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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
        
FORM 10-Q
             
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018 
or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                          to                     
Commission File Number: 000-25131


BLUCORA, INC.
(Exact name of registrant as specified in its charter)


Delaware91-1718107
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
6333 State Hwy 161, 4th Floor, Irving, Texas
75038 
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (972) 870-6000
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ý Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer
ý

Accelerated filero
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
o
Emerging growth companyo

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Outstanding at 
Common Stock, Par Value $0.0001 July 25, 2018
47,643,903 




Table of Contents
TABLE OF CONTENTS

Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that involve risks and uncertainties. The statements in this report that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “anticipate,“believe,“plan,“expect,“future,“intend,“may,“will,“should,“estimate,“predict,“potential,“continue,” and similar expressions identify forward-looking statements, but the absence of these words does not mean that the statement is not forward-looking. These forward-looking statements include, but are not limited to, statements regarding:
• our ability to effectively implement our future business plans and growth strategy, including our ability to achieve the anticipated benefits of our Strategic Transformation (as defined in this Quarterly Report on Form 10-Q);
• our ability to effectively compete within our industry;
• our ability to attract and retain customers, as well as our ability to provide strong customer service;
• 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;
• our ability to generate strong investment performance for our customers and the impact of the financial markets on our customers’ portfolios;
• political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation industries;
• our ability to attract and retain productive financial advisors;
• our ability to respond to rapid technological changes, including our ability 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;
• our ability to comply with regulations applicable to the wealth management and tax preparation industries, including increased costs associated with new or changing regulations;
• our ability to successfully transition our wealth management business to a new clearing platform and our expectations concerning the benefits that may be derived therefrom;
• 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 and licensing partners;
• our beliefs and expectations regarding the seasonality of our business;
• risks associated with litigation;
• 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 on our business and our ability to attract and retain customers;
• our ability to develop, establish and maintain strong brands;
• our ability to protect our intellectual property and the impact of any claim that we have infringed on the intellectual property rights of others; and
• our ability to effectively integrate companies or assets that we acquire.
Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause our results, levels of activity, performance, achievements, and prospects to be materially different from those expressed or implied by such forward-looking statements. These risks, uncertainties, and other factors include, among others, the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as supplemented by the those identified under Part II, Item 1A, "Risk Factors" and elsewhere in this report, as well as in the Company's other filings with the Securities and Exchange Commission. You should not rely on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We do not undertake any obligation to update any forward-looking statement to reflect new information, events, or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as required by law.



Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

June 30, 2018December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents$89,840 $59,965 
Cash segregated under federal or other regulations1,117 1,371 
Accounts receivable, net of allowance6,595 10,694 
Commissions receivable16,820 16,822 
Other receivables38 3,180 
Prepaid expenses and other current assets, net6,754 7,365 
Total current assets121,164 99,397 
Long-term assets:
Property and equipment, net9,308 9,831 
Goodwill, net548,838 549,037 
Other intangible assets, net310,983 328,205 
Other long-term assets15,806 15,201 
Total long-term assets884,935 902,274 
Total assets$1,006,099 $1,001,671 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$4,472 $4,413 
Commissions and advisory fees payable17,158 17,813 
Accrued expenses and other current liabilities16,181 19,577 
Deferred revenue2,661 9,953 
Total current liabilities40,472 51,756 
Long-term liabilities:
Long-term debt, net260,029 338,081 
Deferred tax liability, net42,652 43,433 
Deferred revenue501 804 
Other long-term liabilities6,871 8,177 
Total long-term liabilities310,053 390,495 
Total liabilities350,525 442,251 
Redeemable noncontrolling interests18,460 18,033 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, par $0.0001—authorized shares, 900,000; issued and outstanding shares,
47,493 and 46,366 5 5 
Additional paid-in capital1,569,412 1,555,560 
Accumulated deficit(932,050)(1,014,174)
Accumulated other comprehensive loss (253)(4)
Total stockholders’ equity637,114 541,387 
Total liabilities and stockholders’ equity$1,006,099 $1,001,671 

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.
4

Table of Contents
BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)

