six months ended June 30, 20212022 and June 30, 2020,2021, average advisory fee rate equals the sum of each quarterly average advisory fee rate within the relevant year-to-date period.
For the three and six months endedCompared to June 30, 2021, advisory assets decreased $2.7 billion, driven by a decrease of $5.8 billion from unfavorable market changes and reinvestment levels, partially offset by a $3.1 billion increase in net new advisory assets. Net new advisory assets benefited from organic growth and the conversion of off platform, direct to fund assets, when appropriate for the client, to fee-based advisory platforms that include ongoing management and which generate higher margins. Although ending advisory assets declined, due to the timing of market declines relative to when clients are billed, advisory revenue increased $7.6 million and $23.7 million compared to the three and six months ended June 30, 2020,2021, respectively. The average advisory revenue increased $30.2 million and $42.6 million, respectively, primarily due to a year-over-year increase in advisory assets. The increase in advisory assets was primarily due to favorable market change, an increase in advisory assets resulting fromfee rates between the HKFS Acquisition, and net client inflows. In addition, advisory revenue recognized for the second quarter of 2020 was negatively affected because such revenue was primarily based on the value of client assets within advisory accounts as of March 31, 2020, whichtwo periods were substantially affected by the COVID-19 pandemic and related financial market disruption.relatively flat.
For the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020, the average advisory fee rate decreased primarily due to our tiered fee structure, which has generated lower average fee rates as client asset balances have increased. In addition, the average advisory fee rate decreased due to the lower advisory fee structure of HKFS.
For the three and six months ended June 30, 2021,2022, advisory assets increased $2.7declined $4.2 billion and $3.8$5.4 billion, respectively, primarily due to favorable market change and strong client inflows, partially offset by client outflows that resulted from financial professional attrition.the decline in global markets discussed in the sections above.
Commission revenue.Revenue. The Wealth Management segment generates two types of commissions: (1) transaction-based commissions and (2) trailing commissions. Transaction-based commissions, which occur when clients trade securities or purchase investment products, represent gross commissions generated by our financial professionals. The level of transaction-based commissions can vary from period-to-period based on the overall economic environment, number of trading days in the reporting period, market volatility, interest rate fluctuations, and investment activity of our financial professionals’ clients. We earn trailing commissions (a commission or fee that is paid periodically over time) on certain mutual funds and variable annuities held by clients. Trailing commissions are recurring in nature and are based on the market value of investment holdings in trail-eligible assets.
Our commission revenue, by product category and by type of commission revenue, was as follows:follows (in thousands):
(in thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
20212020$%20212020$% 20222021$%20222021$%
By product category:By product category:By product category:
Mutual fundsMutual funds$23,857 $19,312 $4,545 24 %$47,551 $45,212 $2,339 5 %Mutual funds$17,790 $23,857 $(6,067)(25.4)%$37,173 $47,551 $(10,378)(21.8)%
Variable annuitiesVariable annuities18,473 14,604 3,869 26 %36,495 28,354 8,141 29 %Variable annuities15,772 18,473 (2,701)(14.6)%32,069 36,495 (4,426)(12.1)%
InsuranceInsurance4,005 2,831 1,174 41 %9,630 8,064 1,566 19 %Insurance4,235 4,005 230 5.7 %7,959 9,630 (1,671)(17.4)%
General securitiesGeneral securities5,367 3,089 2,278 74 %10,560 8,786 1,774 20 %General securities5,038 5,367 (329)(6.1)%13,289 10,560 2,729 25.8 %
Total commission revenueTotal commission revenue$51,702 $39,836 $11,866 30 %$104,236 $90,416 $13,820 15 %Total commission revenue$42,835 $51,702 $(8,867)(17.2)%$90,490 $104,236 $(13,746)(13.2)%
By type of commission:By type of commission:By type of commission:
Transaction-basedTransaction-based$21,076 $14,803 $6,273 42 %$43,443 $38,184 $5,259 14 %Transaction-based$17,881 $21,076 $(3,195)(15.2)%$38,505 $43,443 $(4,938)(11.4)%
TrailingTrailing30,626 25,033 5,593 22 %60,793 52,232 8,561 16 %Trailing24,954 30,626 (5,672)(18.5)%51,985 60,793 (8,808)(14.5)%
Total commission revenueTotal commission revenue$51,702 $39,836 $11,866 30 %$104,236 $90,416 $13,820 15 %Total commission revenue$42,835 $51,702 $(8,867)(17.2)%$90,490 $104,236 $(13,746)(13.2)%
As discussed in the sections above, the declines in transaction-based and trailing commission revenues for the periods shown in the table above were primarily due to unfavorable transaction activity and volatility in global financial markets during the three and six months ended June 30, 2022.
Blucora, Inc. | Q2 20212022 Form 10-Q 2825

For the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020:
•Transaction-based commission revenue increased $6.3 million and $5.3 million, respectively, primarily due to an increase in trading volumes. Transaction-based commission revenue in the second quarter of 2020 was negatively affected by suppressed trading volumes as a result of the COVID-19 pandemic and related financial market disruption.
•Trailing commission revenue increased $5.6 million and $8.6 million, respectively, primarily due to increased client asset levels. Trailing commission revenue in the second quarter of 2020 was negatively affected by suppressed client asset levels as a result of the COVID-19 pandemic and related financial market disruption.
Trailing commission revenue and transaction-based commission revenue remain susceptible to being adversely affected in future periods in which pandemic-influenced economic and market factors remain present.
Asset-based revenue.Asset-Based Revenue. Asset-based revenue primarily includes fees from financial product manufacturer sponsorship programs, cash sweep programs, asset-based retirement plan service fees, and other asset-based revenues.
For the three and six months ended June 30, 20212022, compared to the three months ended June 30, 2020, asset-based revenue increased $1.5 million primarily due to a $0.8 million increase in revenue generated from financial product manufacturer sponsorship programs, as well as a $0.6 million increase in asset-based retirement plan service fees following the HKFS Acquisition.
For theand six months ended June 30, 2021, comparedasset-based revenue increased $1.4 million and $1.8 million, respectively. These increases were primarily due to $2.3 million of incremental cash sweep revenue during the three and six months ended, June 30, 2020, asset-based revenue decreased $3.7 million primarily due to a $6.2 million decreasedriven by increases in the federal funds rate. The increases in cash sweep revenue as a result of lower interest rates,were partially offset by a $1.0 million increase in revenue generatedreduced fees from financial product manufacturer sponsorship programsprograms. Due to the timing of rate increases and a $1.4 million increase in revenue generated from asset-based retirement plan service fees following the HKFS Acquisition.
In March 2020,non-linear nature of upside associated with these increases, and with expectation of additional rate increases by the Federal Reserve lowered its target range forin the federal funds rate to 0.00-0.25%. As oursecond half of 2022, cash sweep revenue is based on a rate derived fromexpected to continue to increase for the federal funds rate, cash sweep revenue in all quarters subsequent toremainder of the first quarter of 2020 has been materially reduced. We expect continued low levels of cash sweep revenue in future periods in which the federal funds rate is at reduced levels, although we may experience an increase in cash sweep revenue should the federal funds rate increase.year.
Transaction and fee revenue.Fee Revenue. Transaction and fee revenue primarily includes support fees charged to financial professionals, fees charged for executing certain transactions in client accounts, and other fees related to services provided and other account charges as generally outlined in agreements with financial professionals, clients, financial institutions, and retirement plan sponsors.
For the three and six months ended June 30, 20212022, compared to the three and six months ended June 30, 2020,2021, transaction and fee revenue increased $2.9 million and $3.3 million, respectively, primarily due to incremental revenue generated from financial professional support fees, as well as incremental transaction and fee revenue as a result of the HKFS Acquisition.remained relatively flat.
Tax Software
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
 20212020$%20212020$%
Revenue$91,917 $45,238 $46,679 103 %$215,809 $163,569 $52,240 32 %
Operating income$63,448 $6,659 $56,789 853 %$114,336 $44,412 $69,924 157 %
Segment margin69 %15 %53 %27 %
Tax Software revenue and operating income for the three and six months ended June 30, 2021 and for the three and six months ended June 30, 2020 were significantly impacted by the extension of the filing and payment deadlines for federal tax returns in both the 2020 and 2021 tax seasons. For additional discussion of the COVID-19 pandemic and its effect on current and prior year Tax Software segment results, please see the “COVID-19 Pandemic” section within this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Blucora, Inc. | Q2 2021 Form 10-Q 29

