Exhibit 99.2
Blucora, Inc.
Supplemental Information
September 30, 2021
Table of Contents
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| Financial Information: | |
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| Operating Metrics: | |
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Blucora Consolidated Statements of Operations (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands except %s and per share amounts, rounding differences may exist) | 2019 | | 2020 | | 2021 | | | | | | |
| FY 12/31 | | 1Q | | 2Q | | 3Q | | 4Q | | FY 12/31 | | 1Q | | 2Q | | 3Q | | | | |
| Segment revenue: | | | | | | | | | | | | | | | | | | | | | |
| Wealth Management | $ | 507,979 | | | $ | 144,989 | | | $ | 115,884 | | | $ | 135,932 | | | $ | 149,384 | | | $ | 546,189 | | | $ | 154,491 | | | $ | 162,395 | | | $ | 169,135 | | | | | |
| Tax Software | 209,966 | | | 118,331 | | | 45,238 | | | 39,421 | | | 5,773 | | | 208,763 | | | 123,892 | | | 91,917 | | | 5,039 | | | | | |
| Total segment revenue | 717,945 | | | 263,320 | | | 161,122 | | | 175,353 | | | 155,157 | | | 754,952 | | | 278,383 | | | 254,312 | | | 174,174 | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | | | | | | |
| Cost of revenue: | | | | | | | | | | | | | | | | | | | | | |
| Wealth Management | 352,081 | | | 102,342 | | | 83,868 | | | 96,122 | | | 103,630 | | | 385,962 | | | 108,623 | | | 113,910 | | | 120,641 | | | | | |
| Tax Software | 10,691 | | | 4,013 | | | 3,054 | | | 2,692 | | | 2,569 | | | 12,328 | | | 5,578 | | | 4,429 | | | 2,323 | | | | | |
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| Total segment cost of revenue | 362,772 | | | 106,355 | | | 86,922 | | | 98,814 | | | 106,199 | | | 398,290 | | | 114,201 | | | 118,339 | | | 122,964 | | | | | |
| Engineering and technology | 30,931 | | | 8,515 | | | 7,377 | | | 6,007 | | | 5,359 | | | 27,258 | | | 7,128 | | | 7,231 | | | 7,874 | | | | | |
| Sales and marketing | 126,205 | | | 79,710 | | | 40,057 | | | 31,018 | | | 26,833 | | | 177,618 | | | 77,562 | | | 34,848 | | | 28,399 | | | | | |
| General and administrative | 78,529 | | | 24,728 | | | 20,200 | | | 18,605 | | | 18,625 | | | 82,158 | | | 24,685 | | | 23,832 | | | 23,102 | | | | | |
| Depreciation | 5,479 | | | 1,796 | | | 1,675 | | | 1,874 | | | 1,948 | | | 7,293 | | | 2,300 | | | 3,204 | | | 2,867 | | | | | |
| Amortization of other acquired intangible assets | 37,357 | | | 7,748 | | | 6,673 | | | 7,746 | | | 7,578 | | | 29,745 | | | 7,175 | | | 7,063 | | | 7,009 | | | | | |
Impairment of goodwill and an intangible asset (1) | 50,900 | | | 270,625 | | | — | | | — | | | — | | | 270,625 | | | — | | | — | | | — | | | | | |
| Acquisition and integration | 25,763 | | | 5,682 | | | 2,824 | | | 10,276 | | | 12,303 | | | 31,085 | | | 8,103 | | | 18,169 | | | 2,241 | | | | | |
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| Total operating expenses | 717,936 | | | 505,159 | | | 165,728 | | | 174,340 | | | 178,845 | | | 1,024,072 | | | 241,154 | | | 212,686 | | | 194,456 | | | | | |
| Operating income (loss) | 9 | | | (241,839) | | | (4,606) | | | 1,013 | | | (23,688) | | | (269,120) | | | 37,229 | | | 41,626 | | | (20,282) | | | | | |
| Other loss, net | (16,915) | | | (6,135) | | | (5,288) | | | (11,963) | | | (7,918) | | | (31,304) | | | (7,883) | | | (8,024) | | | (8,295) | | | | | |
| Income (loss) before income taxes | (16,906) | | | (247,974) | | | (9,894) | | | (10,950) | | | (31,606) | | | (300,424) | | | 29,346 | | | 33,602 | | | (28,577) | | | | | |
| Income tax benefit (expense) | 65,054 | | | (67,520) | | | 59,539 | | | (15,256) | | | (19,094) | | | (42,331) | | | (1,700) | | | (1,994) | | | 774 | | | | | |
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| Net income (loss) | $ | 48,148 | | | $ | (315,494) | | | $ | 49,645 | | | $ | (26,206) | | | $ | (50,700) | | | $ | (342,755) | | | $ | 27,646 | | | $ | 31,608 | | | $ | (27,803) | | | | | |
| Net income (loss) per share: | | | | | | | | | | | | | | | | | | | | | |
| Basic | $ | 1.00 | | | $ | (6.60) | | | $ | 1.04 | | | $ | (0.55) | | | $ | (1.05) | | | $ | (7.14) | | | $ | 0.57 | | | $ | 0.65 | | | $ | (0.57) | | | | | |
| Diluted | $ | 0.98 | | | $ | (6.60) | | | $ | 1.03 | | | $ | (0.55) | | | $ | (1.05) | | | $ | (7.14) | | | $ | 0.56 | | | $ | 0.64 | | | $ | (0.57) | | | | | |
| Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | | |
| Basic | 48,264 | | | 47,827 | | | 47,941 | | | 48,039 | | | 48,107 | | | 47,978 | | | 48,261 | | | 48,508 | | | 48,707 | | | | | |
| Diluted | 49,282 | | | 47,827 | | | 48,092 | | | 48,039 | | | 48,107 | | | 47,978 | | | 49,097 | | | 49,385 | | | 48,707 | | | | | |
____________________________
(1)In the first quarter of 2020, we recognized a $270.6 million goodwill impairment related to our Wealth Management reporting unit. In 2019, we recognized a $50.9 million impairment of an intangible asset related to the HD Vest trade name intangible asset.
