Categories: Wire Stories

Blucora Announces Second Quarter 2021 Results

DALLAS, Aug. 04, 2021 (GLOBE NEWSWIRE) — Blucora, Inc. (NASDAQ: BCOR), a leading provider of technology-enabled, tax focused financial solutions, today announced financial results for the second quarter ended June�30, 2021.

Second Quarter Highlights and Recent Developments

  • Total revenue increased to $254.3 million, or a 58% increase versus Q2 2020
  • GAAP Net Income of $31.6 million, or $0.64 per diluted share
  • Non-GAAP Net Income of $63.1 million, or $1.28 per diluted share
  • Total client assets ended the quarter up 28% year-over-year to $87.8 billion, with $39.4 billion, or 44.9% in advisory assets
  • Advisory assets increased 49% year-over-year, including approximately $5.3 billion in Avantax Planning Partners (“APP”) assets
  • Agreed to acquire Headquarters Advisory Group, LLC, an existing FP with approximately $1.1 billion in assets; once closed, the assets would expand the nationwide footprint of Avantax’s in-house RIA

“Our wealth management and tax software businesses continue to exceed expectations during the year, both completing a strong second quarter”, commented Chris Walters, Blucora’s President and Chief Executive Officer. Mr. Walters continued, “We continue to operate effectively in executing our strategic priorities, which were designed to drive long-term sustainable growth for both businesses.”

Summary Financial Performance: Q2 2021
($ in millions except per share amounts)

  Q2 2021   Q2 2020   Change
Revenue:          
Wealth Management $ 162.4       $ 115.9       40%    
Tax Software $ 91.9       $ 45.2       103%    
Total Revenue $ 254.3       $ 161.1       58%    
Segment Operating Income          
Wealth Management $ 21.4       $ 11.7       83%    
Tax Software $ 63.4       $ 6.7       846%    
Total Segment Operating Income $ 84.8       $ 18.4       361%    
Unallocated Corporate-Level General and Administrative Expenses $ (6.3 )     $ (5.8 )     (9)%    
GAAP:          
Operating Income (Loss) $ 41.6       $ (4.6 )     1004%    
Net Income $ 31.6       $ 49.6       (36)%    
Diluted Net Income Per Share $ 0.64       $ 1.03       (38)%    
Non-GAAP: (1)          
Adjusted EBITDA $ 78.6       $ 12.6       524%    
Net Income $ 63.1       $ 4.5       1302%    
Diluted Net Income per Share $ 1.28       $ 0.09       1322%    

_________________________
(1)   See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.

Third Quarter and Full Year 2021 Outlook

($ in millions except per share amounts) 3Q 2021 Full Year 2021
Wealth Management Revenue $158.5 – $162.5 $631.5 – $649.5
Tax Software Revenue $5.0 – $5.5 $223.5 – $226.5
Total Revenue $163.5 – $168.0 $855.0 – $876.0
Wealth Management Segment Operating Income $16.5 – $18.0 $79.0 – $83.5
Tax Software Segment Operating Income ($15.5) – ($15.0) $80.0 – $82.0
Unallocated Corporate-Level General and Administrative Expenses $7.5 – $7.0 $27.5 – $26.5
GAAP:    
Net Income (loss) ($34.0) – $(30.5) ($8.5) – $1.0
Net Income (loss) per diluted share ($0.69) – ($0.62) ($0.17) – $0.02
Non-GAAP:    
Adjusted EBITDA (1) ($6.5) – ($4.0) $131.5 – $139.0
Non-GAAP Net Income (loss) (1) ($19.0) – ($16.0) $76.0 – $84.5
Non-GAAP Net Income (loss) per diluted share (1) ($0.39) – ($0.33) $1.52 – $1.70

____________________________

(1)   See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.

Conference Call and Webcast

A conference call and live webcast will be held today at 8:30 a.m. Eastern Time during which the Company will further discuss second quarter results, its outlook for full year 2021, its tax season update, and other business matters. We will also provide supplemental financial information to our results on the Investor Relations section of the Blucora corporate website at www.blucora.com prior to the call. The supplemental financial information has also been furnished with the SEC on Form 8-K. A replay of the call will be available on our website.

About Blucora®

Blucora, Inc. (NASDAQ: BCOR) is a provider of data and technology-driven solutions that empowers people to improve their financial wellness. Blucora operates in two segments including (i) wealth management, through its Avantax Wealth Management and Avantax Planning Partners brands, with a collective $88 billion in total client assets as of June 30, 2021 and (ii) tax software, through its TaxAct business, a market leader in tax software with approximately 3 million consumer and approximately 24,500 professional users in 2021. With integrated tax-focused software and wealth management, Blucora is uniquely positioned to assist our customers in achieving better long-term outcomes via holistic, tax-advantaged solutions. For more information on Blucora, visit www.blucora.com.