($ in thousands)Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
 20222021$%20222021$%
Revenue$94,214 $91,917 $2,297 2.5 %$235,364 $215,809 $19,555 9.1 %
Operating income$53,859 $63,448 $(9,589)(15.1)%$111,889 $114,336 $(2,447)(2.1)%
Segment margin57.2 %69.0 %47.5 %53.0 %
For the three months ended June 30, 20212022, compared to the three months ended June 30, 2020,2021, Tax Software operating income increased $56.8decreased $9.6 million due to the following factors:
•Tax Software revenue increased $46.7$2.3 million primarily due to a $44.4 millionan increase in consumer revenue and a $2.3 million increase in professional revenue. The increases primarily resulted from the disparity in the tax filing and payment deadlines in 2021 versus 2020.e-files associated with market share growth.
•Tax Software operating expenses decreased $10.1increased $11.9 million primarily due to decreasedincreased investments in seasonal customer care support and tax experts and an increase in strategic advertising and marketing expenses. Advertising and marketingspend. These incremental costs were the primary drivers of the reduction in our Tax Software business were elevatedsegment margin shown in the second quarter of 2020 due to the extension of the filing and payment deadline for tax year 2019 federal tax returns to July 15, 2020, thereby necessitating a full quarter of advertising and marketing efforts. In contrast, the filing and payment deadline in most states for tax year 2020 federal tax returns was May 17, 2021, thereby necessitating only a partial quarter of advertising and marketing efforts.table above.
For the six months ended June 30, 20212022, compared to the six months ended June 30, 2020,2021, Tax Software operating income increased $69.9decreased $2.4 million due to the following factors:
•Tax Software revenue increased $52.2$19.6 million primarily due to a $51.2$16.9 million increase in consumer revenue and a $1.1$2.7 million increase in professional revenue. The growth in revenue during the six months ended June 30, 2022 was attributable to higher average revenue per unit and growth in market share from favorable customer retention and acquisition. These increases primarily resulted fromduring the disparityperiod were partially offset by an increase in the tax filing and payment deadlines in 2021 versus 2020.volume of customers that filed extensions when compared to the prior year. We expect to continue to benefit from higher average revenue per unit for the remainder of the year as customers complete returns associated with these extensions.
•Tax Software operating expenses decreased $17.7increased $22.0 million primarily due to decreasedincreased investments in seasonal customer care support and tax experts and an increase in strategic advertising and marketing expenses. Advertising and marketing expenses forspend. These incremental costs were the six months ended June 30, 2020 were elevated due to incremental marketing efforts to address weak performance through the first two monthsprimary drivers of the 2020 tax season, as well as increased marketing due toreduction in segment margin shown in the extended tax season.table above.
Sources of revenueRevenue
Tax Software revenue is derived primarily from the sale of tax preparation digital services, ancillary services, packaged tax preparation software, and multiple element arrangements that may include a combination of these items. Ancillary services primarily include refund payment transfer, audit defense, e-file concierge services, and expert filing assistance.Xpert Assist.
Blucora, Inc. | Q2 2022 Form 10-Q 26

We classify Tax Software revenue into two different categories: consumer revenue and professional revenue. Consumer revenue represents Tax Software revenueis derived from products and services sold directly to customers and businesses primarily for the preparation of individual or business tax returns. Professional revenue represents Tax Software revenue derived from products sold to tax return preparers who utilize our offerings to service end-user customers.
Revenue by category was as follows:follows (in thousands):
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
 20212020$%20212020$%
Consumer$88,846 $44,421 $44,425 100 %$199,413 $148,242 $51,171 35 %
Professional3,071 817 2,254 276 %16,396 15,327 1,069 7 %
Total revenue$91,917 $45,238 $46,679 103 %$215,809 $163,569 $52,240 32 %

Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
 20222021$%20222021$%
Consumer$91,027 $88,846 $2,181 2.5 %$216,288 $199,413 $16,875 8.5 %
Professional3,187 3,071 116 3.8 %19,076 16,396 2,680 16.3 %
Total Tax Software revenue$94,214 $91,917 $2,297 2.5 %$235,364 $215,809 $19,555 9.1 %
Business Metrics
We measure the performance of our Tax Software business using three sets of non-financial metrics, which we consider to be important indicators of the performance of our Tax Software business and are especially relevant through the end of a completed tax season. These non-financial metrics include key performance indicators for our total Tax Software business, in addition to the consumer and professional tax software portions of the Tax Software business:
•We measure our total tax software customers using the total number of accepted federal tax e-files completed by both our consumer tax software customers and our professional tax software customers.
•We measure our consumer tax software customers using the number of accepted federal tax e-files made through our software and digital services.
Blucora, Inc. | Q2 2021 Form 10-Q 30

•We measure our professional tax software customers using three metrics: (1) the number of accepted federal tax e-files made through our software, (2) the number of units sold, and (3) the number of e-files per unit sold.
(In thousands, except percentages and as otherwise indicated)Six months endedQTDYear-to-date period endedYTD
June 30,ChangeJuly 16,Change
(In thousands, except as otherwise indicated)(In thousands, except as otherwise indicated)Six Months Ended June 30,Change
20212020Units%2021 (1)2020 (1)Units%20222021Units%
Total e-files (2)5,049 4,595 454 10 %5,421 5,149 272 5 %
Total e-files (1)
Total e-files (1)
5,528 5,397 131 2.4 %
Consumer:Consumer:Consumer:
Consumer e-files (2)2,939 2,734 205 7 %3,122 3,113 9 — %
Consumer e-files (1)
Consumer e-files (1)
3,184 3,112 72 2.3 %
Professional:Professional:Professional:
Professional e-filesProfessional e-files2,110 1,861 249 13 %2,299 2,036 263 13 %Professional e-files2,344 2,285 59 2.6 %
Units sold (in ones)Units sold (in ones)20,692 20,087 605 3 %20,711 20,207 504 2 %Units sold (in ones)20,927 20,692 235 1.1 %
Professional e-files per unit sold (in ones)Professional e-files per unit sold (in ones)102.0 92.6 9.4 10 %111.0 100.8 10.2 10 %Professional e-files per unit sold (in ones)112.0 110.4 1.6 1.4 %
____________________________
(1)Tax season begins on the first day that the IRS begins accepting e-files and ends on filing deadline day plus one day. Due to the impact of the COVID-19 pandemic, the IRS extended the filing deadlines for federal tax returns relating to the 2020 and 2019 tax years to May 17, 2021 (with the filing deadline extended to June 15, 2021 for Texas, Louisiana, and Oklahoma) and July 15, 2020, respectively. In order to provide comparable tax season data, we provided the above metrics for the year-to-date periods ended July 16, 2021 and 2020 as these periods capture the activity of the entire tax season for each year.
(2)We participate in the Free File Alliance that is part of an IRS partnership that provides free electronic tax filing services to taxpayers meeting certain income-based guidelines. Free File Alliance e-files are included within total e-files and consumer e-files above.
For the six months ended June 30, 20212022, compared to the six months ended June 30, 2020, the number of consumer2021, e-files the number of professional e-files,across each category, and the number of professional units sold, all increased due to the disparity in the tax filing and payment deadlines in 2021 versus 2020.
For the year-to-date period ended July 16, 2021 compared to the year-to-date period ended July 16, 2020, total e-files increased 5% primarily due to the increasegrowth in the number of professional tax software e-files, which resulted from increased market share from favorable customer retention and acquisition, both of which benefited from our investments in the professional tax software market.
For more information on the risks associated with our Tax Software business, see the “COVID-19 Pandemic” section within this Management’s Discussionstrategic marketing spend and Analysis of Financial Condition and Results of Operations and “Item 1A. Risk Factors” under the heading, “The current COVID-19 pandemic could have a Material Adverse Effect.” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020.customer care support.
Blucora, Inc. | Q2 20212022 Form 10-Q 3127

Corporate-Level Activity
Certain corporate-level activity, including certain general and administrative costs (such as personnel and overhead costs), stock-based compensation, acquisition and integration costs, depreciation, amortization of acquired intangible assets, impairment of goodwill, executive transition costs, headquarters relocation costs, and contested proxy and other legal and consulting costs, is not allocated to our reportable segments.
Corporate levelCorporate-level activity by category was as follows:follows (in thousands):
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
20212020$%20212020$% 20222021$%20222021$%
Unallocated corporate-level general and administrative expensesUnallocated corporate-level general and administrative expenses$6,259 $5,810 $449 8 %$11,953 $12,826 $(873)(7)%Unallocated corporate-level general and administrative expenses$7,680 $6,259 $1,421 22.7 %$14,972 $11,953 $3,019 25.3 %
Stock-based compensationStock-based compensation5,160 3,904 1,256 32 %10,770 2,703 8,067 298 %Stock-based compensation5,198 5,160 38 0.7 %11,423 10,770 653 6.1 %
Acquisition and integration costs18,169 2,824 15,345 543 %26,272 8,506 17,766 209 %
Acquisition and integrationAcquisition and integration(6,792)18,169 (24,961)(137.4)%(5,126)26,272 (31,398)(119.5)%
DepreciationDepreciation4,102 2,412 1,690 70 %7,345 4,832 2,513 52 %Depreciation5,002 4,102 900 21.9 %9,676 7,345 2,331 31.7 %
Amortization of acquired intangible assetsAmortization of acquired intangible assets7,063 6,673 390 6 %14,238 14,421 (183)(1)%Amortization of acquired intangible assets6,462 7,063 (601)(8.5)%13,093 14,238 (1,145)(8.0)%
Contested proxy and other legal and consulting costsContested proxy and other legal and consulting costs2,465 — 2,465 N/A5,695 — 5,695 N/AContested proxy and other legal and consulting costs1,397 2,465 (1,068)(43.3)%4,317 5,695 (1,378)(24.2)%
Executive transition costs— 636 (636)(100)%— 9,820 (9,820)(100)%
Headquarters relocation costs— 737 (737)(100)%— 1,453 (1,453)(100)%
Impairment of goodwill— — — N/A— 270,625 (270,625)(100)%
Total corporate-level activityTotal corporate-level activity$43,218 $22,996 $20,222 88 %$76,273 $325,186 $(248,913)(77)%Total corporate-level activity$18,947 $43,218 $(24,271)(56.2)%$48,355 $76,273 $(27,918)(36.6)%
For the three months ended June 30, 20212022, compared to the three months ended June 30, 2020, corporate level2021, corporate-level activity increased $20.2decreased $24.3 million primarily due to the following factors:
•For the three months ended June 30, 2021, acquisitionAcquisition and integration expenses were $18.2 million, which included $12.6 million related to the HKFS Acquisition and $5.6 million related to the acquisition of 1st Global, Inc. and 1st Global Insurance Services, Inc. (together, “1st Global”) in 2019 (the “1st Global Acquisition”). For the three months ended June 30, 2020, acquisition and integration expenses were $2.8 million, which included $1.7 million related to the 1st Global Acquisition and $1.1 million related to the HKFS Acquisition.
•Contested proxy and other legal and consulting costs of $2.5 million were recognized for the three months ended June 30, 2021.
•Depreciation expense increased $1.7decreased $25.0 million, primarily due to propertyan $18.5 million decrease in the fair value adjustments recorded for the HKFS Contingent Consideration liability between the two periods, and equipment put into service at our new headquartersa $6.4 million decrease in July 2020professional services and an increaseother expenses due to a reduction in capitalized software costs.integration activities.
•Stock-based compensation expenseUnallocated general and administrative expenses increased $1.3 million.$1.4 million primarily due to incremental personnel costs.
For the six months ended June 30, 20212022, compared to the six months ended June 30, 2020, corporate level2021, corporate-level activity decreased $248.9$27.9 million primarily due to the non-recurrence of the following factors:
•ForAcquisition and integration expenses decreased $31.4 million, primarily due to a $23.1 million decrease in the six months ended June 30, 2020, we recognized goodwill impairment of $270.6fair value adjustments recorded for the HKFS Contingent Consideration liability between the two periods, and an $8.3 million relateddecrease in professional services and other expenses due to our Wealth Management reporting unit.a reduction in integration activities.
•Executive transition costs of $9.8Unallocated general and administrative expenses increased $3.0 million were recognized for the six months ended June 30, 2020primarily due to the departure of certain Company executives.
Partially offsetting this decrease in corporate-level activity:
•For the six months ended June 30, 2021, acquisition and integration expenses were $26.3 million, which included $20.5 million related to the HKFS Acquisition and $5.8 million related to the 1st Global Acquisition. For the six months ended June 30, 2020, acquisition and integration expenses were $8.5 million, which included $4.7 million related to the 1st Global Acquisition and $3.8 million related to the HKFS Acquisition.incremental personnel costs.
•Stock-based compensationDepreciation expense increased $8.1 million. Stock-based compensation for the six months ended June 30, 2020 was reduced by $6.7$2.3 million primarily due to stock award forfeitures resulting from executive departures in 2020.capitalized software costs for our Tax Software business.
•Contested proxy and other legal and consulting costs of $5.7 million were recognized for the six months ended June 30, 2021.
Blucora, Inc. | Q2 2021 Form 10-Q 32

