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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, 2022
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/ad2f666ca33bb7efd6c69316d657077f-bcor-20220331_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 filer
ý
Accelerated 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 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 April 27, 2022, 47,247,539 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. | Q1 2022 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, 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 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 (the “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 retain employees and acquired client assets following acquisitions;
any compromise of confidentiality, availability or integrity of information, including cyberattacks;
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 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 acquired 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. | Q1 2022 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;
our ability to protect our intellectual property and the impact of any claim that we infringed on the intellectual property rights of others; and
the effects on our business of actions of activist stockholders.
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, 2021, 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 2022 Form 10-Q 4


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BLUCORA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
March 31,
2022
December 31,
2021
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$144,222 $134,824 
Accounts receivable, net 26,618 21,906 
Commissions and advisory fees receivable22,890 25,073 
Prepaid expenses and other current assets21,695 18,476 
Total current assets215,425 200,279 
Long-term assets:
Property, equipment, and software, net73,687 73,638 
Right-of-use assets, net20,113 20,466 
Goodwill, net454,821 454,821 
Acquired intangible assets, net296,894 302,289 
Other long-term assets23,019 20,450 
Total long-term assets868,534 871,664 
Total assets$1,083,959 $1,071,943 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$23,879 $8,216 
Commissions and advisory fees payable15,387 17,940 
Accrued expenses and other current liabilities61,255 65,678 
Current deferred revenue8,459 13,180 
Current lease liabilities4,945 4,896 
Current portion of long-term debt1,812 1,812 
Total current liabilities115,737 111,722 
Long-term liabilities:
Long-term debt, net553,297 553,134 
Long-term lease liabilities32,504 33,267 
Deferred tax liabilities, net19,480 20,124 
Long-term deferred revenue5,090 5,322 
Other long-term liabilities8,978 6,752 
Total long-term liabilities619,349 618,599 
Total liabilities735,086 730,321 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, par value $0.0001 per share—900,000 shares authorized; 50,384 shares issued and 47,433 shares outstanding at March 31, 2022; 50,137 shares issued and 48,831 shares outstanding at December 31, 2021
5 5 
Additional paid-in capital1,622,973 1,619,805 
Accumulated deficit(1,215,169)(1,249,789)
Treasury stock, at cost— 2,951 shares at March 31, 2022 and 1,306 shares at December 31, 2021
(58,936)(28,399)
Total stockholders’ equity348,873 341,622 
Total liabilities and stockholders’ equity$1,083,959 $1,071,943 

See accompanying notes.
Blucora, Inc. | Q1 2022 Form 10-Q 5


BLUCORA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands, except per share amounts)

 Three Months Ended March 31,
 20222021
Revenue:
Wealth Management$166,403 $154,491 
Tax Software141,150 123,892 
Total revenue307,553 278,383 
Operating expenses:
Cost of revenue:
Wealth Management 119,874 108,623 
Tax Software 9,426 5,578 
Total cost of revenue129,300 114,201 
Engineering and technology8,504 7,128 
Sales and marketing84,403 77,562 
General and administrative29,075 24,685 
Acquisition and integration1,666 8,103 
Depreciation2,931 2,300 
Amortization of acquired intangible assets6,631 7,175 
Total operating expenses262,510 241,154 
Operating income45,043 37,229 
Interest expense and other, net(7,841)(7,883)
Income before income taxes37,202 29,346 
Income tax expense(2,582)(1,700)
Net income$34,620 $27,646 
Net income per share:
Basic$0.71 $0.57 
Diluted$0.70 $0.56 
Weighted average shares outstanding:
Basic48,513 48,261 
Diluted49,747 49,097 


















See accompanying notes.
Blucora, Inc. | Q1 2022 Form 10-Q 6


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

Additional paid-in capitalAccumulated deficit
Common stockTreasury stock
SharesAmountSharesAmountTotal
Balance as of December 31, 202150,137 $5 $1,619,805 $(1,249,789)1,306 $(28,399)$341,622 
Common stock issued pursuant to stock incentive plans and employee stock purchase plans247 — 96 — — — 96 
Stock repurchases— — — — 1,645 (30,537)(30,537)
Stock-based compensation— — 4,641 — — — 4,641 
Tax payments from shares withheld for equity awards— — (1,569)— — — (1,569)
Net income— — — 34,620 — — 34,620 
Balance as of March 31, 202250,384 $5 $1,622,973 $(1,215,169)2,951 $(58,936)$348,873 
Additional paid-in capitalAccumulated deficit
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 pursuant to stock incentive plans and employee stock purchase plans132 — 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 































See accompanying notes.
Blucora, Inc. | Q1 2022 Form 10-Q 7


BLUCORA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)

