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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 March 31, 2020
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
https://cdn.kscope.io/bcd522939e6acb65ea1999d30540efe9-bcor-20200331_g1.jpg
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)
(972870-6400
(Registrant’s telephone number, including area code)


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.
As of May 1, 2020, 47,849,614 shares of the registrant’s Common Stock were outstanding.



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.
Trademarks, Trade Names, and Service Marks
This report includes some of the trademarks, trade names, and service marks of Blucora, Inc. (referred to throughout this report as “Blucora,” the “Company,” “we,” “us,” or “our”), including Blucora, Avantax Wealth Management, HD Vest, 1st Global, TaxAct, Tax-Smart Investing, Capital Gains Analyzer, Tax-Loss Harvester, and Social Security Planner. 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 that 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.

Blucora, Inc. | Q1 2020 Form 10-Q 2


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Many of the forward-looking statements are located in Part I, Item 2 of this Form 10-Q under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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 “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” “may,” “will,” “should,” “estimates,” “predicts,” “potential,” “continues,” and similar terms and expressions, 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:
the impact of the recent coronavirus pandemic on our results of operations and our business, including the impact of the resulting economic downturn, the extension of tax filing deadlines, and other related relief;
our ability to effectively compete within our industry;
our ability to attract and retain financial advisors, qualified employees, clients and customers, as well as our ability to provide strong customer/client service;
our ability to close, finance, and realize all of the anticipated benefits of our recent or pending acquisitions, as well as our ability to integrate the operations of recently acquired businesses;
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 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 and the Securities and Exchange Commission;
risks associated with legal proceedings, including litigation and regulatory proceedings;
our ability to manage leadership and employee transitions, including costs and time burdens on management and our board of directors related thereto;
political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation 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;
Blucora, Inc. | Q1 2020 Form 10-Q 3


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.
Forward-looking statements are not guarantees of future performance and 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, 2019, as supplemented by those identified under Part II, Item 1A, “Risk Factors” and elsewhere in this Form 10-Q, as well as in our other filings with the SEC. All forward-looking statements speak only as of the date of this Form 10-Q. We do not undertake any obligation and do not intend to update or revise any forward-looking statement to reflect new information, events, or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, except as required by law.




Blucora, Inc. | Q1 2020 Form 10-Q 4



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
March 31,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents$168,198  $80,820  
Cash segregated under federal or other regulations1,170  5,630  
Accounts receivable, net of allowance25,343  16,266  
Commissions receivable17,719  21,176  
Other receivables6,141  2,902  
Prepaid expenses and other current assets, net13,387  12,349  
Total current assets231,958  139,143  
Long-term assets:
Property and equipment, net31,807  18,706  
Right-of-use assets, net29,224  10,151  
Goodwill, net391,084  662,375  
Other intangible assets, net282,462  290,211  
Deferred tax asset, net  9,997  
Other long-term assets4,397  6,989  
Total long-term assets738,974  998,429  
Total assets$970,932  $1,137,572  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$30,085  $10,969  
Commissions and advisory fees payable17,940  19,905  
Accrued expenses and other current liabilities59,760  36,144  
Deferred revenue—current4,425  12,014  
Lease liabilities—current2,187  3,272  
Current portion of long-term debt, net56,229  11,228  
Total current liabilities170,626  93,532  
Long-term liabilities:
Long-term debt, net381,521  381,485  
Deferred tax liability, net47,502    
Deferred revenue—long-term6,941  7,172  
Lease liabilities—long-term31,509  5,916  
Other long-term liabilities6,658  5,952  
Total long-term liabilities474,131  400,525  
Total liabilities644,757  494,057  
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, par $0.0001900,000 authorized shares; 49,148 shares issued and 47,842 shares outstanding at March 31, 2020; 49,059 shares issued and 47,753 shares outstanding at December 31, 2019
5  5  
Additional paid-in capital1,584,854  1,586,972  
Accumulated deficit(1,230,285) (914,791) 
Accumulated other comprehensive loss    (272) 
Treasury stock, at cost—1,306 shares at March 31, 2020 and December 31, 2019
(28,399) (28,399) 
Total stockholders’ equity326,175  643,515  
Total liabilities and stockholders’ equity$970,932  $1,137,572  
See accompanying notes to unaudited condensed consolidated financial statements.
Blucora, Inc. | Q1 2020 Form 10-Q 5


BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share data)
 Three months ended March 31,
 20202019
Revenue:
Wealth management services revenue$144,989  $89,532  
Tax preparation services revenue118,331  136,236  
Total revenue263,320  225,768  
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue102,342  61,374  
Tax preparation services cost of revenue4,013  4,201  
Total cost of revenue106,355  65,575  
Engineering and technology8,515  6,529  
Sales and marketing79,710  55,572  
General and administrative24,728  17,077  
Acquisition and integration5,682  1,797  
Depreciation1,796  1,061  
Amortization of other acquired intangible assets7,748  8,044  
Impairment of goodwill 270,625    
Total operating expenses505,159  155,655  
Operating income (loss) (241,839) 70,113  
Other loss, net  (6,135) (3,958) 
Income (loss) before income taxes (247,974) 66,155  
Income tax expense  (67,520) (3,985) 
Net income (loss) attributable to Blucora, Inc. $(315,494) $62,170  
Net income (loss) per share attributable to Blucora, Inc.: 
Basic$(6.60) $1.29  
Diluted$(6.60) $1.25  
Weighted average shares outstanding:  
Basic47,827  48,161  
Diluted47,827  49,542  
Comprehensive income (loss): 
Net income (loss)$(315,494) $62,170  
Other comprehensive income272  107  
Comprehensive income (loss) attributable to Blucora, Inc. $(315,222) $62,277  














See accompanying notes to unaudited condensed consolidated financial statements.
Blucora, Inc. | Q1 2020 Form 10-Q 6


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


Redeemable Noncontrolling InterestsAdditional paid-in capitalAccumulated deficitAccumulated other comprehensive loss
Common stockTreasury stock
SharesAmountSharesAmountTotal
Balance as of December 31, 2019  $  49,059  $5  $1,586,972  $(914,791) $(272) (1,306) $(28,399) $643,515  
Common stock issued for stock options and restricted stock units—  89      —  —  —  —    
Stock-based compensation—  —  —  (1,201) —  —  —  —  (1,201) 
Tax payments from shares withheld for equity awards—  —  —  (917) —  —  —  —  (917) 
Cumulative translation adjustment—  —  —  —  —  272  —  —  272  
Net loss  —  —  —  (315,494) —  —  —  (315,494) 
Balance as of March 31, 2020$  49,148  $5  $1,584,854  $(1,230,285) $  (1,306) $(28,399) $326,175  
Redeemable Noncontrolling InterestsCommon stockAdditional paid-in capitalAccumulated deficitAccumulated other comprehensive lossTreasury stock
SharesAmountSharesAmountTotal
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  
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) 
Cumulative translation adjustment—  —  —  —  —  107  —  —  107  
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  

























See accompanying notes to unaudited condensed consolidated financial statements.
Blucora, Inc. | Q1 2020 Form 10-Q 7


BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Three months ended March 31,
 20202019
Operating activities:
Net income (loss) $(315,494) $62,170  
Adjustments to reconcile net income (loss) to net cash from operating activities: 
Stock-based compensation(1,201) 2,443  
Depreciation and amortization of acquired intangible assets10,168  9,354  
Impairment of goodwill270,625    
Reduction of right-of-use lease assets  1,625  904  
Deferred income taxes57,898  (972) 
Amortization of debt issuance costs  313  172  
Accretion of debt discounts68  38  
Other919    
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable(9,066) (8,395) 
Commissions receivable3,457  1,180  
Other receivables(3,239) (42) 
Prepaid expenses and other current assets(1,715) (3,085) 
Other long-term assets2,560  (841) 
Accounts payable17,744  6,432  
Commissions and advisory fees payable(1,965) (1,544) 
Lease liabilities(1,289)   
Deferred revenue(7,820) (4,524) 
Accrued expenses and other current and long-term liabilities23,276  6,946  
Net cash provided by operating activities  46,864  70,236  
Investing activities:
Purchases of property and equipment(7,715) (1,243) 
Net cash used by investing activities  (7,715) (1,243) 
Financing activities:
Proceeds from credit facilities  55,000    
Payments on credit facilities(10,313)   
Proceeds from stock option exercises  283  
Tax payments from shares withheld for equity awards(918) (2,425) 
Contingent consideration payments for business acquisition  (943) 
Net cash provided (used) by financing activities 43,769  (3,085) 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash    15  
Net increase in cash, cash equivalents, and restricted cash  82,918  65,923  
Cash, cash equivalents, and restricted cash, beginning of period86,450  85,366  
Cash, cash equivalents, and restricted cash, end of period$169,368  $151,289  
Supplemental cash flow information:
Cash paid for income taxes$213  $1,031  
Cash paid for interest$5,011  $3,624  
Non-cash investing activities
Purchases of property and equipment through leasehold incentives (investing)$4,959  $  








