Blucora Announces Third Quarter 2021 Results
Blucora, Inc. (NASDAQ: BCOR) reported a GAAP net loss of $27.8 million for Q3 2021, reflecting a loss of $(0.57) per diluted share. Total revenue decreased by 1% year-over-year to $174.2 million, with wealth management revenue rising 24% to $169.1 million, while tax software revenue fell significantly by 87% to $5 million. Client assets rose 14% year-over-year to $86.6 billion. The company forecasts tax software segment revenue growth of 14% to 18% for 2022 and operating income reaching an all-time high between $98 million and $106 million.
- Wealth management revenue increased by 24% year-over-year.
- Total client assets rose by 14% year-over-year to $86.6 billion.
- Preliminary outlook projects tax software revenue growth of 14% to 18% for 2022.
- GAAP net loss of $27.8 million for Q3 2021.
- Tax software revenue fell by 87% year-over-year.
- Total revenue decreased by 1% compared to Q3 2020.
DALLAS, Nov. 04, 2021 (GLOBE NEWSWIRE) -- Blucora, Inc. (NASDAQ: BCOR), a leading provider of technology-enabled, tax focused financial solutions, today announced financial results for the third quarter ended September 30, 2021.
Third Quarter Highlights and Recent Developments
- Total revenue for the quarter was
$174.2 million - GAAP Net Loss of
$27.8 million , or$(0.57) per diluted share - Non-GAAP Net Loss of
$12.8 million , or$(0.26) per diluted share - Total client assets ended the quarter up
14% year-over-year to$86.6 billion , with$39.8 billion , or45.9% in advisory assets - Advisory assets increased
23% year-over-year, including approximately$5.4 billion in Avantax Planning Partners (“APP”) assets - Preliminary outlook for the tax software segment projects revenue growth of between
14% and18% from the mid-point of our 2021 full-year guidance. Preliminary outlook for operating income for full year 2022 of between$98 million and$106 million , which would be an all-time high - In late August, we completed the acquisition of Headquarters Advisory Group, LLC and on November 2nd, we announced the completed acquisition of Warner Finance, both were existing FPs, which continues to expand the nationwide footprint of Avantax’s in-house RIA
“We believe that continued execution of our strategy will drive long-term sustainable growth within both of our segments. It’s great to see the progress that our team is making in delivering ongoing improvements in the experiences for our Financial Professionals and customers” commented Chris Walters, Blucora’s President and Chief Executive Officer. Mr. Walters continued, “Our progress is highlighted by the strong 2022 tax software segment outlook that we’ve shared today.”
Summary Financial Performance: Q3 2021
($ in millions, except per share amounts)
| Q3 2021 | Q3 2020 | Change | |||||||||||
| Revenue: | |||||||||||||
| Wealth Management | $ | 169.1 | $ | 135.9 | 24 | % | |||||||
| Tax Software | 5.0 | 39.4 | (87 | ) | % | ||||||||
| Total Revenue | $ | 174.2 | $ | 175.4 | (1 | ) | % | ||||||
| Segment Operating Income (Loss) | |||||||||||||
| Wealth Management | $ | 19.6 | $ | 17.5 | 12 | % | |||||||
| Tax Software | (13.9 | ) | 16.2 | (185 | ) | % | |||||||
| Total Segment Operating Income | $ | 5.7 | $ | 33.7 | (83 | ) | % | ||||||
| Unallocated Corporate-Level General and Administrative Expenses | $ | (6.5 | ) | $ | (6.7 | ) | 3 | % | |||||
| GAAP: | |||||||||||||
| Operating Income (Loss) | $ | (20.3 | ) | $ | 1.0 | (2,102 | ) | % | |||||
| Net Loss | $ | (27.8 | ) | $ | (26.2 | ) | (6 | ) | % | ||||
| Diluted Net Loss Per Share | $ | (0.57 | ) | $ | (0.55 | ) | (4 | ) | % | ||||
| Non-GAAP: (1) | |||||||||||||
| Adjusted EBITDA | $ | (0.8 | ) | $ | 27.0 | (103 | ) | % | |||||
| Net Income (Loss) | $ | (12.8 | ) | $ | 15.1 | (185 | ) | % | |||||
| Net Income (Loss) per Share - diluted | $ | (0.26 | ) | $ | 0.31 | (184 | ) | % | |||||
_________________________
(1) See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.