Blucora Consolidated Financial Results (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands except %s and per share amounts, rounding differences may exist) | 2019 | | 2020 | | 2021 | | | | | | |
| FY 12/31 | | 1Q | | 2Q | | 3Q | | 4Q | | FY 12/31 | | 1Q | | 2Q | | 3Q | | | | |
| Segment revenue: | | | | | | | | | | | | | | | | | | | | | |
Wealth Management (1) | $ | 507,979 | | | $ | 144,989 | | | $ | 115,884 | | | $ | 135,932 | | | $ | 149,384 | | | $ | 546,189 | | | $ | 154,491 | | | $ | 162,395 | | | $ | 169,135 | | | | | |
Tax Software (2) | 209,966 | | | 118,331 | | | 45,238 | | | 39,421 | | | 5,773 | | | 208,763 | | | 123,892 | | | 91,917 | | | 5,039 | | | | | |
| Total segment revenue | $ | 717,945 | | | $ | 263,320 | | | $ | 161,122 | | | $ | 175,353 | | | $ | 155,157 | | | $ | 754,952 | | | $ | 278,383 | | | $ | 254,312 | | | $ | 174,174 | | | | | |
Segment operating income: (3) | | | | | | | | | | | | | | | | | | | | | |
Wealth Management (1) | $ | 68,292 | | | $ | 22,598 | | | $ | 11,731 | | | $ | 17,498 | | | $ | 20,368 | | | $ | 72,195 | | | $ | 19,396 | | | $ | 21,396 | | | $ | 19,564 | | | | | |
Tax Software (2) | 96,249 | | | 37,753 | | | 6,659 | | | 16,234 | | | (11,025) | | | 49,621 | | | 50,888 | | | 63,448 | | | (13,864) | | | | | |
| Total segment operating income | $ | 164,541 | | | $ | 60,351 | | | $ | 18,390 | | | $ | 33,732 | | | $ | 9,343 | | | $ | 121,816 | | | $ | 70,284 | | | $ | 84,844 | | | $ | 5,700 | | | | | |
| Segment operating income as a % of segment revenue: | | | | | | | | | | | | | | | | | | | | | |
Wealth Management (1) | 13 | % | | 16 | % | | 10 | % | | 13 | % | | 14 | % | | 13 | % | | 13 | % | | 13 | % | | 12 | % | | | | |
Tax Software (2) | 46 | % | | 32 | % | | 15 | % | | 41 | % | | (191) | % | | 24 | % | | 41 | % | | 69 | % | | (275) | % | | | | |
| Total operating income as a % of segment revenue | 23 | % | | 23 | % | | 11 | % | | 19 | % | | 6 | % | | 16 | % | | 25 | % | | 33 | % | | 3 | % | | | | |
Unallocated corporate-level general and administrative expenses (3) | $ | 27,361 | | | $ | 7,016 | | | $ | 5,810 | | | $ | 6,745 | | | $ | 7,118 | | | $ | 26,689 | | | $ | 5,694 | | | $ | 6,259 | | | $ | 6,499 | | | | | |
Adjusted EBITDA (4) | $ | 137,180 | | | $ | 53,335 | | | $ | 12,580 | | | $ | 26,987 | | | $ | 2,225 | | | $ | 95,127 | | | $ | 64,590 | | | $ | 78,585 | | | $ | (799) | | | | | |
Other unallocated corporate-level operating expenses: (3) | | | | | | | | | | | | | | | | | | | | | |
| Stock-based compensation | $ | 16,300 | | | $ | (1,201) | | | $ | 3,904 | | | $ | 4,517 | | | $ | 2,846 | | | $ | 10,066 | | | $ | 5,610 | | | $ | 5,160 | | | $ | 4,729 | | | | | |
| Acquisition and integration—Excluding change in the fair value of acquisition-related contingent consideration | 25,763 | | | 5,682 | | | 2,824 | | | 11,276 | | | 3,003 | | | 22,785 | | | 1,803 | | | 6,669 | | | 541 | | | | | |
| Acquisition and integration—Change in the fair value of acquisition-related contingent consideration | — | | | — | | | — | | | (1,000) | | | 9,300 | | | 8,300 | | | 6,300 | | | 11,500 | | | 1,700 | | | | | |
| Depreciation | 6,851 | | | 2,420 | | | 2,412 | | | 2,620 | | | 2,710 | | | 10,162 | | | 3,243 | | | 4,102 | | | 3,906 | | | | | |
| Amortization of acquired intangible assets | 37,357 | | | 7,748 | | | 6,673 | | | 7,746 | | | 7,578 | | | 29,745 | | | 7,175 | | | 7,063 | | | 7,009 | | | | | |
| Executive transition costs | — | | | 9,184 | | | 636 | | | 405 | | | 476 | | | 10,701 | | | — | | | — | | | — | | | | | |
| Headquarters relocation costs | — | | | 716 | | | 737 | | | 410 | | | — | | | 1,863 | | | — | | | — | | | — | | | | | |
| Contested proxy and other legal and consulting costs | — | | | — | | | — | | | — | | | — | | | — | | | 3,230 | | | 2,465 | | | 1,598 | | | | | |
| Impairment of goodwill and an intangible asset | 50,900 | | | 270,625 | | | — | | | — | | | — | | | 270,625 | | | — | | | — | | | — | | | | | |
