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 ~~September 30, 2021~~March 31, 2022


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

For the transition period from to

Commission File Number: 000-25131

Blucora, Inc.

(Exact name of registrant as specified in its charter)


Delaware			91-1718107
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

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 class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

BCOR

NASDAQ Global Select Market

Indicate 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	☐ý	Accelerated filer	ý☐
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 ~~October 28, 2021, 48,718,718~~April 27, 2022, 47,247,539 shares of the registrant’s Common Stock were outstanding.

TABLE OF CONTENTS


PART I . FINANCIAL INFORMATION		Page
Item 1.	Financial Statements	5
	~~Unaudited~~ Condensed Consolidated Balance Sheets (Unaudited)	5
	~~Unaudited~~ Condensed Consolidated Statements of ~~Comprehensive Income (Loss)~~Operations (Unaudited)	6
	~~Unaudited~~ Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	7
	~~Unaudited~~ Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2119
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4537
Item 4.	Controls and Procedures	4637

PART II . OTHER INFORMATION
Item 1.	Legal Proceedings	4638
Item 1A.	Risk Factors	4638
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4738
Item 3.	Defaults Upon Senior Securities	4738
Item 4.	Mine Safety Disclosures	4738
Item 5.	Other Information	4738
Item 6.	Exhibits	4840

Signatures		4941

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. | ~~Q3 2021~~Q1 2022 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 attract and retain financial professionals, ~~qualified~~ employees, clients, and customers, as well as our ability to provide strong customer/client service;

•the impact of the 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 ability to retain employees and acquired client assets following acquisitions;~~

•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;

•~~the compromising of confidentiality, availability or integrity of information, including cyberattacks;~~

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

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

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

•risks related to goodwill and ~~other~~acquired intangible asset impairment;

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

•risks associated with the use and implementation of information technology and the effect of security breaches, computer viruses, and computer hacking attacks;

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 3

•our ability to comply with laws and regulations regarding privacy and protection of user data;

•our ability to maintain our relationships with third-party partners, providers, suppliers, vendors, distributors, contractors, financial institutions, industry associations, and licensing partners, and our expectations regarding and reliance on the products, tools, platforms, systems, and services provided by these third parties;

•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. | ~~Q3 2021~~Q1 2022 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)


							March 31, 2022		December 31, 2021
		September 30, 2021		December 31, 2020			(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	184,926	$	150,125	Cash and cash equivalents	$	144,222	$	134,824
Cash segregated under federal or other regulations		536		637
Accounts receivable, net of allowance		17,886		12,736

Accounts receivable, net						Accounts receivable, net	26,618		21,906
Commissions and advisory fees receivable	Commissions and advisory fees receivable	25,003		26,132		Commissions and advisory fees receivable	22,890		25,073
Other receivables		468		717
Prepaid expenses and other current assets, net		11,119		10,321

Prepaid expenses and other current assets						Prepaid expenses and other current assets	21,695		18,476
Total current assets	Total current assets	239,938		200,668		Total current assets	215,425		200,279
Long-term assets:	Long-term assets:					Long-term assets:
Property and equipment, net		68,950		58,500
Property, equipment, and software, net						Property, equipment, and software, net	73,687		73,638
Right-of-use assets, net	Right-of-use assets, net	20,818		23,455		Right-of-use assets, net	20,113		20,466
Goodwill		454,821		454,821
Other intangible assets, net		304,435		322,179
Goodwill, net						Goodwill, net	454,821		454,821
Acquired intangible assets, net						Acquired intangible assets, net	296,894		302,289

Other long-term assets	Other long-term assets	14,519		4,569		Other long-term assets	23,019		20,450
Total long-term assets	Total long-term assets	863,543		863,524		Total long-term assets	868,534		871,664
Total assets	Total assets	$	1,103,481	$	1,064,192	Total assets	$	1,083,959	$	1,071,943
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	8,932	$	9,290	Accounts payable	$	23,879	$	8,216
Commissions and advisory fees payable	Commissions and advisory fees payable	18,297		19,021		Commissions and advisory fees payable	15,387		17,940
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	75,375		56,419		Accrued expenses and other current liabilities	61,255		65,678
Deferred revenue—current		5,469		12,298
Lease liabilities—current		4,429		2,304
Current deferred revenue						Current deferred revenue	8,459		13,180
Current lease liabilities						Current lease liabilities	4,945		4,896
Current portion of long-term debt	Current portion of long-term debt	1,790		1,784		Current portion of long-term debt	1,812		1,812
Total current liabilities	Total current liabilities	114,292		101,116		Total current liabilities	115,737		111,722
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Long-term debt, net	Long-term debt, net	552,987		552,553		Long-term debt, net	553,297		553,134
Deferred tax liability, net		29,502		30,663
Deferred revenue—long-term		5,553		6,247
Lease liabilities—long-term		34,020		36,404
Long-term lease liabilities						Long-term lease liabilities	32,504		33,267
Deferred tax liabilities, net						Deferred tax liabilities, net	19,480		20,124
Long-term deferred revenue						Long-term deferred revenue	5,090		5,322
Other long-term liabilities	Other long-term liabilities	7,992		24,919		Other long-term liabilities	8,978		6,752
Total long-term liabilities	Total long-term liabilities	630,054		650,786		Total long-term liabilities	619,349		618,599
Total liabilities	Total liabilities	744,346		751,902		Total liabilities	735,086		730,321

Commitments and contingencies (Note 8)		0		0
Commitments and contingencies (Note 9)						Commitments and contingencies (Note 9)	0		0

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, par value $0.0001 per share—900,000 shares authorized; 50,025 shares issued and 48,719 shares outstanding at September 30, 2021; 49,483 shares issued and 48,177 shares outstanding at December 31, 2020		5		5
Common stock, par value $0.0001 per share—900,000 shares authorized; 50,384 shares issued and 47,433 shares outstanding at March 31, 2022; 50,137 shares issued and 48,831 shares outstanding at December 31, 2021						Common stock, par value $0.0001 per share—900,000 shares authorized; 50,384 shares issued and 47,433 shares outstanding at March 31, 2022; 50,137 shares issued and 48,831 shares outstanding at December 31, 2021	5		5
Additional paid-in capital	Additional paid-in capital	1,613,624		1,598,230		Additional paid-in capital	1,622,973		1,619,805
Accumulated deficit	Accumulated deficit	(1,226,095)		(1,257,546)		Accumulated deficit	(1,215,169)		(1,249,789)

Treasury stock, at cost—1,306 shares at September 30, 2021 and December 31, 2020		(28,399)		(28,399)
Treasury stock, at cost— 2,951 shares at March 31, 2022 and 1,306 shares at December 31, 2021						Treasury stock, at cost— 2,951 shares at March 31, 2022 and 1,306 shares at December 31, 2021	(58,936)		(28,399)
Total stockholders’ equity	Total stockholders’ equity	359,135		312,290		Total stockholders’ equity	348,873		341,622
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,103,481	$	1,064,192	Total liabilities and stockholders’ equity	$	1,083,959	$	1,071,943

See accompanying ~~notes to unaudited condensed consolidated financial statements.~~notes.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 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 September 30,				Nine months ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Revenue:	Revenue:									Revenue:
Wealth management services revenue		$	169,135	$	135,932	$	486,021	$	396,805
Tax software services revenue		5,039		39,421		220,848		202,990
Wealth Management										Wealth Management	$	166,403	$	154,491
Tax Software										Tax Software	141,150		123,892
Total revenue	Total revenue	174,174		175,353		706,869		599,795		Total revenue	307,553		278,383
Operating expenses:	Operating expenses:									Operating expenses:
Cost of revenue:	Cost of revenue:									Cost of revenue:
Wealth management services cost of revenue		120,641		96,122		343,174		282,332
Tax software services cost of revenue		2,323		2,692		12,330		9,759
Wealth Management										Wealth Management	119,874		108,623
Tax Software										Tax Software	9,426		5,578
Total cost of revenue	Total cost of revenue	122,964		98,814		355,504		292,091		Total cost of revenue	129,300		114,201
Engineering and technology	Engineering and technology	7,874		6,007		22,233		21,899		Engineering and technology	8,504		7,128
Sales and marketing	Sales and marketing	28,399		31,018		140,809		150,785		Sales and marketing	84,403		77,562
General and administrative	General and administrative	23,102		18,605		71,619		63,533		General and administrative	29,075		24,685
Acquisition and integration	Acquisition and integration	2,241		10,276		28,513		18,782		Acquisition and integration	1,666		8,103
Depreciation	Depreciation	2,867		1,874		8,371		5,345		Depreciation	2,931		2,300
Amortization of other acquired intangible assets		7,009		7,746		21,247		22,167
Impairment of goodwill		—		—		—		270,625
Amortization of acquired intangible assets										Amortization of acquired intangible assets	6,631		7,175

Total operating expenses	Total operating expenses	194,456		174,340		648,296		845,227		Total operating expenses	262,510		241,154
Operating income (loss)		(20,282)		1,013		58,573		(245,432)
Other loss, net		(8,295)		(11,963)		(24,202)		(23,386)
Income (loss) before income taxes		(28,577)		(10,950)		34,371		(268,818)
Income tax benefit (expense)		774		(15,256)		(2,920)		(23,237)
Net income (loss)		$	(27,803)	$	(26,206)	$	31,451	$	(292,055)
Net income (loss) per share:
Operating income										Operating income	45,043		37,229
Interest expense and other, net										Interest expense and other, net	(7,841)		(7,883)
Income before income taxes										Income before income taxes	37,202		29,346
Income tax expense										Income tax expense	(2,582)		(1,700)
Net income										Net income	$	34,620	$	27,646

Net income per share:										Net income per share:
Basic	Basic	$	(0.57)	$	(0.55)	$	0.65	$	(6.09)	Basic	$	0.71	$	0.57
Diluted	Diluted	$	(0.57)	$	(0.55)	$	0.64	$	(6.09)	Diluted	$	0.70	$	0.56
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	48,707		48,039		48,492		47,936		Basic	48,513		48,261
Diluted	Diluted	48,707		48,039		49,373		47,936		Diluted	49,747		49,097
Comprehensive income (loss):
Net income (loss)		$	(27,803)	$	(26,206)	$	31,451	$	(292,055)
Other comprehensive income, net of income taxes		—		—		—		272
Comprehensive income (loss)		$	(27,803)	$	(26,206)	$	31,451	$	(291,783)

See accompanying ~~notes to unaudited condensed consolidated financial statements.~~notes.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 6

BLUCORA, INC.

~~UNAUDITED~~ CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

~~(In~~(Unaudited) (In thousands)

Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss
Common stock Treasury stock
Shares Amount Shares Amount Total
Balance as of December 31, 2020 49,483 $ 5 $ 1,598,230 $ (1,257,546) $ — (1,306) $ (28,399) $ 312,290
Common stock issued for stock options and restricted stock units 132 — 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, 2021 49,615 $ 5 $ 1,602,948 $ (1,229,900) $ — (1,306) $ (28,399) $ 344,654
Common stock issued for stock options, restricted stock units, and employee stock purchase plan 347 — 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, 2021 49,962 $ 5 $ 1,609,193 $ (1,198,292) $ — (1,306) $ (28,399) $ 382,507
Common stock issued for stock options and restricted stock units 63 — 328 — — — — 328
Stock-based compensation — — 4,387 — — — — 4,387
Tax payments from shares withheld for equity awards — — (284) — — — — (284)
Net loss — — — (27,803) — — — (27,803)
Balance as of September 30, 2021 50,025 $ 5 $ 1,613,624 $ (1,226,095) $ — (1,306) $ (28,399) $ 359,135
Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss
Common stock Treasury stock
Shares Amount Shares Amount Total
Balance as of December 31, 2019 49,059 $ 5 $ 1,586,972 $ (914,791) $ (272) (1,306) $ (28,399) $ 643,515
Common stock issued for stock options and restricted stock units 89 — — — — — — —
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, 2020 49,148 $ 5 $ 1,584,854 $ (1,230,285) $ — (1,306) $ (28,399) $ 326,175
Common stock issued for stock options, restricted stock units, and employee stock purchase plan 192 — 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, 2020 49,340 $ 5 $ 1,589,895 $ (1,180,640) $ — (1,306) $ (28,399) $ 380,861
Common stock issued for stock options and restricted stock units 10 — — — — — — —
Stock-based compensation — — 4,517 — — — — 4,517
Tax payments from shares withheld for equity awards — — (28) — — — — (28)
Net loss — — — (26,206) — — — (26,206)
Balance as of September 30, 2020 49,350 $ 5 $ 1,594,384 $ (1,206,846) $ — (1,306) $ (28,399) $ 359,144


				Additional paid-in capital		Accumulated deficit
	Common stock							Treasury stock
	Shares	Amount						Shares		Amount	Total
Balance as of December 31, 2021	50,137	$	5	$	1,619,805	$	(1,249,789)		1,306		$	(28,399)	$	341,622
Common stock issued pursuant to stock incentive plans and employee stock purchase plans	247	—		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, 2022	50,384	$	5	$	1,622,973	$	(1,215,169)		2,951		$	(58,936)	$	348,873


				Additional paid-in capital		Accumulated deficit
	Common stock								Treasury stock
	Shares	Amount						Shares		Amount	Total
Balance as of December 31, 2020	49,483	$	5	$	1,598,230	$	(1,257,546)			1,306	$	(28,399)	$	312,290
Common stock issued pursuant to stock incentive plans and employee stock purchase plans	132	—		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, 2021	49,615	$	5	$	1,602,948	$	(1,229,900)			1,306	$	(28,399)	$	344,654

See accompanying ~~notes to unaudited condensed consolidated financial statements.~~notes.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 7

BLUCORA, INC.

~~UNAUDITED~~ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(In~~(Unaudited) (In thousands)

Nine months ended September 30,
2021 2020
Operating activities:
Net income (loss) $ 31,451 $ (292,055)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Stock-based compensation 15,499 7,220
Depreciation and amortization of acquired intangible assets 32,498 29,619
Impairment of goodwill — 270,625
Reduction of right-of-use lease assets 2,694 8,335
Deferred income taxes (1,161) 23,199
Amortization of debt issuance costs 1,128 1,006
Accretion of debt discounts 851 414
Gain on the sale of a business — (349)
Change in the fair value of acquisition-related contingent consideration 19,500 (1,000)
Accretion of lease liability 731 1,413
Other 1,371 984
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable (5,008) 12,267
Commissions and advisory fees receivable 1,129 (1,480)
Other receivables 249 (2,909)
Prepaid expenses and other current assets (798) 2,555
Other long-term assets (10,898) 2,763
Accounts payable (358) (7,018)
Commissions and advisory fees payable (500) (3,012)
Lease liabilities (1,047) (3,568)
Deferred revenue (7,523) (8,582)
Accrued expenses and other current and long-term liabilities (5,417) (5,113)
Net cash provided by operating activities 74,391 35,314
Investing activities:
Purchases of property and equipment (21,624) (28,711)
Business acquisitions, net of cash acquired — (102,425)
Asset acquisitions, net of cash acquired (3,823) —
Proceeds from sale of a business — 349
Net cash used by investing activities (25,447) (130,787)
Financing activities:
Proceeds from credit facilities, net of debt issuance costs and debt discounts (502) 226,278
Payments on credit facilities (1,359) (66,078)
Proceeds from stock option exercises 535 25
Proceeds from issuance of stock through employee stock purchase plan 1,845 1,201
Tax payments from shares withheld for equity awards (1,613) (1,034)
Acquisition-related contingent consideration payments (13,150) —
Net cash provided (used) by financing activities (14,244) 160,392
Net increase in cash, cash equivalents, and restricted cash 34,700 64,919
Cash, cash equivalents, and restricted cash, beginning of period 150,762 86,450
Cash, cash equivalents, and restricted cash, end of period $ 185,462 $ 151,369
Supplemental cash flow information:
Cash paid for income taxes $ 2,864 $ 1,657
Cash paid for interest $ 21,626 $ 16,994
Non-cash investing activities:
Purchases of property and equipment through leasehold incentives $ — $ 9,726


	Three Months Ended March 31,
	2022		2021
Operating activities:
Net income	$	34,620	$	27,646
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization of acquired intangible assets	11,305		10,418
Stock-based compensation	6,225		5,610
Change in the fair value of acquisition-related contingent consideration	1,700		6,300


Reduction of right-of-use lease assets	353		569
Deferred income taxes	(644)		(269)
Amortization of debt discount and issuance costs	681		640


Accretion of lease liabilities	514		514
Other non-cash items	1,101		(78)
Changes in operating assets and liabilities, net of acquisitions and disposals:

Accounts receivable, net	(4,647)		(11,541)
Commissions and advisory fees receivable	2,183		111

Prepaid expenses and other current assets	(2,741)		(1,163)
Other long-term assets	(3,363)		(828)
Accounts payable	15,663		12,729
Commissions and advisory fees payable	(2,553)		(259)
Lease liabilities	(1,229)		(172)
Deferred revenue	(4,953)		(7,250)
Accrued expenses and other current and long-term liabilities	(6,872)		10,745
Net cash provided by operating activities	47,343		53,722
Investing activities:
Purchases of property, equipment, and software	(4,731)		(8,598)


Asset acquisitions	(751)		(587)


Net cash used by investing activities	(5,482)		(9,185)
Financing activities:

Payments on credit facilities	(453)		(453)


Stock repurchases	(30,537)		—


Proceeds from stock option exercises	96		63

Tax payments from shares withheld for equity awards	(1,569)		(865)
Net cash used by financing activities	(32,463)		(1,255)








Net increase in cash, cash equivalents, and restricted cash	9,398		43,282
Cash, cash equivalents, and restricted cash, beginning of period	134,824		150,762
Cash, cash equivalents, and restricted cash, end of period	$	144,222	$	194,044

Supplemental cash flow information:

Cash paid for income taxes	$	850	$	—
Cash paid for interest	$	7,107	$	7,123

See accompanying ~~notes to unaudited condensed consolidated financial statements.~~notes.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 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

Our ~~wealth management~~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 ~~the~~a 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 is an in-house/~~employee based~~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”). ~~Our employee-based RIA model, which we refer to as “Avantax Planning Partners,” also includes Avantax Wealth Management total client assets that have been~~We acquired ~~from Avantax Wealth Management financial professionals.~~

OnHKFS 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 designed~~order to create tighter brand alignment ~~bringing the Wealth Management business under~~through one common and recognizable brand.

