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Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Blucora Announces First Quarter 2019 Results

May 8, 2019

IRVING, Texas, May 08, 2019 (GLOBE NEWSWIRE) -- Blucora, Inc. (NASDAQ: BCOR), a leading provider of tax-smart financial solutions that empower people’s goals, today announced financial results for the first quarter ended March 31, 2019.

First Quarter Highlights and Recent Developments

-- Increased total revenue by 10% year-over-year -- Grew GAAP net Income by 37%, Adjusted EBITDA* by 26%, Non-GAAP net income* by 33% -- Advisory assets grew 10% y/y, reaching record level and crossing 30% of total client assets for the first time -- Strengthened balance sheet through strong cash flow, improving net leverage ratio to 0.8x at quarter-end, from 2.1x in prior year period -- Tax preparation revenue expected to grow approximately 13% for the six months ended June 30, 2019 compared to the same period last year, with a segment margin of 58% -- Closed acquisition of 1st Global on May 6, 2019, extending lead in tax-focused wealth management segment

“It’s been a strong start to the year for Blucora, with double-digit growth in revenue, segment income, and adjusted EBITDA, as well as both GAAP and Non-GAAP EPS,” commented John Clendening, Blucora’s President and Chief Executive Officer. “Our strong cash generation enabled us to end the first quarter with a net leverage ratio at its lowest level in years and below 1x, prior to the closing of the 1st Global acquisition. Additionally, our wealth management business grew advisory assets to a new record level of $14 billion, crossing the 30% of total client asset level for the first time.”

Summary Financial Performance: Q1 2019 ($ in millions except per share amounts)

Q1 Q1 2019 2018 Change Revenue: Wealth Management $ 89.5 $ 92.1 (3 ) % Tax Preparation $ 136.2 $ 113.9 20 % Total Revenue $ 225.8 $ 206.0 10 % Segment Income (Loss): Wealth Management $ 11.5 $ 13.1 (12 ) % Tax Preparation $ 79.3 $ 58.8 35 % Total Segment Income $ 90.8 $ 71.9 26 % Unallocated Corporate Operating Expenses $ (7.1 ) $ (5.5 ) 28 % GAAP: Operating Income $ 70.1 $ 52.7 33 % Net Income Attributable to Blucora, Inc. $ 62.2 $ 45.3 37 % Diluted Net Income Per Share Attributable to Blucora, Inc. (EPS) $ 1.25 $ 0.93 34 % Non-GAAP*: Adjusted EBITDA $ 83.7 $ 66.3 26 % Net Income $ 77.2 $ 58.2 33 % Diluted Net Income Per Share (EPS) $ 1.56 $ 1.20 30 % * See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.

Tax Season Update

Clendening continued, “Our tax preparation business had a strong finish to the tax season and once again demonstrated very strong financial performance. Based on these results we now expect full first-half 2019 tax revenue growth of approximately 13% versus the comparable period last year, which is above the high-end of our upwardly revised outlook range of 8-11%.”

“This season we continued to make the tax filing experience easier and more rewarding for our customers, introducing an upgraded mobile experience, innovations like ten minute taxes - to streamline the experience for filers with simple returns, and refund marketplace – which rewarded filers with bonuses when refunds were placed on gift cards from national retailers. We also brought back our proprietary BluPrintTM financial assessment, which turns insights from a customer’s tax return into actionable recommendations to improve their financial lives, and this year included new partners with compelling solutions,” Clendening concluded.

(in thousands except %s) Tax seasons ended April 16, 2019 April 19, 2018 Change E-files: Consumer 3,115 3,772 (17 ) % Professional tax preparer 1,833 1,763 4 % Total e-files 4,948 5,535 (11 ) % -------------- --------------

Tax season begins on the first day that the IRS begins accepting e-files and ends on tax day +1. This information includes non-financial metrics used in measuring the performance of the consumer and professional tax preparer sides of the Tax Preparation business.

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 digital e-files above. Free File Alliance e-files were 158 and 188 for the tax seasons ended April 16, 2019 and April 19, 2018, respectively.

Second Quarter and Full Year 2019 Outlook

For the second quarter of 2019, excluding 1st Global, the Company expects revenues to be between $163.0 million and $166.5 million, GAAP net income attributable to Blucora, Inc. to be between $23.0 million and $26.0 million, or $0.46 to $0.52 per diluted share, Adjusted EBITDA* to be between $44.0 million and $47.0 million, and Non-GAAP net income* to be between $35.5 million and $38.5 million, or $0.71 to $0.77 per diluted share.