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| Operating income (loss) | $ | 9 | | | $ | (241,839) | | | $ | (4,606) | | | $ | 1,013 | | | $ | (23,688) | | | $ | (269,120) | | | $ | 37,229 | | | $ | 41,626 | | | $ | (20,282) | | | | | |
Unallocated other (income) loss, net: (3) | | | | | | | | | | | | | | | | | | | | | |
| Interest expense | $ | 19,017 | | | $ | 5,316 | | | $ | 4,840 | | | $ | 7,254 | | | $ | 7,160 | | | $ | 24,570 | | | $ | 7,183 | | | $ | 7,302 | | | $ | 7,304 | | | | | |
| Amortization of debt issuance costs | 1,042 | | | 313 | | | 331 | | | 362 | | | 366 | | | 1,372 | | | 363 | | | 377 | | | 388 | | | | | |
| Accretion of debt discounts | 228 | | | 68 | | | 70 | | | 276 | | | 279 | | | 693 | | | 277 | | | 284 | | | 290 | | | | | |
| Total interest expense | $ | 20,287 | | | $ | 5,697 | | | $ | 5,241 | | | $ | 7,892 | | | $ | 7,805 | | | $ | 26,635 | | | $ | 7,823 | | | $ | 7,963 | | | $ | 7,982 | | | | | |
| Interest income | (449) | | | (14) | | | (11) | | | (2) | | | (38) | | | (65) | | | (2) | | | — | | | — | | | | | |
| Gain on sale of a business | (3,256) | | | — | | | — | | | (349) | | | — | | | (349) | | | — | | | — | | | — | | | | | |
| Non-capitalized debt issuance expenses | — | | | — | | | — | | | 3,687 | | | — | | | 3,687 | | | — | | | — | | | — | | | | | |
| Other loss, net | 333 | | | 452 | | | 58 | | | 735 | | | 151 | | | 1,396 | | | 62 | | | 61 | | | 313 | | | | | |
| Total other loss, net | $ | 16,915 | | | $ | 6,135 | | | $ | 5,288 | | | $ | 11,963 | | | $ | 7,918 | | | $ | 31,304 | | | $ | 7,883 | | | $ | 8,024 | | | $ | 8,295 | | | | | |
| Income (loss) before income taxes | $ | (16,906) | | | $ | (247,974) | | | $ | (9,894) | | | $ | (10,950) | | | $ | (31,606) | | | $ | (300,424) | | | $ | 29,346 | | | $ | 33,602 | | | $ | (28,577) | | | | | |
| Income tax (benefit) expense: | | | | | | | | | | | | | | | | | | | | | |
| Cash | $ | 3,564 | | | $ | 483 | | | $ | 158 | | | $ | 269 | | | $ | 362 | | | $ | 1,272 | | | $ | 1,969 | | | $ | 2,688 | | | $ | (577) | | | | | |
Non-cash (5) | (68,618) | | | 67,037 | | | (59,697) | | | 14,987 | | | 18,732 | | | 41,059 | | | (269) | | | (694) | | | (197) | | | | | |
| Total income tax (benefit) expense | $ | (65,054) | | | $ | 67,520 | | | $ | (59,539) | | | $ | 15,256 | | | $ | 19,094 | | | $ | 42,331 | | | $ | 1,700 | | | $ | 1,994 | | | $ | (774) | | | | | |
| GAAP net income (loss) | $ | 48,148 | | | $ | (315,494) | | | $ | 49,645 | | | $ | (26,206) | | | $ | (50,700) | | | $ | (342,755) | | | $ | 27,646 | | | $ | 31,608 | | | $ | (27,803) | | | | | |
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| GAAP net income (loss) per share - diluted | $ | 0.98 | | | $ | (6.60) | | | $ | 1.03 | | | $ | (0.55) | | | $ | (1.05) | | | $ | (7.14) | | | $ | 0.56 | | | $ | 0.64 | | | $ | (0.57) | | | | | |
Non-GAAP net income (loss) (4) | $ | 104,198 | | | $ | 43,561 | | | $ | 4,463 | | | $ | 15,055 | | | $ | (8,999) | | | $ | 54,080 | | | $ | 50,952 | | | $ | 63,122 | | | $ | (12,754) | | | | | |
Non-GAAP net income (loss) per share - diluted (4) (6) | $ | 2.11 | | | $ | 0.90 | | | $ | 0.09 | | | $ | 0.31 | | | $ | (0.19) | | | $ | 1.12 | | | $ | 1.04 | | | $ | 1.28 | | | $ | (0.26) | | | | | |
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| Weighted average shares outstanding - basic | 48,264 | | | 47,827 | | | 47,941 | | | 48,039 | | | 48,107 | | | 47,978 | | | 48,261 | | | 48,508 | | | 48,707 | | | | | |
| Weighted average shares outstanding - diluted | 49,282 | | | 47,827 | | | 48,092 | | | 48,039 | | | 48,107 | | | 47,978 | | | 49,097 | | | 49,385 | | | 48,707 | | | | | |
Notes to Consolidated Financial Results on next page
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. The operations of HKFS are included in the Company's operating results as part of the Wealth Management segment beginning July 1, 2020 when HKFS was acquired.
