Avantax (AVTA) 8-K Blucora Announces Strong Second Quarter Results

Exhibit 99.1

Blucora Announces Strong Second Quarter Results

BELLEVUE, Wash., July 26, 2012 (BUSINESS WIRE) — Blucora, Inc. (NASDAQ: BCOR) today announced financial results for the second quarter ended June 30, 2012.

“We are pleased with our performance in the second quarter, and encouraged by the continued momentum in our search business,” said Bill Ruckelshaus, President and Chief Executive Officer of Blucora. “Our results also reflect the end of a strong season for TaxACT. We believe both of our businesses are well positioned and we remain optimistic about our outlook.”

Summary Financial Performance: 2Q 2012

($ in millions except per share amounts)

	Q2 2012		Q2 2011			Growth
Revenue	$	100.9	$	54.3			86	%
Search	$	81.8	$	54.3			51	%
Tax Preparation	$	19.1		N/A			N/A
Adjusted EBITDA	$	24.5	$	9.0			173	%
Non-GAAP Net Income	$	21.8	$	7.6			187	%
Non-GAAP Diluted EPS	$	0.53	$	0.20			165	%
Net Income (Loss)	$	9.7	$	(4.7	)		N/A
GAAP Diluted Income (Loss) Per Share	$	0.23	$	(0.12	)		N/A

See reconciliation of non-GAAP to GAAP measures below.

Segment Information

Search

Search revenue for the second quarter of 2012 was $81.8 million, up 51 percent from the second quarter of 2011. Search revenue reflects strong growth from search distribution, which increased 70 percent over the prior year and was driven by growth from both existing and new partners. Search segment income was $15.1 million, up 31 percent over the second quarter of 2011.

Tax Preparation

Tax Preparation revenue for the second quarter of 2012 was $19.1 million, and segment income was $12.0 million.

Corporate Operating Expenses

Unallocated corporate operating expenses for the second quarter of 2012 were $2.5 million.

Third Quarter Outlook

For the third quarter of 2012, the Company expects revenues to be between $90.0 million and $93.0 million, Adjusted EBITDA to be between $10.5 million and $11.5 million, Non-GAAP Net Income to be between $8.1 million and $9.4 million, or $0.19 to 0.23 per diluted share, and Net Income to be between $0.5 million and $1.5 million, or $0.01 to $0.04 per diluted share.

Conference Call and Webcast

A conference call will be held today at 2 p.m. Pacific time / 5 p.m. Eastern time. The live webcast and supplemental materials are included in a current report on form 8-K and can be accessed in the Investor Relations section of the Blucora corporate website athttp://www.blucora.com.

###

About Blucora™

Blucora operates two leading Internet businesses. Our InfoSpace business provides online search and monetization solutions to a network of more than 100 partners globally. Through TaxACT, we provide online tax preparation solutions to consumers and professional preparers. The Blucora team brings decades of experience operating and investing in desktop, online, and mobile businesses. We are passionate about the power of the Internet to improve the lives of consumers, and our businesses operate at the forefront of digital migration trends in their respective markets. More information about Blucora may be found at www.blucora.com. Follow and subscribe to us on Twitter, LinkedIn and YouTube.

Source: Blucora, Inc.

Blucora Contact:

Stacy Ybarra, 425-709-8127

stacy.ybarra@blucora.com

This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: general economic, industry, and market sector conditions; the timing and extent of market acceptance of developed products and services and related costs; our dependence on companies to distribute our products and services; the ability to successfully integrate acquired businesses; future acquisitions; the successful

execution of the Company’s strategic initiatives, operating plans, and marketing strategies; the condition of our cash investments; and the completion of the review of our financial statements for the second quarter of 2012. A more detailed description of these and certain other factors that could affect actual results is included in Blucora, Inc.’s most recent Annual Report on Form 10-K and subsequent reports filed with or furnished to the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Blucora, Inc. undertakes no obligation to update any forward-looking statements to reflect new information, events, or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

Blucora, Inc.

