Avantax (AVTA) 8-K Blucora Reports Third Quarter Results

Exhibit 99.2

Blucora, Inc.

Q3 2013 Earnings

Supplemental Information

Table of Contents

Financial Information
Summary - Consolidated Financial Results	2
Reconciliation of Non-GAAP Financial Measures	4
Operating Metrics
Search	5
Pro-Forma Information
Q3 year-over-year Tax Preparation	6
Q3 year-over-year E-Commerce	7
Last 12 Months - Pro Forma Results	8
Last 12 Months - Levered Free Cash Flow	9
Reconciliation Pro Forma Non-GAAP Financial Measures	10

1

Blucora Consolidated Financial Results

(in thousands except earnings per share, rounding differences may exist)

	2011			2012															2013
	FYE 12/31			1Q12			2Q12			3Q12			4Q12			FYE 12/31			1Q13			2Q13			3Q13
Segment Revenue
Search	$	228,814		$	75,295		$	81,808		$	91,408		$	96,303		$	344,814		$	100,601		$	94,497		$	107,742
Tax Preparation(1)		—			40,401			19,075			1,462			1,167			62,105			64,737			22,684			1,749
E-Commerce(2)		—			—			—			—			—			—			-—			—			14,630
Total	$	228,814		$	115,696		$	100,883		$	92,870		$	97,470		$	406,919		$	165,338		$	117,181		$	124,121
Segment Income (Loss)(3)
Search	$	46,206		$	13,373		$	15,078		$	16,356		$	17,378		$	62,185		$	18,270		$	17,912		$	21,319
Tax Preparation(1)		—			22,135			11,954			(1,561	)		(2,476	)		30,052			30,784			14,438			(1,605	)
E-Commerce(2)		—			—			—			—			—			—			—			—			906
Total	$	46,206		$	35,508		$	27,032		$	14,795		$	14,902		$	92,237		$	49,054		$	32,350		$	20,620
Segment Income (Loss) % of Revenue
Search		20	%		18	%		18	%		18	%		18	%		18	%		18	%		19	%		20	%
Tax Preparation		na			55	%		63	%		(107	%)		(212	%)		48	%		48	%		64	%		(92	%)
E-Commerce		na			na			na			na			na			na			na			na			6	%
Total		20	%		31	%		27	%		16	%		15	%		23	%		30	%		28	%		17	%
Unallocated Corporate Operating Expense	$	9,583		$	3,806	(4)	$	2,525		$	2,695		$	2,772		$	11,794		$	3,198		$	3,135		$	4,025	(5)
Adjusted EBITDA	$	36,623		$	31,702		$	24,507		$	12,100		$	12,130		$	80,439		$	45,856		$	29,215		$	16,595
Other Unallocated Corporate
Depreciation	$	4,861		$	951		$	956		$	988		$	917		$	3,812		$	1,003		$	990		$	1,126
Amortization of Intangibles		2,595			3,624	(6)		5,248			5,183			5,144			19,193			5,109			5,095			6,090	(7)
Stock Compensation		7,687			6,708	(8)		2,020			2,195			2,300			13,215			2,485			2,753			3,252	(9)
Loss (Gain) on derivative instruments		—			272			(333	)		4,335			(1,928	)		2,346			(348	)		2,323			3,956
Impairment of equity investment in privately-held company		—			—			—			—			—			—			—			—			3,711
Loss on debt extinguishment		—			—			—			—			—			—			—			—			1,593
Interest Income		(369	)		(9	)		(52	)		(18	)		(52	)		(131	)		(55	)		(109	)		(42	)
Interest Expense		73			844			1,009			794			875			3,522			1,148			2,890	(10)		2,669
Amortization of debt issuance costs		—			331			332			83			74			820			107			476	(10)		258
Accretion of debt discount		—			135			124			34			31			324			161			949	(10)		862
Other (Income) Loss		1,541			(18	)		(150	)		(32	)		(4	)		(204	)		(8	)		(225	)		111
Total	$	16,388		$	12,838		$	9,154		$	13,562		$	7,357		$	42,911		$	9,602		$	15,142		$	23,586
Income (Loss) Before Taxes		20,235			18,864			15,353			(1,462	)		4,773			37,528			36,254			14,073			(6,991	)
Income Tax
Cash	$	1,712		$	861		$	474		$	(185	)	$	293		$	1,443		$	1,472		$	435		$	(517	)
Non-cash(11)		(13,000	)		6,597			5,181			1,121			660			13,559			11,174			5,232			7
Total	$	(11,288	)(12)	$	7,458		$	5,655		$	936		$	953		$	15,002		$	12,646		$	5,667		$	(510	)
Income (Loss) from Continuing Operations		31,523			11,406			9,698			(2,398	)		3,820			22,526			23,608			8,406			(6,481	)
Discontinued Operations Loss(13)		(9,927	)		—			—			—			—			—			—			—			—
GAAP Net Income (Loss)	$	21,596		$	11,406		$	9,698		$	(2,398	)	$	3,820		$	22,526		$	23,608		$	8,406		$	(6,481	)
GAAP Earnings Per Share - diluted	$	0.56		$	0.28		$	0.23	(14)	$	(0.06	)	$	0.04	(14)	$	0.54			0.53	(15)	$	0.20		$	(0.16	)
Non-GAAP Net Income	$	(11,195	)	$	28,517		$	21,817		$	10,421		$	10,005		$	70,760		$	41,997		$	24,632		$	12,970
Non-GAAP Earnings (Loss) Per Share - diluted	$	(0.29	)	$	0.70		$	0.53		$	0.25	(16)	$	0.24		$	1.70		$	0.95		$	0.58		$	0.30	(17)
Outstanding Shares		39,534			39,804			40,334			40,633			40,832			40,832			40,933			41,143			41,176
Basic Shares		37,954			39,692			40,116			40,511			40,789			40,279			40,911			41,050			41,088
Fully-diluted Shares		38,621			40,978			41,245			40,511			42,411			41,672			44,294			42,724			41,088
Cash & Short-term Investment	$	293,551		$	129,868		$	141,867		$	150,417		$	162,288		$	162,288		$	401,677		$	415,493		$	248,382
Outstanding Debt		—			85,000			75,000			74,496			74,496			74,496			275,746			265,746			266,634
Net Cash	$	293,551		$	44,868		$	66,867		$	75,921		$	87,792		$	87,792		$	125,931		$	149,747		$	(18,252	)