OPERATING EXPENSES
Cost of Revenue
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
 20212020$%20212020$%
Wealth Management services cost of revenue$113,910 $83,868 $30,042 36 %$222,533 $186,210 $36,323 20 %
Tax Software services cost of revenue4,429 3,054 1,375 45 %10,007 7,067 2,940 42 %
Total cost of revenue$118,339 $86,922 $31,417 36 %$232,540 $193,277 $39,263 20 %
Percentage of revenue47 %54 %44 %46 %
($ in thousands)Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
 20222021$%20222021$%
Wealth Management$113,644 $113,910 $(266)(0.2)%$233,518 $222,533 $10,985 4.9 %
Tax Software6,873 4,429 2,444 55.2 %16,299 10,007 6,292 62.9 %
Total cost of revenue$120,517 $118,339 $2,178 1.8 %$249,817 $232,540 $17,277 7.4 %
Percentage of revenue46.9 %46.5 %44.3 %43.7 %
Cost of revenue consists of costs related to our Wealth Management and Tax Software businesses, which include commissions and advisory fees paid to independent financial professionals, payments made to CPA firms under fee sharing arrangements, amortization of forgivable loans issued to our financial professionals, third-party
Blucora, Inc. | Q2 2022 Form 10-Q 28

costs, and costs associated with the technical support team and the operation of our data centers. Data center costs include personnel expenses, the cost of temporary help and contractors, professional services fees, software support and maintenance, bandwidth and hosting costs, and depreciation (including depreciation related to software development costs in the Tax Software segment). Cost of revenue does not include compensation paid to in-housein-house/employee financial professionals in our Wealth Management business. As the in-houseThe compensation of our in-house/employee financial professionals are employees of Avantax Planning Partners, their compensation is reflected in “Sales and marketing” expense.
For the three months ended June 30, 2022, compared to the three months ended June 30, 2021, cost of revenue increased $2.2 million primarily due to increased Tax Software segment personnel costs and depreciation of capitalized software development costs.
For the six months ended June 30, 2022, compared to the six months ended June 30, 2021, compared to the three and six months ended June 30, 2020, cost of revenue increased $31.4$17.3 million and $39.3 million, respectively, primarily due to an increase in advisory fees and commissions paid to financial professionals which primarily resulted from increased client asset balances and trading activity in our legacy Avantaxassociated with incremental Wealth Management revenues. Payout ratios to independent financial professionals are determined based on trailing twelve-month revenues and may not immediately correlate with changes in client assets during periods of significant market volatility. Payout ratios have increased due to an expansion in the number of financial professionals concentrated at higher payout levels, due in part to improved market performance during the second half of 2021, greater retention and recruitment of higher producing financial professionals, and the alignment of our payout grids. Furthermore, the Tax Software business and incremental advisory asset balances following the HKFS Acquisition. The increase in cost of revenue was also the result ofhad increased personnel costs and depreciation of capitalized software during such period. Continued investments in internally developed software for the Tax Software segment, as well asbusiness are expected to result in increased depreciation related to capitalized software costs in the Tax Software segment.future periods.
Engineering and Technology
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
($ in thousands)($ in thousands)Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
20212020$%20212020$% 20222021$%20222021$%
Engineering and technologyEngineering and technology$7,231 $7,377 $(146)(2)%$14,359 $15,892 $(1,533)(10)%Engineering and technology$8,620 $7,231 $1,389 19.2 %$17,124 $14,359 $2,765 19.3 %
Percentage of revenuePercentage of revenue3 %5 %3 %4 %Percentage of revenue3.4 %2.8 %3.0 %2.7 %
Engineering and technology expenses are associated with the research, development, support, and ongoing enhancements of our offerings, which include personnel expenses, the cost of temporary help and contractors, software support and maintenance, bandwidth and hosting, and professional services fees. Engineering and technology expenses do not include the costs of computer hardware and software that are capitalized, depreciated over their useful lives, and recognized on the condensed consolidated statements of comprehensive income (loss)operations as either “cost“Cost of revenue”Revenue” or “depreciation.“Depreciation.” For more information, see the “Cost of Revenue” and “Depreciation and Amortization of Acquired Intangible Assets” sections contained within this discussion of “Operating Expenses.”
For the three months ended June 30, 2022, compared to the three months ended June 30, 2021, engineering and technology expenses increased $1.4 million primarily due to increases in personnel expenses across both segments.
For the six months ended June 30, 20212022, compared to the six months ended June 30, 2020,2021, engineering and technology expenses decreased $1.5increased $2.8 million primarily due to decreased consulting fees in our Tax Software business, partially offset by an increaseincreases in personnel expenses in our Wealth Management business.Tax Software segment.
Sales and Marketing
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
($ in thousands)($ in thousands)Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
20212020$%20212020$% 20222021$%20222021$%
Sales and marketingSales and marketing$34,848 $40,057 $(5,209)(13)%$112,410 $119,767 $(7,357)(6)%Sales and marketing$47,508 $34,848 $12,660 36.3 %$131,911 $112,410 $19,501 17.3 %
Percentage of revenuePercentage of revenue14 %25 %21 %28 %Percentage of revenue18.5 %13.7 %23.4 %21.1 %
Sales and marketing expenses primarily consist of marketing expenses associated with our Tax Software business (including expenses related to marketing agencies and media companies) and our Wealth Management business, personnel expenses, compensation paid to Avantax Planning Partners in-housein-house/employee financial professionals, the
Blucora, Inc. | Q2 2021 Form 10-Q 33

cost of temporary help and contractors, and back officeback-office processing support expenses for our Wealth Management business.
For the three and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021, compared to the three months ended June 30, 2020, sales and marketing expenses decreased $5.2increased $12.7 million and $19.5 million, respectively, primarily due to an $11.7 million decrease inthe following factors:
Blucora, Inc. | Q2 2022 Form 10-Q 29