Any reference to Avantax Planning Partners in this Form 10-Q is inclusive of HKFS.

Tax Software

~~The~~Our 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~~As a result of the continued impact 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 would typically be 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 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 further 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.

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 9~~

Segments

We have 2 reportable segments: (1) the Wealth Management segment and (2) the Tax Software segment.

Note 2: Summary of Significant Accounting Policies

Interim ~~financial information~~Financial 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

Blucora, Inc. | Q1 2022 Form 10-Q 9

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~~A summary of our significant accounting policies is included in Note 2 to the Consolidated Financial Statements in our Annual Report on ~~the condensed consolidated balance sheets and the condensed consolidated statements of cash flows (in thousands):~~
September 30,
2021 December 31,
2020
Cash and cash equivalents $ 184,926 $ 150,125
Cash segregated under federal or other regulations 536 637
Total cash, cash equivalents, and restricted cash $ 185,462 $ 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~~Form 10-K for the ~~exclusive benefit of our Avantax Wealth Management clients and is recognized as restricted cash on the condensed consolidated balance sheets.~~

~~Asset Acquisitions~~

Acquisitions that do not meet the criteria to be accounted for as a business combination are accounted for as an asset acquisition. Using a cost accumulation model, the purchase price, including acquisition costs and any contingent consideration, if the contingencies are met for such contingent consideration at or near the acquisition date, is allocated to the acquired assets and assumed liabilities based upon their relative fair values as of the acquisition date andyear ended December 31, 2021. There have been no goodwill is contemplated in the allocation process. Contingent consideration that is not earned at or near the acquisition date is capitalized as part of the cost of the assets acquired and is allocated to increase the eligible assets on a relative fair value basis.

We include the operations of an asset acquisition in our consolidated operating results beginning on the date of acquisition. The allocation of the purchase price to the assets acquired and liabilities assumed may require estimates, including but not limited to ones related to expected long-term revenues, future expected operating expenses, cost of capital, assumed attrition rates, and discount rates.

~~Goodwill~~

We assess goodwill for impairment at the reporting unit level, which consists of the Wealth Management reporting unit and the Tax Software reporting unit. 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 estimated fair value

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 10~~

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 estimated 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 tests, 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 is an estimate of fair value that uses 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 related to the reporting unit or overall business. The market approach is an estimate of fair value that takes income-based valuation multiples for a set of comparable companies and applies the valuation multiple to each reporting unit’s income.

For the Wealth Management reporting unit, the carrying value of the reporting unit exceeded its estimated fair value by $270.6 million. Therefore, we recorded an impairment of goodwill of $270.6 million as of March 31, 2020. For the Tax Software reporting unit, the carrying value of the reporting unit was significantly below its estimated fair value, and therefore, the goodwill of the Tax Software reporting unit was not considered impaired.

While no goodwill impairment triggering events were identified during the nine months ended September 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 estimated fair value of the Wealth Management reporting unit.

significant accounting policies since December 31, 2021.

Note 3: Segment Information and Revenue

We have 2 reportable ~~operating~~ 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.

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 11~~

Information on reportable ~~operating~~ segments currently presented to our chief operating decision maker and a reconciliation ~~of operating income (loss)~~ to consolidated net income ~~(loss)~~ are presented below (in thousands):


		Three months ended September 30,				Nine months ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Revenue:	Revenue:									Revenue:
Wealth Management revenue		$	169,135	$	135,932	$	486,021	$	396,805
Tax Software revenue		5,039		39,421		220,848		202,990
Wealth Management										Wealth Management	$	166,403	$	154,491
Tax Software										Tax Software	141,150		123,892
Total revenue	Total revenue	$	174,174	$	175,353	$	706,869	$	599,795	Total revenue	307,553		278,383
Operating income (loss):	Operating income (loss):									Operating income (loss):
Wealth Management	Wealth Management	$	19,564	$	17,498	$	60,356	$	51,827	Wealth Management	16,421		19,396
Tax Software	Tax Software	(13,864)		16,234		100,472		60,646		Tax Software	58,030		50,888
Corporate-level activity	Corporate-level activity	(25,982)		(32,719)		(102,255)		(357,905)		Corporate-level activity	(29,408)		(33,055)
Total operating income (loss)		(20,282)		1,013		58,573		(245,432)
Other loss, net		(8,295)		(11,963)		(24,202)		(23,386)
Income tax benefit (expense)		774		(15,256)		(2,920)		(23,237)
Net income (loss)		$	(27,803)	$	(26,206)	$	31,451	$	(292,055)
Total operating income										Total operating income	45,043		37,229
Interest expense and other, net										Interest expense and other, net	(7,841)		(7,883)
Income before income taxes										Income before income taxes	37,202		29,346
Income tax expense										Income tax expense	(2,582)		(1,700)
Net income										Net income	$	34,620	$	27,646

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

Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020
Wealth Management:
Advisory revenue $ 103,540 $ 82,612 $ 291,167 $ 227,672
Commission revenue 52,961 44,921 157,197 135,337
Asset-based revenue 5,659 4,351 16,514 18,911
Transaction and fee revenue 6,975 4,048 21,143 14,885
Total Wealth Management revenue $ 169,135 $ 135,932 $ 486,021 $ 396,805
Tax Software:
Consumer revenue $ 4,479 $ 38,482 $ 203,891 $ 186,724
Professional revenue 560 939 16,957 16,266
Total Tax Software revenue $ 5,039 $ 39,421 $ 220,848 $ 202,990

Blucora, Inc. | Q1 2022 Form 10-Q 10

Wealth Management ~~revenue recognition~~Revenue Recognition

Wealth management revenue primarily consists of advisory revenue, commission revenue, asset-based revenue, and transaction and fee revenue.

~~The~~Revenues by major category within the Wealth Management segment and the timing of Wealth Management revenue recognition was as follows (in thousands):

Three months ended September 30,
2021 2020
Recognized Upon Transaction Recognized Over Time Total Recognized Upon Transaction Recognized Over Time Total
Advisory revenue $ — $ 103,540 $ 103,540 $ — $ 82,612 $ 82,612
Commission revenue 22,372 30,589 52,961 16,884 28,037 44,921
Asset-based revenue — 5,659 5,659 — 4,351 4,351
Transaction and fee revenue 1,213 5,762 6,975 1,067 2,981 4,048
Total Wealth Management revenue $ 23,585 $ 145,550 $ 169,135 $ 17,951 $ 117,981 $ 135,932

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 12~~

Nine months ended September 30,
2021 2020
Recognized Upon Transaction Recognized Over Time Total Recognized Upon Transaction Recognized Over Time Total
Advisory revenue $ — $ 291,167 $ 291,167 $ — $ 227,672 $ 227,672
Commission revenue 65,815 91,382 157,197 55,068 80,269 135,337
Asset-based revenue — 16,514 16,514 — 18,911 18,911
Transaction and fee revenue 3,779 17,364 21,143 4,063 10,822 14,885
Total Wealth Management revenue $ 69,594 $ 416,427 $ 486,021 $ 59,131 $ 337,674 $ 396,805


	Three Months Ended March 31,
	2022		2021
Recognized upon transaction:
Commission	$	20,624	$	22,367
Transaction and fee	1,244		1,374
Total Wealth Management revenue recognized upon transaction	$	21,868	$	23,741
Recognized over time:
Advisory	$	107,169	$	91,119
Commission	27,031		30,167
Asset-based	5,663		5,329
Transaction and fee	4,672		4,135
Total Wealth Management revenue recognized over time	$	144,535	$	130,750
Total Wealth Management revenue:
Advisory	$	107,169	$	91,119
Commission	47,655		52,534
Asset-based	5,663		5,329
Transaction and fee	5,916		5,509
Total Wealth Management revenue	$	166,403	$	154,491

Tax Software ~~revenue recognition~~Revenue Recognition

We generate Tax Software revenue from the sale of digital tax preparation services, packaged tax preparation software, ancillary services, and multiple element arrangements that may include a combination of these items.

~~The~~Revenues by major category within the Tax Software segment and the timing of Tax Software revenue recognition was as follows (in thousands):

Three months ended September 30,
2021 2020
Recognized Upon Transaction Recognized Over Time Total Recognized Upon Transaction Recognized Over Time Total
Consumer revenue $ 4,479 $ — $ 4,479 $ 38,480 $ 2 $ 38,482
Professional revenue 370 190 560 641 298 939
Total Tax Software revenue $ 4,849 $ 190 $ 5,039 $ 39,121 $ 300 $ 39,421

Nine months ended September 30,
2021 2020
Recognized Upon Transaction Recognized Over Time Total Recognized Upon Transaction Recognized Over Time Total
Consumer revenue $ 203,891 $ — $ 203,891 $ 186,721 $ 3 $ 186,724
Professional revenue 14,626 2,331 16,957 13,822 2,444 16,266
Total Tax Software revenue $ 218,517 $ 2,331 $ 220,848 $ 200,543 $ 2,447 $ 202,990


	Three Months Ended March 31,
	2022		2021
Recognized upon transaction:
Consumer	$	125,261	$	110,567
Professional	13,784		12,127
Total Tax Software revenue recognized upon transaction	$	139,045	$	122,694
Recognized over time:

Professional	$	2,105	$	1,198
Total Tax Software revenue recognized over time	$	2,105	$	1,198
Total Tax Software revenue:
Consumer	$	125,261	$	110,567
Professional	15,889		13,325
Total Tax Software revenue	$	141,150	$	123,892

Note 4: Asset Acquisitions

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we completed ~~several~~ acquisitions in our Wealth Management business that met the criteria to be accounted for as asset acquisitions. ~~We paid $3.8 million in total~~Total initial purchase consideration, including acquisition costs ~~which~~and fixed deferred payments, was ~~allocated to the acquired assets and assumed liabilities, and primarily consisted of customer relationship intangibles. We are subject to additional contingent~~$1.2 million. This purchase consideration payments on these acquisitions in 2021 up to a maximum of $5.2 million over a four-year period that are contingent upon meeting certain revenue thresholds related to the respective asset acquisitions.

was

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 1311

allocated to the 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 March 31, 2022, the maximum future fixed and contingent payments associated with all prior asset acquisitions were $17.0 million, with specified payment dates from 2022 through 2026.

Note 5: Debt

Our debt consisted of the following as of the periods indicated in the table below (in thousands):
September 30, 2021 December 31, 2020
Principal
amount Discount Debt issuance costs Net
carrying
value Principal
amount Discount Debt issuance costs Net
carrying
value
Senior Secured Credit Facility $ 561,797 $ (3,322) $ (3,698) $ 554,777 $ 563,156 $ (4,173) $ (4,646) $ 554,337
Less: Current portion of long-term debt, net (1,790) (1,784)
Long-term debt, net $ 552,987 $ 552,553


	March 31, 2022		December 31, 2021
	Senior Secured Credit Facility
Principal outstanding	$	560,891	$	561,344
Unamortized debt issuance costs	(3,047)		(3,371)
Unamortized debt discount	(2,735)		(3,027)
Net carrying value	$	555,109	$	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 ~~which~~that 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 ~~sheet~~sheets as part of the total deferred financing costs associated with the New Revolver.

As of ~~September 30, 2021,~~March 31, 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.~~Loan. As of ~~September 30, 2021,~~March 31, 2022, we had ~~$561.8~~$560.9 million in principal amount outstanding under the Term Loan and no ~~amount~~amounts outstanding under the New Revolver. Based on aggregate loan commitments as of ~~September 30, 2021,~~March 31, 2022, approximately $90.0 million was available for future borrowings under the Senior Secured Credit Facility, subject to customary terms and conditions.

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. 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 ~~maturity date of May 22, 2024.~~Term Loan Maturity Date.

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 ~~September 30, 2021,~~March 31, 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. | Q1 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 ~~HKFS Acquisition~~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,

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 14~~

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 ~~September 30, 2021.~~

March 31, 2022.

Note 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 ~~our accompanying condensed consolidated statements of comprehensive income (loss) in~~ “General and administrative” expense for those net ~~lease expense~~costs related to leases used in our operations and within “Acquisition and integration” expense for those net ~~lease expense~~costs related to ~~the~~an unoccupied lease ~~resulting from~~assumed in a previous acquisition on the ~~acquisition~~condensed consolidated statements of ~~1st Global, Inc. and 1st Global Insurance Services, Inc. (together,~~ ~~“1st Global”) in 2019 (the~~ ~~“1st Global Acquisition”~~).operations.