(2)As a highly seasonal business, a significant portion of Tax Software revenue is typically generated in the first two quarters of the calendar year. In March 2020 and as a result of the COVID-19 pandemic, the Internal Revenue Service (the "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 and segment operating income 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 season and extended the filing and payment deadline for tax year 2020 federal tax returns from April 15, 2021 to May 17, 2021. In addition, the IRS extended the federal filing and payment deadline for Texas, Louisiana, and Oklahoma to mid-June. 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.
(3)We do not allocate certain operating expenses (including personnel and overhead costs), stock-based compensation, depreciation, amortization of acquired intangible assets, acquisition and integration costs, executive transition costs, headquarters relocation costs, contested proxy and other legal and consulting costs, impairment of goodwill and an intangible asset, other loss, net, or income taxes to the reportable operating segments. General and administrative costs are included in "Unallocated corporate-level expenses."
(4)See the Reconciliation of Certain Non-GAAP Financial Measures to the Nearest Comparable GAAP Financial Measures on page 5.
(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 either be utilized or expire between 2021 and 2024.
(6)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 to the Nearest Comparable GAAP Financial Measures (1) (2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2019 | | 2020 | | 2021 | | | | | | |
| (in thousands except per share amounts, rounding differences may exist) | FY 12/31 | | 1Q | | 2Q | | 3Q | | 4Q | | FY 12/31 | | 1Q | | 2Q | | 3Q | | | | |
| Adjusted EBITDA | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) (1) (2) | $ | 48,148 | | | $ | (315,494) | | | $ | 49,645 | | | $ | (26,206) | | | $ | (50,700) | | | $ | (342,755) | | | $ | 27,646 | | | $ | 31,608 | | | $ | (27,803) | | | | | |
| Stock-based compensation | 16,300 | | | (1,201) | | | 3,904 | | | 4,517 | | | 2,846 | | | 10,066 | | | 5,610 | | | 5,160 | | | 4,729 | | | | | |
| Depreciation and amortization of acquired intangible assets | 44,208 | | | 10,168 | | | 9,085 | | | 10,366 | | | 10,288 | | | 39,907 | | | 10,418 | | | 11,165 | | | 10,915 | | | | | |
| Other loss, net | 16,915 | | | 6,135 | | | 5,288 | | | 11,963 | | | 7,918 | | | 31,304 | | | 7,883 | | | 8,024 | | | 8,295 | | | | | |
| Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration | 25,763 | | | 5,682 | | | 2,824 | | | 11,276 | | | 3,003 | | | 22,785 | | | 1,803 | | | 6,669 | | | 541 | | | | | |
| Acquisition and integration—Change in the fair value of HKFS Contingent Consideration | — | | | — | | | — | | | (1,000) | | | 9,300 | | | 8,300 | | | 6,300 | | | 11,500 | | | 1,700 | | | | | |
| Executive transition costs | — | | | 9,184 | | | 636 | | | 405 | | | 476 | | | 10,701 | | | — | | | — | | | — | | | | | |
| Headquarters relocation costs | — | | | 716 | | | 737 | | | 410 | | | — | | | 1,863 | | | — | | | — | | | — | | | | | |
| Contested proxy and other legal and consulting costs | — | | | — | | | — | | | — | | | — | | | — | | | 3,230 | | | 2,465 | | | 1,598 | | | | | |
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| Income tax (benefit) expense | (65,054) | | | 67,520 | | | (59,539) | | | 15,256 | | | 19,094 | | | 42,331 | | | 1,700 | | | 1,994 | | | (774) | | | | | |
| Impairment of goodwill and an intangible asset | 50,900 | | | 270,625 | | | — | | | — | | | — | | | 270,625 | | | — | | | — | | | — | | | | | |
| Adjusted EBITDA | $ | 137,180 | | | $ | 53,335 | | | $ | 12,580 | | | $ | 26,987 | | | $ | 2,225 | | | $ | 95,127 | | | $ | 64,590 | | | $ | 78,585 | | | $ | (799) | | | | | |
| Non-GAAP Net Income (Loss) | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) (1) (2) | $ | 48,148 | | | $ | (315,494) | | | $ | 49,645 | | | $ | (26,206) | | | $ | (50,700) | | | $ | (342,755) | | | $ | 27,646 | | | $ | 31,608 | | | $ | (27,803) | | | | | |
| Stock-based compensation | 16,300 | | | (1,201) | | | 3,904 | | | 4,517 | | | 2,846 | | | 10,066 | | | 5,610 | | | 5,160 | | | 4,729 | | | | | |