The company expects 1st Global, from the period of May 6 through the end of second quarter, to add $25.5 to $27.0 million in revenue and $1 to $1.5 million in segment income. Amounts included in our 2019 outlook do not consider the effects of possible adjustments due to purchase accounting related matters from our recent acquisition of 1st Global.

For the full year 2019, excluding 1st Global, the Company expects revenues to be between $595.5 million and $608.5 million, GAAP net income attributable to Blucora, Inc. to be between $41.0 million and $51.5 million, or $0.81 to $1.02 per diluted share, Adjusted EBITDA* to be between $119.0 million and $129.0 million, and Non-GAAP net income* to be between $91.0 million and $101.5 million, or $1.80 to $2.01 per diluted share.

The company expects 1st Global from the period of May 6 through year end to add between $108.5 and $115.5 million in revenue and between $9 and $11 million in segment income.

The company continues to expect total acquisition-related integration cost of approximately $28 million, with an estimated $10 million being recognized in 2019 and $18 million in 2020, subject to the timing of certain items including platform reconfiguration at Fidelity.

The company continues to believe the acquisition will generate between $23 million and $24 million of run-rate adjusted EBITDA* accretion by the end of 2019 (see Notes to Reconciliations of Non-GAAP Financial Measures below).

The second quarter and fiscal 2019 outlook for GAAP net income or loss attributable to Blucora assumes an estimated tax rate of approximately 6% to 8%.

Conference Call and Webcast

A conference call and live webcast will be held today at 8:30 a.m. Eastern Time during which the Company will further discuss first quarter results, its outlook for the full year 2019 and other business matters. We will also provide the prepared remarks for the conference call along with supplemental financial information to our results on the Investor Relations section of the Blucora corporate website at http://www.blucora.com prior to the call. The supplemental financial information has also been filed with the SEC on Form 8-K. A replay of the call will be available on our website.

About Blucora®

Blucora, Inc. (NASDAQ: BCOR) is on the forefront of financial technology, pioneering tax-smart financial solutions that empower people’s goals. Blucora operates in two segments including wealth management, through its HD Vest and 1st Global businesses, the No. 1 and No. 2 tax-focused broker-dealers, respectively, with a combined $66 billion in total client assets as of March 31, 2019, and tax preparation, through its TaxAct business, the No. 3 tax preparation software by market share with approximately 3 million consumer and professional users. With integrated tax and wealth management, Blucora is uniquely positioned to provide better long-term outcomes for customers with holistic, tax-advantaged solutions. For more information on Blucora, visit www.blucora.com.

Source: Blucora

Blucora Contact:

Bill Michalek (972) 870-6463

VP, Investor Relations

This release 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. When used in this release, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecasts,” “projects” and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: our ability to effectively implement our future business plans and growth strategy; our ability to effectively compete within our industry; our ability to attract and retain customers and productive financial advisors; our ability to realize all of the anticipated benefits of the acquisition of 1st Global, as well as our ability to integrate the operations of 1st Global; the availability of financing and our ability to meet our current and future debt service obligations and comply with our debt covenants; our ability to generate strong investment performance for our customers and the impact of the financial markets on our customers’ portfolios and investment behavior; political and economic conditions and changes and events that directly or indirectly impact the wealth management and tax preparation industries; our ability to successfully make technology enhancements and introduce new and improve on existing products and services; our expectations concerning the revenues we generate from fees associated with the financial products that we distribute; our ability to comply with laws and regulations, including, among others, those related to privacy protection and consumer data; our expectations concerning the benefits that may be derived from our new clearing platform and investment advisory platform; cybersecurity risks; our ability to maintain our relationships with third party partners; the seasonality of our business; litigation risks; our ability to attract and retain qualified employees; our assessments and estimates that determine our effective tax rate; the impact of new or changing tax legislation; our ability to develop, establish and maintain strong brands; our ability to protect our intellectual property; and our ability to effectively integrate other companies or assets that we may acquire. A more detailed description of these and certain other factors that could affect actual results is included in the Company’s filings with 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. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this release, except as may be required by applicable law.