~~Lease expense,~~Operating lease cost, net of sublease income, and cash paid on operating lease liabilities ~~and lease liabilities obtained from new right-of-use assets~~ for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows (in thousands):
Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020
Fixed lease expense $ 1,001 $ 1,566 $ 3,254 $ 5,652
Variable lease expense 462 191 707 778
Lease expense, before sublease income 1,463 1,757 3,961 6,430
Sublease income (116) (464) (348) (1,119)
Total lease expense, net of sublease income $ 1,347 $ 1,293 $ 3,613 $ 5,311
Additional lease information:
Cash paid on operating lease liabilities $ 602 $ 1,037 $ 1,047 $ 3,509
Lease liabilities obtained from new right-of-use assets (1)
$ — $ 1,352 $ 93 $ 21,766

~~__________________________~~


	Three Months Ended March 31,
	2022		2021
Fixed lease cost	$	973	$	1,154
Variable lease cost	402		143
Operating lease cost, before sublease income	1,375		1,297
Sublease income	(234)		(116)
Total operating lease cost, net of sublease income	$	1,141	$	1,181

Additional lease information:
Cash paid on operating lease liabilities	$	1,229	$	217

~~(1)Lease liabilities obtained from new right-of-use~~Right-of-use assets ~~for the nine months ended September 30, 2020 resulted from the new corporate headquarters lease that commenced in January 2020.~~

~~As of September 30, 2021, our weighted-average remaining~~and operating lease ~~term was approximately 10.6 years and our weighted-average operating lease discount rate was 5.4%.~~liabilities were recorded on the condensed consolidated balance sheets as follows (in thousands):


	March 31, 2022			December 31, 2021
Right-of-use assets, net	$	20,113		$	20,466

Current lease liabilities	$	4,945		$	4,896
Long-term lease liabilities	32,504			33,267
Total operating lease liabilities	$	37,449		$	38,163

Weighted-average remaining lease term (in years)	10.1			10.3
Weighted-average discount rate	5.4		%	5.4		%

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 1513

~~Operating~~The maturities of our operating lease liabilities ~~on the condensed consolidated balance sheets~~as of March 31, 2022 were as follows (in thousands):
September 30, 2021 December 31, 2020
Lease liabilities—current $ 4,429 $ 2,304
Lease liabilities—long-term 34,020 36,404
Total operating lease liabilities $ 38,449 $ 38,708

~~The scheduled maturities of our operating lease liabilities on the condensed consolidated balance sheet as of September 30, 2021 were as follows (in thousands):~~
Undiscounted cash flows:
Remainder of 2021 $ 804
2022 5,040
2023 5,172
2024 5,080
2025 5,013
Thereafter 30,324
Total undiscounted cash flows 51,433
Imputed interest (12,984)
Total operating lease liabilities $ 38,449



Undiscounted cash flows:
Remainder of 2022	$	3,811
2023	5,172
2024	5,080
2025	5,013
2026	4,193
Thereafter	26,130
Total undiscounted cash flows	49,399
Imputed interest	(11,950)
Present value of cash flows	$	37,449

Note 7: Balance Sheet Components

Prepaid expenses and other current assets ~~net,~~ consisted of the following (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Prepaid expenses	Prepaid expenses	$	7,523	$	9,643	Prepaid expenses	$	16,213	$	13,138

Other current assets	Other current assets	3,596		678		Other current assets	5,482		5,338
Total prepaid expenses and other current assets, net		$	11,119	$	10,321
Total prepaid expenses and other current assets						Total prepaid expenses and other current assets	$	21,695	$	18,476

Accrued expenses and other current liabilities consisted of the following (in thousands):
September 30, 2021 December 31, 2020
Salaries and related benefit expenses $ 23,069 $ 19,317
HKFS Contingent Consideration liability (1)(2)
25,400 17,900
Contingent liability from 1st Global Acquisition (2)
16,828 11,328
Accrued vendor and advertising costs 2,254 2,606
Accrued taxes 1,630 240
Other current liabilities 6,194 5,028
Total accrued expenses and other current liabilities $ 75,375 $ 56,419


	March 31, 2022		December 31, 2021
Salaries and related benefit expenses	$	10,518	$	26,417
HKFS Contingent Consideration liability (1)	30,000		28,300


Accrued legal costs	1,609		2,871
Accrued vendor and advertising costs	10,923		3,777
Accrued taxes	3,698		—
Other	4,507		4,313
Total accrued expenses and other current liabilities	$	61,255	$	65,678

__________________________

(1)As of September 30, 2021, this amount represents the estimated fair value of the second contingent consideration payment related to the HKFS Acquisition which is payable in the third quarter of 2022. As of December 31, 2020, this amount represents the estimated fair value of the first contingent consideration payment related to the HKFS Acquisition which was subsequently paid in the third quarter of 2021.

~~(2)~~For more information on the Company’s contingent liabilities, see "Note 8—9—Commitments and Contingencies."

Note 8: Fair Value Measurements

Certain 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.

•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.

Blucora, Inc. | Q1 2022 Form 10-Q 14

Assets and Liabilities Measured on a Recurring Basis

The fair value hierarchy of our financial assets and liabilities carried at estimated fair value and measured on a recurring basis were as follows (in thousands):


			Fair value measurements at the reporting date using
	March 31, 2022		Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)


Cash equivalents: money market and other funds	$	4,294	$	4,294	$	—	$	—

















Deferred compensation assets	905		905		—		—
Total assets at fair value	$	5,199	$	5,199	$	—	$	—

HKFS Contingent Consideration liability	$	30,000	$	—	$	—	$	30,000
Deferred compensation liabilities	905		905		—		—
Total liabilities at fair value	$	30,905	$	905	$	—	$	30,000


			Fair value measurements at the reporting date using
	December 31, 2021		Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents: money market and other funds	$	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 them utilizing quoted prices in active markets.

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 post-closing earn-out payments resulting from the acquisition of Avantax Planning Partners, formerly “HKFS” (see “Note 9—Commitments and Contingencies”). Based on advisory asset levels and the achievement of performance goals for the first earn-out period, we made the full $30.0 million payment 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 (calculated in accordance with the amended HKFS Purchase Agreement and based on estimated advisory asset levels as of June 30, 2022) was $30.0 million as of March 31, 2022 and is included in “Accrued expenses and other current liabilities” on the condensed consolidated balance sheets. 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 as of June 30, 2022, a risk-adjusted discount rate (which reflects the risk in the advisory asset projection) of 12.2%, asset volatility of 24.6%, and a credit spread of 1.9%. Significant increases to the discount rate, asset volatility, or credit spread inputs would have resulted in a significantly lower fair value measurement, and a

Blucora, Inc. | Q1 2022 Form 10-Q 15

significant decrease to the forecasted advisory asset levels would have resulted in a significantly lower fair value measurement.

A roll forward of the HKFS Contingent Consideration liability is as follows (in thousands):


	HKFS Contingent Consideration liability



Balance as of December 31, 2020	$	35,900
HKFS Contingent Consideration first earn-out payment	(30,000)
Valuation change recognized as expense	22,400
Balance as of December 31, 2021	28,300
Valuation change recognized as expense	1,700
Balance as of March 31, 2022	$	30,000

Changes in the fair value of this contingent consideration are reflected in “Acquisition and integration” expense on the condensed consolidated statements of operations.

Fair Value of Financial Instruments

We consider the carrying values of accounts receivable, commissions 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 March 31, 2022, the Term Loan’s principal amount was $560.9 million, and the fair value of the Term Loan’s principal amount was $560.2 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.

Note 8:9: 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.

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 16~~

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. The $5.5 million increase to the contingent liability reserve was recognized in “Acquisition and integration” expense on the accompanying condensed consolidated statements of comprehensive income for the nine months ended September 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 Acquisition~~Consideration Liability

On July 1, 2020, we closed the ~~HKFS Acquisition~~acquisition of Avantax Planning Partners, formerly “HKFS”, for an upfront cash purchase price of $104.4 million. The purchase price iswas subject to ~~2 post-closing~~variable 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-out~~no payment of consideration is owed to the Sellers for such period.

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 that both ~~that~~ it is 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, we~~

Blucora, Inc. | Q1 2022 Form 10-Q 16

We are not currently a party to any such matters for which we have recognized a material liability on our condensed consolidated balance sheet as of ~~September 30, 2021.~~March 31, 2022.

~~Note 9—Fair Value Measurements~~

~~In accordance with Accounting Standards Codification 820,~~ ~~Fair Value Measurements and Disclosures, certain 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.~~

•~~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.~~

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 17~~

~~Assets and liabilities measured on a recurring basis~~

~~The fair value hierarchy of our financial assets and liabilities carried at estimated fair value and measured on a recurring basis were as follows (in thousands):~~
Fair value measurements at the reporting date using
September 30, 2021 Quoted prices in
active markets
using identical
assets
(Level 1) Significant other
observable
inputs
(Level 2) Significant
unobservable
inputs
(Level 3)
Cash equivalents: money market and other funds $ 4,293 $ 4,293 $ — $ —
Total assets at fair value $ 4,293 $ 4,293 $ — $ —
HKFS Contingent Consideration liability $ 25,400 $ — $ — $ 25,400
Total liabilities at fair value $ 25,400 $ — $ — $ 25,400
Fair value measurements at the reporting date using
December 31, 2020 Quoted prices in
active markets
using identical
assets
(Level 1) Significant other
observable
inputs
(Level 2) Significant
unobservable
inputs
(Level 3)
Cash equivalents: money market and other funds $ 4,290 $ 4,290 $ — $ —
Total assets at fair value $ 4,290 $ 4,290 $ — $ —
HKFS Contingent Consideration liability $ 35,900 $ — $ — $ 35,900
Total liabilities at fair value $ 35,900 $ — $ — $ 35,900

~~Cash equivalents are classified within Level 1 of the fair value hierarchy because we value cash equivalents utilizing quoted prices in active markets.~~

The HKFS Contingent Consideration liability relates to the 2 post-closing earn-out payments resulting from the HKFS Acquisition (see "Note 8—Commitments and Contingencies"). Based on advisory asset levels and the achievement of performance goals for the first earn-out period, we made the full $30.0 million paymentWe have entered into indemnification agreements in the ~~third quarter~~ordinary course of ~~2021.~~

~~The estimated fair value of the portion of the HKFS Contingent Consideration liability related to the second earn-out period (calculated in accordance~~business with ~~the amended HKFS Purchase Agreement~~our officers and based on estimated advisory asset levels as of June 30, 2022) was $25.4 million as of September 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 12.0%, volatility of 24.8%, and a credit spread of 2.2%. 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 decreasesdirectors. Pursuant to these ~~inputs. A significant increase~~agreements, we may be obligated to advance payment of legal fees and costs incurred by the ~~forecasted advisory assets levels would have resulted in a significantly higher fair value measurement, while a significant decrease~~defendants pursuant to ~~the forecasted advisory asset levels would have resulted in a significantly lower fair value measurement.~~

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 18~~

~~A roll forward of the HKFS Contingent Consideration liability follows (in thousands):~~


	~~HKFS Contingent Consideration liability~~
~~Balance as of December 31, 2020~~ ~~(1)~~	$	~~35,900~~
~~HKFS Contingent Consideration first earn-out payment~~	~~(30,000)~~
~~Valuation change recognized as expense~~ ~~(2)~~	~~19,500~~
~~Balance as of September 30, 2021~~ ~~(1)~~	$	~~25,400~~

~~_________________________~~

~~(1)See “Note 7—Balance Sheet Components” for the current portion of the HKFS Contingent Consideration liability as of September 30, 2021~~our obligations under these indemnification agreements and ~~December 31, 2020.~~

~~(2)~~The change in the fair value of the HKFS Contingent Consideration liability is recognized in “Acquisition and integration” expenses on the condensed consolidated statements of comprehensive income (loss). For the three months ended September 30, 2021, we recognized a valuation change of $1.7 million.

~~Fair value of financial instruments~~

We consider the carrying values of accounts receivable, commissions and advisory fees receivable, other receivables, prepaid expenses, other current assets, accounts payable, commissions and advisory fees payable, accrued expenses, other current liabilities, and deferred revenues to approximate their fair values primarily due to their short-term natures.

As of September 30, 2021, the Term Loan’s principal amount was $561.8 million, and the fair value of the Term Loan’s principal amount was $562.5 million. As of December 31, 2020, the Term Loan’s principal amount was $563.2 million, and the fair value of the Term Loan’s principal amount was $561.7 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 September 30, 2021 and December 31, 2020, we had no amounts outstanding under the Revolver.~~

applicable Delaware law.

Note 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 September 30, Nine months ended September 30,
2021 2020 2021 2020
Interest expense $ 7,304 $ 7,254 $ 21,789 $ 17,410
Amortization of debt issuance costs 388 362 1,128 1,006
Accretion of debt discounts 290 276 851 414
Total interest expense 7,982 7,892 23,768 18,830
Interest income — (2) (2) (27)
Gain on sale of a business — (349) — (349)
Non-capitalized debt issuance expenses — 3,687 — 3,687
Other 313 735 436 1,245
Other loss, net $ 8,295 $ 11,963 $ 24,202 $ 23,386


	Three Months Ended March 31,
	2022		2021
Interest expense	$	7,130	$	7,183
Amortization of debt issuance costs	389		363
Amortization of debt discount	292		277
Total interest expense	7,811		7,823
Interest income and other	30		60



Interest expense and other, net	$	7,841	$	7,883

Note 11: Income Taxes
Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020
Income tax benefit (expense) $ 774 $ (15,256) $ (2,920) $ (23,237)

~~The Company recorded~~For 2022, our provision for income ~~tax benefit of $0.8 million and income tax expense of $2.9 million for the three and nine months ended September 30, 2021, respectively. For 2021, the Company prepared its~~taxes in interim ~~tax provision by applying a year-to-date effective tax rate to each quarter. For 2020, the Company prepared its interim~~

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 19~~

~~tax provision by applying an~~periods is based on our estimated annual effective tax rate. We ~~believe using~~record cumulative adjustments in the ~~actual year-to-date~~quarter in which a change in the estimated annual effective rate is determined. The estimated annual effective tax rate ~~in 2021 results~~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 ~~best estimate~~quarter in which the event occurs.

We recorded income tax expense of $2.6 million and $1.7 million for the ~~annual effective tax rate.~~

~~The Company’s~~three months ended March 31, 2022 and 2021, respectively. Our effective income tax rate for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and March 31, 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 of~~maintain a valuation ~~allowances, which were previously recorded in connection with our~~allowance 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 ~~2021~~2022 and 2024.

The Company recorded income tax expense of $15.3 million and $23.2 million for the three and nine months ended September 30, 2020, respectively. The Company’s effective income tax rate for the three and nine months ended September 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.

Note 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 ~~unvested~~outstanding 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.

Blucora, Inc. | Q1 2022 Form 10-Q 17

The calculations of basic and diluted net income ~~(loss)~~ per share were as follows (in thousands):
Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020
Numerator:
Net income (loss) $ (27,803) $ (26,206) $ 31,451 $ (292,055)
Denominator:
Weighted average common shares outstanding—basic 48,707 48,039 48,492 47,936
Dilutive potential common shares (1)
— — 881 —
Weighted average common shares outstanding—diluted 48,707 48,039 49,373 47,936
Net income (loss) per share:
Basic $ (0.57) $ (0.55) $ 0.65 $ (6.09)
Diluted $ (0.57) $ (0.55) $ 0.64 $ (6.09)
Anti-dilutive shares (1)
4,616 3,165 2,076 2,869

~~_________________________~~


	Three Months Ended March 31,
	2022		2021
Numerator:
Net income	$	34,620	$	27,646
Denominator:
Basic weighted average common shares outstanding	48,513		48,261
Dilutive potential common shares (1)	1,234		836
Diluted weighted average common shares outstanding	49,747		49,097
Net income per share:
Basic	$	0.71	$	0.57
Diluted	$	0.70	$	0.56
Shares excluded (1)	910		1,289

________________________

(1)~~Dilutive potential~~Potential common shares were excluded from the calculation of diluted net income ~~(loss)~~ per share ~~in the~~for these periods ~~presented which have a net loss, as~~because their effect would have been ~~anti-dilutive due to the net loss recognized for such periods.~~

anti-dilutive.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 2018

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 improve~~enable financial success by changing the way individuals and families plan and achieve their ~~financial wellness~~goals through ~~data and technology-driven~~tax-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

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 ~~the~~a 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.

As Any reference to Avantax Planning Partners in this Form 10-Q is inclusive of September 30, 2021, the Wealth Management business worked with a nationwide network of 3,529 financial professionals and supported $86.6 billion of total client assets, including $39.8 billion of advisory assets.HKFS.

Tax Software

COVID-19 Pandemic

~~Beginning in March 2020, the~~The extended COVID-19 pandemic has 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, has negatively impacted both our Wealth Management and Tax Software businesses. In addition, the various precautionary 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, as well as the societal response, have had, and could continue to have, an

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 21~~

adverse effect on the U.S. and global markets and economy. The extent to which the COVID-19 pandemic may impact our results in the future will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and scope of the COVID-19 pandemic, the emergence of new variants of the virus, 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 have been taken, or may be taken in the future, in response to the COVID-19 pandemic.

In our Wealth Management business, the amount of cash sweep revenue we generate continues to be affected by the low interest rate environment. In ~~March 2020,~~response to the economic and market disruption associated with the COVID-19 pandemic, the Federal Reserve ~~lowered its target range for~~decreased the federal funds rate in 2020 and maintained a low-interest rate environment in 2021, causing a significant decline in cash sweep revenue. The Federal Reserve has signaled adjustments to ~~0.00-0.25%. As our~~monetary policy that would increase the federal funds rates, which we expect would positively impact cash sweep revenue. If the Federal Reserve does not increase, or further decreases, the federal funds rates, cash sweep revenue ~~is based on a rate derived from the federal funds rate, cash sweep revenue in all quarters subsequent~~would continue 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.be negatively impacted.