 Three Months Ended March 31,
 20222021
Operating activities:
Net income$34,620 $27,646 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization of acquired intangible assets11,305 10,418 
Stock-based compensation6,225 5,610 
Change in the fair value of acquisition-related contingent consideration1,700 6,300 
Reduction of right-of-use lease assets353 569 
Deferred income taxes(644)(269)
Amortization of debt discount and issuance costs681 640 
Accretion of lease liabilities514 514 
Other non-cash items1,101 (78)
Changes in operating assets and liabilities, net of acquisitions and disposals:
Accounts receivable, net(4,647)(11,541)
Commissions and advisory fees receivable2,183 111 
Prepaid expenses and other current assets(2,741)(1,163)
Other long-term assets(3,363)(828)
Accounts payable15,663 12,729 
Commissions and advisory fees payable(2,553)(259)
Lease liabilities(1,229)(172)
Deferred revenue(4,953)(7,250)
Accrued expenses and other current and long-term liabilities(6,872)10,745 
Net cash provided by operating activities47,343 53,722 
Investing activities:
Purchases of property, equipment, and software(4,731)(8,598)
Asset acquisitions(751)(587)
Net cash used by investing activities(5,482)(9,185)
Financing activities:
Payments on credit facilities(453)(453)
Stock repurchases(30,537) 
Proceeds from stock option exercises96 63 
Tax payments from shares withheld for equity awards(1,569)(865)
Net cash used by financing activities(32,463)(1,255)
Net increase in cash, cash equivalents, and restricted cash9,398 43,282 
Cash, cash equivalents, and restricted cash, beginning of period134,824 150,762 
Cash, cash equivalents, and restricted cash, end of period$144,222 $194,044 
Supplemental cash flow information:
Cash paid for income taxes$850 $ 
Cash paid for interest$7,107 $7,123 








See accompanying notes.
Blucora, Inc. | Q1 2022 Form 10-Q 8


BLUCORA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 a 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 planning, investing, and wealth management services to their clients.
Avantax Planning Partners is an in-house/employee-based RIA, insurance agency, 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”). We acquired HKFS in July 2020 (the “HKFS Acquisition”) and subsequently rebranded it in order to create tighter brand alignment through one common and recognizable brand. Any reference to Avantax Planning Partners in this Form 10-Q is inclusive of HKFS.
Tax Software
Our 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 and ancillary services for consumers, small business owners, and tax professionals through its website www.TaxAct.com and its mobile applications.

Our 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 of the fiscal year, the Tax Software segment typically reports losses because revenue from the segment is minimal while core operating expenses continue.

As a result of the continued impact of the COVID-19 pandemic, the Internal Revenue Service (“IRS”) delayed the start of the tax year 2020 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. Beyond federal filings, the majority of states also extended their filing and payment deadlines for tax year 2020 state tax returns. 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 to the second quarter of 2021.
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 unaudited 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
Blucora, Inc. | Q1 2022 Form 10-Q 9


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 condensed 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, 2021. Interim results are not necessarily indicative of results for a full year.
A summary of our significant accounting policies is included in Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes in our significant accounting policies since December 31, 2021.
Note 3: Segment Information and Revenue
We have two reportable 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, acquisition and integration costs, depreciation, amortization of acquired intangible assets, or contested proxy and other legal and consulting costs to the reportable segments. Such amounts are reflected under the heading “Corporate-level activity.” In addition, we do not allocate interest expense and other, net, or income taxes to the reportable segments. We do not report assets or capital expenditures by segment to the chief operating decision maker.
Information on reportable segments currently presented to our chief operating decision maker and a reconciliation to consolidated net income are presented below (in thousands):
Three Months Ended March 31,
20222021
Revenue:
Wealth Management$166,403 $154,491 
Tax Software141,150 123,892 
Total revenue307,553 278,383 
Operating income (loss):
Wealth Management16,421 19,396 
Tax Software58,030 50,888 
Corporate-level activity(29,408)(33,055)
Total operating income45,043 37,229 
Interest expense and other, net(7,841)(7,883)
Income before income taxes37,202 29,346 
Income tax expense(2,582)(1,700)
Net income$34,620 $27,646 







Blucora, Inc. | Q1 2022 Form 10-Q 10


Wealth Management Revenue Recognition
Wealth management revenue primarily consists of advisory revenue, commission revenue, asset-based revenue, and transaction and fee revenue.
Revenues by major category within the Wealth Management segment and the timing of Wealth Management revenue recognition was as follows (in thousands):
Three Months Ended March 31,
20222021
Recognized upon transaction:
Commission$20,624 $22,367 
Transaction and fee1,244 1,374 
Total Wealth Management revenue recognized upon transaction$21,868 $23,741 
Recognized over time:
Advisory$107,169 $91,119 
Commission27,031 30,167 
Asset-based5,663 5,329 
Transaction and fee4,672 4,135 
Total Wealth Management revenue recognized over time$144,535 $130,750 
Total Wealth Management revenue:
Advisory$107,169 $91,119 
Commission47,655 52,534 
Asset-based5,663 5,329 
Transaction and fee5,916 5,509 
Total Wealth Management revenue$166,403 $154,491 
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.
Revenues by major category within the Tax Software segment and the timing of Tax Software revenue recognition was as follows (in thousands):
Three Months Ended March 31,
20222021
Recognized upon transaction:
Consumer$125,261 $110,567 
Professional13,784 12,127 
Total Tax Software revenue recognized upon transaction$139,045 $122,694 
Recognized over time:
Professional$2,105 $1,198 
Total Tax Software revenue recognized over time$2,105 $1,198 
Total Tax Software revenue:
Consumer$125,261 $110,567 
Professional15,889 13,325 
Total Tax Software revenue$141,150 $123,892 
Note 4: Asset Acquisitions
During the three months ended March 31, 2022, we completed acquisitions in our Wealth Management business that met the criteria to be accounted for as asset acquisitions. Total initial purchase consideration, including acquisition costs and fixed deferred payments, was $1.2 million. This purchase consideration was
Blucora, Inc. | Q1 2022 Form 10-Q 11


