Avantax 8K Blucora Announces Second Quarter 2020 Results | AVTA 5 Aug 20

Exhibit 99.2

Blucora, Inc.

Supplemental Information

June 30, 2020

Table of Contents


Financial Information
Consolidated Financial Results			2
Reconciliation of Certain Non-GAAP Financial Measures			4
Net Leverage Ratio			6
Reconciliation of Operating Free Cash Flow from Continuing Operations			7

Operating Metrics
Wealth Management			8
Tax Preparation			9

Blucora Consolidated Financial Results⁽¹⁾


(in thousands except %s and per share amounts, rounding differences may exist)	2018				2019																												2020
				FY 12/31				1Q				2Q				3Q				4Q				FY 12/31				1Q				2Q
Segment revenue:
Wealth Management ⁽¹⁾	$	373,174			$	89,532			$	127,831			$	145,428			$	145,188			$	507,979			$	144,989			$	115,884
Tax Preparation ⁽²⁾	187,282				136,236				65,909				3,588				4,233				209,966				118,331				45,238
Total segment revenue	$	560,456			$	225,768			$	193,740			$	149,016			$	149,421			$	717,945			$	263,320			$	161,122
Segment income (loss): ⁽³⁾
Wealth Management ⁽¹⁾	$	53,053			$	11,540			$	16,979			$	20,631			$	19,142			$	68,292			$	22,598			$	11,731
Tax Preparation ⁽²⁾	87,249				79,272				41,368				(12,075)				(12,316)				96,249				37,753				6,659
Total segment income (loss)	$	140,302			$	90,812			$	58,347			$	8,556			$	6,826			$	164,541			$	60,351			$	18,390
Segment income (loss) % of revenue:
Wealth Management ⁽¹⁾	14		%		13		%		13		%		14		%		13		%		13		%		16		%		10		%
Tax Preparation ⁽²⁾	47		%		58		%		63		%		(337)		%		(291)		%		46		%		32		%		15		%
Total segment income (loss) % of revenue	25		%		40		%		30		%		6		%		5		%		23		%		23		%		11		%
Unallocated corporate-level general and administrative expenses ⁽³⁾	$	20,495			$	7,105			$	6,221			$	6,476			$	7,559			$	27,361			$	7,016			$	5,810
Adjusted EBITDA ⁽⁴⁾	$	119,807			$	83,707			$	52,126			$	2,080			$	(733)			$	137,180			$	53,335			$	12,580
Other unallocated corporate-level operating expenses: ⁽³⁾
Stock-based compensation	$	13,253			$	2,443			$	4,082			$	4,639			$	5,136			$	16,300			$	(1,201)			$	3,904
Acquisition and integration costs	—				1,797				9,183				6,759				8,024				25,763				5,682				2,824
Depreciation	5,003				1,310				1,662				1,811				2,068				6,851				2,420				2,412
Amortization of acquired intangible assets	33,586				8,044				9,169				10,082				10,062				37,357				7,748				6,673
Executive transition costs	—				—				—				—				—				—				9,184				636
Headquarters relocation costs	—				—				—				—				—				—				716				737
Impairment of goodwill and intangible asset	—				—				—				50,900				—				50,900				270,625				—
Restructuring	288				—				—				—				—				—				—				—
Operating income (loss)	$	67,677			$	70,113			$	28,030			$	(72,111)			$	(26,023)			$	9			$	(241,839)			$	(4,606)
Unallocated other (income) loss, net: ⁽³⁾
Interest expense	$	15,610			$	3,776			$	4,770			$	5,469			$	5,002			$	19,017			$	5,316			$	4,840
Amortization of debt issuance costs	833				172				375				301				194				1,042				313				331
Accretion of debt discounts	163				38				85				66				39				228				68				70
Total interest expense	$	16,606			$	3,986			$	5,230			$	5,836			$	5,235			$	20,287			$	5,697			$	5,241
Interest income	(349)				(140)				(149)				(52)				(108)				(449)				(14)				(11)
Loss on debt extinguishment and modification expense	1,534				—				—				—				—				—				—				—
Gain on sale of a business	—				—				—				(3,256)				—				(3,256)				—				—
Other (income) loss, net	(1,994)				112				37				78				106				333				452				58
Total other loss, net	$	15,797			$	3,958			$	5,118			$	2,606			$	5,233			$	16,915			$	6,135			$	5,288
Income (loss) before income taxes	$	51,880			$	66,155			$	22,912			$	(74,717)			$	(31,256)			$	(16,906)			$	(247,974)			$	(9,894)
Income tax (benefit) expense:
Cash	$	2,714			$	834			$	3,193			$	3,262			$	(3,725)			$	3,564			$	483			$	158
Non-cash ⁽⁵⁾	(2,403)				3,151				(11,317)				(15,593)				(44,859)				(68,618)				67,037				(59,697)
Total income tax (benefit) expense	$	311			$	3,985			$	(8,124)			$	(12,331)			$	(48,584)			$	(65,054)			$	67,520			$	(59,539)
GAAP income (loss)	$	51,569			$	62,170			$	31,036			$	(62,386)			$	17,328			$	48,148			$	(315,494)			$	49,645
GAAP impact of noncontrolling interests ⁽⁶⁾	(935)				—				—				—				—				—				—				—
GAAP net income (loss) attributable to Blucora, Inc.	$	50,634			$	62,170			$	31,036			$	(62,386)			$	17,328			$	48,148			$	(315,494)			$	49,645
GAAP income (loss) per share - diluted	$	0.90			$	1.25			$	0.62			$	(1.28)			$	0.36			$	0.98			$	(6.60)			$	1.03
Non-GAAP net income (loss) ⁽⁴⁾	$	94,036			$	77,194			$	41,382			$	(9,565)			$	(4,813)			$	104,198			$	43,561			$	4,463
Non-GAAP net income (loss) per share - diluted ^{(4) (7)}	$	1.90			$	1.56			$	0.83			$	(0.20)			$	(0.10)			$	2.11			$	0.90			$	0.09

