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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
       
FORM 10-Q
      

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
or
TRANSITION 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 N. State Hwy 161, 4th Floor, Irving, Texas
75038 
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (972870-6400

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareBCORNASDAQ Global Select Market

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 every Interactive Data File required to be submitted 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 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 filerýAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  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.
Outstanding at
ClassJuly 31, 2019
Common Stock, Par Value $0.000148,852,487 





TABLE OF CONTENTS
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Trademarks, Trade Names and Service Marks
This report includes certain trademarks, trade names and service marks of Blucora, Inc. (referred to throughout this report as "Blucora," the "Company," "we," "us," or "our"), including Blucora, HD Vest, 1st Global and TaxAct. Each one of these trademarks, trade names or service marks is either (i) our registered trademark, (ii) a trademark for which we have a pending application, (iii) a trade name or service mark for which we claim common law rights or (iv) a registered trademark or application for registration which we have been authorized by a third party to use.
Solely for convenience, the trademarks, service marks and trade names included in this report are without the ®, ™ or other applicable symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. This report may also include additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names included in this report are, to our knowledge, the property of their respective owners.



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 "could" or, in each case, their negative variables 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 compete within our industry;
our ability to attract and retain customers, as well as our ability to provide strong customer service;
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;
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 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;
our ability to manage leadership and employee transitions;
risks related to goodwill and other intangible asset impairment;
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 expectations concerning the benefits that may be derived from our clearing platform and our investment advisory platform;
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, many of which are beyond our control, 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, 2018, as supplemented by 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.




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
June 30,
2019
December 31,
2018
ASSETS
Current assets:
Cash and cash equivalents$109,606 $84,524 
Cash segregated under federal or other regulations146 842 
Accounts receivable, net of allowance20,391 15,721 
Commissions receivable19,857 15,562 
Other receivables8,069 7,408 
Prepaid expenses and other current assets, net10,595 7,755 
Total current assets168,664 131,812 
Long-term assets:
Property and equipment, net15,090 12,389 
Right-of-use assets, net11,338 — 
Goodwill, net674,130 548,685 
Other intangible assets, net355,596 294,603 
Other long-term assets10,820 10,236 
Total long-term assets1,066,974 865,913 
Total assets$1,235,638 $997,725 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$7,945 $3,798 
Commissions and advisory fees payable18,810 15,199 
Accrued expenses and other current liabilities43,429 18,980 
Lease liabilities7,168 46 
Deferred revenue4,158 10,257 
Current portion of long-term debt, net919  
Total current liabilities82,429 48,280 
Long-term liabilities:
Long-term debt, net381,579 260,390 
Deferred tax liability, net44,840 40,394 
Deferred revenue7,635 8,581 
Lease liabilities6,911 100 
Other long-term liabilities7,012 7,440 
Total long-term liabilities447,977 316,905 
Total liabilities530,406 365,185 
Redeemable noncontrolling interests 24,945 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, par $0.0001—authorized shares, 900,000; issued and outstanding shares,
48,779 and 48,044, respectively
5 5 
Additional paid-in capital1,575,554 1,569,725 
Accumulated deficit(870,119)(961,689)
Accumulated other comprehensive loss (208)(446)
Total stockholders’ equity705,232 607,595 
Total liabilities and stockholders’ equity$1,235,638 $997,725 
See accompanying notes to Unaudited Condensed Consolidated Financial Statements.
4