See accompanying notes to unaudited condensed consolidated financial statements.
Blucora, Inc. | Q1 2020 Form 10-Q 8


BLUCORA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Description of the Business
Blucora, Inc. (the “Company,” “Blucora,” “we,” “our,” or “us”) operates two primary businesses: the Wealth Management business and the digital Tax Preparation business.
Wealth Management
The Wealth Management business consists of the operations of Avantax Wealth Management (“Avantax,” the “Wealth Management business,” or the “Wealth Management segment”), which provides tax-focused wealth management solutions for financial advisors, tax preparers, certified public accounting firms, and their clients. Avantax is comprised of what was formerly HD Vest and 1st Global, both of which are discussed below.
On May 6, 2019, we closed the acquisition of all of the issued and outstanding common stock of 1st Global, Inc. and 1st Global Insurance Services, Inc. (together, “1st Global”), a tax-focused wealth management company, for a cash purchase price of $180.0 million (the “1st Global Acquisition”). The operations of 1st Global are included in our operating results as part of the Wealth Management segment from the date of the 1st Global Acquisition.
In September 2019, we announced a rebranding of our Wealth Management business to Avantax Wealth Management (the “Rebranding”). In connection with the Rebranding, HD Vest (which comprised all of the Wealth Management business prior to the 1st Global Acquisition) was renamed Avantax Wealth Management in September 2019, and 1st Global converted in October 2019.
Tax Preparation
The Tax Preparation business consists of the operations of TaxAct, Inc. (“TaxAct,” the “Tax Preparation business,” or the “Tax Preparation segment”) and provides digital tax preparation solutions for consumers, small business owners, and tax professionals through its website www.TaxAct.com.
The Tax Preparation segment is highly seasonal, with a significant portion of its annual revenue typically earned in the first four months of the fiscal year. During the third and fourth quarters, the Tax Preparation segment typically reports losses because revenue from the segment is minimal while core operating expenses continue. In March 2020 and as a result of the coronavirus pandemic, the Internal Revenue Service (“IRS”) extended the filing deadline for federal tax returns from April 15, 2020 to July 15, 2020. We expect this filing extension will result in the shifting of a significant portion of Tax Preparation segment revenue that is usually earned in the first and second quarters of 2020 to the third quarter of 2020.
Segments
We have two reportable segments: (1) the Wealth Management segment and (2) the Tax Preparation segment.

Note 2: Summary of Significant Accounting Policies
Interim financial information
The accompanying condensed consolidated financial statements have been prepared by us under the rules and regulations of the Securities and Exchange Commission (the SEC”) for interim financial reporting. These condensed 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 condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2019. Interim results are not necessarily indicative of results for a full year.
Blucora, Inc. | Q1 2020 Form 10-Q 9