•Strategic advertising and marketing costs in our Tax Software business. Advertisingsegment increased $7.0 million and marketing$9.5 million, respectively.
•Personnel costs in our Tax Software business were elevated in the second quarter of 2020 due to the extension of the filingboth segments increased $5.2 million and payment deadline for tax year 2019 federal tax returns to July 15, 2020, thereby necessitating a full quarter of advertising and marketing efforts. In contrast, the filing and payment deadline in most states for tax year 2020 federal tax returns was May 17, 2021, thereby necessitating only a partial quarter of advertising and marketing efforts. This decrease was partially offset by a $6.5$8.7 million, increase in sales and marketing expenses in our Wealth Management business due to incremental expenses following the HKFS Acquisition and increased headcount to support growth in the Wealth Management business.
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020, sales and marketing expenses decreased $7.4 million primarily due to a $19.9 million decrease in advertising and marketing costs in our Tax Software business. Advertising and marketing costs in our Tax Software business were elevated for the six months ended June 30, 2020 primarily due to incremental marketing efforts in March 2020 to address weak performance through the first two months of the 2020 tax season, as well as increased marketing required due to the extended tax season. This decrease was partially offset by a $12.4 million increase in sales and marketing expenses in our Wealth Management business due to incremental expenses following the HKFS Acquisition and increased headcount to support growth in the Wealth Management business.respectively.
General and Administrative
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
($ in thousands)($ in thousands)Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
20212020$%20212020$% 20222021$%20222021$%
General and administrativeGeneral and administrative$23,832 $20,200 $3,632 18 %$48,517 $44,928 $3,589 8 %General and administrative$26,646 $23,832 $2,814 11.8 %$55,721 $48,517 $7,204 14.8 %
Percentage of revenuePercentage of revenue9 %13 %9 %11 %Percentage of revenue10.4 %9.4 %9.9 %9.1 %
General and administrative (“G&A”) expenses primarily consist of expenses associated with personnel expenses, the cost of temporary help and contractors, professional services fees, general business development and management expenses, occupancy and general office expenses, business taxes, and insurance expenses.
For the three and six months ended June 30, 20212022, compared to the three months ended June 30, 2020, G&A expenses increased $3.6 million primarily due to the following factors:
•For the three months ended June 30, 2021, we recognized $2.5 million in expenses associated with contested proxy and other legal and consulting costs.
•Stock-based compensation increased $1.3 million. Stock-based compensation for the three months ended June 30, 2020 was reduced due to stock award forfeitures resulting from executive departures in 2020.
For the six months ended June 30, 2021, compared to the six months ended June 30, 2020, G&A expenses increased $3.6$2.8 million and $7.2 million, respectively, primarily due to the following factors:
•Stock-based compensation increased $8.1 million. Stock-based compensation for the six months ended June 30, 2020 was reduced due to stock award forfeitures resulting from executive departures in 2020.
•For the six months ended June 30, 2021, we recognized $5.7 million in expenses associated with contested proxyincremental personnel costs and other legalhardware and consulting costs.
Partially offsetting these increases, we recognized $9.8 million of executive transition costs for the six months ended June 30, 2020 due to the departure of certain Company executives in 2020.
Blucora, Inc. | Q2 2021 Form 10-Q 34

software support and maintenance fees.
Acquisition and Integration
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
 20212020$%20212020$%
Employee-related expenses$522 $232 $290 125 %$735 $1,062 $(327)(31)%
Professional services117 2,356 (2,239)(95)%1,243 6,542 (5,299)(81)%
Change in fair value of HKFS Contingent Consideration11,500 — 11,500 N/A17,800 — 17,800 N/A
Other expenses6,030 236 5,794 2455 %6,494 902 5,592 620 %
Total$18,169 $2,824 $15,345 543 %$26,272 $8,506 $17,766 209 %
Percentage of revenue7 %2 %5 %2 %
($ in thousands)Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
 20222021$%20222021$%
Change in the fair value of HKFS Contingent Consideration$(7,020)$11,500 $(18,520)(161.0)%$(5,320)$17,800 $(23,120)(129.9)%
Professional services and other expenses228 6,669 (6,441)(96.6)%194 8,472 (8,278)(97.7)%
Total$(6,792)$18,169 $(24,961)(137.4)%$(5,126)$26,272 $(31,398)(119.5)%
Percentage of revenue(2.6)%7.1 %(0.9)%4.9 %
Acquisition and integration expenses primarily relate to costs incurred for the HKFS Acquisitionacquisitions of Avantax Planning Partners and the 1st Global Acquisition and consist of employee-related expenses, professional services fees, and other expenses.
For the three months ended June 30, 2021, acquisition and integration expenses of $18.2 million were primarily composed of $12.6 million related to the HKFS Acquisition, which included an $11.5 million loss related to the increasechanges in the fair value of the liability related to the two post-closing earn-out payments (the “HKFS Contingent Consideration”). In addition, acquisitioncontingent consideration, and integration expenses for the second quarter of 2021 included $5.6 million related to the 1st Global Acquisition, which included a $5.5 million increase to the contingent liability reserve balance related to a regulatory matter assumed in the 1st Global Acquisition. For additional information on the HKFS Contingent Consideration liability and the contingent liability from the 1st Global Acquisition, see “Item 1. Financial Statements—Note 7.” other expenses.
For the three and six months ended June 30, 2020, acquisition and integration expenses included $1.7 million related2022, compared to the 1st Global Acquisitionthree and $1.1 million related to the HKFS Acquisition.
For the six months ended June 30, 2021, acquisition and integration expenses of $26.3decreased $25.0 million wereand $31.4 million, respectively, primarily composed of $20.5 million relateddue to the HKFS Acquisition, which included a $17.8 million loss related to the increasefollowing factors:
•The change in the fair value of the HKFS Contingent Consideration liability. In addition, acquisitionliability declined $18.5 million and integration expenses for$23.1 million, respectively. These changes are inclusive of a $7.0 million gain recorded during the sixthree months ended June 30, 2021 included $5.8 million related to2022, reflecting a decrease in the 1st Global Acquisition, which included a $5.5 million increase tofair value of the contingent liability reserve balance relatedconsideration due to a regulatory matter assumedsignificant decline in advisory asset levels during the second quarter of 2022, which was caused by the market decline discussed in the 1st Global Acquisition. For the six months ended June 30, 2020, acquisitionsections above.
•Professional services and other expenses declined $6.4 million and $8.3 million, respectively, due to a reduction in integration expenses included $4.7 million related to the 1st Global Acquisition and $3.8 million related to the HKFS Acquisition.activities.
Depreciation and Amortization of Acquired Intangible Assets
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
($ in thousands)($ in thousands)Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
20212020$%20212020$% 20222021$%20222021$%
DepreciationDepreciation$3,204 $1,675 $1,529 91 %$5,504 $3,471 $2,033 59 %Depreciation$3,137 $3,204 $(67)(2.1)%$6,068 $5,504 $564 10.2 %
Amortization of acquired intangible assetsAmortization of acquired intangible assets7,063 6,673 390 6 %14,238 14,421 (183)(1)%Amortization of acquired intangible assets6,462 7,063 (601)(8.5)%13,093 14,238 (1,145)(8.0)%
TotalTotal$10,267 $8,348 $1,919 23 %$19,742 $17,892 1,850 10 %Total$9,599 $10,267 $(668)(6.5)%$19,161 $19,742 $(581)(2.9)%
Percentage of revenuePercentage of revenue4 %5 %4 %4 %Percentage of revenue3.7 %4.0 %3.4 %3.7 %
Depreciation of property, equipment, and equipmentsoftware, net includes depreciation of computer equipment and software (including internally developed software), office equipment and furniture, and leasehold improvements. Amortization of acquired intangible assets primarily includes the amortization of client, financial professional, sponsor, and sponsorcustomer relationships, which are amortized over their estimated lives.
Blucora, Inc. | Q2 2022 Form 10-Q 30

For both the three and six months ended June 30, 20212022, compared to the three and six months ended June 30, 2020,2021, depreciation and amortization expense increased $1.9 million primarily due to increased depreciation resulting from property and equipment put into service at our new headquarters in July 2020 and an increase in capitalized software costs.did not materially change.
Blucora, Inc. | Q2 2021 Form 10-Q 35

INTEREST EXPENSE AND OTHER, NET
Impairment of Goodwill
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
 20212020$%20212020$%
Impairment of goodwill$— $— $— N/A— $270,625 $(270,625)(100)%
Percentage of revenue— %— %— %64 %
For the six months ended June 30, 2020, we recognized goodwill impairment of $270.6 million related to our Wealth Management reporting unit.
OTHER LOSS, NET
(In thousands, except percentages)Three months endedQTDSix months endedYTD
June 30,ChangeJune 30,Change
20212020$%20212020$%
Interest expense$7,302 $4,840 $2,462 51 %$14,485 $10,156 $4,329 43 %
Amortization of debt issuance costs377 331 46 14 %740 644 96 15 %
Accretion of debt discounts284 70 214 306 %561 138 423 307 %
Total interest expense7,963 5,241 2,722 52 %15,786 10,938 4,848 44 %
Interest income— (11)11 100 %(2)(25)23 92 %
Other61 58 3 5 %123 510 (387)(76)%
Other loss, net$8,024 $5,288 $2,736 52 %$15,907 $11,423 $4,484 39 %
($ in thousands)Three Months Ended June 30,ChangeSix Months Ended
June 30,		Change
20222021$%20222021$%
Interest expense$7,265 $7,302 $(37)(0.5)%$14,395 $14,485 $(90)(0.6)%
Amortization of debt issuance costs399 377 22 5.8 %788 740 48 6.5 %
Amortization of debt discount299 284 15 5.3 %591 561 30 5.3 %
Total interest expense7,963 7,963 — — %15,774 15,786 (12)(0.1)%
Interest income and other154 61 93 152.5 %184 121 63 52.1 %
Interest expense and other, net$8,117 $8,024 $93 1.2 %$15,958 $15,907 $51 0.3 %
For the three and six months ended June 30, 20212022, compared to the three and six months ended June 30, 2020,2021, interest expense and other, loss, net, increased $2.7did not materially change. As the interest rate on our Term Loan is variable at the London Interbank Offered Rate, we expect for our interest expense to increase in future periods due to increasing interest rates.
INCOME TAXES
We recorded income tax expense of $3.2 million and $4.5$5.8 million for the three and six months ended June 30, 2022, respectively, primarily due to a $2.7 million and $4.8 million increase in total interest expense, respectively. This increased interest expense was primarily due to higher outstanding debt balances following the $175.0 million increase in the Term Loan (as defined below) under the Senior Secured Credit Facility (as defined below) in the third quarter of 2020.
The Senior Secured Credit Facility, including the Term Loan and the Revolver (as defined below) thereunder, are described in more detail under “Liquidity and Capital Resources” below.
INCOME TAXES
(In thousands, except percentages)Three months endedQTDThree months endedYTD
June 30,ChangeJune 30,Change
 20212020$%20212020$%
Income tax benefit (expense)$(1,994)$59,539 $(61,533)(103)%$(3,694)$(7,981)$4,287 (54)%
The Company recorded income tax expense of $2.0 million and $3.7 million for the three and six months ended June 30, 2021, respectively. For 2021, the Company has prepared itsThe prior period interim tax provision was prepared by applying a year-to-date effective tax rate. For 2020, the Company prepared itsrate to income before income taxes. The current period interim tax provision was prepared by applying an estimated annual effective tax rate. We believe usingrate to income before income taxes and by calculating the actual year-to-date effective tax rate in 2021 resulted ineffect of discrete items recognized during the best estimate of the annual effective tax rate.quarter (if applicable).
The Company’sOur effective income tax rate for the three and six months ended June 30, 2022, and June 30, 2021 differed from the 21% statutory rate primarily due to the release of valuation allowances and the effect of state income taxes. We currently expect to continue to release portions ofmaintain a valuation allowances, which were previously recorded in connection with ourallowance for federal net operating loss carryforwards that we have concluded it is more likely than not that the related deferred tax benefits will not be realized. This valuation allowance does not prevent us from utilizing unexpired net operating losses to offset taxable income in future federal income tax liabilities.periods. The majority of these net operating losses will either be utilized or expire between 20212022 and 2024.

