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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 September 30, 2021
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/04fd0722538d729b9e786f9630d4a3af-bcor-20210930_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.)
3200 Olympus Blvd, Suite 100, Dallas, Texas 75019
(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 filerAccelerated filer
ý
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 Section 13(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 October 28, 2021, 48,718,718 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.
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, Avantax Planning Partners, Avantax Retirement Plan Services, HD Vest, 1st Global, HKFS, 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 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.
References to our or our subsidiaries’ website addresses or the website addresses of third parties in this report do not constitute incorporation by reference of the information contained on such websites and should not be considered part of this report.

Blucora, Inc. | Q3 2021 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,” “would,” “could,” “should,” “estimates,” “predicts,” “potential,” “continues,” “target,” “outlook,” and similar terms and expressions, but the absence of these words does not mean that the statement is not forward-looking. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to:
our ability to effectively compete within our industries;
our ability to attract and retain financial professionals, qualified employees, clients, and customers, as well as our ability to provide strong customer/client service;
the impact of the COVID-19 pandemic on our results of operations and our business, including the impact of the resulting economic and market disruption, the extension of tax filing deadlines, and other related government actions;
our ability to retain employees and acquired client assets following acquisitions;
our future capital requirements and the availability of financing, if necessary;
our ability to meet our current and future debt service obligations, including our ability to maintain compliance with our debt covenants;
any downgrade of the Company’s credit ratings;
our ability to generate strong performance for our clients and the impact of the financial markets on our clients’ portfolios;
the impact of new or changing legislation and regulations (or interpretations thereof) on our business, including our ability to successfully address and comply with such legislation and regulations (or interpretations thereof) and increased costs, reductions of revenue, and potential fines, penalties, or disgorgement to which we may be subject as a result thereof;
risks, burdens, and costs, including fines, penalties, or disgorgement, associated with our business being subjected to regulatory inquiries, investigations, or initiatives, including those of the Financial Industry Regulatory Authority, Inc. and the Securities and Exchange Commission (“SEC”);
risks associated with legal proceedings, including litigation and regulatory proceedings;
our ability to close, finance, and realize all of the anticipated benefits of acquisitions, as well as our ability to integrate the operations of recently acquired businesses, and the potential impact of such acquisitions on our existing indebtedness and leverage;
our ability to manage leadership and employee transitions, including costs and time burdens on management and our board of directors related thereto;
the compromising of confidentiality, availability or integrity of information, including cyberattacks;
political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation software industries;
our ability to respond to rapid technological changes, including our ability to successfully release new products and services or improve upon existing products and services;
our expectations concerning the revenues we generate from fees associated with the financial products that we distribute;
risks related to goodwill and other intangible asset impairment;
our ability to develop, establish, and maintain strong brands;
risks associated with the use and implementation of information technology and the effect of security breaches, computer viruses, and computer hacking attacks;
Blucora, Inc. | Q3 2021 Form 10-Q 3