Full Year 2021 Outlook
| ($ in millions, except per share amounts) | Prior Outlook | Current Outlook |
| Wealth Management Revenue | ||
| Tax Software Revenue | ||
| Total Revenue | ||
| Wealth Management Segment Operating Income | ||
| Tax Software Segment Operating Income | ||
| Unallocated Corporate-Level General and Administrative Expenses | ||
| GAAP: | ||
| Net Income (loss) | ( | ( |
| Net Income (loss) per diluted share | ( | ( |
| Non-GAAP: | ||
| Adjusted EBITDA (1) | ||
| Non-GAAP Net Income (loss) (1) | ||
| Non-GAAP Net Income (loss) per diluted share (1) |
____________________________
(1) See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.
Preliminary 2022 Tax Software Outlook
As we have continued to analyze the data from our new marketing efforts and from our new product and service offerings, we are confident in providing our preliminary outlook for 2022. At this time, we are providing our preliminary 2022 outlook for the Tax Software segment to provide revenue growth of between
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 third quarter results, its outlook for full year 2021, and other business matters. We will also provide supplemental financial information to our results on the Investor Relations section of the Blucora corporate website at www.blucora.com prior to the call. The supplemental financial information has also been furnished 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 a provider of data and technology-driven solutions that empower people to improve their financial wellness. Blucora operates in two segments including (i) wealth management, through its Avantax Wealth Management and Avantax Planning Partners brands, with a collective
Source: Blucora
Blucora Investor Relations
Dee Littrell (972) 870-6463
IR@Blucora.com
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecasts,” “future,” “will,” “projects,” “predicts,” “potential,” “continues,” “target,” “outlook,” “guidance” and similar expressions and variations. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: our ability to effectively compete within our industries; our ability to attract and retain financial professionals, qualified employees, clients, and customers, as well as our ability to provide strong customer/client service; the impact of the COVID-19 pandemic on our results of operations and our business, including the impact of the resulting economic and market disruption, the extension of tax filing deadlines and other related government actions; our ability to retain employees and acquired client assets following acquisitions; our future capital requirements and the availability of financing, if necessary; our ability to meet our current and future debt service obligations, including our ability to maintain compliance with our debt covenants; any downgrade of the Company’s credit ratings; our ability to generate strong performance for our clients and the impact of the financial markets on our clients’ portfolios; the impact of new or changing legislation and regulations (or interpretations thereof) on our business, including our ability to successfully address and comply with such legislation and regulations (or interpretations thereof) and increased costs, reductions of revenue, and potential fines, penalties or disgorgement to which we may be subject as a result thereof; risks, burdens, and costs, including fines, penalties, or disgorgement, associated with our business being subjected to regulatory inquiries, investigations, or initiatives including those of the Financial Industry Regulatory Authority, Inc. and the Securities and Exchange Commission; risks associated with legal proceedings, including litigation and regulatory proceedings; our ability to close, finance, and realize all of the anticipated benefits of acquisitions, as well as our ability to integrate the operations of recently acquired businesses, and the potential impact of such acquisitions on our existing indebtedness and leverage; our ability to manage leadership and employee transitions, including costs and time burdens on management and our board of directors related thereto; the compromising of confidentiality, availability or integrity of information, including cyberattacks; political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation software industries; our ability to respond to rapid technological changes, including our ability to successfully release new products and services or improve upon existing products and services; our expectations concerning the revenues we generate from fees associated with the financial products that we distribute; risks related to goodwill and other intangible asset impairment; our ability to develop, establish, and maintain strong brands; risks associated with the use and implementation of information technology and the effect of security breaches, computer viruses, and computer hacking attacks; our ability to comply with laws and regulations regarding privacy and protection of user data; our ability to maintain our relationships with third-party partners, providers, suppliers, vendors, distributors, contractors, financial institutions, industry associations, and licensing partners, and our expectations regarding and reliance on the products, tools, platforms, systems, and services provided by these third parties; our beliefs and expectations regarding the seasonality of our business; our assessments and estimates that determine our effective tax rate; and our ability to protect our intellectual property and the impact of any claim that we have infringed on the intellectual property rights of others. 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 hereof. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as may be required by law.