Basic weighted average shares outstanding	47,394				48,161				48,555				48,652				47,689				48,264				47,827				47,941
Diluted weighted average shares outstanding	49,381				49,542				49,822				48,652				48,344				49,282				47,827				48,092

Notes to Consolidated Financial Results

(1)The operations of 1st Global are included in the Company's operating results as part of the Wealth Management segment beginning May 6, 2019 when 1st Global was acquired.

(2)As a highly seasonal business, almost all of the Tax Preparation revenue is typically generated in the first four months of the calendar year. In March 2020 and as a result of the coronavirus pandemic, the Internal Revenue Service 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 Preparation segment revenue and segment income that is usually earned in the first and second quarters of 2020 to the third quarter of 2020.

(3)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, executive transition costs, headquarters relocation costs, impairment of goodwill and intangible asset, restructuring, other income/loss, or income taxes to the reportable segments. General and administrative costs are included in "Unallocated corporate operating expenses."

(4)Non-GAAP measure. See Reconciliation of certain Non-GAAP Financial Measures on page 4 for additional information.

(5)Amounts represent the non-cash portion of income taxes. We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which consist primarily of U.S. federal net operating losses. The majority of these net operating losses will expire, if unutilized, between 2020 and 2024.

(6)GAAP income (loss) excludes the impact of noncontrolling interests associated with the HD Vest management rollover equity ownership of 4.48%. The impact of noncontrolling interests is recorded separately and after GAAP income (loss) through December 31, 2018, which was the final measurement date of those ownership interests.

(7)For periods in which non-GAAP net income is generated, non-GAAP net income per share is calculated using diluted weighted average shares outstanding. For periods in which non-GAAP net loss is generated, non-GAAP net loss per share is calculated using basic weighted average shares outstanding.