allocated to the acquired assets, primarily customer relationship intangibles. Customer relationship intangibles are amortized on a straight-line basis over an amortization period of 15 years.
We are subject to variable contingent consideration payments related to our asset acquisitions that are not recognized as a liability on our condensed consolidated balance sheets until all contingencies related to the achievement of future financial targets are resolved and the consideration is paid. As of March 31, 2022, the maximum future fixed and contingent payments associated with all prior asset acquisitions were $17.0 million, with specified payment dates from 2022 through 2026.
Note 5: Debt
Our debt consisted of the following as of the periods indicated in the table below (in thousands):
March 31,
2022
December 31,
2021
Senior Secured Credit Facility
Principal outstanding$560,891 $561,344 
Unamortized debt issuance costs(3,047)(3,371)
Unamortized debt discount(2,735)(3,027)
Net carrying value$555,109 $554,946 
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”). The Term Loan has a maturity date of May 22, 2024 (the “Term Loan Maturity Date”). On April 26, 2021, to ensure adequate liquidity and flexibility to support the Company’s growth, we entered into Amendment No. 5 to the Credit Agreement (the “Credit Agreement Amendment”). Pursuant to the Credit Agreement Amendment, the Credit Agreement was amended to, among other things, refinance the existing $65.0 million Revolver and add $25.0 million of additional revolving credit commitments, for an aggregate principal amount of $90.0 million in revolving credit commitments (the “New Revolver”). The New Revolver has a maturity date of February 21, 2024 (the “New Revolver Maturity Date”).
The Company capitalized approximately $0.5 million of debt issuance costs paid in connection with the Credit Agreement Amendment, which are included in other long-term assets on the Company’s condensed consolidated balance sheets as part of the total deferred financing costs associated with the New Revolver.
As of March 31, 2022, the Senior Secured Credit Facility provided for up to $765.0 million of borrowings and consisted of a committed $90.0 million under the New Revolver and a $675.0 million Term Loan. As of March 31, 2022, we had $560.9 million in principal amount outstanding under the Term Loan and no amounts outstanding under the New Revolver. Based on aggregate loan commitments as of March 31, 2022, approximately $90.0 million was available for future borrowings under the Senior Secured Credit Facility, subject to customary terms and conditions.
The Company is required to make mandatory annual prepayments on the Term Loan in certain circumstances, including in the event that the Company generates Excess Cash Flow (as defined in the Credit Agreement) in a given fiscal year. The Credit Agreement permits the Company to voluntarily prepay the Term Loan without premium or penalty. In addition, the Company is required to make principal amortization payments on the Term Loan quarterly on the last business day of each March, June, September, and December, in an amount equal to approximately $0.5 million (subject to reduction for prepayments), with the remaining principal amount of the Term Loan due on the Term Loan Maturity Date.
The interest rate on the Term Loan is variable at the London Interbank Offered Rate (subject to a floor of 1.0%), plus the applicable interest rate margin of 4.0% for Eurodollar Rate Loans (as defined in the Credit Agreement) and 3.0% for ABR Loans (as defined in the Credit Agreement). As of March 31, 2022, the applicable interest rate on the Term Loan was 5.0%. Depending on the Consolidated First Lien Net Leverage Ratio (as defined in the Credit Agreement), the applicable interest rate margin on the New Revolver ranges from 2.0% to 2.5% for Eurodollar Rate Loans and 1.0% to 1.5% for ABR Loans. The Company is required to pay a commitment fee on the undrawn commitment under the New Revolver in a percentage that is dependent on the Consolidated First Lien Net
Blucora, Inc. | Q1 2022 Form 10-Q 12


Leverage Ratio that ranges from 0.35% to 0.4%. Interest is payable at the end of each interest period, typically quarterly.
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 (including certain subsidiaries acquired in the acquisition of Avantax Planning Partners and certain other material subsidiaries). The Senior Secured Credit Facility includes financial and operating covenants (including a Consolidated Total Net Leverage Ratio), which are set forth in detail in the Credit Agreement.
Pursuant to the Credit Agreement Amendment, if the Company’s usage of the New Revolver exceeds 30% of the aggregate commitments under the New Revolver on the last day of any calendar quarter, the Company shall not permit the Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) to exceed (i) 4.75 to 1.00 for the period beginning on April 1, 2021 and ending on December 31, 2021, (ii) 4.25 to 1.00 for the period beginning on January 1, 2022 and ending on September 30, 2022, (iii) 4.00 to 1.00 for the period beginning on October 1, 2022 and ending on December 31, 2022, and (iv) 3.50 to 1.00 for the period beginning on January 1, 2023 and ending on February 21, 2024.
Except as described above, the New Revolver has substantially the same terms as the previous Revolver, including certain covenants and events of default. The Company was in compliance with the debt covenants of the Senior Secured Credit Facility as of March 31, 2022.
Note 6: Leases
Our leases are primarily related to office space and are classified as operating leases. Operating lease cost, net of sublease income, is recognized in “General and administrative” expense for those net costs related to leases used in our operations and within “Acquisition and integration” expense for those net costs related to an unoccupied lease assumed in a previous acquisition on the condensed consolidated statements of operations.
Operating lease cost, net of sublease income, and cash paid on operating lease liabilities for the three months ended March 31, 2022 and 2021 were as follows (in thousands):
Three Months Ended March 31,
20222021
Fixed lease cost$973 $1,154 
Variable lease cost402 143 
Operating lease cost, before sublease income1,375 1,297 
Sublease income(234)(116)
Total operating lease cost, net of sublease income$1,141 $1,181 
Additional lease information:
Cash paid on operating lease liabilities$1,229 $217 
Right-of-use assets and operating lease liabilities were recorded on the condensed consolidated balance sheets as follows (in thousands):
March 31, 2022December 31, 2021
Right-of-use assets, net$20,113 $20,466 
Current lease liabilities$4,945 $4,896 
Long-term lease liabilities32,504 33,267 
Total operating lease liabilities$37,449 $38,163 
Weighted-average remaining lease term (in years)10.110.3
Weighted-average discount rate5.4 %5.4 %
Blucora, Inc. | Q1 2022 Form 10-Q 13