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;
the seasonality of our business;
our assessments and estimates that determine our effective tax rate; and
our ability to protect our intellectual property and the impact of any claim that we have infringed on the intellectual property rights of others.
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, 2020, 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. | Q3 2021 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)
September 30,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$184,926 $150,125 
Cash segregated under federal or other regulations536 637 
Accounts receivable, net of allowance17,886 12,736 
Commissions and advisory fees receivable25,003 26,132 
Other receivables468 717 
Prepaid expenses and other current assets, net11,119 10,321 
Total current assets239,938 200,668 
Long-term assets:
Property and equipment, net68,950 58,500 
Right-of-use assets, net20,818 23,455 
Goodwill454,821 454,821 
Other intangible assets, net304,435 322,179 
Other long-term assets14,519 4,569 
Total long-term assets863,543 863,524 
Total assets$1,103,481 $1,064,192 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$8,932 $9,290 
Commissions and advisory fees payable18,297 19,021 
Accrued expenses and other current liabilities75,375 56,419 
Deferred revenue—current5,469 12,298 
Lease liabilities—current4,429 2,304 
Current portion of long-term debt1,790 1,784 
Total current liabilities114,292 101,116 
Long-term liabilities:
Long-term debt, net552,987 552,553 
Deferred tax liability, net29,502 30,663 
Deferred revenue—long-term5,553 6,247 
Lease liabilities—long-term34,020 36,404 
Other long-term liabilities7,992 24,919 
Total long-term liabilities630,054 650,786 
Total liabilities744,346 751,902 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, par value $0.0001 per share—900,000 shares authorized; 50,025 shares issued and 48,719 shares outstanding at September 30, 2021; 49,483 shares issued and 48,177 shares outstanding at December 31, 2020
5 5 
Additional paid-in capital1,613,624 1,598,230 
Accumulated deficit(1,226,095)(1,257,546)
Treasury stock, at cost—1,306 shares at September 30, 2021 and December 31, 2020
(28,399)(28,399)
Total stockholders’ equity359,135 312,290 
Total liabilities and stockholders’ equity$1,103,481 $1,064,192 

See accompanying notes to unaudited condensed consolidated financial statements.
Blucora, Inc. | Q3 2021 Form 10-Q 5


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

 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Revenue:
Wealth management services revenue$169,135 $135,932 $486,021 $396,805 
Tax software services revenue5,039 39,421 220,848 202,990 
Total revenue174,174 175,353 706,869 599,795 
Operating expenses:
Cost of revenue:
Wealth management services cost of revenue120,641 96,122 343,174 282,332 
Tax software services cost of revenue2,323 2,692 12,330 9,759 
Total cost of revenue122,964 98,814 355,504 292,091 
Engineering and technology7,874 6,007 22,233 21,899 
Sales and marketing28,399 31,018 140,809 150,785 
General and administrative23,102 18,605 71,619 63,533 
Acquisition and integration2,241 10,276 28,513 18,782 
Depreciation2,867 1,874 8,371 5,345 
Amortization of other acquired intangible assets7,009 7,746 21,247 22,167 
Impairment of goodwill   270,625 
Total operating expenses194,456 174,340 648,296 845,227 
Operating income (loss)(20,282)1,013 58,573 (245,432)
Other loss, net(8,295)(11,963)(24,202)(23,386)
Income (loss) before income taxes(28,577)(10,950)34,371 (268,818)
Income tax benefit (expense)774 (15,256)(2,920)(23,237)
Net income (loss)$(27,803)$(26,206)$31,451 $(292,055)
Net income (loss) per share:
Basic$(0.57)$(0.55)$0.65 $(6.09)
Diluted$(0.57)$(0.55)$0.64 $(6.09)
Weighted average shares outstanding:
Basic48,707 48,039 48,492 47,936 
Diluted48,707 48,039 49,373 47,936 
Comprehensive income (loss):
Net income (loss)$(27,803)$(26,206)$31,451 $(292,055)
Other comprehensive income, net of income taxes   272 
Comprehensive income (loss)$(27,803)$(26,206)$31,451 $(291,783)












See accompanying notes to unaudited condensed consolidated financial statements.
Blucora, Inc. | Q3 2021 Form 10-Q 6


BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Additional paid-in capitalAccumulated deficitAccumulated other comprehensive loss
Common stockTreasury stock
SharesAmountSharesAmountTotal
Balance as of December 31, 202049,483 $5 $1,598,230 $(1,257,546)$ (1,306)$(28,399)$312,290 
Common stock issued for stock options and restricted stock units132 — 63 — — — — 63 
Stock-based compensation— — 5,520 — — — — 5,520 
Tax payments from shares withheld for equity awards— — (865)— — — — (865)
Net income— — — 27,646 — — — 27,646 
Balance as of March 31, 202149,615 $5 $1,602,948 $(1,229,900)$ (1,306)$(28,399)$344,654 
Common stock issued for stock options, restricted stock units, and employee stock purchase plan347 — 1,989 — — — — 1,989 
Stock-based compensation— — 4,720 — — — — 4,720 
Tax payments from shares withheld for equity awards— — (464)— — — — (464)
Net income— — — 31,608 — — — 31,608 
Balance as of June 30, 202149,962 $5 $1,609,193 $(1,198,292)$ (1,306)$(28,399)$382,507 
Common stock issued for stock options and restricted stock units63 — 328 — — — — 328 
Stock-based compensation— — 4,387 — — — — 4,387 
Tax payments from shares withheld for equity awards— — (284)— — — — (284)
Net loss— — — (27,803)— — — (27,803)
Balance as of September 30, 202150,025 $5 $1,613,624 $(1,226,095)$ (1,306)$(28,399)$359,135 
Additional paid-in capitalAccumulated deficitAccumulated other comprehensive loss
Common stockTreasury stock
SharesAmountSharesAmountTotal
Balance as of December 31, 201949,059 $5 $1,586,972 $(914,791)$(272)(1,306)$(28,399)$643,515 
Common stock issued for stock options and restricted stock units89 — — — — — —  
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, 202049,148 $5 $1,584,854 $(1,230,285)$ (1,306)$(28,399)$326,175 
Common stock issued for stock options, restricted stock units, and employee stock purchase plan192 — 1,226 — — — — 1,226 
Stock-based compensation— — 3,904 — — — — 3,904 
Tax payments from shares withheld for equity awards— — (89)— — — — (89)
Net income— — — 49,645 — — — 49,645 
Balance as of June 30, 202049,340 $5 $1,589,895 $(1,180,640)$ (1,306)$(28,399)$380,861 
Common stock issued for stock options and restricted stock units10 — — — — — —  
Stock-based compensation— — 4,517 — — — — 4,517 
Tax payments from shares withheld for equity awards— — (28)— — — — (28)
Net loss— — — (26,206)— — — (26,206)
Balance as of September 30, 202049,350 $5 $1,594,384 $(1,206,846)$ (1,306)$(28,399)$359,144 






See accompanying notes to unaudited condensed consolidated financial statements.
Blucora, Inc. | Q3 2021 Form 10-Q 7


BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Nine months ended September 30,
 20212020
Operating activities:
Net income (loss)$31,451 $(292,055)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Stock-based compensation15,499 7,220 
Depreciation and amortization of acquired intangible assets32,498 29,619 
Impairment of goodwill 270,625 
Reduction of right-of-use lease assets2,694 8,335 
Deferred income taxes(1,161)23,199 
Amortization of debt issuance costs1,128 1,006 
Accretion of debt discounts851 414 
Gain on the sale of a business (349)
Change in the fair value of acquisition-related contingent consideration19,500 (1,000)
Accretion of lease liability731 1,413 
Other1,371 984 
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable(5,008)12,267 
Commissions and advisory fees receivable1,129 (1,480)
Other receivables249 (2,909)
Prepaid expenses and other current assets(798)2,555 
Other long-term assets(10,898)2,763 
Accounts payable(358)(7,018)
Commissions and advisory fees payable(500)(3,012)
Lease liabilities(1,047)(3,568)
Deferred revenue(7,523)(8,582)
Accrued expenses and other current and long-term liabilities(5,417)(5,113)
Net cash provided by operating activities74,391 35,314 
Investing activities:
Purchases of property and equipment(21,624)(28,711)
Business acquisitions, net of cash acquired (102,425)
Asset acquisitions, net of cash acquired(3,823) 
Proceeds from sale of a business 349 
Net cash used by investing activities(25,447)(130,787)
Financing activities:
Proceeds from credit facilities, net of debt issuance costs and debt discounts(502)226,278 
Payments on credit facilities(1,359)(66,078)
Proceeds from stock option exercises535 25 
Proceeds from issuance of stock through employee stock purchase plan1,845 1,201 
Tax payments from shares withheld for equity awards(1,613)(1,034)
Acquisition-related contingent consideration payments(13,150) 
Net cash provided (used) by financing activities(14,244)160,392 
Net increase in cash, cash equivalents, and restricted cash34,700 64,919 
Cash, cash equivalents, and restricted cash, beginning of period150,762 86,450 
Cash, cash equivalents, and restricted cash, end of period$185,462 $151,369 
Supplemental cash flow information:
Cash paid for income taxes$2,864 $1,657 
Cash paid for interest$21,626 $16,994 
Non-cash investing activities:
Purchases of property and equipment through leasehold incentives$ $9,726 