Blucora, Inc. | Q1 2022 Form 10-Q 19

In our Tax Software segment, ~~our revenue and operating income generation is highly seasonal, with a significant portion~~the 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 revenue from the segment is minimal while core operating expenses continue.~~

~~As a result of the COVID-19 pandemic, the~~business has been affected by recent changes to tax filing deadlines. 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. Further, 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 ~~2021~~tax 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.~~2021 as a result of the COVID-19 pandemic. 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 months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ 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. | ~~Q3 2021~~Q1 2022 Form 10-Q 2220

RESULTS OF OPERATIONS

Summary


(In thousands, except percentages)		Three months ended				QTD				Nine months ended				YTD
		September 30,				Change				September 30,				Change
($ in thousands)																		($ in thousands)	Three Months Ended March 31,				Change
		2021		2020		$		%		2021		2020		$		%			2022		2021		$		%
Revenue:	Revenue:																	Revenue:
Wealth Management	Wealth Management	$	169,135	$	135,932	$	33,203	24	%	$	486,021	$	396,805	$	89,216	22	%	Wealth Management	$	166,403	$	154,491	$	11,912	7.7	%
Tax Software	Tax Software	5,039		39,421		(34,382)		(87)	%	220,848		202,990		17,858		9	%	Tax Software	141,150		123,892		17,258		13.9	%
Total revenue	Total revenue	$	174,174	$	175,353	$	(1,179)	(1)	%	$	706,869	$	599,795	$	107,074	18	%	Total revenue	307,553		278,383		29,170		10.5	%
Operating income (loss):	Operating income (loss):																	Operating income (loss):
Wealth Management	Wealth Management	$	19,564	$	17,498	$	2,066	12	%	$	60,356	$	51,827	$	8,529	16	%	Wealth Management	16,421		19,396		(2,975)		(15.3)	%
Tax Software	Tax Software	(13,864)		16,234		(30,098)		(185)	%	100,472		60,646		39,826		66	%	Tax Software	58,030		50,888		7,142		14.0	%
Corporate-level activity	Corporate-level activity	(25,982)		(32,719)		6,737		21	%	(102,255)		(357,905)		255,650		71	%	Corporate-level activity	(29,408)		(33,055)		3,647		11.0	%
Operating income (loss)		(20,282)		1,013		(21,295)		(2,102)	%	58,573		(245,432)		304,005		124	%
Other loss, net		(8,295)		(11,963)		3,668		31	%	(24,202)		(23,386)		(816)		(3)	%
Income (loss) before income taxes		(28,577)		(10,950)		(17,627)		(161)	%	34,371		(268,818)		303,189		113	%
Income tax benefit (expense)		774		(15,256)		16,030		105	%	(2,920)		(23,237)		20,317		87	%
Net income (loss)		$	(27,803)	$	(26,206)	$	(1,597)	(6)	%	$	31,451	$	(292,055)	323,506		111	%
Total operating income																		Total operating income	45,043		37,229		7,814		21.0	%
Interest expense and other, net																		Interest expense and other, net	(7,841)		(7,883)		42		0.5	%
Income before income taxes																		Income before income taxes	37,202		29,346		7,856		26.8	%
Income tax expense																		Income tax expense	(2,582)		(1,700)		(882)		(51.9)	%
Net income																		Net income	$	34,620	$	27,646	$	6,974	25.2	%

For the three months ended ~~September 30, 2021~~March 31, 2022, compared to the three months ended ~~September 30, 2020,~~March 31, 2021, net ~~loss decreased $1.6~~income increased $7.0 million primarily due to the following factors:

•Wealth Management segment operating income ~~increased $2.1~~decreased $3.0 million primarily due to a $33.2 million increase in revenue, partially offset by a $31.1 million increase in operating expenses. Wealth Management segment results for 2020 were negatively affected by suppressed client asset levelshigher payout ratios to financial professionals and ~~transaction activity in 2020 resulting from the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020.~~

•Tax Software segment operating income decreased $30.1 million primarily due to a $34.4 million decrease in revenue, mostly resulting from the earlier tax filing and payment deadlines in 2021 versus 2020. In addition, operating expenses decreased $4.3 million primarily due to reduced sales and marketing expenses.

•Expenses within corporate-level activity decreased $6.7 million primarily due to an $8.0 million decrease in acquisition and integration costs, partially offset by an increase of $1.6 million in expenses associated with other legal and consultingincremental personnel costs.

•Other loss, net decreased $3.7 million primarily due to the recognition of $3.7 million of non-capitalized debt issuance expenses related to the $175.0 million Term Loan increase in the three months ended September 30, 2020.

•The Company recorded income tax benefit of $0.8 million for the three months ended September 30, 2021. This compared to income tax expense of $15.3 million for the three months ended September 30, 2020.

~~For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, net income increased $323.5 million primarily due to the following factors:~~

•Wealth Management segment operating income increased $8.5 million primarily due to an $89.2 million increase in revenue, partially offset by an $80.7 million increase in operating expenses. Wealth Management segment operating income benefited from $7.2 million in 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 for 2020 were negatively affected by suppressed client asset levels and transaction activity in 2020 resulting from the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020.

•Tax Software segment operating income increased ~~$39.8~~$7.1 million primarily due to ~~a $22.0 million decrease~~favorable increases in ~~operating expenses, primarily from reduced sales and marketing expenses, and a $17.9 million increase in revenue.~~revenue per unit.

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 23~~

•Expenses within corporate-level activity decreased ~~$255.7~~$3.6 million primarily due to the recognition of a $270.6 million goodwill impairment and $10.2 million in executive transition costs for the nine months ended September 30, 2020. These decreases were partially offset by an increase of $9.7 million inreduced acquisition and integration expenses, an increase of $8.3 million in stock-based compensation expense, and a $7.3 million increase in expenses associated with contested proxy and other legal and consulting costs for the nine months ended September 30, 2021.costs.

•The Company recorded income tax expense of ~~$2.9~~$2.6 million, an effective tax rate of 6.9%, for the ~~nine~~three months ended ~~September 30, 2021, which represented the Company’s state income taxes on current period income. This~~March 31, 2022, compared to income tax expense of ~~$23.2~~$1.7 million, ~~for the nine months ended September 30, 2020. The effective tax rate was 8.49% as of September 30, 2021 as compared to~~ an effective tax rate of ~~8.64% at September 30, 2020.~~5.8%, for the three months ended March 31, 2021.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 2421

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 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 ended						QTD				Nine months ended						YTD
		September 30,						Change				September 30,						Change
($ in thousands)																						($ in thousands)	Three Months Ended March 31,						Change
		2021			2020			$		%		2021			2020			$		%			2022			2021			$		%
Revenue	Revenue	$	169,135		$	135,932		$	33,203	24	%	$	486,021		$	396,805		$	89,216	22	%	Revenue	$	166,403		$	154,491		$	11,912	7.7	%
Operating income	Operating income	$	19,564		$	17,498		$	2,066	12	%	$	60,356		$	51,827		$	8,529	16	%	Operating income	$	16,421		$	19,396		$	(2,975)	(15.3)	%
Segment margin	Segment margin	12		%	13		%					12		%	13		%					Segment margin	9.9		%	12.6		%

For the three months ended ~~September 30, 2021~~March 31, 2022, compared to the three months ended ~~September 30, 2020,~~March 31, 2021, Wealth Management segment operating income ~~increased $2.1~~decreased $3.0 million primarily due to the following factors:

•Wealth Management revenue increased ~~$33.2~~$11.9 million primarily due to a ~~$20.9~~$16.1 million increase in advisory revenue, ~~an $8.0~~partially offset by a $4.9 million decrease in commission revenue. The increase in ~~commission~~advisory revenue ~~and a $2.9 million increase in transaction and fee revenue. Revenue increases~~was primarily ~~resulted~~ from increased client asset levels ~~and~~compared to March 31, 2021. Commission revenue was negatively impacted by unfavorable transaction activity ~~which were favorable compared to~~and volatility in global markets primarily as a result of Russia’s invasion of Ukraine and the ~~suppressed client asset levels and transaction activity~~measures taken in ~~2020 resulting from the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020.~~response, including sanctions imposed by governments.

•Wealth Management operating expenses increased ~~$31.1~~$14.9 million primarily due to a ~~$24.5~~$10.8 million increase in cost of revenue resulting from increased advisory fees and commissions paid, ~~which has been primarily driven by an increase in~~coupled with $4.1 million of incremental personnel costs. Increased payout ratios correlate with increased asset levels, the ~~number~~timing of certain quarterly billings relative to the market impacts from Russia’s invasion of Ukraine, and the exit of lower producing financial professionals ~~with higher~~who were concentrated at lower payout ~~levels due~~levels. Increased personnel costs reflect our strategic investments to ~~improved market performance~~drive growth through enhanced service capabilities that support our financial and ~~the alignment of our payout grids, combined with an increase in sales and marketing expenses. This increase in cost of revenue has resulted in a decrease in segment~~tax professionals.

•Segment margin compression for the three months ended ~~September 30, 2021 compared to the three months ended September 30, 2020.~~

~~For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, Wealth Management operating income increased $8.5 million~~March 31, 2022, was primarily due to the ~~following factors:~~

•~~Wealth Management revenue increased $89.2 million primarily due to a $63.5 million~~ increase in advisory revenue, a $21.9 million increase in commission revenue, and a $6.3 million increase in transaction and fee revenue, partially offset by a $2.4 million decrease in asset-based revenue. Revenue increases primarily resulted from increased client asset levels and transaction activity, which were favorable compared tooperating expenses discussed above, coupled with the ~~suppressed client asset levels and transaction activity in 2020 resulting from~~impact of market volatility on our higher margin service offerings. For the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020. In addition, Wealth Management revenue for the nine months ended September 30, 2021 increased due to $20.7 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 endremainder of the ~~first quarter of 2020.~~

•~~Wealth Management operating expenses increased $80.7 million primarily due~~year, we expect to ~~a $60.8 million~~incur incremental travel and conference costs associated with reduced COVID-19 travel restrictions; however, we expect for segment margin to increase ~~in cost of revenue~~ as a result of ~~increased advisory fees and commissions paid to financial professionals, as well as incremental expenses resulting from~~ the ~~HKFS Acquisition and increases in sales and marketing expenses in our Avantax Wealth Management business. The increase in advisory fees and commissions paid has been primarily driven by an~~recently announced increase in the ~~number of financial professionals with higher payout levels due to improved market performance and the alignment of our payout grids.~~federal funds rate.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 2522

Sources of ~~revenue~~Revenue

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.

A summary of our sources of revenue and business and financial metrics ~~was~~is as follows:
Three months ended QTD Nine months ended YTD
(In thousands, except percentages) September 30, Change September 30, Change
Sources of Revenue Primary Drivers 2021 2020 $ 2021 2020 $
Financial professional-driven Advisory - Advisory asset levels $ 103,540 $ 82,612 $ 20,928 $ 291,167 $ 227,672 $ 63,495
Commission - Transactions
- Asset levels
- Product mix 52,961 44,921 8,040 157,197 135,337 21,860
Other revenue Asset-based - Cash balances
- Interest rates
- Number of accounts
- Client asset levels 5,659 4,351 1,308 16,514 18,911 (2,397)
Transaction and fee - Account activity
- Number of financial
professionals
- Number of clients
- Number of accounts 6,975 4,048 2,927 21,143 14,885 6,258
Total revenue $ 169,135 $ 135,932 $ 33,203 $ 486,021 $ 396,805 $ 89,216
Total recurring revenue $ 145,311 $ 117,822 $ 27,489 $ 414,966 $ 337,081 $ 77,885
Recurring revenue rate 85.9 % 86.7 % 85.4 % 84.9 %


($ in thousands)			Three Months Ended March 31,						Change
	Sources of Revenue	Primary Drivers	2022			2021			$		%
Financial professional-driven	Advisory	- Advisory asset levels	$	107,169		$	91,119		$	16,050	17.6	%
	Commission	- Transactions - Asset levels - Product mix	47,655			52,534			(4,879)		(9.3)	%
Other revenue	Asset-based	- Cash balances - Interest rates - Number of accounts - Client asset levels	5,663			5,329			334		6.3	%
	Transaction and fee	- Account activity - Number of financial professionals - Number of clients - Number of accounts	5,916			5,509			407		7.4	%
	Total revenue		$	166,403		$	154,491		$	11,912	7.7	%
	Total recurring revenue		$	143,737		$	130,755		$	12,982	9.9	%
	Recurring revenue rate		86.4		%	84.6		%

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.~~ | ~~Q3 2021 Form 10-Q 26~~

Business ~~metrics~~Metrics
(In thousands, except percentages and as otherwise indicated) September 30, Change
2021 2020 $ %
Client assets balances:
Total client assets $ 86,647,743 $ 76,152,721 $ 10,495,022 14 %
Brokerage assets $ 46,850,354 $ 43,733,735 $ 3,116,619 7 %
Advisory assets $ 39,797,389 $ 32,418,986 $ 7,378,403 23 %
Advisory assets as a percentage of total client assets 45.9 % 42.6 %
Number of financial professionals (in ones):
Independent financial professionals (1)
3,498 3,956 (458) (12) %
In-house/employee financial professionals (2)
31 19 12 63 %
Total number of financial professionals 3,529 3,975 (446) (11) %
Advisory and commission revenue per financial professional (3)
$ 44.3 $ 32.1 $ 12.2 38 %
Quarterly production retention rate: (4)
TTM Financial professional-driven revenue (5)
$ 585,307 $ 491,829
TTM Financial professional-driven revenue related to independent financial professionals who departed in the quarter (5)
$ 12,157 $ 5,366
TTM Financial professional-driven revenue, less that related to independent financial professionals who departed in the quarter (5)
$ 573,150 $ 486,463
Quarterly production retention rate (4)
97.9 % 98.9 %

~~____________________________~~


($ in thousands)	Three Months Ended March 31,						Change
	2022			2021			$		%
Client assets balances:
Total client assets (1)	$	86,144,055		$	84,776,191		$	1,367,864	1.6	%
Brokerage assets (1)	$	45,222,763		$	48,001,320		$	(2,778,557)	(5.8)	%
Advisory assets (1)	$	40,921,292		$	36,774,871		$	4,146,421	11.3	%
Advisory assets as a percentage of total client assets	47.5		%	43.4		%

Number of financial professionals (in ones):
Independent financial professionals (2)	3,376			3,691			(315)		(8.5)	%
In-house/employee financial professionals (3)	33			27			6		22.2	%
Total number of financial professionals	3,409			3,718			(309)		(8.3)	%

Advisory and commission revenue per financial professional (4)	$	45.4		$	38.6		$	6.8	17.6	%

___________________________

(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-house financial/~~in-house/employee financial professionals includes licensed financial planning consultants, all of which are ~~employees of~~affiliated with Avantax Planning Partners.

~~(3)~~(4)Calculation based on advisory and commission revenue for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ 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. | Q1 2022 Form 10-Q 23

~~(5)~~
~~For the trailing-twelve-month period then ended.~~

Client ~~assets.~~Assets. Total client assets 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. To the extent that we 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 based~~fee-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 ~~$10.5~~$1.4 billion at ~~September 30, 2021~~March 31, 2022 compared to ~~September 30, 2020~~March 31, 2021 primarily due to ~~$12.6~~$2.4 billion of favorable market change and reinvestment levels ~~following the pandemic-influenced market downturn in 2020. Partially offsetting these increases were~~(primarily during 2021), partially offset by net client outflows of ~~$2.2~~$1.0 billion. Net client outflows included net client inflows during the three months ended March 31, 2022 of $0.2 billion.

Advisory assets as a percentage of total client assets increased to ~~45.9%~~47.5% at ~~September 30, 2021~~March 31, 2022, compared to ~~42.6%~~43.4% at ~~September 30, 2020.~~March 31, 2021. This increase was primarily ~~due~~driven by net client inflows of $3.4 billion, relating in part to ~~the HKFS Acquisition because over 90% of the~~

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 27~~

~~client~~our focus on converting off platform, direct to fund assets ~~acquired were comprised of advisory assets. In addition, advisory assets as a percentage of total client assets increased in our 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~~when appropriate for the ~~year ended December 31, 2020.~~client, to fee-based advisory platforms that include ongoing management and which incur higher margins.