Three months ended June 30,Six months ended June 30,
2018201720182017
Revenue:
Wealth management services revenue$92,015 $85,296 $184,097 $167,963 
Tax preparation services revenue65,833 53,866 179,716 153,574 
Total revenue157,848 139,162 363,813 321,537 
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue62,452 56,963 125,519 112,837 
Tax preparation services cost of revenue2,459 2,411 6,812 6,229 
Amortization of acquired technology49 47 99 95 
Total cost of revenue64,960 59,421 132,430 119,161 
Engineering and technology4,848 4,242 9,979 8,990 
Sales and marketing23,791 22,296 79,044 71,294 
General and administrative15,625 13,715 30,491 27,198 
Depreciation993 873 2,908 1,813 
Amortization of other acquired intangible assets8,806 8,289 17,113 16,577 
Restructuring2 331 291 2,620 
Total operating expenses119,025 109,167 272,256 247,653 
Operating income 38,823 29,995 91,557 73,884 
Other loss, net (2,759)(24,200)(7,987)(33,908)
Income before income taxes 36,064 5,795 83,570 39,976 
Income tax expense (907)(2,315)(2,870)(5,786)
Net income 35,157 3,480 80,700 34,190 
Net income attributable to noncontrolling interests (222)(176)(427)(302)
Net income attributable to Blucora, Inc. $34,935 $3,304 $80,273 $33,888 
Net income per share attributable to Blucora, Inc.: 
Basic$0.74 $0.08 $1.71 $0.79 
Diluted$0.71 $0.07 $1.64 $0.73 
Weighted average shares outstanding:
Basic47,221 43,644 46,931 42,895 
Diluted49,434 46,937 49,049 46,182 
Other comprehensive income (loss): 
Net income $35,157 $3,480 $80,700 $34,190 
Unrealized gain on available-for-sale investments, net of tax   1 
Foreign currency translation adjustment (112)147 (249)190 
Other comprehensive income (loss) (112)147 (249)191 
Comprehensive income 35,045 3,627 80,451 34,381 
Comprehensive income attributable to noncontrolling interests (222)(176)(427)(302)
Comprehensive income attributable to Blucora, Inc. $34,823 $3,451 $80,024 $34,079 