Cash, cash equivalents, and restricted cash
The following table presents cash, cash equivalents, and restricted cash as reported on the consolidated balance sheets and the consolidated statements of cash flows (in thousands):
March 31, 2020December 31, 2019
Cash and cash equivalents$168,198  $80,820  
Cash segregated under federal or other regulations1,170  5,630  
Total cash, cash equivalents, and restricted cash$169,368  $86,450  
We generally invest our available cash in high-quality marketable investments. These investments include money market funds invested in securities issued by agencies of the U.S. government. We may invest, from time-to-time, in other vehicles, such as debt instruments issued by the U.S. federal government and its agencies, international governments, municipalities and publicly held corporations, as well as commercial paper and insured time deposits with commercial banks. Specific holdings can vary from period to period depending upon our cash requirements. Such investments are reported at fair value on the consolidated balance sheets.
Cash segregated under federal and other regulations is held in a separate bank account for the exclusive benefit of our Wealth Management business clients and is considered restricted cash.
Recently adopted 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”). We consider 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 our consolidated financial position and results of operations. We have recently adopted the following ASUs:
Measurement of Credit Losses. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes how entities account for credit losses of financial assets measured at amortized cost. ASU 2016-13 requires financial assets measured at amortized cost to be presented on the balance sheet at the net amount expected to be collected.
The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. ASU 2016-13 replaces the previous “incurred loss” model with a “current expected credit loss” model that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of the financial asset. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including the interim periods within those fiscal years. Entities must apply ASU 2016-13 using a modified-retrospective approach by recording a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which ASU 2016-13 is effective.
We adopted ASU 2016-13 effective January 1, 2020. Our financial assets within the scope of ASU 2016-13 primarily consisted of our commissions receivable and accounts receivable. While we have implemented the current expected credit loss model and assessed the impact of this new model on our in-scope financial assets, the adoption of ASU 2016-13 did not have a material impact on our consolidated financial statements and did not result in a cumulative-effect adjustment to retained earnings as of January 1, 2020.
Goodwill. In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill (“ASU 2017-04”), which simplifies the subsequent measurement of goodwill by eliminating the previously applicable step two from the goodwill impairment test. Under the amended guidance of ASU 2017-04, when required to test goodwill for recoverability, an entity will perform its goodwill impairment test by comparing the fair value of the reporting unit to its carrying value and recognizing an impairment charge for the amount by which the carrying value exceeds the fair value of the reporting unit. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, and entities must apply ASU 2017-04 on a prospective basis.
We adopted ASU 2017-04 effective January 1, 2020 and applied this new guidance to the goodwill impairment test we performed as of March 31, 2020. For more information on this impairment test, see “Note 5—Goodwill and Other Intangible Assets.”
Blucora, Inc. | Q1 2020 Form 10-Q 10


Note 3: 1st Global Acquisition
On May 6, 2019, we closed the 1st Global Acquisition, pursuant to which we acquired all of the issued and outstanding common stock of 1st Global for a cash purchase price of $180.0 million. The purchase price was allocated to 1st Global’s tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values at the time of the 1st Global Acquisition.
As of March 31, 2020, the fair values of assets acquired and liabilities assumed in the 1st Global Acquisition were as follows (in thousands):
Purchase Price Allocation at
December 31, 2019
Purchase Price Allocation Adjustments Since
December 31, 2019
Purchase Price Allocation at
March 31, 2020
Assets acquired:
Tangible assets acquired, including cash of $12,389
$38,413  $—  $38,413  
Goodwill117,792  (666) 117,126  
Identifiable intangible assets83,980  —  83,980  
Liabilities assumed:
Contingent liability(11,052) —  (11,052) 
Deferred revenues(17,715) —  (17,715) 
Other current liabilities(12,956) 281  (12,675) 
Deferred tax liabilities, net(18,462) 385  (18,077) 
Total assets acquired and liabilities assumed$180,000  $—  $180,000  
During the three months ended March 31, 2020, we adjusted the fair values of goodwill, other current liabilities, and deferred tax liabilities, net, due to the pre-acquisition 1st Global tax returns being filed in the first quarter of 2020. The primary area of acquisition accounting that had not yet been finalized as of March 31, 2020 related to a pre-acquisition 1st Global state tax return that is still to be filed. The filing of this state tax return could result in additional purchase price allocation adjustments.
As part of the 1st Global Acquisition, we assumed a contingent liability related to a regulatory inquiry and recorded the contingent liability as part of the opening balance sheet. While the inquiry is still on-going, we evaluated a range of possible losses, resulting in a contingent liability reserve balance (including accrued interest) of $11.3 million at March 31, 2020.