Blucora, Inc.
Condensed Consolidated Statements of Operations
(Unaudited) (Amounts in thousands, except per share data)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Revenue: | |||||||||||||||||||
| Wealth management services revenue | $ | 169,135 | $ | 135,932 | $ | 486,021 | $ | 396,805 | |||||||||||
| Tax software services revenue | 5,039 | 39,421 | 220,848 | 202,990 | |||||||||||||||
| Total revenue | 174,174 | 175,353 | 706,869 | 599,795 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||
| Wealth management services cost of revenue | 120,641 | 96,122 | 343,174 | 282,332 | |||||||||||||||
| Tax software services cost of revenue | 2,323 | 2,692 | 12,330 | 9,759 | |||||||||||||||
| Total cost of revenue | 122,964 | 98,814 | 355,504 | 292,091 | |||||||||||||||
| Engineering and technology | 7,874 | 6,007 | 22,233 | 21,899 | |||||||||||||||
| Sales and marketing | 28,399 | 31,018 | 140,809 | 150,785 | |||||||||||||||
| General and administrative | 23,102 | 18,605 | 71,619 | 63,533 | |||||||||||||||
| Acquisition and integration | 2,241 | 10,276 | 28,513 | 18,782 | |||||||||||||||
| Depreciation | 2,867 | 1,874 | 8,371 | 5,345 | |||||||||||||||
| Amortization of other acquired intangible assets | 7,009 | 7,746 | 21,247 | 22,167 | |||||||||||||||
| Impairment of goodwill | — | — | — | 270,625 | |||||||||||||||
| Total operating expenses | 194,456 | 174,340 | 648,296 | 845,227 | |||||||||||||||
| Operating income (loss) | (20,282 | ) | 1,013 | 58,573 | (245,432 | ) | |||||||||||||
| Other loss, net (1) | (8,295 | ) | (11,963 | ) | (24,202 | ) | (23,386 | ) | |||||||||||
| Income (loss) before income taxes | (28,577 | ) | (10,950 | ) | 34,371 | (268,818 | ) | ||||||||||||
| Income tax benefit (expense) | 774 | (15,256 | ) | (2,920 | ) | (23,237 | ) | ||||||||||||
| Net income (loss) | $ | (27,803 | ) | $ | (26,206 | ) | $ | 31,451 | $ | (292,055 | ) | ||||||||
| Net income (loss) per share: | |||||||||||||||||||
| Basic | $ | (0.57 | ) | $ | (0.55 | ) | $ | 0.65 | $ | (6.09 | ) | ||||||||
| Diluted | $ | (0.57 | ) | $ | (0.55 | ) | $ | 0.64 | $ | (6.09 | ) | ||||||||
| Weighted average shares outstanding: | |||||||||||||||||||
| Basic | 48,707 | 48,039 | 48,492 | 47,936 | |||||||||||||||
| Diluted | 48,707 | 48,039 | 49,373 | 47,936 | |||||||||||||||
_________________________
(1) Other loss, net consisted of the following (in thousands):
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| Interest expense | $ | 7,304 | $ | 7,254 | $ | 21,789 | $ | 17,410 | ||||||||||
| Amortization of debt issuance costs | 388 | 362 | 1,128 | 1,006 | ||||||||||||||
| Accretion of debt discounts | 290 | 276 | 851 | 414 | ||||||||||||||
| Total interest expense | 7,982 | 7,892 | 23,768 | 18,830 | ||||||||||||||
| Interest income | — | (2 | ) | (2 | ) | (27 | ) | |||||||||||
| Gain on the sale of a business | — | (349 | ) | — | (349 | ) | ||||||||||||
| Non-capitalized debt issuance expenses | — | 3,687 | — | 3,687 | ||||||||||||||
| Other | 313 | 735 | 436 | 1,245 | ||||||||||||||
| Other loss, net | $ | 8,295 | $ | 11,963 | $ | 24,202 | $ | 23,386 | ||||||||||
Blucora, Inc.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except per share amounts)
| September 30, 2021 (unaudited) | December 31, 2020 (audited) | ||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 184,926 | $ | 150,125 | |||||
| Cash segregated under federal or other regulations | 536 | 637 | |||||||
| Accounts receivable, net of allowance | 17,886 | 12,736 | |||||||
| Commissions and advisory fees receivable | 25,003 | 26,132 | |||||||