Financial ~~professionals.~~Professionals. ~~The Wealth Management business worked with a nationwide network of 3,529 financial professionals as of September 30, 2021.~~ The number of our financial professionals decreased ~~by 11%~~8.3% at ~~September 30, 2021~~March 31, 2022 compared to ~~September 30, 2020,~~March 31, 2021, with the decrease primarily due to attrition related to lower revenue-producing financial professionals. This attrition led to a 17.6% increase in advisory and commission revenue per financial professional for the comparable periods. 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 revenue 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)		September 30,				Change
											Three Months Ended March 31,				Change
		2021		2020		$		%			2022		2021		$		%
Advisory assets—independent financial professionals ~~(1)~~	Advisory assets—independent financial professionals ~~(1)~~	$	33,713,543	$	27,852,099	$	5,861,444	21	%	Advisory assets—independent financial professionals ~~(1)~~	$	34,393,359	$	31,712,984	$	2,680,375	8.5	%
Advisory assets—in-house/employee financial professionals ~~(2)~~	Advisory assets—in-house/employee financial professionals ~~(2)~~	4,701,444		3,422,173		1,279,271		37	%	Advisory assets—in-house/employee financial professionals ~~(2)~~	5,163,741		3,794,739		1,369,002		36.1	%
Retirement advisory assets—in-house financial professionals ~~(3)~~	Retirement advisory assets—in-house financial professionals ~~(3)~~	1,382,402		1,144,714		237,688		21	%	Retirement advisory assets—in-house financial professionals ~~(3)~~	1,364,192		1,267,148		97,044		7.7	%
Total advisory assets	Total advisory assets	$	39,797,389	$	32,418,986	$	7,378,403	23	%	Total advisory assets	$	40,921,292	$	36,774,871	$	4,146,421	11.3	%

~~_________________________~~

~~(1)~~Blucora, Inc.~~Represents individual client and retirement advisory assets for which Avantax Wealth Management serves as the RIA.~~ | Q1 2022 Form 10-Q 24

~~(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.~~

The activity within our advisory assets was as ~~follows:~~follows (in thousands):


(In thousands, except as otherwise indicated)		Three months ended September 30,				Nine months ended September 30,
											Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Balance, beginning of the period	Balance, beginning of the period	$	39,440,985	$	26,555,388	$	35,603,557	$	27,629,164	Balance, beginning of the period	$	42,179,051	$	35,603,557
Net increase in new advisory assets		621,205		125,406		1,853,632		231,382
Inflows from acquisitions		—		4,178,729		—		4,178,729
Net new advisory assets										Net new advisory assets	1,166,673		368,863

Market impact and other	Market impact and other	(264,801)		1,559,463		2,340,200		379,711		Market impact and other	(2,424,432)		802,451
Balance, end of the period	Balance, end of the period	$	39,797,389	$	32,418,986	$	39,797,389	$	32,418,986	Balance, end of the period	$	40,921,292	$	36,774,871
Advisory revenue	Advisory revenue	$	103,540	$	82,612	$	291,167	$	227,672	Advisory revenue	$	107,169	$	91,119
Average advisory fee rate (1)	Average advisory fee rate (1)	26 bps		27 bps		78 bps		83 bps		Average advisory fee rate (1)	25 bps		26 bps

_________________________

(1)For the three months ended ~~September 30,~~March 31, 2022 and March 31, 2021, ~~and September 30, 2020,~~ 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~~

Compared to March 31, 2021, advisory assets increased $4.1 billion, driven by a $3.4 billion increase in net new advisory assets, and reinvestment levels of $0.7 billion. Net new advisory assets benefited from a focus on converting off platform, direct to fund assets when appropriate for the ~~nine months ended September 30, 2021~~client, to fee-based advisory platforms that include ongoing management and ~~September 30, 2020, average~~which incur higher margins. This increase in advisory ~~fee rate equals the sum of each quarterly average~~assets resulted in a $16.1 million increase in advisory ~~fee rate within the relevant year-to-date period.~~

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 28~~

~~For the three and nine months ended September 30, 2021~~revenue compared to the three ~~and nine~~ months ended ~~September 30, 2020, advisory revenue increased $20.9 million and $63.5 million, respectively, primarily due to a year-over-year increase in advisory assets.~~March 31, 2021. The increase in advisory assets was primarily due to favorable market change, an increase in advisory assets resulting from the HKFS Acquisition, and net client inflows. In addition, advisory revenue recognized was negatively affected because such revenue was primarily based on the value of client assets within advisory accounts as of June 30, 2020, which were substantially affected by the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020.

~~For the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020, the~~ average advisory fee ~~rate decreased primarily due to our tiered fee structure, which has generated lower average fee~~ rates ~~as average client asset balances have increased. In addition,~~between the ~~average advisory fee rate decreased due to the lower advisory fee structure of HKFS.~~two periods were relatively flat.

For the three months ended ~~September 30, 2021,~~March 31, 2022, advisory assets ~~remained relatively constant. For the nine months ended September 30, 2021, advisory assets increased $4.2~~declined $1.3 billion primarily due to ~~favorable market change~~volatility in global markets as a result of Russia’s invasion of Ukraine and ~~client inflows.~~the measures taken in response, including sanctions imposed by governments.

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 ended				QTD				Nine months ended				YTD
		September 30,				Change				September 30,				Change
																			Three Months Ended March 31,				Change
		2021		2020		$		%		2021		2020		$		%			2022		2021		$		%
By product category:	By product category:																	By product category:
Mutual funds	Mutual funds	$	22,749	$	21,674	$	1,075	5	%	$	70,300	$	66,886	$	3,414	5	%	Mutual funds	$	19,383	$	23,694	$	(4,311)	(18.2)	%
Variable annuities	Variable annuities	18,752		16,168		2,584		16	%	55,247		44,522		10,725		24	%	Variable annuities	16,297		18,022		(1,725)		(9.6)	%
Insurance	Insurance	4,414		4,145		269		6	%	14,044		12,209		1,835		15	%	Insurance	3,724		5,625		(1,901)		(33.8)	%
General securities	General securities	6,951		2,934		4,017		137	%	17,511		11,720		5,791		49	%	General securities	8,251		5,193		3,058		58.9	%
Other		95		—		95		N/A		95		—		95		N/A

Total commission revenue	Total commission revenue	$	52,961	$	44,921	$	8,040	18	%	$	157,197	$	135,337	$	21,860	16	%	Total commission revenue	$	47,655	$	52,534	$	(4,879)	(9.3)	%

By type of commission:	By type of commission:																	By type of commission:
Transaction-based	Transaction-based	$	22,372	$	16,884	$	5,488	33	%	$	65,815	$	55,068	$	10,747	20	%	Transaction-based	$	20,624	$	22,367	$	(1,743)	(7.8)	%
Trailing	Trailing	30,589		28,037		2,552		9	%	91,382		80,269		11,113		14	%	Trailing	27,031		30,167		(3,136)		(10.4)	%
Total commission revenue	Total commission revenue	$	52,961	$	44,921	$	8,040	18	%	$	157,197	$	135,337	$	21,860	16	%	Total commission revenue	$	47,655	$	52,534	$	(4,879)	(9.3)	%

For the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022, compared to the three ~~and nine~~ months ended ~~September 30, 2020:~~

•~~Transaction-based~~March 31, 2021 transaction-based commission revenue ~~increased $5.5~~and trailing commission revenue decreased $1.7 million and ~~$10.7~~$3.1 million, ~~respectively,~~respectively. These decreases were primarily due to ~~an increase~~unfavorable transaction activity and volatility in ~~transaction activity. Transaction-based commission revenue in 2020 was negatively affected by suppressed transaction activity~~global markets as a result of Russia’s invasion of Ukraine and the ~~COVID-19 pandemic and related financial market disruption beginning~~measures taken in ~~the second quarter of 2020.~~

•~~Trailing commission revenue increased $2.6 million and $11.1 million, respectively, primarily due to increased client asset levels. Trailing commission revenue in 2020 was negatively affected~~response, including sanctions imposed by ~~suppressed client asset levels as a result of the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020.~~

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.governments.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 2925

~~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 months ended ~~September 30, 2021~~March 31, 2022, compared to the three months ended ~~September 30, 2020,~~March 31, 2021, asset-based revenue increased ~~$1.3~~$0.3 million, primarily ~~due to~~ a ~~$0.9 million increase in~~result of incremental revenue generated from financial product manufacturer sponsorship ~~programs, as well as a $0.3 million increase~~programs. Interest rates during the two comparable periods were consistent, resulting in ~~asset-based retirement plan service fees following the HKFS Acquisition.~~

~~For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, asset-based revenue decreased $2.4 million primarily due to a $6.2 million decrease in~~flat cash sweep revenue as a result of lower interest rates, partially offset by a $1.9 million increase in revenue generated from financial product manufacturer sponsorship programs and a $1.7 million increase in revenue generated from asset-based retirement plan service fees followingbetween the ~~HKFS Acquisition.~~

In March 2020, the Federal Reserve lowered its target range for the federal funds rate to 0.00-0.25%. As our cash sweep revenue is based on a rate derived from 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.periods.

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 nine~~ months ended ~~September 30, 2021~~March 31, 2022, compared to the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, transaction and fee revenue increased ~~$2.9~~$0.4 million, ~~and $6.3 million, respectively,~~ primarily due to incremental revenue generated from financial professional support ~~fees, as well as for the nine months ended September 30, 2021 incremental transaction and fee revenue as a result of the HKFS Acquisition.~~fees.

Tax Software
(In thousands, except percentages) Three months ended QTD Nine months ended YTD
September 30, Change September 30, Change
2021 2020 $ % 2021 2020 $ %
Revenue $ 5,039 $ 39,421 $ (34,382) (87) % $ 220,848 $ 202,990 $ 17,858 9 %
Operating income (loss) $ (13,864) $ 16,234 $ (30,098) (185) % $ 100,472 $ 60,646 $ 39,826 66 %
Segment margin (275) % 41 % 45 % 30 %

Tax Software revenue and operating income for the three and nine months ended September 30, 2020 were significantly impacted by the extension of the filing and payment deadlines for federal tax returns in the 2020 tax season. 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.


($ in thousands)	Three Months Ended March 31,						Change
	2022			2021			$		%
Revenue	$	141,150		$	123,892		$	17,258	13.9	%
Operating income	$	58,030		$	50,888		$	7,142	14.0	%
Segment margin	41.1		%	41.1		%

For the three months ended ~~September 30, 2021~~March 31, 2022, compared to the three months ended ~~September 30, 2020, Tax Software operating income decreased $30.1 million due to the following factors:~~

•Tax Software revenue decreased $34.4 million primarily due to a $34.0 million decrease in consumer revenue and a $0.4 million decrease in professional revenue. The decreases primarily resulted from the earlier tax filing and payment deadline inMarch 31, 2021, ~~versus 2020 and, to a lesser extent, from IRS delays in the processing of 2020 tax returns and refunds.~~

•Tax Software operating expenses decreased $4.3 million primarily due to decreased advertising and marketing expenses. Advertising and marketing costs in our Tax Software business were elevated in the third quarter of 2020 due to the extension of the extension of the 2019 tax returns to July 15, 2020.

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 30~~

~~For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020,~~ Tax Software operating income increased ~~$39.8~~$7.1 million due to the following factors:

•Tax Software revenue increased ~~$17.9~~$17.3 million ~~primarily~~ due to a ~~$17.2~~$14.7 million increase in consumer revenue and a ~~$0.7~~$2.6 million increase in professional revenue. Revenue during the three months ended March 31, 2022 benefited primarily from higher revenue per unit, which we expect to continue into the second quarter of 2022.

•Tax Software operating expenses ~~decreased $22.0~~increased $10.1 million primarily due to ~~decreased~~increased investments in seasonal customer care support and tax experts and an increase in strategic advertising and marketing expenses. Advertising and marketing expenses for the nine months ended September 30, 2020 were elevated due to incremental marketing efforts to address weak performance through the first two months of the 2020 tax season, as well as increased advertising and marketing resulting from the extended tax season.spend.

Sources of ~~revenue~~Revenue

Tax Software revenue is derived primarily from the sale of ~~digital~~ 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.

We classify Tax Software revenue into two different categories: consumer revenue and professional revenue. Consumer revenue ~~represents Tax Software revenue~~is derived from products and services sold to directly 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 ended QTD Nine months ended YTD
September 30, Change September 30, Change
2021 2020 $ % 2021 2020 $ %
Consumer revenue $ 4,479 $ 38,482 $ (34,003) (88) % $ 203,891 $ 186,724 $ 17,167 9 %
Professional revenue 560 939 (379) (40) % 16,957 16,266 691 4 %
Total Tax Software revenue $ 5,039 $ 39,421 $ (34,382) (87) % $ 220,848 $ 202,990 $ 17,858 9 %


	Three Months Ended March 31,				Change
	2022		2021		$		%
Consumer	$	125,261	$	110,567	$	14,694	13.3	%
Professional	15,889		13,325		2,564		19.2	%
Total Tax Software revenue	$	141,150	$	123,892	$	17,258	13.9	%

Blucora, Inc. | Q1 2022 Form 10-Q 26

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.

•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.

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 31~~

(In thousands, except percentages and as otherwise indicated) Nine months ended YTD Year-to-date period ended YTD
September 30, Change July 16, Change
2021 2020 Units %
2021 (1)
2020 (1)
Units %
Total e-files (2)
5,492 5,234 258 5 % 5,421 5,149 272 5 %
Consumer:
Consumer e-files (2)
3,144 3,145 (1) — % 3,122 3,113 9 — %
Professional:
Professional e-files 2,348 2,089 259 12 % 2,299 2,036 263 13 %
Units sold (in ones) 20,808 20,288 520 3 % 20,711 20,207 504 2 %
Professional e-files per unit sold (in ones) 112.8 102.9 9.9 10 % 111.0 100.8 10.2 10 %
~~____________________________~~

~~(1)~~T~~ax season begins~~Quantitative information on the ~~first day that~~number of consumer e-files, professional e-files, professional units sold, and professional e-files per unit sold has been excluded because we do not view the ~~IRS begins accepting e-files and ends on filing deadline day plus one day. Due~~comparison of these metrics to the ~~impact~~prior year comparable period as meaningful due to the extension of the ~~COVID-19 pandemic, the IRS extended the~~ filing ~~deadlines~~and payment deadline for tax year 2020 federal tax returns ~~relating to the 2020 and 2019 tax years~~from April 15, 2021 to May 17, 2021, ~~(with~~as well as the extension of the federal filing ~~deadline extended to June 15, 2021~~and payment deadlines for Texas, Louisiana, and ~~Oklahoma) and July~~Oklahoma to June 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 nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, and 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%. This increase was primarily due to the increase in the number of professional tax software e-files, which resulted from increased market share 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 Discussion 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.~~

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 32~~

2021.

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-level activity by category was as ~~follows:~~follows (in thousands):

(In thousands, except percentages) Three months ended QTD Nine months ended YTD
September 30, Change September 30, Change
2021 2020 $ % 2021 2020 $ %
Unallocated corporate-level general and administrative $ 6,499 $ 6,745 $ (246) (4) % $ 18,452 $ 19,571 $ (1,119) (6) %
Stock-based compensation 4,729 4,517 212 5 % 15,499 7,220 8,279 115 %
Acquisition and integration 2,241 10,276 (8,035) (78) % 28,513 18,782 9,731 52 %
Depreciation 3,906 2,620 1,286 49 % 11,251 7,452 3,799 51 %
Amortization of other acquired intangible assets 7,009 7,746 (737) (10) % 21,247 22,167 (920) (4) %
Contested proxy and other legal and consulting costs 1,598 — 1,598 N/A 7,293 — 7,293 N/A
Executive transition costs — 405 (405) (100) % — 10,225 (10,225) (100) %
Headquarters relocation costs — 410 (410) (100) % — 1,863 (1,863) (100) %
Impairment of goodwill — — — N/A — 270,625 (270,625) (100) %
Total corporate-level activity $ 25,982 $ 32,719 $ (6,737) (21) % $ 102,255 $ 357,905 $ (255,650) (71) %


	Three Months Ended March 31,				Change
	2022		2021		$		%
Unallocated corporate-level general and administrative expenses	$	7,292	$	5,694	$	1,598	28.1	%
Stock-based compensation	6,225		5,610		615		11.0	%
Acquisition and integration	1,666		8,103		(6,437)		(79.4)	%
Depreciation	4,674		3,243		1,431		44.1	%
Amortization of acquired intangible assets	6,631		7,175		(544)		(7.6)	%
Contested proxy and other legal and consulting costs	2,920		3,230		(310)		(9.6)	%



Total corporate-level activity	$	29,408	$	33,055	$	(3,647)	(11.0)	%

For the three months ended ~~September 30, 2021~~March 31, 2022, compared to the three months ended ~~September 30, 2020,~~March 31, 2021, corporate-level activity decreased ~~$6.7~~$3.6 million primarily due to the following factors:

•Acquisition and integration expenses decreased ~~$8.0~~$6.4 million, primarily due to a $4.6 million decrease in the ~~following factors. For the three months ended September 30, 2021, acquisition and integration expenses were $2.2 million, which primarily related to~~fair value adjustment recorded for the HKFS ~~Acquisition. For the three months ended September 30, 2020, acquisition~~Contingent Consideration liability, and a $1.8 million decrease in professional services and other expenses due to a reduction in integration ~~expenses were $10.3 million, which included $5.9 million related to the acquisition of 1st Global, Inc. and 1st Global Insurance Services, Inc. (together,~~ ~~“1st Global”) in 2019 (the~~ ~~“1st Global Acquisition”) and $4.4 million related to the HKFS Acquisition.~~activities.