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,
 2019 2018 2019 2018 
Revenue:
Wealth management services revenue$127,831 $92,015 $217,363 $184,097 
Tax preparation services revenue65,909 65,833 202,145 179,716 
Total revenue193,740 157,848 419,508 363,813 
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue87,477 62,149 148,851 125,213 
Tax preparation services cost of revenue3,149 2,459 7,350 6,812 
Amortization of acquired technology 49  99 
Total cost of revenue90,626 64,657 156,201 132,124 
Engineering and technology7,159 4,848 13,688 9,979 
Sales and marketing29,256 23,791 84,828 79,044 
General and administrative19,002 15,625 36,079 30,491 
Acquisition and integration9,183  10,980  
Depreciation1,315 993 2,376 2,908 
Amortization of other acquired intangible assets9,169 8,806 17,213 17,113 
Restructuring 2  291 
Total operating expenses165,710 118,722 321,365 271,950 
Operating income 28,030 39,126 98,143 91,863 
Other loss, net (5,118)(2,759)(9,076)(7,987)
Income before income taxes 22,912 36,367 89,067 83,876 
Income tax benefit (expense) 8,124 (907)4,139 (2,870)
Net income 31,036 35,460 93,206 81,006 
Net income attributable to noncontrolling interests  (222) (427)
Net income attributable to Blucora, Inc. $31,036 $35,238 $93,206 $80,579 
Net income per share attributable to Blucora, Inc.: 
Basic$0.64 $0.75 $1.93 $1.72 
Diluted$0.62 $0.71 $1.88 $1.64 
Weighted average shares outstanding: 
Basic48,555 47,221 48,358 46,931 
Diluted49,822 49,434 49,681 49,049 
Other comprehensive income (loss): 
Net income$31,036 $35,460 $93,206 $81,006 
Foreign currency translation adjustment131 (112)238 (249)
Other comprehensive income (loss)131 (112)238 (249)
Comprehensive income 31,167 35,348 93,444 80,757 
Comprehensive income attributable to noncontrolling interests  (222) (427)
Comprehensive income attributable to Blucora, Inc. $31,167 $35,126 $93,444 $80,330 
See accompanying notes to Unaudited Condensed Consolidated Financial Statements.
5


BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except per share data)


Redeemable Noncontrolling InterestsAdditional- paid-in capitalAccumulated deficitAccumulated other comprehensive loss
Common stock
SharesAmountTotal
Balance as of December 31, 2018 $24,945 48,044 $5 $1,569,725 $(961,689)$(446)$607,595 
Common stock issued for stock options and restricted stock units— 211 — 283 — — 283 
Other comprehensive income— — — — — 107 107 
Stock-based compensation— — — 2,443 — — 2,443 
Tax payments from shares withheld for equity awards— — — (2,425)— — (2,425)
Reclassification of mandatorily redeemable noncontrolling interests(22,428)— — — — — — 
Impact of adoption of new leases accounting standard— — — — (1,636)— (1,636)
Net income — — — 62,170 — 62,170 
Balance as of March 31, 2019$2,517 48,255 $5 $1,570,026 $(901,155)$(339)$668,537 
Common stock issued for stock options, restricted stock units and employee stock purchase plan— 524 — 4,181 — — 4,181 
Other comprehensive income— — — — — 131 131 
Stock-based compensation— — — 4,082 — — 4,082 
Tax payments from shares withheld for equity awards— — — (2,735)— — (2,735)
Redemption of noncontrolling interests(2,517)— — — — — — 
Net income — — — 31,036 — 31,036 
Balance as of June 30, 2019$ 48,779 $5 $1,575,554 $(870,119)$(208)$705,232 
6


Redeemable Noncontrolling InterestsAdditional- paid-in capitalAccumulated deficitAccumulated other comprehensive loss
Common stock
SharesAmountTotal
Balance as of December 31, 2017 $18,033 46,367 $5 $1,555,560 $(1,014,174)$(4)$541,387 
Common stock issued for stock options, restricted stock units and employee stock purchase plan— 462 — 3,237 — — 3,237 
Other comprehensive loss— — — — — (137)(137)
Stock-based compensation— — — 2,958 — — 2,958 
Tax payments from shares withheld for equity awards— — — (1,493)— — (1,493)
Impact of adoption of new revenue recognition accounting standard— — — — 1,851 — 1,851 
Net income205 — — — 45,341 — 45,341 
Balance as of March 31, 2018$18,238 46,829 $5 $1,560,262 $(966,982)$(141)$593,144 
Common stock issued for stock options and restricted stock units— 665 — 7,852 — — 7,852 
Other comprehensive loss— — — — — (112)(112)
Stock-based compensation— — — 4,033 — — 4,033 
Tax payments from shares withheld for equity awards— — — (2,735)— — (2,735)
Net income222 — — — 35,238 — 35,238 
Balance as of June 30, 2018$18,460 47,494 $5 $1,569,412 $(931,744)$(253)$637,420 
See accompanying notes to Unaudited Condensed Consolidated Financial Statements.
7


BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Six months ended June 30,
 2019 2018 
Operating Activities:
Net income $93,206 $81,006 
Adjustments to reconcile net income to net cash from operating activities: 
Stock-based compensation6,525 6,685 
Depreciation and amortization of acquired intangible assets20,185 20,338 
Reduction of right-of-use lease assets1,977 — 
Deferred income taxes4,446 (781)
Amortization of premium on investments, net, and debt issuance costs 547 487 
Accretion of debt discounts123 87 
Loss on debt extinguishment  1,533 
Other260  
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable(3,217)4,096 
Commissions receivable847 2 
Other receivables(661)3,142 
Prepaid expenses and other current assets12,258 461 
Other long-term assets(355)(764)
Accounts payable(2,995)59 
Commissions and advisory fees payable(663)(655)
Lease liabilities(2,066)— 
Deferred revenue(24,760)(5,746)
Accrued expenses and other current and long-term liabilities(8,845)(3,393)
Net cash provided by operating activities 96,812 106,557 
Investing Activities:
Business acquisition, net of cash acquired(164,461) 
Purchases of property and equipment(2,938)(2,602)
Net cash used by investing activities (167,399)(2,602)
Financing Activities:
Proceeds from credit facilities 121,499  
Payments on credit facilities (80,000)
Payment of redeemable noncontrolling interests(24,945) 
Proceeds from stock option exercises3,320 10,386 
Proceeds from issuance of stock through employee stock purchase plan1,144 704 
Tax payments from shares withheld for equity awards(5,160)(4,229)
Contingent consideration payments for business acquisition(943)(1,315)
Net cash provided (used) by financing activities 94,915 (74,454)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 58 (30)
Net increase in cash, cash equivalents, and restricted cash 24,386 29,471 
Cash, cash equivalents, and restricted cash, beginning of period85,366 62,311 
Cash, cash equivalents, and restricted cash, end of period$109,752 $91,782 
Cash paid for income taxes$2,566 $767 
Cash paid for interest$6,671 $7,991 
See accompanying notes to Unaudited Condensed Consolidated Financial Statements.
8


BLUCORA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Description of the Business
Description of the business: Blucora, Inc. (the "Company," "Blucora," "we," "our," or "us") operates two businesses: a Wealth Management business and a digital Tax Preparation business. The Wealth Management business consists of HD Vest ("HD Vest") and, since May 6, 2019, 1st Global ("1st Global"), collectively referred to as the "Wealth Management business" or the "Wealth Management segment". The Wealth Management business provides wealth management solutions for financial advisors and their clients. Specifically, the Wealth Management business provides an integrated platform of brokerage, investment advisory and insurance services to assist in making each financial advisor a financial service center for his/her clients. The Wealth Management business was founded to help tax and accounting professionals integrate financial services into their practices.
On May 6, 2019, the Company closed the Acquisition of all of the issued and outstanding common stock of 1st Global, (the "Acquisition"), a tax-focused wealth management company, for a cash purchase price of $180.0 million. The purchase price was paid with a combination of (i) cash on hand and (ii) the proceeds from a $125.0 million increase in the term loan under the company's credit agreement. See further discussion of the term loan increase in "Note 6: Debt."
The operations of 1st Global are included in the Company's operating results as part of the Wealth Management segment from the date of the Acquistion. See further discussion in "Note 3: Business Combinations."
The Tax Preparation business consists of the operations of 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 and the Tax Preparation segment.
Reclassification: The Company reclassified approximately $0.7 million from long-term assets to current assets related to loans given to several HD Vest advisors on its December 31, 2018 consolidated balance sheet.
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 unaudited 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, 2018. 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,
2019 2018 2018 
Cash and cash equivalents$109,606 $89,840 $84,524 
Cash segregated under federal or other regulations146 1,117 842 
Restricted cash included in "Prepaid expenses and other current assets, net"  275  
Restricted cash included in "Other long-term assets" 550  
Total cash, cash equivalents, and restricted cash $109,752 $91,782 $85,366 