Source: Blucora

Blucora Investor Relations
Dee Littrell (972) 870-6463
IR@Blucora.com

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecasts,” “future,” “will,” “projects,” “predicts,” “potential,” “continues,” “target,” “outlook” and similar expressions and variations. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: the impact of the coronavirus 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 relief; our ability to effectively implement our future business plans and growth strategy; our ability to effectively compete within our industry; our ability to attract and retain financial professionals, qualified employees, clients, and customers, as well as our ability to provide strong customer/client service; our ability to close, finance, and realize all of the anticipated benefits of 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 fulfill the closing conditions to, and consummate, the acquisition of Headquarters Advisory Group; our ability to retain employees and acquired client assets following such acquisition; 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; 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; risks associated with legal proceedings, including litigation and regulatory proceedings; our ability to manage leadership and employee transitions, including costs and time burdens on management and our board of directors related thereto; political and economic conditions and events that directly or indirectly impact the wealth management and tax 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; the compromising of confidentiality, availability or integrity of information, including cyberattacks; our expectations concerning the revenues we generate from fees associated with the financial products that we distribute; risks related to goodwill and other intangible asset impairment; our ability to develop, establish, and maintain strong brands; risks associated with the use and implementation of information technology and the effect of security breaches, computer viruses, and computer hacking attacks; our ability to comply with laws and regulations regarding privacy and protection of user data; our ability to maintain our relationships with third-party partners, providers, suppliers, vendors, distributors, contractors, financial institutions, industry associations, and licensing partners, and our expectations regarding and reliance on the products, tools, platforms, systems, and services provided by these third parties; our beliefs and expectations regarding the seasonality of our business; 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. A more detailed description of these and certain other factors that could affect actual results is included in the Company’s filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as may be required by law.

Blucora, Inc.
Condensed Consolidated Statements of Operations
(Unaudited) (Amounts in thousands, except per share data)

  Three months ended
June 30,
  Six months ended
June 30,
  2021   2020   2021   2020
Revenues:              
Wealth management services revenue $ 162,395       $ 115,884       $ 316,886       $ 260,873    
Tax software services revenue 91,917       45,238       215,809       163,569    
Total revenue 254,312       161,122       532,695       424,442    
Operating expenses:              
Cost of revenue:              
Wealth management services cost of revenue 113,910       83,868       222,533       186,210    
Tax software services cost of revenue 4,429       3,054       10,007       7,067    
Total cost of revenue 118,339       86,922       232,540       193,277    
Engineering and technology 7,231       7,377       14,359       15,892    
Sales and marketing 34,848       40,057       112,410       119,767    
General and administrative 23,832       20,200       48,517       44,928    
Acquisition and integration 18,169       2,824       26,272       8,506    
Depreciation 3,204       1,675       5,504       3,471    
Amortization of other acquired intangible assets 7,063       6,673       14,238       14,421    
Impairment of goodwill —       —       —       270,625    
Total operating expenses 212,686       165,728       453,840       670,887    
Operating income (loss) 41,626       (4,606 )     78,855       (246,445 )  
Other loss, net (1) (8,024 )     (5,288 )     (15,907 )     (11,423 )  
Income (loss) before income taxes 33,602       (9,894 )     62,948       (257,868 )  
Income tax benefit (expense) (1,994 )     59,539       (3,694 )     (7,981 )  
Net income (loss) $ 31,608       $ 49,645       $ 59,254       $ (265,849 )  
Net income (loss) per share:              
Basic $ 0.65       $ 1.04       $ 1.22       $ (5.55 )  
Diluted $ 0.64       $ 1.03       $ 1.20       $ (5.55 )  
Weighted average shares outstanding:              
Basic 48,508       47,941       48,384       47,884    
Diluted 49,385       48,092       49,241       47,884    

_________________________
(1)   Other loss, net consisted of the following (in thousands):

  Three months ended
June 30,
  Six months ended
June 30,
  2021   2020   2021   2020
Interest expense $ 7,302     $ 4,840       $ 14,485       $ 10,156    
Amortization of debt issuance costs 377     331       740       644    
Accretion of debt discounts 284     70       561       138    
Total interest expense 7,963     5,241       15,786       10,938    
Interest income —     (11 )     (2 )     (25 )  
Other 61     58       123       510    
Other loss, net $ 8,024     $ 5,288       $ 15,907       $ 11,423    


Blucora, Inc.
Condensed Consolidated Balance Sheets
(Unaudited) (Amounts in thousands)