| Other receivables | 468 | 717 | |||||||
| Prepaid expenses and other current assets, net | 11,119 | 10,321 | |||||||
| Total current assets | 239,938 | 200,668 | |||||||
| Long-term assets: | |||||||||
| Property and equipment, net | 68,950 | 58,500 | |||||||
| Right-of-use assets, net | 20,818 | 23,455 | |||||||
| Goodwill | 454,821 | 454,821 | |||||||
| Other intangible assets, net | 304,435 | 322,179 | |||||||
| Other long-term assets | 14,519 | 4,569 | |||||||
| Total long-term assets | 863,543 | 863,524 | |||||||
| Total assets | $ | 1,103,481 | $ | 1,064,192 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 8,932 | $ | 9,290 | |||||
| Commissions and advisory fees payable | 18,297 | 19,021 | |||||||
| Accrued expenses and other current liabilities | 75,375 | 56,419 | |||||||
| Deferred revenue—current | 5,469 | 12,298 | |||||||
| Lease liabilities—current | 4,429 | 2,304 | |||||||
| Current portion of long-term debt | 1,790 | 1,784 | |||||||
| Total current liabilities | 114,292 | 101,116 | |||||||
| Long-term liabilities: | |||||||||
| Long-term debt, net | 552,987 | 552,553 | |||||||
| Deferred tax liability, net | 29,502 | 30,663 | |||||||
| Deferred revenue—long-term | 5,553 | 6,247 | |||||||
| Lease liabilities—long-term | 34,020 | 36,404 | |||||||
| Other long-term liabilities | 7,992 | 24,919 | |||||||
| Total long-term liabilities | 630,054 | 650,786 | |||||||
| Total liabilities | 744,346 | 751,902 | |||||||
| Stockholders’ equity: | |||||||||
| Common stock, par value | 5 | 5 | |||||||
| Additional paid-in capital | 1,613,624 | 1,598,230 | |||||||
| Accumulated deficit | (1,226,095 | ) | (1,257,546 | ) | |||||
| Treasury stock, at cost—1,306 shares at September 30, 2021 and December 31, 2020 | (28,399 | ) | (28,399 | ) | |||||
| Total stockholders’ equity | 359,135 | 312,290 | |||||||
| Total liabilities and stockholders’ equity | $ | 1,103,481 | $ | 1,064,192 | |||||
Blucora, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited) (Amounts in thousands)
| Nine months ended September 30, | |||||||||
| 2021 | 2020 | ||||||||
| Operating activities: | |||||||||
| Net income (loss) | $ | 31,451 | $ | (292,055 | ) | ||||
| Adjustments to reconcile net income (loss) to net cash from operating activities: | |||||||||
| Stock-based compensation | 15,499 | 7,220 | |||||||
| Depreciation and amortization of acquired intangible assets | 32,498 | 29,619 | |||||||
| Impairment of goodwill | — | 270,625 | |||||||
| Reduction of right-of-use lease assets | 2,694 | 8,335 | |||||||
| Deferred income taxes | (1,161 | ) | 23,199 | ||||||
| Amortization of debt issuance costs | 1,128 | 1,006 | |||||||
| Accretion of debt discounts | 851 | 414 | |||||||
| Gain on sale of a business | — | (349 | ) | ||||||
| Change in fair value of acquisition-related contingent consideration | 19,500 | (1,000 | ) | ||||||
| Accretion of lease liability | 731 | 1,413 | |||||||
| Other | 1,371 | 984 | |||||||
| Cash provided (used) by changes in operating assets and liabilities: | |||||||||
| Accounts receivable | (5,008 | ) | 12,267 | ||||||
| Commissions and advisory fees receivable | 1,129 | (1,480 | ) | ||||||
| Other receivables | 249 | (2,909 | ) | ||||||
| Prepaid expenses and other current assets | (798 | ) | 2,555 | ||||||
| Other long-term assets | (10,898 | ) | 2,763 | ||||||
| Accounts payable | (358 | ) | (7,018 | ) | |||||
| Commissions and advisory fees payable | (500 | ) | (3,012 | ) | |||||
| Lease liabilities | (1,047 | ) | (3,568 | ) | |||||
| Deferred revenue | (7,523 | ) | (8,582 | ) | |||||