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.
9


Business combinations and intangible assets including goodwill: We account for business combinations using the acquisition method.
The 1st Global purchase price has been allocated to 1st Global’s tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values at the time of Acquisition. This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing or amounts recognized in the Company's financial statements. The most subjective areas include determining the fair value of the following:
intangible assets, including the valuation methodology, estimations of future cash flows, discount rates, growth rates, as well as the estimated useful life of intangible assets;
deferred tax assets and liabilities and uncertain tax positions, which are initially estimated as of the Acquisition date;
property, plant and equipment; pre-existing liabilities or legal claims; and deferred revenue, each as may be applicable; and
goodwill as measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.
The Company's assumptions and estimates are based upon comparable market data and information obtained from the Company's management and the management of 1st Global.
Fair value of financial instruments: The Company measures its cash equivalents 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.
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.
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 and ASCs not listed below were assessed and either were determined to not be 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 and ASCs that impact the following areas:
Leases (ASU 2016-02) - In February 2016, the FASB issued guidance codified in ASC 842, "Leases" ("ASC 842"), which supersedes the guidance in ASC 840 "Leases." Under ASC 842, lease assets and liabilities, whether arising from leases that are considered operating or finance (capital) will be recognized on the balance sheet. Lease liabilities are measured as the present value of unpaid lease payments for operating leases where the Company is the lessee, and a corresponding right-of-use ("ROU") asset is recognized for the right to use the leased assets.
This guidance became 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. Prior comparable periods are presented in accordance with accounting guidance under ASC 840 "Leases" and were not restated.
The Company adopted ASC 842 on January 1, 2019 for all open leases with a term greater than one year as of the adoption date, using the modified retrospective method of adoption with a cumulative effect adjustment to retained earnings. The Company elected the package of practical expedients, for which there is no requirement to reassess lease existence, classification and initial direct costs, the hindsight practical expedient, for which the Company used hindsight in determining certain lease terms, and the short-term lease expedient, for which the Company considered all open leases with a term greater than one year as of the adoption date. The adoption resulted in $6.6 million of additional operating lease assets, $9.1 million of additional operating lease liabilities, and a $1.6 million adjustment to the opening balance of retained earnings as a result of
10


reevaluating certain of the Company's lease terms as of the adoption date. The Company also reclassified, upon adoption, $0.9 million of other lease-related balances to reduce the measurement of lease assets.
The Company's lease terms are comprised of contractual terms but may include extension or termination options reasonably assured to be exercised at lease inception, which are included in the recognition of ROU assets and lease liabilities. The Company’s leases do not contain residual value guarantees or material variable lease payments. The Company does not have any material restrictions or covenants imposed by leases that would impact the Company’s ability to pay dividends or cause the Company to incur additional financial obligations.
The Company’s leases are not complex; therefore, there were no significant assumptions or judgments made in applying the requirements of ASC 842, including the determination of whether the contracts contained a lease, the allocation of consideration in the contracts between lease and non-lease components, and the determination of the discount rates for the leases.
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.
Note 3: Business Combinations
On May 6, 2019, the Company closed the Acquisition of all of the issued and outstanding common stock of 1st Global for a cash purchase price of $180.0 million. The purchase price is subject to customary adjustment as well as certain indemnity escrows, in each case as described more fully in the stock purchase agreement governing the Acquisition. The purchase price has been allocated to 1st Global’s tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values at the time of acquisition. The preliminary fair values of assets acquired and liabilities assumed in the Acquisition were as follows (in thousands):
Tangible assets acquired, including cash of $12,389
$37,153 
Goodwill125,277 
Identified intangible assets78,200 
Contingent liability(10,000)
Deferred revenues(17,715)
Other current liabilities(13,397)
Deferred tax liabilities and other(19,518)
Total$180,000 
Cash paid at acquisition date$176,850 
Cash to be paid after acquisition date3,150 

The identified intangible assets were recognized as follows (in thousands):
Estimated Fair ValueWeighted Average Estimated Useful Life (months)
Advisor relationships$70,800 144
Sponsor relationships700 120
Developed technology3,600 60
Trade name3,100 60
Total identified intangible assets$78,200 137

For the three months ended June 30, 2019, the Company recognized amortization expense of approximately $1.1 million in "Amortization of other acquired intangible assets" on the consolidated statements of comprehensive income.
11