Note 4: Segment Information and Revenues
We have two reportable segments: (1) the Wealth Management segment and (2) the Tax Preparation segment. Our Chief Executive Officer is the 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.
We do not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, depreciation, amortization of intangible assets, acquisition and integration costs, executive transition costs, headquarters relocation costs, and impairment of goodwill to the reportable segments. Such amounts are reflected in the table below under the heading “Corporate-level activity.” In addition, we do not allocate other loss, net, and income taxes to the reportable segments. We do not report assets or capital expenditures by segment to the chief operating decision maker.
Blucora, Inc. | Q1 2020 Form 10-Q 11


Information on reportable segments currently presented to our chief operating decision maker and a reconciliation to consolidated net income (loss) are presented below (in thousands):
Three Months Ended March 31,
20202019
Revenue:
Wealth Management$144,989  $89,532  
Tax Preparation118,331  136,236  
Total revenue263,320  225,768  
Operating income:
Wealth Management22,598  11,540  
Tax Preparation37,753  79,272  
Corporate-level activity(302,190) (20,699) 
Total operating income (loss)(241,839) 70,113  
Other loss, net(6,135) (3,958) 
Income tax expense(67,520) (3,985) 
Net income (loss) attributable to Blucora, Inc.$(315,494) $62,170  
Revenues by major category within each segment are presented below (in thousands):
Three Months Ended March 31,
20202019
Wealth Management:
Advisory$78,757  $39,757  
Commission50,580  37,160  
Asset-based10,579  9,693  
Transaction and fee5,073  2,922  
Total Wealth Management revenue$144,989  $89,532  
Tax Preparation:
Consumer$103,821  $123,942  
Professional14,510  12,294  
Total Tax Preparation revenue$118,331  $136,236  
Wealth Management revenue recognition
Wealth management revenue primarily consists of advisory revenue, commission revenue, asset-based revenue, and transaction and fee revenue.
The timing of Wealth Management revenue recognition was as follows (in thousands):
Three months ended March 31,
20202019
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Advisory revenue$  $78,757  $78,757  $  $39,757  $39,757  
Commission revenue23,381  27,199  50,580  15,684  21,476  37,160  
Asset-based revenue  10,579  10,579    9,693  9,693  
Transaction and fee revenue1,859  3,214  5,073  770  2,152  2,922  
Total Wealth Management revenue$25,240  $119,749  $144,989  $16,454  $73,078  $89,532  
Blucora, Inc. | Q1 2020 Form 10-Q 12


Tax Preparation revenue recognition
We generate revenue from the sale of tax preparation digital services, packaged tax preparation software, ancillary services, and multiple element arrangements that may include a combination of these items.
The timing of Tax Preparation revenue recognition was as follows (in thousands):
Three months ended March 31,
20202019
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Consumer$103,821  $  $103,821  $123,015  $927  $123,942  
Professional12,994  1,516  14,510  10,842  1,452  12,294  
Total Tax Preparation revenue$116,815  $1,516  $118,331  $133,857  $2,379  $136,236  