  June 30,
2021
  December 31,
2020
ASSETS      
Current assets:      
Cash and cash equivalents $ 232,409       $ 150,125    
Cash segregated under federal or other regulations 591       637    
Accounts receivable, net of allowance 18,784       12,736    
Commissions and advisory fees receivable 26,662       26,132    
Other receivables 1,045       717    
Prepaid expenses and other current assets, net 13,972       10,321    
Total current assets 293,463       200,668    
Long-term assets:      
Property and equipment, net 65,004       58,500    
Right-of-use assets, net 21,245       23,455    
Goodwill, net 454,821       454,821    
Other intangible assets, net 308,743       322,179    
Other long-term assets 13,613       4,569    
Total long-term assets 863,426       863,524    
Total assets $ 1,156,889       $ 1,064,192    
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 10,164       $ 9,290    
Commissions and advisory fees payable 19,170       19,021    
Accrued expenses and other current liabilities 80,359       56,419    
Deferred revenue—current 5,084       12,298    
Lease liabilities—current 3,768       2,304    
Current portion of long-term debt, net 1,788       1,784    
Total current liabilities 120,333       101,116    
Long-term liabilities:      
Long-term debt, net 552,828       552,553    
Deferred tax liability, net 29,700       30,663    
Deferred revenue—long-term 5,784       6,247    
Lease liabilities—long-term 34,765       36,404    
Other long-term liabilities 30,972       24,919    
Total long-term liabilities 654,049       650,786    
Total liabilities 774,382       751,902    
       
Stockholders’ equity:      
Common stock, par $0.0001—900,000 authorized shares; 49,962 shares issued and 48,656 shares outstanding at June 30, 2021; 49,483 shares issued and 48,177 shares outstanding at December 31, 2020 5       5    
Additional paid-in capital 1,609,193       1,598,230    
Accumulated deficit (1,198,292 )     (1,257,546 )  
Treasury stock, at cost—1,306 shares at June 30, 2021 and December 31, 2020 (28,399 )     (28,399 )  
Total stockholders’ equity 382,507       312,290    
Total liabilities and stockholders’ equity $ 1,156,889       $ 1,064,192    

Blucora, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited) (Amounts in thousands)

  Six months ended June 30,
  2021   2020
Operating activities:      
Net income (loss) $ 59,254       $ (265,849 )  
Adjustments to reconcile net income (loss) to net cash from operating activities:      
Stock-based compensation 10,770       2,703    
Depreciation and amortization of acquired intangible assets 21,583       19,253    
Impairment of goodwill —       270,625    
Reduction of right-of-use lease assets 1,420       3,196    
Deferred income taxes (963 )     8,784    
Amortization of debt issuance costs 740       644    
Accretion of debt discounts 561       138    
Change in fair value of acquisition-related contingent consideration 17,800       —    
Accretion of lease liability 1,046       901    
Other 481       670    
Cash provided (used) by changes in operating assets and liabilities:      
Accounts receivable (5,948 )     184    
Commissions and advisory fees receivable (530 )     5,586    
Other receivables (406 )     (2,809 )  
Prepaid expenses and other current assets (3,651 )     1,435    
Other long-term assets (9,239 )     3,162    
Accounts payable 874       2,942    
Commissions and advisory fees payable 149       (5,210 )  
Lease liabilities (431 )     (2,572 )  
Deferred revenue (7,677 )     (8,299 )  
Accrued expenses and other current and long-term liabilities 11,438       (1,110 )  
Net cash provided by operating activities 97,271       34,374    
Investing activities:      
Purchases of property and equipment (13,544 )     (19,072 )  
Asset acquisitions (881 )     —    
Net cash used by investing activities (14,425 )     (19,072 )  
Financing activities:      
Proceeds from credit facilities, net of debt issuance costs and debt discounts (502 )     55,000    
Payments on credit facilities (906 )     (65,625 )  
Proceeds from stock option exercises 284       25    
Proceeds from issuance of stock through employee stock purchase plan 1,845       1,201    
Tax payments from shares withheld for equity awards (1,329 )     (1,006 )  
Net cash used by financing activities (608 )     (10,405 )  
Net increase in cash, cash equivalents, and restricted cash 82,238       4,897    
Cash, cash equivalents, and restricted cash, beginning of period 150,762       86,450    
Cash, cash equivalents, and restricted cash, end of period $ 233,000       $ 91,347    

Blucora, Inc.
Segment Information
(Unaudited) (Amounts in thousands)

  Three months ended
June 30,
  Six months ended
June 30,
  2021   2020   2021   2020
Revenue:              
Wealth Management (1) $ 162,395       $ 115,884       $ 316,886       $ 260,873    
Tax Software (1) 91,917       45,238       215,809       163,569    
Total revenue 254,312       161,122       532,695       424,442    
Operating income (loss):              
Wealth Management 21,396       11,731       40,792       34,329    
Tax Software 63,448       6,659       114,336       44,412    
Corporate-level activity (2) (43,218 )     (22,996 )     (76,273 )     (325,186 )  
Total operating income (loss) 41,626       (4,606 )     78,855       (246,445 )  
Other loss, net (8,024 )     (5,288 )     (15,907 )     (11,423 )  
Income (loss) before income taxes 33,602       (9,894 )     62,948       (257,868 )  
Income tax benefit (expense) (1,994 )     59,539       (3,694 )     (7,981 )  
Net income (loss) $ 31,608       $ 49,645       $ 59,254       $ (265,849 )  