Preliminary Condensed Consolidated Statements of Comprehensive Income⁽¹⁾

(Unaudited)

(Amounts in thousands, except per share data)

	Three months ended						Six months ended
	30-Jun 2012			30-Jun 2011			30-Jun 2012			30-Jun 2011
Revenues	$	100,883		$	54,292		$	216,579		$	105,942
Cost of sales (includes amortization of acquired intangible assets of $2,080, $772, $3,591, and $1,730)(2)		64,227			36,579			123,774			69,253
Gross profit		36,656			17,713			92,805			36,689
Expenses and other income (loss):
Engineering and technology(2)		2,448			1,784			5,021			3,448
Sales and marketing(2)		8,869			4,902			28,312			11,869
General and administrative(2)		5,356			4,970			16,422			10,130
Depreciation		532			552			1,067			1,214
Amortization of intangible assets		3,168			—			5,281			—
Other loss (income) net(3)		930			(107	)		2,485			(182	)
Total expenses and other income (loss)		21,303			12,101			58,588			26,479
Income from continuing operations before income taxes		15,353			5,612			34,217			10,210
Income tax expense		(5,655	)		(1,936	)		(13,113	)		(3,638	)
Income from continuing operations		9,698			3,676			21,104			6,572
Discontinued operations:(1)
Loss from discontinued operations, net of taxes(2)		—			(680	)		—			(2,253	)
Loss on sale of discontinued operations, net of taxes		—			(7,674	)		—			(7,674	)
Net income (loss)	$	9,698		$	(4,678	)	$	21,104		$	(3,355	)
Earnings per share - Basic
Income from continuing operations	$	0.24		$	0.10		$	0.53		$	0.18
Loss from discontinued operations		—			(0.02	)		—			(0.06	)
Loss on sale of discontinued operations		—			(0.20	)		—			(0.21	)
Net income (loss) per share - Basic	$	0.24		$	(0.12	)	$	0.53		$	(0.09	)
Earnings per share - Diluted
Income from continuing operations	$	0.23	(4)	$	0.10		$	0.51		$	0.18
Loss from discontinued operations		—			(0.02	)		—			(0.06	)
Loss on sale of discontinued operations		—			(0.20	)		—			(0.21	)
Net income (loss) per share - Diluted	$	0.23		$	(0.12	)	$	0.51		$	(0.09	)
Weighted average shares outstanding used in computing basic income (loss) per share		40,116			37,422			39,904			36,883
Weighted average shares outstanding used in computing diluted income (loss) per share		41,245			38,128			41,112			37,609

⁽¹⁾  In the year ended December 31, 2011, the Company completed the sale of its Mercantila e-commerce business. The operating results of that business have been presented as discontinued operations for all periods presented. In the three and six months ended June 30, 2011, the Company recorded a $0.5 million and $1.3 million income tax benefit related to discontinued operations, respectively. A loss, net of an income tax benefit of $5.1 million, on the sale of the Mercantila business was recorded for the three and six months ended June 30, 2011, respectively. Revenue, operating expenses and income taxes, and loss from discontinued operations are presented below (in thousands):

	Three months ended					Six months ended
	30-Jun 2012		30-Jun 2011			30-Jun 2012		30-Jun 2011
E-Commerce
Revenue	$	—	$	6,915				$	16,894
Operating expenses and income taxes		—		7,595					19,147
Loss from discontinued operations, net of taxes	$	—	$	(680	)	$	—	$	(2,253	)
Loss on sale of discontinued operations, net of taxes	$	—	$	(7,674	)	$	—	$	(7,674	)

⁽²⁾  In the six months ended June 30, 2012, $5.2 million in stock-based compensation expense was recorded in association with the modification of the terms of a warrant and the vesting of a non-employee performance-based equity award, which were both triggered by the acquisition of the TaxACT business, and the related expense was allocated to general and administrative expense. Stock-based compensation expense for the three and six months ended June 30, 2012 and 2011 is allocated among the following captions (in thousands):

	Three months ended					Six months ended
	30-Jun 2012		30-Jun 2011			30-Jun 2012		30-Jun 2011
Stock-Based Compensation
Cost of sales	$	68	$	53		$	148	$	197
Engineering and technology		306		178			562		433
Sales and marketing		388		223			802		652
General and administrative		1,258		884			7,216		2,089
Discontinued operations		—		(536	)		—		(159	)
Total stock-based compensation expense	$	2,020	$	802		$	8,728	$	3,212

⁽³⁾  Other loss (income) for the three and six months ended June 30, 2012 and 2011 is allocated among the following captions (in thousands):

Other Loss (Income)
Interest expense		1,009			—			1,853			—
Amortization of debt issuance costs and accretion of debt discount		456			—			922			—
Gain on derivative instrument		(333	)		—			(61	)		—
Gain on contingency resolution		—			—			—			(1,500	)
Increase in fair value of earn-out contingent liability		—			—			—			1,500
Other		(202	)		(107	)		(229	)		(182	)
Total other loss (income)	$	930		$	(107	)	$	2,485		$	(182	)

⁽⁴⁾  Calculation excludes the income effect of dilutive derivative instruments.