The maturities of our operating lease liabilities as of March 31, 2022 were as follows (in thousands):
Undiscounted cash flows:
Remainder of 2022$3,811 
20235,172 
20245,080 
20255,013 
20264,193 
Thereafter26,130 
Total undiscounted cash flows49,399 
Imputed interest(11,950)
Present value of cash flows$37,449 
Note 7: Balance Sheet Components
Prepaid expenses and other current assets consisted of the following (in thousands):
March 31, 2022December 31, 2021
Prepaid expenses$16,213 $13,138 
Other current assets5,482 5,338 
Total prepaid expenses and other current assets$21,695 $18,476 
Accrued expenses and other current liabilities consisted of the following (in thousands):
March 31, 2022December 31, 2021
Salaries and related benefit expenses$10,518 $26,417 
HKFS Contingent Consideration liability (1)
30,000 28,300 
Accrued legal costs1,609 2,871 
Accrued vendor and advertising costs10,923 3,777 
Accrued taxes3,698  
Other4,507 4,313 
Total accrued expenses and other current liabilities$61,255 $65,678 
__________________________
(1)For more information on the Company’s contingent liabilities, see "Note 9—Commitments and Contingencies."
Note 8: Fair Value Measurements
Certain of our assets and liabilities are carried at fair value and are valued using inputs that are classified in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs, other than Level 1, or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data and reflect our own assumptions.
Blucora, Inc. | Q1 2022 Form 10-Q 14


Assets and Liabilities Measured on a Recurring Basis
The fair value hierarchy of our financial assets and liabilities carried at estimated fair value and measured on a recurring basis were as follows (in thousands):
  Fair value measurements at the reporting date using
 March 31, 2022Quoted prices in
active markets
using identical 
assets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Cash equivalents: money market and other funds
$4,294 $4,294 $ $ 
Deferred compensation assets905 905   
Total assets at fair value$5,199 $5,199 $ $ 
HKFS Contingent Consideration liability
$30,000 $ $ $30,000 
Deferred compensation liabilities905 905   
Total liabilities at fair value$30,905 $905 $ $30,000 
  Fair value measurements at the reporting date using
 December 31, 2021Quoted prices in
active markets
using identical 
assets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Cash equivalents: money market and other funds
$4,293 $4,293 $ $ 
Total assets at fair value$4,293 $4,293 $ $— 
HKFS Contingent Consideration liability
$28,300 $ $ $28,300 
Total liabilities at fair value$28,300 $ $ $28,300 
Cash equivalents are classified within Level 1 of the fair value hierarchy because we value them utilizing quoted prices in active markets.
We offer non-qualified deferred compensation plans to our executive officers, board of directors, and certain independent financial professionals. Participants in these plans direct the investment of their accounts among the available investment options, which are generally the same as those available under our 401(k) plan. We have elected to fund these obligations through a rabbi trust which mirrors the investment elections made by participants. The assets in the rabbi trust are held for the purpose of satisfying our obligations to participants, however, remain subject to the claims of our creditors in the event we become insolvent. Our obligations and corresponding investments held under these non-qualified deferred compensation plans primarily consist of money market and mutual funds and are classified within Level 1 of the fair value hierarchy because we value them utilizing quoted prices in active markets. These investments, and the corresponding deferred compensation liabilities, are included within “Other long-term assets” and “Other long-term liabilities”, respectively, on the condensed consolidated balance sheets.
The HKFS Contingent Consideration liability relates to post-closing earn-out payments resulting from the acquisition of Avantax Planning Partners, formerly “HKFS” (see “Note 9—Commitments and Contingencies”). Based on advisory asset levels and the achievement of performance goals for the first earn-out period, we made the full $30.0 million payment in the third quarter of 2021.
The estimated fair value of the portion of the HKFS Contingent Consideration liability related to the second earn-out period (calculated in accordance with the amended HKFS Purchase Agreement and based on estimated advisory asset levels as of June 30, 2022) was $30.0 million as of March 31, 2022 and is included in “Accrued expenses and other current liabilities” on the condensed consolidated balance sheets. The estimated fair value of the second earn-out payment was determined using a Monte Carlo simulation model in a risk neutral framework with the underlying simulated variable of advisory asset levels and the related achievement of certain advisory asset growth levels. The Monte Carlo simulation model utilized Level 3 inputs, which included forecasted advisory asset levels as of June 30, 2022, a risk-adjusted discount rate (which reflects the risk in the advisory asset projection) of 12.2%, asset volatility of 24.6%, and a credit spread of 1.9%. Significant increases to the discount rate, asset volatility, or credit spread inputs would have resulted in a significantly lower fair value measurement, and a
Blucora, Inc. | Q1 2022 Form 10-Q 15