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.
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BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Six months ended June 30,
20182017
Operating Activities:
Net income $80,700 $34,190 
Adjustments to reconcile net income to net cash from operating activities: 
Stock-based compensation6,991 5,302 
Depreciation and amortization of acquired intangible assets20,338 18,865 
Restructuring (non-cash) 1,402 
Deferred income taxes(781)(681)
Amortization of premium on investments, net, and debt issuance costs 487 724 
Accretion of debt discounts87 1,840 
Loss on debt extinguishment 1,533 19,581 
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable4,096 2,956 
Commissions receivable2 581 
Other receivables3,142 2,544 
Prepaid expenses and other current assets461 (545)
Other long-term assets(764)341 
Accounts payable59 (795)
Commissions and advisory fees payable(655)(444)
Deferred revenue(5,746)(8,493)
Accrued expenses and other current and long-term liabilities(3,393)3,768 
Net cash provided by operating activities 106,557 81,136 
Investing Activities:
Purchases of property and equipment(2,602)(1,911)
Proceeds from sales of investments 249 
Proceeds from maturities of investments 7,252 
Purchases of investments (409)
Net cash provided (used) by investing activities (2,602)5,181 
Financing Activities:
Proceeds from credit facilities  367,212 
Payments on convertible notes (172,827)
Payments on credit facilities(80,000)(275,000)
Proceeds from stock option exercises10,386 23,996 
Proceeds from issuance of stock through employee stock purchase plan704 662 
Tax payments from shares withheld for equity awards(4,229)(5,267)
Contingent consideration payments for business acquisition(1,315)(946)
Net cash used by financing activities (74,454)(62,170)
Net cash provided by continuing operations 29,501 24,147 
Net cash provided by investing activities from discontinued operations  1,028 
Net cash provided by discontinued operations  1,028 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (30)43 
Net increase in cash, cash equivalents, and restricted cash 29,471 25,218 
Cash, cash equivalents, and restricted cash, beginning of period62,311 54,868 
Cash, cash equivalents, and restricted cash, end of period$91,782 $80,086 
Non-cash investing and financing activities from continuing operations:
Cash paid for income taxes$767 $719 
Cash paid for interest$7,991 $9,478 
See accompanying notes to Unaudited Condensed Consolidated Financial Statements.
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BLUCORA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Description of the Business
Description of the business: Blucora, Inc. (the "Company" or "Blucora") operates two businesses: a Wealth Management business and an online Tax Preparation business. The Wealth Management business consists of the operations of HDV Holdings, Inc. and its subsidiaries ("HD Vest"). HDV Holdings, Inc. is the parent company of the Wealth Management business and owns all outstanding shares of HD Vest, Inc., which serves as a holding company for the various financial services subsidiaries. Those subsidiaries include HD Vest Investment Securities, Inc. (an introducing broker-dealer), H.D. Vest Advisory Services, Inc. (a registered investment adviser), and H.D. Vest Insurance Agency, LLC (an insurance broker) (collectively referred to as the "Wealth Management business" or the "Wealth Management segment"). The Tax Preparation business consists of the operations of TaxAct, Inc. and its subsidiary ("TaxAct") and provides digital tax preparation solutions for consumers, small business owners, and tax professionals through its website www.TaxAct.com (collectively referred to as the "Tax Preparation business" or the "Tax Preparation segment").
Segments: The Company has two reportable segments: the Wealth Management segment, which consists of the HD Vest business, and the Tax Preparation segment, which consists of the TaxAct business.
Note 2: Summary of Significant Accounting Policies
Interim financial information: The accompanying consolidated financial statements have been prepared by the Company under the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial reporting. These consolidated financial statements are unaudited and, in management’s opinion, include all adjustments, consisting of normal recurring adjustments and accruals, necessary for a fair presentation of the consolidated financial position, results of operations, and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Part II Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Interim results are not necessarily indicative of results for a full year.
Cash, cash equivalents, and restricted cash: The following table presents cash, cash equivalents, and restricted cash as reported on the consolidated balance sheets that equal the total amounts on the consolidated statements of cash flows (in thousands):

June 30,December 31,
20182017
2017
Cash and cash equivalents$89,840 $78,312 $59,965 
Cash segregated under federal or other regulations1,117 799 1,371 
Restricted cash included in "Prepaid expenses and other current assets, net" 275 425 425 
Restricted cash included in "Other long-term assets"550 550 550 
Total cash, cash equivalents, and restricted cash $91,782 $80,086 $62,311 