| Accrued expenses and other current and long-term liabilities | (5,417 | ) | (5,113 | ) | |||||
| Net cash provided by operating activities | 74,391 | 35,314 | |||||||
| Investing activities: | |||||||||
| Purchases of property and equipment | (21,624 | ) | (28,711 | ) | |||||
| Business acquisitions, net of cash acquired | — | (102,425 | ) | ||||||
| Asset acquisitions, net of cash acquired | (3,823 | ) | — | ||||||
| Proceeds from sale of a business | — | 349 | |||||||
| Net cash used by investing activities | (25,447 | ) | (130,787 | ) | |||||
| Financing activities: | |||||||||
| Proceeds from credit facilities, net of debt issuance costs and debt discounts | (502 | ) | 226,278 | ||||||
| Payments on credit facilities | (1,359 | ) | (66,078 | ) | |||||
| Proceeds from stock option exercises | 535 | 25 | |||||||
| Proceeds from issuance of stock through employee stock purchase plan | 1,845 | 1,201 | |||||||
| Tax payments from shares withheld for equity awards | (1,613 | ) | (1,034 | ) | |||||
| Acquisition-related contingent consideration payments | (13,150 | ) | — | ||||||
| Net cash provided (used) by financing activities | (14,244 | ) | 160,392 | ||||||
| Net increase in cash, cash equivalents, and restricted cash | 34,700 | 64,919 | |||||||
| Cash, cash equivalents, and restricted cash, beginning of period | 150,762 | 86,450 | |||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 185,462 | $ | 151,369 | |||||
Blucora, Inc.
Segment Information
(Unaudited) (Amounts in thousands)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Revenue: | |||||||||||||||||||
| Wealth Management (1) | $ | 169,135 | $ | 135,932 | $ | 486,021 | $ | 396,805 | |||||||||||
| Tax Software (1) | 5,039 | 39,421 | 220,848 | 202,990 | |||||||||||||||
| Total revenue | $ | 174,174 | $ | 175,353 | $ | 706,869 | $ | 599,795 | |||||||||||
| Operating income (loss): | |||||||||||||||||||
| Wealth Management | $ | 19,564 | $ | 17,498 | $ | 60,356 | $ | 51,827 | |||||||||||
| Tax Software | (13,864 | ) | 16,234 | 100,472 | 60,646 | ||||||||||||||
| Corporate-level activity (2) | (25,982 | ) | (32,719 | ) | (102,255 | ) | (357,905 | ) | |||||||||||
| Total operating income (loss) | (20,282 | ) | 1,013 | 58,573 | (245,432 | ) | |||||||||||||
| Other loss, net | (8,295 | ) | (11,963 | ) | (24,202 | ) | (23,386 | ) | |||||||||||
| Income (loss) before income taxes | (28,577 | ) | (10,950 | ) | 34,371 | (268,818 | ) | ||||||||||||
| Income tax benefit (expense) | 774 | (15,256 | ) | (2,920 | ) | (23,237 | ) | ||||||||||||
| Net income (loss) | $ | (27,803 | ) | $ | (26,206 | ) | $ | 31,451 | $ | (292,055 | ) | ||||||||
_________________________
(1) Revenues by major category within each segment are presented below (in thousands):
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Wealth Management: | |||||||||||||||
| Advisory revenue | $ | 103,540 | $ | 82,612 | $ | 291,167 | $ | 227,672 | |||||||
| Commission revenue | 52,961 | 44,921 | 157,197 | 135,337 | |||||||||||
| Asset-based revenue | 5,659 | 4,351 | 16,514 | 18,911 | |||||||||||
| Transaction and fee revenue | 6,975 | 4,048 | 21,143 | 14,885 | |||||||||||
| Total Wealth Management revenue | $ | 169,135 | $ | 135,932 | $ | 486,021 | $ | 396,805 | |||||||
| Tax Software: | |||||||||||||||
| Consumer revenue | $ | 4,479 | $ | 38,482 | $ | 203,891 | $ | 186,724 | |||||||
| Professional revenue | 560 | 939 | 16,957 | 16,266 | |||||||||||
| Total Tax Software revenue | $ | 5,039 | $ | 39,421 | $ | 220,848 | $ | 202,990 | |||||||
(2) Corporate-level activity included the following (in thousands):