Goodwill consists largely of synergistic opportunities for both HD Vest and 1st Global, including increased scale, enhanced capabilities, and an integrated platform of brokerage, investment advisory and insurance services. Goodwill is not expected to be deductible for income tax purposes, and is reported in the Company's Wealth Management segment.
As part of the Acquisition, the Company assumed, and recorded as part of the opening balance sheet, a contingent liability related to a regulatory inquiry. While the inquiry is still on-going, the Company evaluated a range of possible losses and recorded a reserve of $10.0 million.
The Company retained $3.2 million of the purchase price, which is to be paid to either 1st Global or former employees of 1st Global within the twelve months following the Acquisition.
The preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations, and those estimates and assumptions are subject to change as, due to the recent timing of the Acquisition, the Company obtains additional information for those estimates during the measurement period (up to one year from the Acquisition date). The excess of the total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities was recorded as goodwill.
The primary areas of the acquisition accounting that had not yet been finalized as of June 30, 2019 related to the fair value adjustments for fixed assets, lease obligations, intangible assets, certain contingent liability matters, deferred income taxes and residual goodwill.
The gross contractual amount of acquired accounts receivable, including commissions receivable, was $6.7 million. As an insignificant amount of these receivables was expected to be uncollectible, the acquired amount approximates fair value.
During the three and six months ended June 30, 2019, the Company incurred transaction costs of $4.7 million and $1.8 million, respectively, associated with the Acquisition, which were recognized in "General and administrative expense" on the consolidated statements of comprehensive income.
The operations of 1st Global are included in the Company's operating results as part of the Wealth Management segment from the date of Acquisition. From the date of Acquisition, 1st Global contributed approximately $29.0 million of revenue and $0.7 million of loss before income taxes to the Company.
Pro forma financial information of the 1st Global Acquisition:
The financial information in the table below summarizes the combined results of operations of Blucora and 1st Global, on a pro forma basis, for the period in which the Acquisition occurred and the prior reporting period as though the companies had been combined as of the beginning of each period presented. Pro forma adjustments have been made to include amortization expense on the definite-lived intangible assets identified in the Acquisition, debt-related expenses associated with the credit facility used to finance the Acquisition, and to remove Acquisition-related transaction costs. Income taxes also have been adjusted for the effect of these items. The following pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the Acquisition occurred at the beginning of the period presented (amounts in thousands):

Three months ended June 30, Six months ended June 30,
2019201820192018
Revenue$211,471 $200,243 $478,808 $449,776 
Net income$18,474 $25,553 $68,513 $61,008 

Note 4: 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. The operations of 1st Global are included in the Company's operating results as part of the Wealth Management segment from the date of the Acquisition.
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,
2019 2018 2019 2018 
Revenue:
Wealth Management$127,831 $92,015 $217,363 $184,097 
Tax Preparation65,909 65,833 202,145 179,716 
Total revenue193,740 157,848 419,508 363,813 
Operating income (loss):
Wealth Management16,979 12,954 28,519 26,029 
Tax Preparation41,368 44,121 120,640 102,927 
Corporate-level activity(30,317)(17,949)(51,016)(37,093)
Total operating income28,030 39,126 98,143 91,863 
Other loss, net(5,118)(2,759)(9,076)(7,987)
Income tax benefit (expense)8,124 (907)4,139 (2,870)
Net income$31,036 $35,460 $93,206 $81,006 
Revenues by major category within each segment are presented below (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2019 2018 2019 2018 
Wealth Management:
Commission$48,068 $40,384 $85,228 $83,254 
Advisory61,410 40,058 101,167 79,359 
Asset-based13,219 7,306 22,912 14,478 
Transaction and fee5,134 4,267 8,056 7,006 
Total Wealth Management revenue$127,831 $92,015 $217,363 $184,097 
Tax Preparation:
Consumer$62,686 $63,137 $186,628 $165,049 
Professional3,223 2,696 15,517 14,667 
Total Tax Preparation revenue$65,909 $65,833 $202,145 $179,716 

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.
Details of Wealth Management revenues are (in thousands):
Three months ended June 30, 
20192018
Recognized Upon Transaction Recognized Over Time Total Recognized Upon Transaction Recognized Over Time Total 
Commission revenue$