Cash segregated under federal and other regulations is held in a separate bank account for the exclusive benefit of the Company’s Wealth Management customers. Restricted cash included in prepaid expenses and other current assets, net and other long-term assets represents amounts pledged as collateral for certain of the Company's banking and lease arrangements.
Fair value of financial instruments: The Company measures its cash equivalents and contingent consideration liability at fair value. The Company considers the carrying values of accounts receivable, commissions receivable, other receivables, prepaid expenses, other current assets, accounts payable, commissions and advisory fees payable, accrued expenses, and other current liabilities to approximate fair values primarily due to their short-term natures.
Cash equivalents are classified within Level 2 (see "Note 5: Fair Value Measurements") of the fair value hierarchy because the Company values them utilizing market observable inputs. Unrealized gains and losses are included in "
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"Accumulated other comprehensive loss" on the consolidated balance sheets, and amounts reclassified out of comprehensive income into net income are determined on the basis of specific identification.
The Company has a contingent consideration liability that is related to the Company's 2015 acquisition of SimpleTax Software Inc. ("SimpleTax"). The Company's contingent consideration liability is classified within Level 3 (see "Note 5: Fair Value Measurements") of the fair value hierarchy because the Company values it utilizing significant inputs not observable in the market. Specifically, the Company has determined the fair value of the contingent consideration liability based on a probability-weighted discounted cash flow analysis, which includes assumptions related to estimating revenues, the probability of payment, and the discount rate. The change in the fair value of the contingent consideration liability is recognized in "General and administrative" expense on the consolidated statements of comprehensive income for the period in which the fair value changes. The Company accounts for contingent consideration in accordance with applicable accounting guidance pertaining to business combinations.
Concentration of credit risk:  Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, short-term investments, trade accounts receivable, and commissions receivable. These instruments are generally unsecured and uninsured.
For cash equivalents, short-term investments, and commissions receivable, the Company attempts to manage exposure to counterparty credit risk by only entering into agreements with major financial institutions and investment sponsors that are expected to be able to fully perform under the terms of the agreement.
Accounts receivable are typically unsecured and are derived from revenues earned from customers primarily located in the United States operating in a variety of geographic areas. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.
Property and equipment, net: In the first quarter of 2018, the Company determined that certain of its internally-developed software fixed assets would not be used as long as previously estimated and recognized $1.1 million of depreciation expense after shortening the estimated useful lives of those assets.
Recent accounting pronouncements: Changes to GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of accounting standards updates ("ASUs") to the FASB’s Accounting Standards Codification ("ASC"). The Company considers the applicability and impact of all recent ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s consolidated financial position and results of operations. The Company currently is evaluating, or has adopted, ASUs that impact the following areas:
Revenue recognition (ASC 606) - In May 2014, the FASB issued guidance codified in ASC 606, "Revenue from Contracts with Customers" ("ASC 606"), which amends the guidance in former ASC 605 "Revenue Recognition." The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services by using a five-step process. This guidance is effective on a retrospective basis--either to each reporting period presented or with the cumulative effect of initially applying this guidance recognized at the date of initial application--for annual reporting periods, including interim reporting periods within those annual reporting periods, beginning after December 15, 2017.
The Company adopted the requirements of the new standard on January 1, 2018, utilizing the modified retrospective transition method. Upon adoption, the Company recognized a $1.8 million cumulative effect as an adjustment to the opening balance of retained earnings and deferred revenues on the consolidated balance sheets.
As a result of the ASC 606 adoption, the Company now recognizes certain licensing fees on a net basis, which reduced both transaction and fee revenues and operating expenses by $0.4 million and $0.9 million, respectively, for the three and six months ended June 30, 2018, on the consolidated statements of comprehensive income. Had the Company not adopted ASC 606, total revenues for the three and six months ended June 30, 2018 would have been $0.8 million and $2.0 million, respectively, higher than reported on the consolidated statements of comprehensive income.
Pursuant to the modified retrospective transition method, prior periods were not retrospectively adjusted, and the Company does not disclose the value of unsatisfied performance obligations for contracts with original expected durations of one year or less.
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Leases (ASU 2016-02) - In February 2016, the FASB issued an ASU on lease accounting, whereby lease assets and liabilities, whether arising from leases that are considered operating or finance (capital) and have a term of twelve months or less, will be recognized on the balance sheet. Enhanced qualitative disclosures also will be required. This guidance is effective on a modified retrospective basis--with various practical expedients related to leases that commenced before the effective date--for annual reporting periods, including interim reporting periods within those annual reporting periods, beginning after December 15, 2018. Early adoption is permitted. The Company expects that the adoption of this ASU will not have a material impact to its consolidated financial statements and related disclosures and that it will adopt this ASU on January 1, 2019.
Measurement of Credit Losses (ASU 2016-13) - In June 2016, the FASB issued an ASU that requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2019, including the interim periods within those fiscal years. The Company is currently assessing the impact of adopting this ASU, but based on a preliminary assessment, does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.
Share-Based Payments (ASU 2018-07) - In June 2018, the FASB issued an ASU that requires companies to account for share-based payments granted to nonemployees similarly to share-based payments granted to employees. This ASU is effective for fiscal years beginning after December 15, 2018, including the interim periods within those fiscal years. The Company is currently assessing the impact of adopting this ASU, but based on a preliminary assessment, does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.
Note 3: Segment Information and Revenues
The Company has two reportable segments: the Wealth Management segment and the Tax Preparation segment. The Company’s Chief Executive Officer is its chief operating decision maker and reviews financial information presented on a disaggregated basis. This information is used for purposes of allocating resources and evaluating financial performance.
Information on reportable segments currently presented to the Company’s chief operating decision maker and a reconciliation to consolidated net income are presented below (in thousands):
Three months ended June 30,  Six months ended June 30, 
2018 2017 2018 2017 
Revenue: 
Wealth Management $92,015 $85,296 $184,097 $167,963 
Tax Preparation 65,833 53,866 179,716 153,574 
Total revenue 157,848 139,162 363,813 321,537 
Operating income: 
Wealth Management 12,954 12,406 26,029 24,259 
Tax Preparation 44,121 36,515 102,927 89,648 
Corporate-level activity (18,252)(18,926)(37,399)(40,023)
Total operating income 38,823 29,995 91,557 73,884 
Other loss, net (2,759)(24,200)(7,987)(33,908)
Income tax expense (907)(2,315)(2,870)(5,786)
Net income $35,157 $3,480 $80,700 $34,190 