2

Notes to Consolidated Financial Results

⁽¹⁾  On January 31, 2012, the Company acquired TaxACT Holdings, Inc. and its wholly-owned subsidiary, TaxAct, Inc., which operates the TaxACT tax preparation software and online service and software business. The TaxACT business consists of an online tax preparation service for individuals, tax preparation software for individuals and professional tax preparers, and ancillary data storage services. The majority of the TaxACT business’s revenue is generated by the online service at www.taxact.com. As a highly seasonal business, almost all of the TaxACT revenue is generated in the first four months of the calendar year. Amounts for 2012 represent the results of operations for the TaxACT business from February 1, 2012 to December 31, 2012.

⁽²⁾  On August 22, 2013, the Company acquired Monoprice, Inc., an online provider of self-branded electronics and accessories for both consumers and businesses. Amounts for 2013 represent the results of operations for the Monoprice business from August 23, 2013 to September 30, 2013.

⁽³⁾  The Company does not allocate certain general, administrative, and overhead costs, or stock-based compensation, depreciation, amortization of intangible assets, other loss (income), net, income tax expense, or results from discontinued operations to the reportable segments. The general, administrative and overhead costs are included in Unallocated Corporate Operating Expense.

⁽⁴⁾ Amount for the quarter ended March 31, 2012 includes $1.1 million in transaction costs related to the TaxACT acquisition.

⁽⁵⁾ Amount for the quarter ended September 30, 2013 includes $646,000 in transaction costs related to the Monoprice acquisition.

⁽⁶⁾  Amount for the quarter ended March 31, 2012 includes $3.4 million related to amortization of acquired intangible assets related to the TaxACT acquisition.

⁽⁷⁾  Amount for the quarter ended September 30, 2013 includes $1.0 million related to amortization of acquired intangible assets related to the Monoprice acquisition.

⁽⁸⁾  In the quarter ended March 31, 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.

⁽⁹⁾  In the quarter ended September 30, 2013, $526,000 in stock-based compensation expense was recorded in association with the vesting of a performance-based equity award, which was both triggered by the acquisition of the Monoproice business.