Blucora, Inc.Preliminary Condensed Consolidated Statements of Operations(Unaudited)(Amounts in thousands, except per share data)

Three Months Ended March 31, 2019 2018 Revenue: Wealth management services revenue $ 89,532 $ 92,082 Tax preparation services revenue 136,236 113,883 Total revenue 225,768 205,965 Operating expenses: Cost of revenue: Wealth management services cost of revenue 61,374 63,064 Tax preparation services cost of revenue 4,201 4,353 Amortization of acquired technology — 50 Total cost of revenue (1) 65,575 67,467 Engineering and technology (1) 6,529 5,131 Sales and marketing(1) 55,572 55,253 General and administrative(1) 18,874 14,866 Depreciation 1,061 1,915 Amortization of other acquired intangible assets 8,044 8,307 Restructuring (1) — 289 Total operating expenses 155,655 153,228 Operating income 70,113 52,737 Other loss, net (2) (3,958 ) (5,228 ) Income before income taxes 66,155 47,509 Income tax expense (3,985 ) (1,963 ) Net income 62,170 45,546 Net income attributable to noncontrolling interests — (205 ) Net income attributable to Blucora, Inc.: $ 62,170 $ 45,341 Net income per share attributable to Blucora, Inc.: Basic $ 1.29 $ 0.97 Diluted $ 1.25 $ 0.93 Weighted average shares outstanding: Basic 48,161 46,641 Diluted 49,542 48,665

(1) Stock-based compensation expense was allocated among the following captions (in thousands):

Three Months Ended March 31, 2019 2018 Cost of revenue $ 520 $ 256 Engineering and technology 176 210 Sales and marketing (193 ) 516 General and administrative 1,940 1,973 Total stock-based compensation expense $ 2,443 $ 2,955 - ----- - - -----

(2) Other loss, net consisted of the following (in thousands):

Three Months Ended March 31, 2019 2018 Interest income $ (140 ) $ (40 ) Interest expense 3,776 4,181 Amortization of debt issuance costs 172 203 Accretion of debt discounts 38 47 Loss on debt extinguishment — 776 Other 112 61 Other loss, net $ 3,958 $ 5,228 - ----- - - ----- -

Blucora, Inc.Preliminary Condensed Consolidated Balance Sheets(Unaudited)(Amounts in thousands)

March 31, December 2019 31, 2018 ASSETS Current assets: Cash and cash equivalents $ 149,762 $ 84,524 Cash segregated under federal or other regulations 1,527 842 Accounts receivable, net of allowance 24,113 15,721 Commissions receivable 14,382 15,562 Other receivables 7,450 7,408 Prepaid expenses and other current assets, net 10,840 7,755 Total current assets 208,074 131,812 Long-term assets: Property and equipment, net 12,322 12,389 Right-of-use assets, net 5,942 — Goodwill, net 548,770 548,685 Other intangible assets, net 286,562 294,603 Other long-term assets 11,047 10,236 Total long-term assets 864,643 865,913 Total assets $ 1,072,717 $ 997,725 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 10,230 $ 3,798 Commissions and advisory fees payable 13,655 15,199 Accrued expenses and other current liabilities 48,675 18,980 Lease liabilities 6,493 46 Deferred revenue 6,424 10,257 Total current liabilities 85,477 48,280 Long-term liabilities: Long-term debt, net 260,570 260,390 Deferred tax liability, net 39,422 40,394 Deferred revenue 7,890 8,581 Lease liabilities 2,118 100 Other long-term liabilities 6,186 7,440 Total long-term liabilities 316,186 316,905 Total liabilities 401,663 365,185 Redeemable noncontrolling interests 2,517 24,945 Stockholders’ equity: Common stock 5 5 Additional paid-in capital 1,570,026 1,569,725 Accumulated deficit (901,155 ) (961,689 ) Accumulated other comprehensive loss (339 ) (446 ) Total stockholders’ equity 668,537 607,595 Total liabilities and stockholders’ equity $ 1,072,717 $ 997,725 - --------- - - ------- -

Blucora, Inc.Preliminary Condensed Consolidated Statements of Cash Flows(Unaudited)(Amounts in thousands)

