Blucora Reports Strong Second Quarter Results

(1) In the six months ended June 30, 2012, an additional $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, 2013 and 2012 is allocated among the following captions (in thousands):

(2) Other loss, net for the three and six months ended June 30, 2013 and 2012 is allocated among the following captions (in thousands):

(3) Calculation excludes the income effect of dilutive derivative instruments, net of tax effect, if applicable.

(1) Amounts do not include amortization of acquired intangible assets and certain costs associated with customer service and the operation of the data centers that serve our businesses, which include personnel expenses (which include salaries, benefits and other employee related costs, and stock-based compensation expense), the cost of temporary help and contractors to augment our staffing, bandwidth costs and depreciation.  Such amounts are reflected under the heading "Corporate".

(1) Blucora’s Adjusted EBITDA is calculated by adjusting net income determined in accordance with the accounting principles generally accepted in the United States of America ("GAAP"), excluding the effects of 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 intangible assets, stock-based compensation expense, and other loss  (income), net (which includes such items as interest expense, interest income, gains or losses on derivative instruments, 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, gains on resolution of contingencies, and litigation settlements), as detailed above.  Blucora’s management believes that Adjusted EBITDA provides meaningful supplemental information regarding the Company’s performance. Blucora uses 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.  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.  Items excluded from 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, Blucora's Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

Blucora defines non-GAAP net income as net income, determined in accordance with GAAP, excluding the effects of loss from discontinued operations, net of taxes, stock-based compensation expense, amortization of acquired intangible assets, accretion of debt discount on convertible notes, gain or loss on derivative instruments, and the related cash tax impact of those adjustments, and non-cash income taxes 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 (which consist primarily of U.S. federal net operating losses).  The Company’s management believes that excluding the non-cash portion of income tax expense from its GAAP net income provides meaningful supplemental information to investors and analysts regarding the Company’s performance and the valuation of its business 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.  Non-GAAP net income 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.  Other companies may calculate non-GAAP net income differently, and therefore Blucora's non-GAAP net income may not be comparable to similarly titled measures of other companies.