⁽¹⁰⁾  Interest expense, amortization of debt issuance costs, and accretion of debt discount include amounts associated with the convertible debt issued on March 15, 2013.

⁽¹¹⁾  Amounts represent the non-cash portion of income tax expense from continuing operations. 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.

⁽¹²⁾  Amount includes a tax benefit of $18.9 million, due to the release of the valuation allowance on deferred tax assets.

⁽¹³⁾  In the quarter ended June 30, 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.

⁽¹⁴⁾ Calculation excludes the income effect of dilutive derivative instruments.

⁽¹⁵⁾ Calculation excludes the income effect of dilutive derivative instruments and interest expense, amortization of debt issuance costs, and accretion of discount on convertible debt, net of tax effect due to assumed conversion of the convertible debt in Q1 as Blucora had not obtained approval for flexible settlement. The Company received shareholder approval at its annual meeting in May 2013.

⁽¹⁶⁾ Calculation uses 42,048,000 fully-diluted shares, due to non-GAAP net income.

⁽¹⁷⁾ Calculation uses 43,142,000 fully-diluted shares, due to non-GAAP net income.

3

Blucora Non-GAAP Reconciliation⁽¹⁾

(in thousands except earnings per share, rounding differences may exist)

	2011			2012															2013
	FYE 12/31			1Q12			2Q12			3Q12			4Q12			FYE 12/31			1Q13			2Q13			3Q13
Adjusted EBITDA
Net Income (loss)(2)	$	21,596		$	11,406		$	9,698		$	(2,398	)	$	3,820		$	22,526		$	23,608		$	8,406		$	(6,481	)
Discontinued operations		9,927			—			—			—			—			—			—			—			—
Depreciation		4,861			951			956			988			917			3,812			1,003			990			1,126
Amortization of intangible assets		2,595			3,624			5,248			5,183			5,144			19,199			5,109			5,095			6,090
Stock-based compensation		7,687			6,708			2,020			2,195			2,300			13,223			2,485			2,753			3,252
Other (income) loss(3)		1,245			1,555			930			5,196			(1,004	)		6,677			1,005			6,304			13,118
Income tax expense (benefit)		(11,288	)		7,458			5,655			936			953			15,002			12,646			5,667			(510	)
Adjusted EBITDA	$	36,623		$	31,702		$	24,507		$	12,100		$	12,130		$	80,439		$	45,856		$	29,215		$	16,595
Non-GAAP Net Income
Net Income (loss)(2)	$	21,596		$	11,406		$	9,698		$	(2,398	)	$	3,820		$	22,526		$	23,608		$	8,406		$	(6,481	)
Discontinued operations		9,927			—			—			—			—			—			—			—			—
Amortization of acquired intangible assets		2,595			3,624			5,248			5,183			5,144			19,199			5,109			5,095			6,090
Accretion of debt discount on convertible notes		—			—			—			—			—			—			132			841			843
Stock-based compensation		7,687			6,708			2,020			2,195			2,300			13,223			2,485			2,753			3,252
Loss / (Gain) on derivative		—			272			(333	)		4,335			(1,928	)		2,346			(348	)		2,323			3,956
Impairment loss on investment		—			—			—			—			—			—			—			—			3,711
Loss on debt extinguishment		—			—			—			—			—			—			—			—			1,593
Cash tax impacts of GAAP adjustments		(40	)		(90	)		3			(15	)		9			(93	)		(163	)		(17	)		(1	)
Non-cash income tax expenses (benefit) from continuing operations(1)		(13,000	)		6,597			5,181			1,121			660			13,559			11,174			5,231			7
Non-GAAP net income (5)	$	28,765	(4)	$	28,517		$	21,817		$	10,421		$	10,005		$	70,760		$	41,997		$	24,632		$	12,970
Non-GAAP Earnings Per Share
Non-GAAP Net Income	$	28,765		$	28,517		$	21,817		$	10,421		$	10,005		$	70,760		$	41,997		$	24,632		$	12,970
Non-GAAP Earnings Per Share	$	0.74	(4)	$	0.70		$	0.53		$	0.25		$	0.24		$	1.70		$	0.95		$	0.58		$	0.30
Fully-diluted Shares		38,621			40,978			41,245			42,048			42,411			41,672			44,294			42,724			43,142

⁽¹⁾ For definitions of these non-GAAP financial measures and their relationship to the Company’s GAAP financial statements, please see Note 1 to the Company’s Reconciliations of Non-GAAP financial Measures to the Nearest Comparable GAAP Measure for the three and nine months ended September 30, 2013 and 2012 in exhibit 99.1 to this Current Report on Form 8-K filed on November 5, 2013.