significant decrease to the forecasted advisory asset levels would have resulted in a significantly lower fair value measurement.
A roll forward of the HKFS Contingent Consideration liability is as follows (in thousands):
HKFS Contingent Consideration liability
Balance as of December 31, 2020$35,900 
HKFS Contingent Consideration first earn-out payment(30,000)
Valuation change recognized as expense22,400 
Balance as of December 31, 2021
28,300 
Valuation change recognized as expense1,700 
Balance as of March 31, 2022
$30,000 
Changes in the fair value of this contingent consideration are reflected in “Acquisition and integration” expense on the condensed consolidated statements of operations.
Fair Value of Financial Instruments
We consider the carrying values of accounts receivable, commissions receivable, other receivables, prepaid expenses, other current assets, financial professional loans, accounts payable, commissions and advisory fees payable, accrued expenses, and other current liabilities to approximate fair values primarily due to their short-term natures.
As of March 31, 2022, the Term Loan’s principal amount was $560.9 million, and the fair value of the Term Loan’s principal amount was $560.2 million. As of December 31, 2021, the Term Loan’s principal amount was $561.3 million, and the fair value of the Term Loan’s principal amount was $559.9 million. The fair value of the Term Loan’s principal amount was based on Level 2 inputs from a third-party market quotation.
Note 9: Commitments and Contingencies
HKFS Contingent Consideration Liability
On July 1, 2020, we closed the acquisition of Avantax Planning Partners, formerly “HKFS”, for an upfront cash purchase price of $104.4 million. The purchase price was subject to variable contingent consideration, or earn-out payments (the “HKFS Contingent Consideration”) totaling a maximum of $60.0 million.
The HKFS Contingent Consideration to be paid is determined based on advisory asset levels and the achievement of certain performance goals (i) for the period beginning July 1, 2020 and ending June 30, 2021 and (ii) for the period beginning July 1, 2021 and ending June 30, 2022. Pursuant to the Stock Purchase Agreement, dated as of January 6, 2020, by and among the Company, HKFS, the selling stockholders named therein (the “Sellers”), and JRD Seller Representative, LLC, as the Sellers’ representative (as amended on April 7, 2020, June 30, 2020, and June 29, 2021) (the “HKFS Purchase Agreement”), the maximum aggregate amount that we would be required to pay for each earn-out period is $30.0 million. If the asset market values on the applicable measurement date fall below certain specified thresholds, no payment of consideration is owed to the Sellers for such period.
Based on advisory asset levels and the achievement of performance goals for the first earn-out period specified in the HKFS Purchase Agreement, we paid the full $30.0 million to the Sellers in the third quarter of 2021. The estimated fair value of the HKFS Contingent Consideration liability for the second earn-out period was $30.0 million as of March 31, 2022. For additional information on the valuation of the HKFS Contingent Consideration liability, see "Note 8—Fair Value Measurements."
Litigation
From time to time, we are subject to various legal proceedings, regulatory matters or fines, or claims that arise in the ordinary course of business. We accrue a liability when management believes that both it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Although we believe that resolving such claims, individually or in aggregate, will not have a material adverse impact on our financial statements, these matters are subject to inherent uncertainties.
Blucora, Inc. | Q1 2022 Form 10-Q 16


We are not currently a party to any such matters for which we have recognized a material liability on our condensed consolidated balance sheet as of March 31, 2022.
We have entered into indemnification agreements in the ordinary course of business with our officers and directors. Pursuant to these agreements, we may be obligated to advance payment of legal fees and costs incurred by the defendants pursuant to our obligations under these indemnification agreements and applicable Delaware law.
Note 10: Interest Expense and Other, Net
“Interest expense and other, net” on the condensed consolidated statements of operations consisted of the following (in thousands):
Three Months Ended March 31,
20222021
Interest expense$7,130 $7,183 
Amortization of debt issuance costs389 363 
Amortization of debt discount292 277 
Total interest expense7,811 7,823 
Interest income and other30 60 
Interest expense and other, net$7,841 $7,883 
Note 11: Income Taxes
For 2022, our provision for income taxes in interim periods is based on our estimated annual effective tax rate. We record cumulative adjustments in the quarter in which a change in the estimated annual effective rate is determined. The estimated annual effective tax rate does not include the effects of discrete events that may occur during the year. The effect of these events, if any, is recorded in the quarter in which the event occurs.
We recorded income tax expense of $2.6 million and $1.7 million for the three months ended March 31, 2022 and 2021, respectively. Our effective income tax rate for the three months ended March 31, 2022 and March 31, 2021 differed from the 21% statutory rate primarily due to the release of valuation allowances and the effect of state income taxes. We maintain a valuation allowance for federal net operating loss carryforwards that we have concluded it is more likely than not that the related deferred tax benefits will not be realized. This valuation allowance does not prevent us from utilizing unexpired net operating losses to offset taxable income in future periods. The majority of these net operating losses will either be utilized or expire between 2022 and 2024.
Note 12: Net Income (Loss) Per Share
“Basic net income per share” is calculated using the weighted average number of common shares outstanding during the applicable period. “Diluted net income per share” is calculated using the weighted average number of common shares outstanding plus the number of dilutive potential common shares outstanding during the applicable period. Dilutive potential common shares consist of the incremental common shares issuable upon the exercise of outstanding stock options and the vesting of outstanding restricted stock units using the treasury stock method. Cash-settled restricted stock units are not settled in common shares and are therefore excluded from dilutive potential common shares. Dilutive potential common shares are excluded from the calculation of diluted net income per share if their effect is antidilutive. Certain of our performance-based restricted stock units are considered contingently issuable shares and are excluded from the diluted weighted average common shares outstanding computation because the related performance-based criteria were not achieved as of the end of the reporting period.
Blucora, Inc. | Q1 2022 Form 10-Q 17