Blucora Reconciliation of Certain Non-GAAP Financial Measures ^{(1) (2)}


	2018		2019														2020
(in thousands except per share amounts, rounding differences may exist)	FY 12/31		1Q		2Q		3Q		4Q		FY 12/31		1Q		2Q
Adjusted EBITDA
Net income (loss) attributable to Blucora, Inc.^{(1) (2)}	$	50,634	$	62,170	$	31,036	$	(62,386)	$	17,328	$	48,148	$	(315,494)	$	49,645
Stock-based compensation	13,253		2,443		4,082		4,639		5,136		16,300		(1,201)		3,904
Depreciation and amortization of acquired intangible assets	38,589		9,354		10,831		11,893		12,130		44,208		10,168		9,085
Other loss, net	15,797		3,958		5,118		2,606		5,233		16,915		6,135		5,288
Acquisition and integration costs	—		1,797		9,183		6,759		8,024		25,763		5,682		2,824
Executive transition costs	—		—		—		—		—		—		9,184		636
Headquarters relocation costs	—		—		—		—		—		—		716		737
Restructuring	288		—		—		—		—		—		—		—
Net income attributable to noncontrolling interests	935		—		—		—		—		—		—		—
Income tax (benefit) expense	311		3,985		(8,124)		(12,331)		(48,584)		(65,054)		67,520		(59,539)
Impairment of goodwill and intangible asset	—		—		—		50,900		—		50,900		270,625		—
Adjusted EBITDA	$	119,807	$	83,707	$	52,126	$	2,080	$	(733)	$	137,180	$	53,335	$	12,580
Non-GAAP Net Income (Loss)
Net income (loss) attributable to Blucora, Inc.^{(1) (2)}	$	50,634	$	62,170	$	31,036	$	(62,386)	$	17,328	$	48,148	$	(315,494)	$	49,645
Stock-based compensation	13,253		2,443		4,082		4,639		5,136		16,300		(1,201)		3,904
Amortization of acquired intangible assets	33,586		8,044		9,169		10,082		10,062		37,357		7,748		6,673
Impairment of goodwill and intangible asset	—		—		—		50,900		—		50,900		270,625		—
Gain on the sale of a business	—		—		—		(3,256)		—		(3,256)		—		—
Acquisition and integration costs	—		1,797		9,183		6,759		8,024		25,763		5,682		2,824
Executive transition costs	—		—		—		—		—		—		9,184		636
Headquarters relocation costs	—		—		—		—		—		—		716		737
Restructuring	288		—		—		—		—		—		—		—
Net income attributable to noncontrolling interests	935		—		—		—		—		—		—		—
Cash tax impact of adjustments to GAAP net income	(2,257)		(411)		(771)		(710)		(504)		(2,396)		(736)		(259)
Non-cash income tax (benefit) expense	(2,403)		3,151		(11,317)		(15,593)		(44,859)		(68,618)		67,037		(59,697)
Non-GAAP net income (loss)	$	94,036	$	77,194	$	41,382	$	(9,565)	$	(4,813)	$	104,198	$	43,561	$	4,463

Non-GAAP net income (loss) per share⁽³⁾	$	1.90	$	1.56	$	0.83	$	(0.20)	$	(0.10)	$	2.11	$	0.90	$	0.09
Weighted average shares outstanding⁽³⁾	49,381		49,542		49,822		48,652		47,689		49,282		48,253		48,092

Notes to Reconciliations of Certain Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures on next page

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

(1)We define Adjusted EBITDA as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets, restructuring, other loss, net, net income attributable to noncontrolling interests, acquisition and integration costs, income tax (benefit) expense, the impairment of goodwill and an intangible asset, executive transition costs, and headquarters relocation costs. Restructuring costs relate to the relocation of our corporate headquarters that were completed in 2018. Acquisition and integration costs relate to the acquisition of 1st Global and the acquisition of HKFS. The impairment of an intangible asset relates to the impairment of the HD Vest trade name intangible asset. The impairment of goodwill relates to the impairment of our Wealth Management reporting unit goodwill that was recognized in the first quarter of 2020. Executive transition costs relate to the departure of certain company executives in the first quarter of 2020. Headquarters relocation costs relate to the process of moving to our Dallas and Irving offices to our new headquarters office.