See accompanying notes to unaudited condensed consolidated financial statements.
Blucora, Inc. | Q3 2021 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 Software business.
Wealth Management
Our wealth management business consists of the operations of Avantax Wealth Management and Avantax Planning Partners (collectively, the “Wealth Management business” or the “Wealth Management segment”).

Avantax Wealth Management provides tax-focused wealth management solutions for financial professionals, tax professionals, certified public accounting (“CPA”) firms, and their clients. Avantax Wealth Management offers its services through its registered broker-dealer, registered investment advisor (“RIA”), and insurance agency subsidiaries and is the leading U.S. tax-focused independent broker-dealer. Avantax Wealth Management works with a nationwide network of financial professionals that operate as independent contractors. Avantax Wealth Management provides these financial professionals with an integrated platform of technical, practice, compliance, operations, sales, and product support tools that enable them to offer tax-advantaged investing and wealth management services to their clients.
Avantax Planning Partners is an in-house/employee based RIA and wealth management business that partners with CPA firms in order to provide their consumer and small business clients with holistic financial planning and advisory services, as well as retirement plan solutions through Avantax Retirement Plan Services. Avantax Planning Partners formerly operated as Honkamp Krueger Financial Services, Inc. (“HKFS”). Our employee-based RIA model, which we refer to as “Avantax Planning Partners,” also includes Avantax Wealth Management total client assets that have been acquired from Avantax Wealth Management financial professionals.
On July 1, 2020, we acquired all of the issued and outstanding common stock of HKFS (the “HKFS Acquisition”). The operations of HKFS are included in our operating results as part of the Wealth Management segment from the date of the HKFS Acquisition. On January 4, 2021, we announced the rebranding of HKFS to Avantax Planning Partners (the “Rebranding”). The Rebranding was designed to create tighter brand alignment, bringing the Wealth Management business under one common and recognizable brand.

Tax Software
The Tax Software business consists of the operations of TaxAct, Inc. (“TaxAct,” the “Tax Software business,” or the “Tax Software segment”) and provides digital tax preparation services, packaged tax software, and ancillary services for consumers, small business owners, and tax professionals through its website www.TaxAct.com and its mobile applications. We had referred to this business as the “Tax Preparation business” and “Tax Preparation segment” in previous filings.

The Tax Software segment is highly seasonal with a significant portion of its annual revenue typically earned in the first two quarters of the fiscal year. During the third and fourth quarters, the Tax Software 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 COVID-19 pandemic, the Internal Revenue Service (“IRS”) extended the filing deadline for federal tax returns from April 15, 2020 to July 15, 2020. This filing extension resulted in the shifting of a significant portion of Tax Software segment revenue that would typically be earned in the first and second quarters of 2020 to the third quarter of 2020.