Revenues by major category within each segment are presented below (in thousands):
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Three months ended June 30, Six months ended June 30, 
2018 2017 2018 2017 
Wealth Management: 
Commission $40,384 $38,154 $83,254 $77,749 
Advisory 40,058 35,914 79,359 69,490 
Asset-based 7,306 6,784 14,478 12,750 
Transaction and fee 4,267 4,444 7,006 7,974 
Total Wealth Management revenue $92,015 $85,296 $184,097 $167,963 
Tax Preparation: 
Consumer $63,137 $51,848 $165,049 $140,090 
Professional 2,696 2,018 14,667 13,484 
Total Tax Preparation revenue $65,833 $53,866 $179,716 $153,574 
See "Note 2: Summary of Significant Accounting Policies" for a discussion of the new revenue recognition standard, ASC 606, adopted by the Company on January 1, 2018.
Wealth Management revenue recognition: Wealth Management revenue consists primarily of commission revenue, advisory revenue, asset-based revenue, and transaction and fee revenue. The Company’s Wealth Management revenues are earned from customers primarily located in the United States.
Wealth management revenue details are as follows:
Commission revenue - Commission revenue represents amounts generated by the Company's clients' purchases and sales of securities and various investment products. The Company serves as the registered broker/dealer or insurance agent for those trades. The Company generates two types of commission revenues: transaction-based sales commissions that occur on the trade date, which is when the Company's performance obligations have been substantially completed and trailing commissions which are paid to the Company (typically in arrears on a quarterly basis) based on the clients' account balance, rather than a per-transaction fee.
Advisory revenue - Advisory revenue includes fees charged to clients in advisory accounts where the Company is the Registered Investment Adviser. These fees are based on the value of assets within these advisory accounts. Advisory revenues are deferred and recognized ratably over the period (typically quarterly) in which the performance obligations, which are defined in ASC 606 as promises to transfer goods or services, have been completed.
Asset-based revenue - Asset-based revenue primarily includes fees from financial product manufacturer sponsorship programs, cash sweep programs and other asset-based revenues, primarily including margin revenues, and are recognized ratably over the period in which services are provided.
Transaction and fee revenue - Transaction and fee revenue primarily includes support fees charged to advisers, which are recognized over time as advisory services are provided, fees charged for executing certain transactions in client accounts, which are recognized on a trade-date basis, and other fees related to services provided and other account charges as generally outlined in agreements with financial advisers, clients, and financial institutions, which are recognized as services are performed or as earned, as applicable.
Details of Wealth Management revenues are:
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Wealth Management Segment Revenues
Three Months Ended June 30, 2018 Six Months Ended June 30, 2018 
Recognized Upon Transaction Recognized Over Time Total Recognized Upon Transaction Recognized Over Time Total 
Commission revenue
$15,919 $24,465 $40,384 $34,264 $48,990 $83,254 
Advisory revenue 40,058 40,058  79,359 79,359 
Asset-based revenue 7,306 7,306  14,478 14,478 
Transaction and fee revenue
1,036 3,231 4,267 1,997 5,009 7,006 
Total$16,955 $75,060 $92,015 $36,261 $147,836 $184,097 