We believe that Adjusted EBITDA provides meaningful supplemental information regarding our performance. We use this non-GAAP financial measure for internal management and compensation purposes, when publicly providing guidance on possible future results, and as a means to evaluate period-to-period comparisons. We believe that Adjusted EBITDA is a common measure used by investors and analysts to evaluate our performance, that it provides a more complete understanding of the results of operations and trends affecting our business when viewed together with GAAP results, and that management and investors benefit from referring to this non-GAAP financial measure. Items excluded from Adjusted EBITDA are significant and necessary components to the operations of our business and, therefore, Adjusted EBITDA should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income (loss). Other companies may calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

We define non-GAAP net income (loss) as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, the impairment of goodwill and an intangible asset, gain on the sale of a business, acquisition and integration costs, executive transition costs, headquarters relocation costs, restructuring costs, net income attributable to noncontrolling interests, the related cash tax impact of those adjustments, and non-cash income taxes. We exclude the non-cash portion of income taxes because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which primarily consist of U.S. federal net operating losses. The majority of these net operating losses will expire, if unutilized, between 2020 and 2024.

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

(2)As presented in the Blucora Consolidated Financial Results (unaudited) on page 2.

(3)For periods in which non-GAAP net income is generated, non-GAAP net income per share is calculated using diluted weighted average shares outstanding. For periods in which non-GAAP net loss is generated, non-GAAP net loss per share is calculated using basic weighted average shares outstanding.

Blucora Net Leverage Ratio


	2018			2019																		2020
(in thousands except ratio, rounding differences may exist)	4Q			1Q			2Q			3Q			4Q			1Q			2Q
DEBT:
Senior secured credit facility	$	265,000		$	265,000		$	390,000		$	390,000		$	399,687		$	444,375		$	389,062
CASH:
Cash and cash equivalents	$	84,524		$	149,762		$	109,606		$	97,466		$	80,820		$	168,198		$	90,081
NET DEBT ^{(1) (2)}	$	180,476		$	115,238		$	280,394		$	292,534		$	318,867		$	276,177		$	298,981

Last twelve months:
SEGMENT INCOME:
Wealth Management	$	53,053		$	51,518		$	55,543		$	63,283		$	68,292		$	79,350		$	74,102
Tax Preparation	87,249			107,715			104,962			99,823			96,249			54,730			20,021
	$	140,302		$	159,233		$	160,505		$	163,106		$	164,541		$	134,080		$	94,123
Unallocated corporate-level general and administrative expenses	(20,495)			(22,059)			(24,042)			(25,946)			(27,361)			(27,272)			(26,861)
ADJUSTED EBITDA ⁽¹⁾	$	119,807		$	137,174		$	136,463		$	137,160		$	137,180		$	106,808		$	67,262

NET LEVERAGE RATIO ^{(1) (3)}	1.5		x	0.8		x	2.1		x	2.1		x	2.3		x	2.6		x	4.4		x

Blucora Reconciliation of Trailing Twelve Month ("TTM") Adjusted EBITDA ^{(1) (4)}