| Amortization of acquired intangible assets | 37,357 | | | 7,748 | | | 6,673 | | | 7,746 | | | 7,578 | | | 29,745 | | | 7,175 | | | 7,063 | | | 7,009 | | | | | |
| Impairment of goodwill and an intangible asset | 50,900 | | | 270,625 | | | — | | | — | | | — | | | 270,625 | | | — | | | — | | | — | | | | | |
| Gain on the sale of a business | (3,256) | | | — | | | — | | | (349) | | | — | | | (349) | | | — | | | — | | | — | | | | | |
| Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration | 25,763 | | | 5,682 | | | 2,824 | | | 11,276 | | | 3,003 | | | 22,785 | | | 1,803 | | | 6,669 | | | 541 | | | | | |
| Acquisition and integration—Change in the fair value of HKFS Contingent Consideration | — | | | — | | | — | | | (1,000) | | | 9,300 | | | 8,300 | | | 6,300 | | | 11,500 | | | 1,700 | | | | | |
| Executive transition costs | — | | | 9,184 | | | 636 | | | 405 | | | 476 | | | 10,701 | | | — | | | — | | | — | | | | | |
| Headquarters relocation costs | — | | | 716 | | | 737 | | | 410 | | | — | | | 1,863 | | | — | | | — | | | — | | | | | |
| Contested proxy and other legal and consulting costs | — | | | — | | | — | | | — | | | — | | | — | | | 3,230 | | | 2,465 | | | 1,598 | | | | | |
| Non-capitalized debt issuance expenses | — | | | — | | | — | | | 3,687 | | | — | | | 3,687 | | | — | | | — | | | — | | | | | |
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| Cash tax impact of adjustments to GAAP net income (loss) | (2,396) | | | (736) | | | (259) | | | (418) | | | (234) | | | (1,647) | | | (543) | | | (649) | | | (331) | | | | | |
| Non-cash income tax (benefit) expense | (68,618) | | | 67,037 | | | (59,697) | | | 14,987 | | | 18,732 | | | 41,059 | | | (269) | | | (694) | | | (197) | | | | | |
| Non-GAAP net income (loss) | $ | 104,198 | | | $ | 43,561 | | | $ | 4,463 | | | $ | 15,055 | | | $ | (8,999) | | | $ | 54,080 | | | $ | 50,952 | | | $ | 63,122 | | | $ | (12,754) | | | | | |
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Non-GAAP net income (loss) per share (3) | $ | 2.11 | | | $ | 0.90 | | | $ | 0.09 | | | $ | 0.31 | | | $ | (0.19) | | | $ | 1.12 | | | $ | 1.04 | | | $ | 1.28 | | | $ | (0.26) | | | | | |
Weighted average shares outstanding (3) | 49,282 | | | 48,253 | | | 48,092 | | | 48,203 | | | 48,107 | | | 48,244 | | | 49,097 | | | 49,385 | | | 48,707 | | | | | |
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), determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets, other loss, net, acquisition and integration costs, impairment of goodwill and an intangible asset, executive transition costs, headquarters relocation costs, contested proxy and other legal and consulting costs, and income tax (benefit) expense. Other loss, net primarily consists of interest expense, net and non-capitalized debt issuance expenses. Acquisition and integration costs relate to the acquisition of HKFS and the acquisition of 1st Global, including the increase to the contingent liability reserve in the second quarter of 2021 related to the regulatory inquiry assumed in the acquisition of 1st Global. The impairment of goodwill relates to the impairment of our Wealth Management reporting unit goodwill in the first quarter of 2020. The impairment of an intangible asset relates to the impairment of the HD Vest trade name intangible asset in 2019. 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 former Dallas and Irving offices to our new headquarters.
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), determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, acquisition and integration costs, impairment of goodwill and an intangible asset, gain on the sale of a business, 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 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 either be utilized or expire between 2021 and 2024. Gain on the sale of a business relates to the disposition of SimpleTax in 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 increase to our Term Loan.
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 net income (loss) per share. Other companies may calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share 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) See the Consolidated Financial Results on page 3.