•~~Contested proxy~~Unallocated general and ~~other legal and consulting costs of~~administrative expenses increased $1.6 ~~million were recognized in the three months ended September 30, 2021 with no comparable amount in the 2020 period.~~

~~For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, corporate-level activity decreased $255.7~~ million primarily due to ~~the non-recurrence of the following factors:~~

•~~For the nine months ended September 30, 2020, we recognized goodwill impairment of $270.6 million related to our Wealth Management reporting unit.~~incremental personnel costs.

•~~Executive transition costs of $10.2~~Depreciation expense increased $1.4 million ~~were recognized for the nine months ended September 30, 2020~~primarily due to ~~the departures of certain Company executives.~~

~~Partially offsetting this decrease in corporate-level activity:~~

•For the nine months ended September 30, 2021, acquisition and integration expenses were $28.5 million, which included $22.6 million related to the HKFS Acquisition and $5.9 million related to the 1st Global Acquisition. For the nine months ended September 30, 2020, acquisition and integration expenses were $18.8 million, which included $10.6 million related to the 1st Global Acquisition and $8.2 million related to the HKFS Acquisition.

•~~Stock-based compensation expense increased $8.3 million. Stock-based compensation~~capitalized software costs for ~~the nine months ended September 30, 2020 was reduced by stock award forfeitures resulting from executive departures in 2020.~~

•~~Contested proxy and other legal and consulting costs of $7.3 million were recognized for the nine months ended September 30, 2021.~~our Tax Software business.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 3327

OPERATING EXPENSES

Cost of Revenue
(In thousands, except percentages) Three months ended QTD Nine months ended YTD
September 30, Change September 30, Change
2021 2020 $ % 2021 2020 $ %
Wealth Management services cost of revenue $ 120,641 $ 96,122 $ 24,519 26 % $ 343,174 $ 282,332 $ 60,842 22 %
Tax Software services cost of revenue 2,323 2,692 (369) (14) % 12,330 9,759 2,571 26 %
Total cost of revenue $ 122,964 $ 98,814 $ 24,150 24 % $ 355,504 $ 292,091 $ 63,413 22 %
Percentage of revenue 71 % 56 % 50 % 49 %


($ in thousands)	Three Months Ended March 31,						Change
	2022			2021			$		%
Wealth Management	$	119,874		$	108,623		$	11,251	10.4	%
Tax Software	9,426			5,578			3,848		69.0	%

Total cost of revenue	$	129,300		$	114,201		$	15,099	13.2	%
Percentage of revenue	42.0		%	41.0		%

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 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-house/employee financial professionals in our Wealth Management business. ~~As the~~The 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 ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022, compared to the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, cost of revenue increased ~~$24.2~~$15.1 million, ~~and $63.4 million, respectively,~~ primarily due to an increase in advisory fees and commissions paid to financial professionals ~~which primarily resulted from an increase in~~associated with incremental Wealth Management revenues. Payout ratios for the same period also increased due to the number of financial professionals ~~with~~earning higher payout levels, ~~due to improved market performance~~the exit of lower producing financial professionals who were concentrated at lower payout levels, and the alignment of our payout grids. ~~The increase~~Higher payout ratios are expected to continue in ~~cost of revenue was also~~ the ~~result of~~near term as we continue to grow and scale our business. Furthermore, the Tax Software business had increased personnel costs and depreciation of capitalized software during such period. Continued investments in internally developed software for the Tax Software segment ~~as well as~~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 ended						QTD				Nine months ended						YTD
		September 30,						Change				September 30,						Change
($ in thousands)																						($ in thousands)	Three Months Ended March 31,						Change
		2021			2020			$		%		2021			2020			$		%			2022			2021			$		%
Engineering and technology	Engineering and technology	$	7,874		$	6,007		$	1,867	31	%	$	22,233		$	21,899		$	334	2	%	Engineering and technology	$	8,504		$	7,128		$	1,376	19.3	%
Percentage of revenue	Percentage of revenue	5		%	3		%					3		%	4		%					Percentage of revenue	2.8		%	2.6		%

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 of Revenue” or “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 ~~September 30, 2021~~March 31, 2022, compared to the three months ended ~~September 30, 2020,~~March 31, 2021, engineering and technology expenses increased ~~$1.9~~$1.4 million primarily due to increases in personnel expenses ~~and consulting fees~~ in our Tax Software ~~and Wealth Management businesses.~~

For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, engineering and technology expenses increased $0.3 million primarily due to an increase in personnel expenses in the Tax Software and Wealth Management segments, partially offset by decreased consulting fees in our Tax Software business.

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 34~~

segment.

Sales and Marketing


(In thousands, except percentages)		Three months ended						QTD				Nine months ended						YTD
		September 30,						Change				September 30,						Change
($ in thousands)																						($ in thousands)	Three Months Ended March 31,						Change
		2021			2020			$		%		2021			2020			$		%			2022			2021			$		%
Sales and marketing	Sales and marketing	$	28,399		$	31,018		$	(2,619)	(8)	%	$	140,809		$	150,785		$	(9,976)	(7)	%	Sales and marketing	$	84,403		$	77,562		$	6,841	8.8	%
Percentage of revenue	Percentage of revenue	16		%	18		%					20		%	25		%					Percentage of revenue	27.4		%	27.9		%

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-house~~in-house/employee financial professionals, the cost of temporary help and contractors, and ~~back office~~back-office processing support expenses for our Wealth Management business.

Blucora, Inc. | Q1 2022 Form 10-Q 28

For the three months ended ~~September 30, 2021~~March 31, 2022, compared to the three months ended ~~September 30, 2020,~~March 31, 2021, sales and marketing expenses ~~decreased $2.6~~increased $6.8 million primarily due to a ~~$6.8~~$3.6 million ~~decrease~~increase in personnel costs across both segments, and a $2.6 million increase in strategic advertising and marketing costs in our Tax Software business. Advertising and marketing costs in our Tax Software business were elevated in the third 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 additional 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. This decrease was partially offset by a $4.2 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 nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, sales and marketing expenses decreased $10.0 million primarily due to a $26.7 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 nine months ended September 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 $16.6 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.

General and Administrative


(In thousands, except percentages)		Three months ended						QTD				Nine months ended						YTD
		September 30,						Change				September 30,						Change
($ in thousands)																						($ in thousands)	Three Months Ended March 31,						Change
		2021			2020			$		%		2021			2020			$		%			2022			2021			$		%
General and administrative	General and administrative	$	23,102		$	18,605		$	4,497	24	%	$	71,619		$	63,533		$	8,086	13	%	General and administrative	$	29,075		$	24,685		$	4,390	17.8	%
Percentage of revenue	Percentage of revenue	13		%	11		%					10		%	11		%					Percentage of revenue	9.5		%	8.9		%

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 months ended ~~September 30, 2021~~March 31, 2022, compared to the three months ended ~~September 30, 2020,~~March 31, 2021, G&A expenses increased ~~$4.5~~$4.4 million primarily due to ~~the following factors:~~

•~~For the three months ended September 30, 2021, we recognized $1.6 million in expenses associated with other legal~~incremental personnel costs and ~~consulting costs.~~

•~~Depreciation expense increased $1.3 million resulting from property~~hardware and ~~equipment placed into service at our new headquarters in July 2020.~~

~~For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, G&A expenses increased $8.1 million primarily due to the following factors:~~

•Stock-based compensation increased $8.3 million. Stock-based compensation for the nine months ended September 30, 2020 was reduced due to stock award forfeitures resulting from executive departures in 2020.

•~~For the nine months ended September 30, 2021, we recognized $7.3 million in expenses associated with contested proxy~~software support and ~~other legal and consulting costs.~~

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 35~~

•~~Depreciation expense increased $3.8 million resulting from property and equipment placed into service at our new headquarters in July 2020.~~

~~Partially offsetting these increases, we recognized $10.2 million of executive transition costs for the nine months ended September 30, 2020 due to the departure of certain Company executives in 2020.~~maintenance fees.

Acquisition and Integration
(In thousands, except percentages) Three months ended QTD Nine months ended YTD
September 30, Change September 30, Change
2021 2020 $ % 2021 2020 $ %
Employee-related expenses $ (36) $ 264 $ (300) (114) % $ 699 $ 1,326 $ (627) (47) %
Professional services 377 4,905 (4,528) (92) % 1,620 11,447 (9,827) (86) %
Change in the fair value of HKFS Contingent Consideration 1,700 (1,000) 2,700 270 % 19,500 (1,000) 20,500 2050 %
Other expenses 200 6,107 (5,907) (97) % 6,694 7,009 (315) (4) %
Total $ 2,241 $ 10,276 $ (8,035) (78) % $ 28,513 $ 18,782 $ 9,731 52 %
Percentage of revenue 1 % 6 % 4 % 3 %


($ in thousands)	Three Months Ended March 31,						Change
	2022			2021			$		%




Change in the fair value of HKFS Contingent Consideration	$	1,700		$	6,300		$	(4,600)	(73.0)	%
Professional services and other expenses	(34)			1,803			(1,837)		(101.9)	%
Total acquisition and integration	$	1,666		$	8,103		$	(6,437)	(79.4)	%
Percentage of revenue	0.5		%	2.9		%

Acquisition and integration expenses primarily relate to costs incurred for the ~~HKFS Acquisition~~acquisitions of Avantax Planning Partners and ~~the~~ 1st Global ~~Acquisition~~ and consist of employee-related expenses, professional services fees, changes in the fair value of contingent consideration, and other expenses.

For the three months ended ~~September 30, 2021,~~March 31, 2022, acquisition and integration expenses ~~of $2.2~~decreased $6.4 million, ~~were~~ primarily ~~related~~due to ~~the HKFS Acquisition, which included~~ a ~~$1.7~~$4.6 million ~~loss related to the increase~~decrease in the fair value ~~of the liability related to the two post-closing earn-out payments (the~~ ~~“HKFS Contingent Consideration”). For additional information on~~adjustment recorded for the HKFS Contingent Consideration liability, and ~~the contingent liability from the 1st Global Acquisition, see “Item 1. Financial Statements—Note 8.” For the three months ended September 30, 2020, acquisition~~a $1.8 million decrease in professional services and ~~integration~~other expenses ~~included $5.9 million related to the 1st Global Acquisition and $4.4 million related to the HKFS Acquisition.~~

For the nine months ended September 30, 2021, acquisition and integration expenses of $28.5 million were primarily composed of $22.6 million related to the HKFS Acquisition, which included a $19.5 million loss related to the increase in the fair value of the HKFS Contingent Consideration liability. In addition, acquisition and integration expenses for the nine months ended September 30, 2021 included $5.9 million related to the 1st Global Acquisition, which included an increase of $5.5 million to the contingent liability reserve balance relateddue to a ~~regulatory matter assumed~~reduction in ~~the 1st Global Acquisition. For the nine months ended September 30, 2020, acquisition and~~ integration ~~expenses included $10.6 million related to the 1st Global Acquisition and $8.2 million related to the HKFS Acquisition.~~activities.

Depreciation and Amortization of Acquired Intangible Assets


(In thousands, except percentages)		Three months ended						QTD				Nine months ended						YTD
		September 30,						Change				September 30,						Change
($ in thousands)																						($ in thousands)	Three Months Ended March 31,						Change
		2021			2020			$		%		2021			2020			$		%			2022			2021			$		%
Depreciation	Depreciation	$	2,867		$	1,874		$	993	53	%	$	8,371		$	5,345		$	3,026	57	%	Depreciation	$	2,931		$	2,300		$	631	27.4	%
Amortization of acquired intangible assets	Amortization of acquired intangible assets	7,009			7,746			(737)		(10)	%	21,247			22,167			(920)		(4)	%	Amortization of acquired intangible assets	6,631			7,175			(544)		(7.6)	%
Total		$	9,876		$	9,620		$	256	3	%	$	29,618		$	27,512		2,106		8	%
Total depreciation and amortization of acquired intangible assets																						Total depreciation and amortization of acquired intangible assets	$	9,562		$	9,475		$	87	0.9	%
Percentage of revenue	Percentage of revenue	6		%	5		%					4		%	5		%					Percentage of revenue	3.1		%	3.4		%

Depreciation of property, equipment, and ~~equipment~~software, 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 financial professional, sponsor, and customer relationships, which are amortized over their estimated lives.

For the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022, compared to the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, depreciation and amortization expense increased $0.3 million and $2.1 million, respectively, 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. | ~~Q3 2021~~Q1 2022 Form 10-Q 3629

~~Impairment of Goodwill~~
(In thousands, except percentages) Three months ended QTD Nine months ended YTD
September 30, Change September 30, Change
2021 2020 $ % 2021 2020 $ %
Impairment of goodwill $ — $ — $ — N/A — $ 270,625 $ (270,625) (100) %
Percentage of revenue — % — % — % 45 %
INTEREST EXPENSE AND OTHER, NET

~~For the nine months ended September 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 ended QTD Nine months ended YTD
September 30, Change September 30, Change
2021 2020 $ % 2021 2020 $ %
Interest expense $ 7,304 $ 7,254 $ 50 1 % $ 21,789 $ 17,410 $ 4,379 25 %
Amortization of debt issuance costs 388 362 26 7 % 1,128 1,006 122 12 %
Accretion of debt discounts 290 276 14 5 % 851 414 437 106 %
Total interest expense 7,982 7,892 90 1 % 23,768 18,830 4,938 26 %
Interest income — (2) 2 100 % (2) (27) 25 93 %
Gain on sale of a business — (349) 349 100 % — (349) 349 100 %
Non-capitalized debt issuance expenses — 3,687 (3,687) (100) % — 3,687 (3,687) (100) %
Other 313 735 (422) (57) % 436 1,245 (809) (65) %
Other loss, net $ 8,295 $ 11,963 $ (3,668) (31) % $ 24,202 $ 23,386 $ 816 3 %


($ in thousands)	Three Months Ended March 31,				Change
	2022		2021		$		%
Interest expense	$	7,130	$	7,183	$	(53)	(0.7)	%
Amortization of debt issuance costs	389		363		26		7.2	%
Amortization of debt discount	292		277		15		5.4	%
Total interest expense	7,811		7,823		(12)		(0.2)	%
Interest income and other	30		60		(30)		(50.0)	%



Interest expense and other, net	$	7,841	$	7,883	$	(42)	(0.5)	%

For the three months ended ~~September 30, 2021~~March 31, 2022, compared to the three months ended September 30, 2020, other loss, net, decreased $3.7 million primarily due to the recognition of $3.7 million of non-capitalized debt-issuance expenses related to 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.

~~For the nine months ended September 30,~~March 31, 2021, ~~compared to the nine months ended September 30, 2020, other loss, net, increased $0.8 million, primarily due to a $4.9 million increase in total interest expense. 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, which was partially offset by $3.7 million of non-capitalized debt issuance expenses that were also related to the Term Loan increase.and other, net, did not materially change.