	2018		2019												2020
(in thousands except per share amounts, rounding differences may exist)	TTM 4Q		TTM 1Q		TTM 2Q		TTM 3Q		TTM 4Q		TTM 1Q		TTM 2Q
Adjusted EBITDA
Net income (loss) attributable to Blucora, Inc.	$	50,634	$	67,463	$	63,261	$	14,839	$	48,148	$	(329,516)	$	(310,907)
Stock-based compensation	13,253		12,741		13,093		14,858		16,300		12,656		12,478
Depreciation and amortization of acquired intangible assets	38,589		37,584		38,436		41,128		44,208		45,022		43,276
Other loss, net	15,797		14,527		16,886		15,629		16,915		19,092		19,262
Acquisition and integration costs	—		1,797		10,980		17,739		25,763		29,648		23,289
Executive transition costs	—		—		—		—		—		9,184		9,820
Headquarters relocation costs	—		—		—		—		—		716		1,453
Restructuring	288		(1)		(3)		(3)		—		—		—
Net income attributable to noncontrolling interests	935		730		508		281		—		—		—
Income tax (benefit) expense	311		2,333		(6,698)		(18,211)		(65,054)		(1,519)		(52,934)
Impairment of goodwill and intangible asset	—		—		—		50,900		50,900		321,525		321,525
Adjusted EBITDA	$	119,807	$	137,174	$	136,463	$	137,160	$	137,180	$	106,808	$	67,262

1.Non-GAAP measure using Adjusted EBITDA for the last twelve months. Adjusted EBITDA for the trailing twelve month period is reconciled to the nearest GAAP measure on this page.

2.We define net debt as cash and cash equivalents less the outstanding principal of debt. Management believes that the presentation of this non-GAAP financial measure provides useful information to investors because it is an important liquidity measurement that reflects our ability to service our debt.

3.Net leverage ratio is calculated by dividing net debt by Adjusted EBITDA for the trailing twelve months.

4.For additional information on Adjusted EBITDA and its use as a Non-GAAP measure, see page 5.

Blucora Reconciliation of Operating Free Cash Flow ⁽¹⁾


	2018		2019														2020
(in thousands, rounding differences may exist)	FY 12/31		1Q		2Q		3Q		4Q		FY 12/31		1Q		2Q
Net cash provided by (used in) operating activities	$	105,548	$	70,236	$	26,576	$	(565)	$	(3,443)	$	92,804	$	46,864	$	(12,490)

Purchases of property and equipment	(7,633)		(1,243)		(1,695)		(3,949)		(3,614)		(10,501)		(7,715)		(11,357)
Operating free cash flow	$	97,915	$	68,993	$	24,881	$	(4,514)	$	(7,057)	$	82,303	$	39,149	$	(23,847)

(1)We define operating free cash flow from continuing operations, which is a non-GAAP measure, as net cash provided by (used in) operating activities from continuing operations less purchases of property and equipment. We believe operating free cash flow is an important liquidity measure that reflects the cash generated by the continuing businesses, after the purchases of property and equipment, that can then be used for, among other things, strategic acquisitions and investments in the businesses, stock repurchases, and funding ongoing operations.

Blucora Operating Metrics - Wealth Management


	2018			2019																					2020
(in thousands except %s, rounding differences may exist)	FY 12/31			1Q			2Q			3Q			4Q			FY 12/31			1Q			2Q
Segment revenue	$	373,174		$	89,532		$	127,831		$	145,428		$	145,188		$	507,979		$	144,989		$	115,884
Less: Financial professional commission payout	$	(252,357)		$	(60,860)		$	(86,583)		$	(100,700)		$	(99,860)		$	(348,003)		$	(100,804)		$	(82,656)
Segment net revenue ⁽¹⁾	$	120,817		$	28,672		$	41,248		$	44,728		$	45,328		$	159,976		$	44,185		$	33,228
Segment income ⁽²⁾	$	53,053		$	11,540		$	16,979		$	20,631		$	19,142		$	68,292		$	22,598		$	11,731
Segment income % of revenue	14		%	13		%	13		%	14		%	13		%	13		%	16		%	10		%
Segment income % of net revenue	44		%	40		%	41		%	46		%	42		%	43		%	51		%	35		%