(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 Reconciliation of Trailing Twelve Month ("TTM") Adjusted EBITDA (1) (2)
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| | 2019 | | 2020 | 2021 | | | | | | |
| (in thousands except per share amounts, rounding differences may exist) | TTM 4Q | | TTM 1Q | | TTM 2Q | | TTM 3Q | | TTM 4Q | | TTM 1Q | | TTM 2Q | | TTM 3Q | | | | |
| Adjusted EBITDA | | | | | | | | | | | | | | | | | | | |
| Net income (loss) | $ | 48,148 | | | $ | (329,516) | | | $ | (310,907) | | | $ | (274,727) | | | $ | (342,755) | | | $ | 385 | | | $ | (17,652) | | | $ | (19,249) | | | | | |
| Stock-based compensation | 16,300 | | | 12,656 | | | 12,478 | | | 12,356 | | | 10,066 | | | 16,877 | | | 18,133 | | | 18,345 | | | | | |
| Depreciation and amortization of acquired intangible assets | 44,208 | | | 45,022 | | | 43,276 | | | 41,749 | | | 39,907 | | | 40,157 | | | 42,237 | | | 42,786 | | | | | |
| Other loss, net | 16,915 | | | 19,092 | | | 19,262 | | | 28,619 | | | 31,304 | | | 33,052 | | | 35,788 | | | 32,120 | | | | | |
| Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration | 25,763 | | | 29,648 | | | 23,289 | | | 27,806 | | | 22,785 | | | 18,906 | | | 22,751 | | | 12,016 | | | | | |
| Acquisition and integration—Change in the fair value of HKFS Contingent Consideration | — | | | — | | | — | | | (1,000) | | | 8,300 | | | 14,600 | | | 26,100 | | | 28,800 | | | | | |
| Executive transition costs | — | | | 9,184 | | | 9,820 | | | 10,225 | | | 10,701 | | | 1,517 | | | 881 | | | 476 | | | | | |
| Headquarter relocation costs | — | | | 716 | | | 1,453 | | | 1,863 | | | 1,863 | | | 1,147 | | | 410 | | | — | | | | | |
| Contested proxy and other legal and consulting costs | — | | | — | | | — | | | — | | | — | | | 3,230 | | | 5,695 | | | 7,293 | | | | | |
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| Income tax (benefit) expense | (65,054) | | | (1,519) | | | (52,934) | | | (25,347) | | | 42,331 | | | (23,489) | | | 38,044 | | | 22,014 | | | | | |
| Impairment of goodwill and an intangible asset | 50,900 | | | 321,525 | | | 321,525 | | | 270,625 | | | 270,625 | | | — | | | — | | | — | | | | | |
| Adjusted EBITDA | $ | 137,180 | | | $ | 106,808 | | | $ | 67,262 | | | $ | 92,169 | | | $ | 95,127 | | | $ | 106,382 | | | $ | 172,387 | | | $ | 144,601 | | | | | |
Blucora Net Leverage Ratio | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2019 | | 2020 | | 2021 | | | | | | | |
| (in thousands, except ratio, rounding differences may exist) | 4Q | | 1Q | | 2Q | | 3Q | | 4Q | | 1Q | | 2Q | | 3Q | | | | | |
| DEBT: | | | | | | | | | | | | | | | | | | | | |
| Senior Secured Credit Facility | $ | 399,687 | | | $ | 444,375 | | | $ | 389,062 | | | $ | 563,609 | | | $ | 563,156 | | | $ | 562,703 | | | $ | 562,250 | | | $ | 561,797 | | | | | | |
| CASH: | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | 80,820 | | | $ | 168,198 | | | $ | 90,081 | | | $ | 151,166 | | | $ | 150,125 | | | $ | 191,803 | | | $ | 232,409 | | | $ | 184,926 | | | | | | |
NET DEBT (3) | $ | 318,867 | | | $ | 276,177 | | | $ | 298,981 | | | $ | 412,443 | | | $ | 413,031 | | | $ | 370,900 | | | $ | 329,841 | | | $ | 376,871 | | | | | | |
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| Last twelve months: | | | | | | | | | | | | | | | | | | | | |
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ADJUSTED EBITDA (1) | $ | 137,180 | | | $ | 106,808 | | | $ | 67,262 | | | $ | 92,169 | | | $ | 95,127 | | | $ | 106,382 | | | $ | 172,387 | | | $ | 144,601 | | | | | | |
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NET LEVERAGE RATIO (1) (4) | 2.3 | | x | 2.6 | | x | 4.4 | | x | 4.5 | | x | 4.3 | | x | 3.5 | | x | 1.9 | | x | 2.6 | | x | | | | |
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____________________________
(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 comparable GAAP measure in the top table on this page.
(2) For additional information on Adjusted EBITDA and its use as a non-GAAP measure, see page 6.
(3) We define net debt, a non-GAAP financial measure, 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.
(4) Net leverage ratio is calculated by dividing net debt by Adjusted EBITDA for the trailing twelve months.