Blucora, Inc.

Preliminary Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands)

	30-Jun 2012			December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	135,836		$	81,897
Short-term investments, available-for-sale		6,031			211,654
Accounts receivable, net		32,961			25,019
Other receivables		725			542
Prepaid expenses and other current assets, net		3,050			1,958
Total current assets		178,603			321,070
Property and equipment, net		6,456			5,277
Goodwill		230,980			44,815
Other intangible assets, net		143,143			1,315
Deferred tax asset, net		21,165			19,102
Other long-term assets		3,297			3,560
Total assets	$	583,644		$	395,139
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	35,023		$	28,947
Accrued expenses and other current liabilities		13,519			10,250
Derivative instruments		6,435			—
Total current liabilities		54,977			39,197
Long-term liabilities:
Long-term debt, net of discount of $693		74,307			—
Deferred tax liability		48,812			—
Other long-term liabilities		3,430			837
Total long-term liabilities		126,549			837
Total liabilities		181,526			40,034
Stockholders’ equity:
Common stock		4			4
Additional paid-in capital		1,380,193			1,353,971
Accumulated deficit		(977,798	)		(998,902	)
Accumulated other comprehensive income (loss)		(281	)		32
Total stockholders’ equity		402,118			355,105
Total liabilities and stockholders’ equity	$	583,644		$	395,139

Blucora, Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

	Six months ended
	June 30, 2012			June 30, 2011
Operating activities:
Net income (loss)	$	21,104		$	(3,355	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations:
Loss on sale of discontinued operations		—			7,674
Loss from discontinued operations		—			2,253
Depreciation and amortization of intangible assets		10,779			4,557
Stock-based compensation		4,442			3,371
Warrant-related stock-based compensation		4,286			—
Excess tax benefits from stock-based award activity		(19,051	)		—
Deferred income taxes		(7,273	)		1
Unrealized amortization of premium or accretion of discount on investments, net		(412	)		240
Amortization of prepaid financing costs		628			—
Amortization of debt discount		260			—
Gain on derivative instrument		(61	)		—
Earn-out contingent liability adjustments		—			1,500
Gain on resolution of contingent liability		—			(1,500	)
Loss on disposal of assets		—			5
Other		22			(20	)
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable		1,448			107
Other receivables		1,053			(3,343	)
Prepaid expenses and other current assets		149			586
Other long-term assets		614			(295	)
Accounts payable		(5,457	)		9,825
Accrued expenses and other current and long-term liabilities		18,828			(13,100	)
Net cash provided by operating activities of continuing operations		31,359			8,506
Investing activities:
Business acquisition, net of cash acquired		(279,386	)		—
Purchases of property and equipment		(494	)		(2,209	)
Change in restricted cash		893			288
Proceeds from sales of investments		179,884			—
Proceeds from maturities of investments		32,125			44,767
Purchases of investments		(6,031	)		(139,611	)
Net cash used by investing activities of continuing operations		(73,009	)		(96,765	)
Financing activities:
Proceeds from loan, net of debt issuance costs of $2,343 and debt discount of $953		96,704			—
Repayment of debt		(25,000	)		—
Excess tax benefits from stock-based award activity		19,051			—
Proceeds from stock option exercises and issuance of stock through employee stock purchase plan		5,685			11,869
Tax payments from shares withheld upon vesting of restricted stock units		(851	)		(1,119	)
Earn-out payments for business acquisition		—			(423	)
Repayment of capital lease obligation		—			(221	)
Net cash provided by financing activities of continuing operations		95,589			10,106
Discontinued operations:
Net cash used by operating activities attributable to discontinued operations		—			(6,156	)
Net cash used by investing activities attributable to discontinued operations		—			(638	)
Net cash used by discontinued operations		—			(6,794	)
Net increase (decrease) in cash and cash equivalents		53,939			(84,947	)
Cash and cash equivalents:
Beginning of period		81,897			155,645
End of period	$	135,836		$	70,698

Blucora, Inc.