(in thousands except %s, rounding differences may exist)								2018					2019																														2020
	Sources of Revenue	Primary Drivers	FY 12/31					1Q					2Q					3Q					4Q					FY 12/31					1Q					2Q
Financial professional-driven	Advisory	- Advisory asset levels	$	164,353				$	39,757				$	61,410				$	75,579				$	75,621				$	252,367				$	78,757				$	66,303
		Commission	- Transactions - Asset levels - Product mix		164,201					37,160					48,068					52,623					53,199					191,050					50,580					39,836
Other revenue	Asset-based	- Cash balances - Interest rates - Number of accounts - Client asset levels	31,456					9,693					13,219					13,618					11,652					48,182					10,579					3,981
		Transaction and fee	- Account activity - Number of clients - Number of financial professionals - Number of accounts		13,164					2,922					5,134					3,608					4,716					16,380					5,073					5,764
	Total revenue				$	373,174				$	89,532				$	127,831				$	145,428				$	145,188				$	507,979				$	144,989				$	115,884
	Total recurring revenue ⁽³⁾				$	303,117				$	73,241				$	106,557				$	121,304				$	121,026				$	422,128				$	119,255				$	100,004
	Recurring revenue rate ⁽³⁾				81.2		%			81.8		%			83.4		%			83.4		%			83.4		%			83.1		%			82.3		%			86.3		%


(in thousands except %s and as otherwise indicated, rounding differences may exist)	2018				2019																												2020
				FY 12/31				1Q				2Q				3Q				4Q				FY 12/31				1Q				2Q
Total client assets	$	42,249,055			$	46,164,603			$	67,602,006			$	67,682,510			$	70,644,385			$	70,644,385			$	61,014,454			$	68,519,998
Brokerage assets	$	29,693,650			$	32,176,414			$	41,335,972			$	41,358,346			$	43,015,221			$	43,015,221			$	37,395,490			$	41,964,610
Advisory assets	$	12,555,405			$	13,988,189			$	26,266,034			$	26,324,164			$	27,629,164			$	27,629,164			$	23,618,964			$	26,555,388
% of total client assets	29.7		%		30.3		%		38.9		%		38.9		%		39.1		%		39.1		%		38.7		%		38.8		%
Number of financial professionals (in ones)	3,593				3,553				4,225				4,119				3,984				3,984				3,945				3,862
Advisory and commission revenue per financial professional ⁽⁴⁾	$	91.4			$	21.6			$	25.9			$	31.1			$	32.3			$	111.3			$	32.8			$	27.5

(1)Non-GAAP financial measure represents segment revenue less financial professional commission payout.

(2)Excludes expenses associated with non-recurring projects.

(3)Recurring revenue consists of trailing commissions, advisory fees, fees from cash sweep programs, and certain transaction and fee revenue.

(4)Full year advisory and commission revenue per financial professional is based upon a full year of advisory and commission revenue.

Blucora Operating Metrics - Tax Preparation


(in thousands except %s and as otherwise indicated, rounding differences may exist)	Six months ended June 30,						Year-to-date period ended July 16,
	2020	2019	% change		2020 (1)	2019 (1)	% change
Total e-files (2)	4,595	5,095	(10)	%	5,149	5,108	1	%
Consumers
E-files (2)	2,734	3,179	(14)	%	3,113	3,184	(2)	%
Preparers
E-files	1,861	1,916	(3)	%	2,036	1,924	6	%
Units sold (in ones)	20,087	20,583	(2)	%	20,207	20,596	(2)	%
E-files per unit sold (in ones)	92.6	93.1	(1)	%	100.8	93.4	8	%

(1)Tax season begins on the first day that the IRS begins accepting e-files and ends on filing deadline day plus one day. As a result of the coronavirus pandemic, the IRS extended the filing deadline for federal tax returns relating to the 2019 tax year to July 15, 2020. In order to provide comparable prior period data, we also provided e-file information for the equivalent period in 2019.

(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.

Avantax (AVTA) 8-KBlucora Announces Second Quarter 2020 Results