Blucora Reconciliation of Operating Free Cash Flow (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2019 | | 2020 | | 2021 | | | | | | |
| (in thousands, rounding differences may exist) | FY 12/31 | | 1Q | | 2Q | | 3Q | | 4Q | | FY 12/31 | | 1Q | | 2Q | | 3Q | | | | |
| Net cash provided by (used in) operating activities | $ | 92,804 | | | $ | 46,864 | | | $ | (12,490) | | | $ | 940 | | | $ | 8,765 | | | $ | 44,079 | | | $ | 53,722 | | | $ | 43,549 | | | $ | (22,880) | | | | | |
| Purchases of property and equipment | (10,501) | | | (7,715) | | | (11,357) | | | (9,639) | | | (7,291) | | | (36,002) | | | (8,598) | | | (4,946) | | | (8,080) | | | | | |
| Operating free cash flow | $ | 82,303 | | | $ | 39,149 | | | $ | (23,847) | | | $ | (8,699) | | | $ | 1,474 | | | $ | 8,077 | | | $ | 45,124 | | | $ | 38,603 | | | $ | (30,960) | | | | | |
____________________________
(1) We define operating free cash flow, which is a non-GAAP measure, as net cash provided (used) by operating activities less purchases of property and equipment. We believe operating free cash flow is an important liquidity measure that reflects the cash generated by our 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2019 | | 2020 | | 2021 | | | | | | |
| (in thousands except %s, rounding differences may exist) | FY 12/31 | | 1Q | | 2Q | | 3Q | | 4Q | | FY 12/31 | | 1Q | | 2Q | | 3Q | | | | |
| Segment revenue | $ | 507,979 | | | $ | 144,989 | | | $ | 115,884 | | | $ | 135,932 | | | $ | 149,384 | | | $ | 546,189 | | | $ | 154,491 | | | $ | 162,395 | | | $ | 169,135 | | | | | |
| Less: Financial professional commission payout | $ | (348,003) | | | $ | (100,804) | | | $ | (82,656) | | | $ | (94,794) | | | $ | (102,610) | | | $ | (380,864) | | | $ | (107,211) | | | $ | (112,164) | | | $ | (119,044) | | | | | |
Segment net revenue (1) | $ | 159,976 | | | $ | 44,185 | | | $ | 33,228 | | | $ | 41,138 | | | $ | 46,774 | | | $ | 165,325 | | | $ | 47,280 | | | $ | 50,231 | | | $ | 50,091 | | | | | |
Segment income (2) | $ | 68,292 | | | $ | 22,598 | | | $ | 11,731 | | | $ | 17,498 | | | $ | 20,368 | | | $ | 72,195 | | | $ | 19,396 | | | $ | 21,396 | | | $ | 19,564 | | | | | |
| Segment income as a % of revenue | 13 | % | | 16 | % | | 10 | % | | 13 | % | | 14 | % | | 13 | % | | 13 | % | | 13 | % | | 12 | % | | | | |
| Segment income as a % of net revenue | 43 | % | | 51 | % | | 35 | % | | 43 | % | | 44 | % | | 44 | % | | 41 | % | | 43 | % | | 39 | % | | | | |
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| (in thousands except %s, rounding differences may exist) | 2019 | | 2020 | | 2021 | | | | | | |
| Sources of Revenue | Primary Drivers | FY 12/31 | | 1Q | | 2Q | | 3Q | | 4Q | | FY 12/31 | | 1Q | | 2Q | | 3Q | | | | |
| Financial professional-driven | Advisory | - Advisory asset levels | $ | 252,367 | | | $ | 78,757 | | | $ | 66,303 | | | $ | 82,612 | | | $ | 87,079 | | | $ | 314,751 | | | $ | 91,119 | | | $ | 96,508 | | | $ | 103,540 | | | | | |
| Commission | - Transactions
- Asset levels
- Product mix | 191,050 | | | 50,580 | | | 39,836 | | | 44,921 | | | 49,864 | | | 185,201 | | | 52,534 | | | 51,702 | | | 52,961 | | | | | |
| Other revenue | Asset-based | - Cash balances
- Interest rates
- Number of accounts
- Client asset levels | 48,182 | | | 10,579 | | | 3,981 | | | 4,351 | | | 4,777 | | | 23,688 | | | 5,329 | | | 5,526 | | | 5,659 | | | | | |
| Transaction and fee | - Account activity
- Number of clients
- Number of financial professionals
- Number of accounts | 16,380 | | | 5,073 | | | 5,764 | | | 4,048 | | | 7,664 | | | 22,549 | | | 5,509 | | | 8,659 | | | 6,975 | | | | | |
| Total revenue | $ | 507,979 | | | $ | 144,989 | | | $ | 115,884 | | | $ | 135,932 | | | $ | 149,384 | | | $ | 546,189 | | | $ | 154,491 | | | $ | 162,395 | | | $ | 169,135 | | | | | |
| Total recurring revenue (3) | $ | 422,128 | | | $ | 119,255 | | | $ | 100,004 | | | $ | 117,822 | | | $ | 127,863 | | | $ | 464,944 | | | $ | 130,755 | | | $ | 138,900 | | | $ | 145,311 | | | | | |
| Recurring revenue rate (3) | 83.1 | % | | 82.3 | % | | 86.3 | % | | 86.7 | % | | 85.6 | % | | 85.1 | % | | 84.6 | % | | 85.5 | % | | 85.9 | % | | | | |
____________________________
(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.