As a result of the continued impact of the COVID-19 pandemic, the IRS delayed the start of the 2021 tax season and extended the filing and payment deadline for tax year 2020 federal tax returns from April 15, 2021 to May 17, 2021. In addition, the IRS further extended the federal filing and payment deadline for Texas, Louisiana, and Oklahoma to June 15, 2021. This extension resulted in the shifting of a significant portion of Tax Software segment revenue that would typically have been expected to be earned in the first quarter of 2021 to the second quarter of 2021.
Blucora, Inc. | Q3 2021 Form 10-Q 9


Segments
We have two reportable segments: (1) the Wealth Management segment and (2) the Tax Software 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 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 conformity with United States generally accepted accounting principles (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, 2020. 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 condensed consolidated balance sheets and the condensed consolidated statements of cash flows (in thousands):
September 30,
2021
December 31,
2020
Cash and cash equivalents$184,926 $150,125 
Cash segregated under federal or other regulations536 637 
Total cash, cash equivalents, and restricted cash$185,462 $150,762 
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 condensed consolidated balance sheets.
Cash segregated under federal and other regulations is held in a separate bank account for the exclusive benefit of our Avantax Wealth Management clients and is recognized as restricted cash on the condensed consolidated balance sheets.
Asset Acquisitions
Acquisitions that do not meet the criteria to be accounted for as a business combination are accounted for as an asset acquisition. Using a cost accumulation model, the purchase price, including acquisition costs and any contingent consideration, if the contingencies are met for such contingent consideration at or near the acquisition date, is allocated to the acquired assets and assumed liabilities based upon their relative fair values as of the acquisition date and no goodwill is contemplated in the allocation process. Contingent consideration that is not earned at or near the acquisition date is capitalized as part of the cost of the assets acquired and is allocated to increase the eligible assets on a relative fair value basis.
We include the operations of an asset acquisition in our consolidated operating results beginning on the date of acquisition. The allocation of the purchase price to the assets acquired and liabilities assumed may require estimates, including but not limited to ones related to expected long-term revenues, future expected operating expenses, cost of capital, assumed attrition rates, and discount rates.
Goodwill
We assess goodwill for impairment at the reporting unit level, which consists of the Wealth Management reporting unit and the Tax Software reporting unit. 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 estimated fair value
Blucora, Inc. | Q3 2021 Form 10-Q 10


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 estimated 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.
Beginning in March 2020, the COVID-19 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 Software reporting unit for potential impairment.
As part of the goodwill impairment tests, we compared the estimated fair values of the Wealth Management and Tax Software 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. The income approach is an estimate of fair value that uses 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 related to the reporting unit or overall business. The market approach is an estimate of fair value that takes income-based valuation multiples for a set of comparable companies and applies the valuation multiple to each reporting unit’s income.
For the Wealth Management reporting unit, the carrying value of the reporting unit exceeded its estimated fair value by $270.6 million. Therefore, we recorded an impairment of goodwill of $270.6 million as of March 31, 2020. For the Tax Software reporting unit, the carrying value of the reporting unit was significantly below its estimated fair value, and therefore, the goodwill of the Tax Software reporting unit was not considered impaired.
While no goodwill impairment triggering events were identified during the nine months ended September 30, 2021, 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 estimated fair value of the Wealth Management reporting unit.

Note 3: Segment Information and Revenue
We have two reportable operating segments: (1) the Wealth Management segment and (2) the Tax Software 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 acquired intangible assets, acquisition and integration costs, executive transition costs, headquarters relocation costs, contested proxy and other legal and consulting costs, or 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, or income taxes to the reportable segments. We do not report assets or capital expenditures by segment to the chief operating decision maker.
Blucora, Inc. | Q3 2021 Form 10-Q 11