Note 5: Goodwill and Other Intangible Assets
The following table presents goodwill by reportable segment (in thousands):
Wealth ManagementTax PreparationTotal
Balance as of December 31, 2019$473,833  $188,542  $662,375  
Purchase accounting adjustment(666)   (666) 
Impairment(270,625)   (270,625) 
Balance as of March 31, 2020$202,542  $188,542  $391,084  
Goodwill represents the cost of an acquisition less the fair value of the net identifiable assets of the acquired business. We evaluate goodwill for impairment annually, as of November 30, or more frequently when events or circumstances indicate it is more likely than not that the fair value of one or more of our reporting units is less than its carrying amount. To determine whether it is necessary to perform a goodwill impairment test, we first assess qualitative factors to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We may elect to perform a goodwill impairment test without completing a qualitative assessment.
In March 2020, the coronavirus pandemic had a significant negative impact on the U.S. and global economy and caused substantial disruption in the U.S. and global securities markets, and as a result, negatively impacted certain key Wealth Management business drivers, such as client asset levels and interest rates. These macroeconomic and Company-specific factors, in totality, served as a triggering event that resulted in the testing of the goodwill of the Wealth Management reporting unit and the Tax Preparation reporting unit for potential impairment.
As part of the goodwill impairment test, we compared the estimated fair values of the Wealth Management and Tax Preparation reporting units to their respective carrying values. Estimated fair value was calculated using Level 3 inputs and utilized a blended valuation method that factored in the income approach and the market approach as of March 31, 2020. The income approach estimated fair value by using the present value of future discounted cash flows. Significant estimates used in the discounted cash flow model included our forecasted cash flows, our long-term rates of growth, and our weighted average cost of capital. The weighted average cost of capital factors in the relevant risk associated with business-specific characteristics and the uncertainty related to the ability to achieve our projected cash flows. The market approach estimated fair value by taking income-based valuation multiples for a set of comparable companies and applying the valuation multiple to each reporting unit’s income.
For the Wealth Management reporting unit, the carrying value of the reporting unit exceeded its fair value by $270.6 million. Therefore, we recorded an impairment of goodwill of $270.6 million for the three months ended March 31, 2020. For the Tax Preparation reporting unit, the carrying value of the reporting unit was significantly below its fair value, and therefore, no impairment of goodwill was deemed necessary.
Blucora, Inc. | Q1 2020 Form 10-Q 13


The Wealth Management reporting unit is considered to be at risk for a future impairment of its goodwill in the event of a further decline in general economic, market. or business conditions, or any significant unfavorable changes in our forecasted revenue, expenses, cash flows, weighted average cost of capital, and/or market valuation multiples. We will continue to monitor for events and circumstances that could negatively impact the key assumptions in determining the fair value of the Wealth Management reporting unit.

Note 6: Debt
The Company’s debt consisted of the following as of the periods indicated in the table below (in thousands):
 March 31, 2020December 31, 2019
 Principal
amount
DiscountDebt issuance costsNet 
carrying
value
Principal
amount
DiscountDebt issuance costsNet 
carrying
value
Senior secured credit facility
$444,375  $(1,297) $(5,328) $437,750  $399,687  $(1,366) $(5,608) $392,713  
Less: Current portion of long-term debt, net(56,229) (11,228) 
Long-term debt, net$381,521  $381,485  
In May 2017, we entered into a credit agreement (as the same has been amended, the “Credit Agreement”) with a syndicate of lenders that provides for a term loan facility (the “Term Loan”) and a revolving line of credit (including a letter of credit sub-facility) (the “Revolver”) for working capital, capital expenditures, and general business purposes (as amended, the “Senior Secured Credit Facility”). We increased the outstanding principal amount of the Term Loan by $125.0 million to finance the 1st Global Acquisition, and after giving effect to such increase, the Senior Secured Credit Facility provides for up to $565.0 million, consisting of a committed $65.0 million under the Revolver and a $500.0 million Term Loan that mature on May 22, 2022 and May 22, 2024, respectively. Obligations under the Senior Secured Credit Facility are guaranteed by certain of the Company’s subsidiaries and secured by substantially all the assets of the Company and certain of its subsidiaries.
As of March 31, 2020, we had $389.4 million and $55.0 million in principal amount outstanding under the Term Loan and the Revolver, respectively. For the three months ended March 31, 2020, our total borrowings under the Revolver increased from $10.0 million to $55.0 million, which consisted of $55.0 million of additional borrowings, partially offset by $10.0 million of payments on the Revolver. Based on aggregate loan commitments as of March 31, 2020, approximately $10.0 million was available for future borrowing under the Senior Secured Credit Facility applicable to the Company. On April 23, 2020, we made a $37.0 million payment to reduce the outstanding principal balance on the Revolver to $18.0 million.
The interest rate on the Term Loan is variable at the London Interbank Offered Rate, plus the applicable interest rate margin of 3.00% for Eurodollar Rate loans and 2.00% for ABR loans.
Commencing December 31, 2019, principal payments of the Term Loan are due on a quarterly basis in an amount equal to $