Tax Preparation revenue recognition: The Company derives revenue from the sale of Tax Preparation online services, ancillary services, packaged tax preparation software, and arrangements that may include a combination of these items. Ancillary services include Tax Preparation support services, e-filing services, bank or reloadable pre-paid debit card services, and other value-added services, including enhanced tax and Wealth Management services through HD Vest. The Company’s Tax Preparation revenues are earned from customers primarily located in the United States.
Tax Preparation revenue details are as follows:
Consumer revenue - Consumer revenue includes revenue associated with the Company’s online software products, downloadable or shipped desktop software products, add-on services such as refund payment transfer services, bank or reloadable pre-paid debit card services and audit defense services.
Online revenues include revenues associated with the Company’s online software products sold to customers and businesses primarily for the preparation of individual or business tax returns, and are generally recognized when customers and businesses complete and file returns.
Desktop revenues primarily include revenues from all downloadable or shipped software products and are generally recognized when customers download the software or when the software ships.
Add-on services are revenues related to services such as refund payment transfer services, bank or reloadable pre-paid debit card services and audit defense services, and are generally recognized as customers complete and file returns.
Professional revenue - Professional revenues include revenues associated with the Company’s desktop software products sold to tax return preparers who utilize the Company’s offerings to service end customers and are generally recognized when customers download the software or when the software ships. Professional customers have the option to elect an unlimited e-filing package or a pay-per-return package. As the unlimited e-filing package can be re-used, those revenues are recognized over an estimated filing timeline. Revenues from the pay-per-return package are recognized when customers complete and file returns.
Details of Tax Preparation revenues are:
Tax Preparation Segment Revenues
Three Months Ended June 30, 2018Six Months Ended June 30, 2018
Recognized Upon Transaction
Recognized Over Time
Total
Recognized Upon Transaction
Recognized Over Time
Total
Consumer
$63,137 $ $63,137 $165,049 $ $165,049 
Professional
1,919 777 2,696 12,315 2,352 14,667 
Total$65,056 $777 $65,833 $177,364 $2,352 $179,716 


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Note 4: Restructuring
The following table summarizes the activity in the restructuring liability (in thousands), resulting from the relocation of the Company's corporate headquarters to Irving, Texas:

Employee-Related Termination CostsContract Termination CostsTotal
Balance as of December 31, 2017$1,202 $681 $1,883 
Restructuring charges291  291 
Payments(1,202)(140)(1,342)
Balance as of June 30, 2018$291 $541 $832 

Employee-related termination costs primarily include severance benefits, under both ongoing and one-time benefit arrangements that were paid at termination dates throughout 2018. Contract termination costs were incurred in connection with the Company's previous headquarters' operating lease.
Additional information on the Company's restructuring can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
Note 5: Fair Value Measurements
In accordance with ASC 820, "Fair Value Measurements and Disclosures," certain of the Company's assets and liabilities, which are carried at fair value, are classified in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs, other than Level 1, or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data and reflect the Company’s own assumptions.
The fair value hierarchy of the Company’s assets and liabilities carried at fair value and measured on a recurring basis was as follows (in thousands):

Fair value measurements at the reporting date using
June 30, 2018
Quoted prices in
active markets
using identical 
assets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Cash equivalents: money market and other funds$22,945 $ $22,945 $ 
Total assets at fair value$22,945 $ $22,945 $ 
Acquisition-related contingent consideration liability$1,323 $ $ $1,323 
Total liabilities at fair value$1,323 $ $ $1,323 


Fair value measurements at the reporting date using
December 31, 2017
Quoted prices in
active markets
using identical 
assets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Cash equivalents: money market and other funds
$10,857 $ $10,857 $ 
Total assets at fair value$10,857 $ $10,857 $ 
Acquisition-related contingent consideration liability$2,689 $ $ $2,689 
Total liabilities at fair value$2,689 $ $ $2,689 

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A reconciliation of Level 3 items measured at fair value on a recurring basis is as follows (in thousands):

Acquisition-related contingent consideration liability:
Balance as of December 31, 2017$2,689 
Payment(1,315)
Foreign currency transaction gain (51)
Balance as of June 30, 2018$1,323 