The calculations of basic and diluted net income per share were as follows (in thousands):
Three Months Ended March 31,
 20222021
Numerator:
Net income$34,620 $27,646 
Denominator:
Basic weighted average common shares outstanding48,513 48,261 
Dilutive potential common shares (1)
1,234 836 
Diluted weighted average common shares outstanding49,747 49,097 
Net income per share:
Basic$0.71 $0.57 
Diluted$0.70 $0.56 
Shares excluded (1)
910 1,289 
________________________
(1)Potential common shares were excluded from the calculation of diluted net income per share for these periods because their effect would have been anti-dilutive.
Blucora, Inc. | Q1 2022 Form 10-Q 18


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion provides an analysis of the Company’s financial condition, cash flows, and results of operations from management’s perspective and should be read in conjunction with our condensed consolidated financial statements and accompanying notes thereto included under Part I, Item 1 and the section titled “Cautionary Statement Regarding Forward-Looking Statements” in this Form 10-Q, as well as with our consolidated financial statements, accompanying notes thereto, and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021.
Overview
Blucora, Inc. (the “Company,” “Blucora,” “we,” “our,” or “us”) is a leading provider of integrated tax-focused wealth management services and software, assisting consumers, small business owners, tax professionals, financial professionals, and certified public accounting (“CPA”) firms. Our mission is to enable financial success by changing the way individuals and families plan and achieve their goals through tax-advantaged solutions. We conduct our operations through two primary businesses: (1) the Wealth Management business and (2) the Tax Software business. Our common stock is listed on the NASDAQ Global Select Market under the symbol “BCOR.”
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, 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 a 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 planning, investing, and wealth management services to their clients.
Avantax Planning Partners is an in-house/employee-based RIA, insurance agency, 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”). We acquired HKFS in July 2020 (the “HKFS Acquisition”) and subsequently rebranded it in order to create tighter brand alignment through one common and recognizable brand. Any reference to Avantax Planning Partners in this Form 10-Q is inclusive of HKFS.
Tax Software
Our 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 and ancillary services for consumers, small business owners, and tax professionals through its website www.TaxAct.com and its mobile applications.
COVID-19 Pandemic
The extended COVID-19 pandemic has 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, has negatively impacted both our Wealth Management and Tax Software businesses.
In our Wealth Management business, the amount of cash sweep revenue we generate continues to be affected by the low interest rate environment. In response to the economic and market disruption associated with the COVID-19 pandemic, the Federal Reserve decreased the federal funds rate in 2020 and maintained a low-interest rate environment in 2021, causing a significant decline in cash sweep revenue. The Federal Reserve has signaled adjustments to monetary policy that would increase the federal funds rates, which we expect would positively impact cash sweep revenue. If the Federal Reserve does not increase, or further decreases, the federal funds rates, cash sweep revenue would continue to be negatively impacted.
Blucora, Inc. | Q1 2022 Form 10-Q 19


In our Tax Software segment, the typical seasonality of our Tax Software business has been affected by recent changes to tax filing deadlines. The Internal Revenue Service (“IRS”) delayed the start of the tax year 2020 tax season and extended the filing and payment deadline for tax year 2020 federal tax returns from April 15, 2021 to May 17, 2021 as a result of the COVID-19 pandemic. In addition, the IRS extended the federal filing and payment deadline for Texas, Louisiana, and Oklahoma to June 15, 2021. Beyond federal filings, the majority of states also extended their filing and payment deadlines for tax year 2020 state tax returns. 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 to the second quarter of 2021. This change in seasonality caused significant fluctuations in our quarterly financial results and has affected the comparability of our financial results. As a result, the results of operations for the Tax Software segment are not as comparable for the three months ended March 31, 2022 and 2021 as they would have been in previous years.
For additional information on the effects of the COVID-19 pandemic on our results of operations for the selected periods, see “Results of Operations” below. For more information related to the COVID-19 pandemic and its impact to our businesses, see Part I, Item 1A and Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.