~~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 ended QTD Nine months ended YTD
September 30, Change September 30, Change
2021 2020 $ % 2021 2020 $ %
Income tax benefit (expense) $ 774 $ (15,256) $ 16,030 105 % $ (2,920) $ (23,237) $ 20,317 (87) %

~~The Company~~We recorded ~~income tax benefit of $0.8 million and~~ income tax expense of ~~$2.9~~$2.6 million and $1.7 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, and 2021, respectively. ~~For 2021, the Company prepared its~~The prior period interim tax provision was prepared by applying a year-to-date effective tax rate to ~~each quarter. For 2020, the Company prepared its~~income before income taxes. The current period interim tax provision was prepared by applying an estimated annual effective tax ~~rate. We believe using~~rate to income before income taxes and by calculating the ~~actual year-to-date effective~~ tax ~~rate in 2021 results in~~effect of discrete items recognized during the ~~best estimate of the annual effective tax rate.~~quarter (if applicable).

~~The Company’s~~Our effective income tax rate for the ~~nine~~three months ended ~~September 30,~~March 31, 2022, and March 31, 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 of~~maintain a valuation ~~allowances, which were previously recorded in connection with our~~allowance 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 ~~2021~~2022 and 2024.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 37

~~The Company recorded income tax expense of $15.3 million and $23.2 million for the three and nine months ended September~~ 30 2020, respectively. The Company’s effective income tax rate for the three and nine months ended September 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.~~ | ~~Q3 2021 Form 10-Q 38~~

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 consists of interest expense, ~~net and non-capitalized debt issuance expenses.~~net. Acquisition and integration costs primarily relate to the ~~HKFS Acquisition~~acquisitions 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.

A reconciliation of ~~our Adjusted EBITDA to~~GAAP net income (loss), which we believe to be the most comparable GAAP measure, to Adjusted EBITDA, is presented below:
(In thousands) Three months ended Nine months ended
September 30, September 30,
2021 2020 2021 2020
Net income (loss) $ (27,803) $ (26,206) $ 31,451 $ (292,055)
Stock-based compensation 4,729 4,517 15,499 7,220
Depreciation and amortization of acquired intangible assets 10,915 10,366 32,498 29,619
Other loss, net 8,295 11,963 24,202 23,386
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration 541 11,276 9,013 19,782
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration 1,700 (1,000) 19,500 (1,000)
Impairment of goodwill — — — 270,625
Executive transition costs — 405 — 10,225
Headquarters relocation costs — 410 — 1,863
Contested proxy and other legal and consulting costs 1,598 — 7,293 —
Income tax (benefit) expense (774) 15,256 2,920 23,237
Adjusted EBITDA $ (799) $ 26,987 $ 142,376 $ 92,902


	Three Months Ended March 31,
($ in thousands)	2022		2021
Net income	$	34,620	$	27,646
Stock-based compensation	6,225		5,610
Depreciation and amortization of acquired intangible assets	11,305		10,418
Interest expense and other, net	7,841		7,883
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration	(34)		1,803
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration	1,700		6,300



Contested proxy and other legal and consulting costs	2,920		3,230
Income tax expense	2,582		1,700
Adjusted EBITDA	$	67,159	$	64,590

Non-GAAP ~~net income (loss)~~Net Income (Loss) and ~~non-GAAP net income (loss) per share~~Non-GAAP Net Income (Loss) Per Share

We define ~~non-GAAP net income (loss)~~Non-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, ~~gain on the sale of a business,~~ acquisition and integration ~~costs, impairment of goodwill, executive transition costs, headquarters relocation~~ costs, contested proxy and other legal and consulting costs, ~~non-capitalized debt issuance expenses,~~ the related cash tax impact of those adjustments, and non-cash income tax (benefit) expense. We exclude the non-cash portion of income ~~tax expense~~taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which primarily consist of U.S. federal net operating losses. The majority of these net operating losses will beexpire, if not utilized, ~~or expire~~ between ~~2021~~2022 and 2024. Gain on the sale of a business relates to the disposition of SimpleTax in the third quarter of 2019 and the subsequent working capital adjustment in the third quarter of 2020. Non-capitalized debt issuance expense relates to the expense recognized as a result of the Term Loan increase in the third quarter of 2020.

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 39~~

We believe that ~~non-GAAP net income (loss)~~Non-GAAP Net Income (Loss) and ~~non-GAAP net income (loss)~~Non-GAAP Net Income (Loss) per share provide meaningful supplemental information to management, investors, and analysts regarding our performance and the valuation of our business by excluding items in the statement of operations that we do not consider part of our ongoing operations or that have not been, or are not expected to be, settled in cash. Additionally, we believe that ~~non-GAAP net income (loss)~~Non-GAAP Net Income (Loss) and ~~non-GAAP net income (loss)~~Non-GAAP Net Income (Loss) per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP ~~net income (loss)~~Net Income (Loss) and ~~non-GAAP net income (loss)~~Non-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 income (loss)~~Non-GAAP Net Income (Loss) and ~~non-GAAP net income (loss)~~Non-GAAP Net Income (Loss) per share differently, and, therefore, ~~our non-GAAP net income (loss) and non-GAAP net income (loss) per share~~these measures may not be comparable to similarly titled measures of other companies.

Blucora, Inc. | Q1 2022 Form 10-Q 31

A reconciliation of ~~our non-GAAP~~GAAP net income (loss) and ~~non-GAAP~~GAAP net income (loss) per share, ~~to net income (loss) and 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 ended Nine months ended
September 30, September 30,
2021 2020 2021 2020
Net income (loss) $ (27,803) $ (26,206) $ 31,451 $ (292,055)
Stock-based compensation 4,729 4,517 15,499 7,220
Amortization of acquired intangible assets 7,009 7,746 21,247 22,167
Gain on the sale of a business — (349) — (349)
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration 541 11,276 9,013 19,782
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration 1,700 (1,000) 19,500 (1,000)
Impairment of goodwill — — — 270,625
Executive transition costs — 405 — 10,225
Headquarters relocation costs — 410 — 1,863
Contested proxy and other legal and consulting costs 1,598 — 7,293 —
Non-capitalized debt issuance expenses — 3,687 — 3,687
Cash tax impact of adjustments to GAAP net income (331) (418) (1,523) (1,413)
Non-cash income tax (benefit) expense (197) 14,987 (1,160) 22,327
Non-GAAP net income (loss) $ (12,754) $ 15,055 $ 101,320 $ 63,079
Per diluted share:
Net income (loss) (1)
$ (0.57) $ (0.54) $ 0.64 $ (6.06)
Stock-based compensation 0.10 0.09 0.31 0.15
Amortization of acquired intangible assets 0.14 0.16 0.43 0.46
Gain on the sale of a business — (0.01) — (0.01)
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration 0.01 0.23 0.18 0.41
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration 0.03 (0.02) 0.39 (0.02)
Impairment of goodwill — — — 5.62
Executive transition costs — 0.01 — 0.21
Headquarters relocation costs — 0.01 — 0.04
Contested proxy and other legal and consulting costs 0.04 — 0.15 —
Non-capitalized debt issuance expenses — 0.08 — 0.08
Cash tax impact of adjustments to GAAP net income (0.01) (0.01) (0.03) (0.03)
Non-cash income tax (benefit) expense — 0.31 (0.02) 0.46
Non-GAAP net income (loss) per diluted share $ (0.26) $ 0.31 $ 2.05 $ 1.31
Weighted average shares outstanding - diluted 48,707 48,203 49,373 48,184


($ in thousands)	Three Months Ended March 31,
	2022		2021
Net income	$	34,620	$	27,646
Stock-based compensation	6,225		5,610
Amortization of acquired intangible assets	6,631		7,175

Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration	(34)		1,803
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration	1,700		6,300



Contested proxy and other legal and consulting costs	2,920		3,230

Cash tax impact of adjustments to GAAP net income	(959)		(543)
Non-cash income tax (benefit) expense	1,506		(269)
Non-GAAP Net Income	$	52,609	$	50,952
Per diluted share:
Net income (1)	$	0.70	$	0.56
Stock-based compensation	0.13		0.11
Amortization of acquired intangible assets	0.13		0.15

Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration	—		0.04
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration	0.03		0.13



Contested proxy and other legal and consulting costs	0.06		0.07

Cash tax impact of adjustments to GAAP net income	(0.02)		(0.01)
Non-cash income tax (benefit) expense	0.03		(0.01)
Non-GAAP Net Income per share — Diluted	$	1.06	$	1.04
Diluted weighted average shares outstanding	49,747		49,097

~~_________________________~~____________________________

(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 income~~Non-GAAP Net Income and vice versa.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 4032

LIQUIDITY AND CAPITAL RESOURCES

Cash and Cash Equivalents

Our principal source of liquidity is our cash and cash equivalents. As of ~~September 30, 2021,~~March 31, 2022, we had cash and cash equivalents of ~~approximately $184.9~~$144.2 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 September 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.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 at ~~September 30, 2021~~March 31, 2022 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 March 31, 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 combinations~~acquisitions 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. We also expect to have up to $25.0 million~~equivalents on hand and cash provided by operating activities. Execution of ~~cash outlays in the next 12 months as we continue to execute on~~ our growth ~~strategy related to asset acquisitions~~strategies in our Wealth Management ~~business.~~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, 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 Acquisition~~acquisition 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 Annual Report on 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

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

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 41~~

~~$90.0~~ $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 ~~September 30, 2021,~~March 31, 2022, we had ~~$561.8~~$560.9 million in principal amount outstanding under the Term Loan and no amounts outstanding under the New Revolver. Based on aggregate loan commitments as of ~~September 30, 2021,~~March 31, 2022, approximately $90.0 million was available for future borrowing at ~~September 30, 2021~~March 31, 2022 under the Senior Secured Credit

Blucora, Inc. | Q1 2022 Form 10-Q 33

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 ~~maturity date of May 22, 2024.~~Term Loan Maturity Date.

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) 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.

For additional information on the Term Loan, the New Revolver, and the Credit Agreement, see “Item 1. Financial Statements—Note 5.”

~~Share~~Stock Repurchase Plan

~~On March 19, 2019,~~As of December 31, 2021, we ~~announced that~~had $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

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 42~~

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 ~~nine~~three months ended ~~September 30,~~March 31, 2022, we repurchased approximately 1.6 million shares of our common stock under the stock repurchase plan for an aggregate purchase price of approximately $30.5 million. The

Blucora, Inc. | Q1 2022 Form 10-Q 34

remaining authorized amount under the stock repurchase plan as of March 31, 2022, was approximately $69.5 million. For the three months ended March 31, 2021, we did not repurchase any shares of our common stock under the stock repurchase plan. As

Subsequent to March 31, 2022, and through the date of ~~September 30, 2021, there was approximately $71.7~~this filing, we repurchased an additional 0.2 million ~~in remaining capacity~~shares of our common stock under the stock repurchase ~~plan. As part~~plan for an aggregate purchase price of approximately $4.5 million. Subject to the terms 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 of~~future capital ~~that we deem to be in~~requirements over the ~~best interests of stockholders.~~

next twelve months may encompass share repurchases under this plan.

Contractual Obligations and Commitments

~~As part~~On July 1, 2020, we closed the acquisition of ~~the HKFS Acquisition, the~~Avantax Planning Partners, formerly “HKFS”, for an upfront cash purchase price ~~paid by us~~of $104.4 million. The purchase price was subject to ~~two post-closing~~variable contingent consideration, or earn-out ~~payments. The amount~~payments (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”), 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-out~~no payment of consideration is owed to the Sellers for such period.

Based on advisory asset levels and the achievement of performance goals for the first earn-out period specified in the HKFS Purchase Agreement, we ~~made~~paid the full $30.0 million ~~payment~~ in the third quarter of 2021. The estimated fair value of the ~~portion of the~~ HKFS Contingent Consideration liability ~~related to~~for the second earn-out period ~~(calculated in accordance with the amended HKFS Purchase Agreement and based on estimated advisory asset levels as of June 30, 2022)~~ was $~~25.4~~30.0 million as of ~~September 30, 2021. While this amount was calculated~~March 31, 2022 and is included within “Accrued expenses and other current liabilities” on the condensed consolidated balance sheets. We expect to pay the full $30.0 million in ~~accordance with~~ the ~~fair value guidance contained in Accounting Standards Codification 820,~~ ~~Fair Value Measurements, there are a number~~third quarter of ~~assumptions and estimates factored into this fair value (including a risk-adjusted discount rate), and the actual earn-out payment could differ from the estimated fair value.~~2022.

~~Additional information on our contractual obligations and commitments can be found in our Annual Report on Form 10-K for~~In addition, the ~~year ended December 31, 2020.~~

~~Off-Balance Sheet Arrangements~~

~~The~~ Company has ~~future commitments for contingent consideration pursuant to certain~~entered into several asset purchase agreements ~~entered into~~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 acquisition. Contingent consideration arrangements encompass obligations to ~~acquire certain wealth management companies in 2020~~make future payments to sellers contingent upon the achievement of future financial targets. These contingent payments are not recognized until all contingencies are resolved and the ~~first nine months of 2021 to support growth in our Wealth Management business.~~consideration is paid. As of ~~September 30, 2021,~~March 31, 2022, the ~~Company had obligations up to a~~ maximum ~~of $7.2~~future fixed and contingent payments associated with these asset acquisitions was $17.0 million, ~~that may be payable pursuant to specific~~with specified payment ~~schedules over the next four years upon meeting certain contingencies.~~dates from 2022 through 2026.

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 4335

Cash Flows

Our cash flows were comprised of the ~~following:~~following (in thousands):


(In thousands)		Nine months ended September 30,
									Three Months Ended March 31,
		2021		2020		Change ($)			2022		2021		$ Change
Net cash provided by operating activities	Net cash provided by operating activities	$	74,391	$	35,314	$	39,077	Net cash provided by operating activities	$	47,343	$	53,722	$	(6,379)
Net cash used by investing activities	Net cash used by investing activities	(25,447)		(130,787)		105,340		Net cash used by investing activities	(5,482)		(9,185)		3,703
Net cash provided (used) by financing activities		(14,244)		160,392		(174,636)
Net cash used by financing activities								Net cash used by financing activities	(32,463)		(1,255)		(31,208)

Net increase in cash, cash equivalents, and restricted cash	Net increase in cash, cash equivalents, and restricted cash	$	34,700	$	64,919	$	(30,219)	Net increase in cash, cash equivalents, and restricted cash	$	9,398	$	43,282	$	(33,884)

Net ~~cash~~Cash from ~~operating activities~~Operating Activities

Net cash provided by operating activities consists of net income, ~~(loss),~~ offset by certain non-cash adjustments, and changes in operating assets and liabilities, which were as ~~follows:~~follows (in thousands):


(In thousands)		Nine months ended September 30,
		2021		2020		Change ($)			Three Months Ended March 31,
Net income (loss)		$	31,451	$	(292,055)	$	323,506
Non-cash adjustments to net income (loss)		73,111		341,466		(268,355)
									2022		2021		$ Change
Net income								Net income	$	34,620	$	27,646	$	6,974
Non-cash adjustments to net income								Non-cash adjustments to net income	21,235		23,704		(2,469)
Operating cash flows before changes in operating assets and liabilities	Operating cash flows before changes in operating assets and liabilities	104,562		49,411		55,151		Operating cash flows before changes in operating assets and liabilities	55,855		51,350		4,505
Changes in operating assets and liabilities, net of acquisitions and disposals	Changes in operating assets and liabilities, net of acquisitions and disposals	(30,171)		(14,097)		(16,074)		Changes in operating assets and liabilities, net of acquisitions and disposals	(8,512)		2,372		(10,884)
Net cash provided by operating activities	Net cash provided by operating activities	$	74,391	$	35,314	$	39,077	Net cash provided by operating activities	$	47,343	$	53,722	$	(6,379)

~~For~~Net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2021 compared to the nine months ended September 30, 2020,~~March 31, 2022, included $55.9 million of operating cash flows before changes in operating assets and liabilities ~~increased $55.2~~and $8.5 million of changes in operating assets and liabilities. Non-cash adjustments to net income for the three months ended March 31, 2022 primarily ~~due~~related to ~~an increase~~depreciation and amortization costs of ~~$39.8~~$11.3 million, stock-based compensation of $6.2 million, and changes in the ~~operating income~~fair value of ~~our Tax Software business and an increase~~the HKFS Contingent Consideration liability of ~~$8.5 million in~~$1.7 million. As compared to the ~~operating income of our Wealth Management business. We also had a net increase in operating cash flows for the nine~~three months ended ~~September 30,~~March 31, 2021, ~~due to $3.7 million of non-capitalized debt issuance expenses in the 2020 period with no comparable amount in the 2021 period.~~

~~Changes~~changes in operating assets and liabilities, ~~for the nine months ended September 30, 2021 decreased $16.1~~net of acquisitions, reduced operating cash flows by $10.9 million primarily due to ~~$16.8 million~~the timing of the total $30.0 million HKFS Contingent Consideration earn-out payment made in the third quarter of 2021. The remainder of the $30.0 million payment is included in cash flows from financing activities. In addition, the nine months ended September 30, 2021 also included $12.9settlement for our working capital accounts, and $3.5 million in payments made to financial professionals in support of ongoing growth programs.