Information on reportable operating segments currently presented to our chief operating decision maker and a reconciliation of operating income (loss) to consolidated net income (loss) are presented below (in thousands):
Three months ended September 30,Nine months ended September 30,
2021202020212020
Revenue:
Wealth Management revenue$169,135 $135,932 $486,021 $396,805 
Tax Software revenue5,039 39,421 220,848 202,990 
Total revenue$174,174 $175,353 $706,869 $599,795 
Operating income (loss):
Wealth Management$19,564 $17,498 $60,356 $51,827 
Tax Software(13,864)16,234 100,472 60,646 
Corporate-level activity(25,982)(32,719)(102,255)(357,905)
Total operating income (loss)(20,282)1,013 58,573 (245,432)
Other loss, net(8,295)(11,963)(24,202)(23,386)
Income tax benefit (expense)774 (15,256)(2,920)(23,237)
Net income (loss)$(27,803)$(26,206)$31,451 $(292,055)
Revenues by major category within each segment are presented below (in thousands):
Three months ended September 30,Nine months ended September 30,
2021202020212020
Wealth Management:
Advisory revenue$103,540 $82,612 $291,167 $227,672 
Commission revenue52,961 44,921 157,197 135,337 
Asset-based revenue5,659 4,351 16,514 18,911 
Transaction and fee revenue6,975 4,048 21,143 14,885 
Total Wealth Management revenue$169,135 $135,932 $486,021 $396,805 
Tax Software:
Consumer revenue$4,479 $38,482 $203,891 $186,724 
Professional revenue560 939 16,957 16,266 
Total Tax Software revenue$5,039 $39,421 $220,848 $202,990 
Wealth Management revenue recognition
Wealth management revenue primarily consists of advisory revenue, commission revenue, asset-based revenue, and transaction and fee revenue.
The timing of Wealth Management revenue recognition was as follows (in thousands):
Three months ended September 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Advisory revenue$ $103,540 $103,540 $ $82,612 $82,612 
Commission revenue22,372 30,589 52,961 16,884 28,037 44,921 
Asset-based revenue 5,659 5,659  4,351 4,351 
Transaction and fee revenue1,213 5,762 6,975 1,067 2,981 4,048 
Total Wealth Management revenue$23,585 $145,550 $169,135 $17,951 $117,981 $135,932 
Blucora, Inc. | Q3 2021 Form 10-Q 12


Nine months ended September 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Advisory revenue$ $291,167 $291,167 $ $227,672 $227,672 
Commission revenue65,815 91,382 157,197 55,068 80,269 135,337 
Asset-based revenue 16,514 16,514  18,911 18,911 
Transaction and fee revenue3,779 17,364 21,143 4,063 10,822 14,885 
Total Wealth Management revenue$69,594 $416,427 $486,021 $59,131 $337,674 $396,805 
Tax Software revenue recognition
We generate Tax Software revenue from the sale of digital tax preparation services, packaged tax preparation software, ancillary services, and multiple element arrangements that may include a combination of these items.
The timing of Tax Software revenue recognition was as follows (in thousands):
Three months ended September 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Consumer revenue$4,479 $ $4,479 $38,480 $2 $38,482 
Professional revenue370 190 560 641 298 939 
Total Tax Software revenue$4,849 $190 $5,039 $39,121 $300 $39,421 
Nine months ended September 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Consumer revenue$203,891 $ $203,891 $186,721 $3 $186,724 
Professional revenue14,626 2,331 16,957 13,822 2,444 16,266 
Total Tax Software revenue$218,517 $2,331 $220,848 $200,543 $2,447 $202,990 

Note 4: Asset Acquisitions
During the nine months ended September 30, 2021, we completed several acquisitions in our Wealth Management business that met the criteria to be accounted for as asset acquisitions. We paid $3.8 million in total consideration, including acquisition costs, which was allocated to the acquired assets and assumed liabilities, and primarily consisted of customer relationship intangibles. We are subject to additional contingent consideration payments on these acquisitions in 2021 up to a maximum of $5.2 million over a four-year period that are contingent upon meeting certain revenue thresholds related to the respective asset acquisitions.

Blucora, Inc. | Q3 2021 Form 10-Q 13


Note 5: Debt
Our debt consisted of the following as of the periods indicated in the table below (in thousands):
 September 30, 2021December 31, 2020
 Principal
amount
DiscountDebt issuance costsNet 
carrying
value
Principal
amount
DiscountDebt issuance costsNet 
carrying
value
Senior Secured Credit Facility
$561,797 $(3,322)$(3,698)$554,777 $563,156