The contingent consideration liability is related to the Company's 2015 acquisition of SimpleTax, and the related payments that began in 2017 and are expected to continue annually through 2019. As of June 30, 2018, the Company could be required to pay up to an additional undiscounted aggregate amount of $1.3 million. This liability is included within Level 3 of the fair value hierarchy because the Company values it utilizing inputs not observable in the market. Specifically, the Company has determined the fair value of the contingent consideration liability based on a probability-weighted discounted cash flow analysis, which includes assumptions related to estimating SimpleTax revenues, the probability of payment (100%), and the discount rate (9%). A decrease in estimated SimpleTax revenues or an increase in the discount rate would decrease the fair value of the contingent consideration liability. As of June 30, 2018, $1.3 million of the contingent consideration liability was included in "Accrued expenses and other current liabilities" on the consolidated balance sheets.
Note 6: Debt
The Company’s debt consisted of the following as of the periods indicated in the table below (in thousands):

June 30, 2018December 31, 2017
Principal
amount
DiscountDebt issuance costs
Net 
carrying
value
Principal
amount
DiscountDebt issuance costs
Net 
carrying
value
Senior secured credit facility$265,000 $(1,045)$(3,926)$260,029 $345,000 $(1,455)$(5,464)$338,081 
Total debt$265,000 $(1,045)$(3,926)$260,029 $345,000 $(1,455)$(5,464)$338,081 

Senior secured credit facility: In May 2017, Blucora entered into a credit agreement with a syndicate of lenders in order to provide a term loan and revolving line of credit for working capital, capital expenditures and general business purposes (the "Blucora senior secured credit facilities"). The Blucora senior secured credit facilities in the aggregate amount of $425.0 million consist of a committed $50.0 million revolving credit facility (including a letter of credit sub-facility) and a $375.0 million term loan facility that mature in May 22, 2022 and May 22, 2024, respectively. Obligations under the Blucora senior secured credit facilities are guaranteed by certain of Blucora's subsidiaries and secured by the assets of Blucora and its subsidiaries. The Blucora senior secured credit facilities include financial and operating covenants, including a consolidated total net leverage ratio, which are set forth in detail in the credit facility agreement. As of June 30, 2018, Blucora was in compliance with all of the financial and operating covenants.
Principal payments on the term loan are payable quarterly in an amount equal to 0.25% of the initial outstanding principal. Under the initial term loan, the applicable interest rate margin was 3.75% for Eurodollar Rate loans and 2.75% for ABR loans. In November 2017, the credit facility agreement was amended in order to refinance and reprice the initial term loan, such that the applicable interest rate margin is 3.00% for Eurodollar Rate loans and 2.00% for ABR loans. In the three and six months ended June 30, 2018, Blucora made prepayments of $40.0 million and $80.0 million, respectively, towards the term loan.
Depending on Blucora’s Consolidated First Lien Net Leverage Ratio (as defined in the credit facility agreement), the applicable interest rate margin on the revolving credit facility is from 2.75% to 3.00% for Eurodollar Rate loans and 1.75% to 2.00% for ABR loans. Interest is payable at the end of each interest period. As of June 30, 2018 Blucora had not borrowed any amounts under the revolving credit facility.
Blucora also has the right to prepay the term loan or outstanding amounts under the revolving credit facility without any premium or penalty (other than customary Eurodollar breakage costs). Prepayments on the term loan are subject to certain prepayment minimums. Beginning with the fiscal year ending December 31, 2018, Blucora may be required to make annual prepayments on the term loan in an amount equal to a percentage of excess cash flow of Blucora during the applicable fiscal
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year from 0% to 50%, depending on the Consolidated First Lien Net Leverage Ratio (as defined in the credit facility agreement) for such fiscal year.
As of June 30, 2018, the credit facility's principal amount approximated its fair value as it is a variable rate instrument and the current applicable margin approximates current market conditions.
Note 7: Redeemable Noncontrolling Interests
In connection with the 2015 acquisition of HD Vest, the management of HD Vest at that time retained an ownership interest in that business. The Company is party to put and call arrangements, exercisable beginning in the first quarter of 2019, with respect to these interests. These put and call arrangements allow certain members of HD Vest management to require the Company to purchase their interests or allow the Company to acquire such interests, respectively. The put arrangements do not meet the definition of a derivative instrument as the put agreements do not provide for net settlement. To the extent that the redemption value of these interests exceeds the value determined by adjusting the carrying value for the subsidiary's attribution of net income (loss), the value of such interests is adjusted to the redemption value with a corresponding adjustment to additional paid-in capital.
A reconciliation of redeemable noncontrolling interests is as follows (in thousands):