Blucora Operating Metrics - Wealth Management (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands except %s and as otherwise indicated, rounding differences may exist) | 2019 | | 2020 | | 2021 | | | | | | |
| FY 12/31 | | 1Q | | 2Q | | 3Q | | 4Q | | FY 12/31 | | 1Q | | 2Q | | 3Q | | | | |
| Total client assets | $ | 70,644,385 | | | $ | 61,014,454 | | | $ | 68,519,998 | | | $ | 76,152,721 | | | $ | 82,961,244 | | | $ | 82,961,244 | | | $ | 84,776,191 | | | $ | 87,814,790 | | | $ | 86,647,743 | | | | | |
| Brokerage assets | $ | 43,015,221 | | | $ | 37,395,490 | | | $ | 41,964,610 | | | $ | 43,733,735 | | | $ | 47,357,687 | | | $ | 47,357,687 | | | $ | 48,001,320 | | | $ | 48,373,805 | | | $ | 46,850,354 | | | | | |
| Advisory assets | $ | 27,629,164 | | | $ | 23,618,964 | | | $ | 26,555,388 | | | $ | 32,418,986 | | | $ | 35,603,557 | | | $ | 35,603,557 | | | $ | 36,774,871 | | | $ | 39,440,985 | | | $ | 39,797,389 | | | | | |
| % of total client assets | 39.1 | % | | 38.7 | % | | 38.8 | % | | 42.6 | % | | 42.9 | % | | 42.9 | % | | 43.4 | % | | 44.9 | % | | 45.9 | % | | | | |
Number of financial professionals (in ones) (1) | 3,984 | | | 3,945 | | | 3,862 | | | 3,975 | | | 3,770 | | | 3,770 | | | 3,718 | | | 3,606 | | | 3,529 | | | | | |
Advisory and commission revenue per financial professional (2) | $ | 111.3 | | | $ | 32.8 | | | $ | 27.5 | | | $ | 32.1 | | | $ | 36.3 | | | $ | 111.3 | | | $ | 38.6 | | | $ | 41.1 | | | $ | 44.3 | | | | | |
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Quarterly production retention rate: (3) | | | | | | | | | | | | | | | | | | | | | |
TTM Financial professional-driven revenue (4) | $ | 443,417 | | | $ | 495,837 | | | $ | 492,498 | | | $ | 491,829 | | | $ | 499,952 | | | $ | 499,952 | | | $ | 514,268 | | | $ | 556,339 | | | $ | 585,307 | | | | | |
TTM Financial professional-driven revenue related to independent financial professionals who departed in the quarter (4) | $ | 10,770 | | | $ | 4,586 | | | $ | 11,445 | | | $ | 5,366 | | | $ | 19,101 | | | $ | 19,101 | | | $ | 8,127 | | | $ | 9,881 | | | $ | 12,157 | | | | | |
TTM Financial professional-driven revenue, less that related to independent financial professionals who departed in the quarter (4) | $ | 432,647 | | | $ | 491,251 | | | $ | 481,053 | | | $ | 486,463 | | | $ | 480,851 | | | $ | 480,851 | | | $ | 506,141 | | | $ | 546,458 | | | $ | 573,150 | | | | | |
Quarterly production retention rate (3) | 97.6 | % | | 99.1 | % | | 97.7 | % | | 98.9 | % | | 96.2 | % | | 96.2 | % | | 98.4 | % | | 98.2 | % | | 97.9 | % | | | | |
____________________________
(1) The increase in financial professionals in the third quarter of 2020 resulted from the addition of 19 in-house financial professionals (licensed financial planning consultants, which are employees of HKFS) and 131 licensed referring representatives at CPA firms that partner with HKFS.
(2) Advisory and commission revenue per financial professional is based upon a full year of advisory and commission revenue.
(3) 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.
(4) For the trailing-twelve-month period then ended.
Blucora Operating Metrics - Tax Software | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands except %s and as otherwise indicated, rounding differences may exist) | Nine months ended September 30, | | Year-to-date period ended July 16, |
| 2021 | | 2020 | | % change | | 2021 (1) | | 2020 (1) | | % change |
| Total e-files (2) | 5,492 | | | 5,234 | | | 5 | % | | 5,421 | | | 5,149 | | | 5 | % |
| Consumers | | | | | | | | | | | |
| E-files (2) | 3,144 | | | 3,145 | | | — | % | | 3,122 | | | 3,113 | | | — | % |
| Professional | | | | | | | | | | | |
| E-files | 2,348 | | | 2,089 | | | 12 | % | | 2,299 | | | 2,036 | | | 13 | % |
| Units sold (in ones) | 20,808 | | | 20,288 | | | 3 | % | | 20,711 | | | 20,207 | | | 2 | % |
| E-files per unit sold (in ones) | 112.8 | | | 103.0 | | | 10 | % | | 111.0 | | | 100.8 | | | 10 | % |
(1)Tax season begins on the first day that the IRS begins accepting e-files and ends on filing deadline day plus one day. Due to the impact of the COVID-19 pandemic, the IRS extended the filing deadlines for federal tax returns relating to the 2020 and 2019 tax years to May 17, 2021 (with the filing deadline extended to June 15, 2021 for Texas, Louisiana, and Oklahoma) and July 15, 2020, respectively. In order to provide comparable tax season data, we provided the above metrics for the year-to-date periods ended July 16, 2021 and 2020 as these periods capture the activity of the entire tax season for each year.
(2)We participate in the Free File Alliance that is part of an IRS partnership that provides free electronic tax filing services to taxpayers meeting certain income-based guidelines. Free File Alliance e-files are included within total e-files and consumer e-files above.