Blucora, Inc. | Q1 2022 Form 10-Q 20


RESULTS OF OPERATIONS
Summary
($ in thousands)Three Months Ended March 31,Change
 20222021$%
Revenue:
Wealth Management$166,403 $154,491 $11,912 7.7 %
Tax Software141,150 123,892 17,258 13.9 %
Total revenue307,553 278,383 29,170 10.5 %
Operating income (loss):
Wealth Management16,421 19,396 (2,975)(15.3)%
Tax Software58,030 50,888 7,142 14.0 %
Corporate-level activity(29,408)(33,055)3,647 11.0 %
Total operating income45,043 37,229 7,814 21.0 %
Interest expense and other, net(7,841)(7,883)42 0.5 %
Income before income taxes37,202 29,346 7,856 26.8 %
Income tax expense(2,582)(1,700)(882)(51.9)%
Net income$34,620 $27,646 $6,974 25.2 %
For the three months ended March 31, 2022, compared to the three months ended March 31, 2021, net income increased $7.0 million primarily due to the following factors:
Wealth Management segment operating income decreased $3.0 million primarily due to higher payout ratios to financial professionals and incremental personnel costs.
Tax Software segment operating income increased $7.1 million primarily due to favorable increases in revenue per unit.
Expenses within corporate-level activity decreased $3.6 million primarily due to reduced acquisition and integration costs.
The Company recorded income tax expense of $2.6 million, an effective tax rate of 6.9%, for the three months ended March 31, 2022, compared to income tax expense of $1.7 million, an effective tax rate of 5.8%, for the three months ended March 31, 2021.
Blucora, Inc. | Q1 2022 Form 10-Q 21


SEGMENT REVENUE & OPERATING INCOME
The revenue and operating income amounts in this section are presented on a basis consistent with accounting principles generally accepted in the United States (“GAAP”) and include certain reconciling items attributable to our segments. We have two reportable segments: (1) the Wealth Management segment and (2) the Tax Software segment. Segment information is presented on a basis consistent with our current internal management financial reporting. We do not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, acquisition and integration costs, depreciation, amortization of acquired intangible assets, or contested proxy and other legal and consulting costs to the reportable segments. Such amounts are reflected under the heading “Corporate-level activity.” In addition, we do not allocate interest expense and other, net, or income taxes to the reportable segments.
Wealth Management
($ in thousands)Three Months Ended March 31,Change
 20222021$%
Revenue$166,403 $154,491 $11,912 7.7 %
Operating income$16,421 $19,396 $(2,975)(15.3)%
Segment margin9.9 %12.6 %
For the three months ended March 31, 2022, compared to the three months ended March 31, 2021, Wealth Management segment operating income decreased $3.0 million primarily due to the following factors:
Wealth Management revenue increased $11.9 million primarily due to a $16.1 million increase in advisory revenue, partially offset by a $4.9 million decrease in commission revenue. The increase in advisory revenue was primarily from increased client asset levels compared to March 31, 2021. Commission revenue was negatively impacted by unfavorable transaction activity and volatility in global markets primarily as a result of Russia’s invasion of Ukraine and the measures taken in response, including sanctions imposed by governments.
Wealth Management operating expenses increased $14.9 million primarily due to a $10.8 million increase in cost of revenue resulting from increased advisory fees and commissions paid, coupled with $4.1 million of incremental personnel costs. Increased payout ratios correlate with increased asset levels, the timing of certain quarterly billings relative to the market impacts from Russia’s invasion of Ukraine, and the exit of lower producing financial professionals who were concentrated at lower payout levels. Increased personnel costs reflect our strategic investments to drive growth through enhanced service capabilities that support our financial and tax professionals.
Segment margin compression for the three months ended March 31, 2022, was primarily due to the increase in operating expenses discussed above, coupled with the impact of market volatility on our higher margin service offerings. For the remainder of the year, we expect to incur incremental travel and conference costs associated with reduced COVID-19 travel restrictions; however, we expect for segment margin to increase as a result of the recently announced increase in the federal funds rate.
Blucora, Inc. | Q1 2022 Form 10-Q 22