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Unallocated corporate-level general and administrative expenses | $ | 6,499 | $ | 6,745 | $ | 18,452 | $ | 19,571 | |||||||
| Stock-based compensation | 4,729 | 4,517 | 15,499 | 7,220 | |||||||||||
| Acquisition and integration costs | 2,241 | 10,276 | 28,513 | 18,782 | |||||||||||
| Depreciation | 3,906 | 2,620 | 11,251 | 7,452 | |||||||||||
| Amortization of acquired intangible assets | 7,009 | 7,746 | 21,247 | 22,167 | |||||||||||
| Impairment of goodwill | — | — | — | 270,625 | |||||||||||
| Executive transition costs | — | 405 | — | 10,225 | |||||||||||
| Headquarters relocation costs | — | 410 | — | 1,863 | |||||||||||
| Contested proxy and other legal and consulting costs | 1,598 | — | 7,293 | — | |||||||||||
| Total corporate-level activity | $ | 25,982 | $ | 32,719 | $ | 102,255 | $ | 357,905 | |||||||
Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures (1)
Adjusted EBITDA Reconciliation (1)
(Unaudited) (Amounts in thousands)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| Net income (loss) (2) | $ | (27,803 | ) | $ | (26,206 | ) | $ | 31,451 | $ | (292,055 | ) | |||||||
| Stock-based compensation | 4,729 | 4,517 | 15,499 | 7,220 | ||||||||||||||
| Depreciation and amortization of acquired intangible assets | 10,915 | 10,366 | 32,498 | 29,619 | ||||||||||||||
| Other loss, net | 8,295 | 11,963 | 24,202 | 23,386 | ||||||||||||||
| Acquisition and integration—Excluding change in the fair value of acquisition-related contingent consideration | 541 | 11,276 | 9,013 | 19,782 | ||||||||||||||
| Acquisition and integration—Change in the fair value of acquisition-related contingent consideration | 1,700 | (1,000 | ) | 19,500 | (1,000 | ) | ||||||||||||
| Impairment of goodwill | — | — | — | 270,625 | ||||||||||||||
| Executive transition costs | — | 405 | — | 10,225 | ||||||||||||||
| Headquarters relocation costs | — | 410 | — | 1,863 | ||||||||||||||
| Contested proxy and other legal and consulting costs | 1,598 | — | 7,293 | — | ||||||||||||||
| Income tax (benefit) expense | (774 | ) | 15,256 | 2,920 | 23,237 | |||||||||||||
| Adjusted EBITDA (1) | $ | (799 | ) | $ | 26,987 | $ | 142,376 | $ | 92,902 | |||||||||
Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) Per Share Reconciliation (1)
(Unaudited) (Amounts in thousands, except per share amounts)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Net income (loss) (2) | $ | (27,803 | ) | $ | (26,206 | ) | $ | 31,451 | $ | (292,055 | ) | ||||||||
| Stock-based compensation | 4,729 | 4,517 | 15,499 | 7,220 | |||||||||||||||
| Amortization of acquired intangible assets | 7,009 | 7,746 | 21,247 | 22,167 | |||||||||||||||
| Gain on the sale of a business | — | (349 | ) | — | (349 | ) | |||||||||||||
| Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration | 541 | 11,276 | 9,013 | 19,782 | |||||||||||||||
| Acquisition and integration—Change in the fair value of HKFS Contingent Consideration | 1,700 | (1,000 | ) | 19,500 | (1,000 | ) | |||||||||||||
| Impairment of goodwill | — | — | — | 270,625 | |||||||||||||||
| Executive transition costs | — | 405 | — | 10,225 | |||||||||||||||
| Headquarters relocation costs | — | 410 | — | 1,863 | |||||||||||||||
| Contested proxy and other legal and consulting costs | 1,598 | — | 7,293 | — | |||||||||||||||
| Non-capitalized debt issuance expenses | — | 3,687 | — | 3,687 | |||||||||||||||
| Cash tax impact of adjustments to GAAP net income (loss) | (331 | ) | (418 | ) | (1,523 | ) | (1,413 | ) | |||||||||||