Preliminary Segment Information

(Unaudited)

(Amounts in thousands)

	Three months ended						Six months ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Search:
Revenue	$	81,808		$	54,292		$	157,103		$	105,942
Cost of revenue(1)		58,236			33,517			111,342			62,702
Operating expenses		8,494			9,241			17,310			20,611
Search segment income		15,078			11,534			28,451			22,629
Search segment margin		18	%		21	%		18	%		21	%
Tax Preparation:
Revenue		19,075			—			59,476			—
Cost of revenue(2)		1,539			—			4,118			—
Operating expenses		5,582			—			21,269			—
Tax Preparation segment income		11,954			—			34,089			—
Tax Preparation segment margin		63	%		0	%		57	%		0	%
Total segment:
Total revenue		100,883			54,292			216,579			105,942
Total cost of revenue		59,775			33,517			115,460			62,702
Total segment operating expenses		14,076			9,241			38,579			20,611
Total segment income		27,032			11,534			62,540			22,629
Total segment margin		27	%		21	%		29	%		21	%
Corporate:
Operating expense		2,525			2,543			6,331			4,673
Stock-based compensation		2,020			1,338			8,728			3,371
Depreciation		956			1,376			1,907			2,827
Amortization of intangible assets		5,248			772			8,872			1,730
Other loss (income), net		930			(107	)		2,485			(182	)
Income tax expense		5,655			1,936			13,113			3,638
Discontinued operations, net of taxes		—			8,354			—			9,927
Total corporate		17,334			16,212			41,436			25,984
Net income (loss)	$	9,698		$	(4,678	)	$	21,104		$	(3,355	)

⁽¹⁾  Amounts do not include amortization of acquired technology and costs associated with the operation of the Company’s data centers that serve its search business, including depreciation, personnel expenses (including stock-based compensation expense), energy, and bandwidth costs.

⁽²⁾  Amounts do not include amortization of acquired technology and costs associated with the operation of the Company’s data center that serves its tax preparation business, including depreciation, personnel expenses, (including stock-based compensation expense), energy, and bandwidth costs, and personnel costs associated with customer service.

Blucora, Inc.

Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measure

Preliminary Adjusted EBITDA Reconciliation⁽¹⁾

(Unaudited)

(Amounts in thousands)

	Three months ended					Six months ended
	June 30, 2012		June 30, 2011			June 30, 2012		June 30, 2011
Net income (loss) (2)	$	9,698	$	(4,678	)	$	21,104	$	(3,355	)
Loss from discontinued operations		—		8,354			—		9,927
Depreciation and amortization of intangible assets		6,204		2,148			10,779		4,557
Stock-based compensation		2,020		1,338			8,728		3,371
Other loss (income), net(3)		930		(107	)		2,485		(182	)
Income tax expense		5,655		1,936			13,113		3,638
Adjusted EBITDA(4)	$	24,507	$	8,991		$	56,209	$	17,956

Blucora, Inc.

Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measure

Preliminary Non-GAAP Reconciliation⁽¹⁾

(Unaudited)

(Amounts in thousands)

	Three months ended						Six months ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Net income (loss) (2)	$	9,698		$	(4,678	)	$	21,104		$	(3,355	)
Loss from discontinued operations		—			8,354			—			9,927
Income from continuing operations (2)		9,698			3,676			21,104			6,572
Stock-based compensation		2,020			1,338			8,728			3,371
Amortization of acquired intangible assets		5,248			772			8,872			1,730
Gain on derivatives		(333	)		—			(61	)		—
Cash tax impact of GAAP adjustments		3			1			(87	)		(42	)
Non-cash income tax expense from continuing operations (1)		5,181			1,803			11,778			3,392
Non-GAAP net income (4)	$	21,817		$	7,590		$	50,334		$	15,023
Income from continuing operations - diluted		0.23			0.10			0.51			0.17
Stock-based compensation - diluted		0.05			0.04			0.21			0.09
Amortization of acquired intangible assets - diluted		0.13			0.02			0.22			0.05
Loss on derivatives - diluted		(0.01	)		—			—			—
Cash tax impact of GAAP adjustments - diluted		—			—			—			—
Non-cash income taxes per share - diluted (4)		0.13			0.04			0.29			0.09
Non-GAAP net income per share - diluted (4)	$	0.53		$	0.20		$	1.23		$	0.40

Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance

(Amounts in thousands)

	Ranges for the three months ending September 30, 2012
Net income		500		1,500
Depreciation and amortization of acquired intangible assets		6,400		6,200
Stock-based compensation		2,100		1,800
Other loss, net(5)		1,200		1,000
Income tax expense		300		1,000
Adjusted EBITDA	$	10,500	$	11,500

Preliminary Non-GAAP Reconciliation for Forward-Looking Guidance

(Amounts in thousands)

	Ranges for the three months ending September 30, 2012
Net income		500		1,500
Stock-based compensation		2,100		1,800
Amortization of acquired intangible assets		5,200		5,200
Non-cash income tax expense from continuing operations		300		900
Non-GAAP net income	$	8,100	$	9,400

⁽¹⁾  Blucora’s Adjusted EBITDA is calculated by adjusting net income determined in accordance with generally accepted accounting principles (“GAAP”) to exclude the effects of loss from discontinued operations (which includes loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes), income taxes, depreciation, amortization of acquired intangible assets, stock-based compensation expense, and other loss (income), net (which includes such items as interest expense, interest income, derivative instrument gains or losses, foreign currency gains or losses, gains or losses from the disposal of assets, adjustments to the fair values of contingent liabilities related to business combinations, and gains on resolutions of contingencies), as detailed above. Blucora’s management believes that Adjusted EBITDA provides meaningful supplemental information regarding the Company’s performance by excluding certain expenses and gains that management believes are not indicative of its core business operating results. Blucora uses this non-GAAP financial measure for internal management purposes, when publicly providing guidance on possible future results, and as a means to evaluate period-to-period comparisons. Blucora believes that Adjusted EBITDA is a common measure used by investors and analysts to evaluate its performance, that it provides a more complete understanding of the results of operations and trends affecting the Company’s business when viewed together with GAAP results, and that management and investors benefit from referring to this non-GAAP financial measure.

Blucora’s Non-GAAP net income and Non-GAAP earnings per share is calculated by adjusting GAAP net income to exclude the effects of discontinued operations, net of taxes (which includes loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes), loss from the sale of discontinued operations, net of taxes, stock-based compensation expense, amortization of acquired intangible assets, gain or loss on derivatives, the cash tax impact of those adjustments to GAAP net income, and non-cash portion of income tax expense from continuing operations, as detailed in the accompanying table to the preliminary condensed consolidated financial statements (unaudited). The Company excludes the non-cash portion of income tax expense because of its ability to offset a substantial portion of its cash tax liabilities by using these deferred tax assets. The majority of these deferred tax assets will expire if unutilized in 2020.

Blucora’s management believes that non-GAAP net income and non-GAAP earnings per share provide meaningful supplemental information to management, investors and analysts regarding the Company’s performance and the valuation of its business by excluding items in the statement of operations that management does not consider part of the Company’s ongoing operations or have not been, or are not expected to be, settled in cash. Additionally, Blucora’s management believes that non-GAAP net income and non-GAAP earnings per share are common measures used by investors and analysts to evaluate the Company’s performance and the valuation of its business.

Adjusted EBITDA, non-GAAP net income and non-GAAP earnings per share should be evaluated in light of the Company’s 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.

⁽²⁾  As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited).

⁽³⁾  Other loss (income), net includes such items as interest expense, interest income, derivative instrument gains or losses, foreign currency gains or losses, gains or losses from the disposal of assets, adjustments to the fair values of contingent liabilities related to business combinations, and gains on resolutions of contingencies.

⁽⁴⁾  Amounts previously disclosed have been revised to reflect the effect of classifying the Company’s Mercantila e-commerce business as discontinued operations.

⁽⁵⁾  Other loss, net, primarily consists of interest expense, interest income, derivative instrument gains or losses, and gains or losses from the disposal of assets.