The Company recorded income tax benefit of $59.5 million and income tax expense of $8.0 million for the three and six months ended June 30, 2020, respectively. The Company’s effective income tax rate for the three and six months ended June 30, 2020 differed from the 21% statutory rate primarily due to expiring net operating loss tax benefits, an adjustment to the valuation allowance against deferred tax assets for net operating losses expected to expire in future years, and non-deductible officer compensation expense.

Blucora, Inc. | Q2 2021 Form 10-Q 36

NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA
We define Adjusted EBITDA as net income (loss), determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets, interest expense and other, loss, net, acquisition and integration costs, impairment of goodwill, executive transition costs, headquarters relocation costs, contested proxy and other legal and consulting costs, and income tax expense. Other loss,Interest expense and other, net primarily constitutes ourconsists of interest expense, net of interest income.net. Acquisition and integration costs primarily relate to the HKFS Acquisitionacquisitions of Avantax Planning Partners and 1st Global Acquisition. Impairment of goodwill relates to the impairment of our Wealth Management reporting unit goodwill in the first quarter of 2020. Executive transition costs relate to the departure of certain Company executives in the first quarter of 2020. Headquarters relocation costs relate to the process of moving from our Dallas and Irving offices to our new headquarters.Global.
We believe that Adjusted EBITDA provides meaningful supplemental information regarding our performance. We use this non-GAAP financial measure for internal management and compensation purposes, when publicly providing guidance on possible future results, and as a means to evaluate period-to-period comparisons. We believe that Adjusted EBITDA is a common measure used by investors and analysts to evaluate our performance, that it provides a more complete understanding of the results of operations and trends affecting our business when viewed together with GAAP results, and that management and investors benefit from referring to this non-GAAP financial measure. Items excluded from Adjusted EBITDA are significant and necessary components to the operations of our business and, therefore, Adjusted EBITDA should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income (loss). Other companies may calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
Blucora, Inc. | Q2 2022 Form 10-Q 31

A reconciliation of our Adjusted EBITDA toGAAP net income (loss), which we believe to be the most comparable GAAP measure, to Adjusted EBITDA, is presented below:
(In thousands)Three months endedSix months ended
June 30,June 30,
 2021202020212020
Net income (loss)$31,608 $49,645 $59,254 $(265,849)
Stock-based compensation5,160 3,904 10,770 2,703 
Depreciation and amortization of acquired intangible assets11,165 9,085 21,583 19,253 
Other loss, net8,024 5,288 15,907 11,423 
Acquisition and integration—Excluding change in fair value of HKFS Contingent Consideration6,669 2,824 8,472 8,506 
Acquisition and integration—Change in fair value of HKFS Contingent Consideration11,500 — 17,800 — 
Impairment of goodwill— — — 270,625 
Executive transition costs— 636 — 9,820 
Headquarters relocation costs— 737 — 1,453 
Contested proxy and other legal and consulting costs2,465 — 5,695 — 
Income tax (benefit) expense1,994 (59,539)3,694 7,981 
Adjusted EBITDA$78,585 $12,580 $143,175 $65,915 
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)2022202120222021
Net income$39,425 $31,608 $74,045 $59,254 
Stock-based compensation5,198 5,160 11,423 10,770 
Depreciation and amortization of acquired intangible assets11,464 11,165 22,769 21,583 
Interest expense and other, net8,117 8,024 15,958 15,907 
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration228 6,669 194 8,472 
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration(7,020)11,500 (5,320)17,800 
Contested proxy and other legal and consulting costs1,397 2,465 4,317 5,695 
Income tax expense3,243 1,994 5,825 3,694 
Adjusted EBITDA$62,052 $78,585 $129,211 $143,175 
Non-GAAP net incomeNet Income (Loss) and non-GAAP net income per shareNon-GAAP Net Income (Loss) Per Share
We define non-GAAP net incomeNon-GAAP Net Income (Loss) as net income (loss), determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, acquisition and integration costs, impairment of goodwill, executive transition costs, headquarters relocation costs, contested proxy and other legal and consulting costs, the related cash tax impact of those adjustments, and non-cash income tax (benefit) expense. We exclude the non-cash portion of income tax expensetaxes 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 beexpire, if not utilized, or expire between 20212022 and 2024.
We believe that non-GAAP net incomeNon-GAAP Net Income (Loss) and non-GAAP net incomeNon-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 that have not been, or are not expected to be, settled in cash. Additionally, we believe that non-GAAP net incomeNon-GAAP Net Income (Loss) and non-GAAP net incomeNon-GAAP Net Income (Loss) per share are common measures used by investors and analysts to evaluate our performance and the
Blucora, Inc. | Q2 2021 Form 10-Q 37

valuation of our business. Non-GAAP net incomeNet Income (Loss) and non-GAAP net incomeNon-GAAP Net Income (Loss) 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 GAAP net income (loss) per share. Other companies may calculate non-GAAP net incomeNon-GAAP Net Income (Loss) and non-GAAP net incomeNon-GAAP Net Income (Loss) per share differently, and, therefore, our non-GAAP net income and non-GAAP net income per sharethese measures may not be comparable to similarly titled measures of other companies.
Blucora, Inc. | Q2 2022 Form 10-Q 32

A reconciliation of our non-GAAP net income and non-GAAP net income per share toGAAP net income (loss) and GAAP net income (loss) per share, respectively, which we believe to be the most comparable GAAP measures, to Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) per share, respectively, is presented below:
(In thousands, except per share amounts)Three months endedSix months ended
June 30,June 30,
 2021202020212020
Net income (loss)$31,608 $49,645 $59,254 $(265,849)
Stock-based compensation5,160 3,904 10,770 2,703 
Amortization of acquired intangible assets7,063 6,673 14,238 14,421 
Acquisition and integration—Excluding change in fair value of HKFS Contingent Consideration6,669 2,824 8,472 8,506 
Acquisition and integration—Change in fair value of HKFS Contingent Consideration11,500 — 17,800 — 
Impairment of goodwill— — — 270,625 
Executive transition costs— 636 — 9,820 
Headquarters relocation costs— 737 — 1,453 
Contested proxy and other legal and consulting costs2,465 — 5,695 — 
Cash tax impact of adjustments to GAAP net income(649)(259)(1,192)(995)
Non-cash income tax (benefit) expense(694)(59,697)(963)7,340 
Non-GAAP net income$63,122 $4,463 $114,074 $48,024 
Per diluted share:
Net income (loss) (1)
$0.64 $1.03 $1.20 $(5.52)
Stock-based compensation0.10 0.08 0.22 0.06 
Amortization of acquired intangible assets0.14 0.14 0.29 0.30 
Acquisition and integration—Excluding change in fair value of HKFS Contingent Consideration0.14 0.06 0.17 0.18 
Acquisition and integration—Change in fair value of HKFS Contingent Consideration0.23 — 0.36 — 
Impairment of goodwill— — — 5.62 
Executive transition costs— 0.01 — 0.20 
Headquarters relocation costs— 0.02 — 0.03 
Contested proxy and other legal and consulting costs0.05 — 0.12 — 
Cash tax impact of adjustments to GAAP net income(0.01)(0.01)(0.02)(0.02)
Non-cash income tax (benefit) expense(0.01)(1.24)(0.02)0.15 
Non-GAAP net income per diluted share$1.28 $0.09 $2.32 $1.00 
Weighted average shares outstanding used in computing per diluted share amounts49,385 48,092 49,241 48,172 
($ in thousands)Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Net income$39,425 $31,608 $74,045 $59,254 
Stock-based compensation5,198 5,160 11,423 10,770 
Amortization of acquired intangible assets6,462 7,063 13,093 14,238 
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration228 6,669 194 8,472 
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration(7,020)11,500 (5,320)17,800 
Contested proxy and other legal and consulting costs1,397 2,465 4,317 5,695 
Cash tax impact of adjustments to GAAP net income(353)(649)(1,312)(1,192)
Non-cash income tax (benefit) expense2,655 (694)4,161 (963)
Non-GAAP Net Income$47,992 $63,122 $100,601 $114,074 
Per diluted share:
Net income (1)
$0.81 $0.64 $1.50 $1.20 
Stock-based compensation0.11 0.10 0.23 0.22 
Amortization of acquired intangible assets0.14 0.14 0.28 0.29 
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration— 0.14 — 0.17 
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration(0.14)0.23 (0.11)0.36 
Contested proxy and other legal and consulting costs0.03 0.05 0.09 0.12 
Cash tax impact of adjustments to GAAP net income(0.01)(0.01)(0.03)(0.02)
Non-cash income tax (benefit) expense0.05 (0.01)0.08 (0.02)
Non-GAAP Net Income per share — Diluted$0.99 $1.28 $2.04 $2.32 
Diluted weighted average shares outstanding48,690 49,385 49,220 49,241 
_____________________________________________________
(1)Any difference in the “per diluted share” amounts between this table and the condensed consolidated statements of comprehensive income (loss)operations is due to using different diluted weighted average shares outstanding in the event that there is GAAP net loss but non-GAAP net incomeNon-GAAP Net Income and vice versa.