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

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

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

⁽⁵⁾ The Company defines Non-GAAP Net Income differently effective with the quarter ended March 31, 2013 to include accretion of debt discount on convertible notes, and to include impairment losses on equity investments and losses on debt extinguishment and modification expenses, effective with the quarter ended September 30, 2013. The Company’s new definition of non-GAAP net income in each quarter did not impact presentation of this non-GAAP financial measure for prior periods.

4

Blucora Operating Metrics - Search

	2011			2012															2013
	FYE 12/31			1Q12			2Q12			3Q12			4Q12			FYE 12/31			1Q13			2Q13			3Q13
Revenue by Source
Owned & Operated (B2C)		21	%		13	%		12	%		12	%		11	%		12	%		12	%		15	%		19	%
Distribution (B2B)		79	%		87	%		88	%		88	%		89	%		88	%		88	%		85	%		81	%

5

Tax Preparation Segment - Pro Forma 3Q Year-over-Year Results

(in thousands, rounding differences may exist)

	Three Months Ended September 30									Nine Months Ended September 30
	(a)			(b)			Percentage			(c)			(d)			Percentage
	2013			2012			Change			2013			2012			Change
Pro Forma Revenue	$	2,031		$	2,075			(2	%)	$	90,505		$	83,828			8	%
Pro Forma Segment Income	$	(1,323	)	$	(948	)		40	%	$	44,953		$	42,318	(e)		6	%
Segment Margin		-65	%		-46	%					50	%		50	%

(a) Includes $282,000 of revenue not reported on a GAAP basis due to fair value purchase accounting on deferred revenue at date of acquisition.

(b) Includes $613,000 of revenue not reported on a GAAP basis due to fair value purchase accounting on deferred revenue at date of acquisition.

(c) Includes $1.3 million of revenue not reported on a GAAP basis due to fair value purchase accounting on deferred revenue at date of acquisition.

(d) Includes $2.0 million of revenue not reported on a GAAP basis due to purchase accounting in February through September 2012, and revenue of $20.9 million for January 2012 (prior to acquisition).

(e) Excludes $120,000 of non-operational expenses related to a non-consummated sales transaction for the six months ended 2Q 2012.

6

E-Commerce Segment - Pro Forma 3Q Year-over-Year Results

(in thousands, rounding differences may exist)

	Three Months Ended September 30									Nine Months Ended September 30
	(a)						Percentage			(a)						Percentage
	2013			2012			Change			2013			2012			Change
Pro Forma Revenue	$	37,043		$	30,224			23	%	$	105,232		$	86,112			22	%
Pro Forma Segment Income	$	4,194	(b)	$	3,411	(c)		23	%	$	12,474	(d)	$	9,407	(c)		33	%
Segment Margin		11	%		11	%					12	%		11	%

(a) Includes $682,000 in revenue not reported on a GAAP basis due to fair value purchase accounting on deferred revenue at date of acquisition.

(b) Excludes $99,000 of charges to costs of revenues reported on a GAAP basis due to fair value purchase accounting on inventory and $23,000 of founders salaries in the period prior to acquisition. Includes $185,000 in proforma deferred transaction consideration arising from acquisition agreements accounted for under GAAP as compensation expense.

(c) Excludes $55,000 and $174,000 of founders salaries in the three and nine months ended September 30, 2012, respectively. Includes $265,000 and $795,000 for the three and nine months ended September 30, 2012, in proforma deferred transaction consideration arising from acquisition agreements accounted for under GAAP as compensation expense.

(d) Excludes $99,000 of charges to costs of revenues reported on a GAAP basis due to fair value purchase accounting on inventory, $138,000 of founders salaries, and $66,000 of other non-recurring charges in the period prior to acquisition. Includes $715,000 in proforma deferred transaction consideration arising from acquisition agreements accounted for under GAAP as compensation expense.