Balance as of December 31, 2017$18,033 
Net income attributable to noncontrolling interests 427 
Balance as of June 30, 2018$18,460 

The redemption amount at June 30, 2018 was $14.1 million.

Note 8: Commitments and Contingencies

Significant events during the period covered by this Quarterly Report on Form 10-Q, outside of the ordinary course of the Company’s business, include debt activity (as discussed further in "Note 6: Debt"), payment of a portion of the SimpleTax acquisition-related contingent consideration liability (as discussed further in "Note 5: Fair Value Measurements"), and estimated sublease income of $2.9 million primarily related to the sublease agreement for the Bellevue facility. Additional information on the Company’s commitments and contingencies can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
Litigation: From time to time, the Company is subject to various legal proceedings or claims that arise in the ordinary course of business. The Company accrues a liability when management believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Following is a brief description of the more significant legal proceedings. Although the Company believes that resolving such claims, individually or in aggregate, will not have a material adverse impact on its financial statements, these matters are subject to inherent uncertainties.
On December 12, 2016, a shareholder derivative action was filed by Jeffrey Tilden against the Company, as a nominal defendant, Andrew Snyder, who was a director of the Company at that time, certain companies affiliated with Mr. Snyder, a former officer of the Company, GCA Savvian Advisors, LLC ("GCA Savvian"), and certain other current and former members of the Company's Board of Directors, in the Superior Court of the State of California in and for the County of San Francisco. The complaint asserted claims for breaches of fiduciary duty against certain current and former directors of the Company related to the Company’s share repurchases and the Company’s acquisitions of HD Vest and Monoprice. The complaint asserted a claim against GCA Savvian, the Company’s financial advisor in connection with the HD Vest acquisition, for aiding and abetting breaches of fiduciary duty. The complaint also asserted a claim for insider trading against Mr. Snyder, a former director of the Company, and certain companies affiliated with Mr. Snyder. The derivative action did not seek monetary damages from the Company. The complaint sought corporate governance reforms, declaratory relief, monetary damages from the other defendants, attorney’s fees and prejudgment interest.
On March 10, 2017, the Company filed a motion to dismiss for improper venue as a result of a forum selection provision in the Company’s bylaws that required the plaintiff to file his derivative fiduciary duty claims in Delaware. Other defendants also filed motions to quash the summons due to a lack of personal jurisdiction over them. On July 25, 2017, the Court granted
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the Company's motion to dismiss. The case was stayed by the Court until November 22, 2017 so that Tilden could file a complaint in Delaware, after which the case was dismissed without further order of the Court.
On November 21, 2017, Tilden filed a shareholder derivative action in the Delaware Court of Chancery asserting the same claims against the same defendants and seeking the same relief as the San Francisco Superior Court lawsuit. On January 31, 2018, the Company filed a motion to dismiss the Delaware complaint, and a hearing on the motion was held on July 11, 2018. The Court has not yet ruled on the motion.
The Company has entered into indemnification agreements in the ordinary course of business with its officers and directors, and the agreement entered into with GCA Savvian in connection with the acquisition of HD Vest also contained indemnification provisions. Pursuant to these agreements, the Company may be obligated to advance payment of legal fees and costs incurred by the defendants pursuant to the Company’s obligations under these indemnification agreements and applicable Delaware law.
Note 9: Stockholders’ Equity
Stock-based compensation: The Company included the following amounts for stock-based compensation expense, which related to stock options, restricted stock units ("RSUs"), and the Company’s employee stock purchase plan ("ESPP"), in the consolidated statements of comprehensive income (in thousands):

Three months ended June 30,Six months ended June 30,
2018201720182017
Cost of revenue$