Blucora, Inc. | Q2 2021 Form 10-Q 38

LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents
Our principal source of liquidity is our cash and cash equivalents. As of June 30, 2021,2022, we had cash and cash equivalents of approximately $232.4$171.3 million. Our Avantax Wealth Management 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 on Avantax Wealth Management operations. As of June 30, 2021, Avantax Wealth Management met all capital adequacy requirements to which it was subject.
We generally invest our excess cash in money market funds that are made up of securities issued by agencies of the U.SU.S. government. We may invest, from time-to-time, in other vehicles, such as debt instruments issued by the U.S. federal government and its agencies, international governments, municipalities, and publicly held corporations, as well as commercial paper and insured time deposits with commercial banks. Specific holdings can vary from period to period depending upon our cash requirements. Our financial instrument investments held atas of June 30, 20212022 had minimal default risk and short-term maturities.
Our Avantax Wealth Management 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 on Avantax Wealth Management operations. As of June 30, 2022, Avantax Wealth Management met all capital adequacy requirements to which it was subject.
Historically, we have financed our operations primarily from cash provided by operating activities and access to credit markets. Our historical uses of cash have been funding our operations, servicing our debt obligations, capital expenditures, business combinationsacquisitions that enhance our strategic position, financial professional loans, contingent consideration associated with our acquisitions, and share repurchases under share repurchase programs. WeFor at least the next twelve months, we plan to finance these cash needs and our operating, working capital, regulatory capital requirements at our broker-dealer subsidiary and capital expenditure requirements for at least the next 12 months largely through our cash and cash equivalents.equivalents on hand and cash provided by operating activities.
Blucora, Inc. | Q2 2022 Form 10-Q 33

Execution of our growth strategies in our Wealth Management business through strategic asset acquisitions is expected to remain a capital allocation priority during the next twelve months. However, the underlying levels of revenues and expenses that we project may not prove to be accurate, and, from time to time, we may make a determination to draw on the Revolver (as defined below) or increase the principal amount of the Term Loan (as defined below) to meet our capital requirements, subject to customary terms and conditions. Our future investments in our business through capital expenditures or acquisitions, prepayment of debt to achieve optimal leverage ratios, or our return of capital to stockholders through stock repurchases, will be determined after considering the best interests of our stockholders.
Since our results of operations are sensitive to various factors, including, among others, the level of competition we face, regulatory and legal impacts, and political and economic conditions, such factors could adversely affect our liquidity and capital resources. In addition, due to the COVID-19 pandemic, we have experienced and may continue to experience near- to mid-term volatility in our results of operations that could further increase our liquidity needs. Due to this volatility, we have taken several measures to ensure proper liquidity levels and are maintaining flexibility in our cash flows. In July 2020, we increased the principal outstanding under our Term Loan to fund the HKFS Acquisitionacquisition of Avantax Planning Partners and have continued to retain a portion of these proceeds in order to provide additional working capital flexibility. In addition, in April 2021, we increased the amount available for borrowings under the Revolver from $65.0 million to $90.0 million. Overall, we believe these measures provide us with the capital flexibility to satisfy our obligations, fund our operations, and invest in our businesses.
For further discussion of the risks to our business related to liquidity, see “Item 1A. Risk Factors” under the heading “Existing cash and cash equivalents 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 I of our Form 10-K for the year ended December 31, 2020.
We may use our cash and cash equivalents in the future to invest in our current businesses, for repayment of debt, for acquiring companies or assets, for stock buybacks, for returning capital to stockholders, or for other utilizations that we deem to be in the best interests of stockholders.business.
Indebtedness
In May 2017, we entered into a credit agreement (as the same has been amended, the “Credit Agreement”) with a syndicate of lenders whichthat provides for a term loan facility (the “Term Loan”) and a revolving line of credit (including a letter of credit sub-facility) (the “Revolver”) for working capital, capital expenditures, and general business purposes (the(as amended, the “Senior Secured Credit Facility”).
The Company is required to make principal amortization payments on the Term Loan quarterly on the last business day of each March, June, September, and December, in an amount equal to $0.5 million (subject to reduction for prepayments), with the remaining principal amount of the Term Loan due on thehas a maturity date of May 22, 2024.
Blucora, Inc.2024 (the | “Term Loan Maturity Date”Q2 2021 Form 10-Q 39).

On April 26, 2021, to ensure adequate liquidity and flexibility to support growth, we entered into Amendment No. 5 to the Credit Agreement (the “Credit Agreement Amendment”). Pursuant to the Credit Agreement Amendment, the Credit Agreement was amended to, among other things, refinance the existing $65.0 million Revolver and add $25.0 million of additional revolving credit commitments, for an aggregate principal amount of $90.0 million in revolving credit commitments (the “New Revolver”). The New Revolver has a maturity date of February 21, 2024 (the “New Revolver Maturity Date”).
As of June 30, 2021,2022, we had $562.3$560.4 million in principal amount outstanding under the Term Loan and no amounts outstanding under the New Revolver. Based on aggregate loan commitments as of June 30, 2021,2022, approximately $90.0 million was available for future borrowing atas of June 30, 20212022 under the Senior Secured Credit Facility, subject to customary terms and conditions. In addition, the Company is required to make principal amortization payments on the Term Loan quarterly on the last business day of each March, June, September, and December, in an amount equal to approximately $0.5 million (subject to reduction for prepayments), with the remaining principal amount of the Term Loan due on the Term Loan Maturity Date. On August 5, 2022, and as provided for within our Senior Secured Credit Facility, we voluntarily prepaid $35.0 million of principal outstanding under our Term Loan. We also settled the accrued and unpaid interest on the applicable principal outstanding up to, but not including, the date of prepayment.
The interest rate on the Term Loan is variable at the London Interbank Offered Rate (subject to a floor of 1.0%), plus the applicable interest rate margin of 4.0% for Eurodollar Rate Loans (as defined in the Credit Agreement) and 3.0% for ABR Loans (as defined in the Credit Agreement). As of June 30, 2022, the applicable interest rate on the Term Loan was 5.0%. Depending on the Consolidated First Lien Net Leverage Ratio (as defined in the Credit Agreement), the applicable interest rate margin on the New Revolver ranges from 2.0% to 2.5% for Eurodollar Rate Loans and 1.0% to 1.5% for ABR Loans. The Company is required to pay a commitment fee on the undrawn commitment under the New Revolver in a percentage that is dependent on the Consolidated First Lien Net Leverage Ratio that ranges from 0.35% to 0.4%. Interest is payable at the end of each interest period.period, typically quarterly.
By June 2023, all U.S. Dollar London Interbank Offered Rate (“LIBOR”) tenors will cease to be published and floating rate instruments that used U.S. Dollar LIBOR will need to shift to a substitute base index. To minimize disruption arising from such transition, the market has begun to shift to alternative fallback rates, such as Secured Overnight Financing Rate (“SOFR”) as a replacement benchmark for floating rate LIBOR based loans. Unless (i)
Blucora, Inc. | Q2 2022 Form 10-Q 34