7

Pro Forma - Consolidated Financial Performance

twelve months ending 9/30/2013

(in thousands, rounding differences may exist)

			(b)
	(a) E-Commerce		Tax Preparation		Search		Corporate			Consolidated
Revenue	$	137,911	$	92,309	$	399,143	$	—		$	629,363
Segment income	$	15,741	$	43,114	$	74,879	$	—		$	133,734
Unallocated Corporate expenses	$	—	$	—	$	—	$	(13,131	)	$	(13,131	)
Adjusted EBITDA										$	120,603
Non-GAAP Net Income										$	98,700	(c)
Non-GAAP Earnings Per Share										$	2.31
Diluted Shares for the twelve-month period ended September 30, 2013											42,728

(a) Includes $682,000 in revenue not reported on a GAAP basis due to fair value purchase accounting on deferred revenue at date of acquisition and $980,000 in proforma deferred transaction consideration arising from acquisition agreements accounted for under GAAP as compensation expense. Excludes $99,000 of charges to costs of revenues reported on a GAAP basis due to fair value purchase accounting on inventory, $202,000 of founders salaries, and $66,000 of other non-recurring charges in the period prior to acquisition.

(b) Includes $2.0 million of revenue not reported on a GAAP basis due to fair value purchase accounting on deferred revenue at date of acquisition in 2012.

(c) Includes twelve months of pro forma cash interest and amortization of debt issuance costs on the convertible debt issued March 15, 2013, and twelve months of pro forma cash interest of 4.0% on $50.0 million debt for Monoprice.

8

Pro-Forma Free Cash Flow (“FCF”)

twelve months ending 9/30/2013

(in thousands, rounding differences may exist)

Pro Forma Adjusted EBITDA	$	120,603	(a)
Less - Pro Forma Capital Expenditures	$	(5,629	)(b)
Less - Pro Forma Cash Taxes	$	(1,542	)
Unlevered FCF	$	113,432
Less - Pro Forma Cash Interest Expense	$	(13,176	)(c)
Levered FCF	$	100,257

(a) See reconciliation of Pro Forma Adjusted EBITDA on Blucora Pro Forma Non-GAAP Reconciliation.

(b) Amount includes $3.5 million of costs associated with the build-out of a data center redundancy site and capitalized tenant improvement costs associated with the move of our Bellevue offices and $1.6m of capital expenditures from Monoprice prior to acquisition.

(c) Amount represents cash interest expense on revolver debt, term debt prior to refinance in Q3 2013, and convertible debt. For periods prior to issuance, cash interest expense on the convertible debt is estimated at 4.25% on $201.25m debt balance. Also includes pro forma cash interest expense estimated at 4.0% on $50.0m debt balance for Monoprice.

9

Blucora Pro Forma Non-GAAP Reconciliation⁽¹⁾

twelve months ending 9/30/2013

(in thousands except rates, rounding differences may exist)

Pro Forma Adjusted EBITDA
Pro forma income from continuing operations	$	27,576
Pro forma depreciation	$	5,560
Pro forma amortization of intangible assets	$	30,017
Pro forma stock-based compensation	$	11,986
Pro forma other expense, net	$	27,281
Pro forma income tax expense	$	18,183
Pro Forma Adjusted EBITDA	$	120,603
Pro Forma Non-GAAP Net Income
Pro forma income from continuing operations	$	27,576
Pro forma amortization of acquired intangible assets	$	30,017
Pro forma accretion of debt discount on convertible debt	$	3,346
Pro forma stock-based compensation	$	11,987
Loss on derivative	$	4,003
Impairment of equity investment in privately-held company	$	3,711
Loss on debt extinguishment	$	1,593
Pro forma cash tax impact of GAAP adjustments	$	(174	)
Pro forma non-cash income tax expense from continuing operations	$	16,641
Pro forma non-GAAP net income	$	98,700
Pro forma non-GAAP Earnings per share - diluted	$	2.31
Weighted average diluted shares		42,728

⁽¹⁾ For definitions of these non-GAAP financial measures and their relationship to the Company’s GAAP financial statements, please see Note 1 to the Company’s Reconciliations of Non-GAAP financial Measures to the Nearest Comparable GAAP Measure for the three and nine months ended September 30, 2013 and 2012 in exhibit 99.1 to this Current Report on Form 8-K filed on November 5, 2013.

10