Sources of Revenue
Wealth Management revenue is derived from multiple sources. We track sources of revenue, primary drivers of each revenue source, and recurring revenue. In addition, we focus on several business and key financial metrics in evaluating the success of our business relationships, our resulting financial position, and operating performance. A summary of our sources of revenue and business and financial metrics is as follows:
($ in thousands)Three Months Ended March 31,Change
Sources of RevenuePrimary Drivers20222021$%
Financial professional-drivenAdvisory- Advisory asset levels$107,169 $91,119 $16,050 17.6 %
Commission- Transactions
- Asset levels
- Product mix
47,655 52,534 (4,879)(9.3)%
Other revenueAsset-based- Cash balances
- Interest rates
- Number of accounts
- Client asset levels
5,663 5,329 334 6.3 %
Transaction and fee- Account activity
- Number of financial
  professionals
- Number of clients
- Number of accounts
5,916 5,509 407 7.4 %
Total revenue$166,403 $154,491 $11,912 7.7 %
Total recurring revenue$143,737 $130,755 $12,982 9.9 %
Recurring revenue rate86.4 %84.6 %
Recurring revenue consists of advisory fees, trailing commissions, fees from cash sweep programs, and certain transaction and fee revenue, all as described further under the headings “Advisory revenue,” “Commission revenue,” “Asset-based revenue,” and “Transaction and fee revenue,” respectively. Certain recurring revenues are associated with asset balances and fluctuate depending on market values and current interest rates. Accordingly, our recurring revenue can be negatively impacted by adverse external market conditions. However, we believe recurring revenue is meaningful because it is not dependent upon transaction volumes or other activity-based revenues, which are more difficult to predict, particularly in declining or volatile markets.
Business Metrics
($ in thousands)
Three Months Ended March 31,Change
20222021$%
Client assets balances:
Total client assets (1)
$86,144,055 $84,776,191 $1,367,864 1.6 %
Brokerage assets (1)
$45,222,763 $48,001,320 $(2,778,557)(5.8)%
Advisory assets (1)
$40,921,292 $36,774,871 $4,146,421 11.3 %
Advisory assets as a percentage of total client assets47.5 %43.4 %
Number of financial professionals (in ones):
Independent financial professionals (2)
3,376 3,691 (315)(8.5)%
In-house/employee financial professionals (3)
33 27 22.2 %
Total number of financial professionals3,409 3,718 (309)(8.3)%
Advisory and commission revenue per financial professional (4)
$45.4 $38.6 $6.8 17.6 %
___________________________
(1)In connection with our ongoing integration of acquisitions, we refined the methodology by which we calculate client assets to align the methodologies within our Wealth Management segment for calculating such metrics. Specifically, such changes to the methodology include alignment to one third party data aggregator for assets not placed in custody with our clearing firm and to one consistent set of logic for all assets and transaction types. We have not recast client assets for prior periods to conform to our current presentation as we believe the changes to the calculation to be immaterial.
(2)The number of independent financial professionals includes licensed financial professionals that work with Avantax Wealth Management and operate as independent contractors, as well as licensed referring representatives at CPA firms (approximately 162) that partner with Avantax Planning Partners.
(3)The number of in-house/employee financial professionals includes licensed financial planning consultants, all of which are affiliated with Avantax Planning Partners.
(4)Calculation based on advisory and commission revenue for the three months ended March 31, 2022 and 2021, respectively.
Blucora, Inc. | Q1 2022 Form 10-Q 23


Client Assets. Total client assets include assets that we hold directly or indirectly on behalf of clients under a safekeeping or custody arrangement or for which we provide administrative services for clients. To the extent that we provide more than one service for a client’s assets, the value of the asset is only counted once in the total amount of total client assets. Total client assets include advisory assets, non-advisory brokerage accounts, annuities, and mutual fund positions held directly with fund companies. These assets are not reported on the Company’s condensed consolidated balance sheets.
Advisory assets include client assets for which we provide investment advisory and management services as a fiduciary under the Investment Advisers Act of 1940. Our compensation for providing such services is typically a fee-based on the value of the advisory assets for each advisory client. These assets are not reported on the Company’s condensed consolidated balance sheets.
Brokerage assets represent total client assets other than advisory assets.
Total client assets increased $1.4 billion at March 31, 2022 compared to March 31, 2021 primarily due to $2.4 billion of favorable market change and reinvestment levels (primarily during 2021), partially offset by net client outflows of $1.0 billion. Net client outflows included net client inflows during the three months ended March 31, 2022 of $0.2 billion.
Advisory assets as a percentage of total client assets increased to 47.5% at March 31, 2022, compared to 43.4% at March 31, 2021. This increase was primarily driven by net client inflows of $3.4 billion, relating in part to our focus on converting off platform, direct to fund assets when appropriate for the client, to fee-based advisory platforms that include ongoing management and which incur higher margins.
Financial Professionals. The number of our financial professionals decreased 8.3% at March 31, 2022 compared to March 31, 2021, with the decrease primarily due to attrition related to lower revenue-producing financial professionals. This attrition led to a 17.6% increase in advisory and commission revenue per financial professional for the comparable periods. The decrease in the number of financial professionals was partially offset by our continued recruitment and onboarding of independent financial professionals.
Advisory Revenue. Advisory revenue primarily includes fees charged to clients in advisory accounts for which we are the RIA. These fees are based on the value of assets within these advisory accounts. For advisory revenues generated by Avantax Wealth Management, advisory fees are typically billed quarterly, in advance, and the related advisory revenues are deferred and recognized ratably over the period in which our performance obligations have been completed. For advisory revenue generated by Avantax Planning Partners, advisory fees are typically billed quarterly, in arrears, and the related advisory revenues are accrued and recognized ratably over the period in which our performance obligations were completed. Because advisory fees are based on advisory assets on the last day of each quarter, our revenues are impacted, in part, by the timing of market movements relative to when clients are billed.
Advisory asset balances were as follows (in thousands):

Three Months Ended March 31,Change
20222021$%
Advisory assets—independent financial professionals
$34,393,359 $31,712,984 $2,680,375 8.5 %
Advisory assets—in-house/employee financial professionals
5,163,741 3,794,739 1,369,002 36.1 %
Retirement advisory assets—in-house financial professionals
1,364,192 1,267,148 97,044 7.7 %
Total advisory assets$40,921,292 $36,774,871 $4,146,421