Net ~~cash~~Cash from ~~investing activities~~Investing Activities

Net cash ~~from~~used by investing activities consists of acquisitions and purchases of property, equipment, and software, and were as ~~follows:~~follows (in thousands):
(In thousands) Nine months ended September 30,
2021 2020 Change ($)
Purchases of property and equipment $ (21,624) $ (28,711) $ 7,087
Business acquisitions, net of cash acquired $ — $ (102,425) $ 102,425
Asset acquisitions, net of cash acquired (3,823) — (3,823)
Proceeds from sale of a business — 349 (349)
Net cash used by investing activities $ (25,447) $ (130,787) $ 105,340


	Three Months Ended March 31,
	2022		2021		$ Change
Purchases of property, equipment, and software	$	(4,731)	$	(8,598)	$	3,867


Asset acquisitions	(751)		(587)		(164)


Net cash used by investing activities	$	(5,482)	$	(9,185)	$	3,703

For the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022, compared to the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash used by investing activities decreased ~~$105.3~~$3.7 million primarily due to ~~the~~reduced internally developed software capital expenditures.

Net Cash from Financing Activities

Net cash ~~outlay~~from financing activities primarily consists of $104.4 million for the HKFS Acquisition in the third quarter of 2020. During the nine months ended September 30, 2021, we paid $3.8 million, including acquisition costs, to complete several asset acquisitions in our Wealth Management businessdebt issuance and repayments, common stock and stock-based awards transactions, and acquisition-related contingent consideration payments. Financing cash flows were as part of our strategic growth strategy. Capital expenditures decreased $7.1 million in the nine months ended September 30, 2021 primarily due to the cash outlay in the nine months ended September 30, 2020 for leasehold improvements to our new corporate headquarters.follows (in thousands):


	Three Months Ended March 31,
	2022		2021		$ Change

Payments on credit facilities	$	(453)	$	(453)	$	—

Stock repurchases	(30,537)		—		(30,537)



Proceeds from stock option exercises	96		63		33

Tax payments from shares withheld for equity awards	(1,569)		(865)		(704)

Net cash used by financing activities	$	(32,463)	$	(1,255)	$	(31,208)

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 4436

~~Net cash from financing activities~~

~~Net cash from financing activities were as follows:~~
(In thousands) Nine months ended September 30,
2021 2020 Change ($)
Proceeds from credit facilities, net of debt issuance costs and debt discounts (1)
$ (502) $ 226,278 $ (226,780)
Payments on credit facilities (1,359) (66,078) 64,719
Proceeds from stock option exercises 535 25 510
Proceeds from issuance of stock through employee stock purchase plan 1,845 1,201 644
Tax payments from shares withheld for equity awards (1,613) (1,034) (579)
Acquisition-related contingent consideration payment (13,150) — (13,150)
Net cash used (provided) by financing activities $ (14,244) $ 160,392 $ (174,636)

~~_________________________~~

~~(1)The Company amended its Senior Secured Credit Facility in April 2021 to increase~~For the ~~borrowing capacity of its revolving line of credit from $65.0 million to $90.0 million. The Company did not borrow under the New Revolver or Term Loan during the nine~~three months ended September 30, 2021. The Company recognized $0.5 million of deferred financing costs in other long-term assets on the condensed consolidated balance sheet that were paid in connection with this amendment.

~~For the nine months ended September 30, 2021~~March 31, 2022, compared to the ~~nine~~three months ended ~~September 30, 2020, net~~March 31, 2021, we used $31.2 million more cash ~~provided by~~for financing activities, ~~decreased $174.6 million~~ primarily due to ~~$175.0~~the repurchase of approximately 1.6 million shares of ~~new borrowings on~~our common stock under the ~~Term Loan, in part to fund the HKFS Acquisition, and a net $10.0 million repayment on the Revolver in the nine months ended September 30, 2020. This activity was partially offset by $13.2 million~~stock repurchase plan for an aggregate purchase price of ~~cash outflow in the nine months ended September 30, 2021 that was a portion of the $30.0 million HKFS Contingent Consideration payment made in the third quarter.~~approximately $30.5 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 ~~unaudited condensed~~ 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 that~~and estimates.

We have identified certain accounting estimates which involve a significant level of estimation uncertainty and have had or are ~~the most important~~reasonably likely to ~~the portrayal of~~have a ~~company’s~~material impact on our financial condition ~~and~~or results of ~~operations and which require a 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 that~~estimates which we believe ~~involve~~to be the ~~more significant judgments and estimates used~~most critical in the preparation of our condensed consolidated financial statements involve ~~wealth management revenue recognition, tax software revenue recognition,~~ business combinations, goodwill impairment, and ~~goodwill impairment.~~income taxes. We continually update and assess the facts, circumstances, and assumptions used in making both our critical accounting estimates and judgments related to our other significant accounting matters.

There have been no material changes in our critical accounting policies as disclosed under “Critical Accounting ~~Policies and~~ Estimates” in Part II, Item 7A7 and in Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~

2021.

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 ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. As of ~~September 30, 2021,~~March 31, 2022, we had ~~$561.8~~$560.9 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 LIBOR. For further information on our outstanding debt, see “Item 1. Financial Statements—Note 5” and the section “Liquidity and Capital Resources” of

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 45~~

“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 ~~September 30, 2021~~March 31, 2022 would result in a ~~$15.1~~$12.3 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 ~~September 30, 2021.~~March 31, 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 ~~September 30, 2021.~~March 31, 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 three months ended ~~September 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Blucora, Inc. | Q1 2022 Form 10-Q 37

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

See “Item 1. Financial Statements—Note 8”9” for information ~~on our~~regarding legal proceedings.

Item 1A. Risk Factors

Our business and future ~~operating~~ results may be affected by a number of risks and uncertainties that should be considered carefully. In addition, this Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual ~~operating~~ 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, ~~2020~~2021 and the risks set forth below.

We believe that there have been no material changes in our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 other than as set forth below. The occurrence of one or more of 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.”

~~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 a material 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.

~~Blucora, Inc.~~ | ~~Q3 2021 Form 10-Q 46~~

2021.

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

~~On March 19, 2019, we announced that our board of directors authorized~~The 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 made~~stock through a variety of methods, including open market or privately negotiated transactions. ~~The timing and number~~As 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.

~~For~~March 31, 2022, the ~~nine months ended September 30, 2021, we did not repurchase any shares of our common stock~~remaining authorized repurchases under the stock repurchase ~~plan. As~~plan was $69.5 million.

The following table details our repurchases of ~~September 30, 2021, there was approximately $71.7 million in remaining capacity under~~common stock for the ~~stock repurchase plan.~~three months ended March 31, 2022 (in thousands, except the average price paid per share data):


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs
January 1-31, 2022	190	$	15.73	190	$	97,007
February 1-28, 2022	524	$	18.12	524	$	87,510
March 1-31, 2022	931	$	19.39	931	$	69,463









Total	1,645	$	18.56	1,645

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~Amendment to Executive Change of Control Severance Plan

We previously adopted the Blucora, Inc. Executive Change of Control Severance Plan (the | “Plan”~~Q3 2021 Form 10-Q 47~~

~~Item 6. Exhibits~~
Exhibit
Number Exhibit Description Form Date of
First Filing Exhibit Number Filed
Herewith
2.1#
Stock Purchase Agreement, dated as of March 18, 2019, by and among 1G Acquisitions, LLC, 1st Global, Inc., 1st Global Insurance Services, Inc., the sellers named therein and joinder sellers, SAB Representative, LLC, as the sellers’ representative, and Blucora, Inc., as guarantor
8-K March 19, 2019 2.1
2.2#
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, 2020
8-K July 1, 2020 2.1
2.3
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’ representative
8-K July 2, 2021 2.1
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Exchange Act rules 13a-14(a) and 15d-14(a))
X
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Exchange Act rules 13a-14(a) and 15d-14(a))
X
32.1*
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350)
X
32.2*
Certification of Principal Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350)
X
101 The following financial statements from the Company's Form 10-Q for the fiscal quarter ended September 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 Statements X
104 Cover 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)~~which we may provide severance benefits to designated executive-level employees who experience a “Qualifying Termination” under the Plan within 24 months following a “Change of ~~Regulation S-K.~~Control” (as defined in the Plan) or within two months prior to a Change of Control.

Effective as of May 2, 2022, the compensation committee of our board of directors adopted the First Amendment to the Blucora, Inc. ~~hereby undertakes~~Executive Change of Control Severance Plan (the “First Amendment”) and designated Christopher W. Walters, our Chief Executive Officer, as a participant in the Plan. The First Amendment amended the Plan to ~~furnish supplemental copies~~provide that Mr. Walters’ severance multiple will be 2.5 rather than the severance multiple of ~~any~~2.0 applicable to the other participants in the Plan. As a result of the ~~omitted schedules and exhibits upon request~~First Amendment, in the event of a Qualifying Termination, Mr. Walters will receive an amount equal to 2.5 multiplied by the ~~Securities~~sum of Mr. Walters’ (A) annual base salary and ~~Exchange Commission.~~

*(B) target annual bonus for the calendar year in which the Qualifying Termination occurs. The ~~certifications attached as Exhibits 32.1 and 32.2 are not~~First Amendment also modified the Plan provisions with respect to the vesting of performance-based equity awards for all participants that experience a Qualifying Termination to provide that the performance conditions will be 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. | ~~Q3 2021~~Q1 2022 Form 10-Q 4838

satisfied at the greater of actual performance and target for all participants as compared to the prior Plan provisions that deemed the performance conditions to be achieved at the target level in the event of a Qualifying Termination.

The foregoing summary is qualified in its entirety by reference to the First Amendment, which is filed as Exhibit 10.1 to this Form 10-Q and incorporated herein by reference.

Blucora, Inc. | Q1 2022 Form 10-Q 39

Item 6. Exhibits

Exhibit
Number

Exhibit Description

Form

Date of
First Filing

Exhibit Number

Filed
Herewith

2.1#

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

8-K

March 19, 2019

2.1

2.2#

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, 2020

8-K

July 1, 2020

2.1

2.3#

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’ representative

8-K

July 2, 2021

2.1

10.1

First Amendment to the Blucora, Inc. Executive Change of Control Severance Plan

31.1

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

31.2

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

32.1*

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

32.2*

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

101

The following financial statements from the Company's Form 10-Q for the fiscal quarter ended March 31, 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 Statements

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

____________________________


#						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, 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. | Q1 2022 Form 10-Q 40

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 registrant and as Principal Financial Officer)

			Date:			~~November~~May 4, ~~2021~~2022

Blucora, Inc. | ~~Q3 2021~~Q1 2022 Form 10-Q 4941


				Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss
	Common stock									Treasury stock
	Shares	Amount								Shares	Amount		Total
Balance as of December 31, 2020	49,483	$	5	$	1,598,230	$	(1,257,546)	$	—	(1,306)	$	(28,399)	$	312,290
Common stock issued for stock options and restricted stock units	132	—		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, 2021	49,615	$	5	$	1,602,948	$	(1,229,900)	$	—	(1,306)	$	(28,399)	$	344,654
Common stock issued for stock options, restricted stock units, and employee stock purchase plan	347	—		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, 2021	49,962	$	5	$	1,609,193	$	(1,198,292)	$	—	(1,306)	$	(28,399)	$	382,507
Common stock issued for stock options and restricted stock units	63	—		328		—		—		—	—		328
Stock-based compensation	—	—		4,387		—		—		—	—		4,387
Tax payments from shares withheld for equity awards	—	—		(284)		—		—		—	—		(284)
Net loss	—	—		—		(27,803)		—		—	—		(27,803)
Balance as of September 30, 2021	50,025	$	5	$	1,613,624	$	(1,226,095)	$	—	(1,306)	$	(28,399)	$	359,135


	September 30, 2021								December 31, 2020
	Principal amount		Discount		Debt issuance costs		Net carrying value		Principal amount		Discount		Debt issuance costs		Net carrying value
Senior Secured Credit Facility	$	561,797	$	(3,322)	$	(3,698)	$	554,777	$	563,156	$	(4,173)	$	(4,646)	$	554,337
Less: Current portion of long-term debt, net							(1,790)								(1,784)
Long-term debt, net							$	552,987							$	552,553


Undiscounted cash flows:
Remainder of 2021	$	804
2022	5,040
2023	5,172
2024	5,080
2025	5,013
Thereafter	30,324
Total undiscounted cash flows	51,433
Imputed interest	(12,984)
Total operating lease liabilities	$	38,449


(In thousands, except percentages and as otherwise indicated)	Nine months ended		YTD			Year-to-date period ended		YTD
	September 30,		Change			July 16,		Change
	2021	2020	Units	%		2021 (1)	2020 (1)	Units	%
Total e-files (2)	5,492	5,234	258	5	%	5,421	5,149	272	5	%
Consumer:
Consumer e-files (2)	3,144	3,145	(1)	—	%	3,122	3,113	9	—	%
Professional:
Professional e-files	2,348	2,089	259	12	%	2,299	2,036	263	13	%
Units sold (in ones)	20,808	20,288	520	3	%	20,711	20,207	504	2	%
Professional e-files per unit sold (in ones)	112.8	102.9	9.9	10	%	111.0	100.8	10.2	10	%


(In thousands, except per share amounts)	Three months ended				Nine months ended
	September 30,				September 30,
	2021		2020		2021		2020
Net income (loss)	$	(27,803)	$	(26,206)	$	31,451	$	(292,055)
Stock-based compensation	4,729		4,517		15,499		7,220
Amortization of acquired intangible assets	7,009		7,746		21,247		22,167
Gain on the sale of a business	—		(349)		—		(349)
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration	541		11,276		9,013		19,782
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration	1,700		(1,000)		19,500		(1,000)
Impairment of goodwill	—		—		—		270,625
Executive transition costs	—		405		—		10,225
Headquarters relocation costs	—		410		—		1,863
Contested proxy and other legal and consulting costs	1,598		—		7,293		—
Non-capitalized debt issuance expenses	—		3,687		—		3,687
Cash tax impact of adjustments to GAAP net income	(331)		(418)		(1,523)		(1,413)
Non-cash income tax (benefit) expense	(197)		14,987		(1,160)		22,327
Non-GAAP net income (loss)	$	(12,754)	$	15,055	$	101,320	$	63,079
Per diluted share:
Net income (loss) (1)	$	(0.57)	$	(0.54)	$	0.64	$	(6.06)
Stock-based compensation	0.10		0.09		0.31		0.15
Amortization of acquired intangible assets	0.14		0.16		0.43		0.46
Gain on the sale of a business	—		(0.01)		—		(0.01)
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration	0.01		0.23		0.18		0.41
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration	0.03		(0.02)		0.39		(0.02)
Impairment of goodwill	—		—		—		5.62
Executive transition costs	—		0.01		—		0.21
Headquarters relocation costs	—		0.01		—		0.04
Contested proxy and other legal and consulting costs	0.04		—		0.15		—
Non-capitalized debt issuance expenses	—		0.08		—		0.08
Cash tax impact of adjustments to GAAP net income	(0.01)		(0.01)		(0.03)		(0.03)
Non-cash income tax (benefit) expense	—		0.31		(0.02)		0.46
Non-GAAP net income (loss) per diluted share	$	(0.26)	$	0.31	$	2.05	$	1.31
Weighted average shares outstanding - diluted	48,707		48,203		49,373		48,184