Blucora Announces Strong Second Quarter Results

See reconciliation of non-GAAP to GAAP measures below.

Loss on sale of discontinued operations, net of taxes

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computing basic income (loss) per share

computing diluted income (loss) per share

(1) In the year ended December 31, 2011, the Company completed the sale of its Mercantila e-commerce business.  The operating results of that business have been presented as discontinued operations for all periods presented.  In the three and six months ended June 30, 2011, the Company recorded a $0.5 million and $1.3 million income tax benefit related to discontinued operations, respectively.  A loss, net of an income tax benefit of $5.1 million, on the sale of the Mercantila business was recorded for the three and six months ended June 30, 2011, respectively. Revenue, operating expenses and income taxes, and loss from discontinued operations are presented below (in thousands):

(2) In the six months ended June 30, 2012, $5.2 million in stock-based compensation expense was recorded in association with the modification of the terms of a warrant and the vesting of a non-employee performance-based equity award, which were both triggered by the acquisition of the TaxACT business, and the related expense was allocated to general and administrative expense.  Stock-based compensation expense for the three and six months ended June 30, 2012 and 2011 is allocated among the following captions (in thousands):

(3) Other loss (income) for the three and six months ended June 30, 2012 and 2011 is allocated among the following captions (in thousands):

(4) Calculation excludes the income effect of dilutive derivative instruments.

(1) Amounts do not include amortization of acquired technology and costs associated with the operation of the Company's data centers that serve its search business, including depreciation, personnel expenses (including stock-based compensation expense), energy, and bandwidth costs.

(2) Amounts do not include amortization of acquired technology and costs associated with the operation of the Company's data center that serves its tax preparation business, including depreciation, personnel expenses, (including stock-based compensation expense), energy, and bandwidth costs, and personnel costs associated with customer service.

(1) Blucora's Adjusted EBITDA is calculated by adjusting net income determined in accordance with generally accepted accounting principles ("GAAP") to exclude the effects of loss from discontinued operations (which includes loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes), income taxes, depreciation, amortization of acquired intangible assets, stock-based compensation expense, and other loss (income),net (which includes such items as interest expense, interest income, derivative instrument gains or losses, foreign currency gains or losses, gains or losses from the disposal of assets, adjustments to the fair values of contingent liabilities related to business combinations, and gains on resolutions of contingencies), as detailed above.  Blucora's management believes that Adjusted EBITDA provides meaningful supplemental information regarding the Company's performance by excluding certain expenses and gains that management believes are not indicative of its core business operating results.  Blucora uses this non-GAAP financial measure for internal management purposes, when publicly providing guidance on possible future results, and as a means to evaluate period-to-period comparisons.  Blucora believes that Adjusted EBITDA is a common measure used by investors and analysts to evaluate its performance, that it provides a more complete understanding of the results of operations and trends affecting the Company's business when viewed together with GAAP results, and that management and investors benefit from referring to this non-GAAP financial measure.

Blucora's Non-GAAP net income and Non-GAAP earnings per share is calculated by adjusting GAAP net income to exclude the effects of discontinued operations, net of taxes (which includes loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes), loss from the sale of discontinued operations, net of taxes, stock-based compensation expense, amortization of  acquired intangible assets, gain or loss on derivatives, the cash tax impact of those adjustments to GAAP net income, and non-cash portion of income tax expense from continuing operations, as detailed in the accompanying table to the preliminary condensed consolidated financial statements (unaudited).  The Company excludes the non-cash portion of income tax expense because of its ability to offset a substantial portion of its cash tax liabilities by using these deferred tax assets.  The majority of these deferred tax assets will expire if unutilized in 2020.

Blucora's management believes that non-GAAP net income and non-GAAP earnings per share provide meaningful supplemental information to management, investors and analysts regarding the Company's performance and the valuation of its business by excluding items in the statement of operations that management does not consider part of the Company's ongoing operations or have not been, or are not expected to be, settled in cash.  Additionally, Blucora's management believes that non-GAAP net income and non-GAAP earnings per share are common measures used by investors and analyst to evaluate the Company's performance and the valuation of its business.

Adjusted EBITDA, non-GAAP net income and non-GAAP earnings per share should be evaluated in light of the Company's financial results prepared in accordance with GAAP, and should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income.

(2) As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited).

(3) Other loss (income), net includes such items as interest expense, interest income, derivative instrument gains or losses, foreign currency gains or losses, gains or losses from the disposal of assets, adjustments to the fair values of contingent liabilities related to business combinations, and gains on resolutions of contingencies.

(4) Amounts previously disclosed have been revised to reflect the effect of classifying the Company's Mercantila e-commerce business as discontinued operations.

(5) Other loss, net, primarily consists of interest expense, interest income, derivative instrument gains or losses, and gains or losses from the disposal of assets.