| Non-cash income tax (benefit) expense | (197 | ) | 14,987 | (1,160 | ) | 22,327 | |||||||||||||
| Non-GAAP net income (loss) | $ | (12,754 | ) | $ | 15,055 | $ | 101,320 | $ | 63,079 | ||||||||||
| Per diluted share: | |||||||||||||||||||
| Net income (loss) (2) (3) | $ | (0.57 | ) | $ | (0.54 | ) | $ | 0.64 | $ | (6.06 | ) | ||||||||
| Stock-based compensation | 0.10 | 0.09 | 0.31 | 0.15 | |||||||||||||||
| Amortization of acquired intangible assets | 0.14 | 0.16 | 0.43 | 0.46 | |||||||||||||||
| Gain on the sale of a business | — | (0.01 | ) | — | (0.01 | ) | |||||||||||||
| Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration | 0.01 | 0.23 | 0.18 | 0.41 | |||||||||||||||
| Acquisition and integration—Change in the fair value of HKFS Contingent Consideration | 0.03 | (0.02 | ) | 0.39 | (0.02 | ) | |||||||||||||
| Impairment of goodwill | — | — | — | 5.62 | |||||||||||||||
| Executive transition costs | — | 0.01 | — | 0.21 | |||||||||||||||
| Headquarters relocation costs | — | 0.01 | — | 0.04 | |||||||||||||||
| Contested proxy and other legal and consulting costs | 0.04 | — | 0.15 | — | |||||||||||||||
| Non-capitalized debt issuance expenses | — | 0.08 | — | 0.08 | |||||||||||||||
| Cash tax impact of adjustments to GAAP net income (loss) | (0.01 | ) | (0.01 | ) | (0.03 | ) | (0.03 | ) | |||||||||||
| Non-cash income tax (benefit) expense | — | 0.31 | (0.02 | ) | 0.46 | ||||||||||||||
| Non-GAAP net income (loss) per share - diluted | $ | (0.26 | ) | $ | 0.31 | $ | 2.05 | $ | 1.31 | ||||||||||
| Weighted average shares outstanding - diluted | 48,707 | 48,203 | 49,373 | 48,184 | |||||||||||||||
Adjusted EBITDA Reconciliation for Forward-Looking Guidance (1)
(Amounts in thousands)
| Ranges for the year ending | ||||||||
| December 31, 2021 | ||||||||
| Low | High | |||||||
| Net income (loss) | $ | (4,500 | ) | $ | — | |||
| Stock-based compensation | 20,700 | 20,500 | ||||||
| Depreciation and amortization of acquired intangible assets | 44,200 | 44,100 | ||||||
| Other loss, net | 32,600 | 32,200 | ||||||
| Acquisition, integration, and contested proxy and other legal and consulting costs (4) | 40,500 | 40,300 | ||||||
| Income tax (benefit) expense | 2,000 | 1,900 | ||||||
| Adjusted EBITDA | $ | 135,500 | $ | 139,000 | ||||
Non-GAAP Net Income and Non-GAAP Net Income Per Share Reconciliation
for Forward-Looking Guidance (1)
(Amounts in thousands, except per share amounts)
| Ranges for the year ending | |||||||||
| December 31, 2021 | |||||||||
| Low | High | ||||||||
| Net income (loss) | $ | (4,500 | ) | $ | — | ||||
| Stock-based compensation | 20,700 | 20,500 | |||||||
| Amortization of acquired intangible assets | 28,300 | 28,300 | |||||||
| Acquisition, integration, and contested proxy and other legal and consulting costs (4) | 40,500 | 40,300 | |||||||
| Cash tax impact of adjustments to net income (loss) | (2,000 | ) | (2,000 | ) | |||||
| Non-cash income tax benefit | (1,000 | ) | (1,100 | ) | |||||
| Non-GAAP net income (loss) | $ | 82,000 | $ | 86,000 | |||||
| Per diluted share: | |||||||||
| Net income (loss) (3) | $ | (0.09 | ) | $ | — | ||||
| Stock-based compensation | 0.42 | 0.41 | |||||||
| Amortization of acquired intangible assets | 0.57 | 0.58 | |||||||
| Acquisition, integration, and contested proxy and other legal and consulting costs (4) | 0.81 | 0.81 | |||||||
| Cash tax impact of adjustments to net income (loss) | (0.04 | ) | (0.04 | ) | |||||
| Non-cash income tax benefit | (0.02 | ) | (0.03 | ) | |||||
| Non-GAAP net income per share | $ | 1.65 | $ | 1.73 | |||||
| Weighted average shares outstanding - diluted | 49,670 | 49,570 | |||||||