such LIBOR tenors cease to be provided at an earlier date or (ii) we and the administrative agent to the Credit Agreement make an “early opt-in election” to replace the rate prior to cessation of LIBOR in accordance with the Credit Agreement, we will continue to have the option under the Credit Agreement to make drawdowns using 1-Day, 1-Month, 3-Month, and 6-Month tenor U.S. Dollar LIBOR until June 2023. The Credit Agreement Amendment provides for a process for transition to a fallback rate consistent with industry practice and permits the administrative agent to the Credit Agreement to apply certain updates to the Credit Agreement to effectuate the fallback rate, including a spread adjustment based on the historical basis between LIBOR and the fallback rate.
Obligations under the Senior Secured Credit Facility are guaranteed by certain of the Company’s subsidiaries and secured by substantially all the assets of the Company and certain of its subsidiaries (including certain subsidiaries acquired in the acquisition of Avantax Planning Partners and certain other material subsidiaries). The Senior Secured Credit Facility includes financial and operating covenants (including a Consolidated Total Net Leverage Ratio), which are set forth in detail in the Credit Agreement.
Pursuant to the Credit Agreement Amendment, if the Company’s usage of the New Revolver exceeds 30% of the aggregate commitments under the New Revolver on the last day of any calendar quarter, the Company shall not permit the Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) to exceed (i) 4.75 to 1.00 for the period beginning on April 1, 2021 and ending on December 31, 2021, (ii) 4.25 to 1.00 for the period beginning on January 1, 2022 and ending on September 30, 2022, (iii) 4.00 to 1.00 for the period beginning on October 1, 2022 and ending on December 31, 2022, and (iv) 3.50 to 1.00 for the period beginning on January 1, 2023 and ending on the New Revolver Maturity Date.
Except as described above, the New Revolver has substantially the same terms as the previous Revolver, including certain covenants and events of default. The Company was in compliance with the debt covenants of the Senior Secured Credit Facility as of June 30, 2022.
For additional information on the Term Loan, the New Revolver, and the Credit Agreement, see “Item 1. Financial Statements—Note 4.5.”
ShareStock Repurchase Plan
On March 19, 2019,As of December 31, 2021, we announced thathad $100.0 million authorized under our board of directors authorized a stock repurchase plan pursuant to which we may repurchase up to $100.0 million of our common stock.plan. Pursuant to the stock repurchase 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, may be suspended or discontinued at any time, and does not have a specified expiration date. 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.
For the three months ended June 30, 2022, we repurchased approximately 0.2 million shares of our common stock under the stock repurchase plan for an aggregate purchase price of approximately $4.5 million.
For the six months ended June 30, 2022, we repurchased approximately 1.9 million shares of our common stock under the stock repurchase plan for an aggregate purchase price of approximately $35.0 million. The remaining authorized amount under the stock repurchase plan as of June 30, 2022, was approximately $65.0 million. For the three and six months ended June 30, 2021, we did not repurchase any shares of our common stock under the stock repurchase plan. As of June 30, 2021, there was approximately $71.7 million in remaining capacity under
Subject to the stock repurchase plan. As partterms of our overall capital allocation strategy, we will assess future share purchases against other alternative uses of capital, which include investments in our businesses, acquiring companies or assets, repurchasesCredit Agreement, a portion of our outstanding debt, and other uses offuture capital that we deem to be inrequirements over the best interests of stockholders.

next twelve months may encompass share repurchases under this plan.
Contractual Obligations and Commitments
As partOn July 1, 2020, we closed the acquisition of the HKFS Acquisition, theAvantax Planning Partners, formerly “HKFS”, for an upfront cash purchase price paid by us isof $104.4 million. The purchase price was subject to two post-closingvariable contingent consideration, or earn-out payments. The amountpayments (the “HKFS Contingent Consideration”), totaling a maximum of the$60.0 million.
The HKFS Contingent Consideration to be paid is determined based on advisory asset levels and the achievement of certain performance goals (i) for the period beginning on July 1, 2020 and ending on July 1,June 30, 2021 and (ii) for the period beginning on July 1, 2021 and ending on July 1,June 30, 2022. Pursuant to the Stock Purchase Agreement, dated as of January 6, 2020, by and among the Company, HKFS, the selling stockholders named therein (the “Sellers”
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“Sellers”), and JRD Seller Representative, LLC, as the Sellers’ representative (as amended on April 7, 2020, June 30, 2020, and June 29, 2021) (the “HKFS Purchase Agreement”), the maximum aggregate amount that we would be required to pay for
Blucora, Inc. | Q2 2021 Form 10-Q 40

each earn-out period is $30.0 million. If the asset market values on the applicable measurement date fall below certain specified thresholds, we would not be required to make any earn-outno payment of consideration is owed to the Sellers for such period.
The estimatedBased on advisory asset levels and the achievement of performance goals for the first earn-out period, we paid the full $30.0 million to the Sellers in the third quarter of 2021. Based on ending advisory asset levels and the achievement of performance goals for the second earn-out period specified in the HKFS Purchase Agreement, the fair value (as calculated in accordance with GAAP) of the HKFS Contingent Consideration liability was $53.7$23.0 million as of June 30, 2021. The portion of the HKFS Contingent Consideration liability related2022 and is expected to the first earn-out period was $30.0 million as of June 30, 2021, and this value was based on the earn-out payment (calculated in accordance with the amended HKFS Purchase Agreement and based on actual advisory asset levels as of June 30, 2021) we will makebe paid in the third quarter of 2021.2022. This amount is included within “Accrued expenses and other current liabilities” on the condensed consolidated balance sheets.
The estimated fair valueIn addition, the Company has entered into several asset purchase agreements that are accounted for as asset acquisitions. These acquisitions may include up-front cash consideration, fixed deferred cash consideration, and contingent consideration arrangements. Future fixed payments are recognized as customer relationship intangible assets on the date of the portion of the HKFSacquisition. Contingent Consideration liability relatedconsideration arrangements encompass obligations to make future payments to the second earn-out period was $23.7 million asprevious sellers contingent upon the achievement of future financial targets. These contingent payments are not recognized until all contingencies are resolved and the consideration is paid. As of June 30, 2021. While this amount2022, the maximum future fixed and contingent payments associated with these asset acquisitions was calculated in accordance$19.2 million, with the fair value guidance contained in Accounting Standards Codification 820, Fair Value Measurements, there are a number of assumptions and estimates factored into this fair value (including a risk-adjusted discount rate), and the actual earn-outspecified payment could differdates from the estimated fair value.
Additional information on our contractual obligations and commitments can be found in our Form 10-K for the year ended December 31, 2020.
Off-balance Sheet Arrangements
We had no off-balance sheet arrangements as of June 30, 2021.2022 through 2026.
Cash Flows
Our cash flows were comprised of the following:following (in thousands):
(In thousands)Six months ended June 30,
Six Months Ended June 30,
20212020Change ($) 20222021$ Change
Net cash provided by operating activitiesNet cash provided by operating activities$97,271 $34,374 $62,897 Net cash provided by operating activities$85,663 $97,271 $(11,608)
Net cash used by investing activitiesNet cash used by investing activities(14,425)(19,072)4,647 Net cash used by investing activities(13,648)(14,425)777 
Net cash used by financing activitiesNet cash used by financing activities(608)(10,405)9,797 Net cash used by financing activities(35,542)(608)(34,934)
Net increase in cash, cash equivalents, and restricted cashNet increase in cash, cash equivalents, and restricted cash$82,238 $4,897 $77,341 Net increase in cash, cash equivalents, and restricted cash$36,473 $82,238 $(45,765)
Net cashCash from operating activitiesOperating Activities
Net cash fromprovided by operating activities consists of net income, (loss), offset by certain non-cash adjustments, and changes in operating assets and liabilities. Operating cash flows and changes in operating assets and liabilities, which were as follows:follows (in thousands):
(In thousands)Six months ended June 30,
 20212020Change ($)
Net income (loss)$59,254 $(265,849)$325,103 
Non-cash adjustments53,438 306,914 (253,476)
Operating cash flows before changes in operating assets and liabilities112,692 41,065 71,627 
Changes in operating assets and liabilities(15,421)(6,691)(8,730)
Net cash provided by operating activities$97,271 $34,374 $62,897 
Six Months Ended June 30,
 20222021$ Change
Net income$74,045 $59,254 $14,791 
Non-cash adjustments to net income33,561 53,438 (19,877)
Operating cash flows before changes in operating assets and liabilities107,606 112,692 (5,086)
Changes in operating assets and liabilities, net of acquisitions and disposals(21,943)(15,421)(6,522)
Net cash provided by operating activities$85,663 $97,271 $(11,608)
ForNet cash provided by operating activities for the six months ended June 30, 2021 compared to the six months ended June 30, 2020,2022, included $107.6 million of operating cash flows before changes in operating assets and liabilities increased $71.6and $21.9 million primarily dueof changes in operating assets and liabilities. Non-cash adjustments to the following factors:
•Operatingnet income from our Tax Software business increased $69.9 million; and
•Executive transition costs of $9.8 million were recognized for the six months ended June 30, 2020 due2022 primarily related to depreciation and amortization costs of $22.8 million, stock-based compensation of $11.4 million, changes in the departurefair value of certain Company executives.
Changesthe HKFS Contingent Consideration liability of $5.3 million, and $2.4 million of amortization related to payments made to financial professionals in operating assets and liabilities forsupport of ongoing growth programs. As compared to the six months ended June 30, 2021, included $10.5changes in operating assets and liabilities, net of acquisitions, reduced operating cash flows by $6.5 million primarily due to $6.9 million in payments made to financial professionals in support of ongoing growth programs.programs, and the timing of settlement for our working capital accounts.
Blucora, Inc. | Q2 20212022 Form 10-Q 4136