Three months ended March 31, 2019 2018 Operating Activities: Net income $ 62,170 $ 45,546 Adjustments to reconcile net income to net cash from operating activities: Stock-based compensation 2,443 2,955 Depreciation and amortization of acquired intangible assets 9,354 10,359 Reduction of right-of-use lease assets 904 — Deferred income taxes (972 ) (749 ) Amortization of premium on investments, net, and debt issuance costs 172 202 Accretion of debt discounts 38 47 Loss on debt extinguishment — 776 Cash provided (used) by changes in operating assets and liabilities: Accounts receivable (8,395 ) (1,961 ) Commissions receivable 1,180 (240 ) Other receivables (42 ) 2,588 Prepaid expenses and other current assets (3,085 ) (319 ) Other long-term assets (841 ) (1,109 ) Accounts payable 6,432 3,290 Commissions and advisory fees payable (1,544 ) (278 ) Deferred revenue (4,524 ) (4,213 ) Accrued expenses and other current and long-term liabilities 6,946 556 Net cash provided by operating activities 70,236 57,450 Investing Activities: Purchases of property and equipment (1,243 ) (940 ) Net cash used by investing activities (1,243 ) (940 ) Financing Activities: Payments on credit facilities — (40,000 ) Proceeds from stock option exercises 283 2,534 Proceeds from issuance of stock through employee stock purchase plan — 703 Tax payments from shares withheld for equity awards (2,425 ) (1,493 ) Contingent consideration payments for business acquisition (943 ) (1,313 ) Net cash used by financing activities (3,085 ) (39,569 ) Effect of exchange rate changes on cash, cash equivalents, and restricted cash 15 (6 ) Net increase in cash, cash equivalents, and restricted cash 65,923 16,935 Cash, cash equivalents, and restricted cash, beginning of period 85,366 62,311 Cash, cash equivalents, and restricted cash, end of period $ 151,289 $ 79,246 - ------- - - ------ -

Blucora, Inc.Preliminary Segment Information(Unaudited)(Amounts in thousands)

Three months ended March 31, 2019 2018 Revenue: Wealth Management (1) $ 89,532 $ 92,082 Tax Preparation (1) 136,236 113,883 Total revenue 225,768 205,965 Operating income: Wealth Management 11,540 13,075 Tax Preparation 79,272 58,806 Corporate-level activity (2) (20,699 ) (19,144 ) Total operating income 70,113 52,737 Other loss, net (3,958 ) (5,228 ) Income tax expense (3,985 ) (1,963 ) Net income $ 62,170 $ 45,546 - ------ - - ------ -

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

Three months ended March 31, 2019 2018 Wealth Management: Commission $ 37,160 $ 42,870 Advisory 39,757 39,301 Asset-based 9,693 7,172 Transaction and fee 2,922 2,739 Total Wealth Management revenue $ 89,532 $ 92,082 Tax Preparation: Consumer $ 123,942 $ 101,912 Professional 12,294 11,971 Total Tax Preparation revenue $ 136,236 $ 113,883 - ------- - -------

(2) Corporate-level activity included the following (in thousands):

Three months ended March 31, 2019 2018 Operating expenses $ (7,105 ) $ (5,541 ) Stock-based compensation (2,443 ) (2,955 ) Acquisition-related costs (1,797 ) — Depreciation (1,310 ) (2,002 ) Amortization of acquired intangible assets (8,044 ) (8,357 ) Restructuring — (289 ) Total corporate-level activity $ (20,699 ) $ (19,144 ) - ------- - - ------- -

Blucora, Inc.Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

Preliminary Adjusted EBITDA Reconciliation (1)(Unaudited)(Amounts in thousands)

(In thousands) Three Months Ended March 31, 2019 2018 Net income attributable to Blucora, Inc. (2) $ 62,170 $ 45,341 Stock-based compensation 2,443 2,955 Depreciation and amortization of acquired intangible assets 9,354 10,359 Restructuring — 289 Other loss, net (3) 3,958 5,228 Net income attributable to noncontrolling interests — 205 Acquisition and integration costs 1,797 — Income tax expense 3,985 1,963 Adjusted EBITDA $ 83,707 $ 66,340 - ------ - ------

Preliminary Non-GAAP Net Income and Non-GAAP Net Income Per Share Reconciliation (1)(Unaudited)(Amounts in thousands, except per share amounts)

Three months ended March 31, 2019 2018 Net income attributable to Blucora, Inc. (2) $ 62,170 $ 45,341 Stock-based compensation 2,443 2,955 Amortization of acquired intangible assets 8,044 8,357 Restructuring — 289 Impact of noncontrolling interests — 205 Acquisition and integration costs 1,797 — Cash tax impact of adjustments to GAAP net income (411 ) (313 ) Non-cash income tax expense (1) 3,151 1,398 Non-GAAP net income $ 77,194 $ 58,232 Per diluted share: Net income attributable to Blucora, Inc. $ 1.25 $ 0.93 Stock-based compensation 0.05 0.06 Amortization of acquired intangible assets 0.17 0.18 Restructuring — 0.01 Impact of noncontrolling interests — 0.00 Acquisition and integration costs 0.04 0.00 Cash tax impact of adjustments to GAAP net income (0.01 ) (0.01 ) Non-cash income tax expense 0.06 0.03 Non-GAAP net income per share $ 1.56 $ 1.20 Weighted average shares outstanding used in computing per diluted share amounts 49,542 48,665

Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance (1)

(Amounts in thousands)

Ranges for the Ranges for the year three months ending ending June 30, 2019 December 31, 2019 Low High Low High Net income attributable to Blucora, Inc. $ 23,000 $ 26,000 $ 41,000 $ 51,500 Stock-based compensation 4,900 4,700 16,700 16,300 Depreciation and amortization of acquired intangible assets 9,800 9,600 38,700 38,200 Other loss, net (3) 4,300 4,100 16,600 16,200 Acquisition and integration costs — — 1,800 1,800 Income tax expense 2,000 2,600 4,200 5,000 Adjusted EBITDA $ 44,000 $ 47,000 $ 119,000 $ 129,000 - ------ - ------ - ------- - -------

Preliminary Non-GAAP Net Income Reconciliation for Forward-Looking Guidance (1)(Amounts in thousands)

Ranges for the three Ranges for the year months ending ending June 30, 2019 December 31, 2019 Low High Low High Net income attributable to Blucora, Inc. $ 23,000 $ 26,000 $ 41,000 $ 51,500 Stock-based compensation 4,900 4,700 16,700 16,300 Amortization of acquired intangible assets 8,000 8,000 32,200 32,100 Acquisition and integration costs — — 1,800 1,800 Cash tax impact of adjustments to net income (500 ) (500 ) (1,600 ) (1,600 ) Non-cash income tax benefit 100 300 900 1,400 Non-GAAP net income $ 35,500 $ 38,500 $ 91,000 $ 101,500 Per diluted share: Net income attributable to Blucora, Inc. $ 0.46 $ 0.52 $ 0.81 $ 1.02 Stock-based compensation 0.10 0.09 0.33 0.32 Amortization of acquired intangible assets 0.16 0.16 0.63 0.63 Acquisition and integration costs — — 0.04 0.04 Cash tax impact of adjustments to net income (0.01 ) (0.01 ) (0.03 ) (0.03 ) Non-cash income tax benefit — 0.01 0.02 0.03 Non-GAAP net income per share $ 0.71 $ 0.77 $ 1.80 $ 2.01 Weighted average shares outstanding used in computing per 50,300 50,150 50,500 50,400 diluted share amounts

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

We define Adjusted EBITDA as net income 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, the impact of noncontrolling interests, acquisition and integration costs and income tax (benefit) expense. Restructuring costs relate to the relocation of our corporate headquarters that began in 2017. 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. 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 as net income attributable to Blucora, Inc., determined in accordance with (1) GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, restructuring costs (described further under Adjusted EBITDA above), the impact of noncontrolling interests, acquisition and integration costs, 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. The aforementioned items are only included in non-GAAP net income in the periods they occurred. We believe that non-GAAP net income and non-GAAP net income 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 and non-GAAP net income per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP net income and non-GAAP net income 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 and net income per share. Other companies may calculate non-GAAP net income and non-GAAP net income per share differently, and, therefore, our non-GAAP net income and non-GAAP net income per share may not be comparable to similarly titled measures of other companies. (2) As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited). Other loss, net primarily includes items such as interest income, interest expense, amortization of debt issuance costs, accretion of debt discounts, and gain/loss on debt extinguishment. Run-rate Adjusted EBITDA represents our projected Adjusted EBITDA following the completion of the acquisition as further adjusted to exclude acquisition and integration costs. We believe run-rate Adjusted (3) EBITDA provides meaningful supplemental information regarding our expected performance for the same reasons described above regarding the use of Adjusted EBITDA. The Company does not provide an outlook for run-rate net income following the acquisition because it contains certain components, such as amortization expense and income taxes for which the Company lacks the necessary data in order to provide an accurate outlook. Because an outlook for run-rate net income following the acquisition cannot be made available without unreasonable effort by the Company, a reconciliation of the Company’s outlook for Run-rate Adjusted EBITDA against its outlook for net income is not provided.