Adjusted EBITDA Reconciliation for Prior Guidance (1)
(Amounts in thousands)
| Ranges for the year ending | ||||||||
| December 31, 2021 | ||||||||
| Low | High | |||||||
| Net income (loss) | $ | (8,500 | ) | $ | 1,000 | |||
| Stock-based compensation | 21,700 | 21,300 | ||||||
| Depreciation and amortization of acquired intangible assets | 46,100 | 45,600 | ||||||
| Other loss, net | 32,600 | 31,900 | ||||||
| Acquisition, integration, and contested proxy and other legal and consulting costs (4) | 38,100 | 37,400 | ||||||
| Income tax expense | 1,500 | 1,800 | ||||||
| Adjusted EBITDA | $ | 131,500 | $ | 139,000 | ||||
Non-GAAP Net Income and Non-GAAP Net Income Per Share Reconciliation for Prior Guidance (1)
(Amounts in thousands, except per share amounts)
| Ranges for the year ending | |||||||||
| December 31, 2021 | |||||||||
| Low | High | ||||||||
| Net income (loss) | $ | (8,500 | ) | $ | 1,000 | ||||
| Stock-based compensation | 21,700 | 21,300 | |||||||
| Amortization of acquired intangible assets | 28,300 | 28,200 | |||||||
| Acquisition, integration, and contested proxy and other legal and consulting costs (4) | 38,100 | 37,400 | |||||||
| Cash tax impact of adjustments to net income (loss) | (2,200 | ) | (2,000 | ) | |||||
| Non-cash income tax benefit | (1,400 | ) | (1,400 | ) | |||||
| Non-GAAP net income | $ | 76,000 | $ | 84,500 | |||||
| Per diluted share: | |||||||||
| Net income (loss) (3) | $ | (0.17 | ) | $ | 0.02 | ||||
| Stock-based compensation | 0.43 | 0.43 | |||||||
| Amortization of acquired intangible assets | 0.57 | 0.57 | |||||||
| Acquisition, integration, and contested proxy and other legal and consulting costs (4) | 0.76 | 0.75 | |||||||
| Cash tax impact of adjustments to net income (loss) | (0.04 | ) | (0.04 | ) | |||||
| Non-cash income tax benefit | (0.03 | ) | (0.03 | ) | |||||
| Non-GAAP net income per share | $ | 1.52 | $ | 1.70 | |||||
| Weighted average shares outstanding - diluted | 50,000 | 49,800 | |||||||
Notes to Reconciliations of 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, executive transition costs, headquarters relocation costs, contested proxy and other legal and consulting costs, and income tax expense. Other loss, net primarily consists of interest expense, net and non-capitalized debt issuance expenses. Acquisition and integration costs primarily relate to the HKFS Acquisition and 1st Global Acquisition. Impairment of goodwill relates to the impairment of our Wealth Management reporting unit goodwill in the first quarter of 2020. 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 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, gain on the sale of a business, acquisition and integration costs, impairment of goodwill, 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 tax expense 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 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 Term Loan increase in the third quarter of 2020.
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) As presented in the condensed consolidated statements of operations (unaudited).
(3) Any difference in the “per diluted share” amounts between this table and the condensed consolidated statements of comprehensive income is due to using different weighted average shares outstanding in the event that there is GAAP net loss but non-GAAP net income and vice versa.
(4) The breakout of components cannot be determined on a forward-looking basis without unreasonable efforts.
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