Net cashCash from investing activitiesInvesting Activities
Net cash used by investing activities consists of acquisitions and purchases of property, and equipment, and asset acquisitions. Investing cash flowssoftware, and were as follows:follows (in thousands):
(In thousands)Six months ended June 30,
20212020Change ($)
Six Months Ended June 30,
Purchases of property and equipment$(13,544)$(19,072)$5,528 
20222021$ Change
Purchases of property, equipment, and softwarePurchases of property, equipment, and software$(11,790)$(13,544)$1,754 
Asset acquisitionsAsset acquisitions(881)— (881)Asset acquisitions(1,858)(881)(977)
Net cash used by investing activitiesNet cash used by investing activities$(14,425)$(19,072)$4,647 Net cash used by investing activities$(13,648)$(14,425)$777 
For the six months ended June 30, 20212022, compared to the six months ended June 30, 2020,2021, net cash used by investing activities decreased $4.6$0.8 million primarily due to decreased purchases of property and equipment followingreduced internally developed capital software expenditures, in the first half of 2020 related to our new headquarters, partially offset by the execution ofincreases in cash outflows for asset acquisitions in the first half of 2021.
For the remainder of 2021, we expect to make cash outlays of $10.0 million to $20.0 million as we seek to execute our strategy of acquiring independent wealth management practices.acquisitions.
Net cashCash from financing activitiesFinancing Activities
Net cash from financing activities primarily consists of debt issuance and repayments, common stock and stock-based awards transactions, related to the issuance of debt and stock. Our financing activities can fluctuate from period-to-period based upon our financing needs.acquisition-related contingent consideration payments. Financing cash flows were as follows:follows (in thousands):
(In thousands)Six months ended June 30,
20212020Change ($)Six Months Ended June 30,
Proceeds from credit facilities, net of debt issuance costs and debt discounts$(502)$55,000 $(55,502)
20222021$ Change
Proceeds from credit facilities, net of debt discount and issuance costsProceeds from credit facilities, net of debt discount and issuance costs$— $(502)$502 
Payments on credit facilitiesPayments on credit facilities(906)(65,625)64,719 Payments on credit facilities(906)(906)— 
Acquisition-related contingent consideration paymentsAcquisition-related contingent consideration payments(98)— (98)
Stock repurchasesStock repurchases(35,000)— (35,000)
Proceeds from stock option exercisesProceeds from stock option exercises284 25 259 Proceeds from stock option exercises174 284 (110)
Proceeds from issuance of stock through employee stock purchase planProceeds from issuance of stock through employee stock purchase plan1,845 1,201 644 Proceeds from issuance of stock through employee stock purchase plan2,324 1,845 479 
Tax payments from shares withheld for equity awardsTax payments from shares withheld for equity awards(1,329)(1,006)(323)Tax payments from shares withheld for equity awards(2,036)(1,329)(707)
Net cash used by financing activitiesNet cash used by financing activities$(608)$(10,405)$9,797 Net cash used by financing activities$(35,542)$(608)$(34,934)
For the six months ended June 30, 20212022, compared to the six months ended June 30, 2020, net2021, we used $34.9 million more cash provided byfor financing activities, increased $9.8 million primarily due to borrowing and repayment activitythe repurchase of approximately 1.9 million shares of our common stock under the Revolver in the prior period.stock repurchase plan for an aggregate purchase price of approximately $35.0 million.
Critical Accounting Policies and Estimates
This Management’s Discussion and Analysis of Financial Condition and Results of Operations and the disclosures included elsewhere in this Quarterly Report on Form 10-Q are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and disclosure of contingencies.
The SEC has defined a company’s most critical In some cases, we could have reasonably used different accounting policies as the ones thatand estimates.
We have identified certain accounting estimates which involve a significant level of estimation uncertainty and have had or are the most importantreasonably likely to the portrayal of the company’shave a material impact on our financial condition andor results of operations and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.operations. On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience, current conditions, and on various other assumptions that we believe to be reasonable under the circumstances and, based on information available to us at that time, we make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources, as well as identify and assess our accounting treatment with respect to commitments and contingencies. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions. The critical accounting policies thatestimates which we believe involveto be the more significant judgments and estimates usedmost critical in the preparation of our condensed consolidated financial statements involve wealth management revenue recognition, tax software revenue recognition, income taxes, business combinations, goodwill impairment, and goodwill impairment.income taxes. We continually update and assess the facts, circumstances, and circumstances regarding all of theseassumptions used in making both our critical accounting mattersestimates and judgments related to our other significant accounting matters affecting estimates in our financial statements.
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matters.
There have been no material changes in our critical accounting policies as disclosed under “Critical Accounting PoliciesEstimates” in Part II, Item 7 and Estimates” andin Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Blucora, Inc. | Q2 2022 Form 10-Q 37

Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the financial instruments infor which we are exposed to market risk, as disclosed within our Annual Report on Form 10-K for the year ended December 31, 2021, during the six months ended June 30, 2021.2022. As of June 30, 2021,2022, we had $562.3$560.4 million in principal amount of debt outstanding under the Term Loan of our Senior Secured Credit Facility, which carries a degree of interest rate risk. This debt has a floating rate portion of its interest rate tied to the London Interbank Offered Rate (“LIBOR”).LIBOR. For further information on our outstanding debt, see “Item 1. Financial Statements—Note 4.5” and the section “Liquidity and Capital Resources” of“Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the subheading “Indebtedness.” A hypothetical 100 basis point increase in LIBOR on June 30, 20212022 would result in a $16.6$10.9 million increase in our 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, 2020.

2021.
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 June 30, 2021.2022. 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 June 30, 2021.2022.
Changes in Internal Control over Financial Reporting
Our internal control environment has been impacted by work-from-home requirements for our employees. These requirements began in March 2020 and have continued through the date of this report. While modifications were made to the manner in which controls were performed, these changes did not have a material impact on our internal control over financial reporting, and thereThere were no changes to our internal control over financial reporting during the quartersix months ended June 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
See “Item 1. Financial Statements—Note 7”8” for additional information on ourregarding legal proceedings.

Item 1A. Risk Factors
Our business and future results may be affected by a number of risks and uncertainties that should be considered carefully. In addition, this reportForm 10-Q 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 our Annual Report on Form 10-K for the year ended December 31, 20202021 and the risks set forth below.
We believe that there have been no material changes in our risk factors as previously disclosed in theour Annual Report on Form 10-K other than as set forth below. The occurrence of one or more offor the events listed below could have a material adverse effect on our business, prospects, results of operations, reputation, financial condition, 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.”
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RISKS ASSOCIATED WITH OUR BUSINESSES
Our business could be adversely affected as a result of actions of activist stockholders.
During 2021, we were the target of a proxy contest initiated by an activist stockholder, which required us to incur significant legal and consulting costs, proxy solicitation expenses, and administrative and associated costs, and required significant time and attention by our board of directors and management.
During the proxy contest, the activist stockholder targeted communications directly to our financial professionals and employees. As a result, it may be more difficult for us to pursue our strategic initiatives or attract and retain financial professionals and qualified employees and business partners, any of which could have an adverse effect on our business, financial condition, and operating results.
We have, and may in the future, become party to litigation as a result of matters arising in connection with the proxy contest, which could serve as a distraction to our board of directors and management and could require us to incur significant additional costs.year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 19, 2019, we announced that our board of directors authorizedThe Company has 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 madestock through a variety of methods, including open market or privately negotiated transactions. As of June 30, 2022, the remaining authorized repurchases under the stock repurchase plan was $65.0 million.
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The timing and numberfollowing table details our repurchases 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, may be suspended or discontinued at any time, and does not have a specified expiration date.
Forcommon stock for the six months ended June 30, 2021, we did not repurchase any shares of our common stock under2022 (in thousands, except the stock repurchase plan. As of June 30, 2021, there was approximately $71.7 million in remaining capacity under the stock repurchase plan.average price paid per share data):
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs
January 1-31, 2022190 $15.73 190 $97,007 
February 1-28, 2022524 $18.12 524 $87,510 
March 1-31, 2022931 $19.39 931 $69,463 
April 1-30, 2022230 $19.40 230 $65,000 
May 1-31, 2022— $— — $65,000 
June 1-30, 2022— $— — $65,000 
Total1,875 $18.67 1,875 
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Blucora, Inc. | Q2 20212022 Form 10-Q 4439

Item 6. Exhibits
Exhibit
Number		Exhibit DescriptionFormDate of
First Filing		Exhibit NumberFiled
Herewith
2.1#8-KMarch 19, 20192.1
2.2#8-KJuly 1, 20202.1
2.38-KJuly 2, 20212.1
10.18-KApril 27, 202110.1
31.1X
31.2X
32.1*X
32.2*X
101The following financial statements from the Company's Form 10-Q for the fiscal quarter ended June 30, 2021, formatted in Inline XBRL: (i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Unaudited Condensed Consolidated Statements of Stockholders' Equity; (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Condensed Consolidated Financial StatementsX
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)X
Exhibit
Number		Exhibit DescriptionFormDate of
First Filing		Exhibit NumberFiled
Herewith
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 guarantor8-KMarch 19, 20192.1
Stock Purchase Agreement, dated as of January 6, 2020, by and among Blucora, Inc., Honkamp Krueger Financial Services, Inc., the sellers named therein, and JRD Seller Representative, LLC, as the sellers’ representative, as amended by First Amendment to Stock Purchase Agreement, dated April 7, 2020 and Second Amendment to Stock Purchase Agreement, dated June 30, 20208-KJuly 1, 20202.1
Third Amendment to Stock Purchase Agreement, dated June 29, 2021, by and among Spirit Acquisitions, LLC, Honkamp Krueger Financial Services, Inc., the sellers named therein, and JRD Seller Representative, LLC, as the sellers’ representative8-KJuly 2, 20212.1
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))X
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))X
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350)X
Certification of Principal Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350)X
101The following financial statements from the Company's Form 10-Q for the fiscal quarter ended June 30, 2022, formatted in Inline XBRL: (i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations, (iii) Unaudited Condensed Consolidated Statements of Stockholders' Equity; (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Condensed Consolidated Financial StatementsX
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)X
____________________________
#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.
#Schedules and exhibits have been omitted pursuant to Item 601(a)(5) 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.
Blucora, Inc. | Q2 20212022 Form 10-Q 4540

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.
By:/s/ Marc Mehlman
 Marc Mehlman
Chief Financial Officer
(On behalf of the Registrantregistrant and as
Principal Financial Officer)
Date:August 4, 20218, 2022

Blucora, Inc. | Q2 20212022 Form 10-Q 4641