_________________________
(1)   Revenues by major category within each segment are presented below (in thousands):

  Three months ended
June 30,
  Six months ended
June 30,
  2021   2020   2021   2020
Wealth Management:              
Advisory $ 96,508      $ 66,303      $ 187,627      $ 145,060   
Commission 51,702      39,836      104,236      90,416   
Asset-based 5,526      3,981      10,855      14,560   
Transaction and fee 8,659      5,764      14,168      10,837   
Total Wealth Management revenue $ 162,395      $ 115,884      $ 316,886      $ 260,873   
Tax Software:              
Consumer $ 88,846      $ 44,421      $ 199,413      $ 148,242   
Professional 3,071      817      16,396      15,327   
Total Tax Software revenue $ 91,917      $ 45,238      $ 215,809      $ 163,569   

(2) Corporate-level activity included the following (in thousands):

  Three months ended
June 30,
  Six months ended
June 30,
  2021   2020   2021   2020
Unallocated corporate-level general and administrative expenses $ 6,259     $ 5,810     $ 11,953     $ 12,826  
Stock-based compensation 5,160     3,904     10,770     2,703  
Acquisition and integration costs 18,169     2,824     26,272     8,506  
Depreciation 4,102     2,412     7,345     4,832  
Amortization of acquired intangible assets 7,063     6,673     14,238     14,421  
Impairment of goodwill —     —     —     270,625  
Executive transition costs —     636     —     9,820  
Headquarters relocation costs —     737     —     1,453  
Contested proxy and other legal and consulting costs 2,465     —     5,695     —  
Total corporate-level activity $ 43,218     $ 22,996     $ 76,273     $ 325,186  

Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures (1)

Adjusted EBITDA Reconciliation (1)
(Unaudited) (Amounts in thousands)

  Three months ended
June 30,
  Six months ended
June 30,
  2021   2020   2021   2020
Net income (loss) (2) $ 31,608     $ 49,645       $ 59,254     $ (265,849 )  
Stock-based compensation 5,160     3,904       10,770     2,703    
Depreciation and amortization of acquired intangible assets 11,165     9,085       21,583     19,253    
Other loss, net 8,024     5,288       15,907     11,423    
Acquisition and integration—Excl. Change in fair value of acquisition-related contingent consideration 6,669     2,824       8,472     8,506    
Acquisition and integration—Change in fair value of acquisition-related contingent consideration 11,500     —       17,800     —    
Impairment of goodwill —     —       —     270,625    
Executive transition costs —     636       —     9,820    
Headquarter relocation costs —     737       —     1,453    
Contested proxy and other legal and consulting costs 2,465     —       5,695     —    
Income tax (benefit) expense 1,994     (59,539 )     3,694     7,981    
Adjusted EBITDA (1) $ 78,585     $ 12,580       $ 143,175     $ 65,915    

Non-GAAP Net Income and Non-GAAP Net Income Per Share Reconciliation (1)
(Unaudited) (Amounts in thousands, except per share amounts)

  Three months ended
June 30,
  Six months ended
June 30,
  2021   2020   2021   2020
Net income (loss) (2) $ 31,608       $ 49,645       $ 59,254       $ (265,849 )  
Stock-based compensation 5,160       3,904       10,770       2,703    
Amortization of acquired intangible assets 7,063       6,673       14,238       14,421    
Acquisition and integration—Excluding change in fair value of HKFS Contingent Consideration 6,669       2,824       8,472       8,506    
Acquisition and integration—Change in fair value of HKFS Contingent Consideration 11,500       —       17,800       —    
Impairment of goodwill —       —       —       270,625    
Executive transition costs —       636       —       9,820    
Headquarters relocation costs —       737       —       1,453    
Contested proxy and other legal and consulting costs 2,465       —       5,695       —    
Cash tax impact of adjustments to GAAP net income (649 )     (259 )     (1,192 )     (995 )  
Non-cash income tax (benefit) expense (694 )     (59,697 )     (963 )     7,340    
Non-GAAP net income $ 63,122       $ 4,463       $ 114,074       $ 48,024    
Per diluted share:              
Net income (loss) (2) (3) $ 0.64       $ 1.03       $ 1.20       $ (5.52 )  
Stock-based compensation 0.10       0.08       0.22       0.06    
Amortization of acquired intangible assets 0.14       0.14       0.29       0.30    
Acquisition and integration—Excluding change in fair value of HKFS Contingent Consideration 0.14       0.06       0.17       0.18    
Acquisition and integration—Change in fair value of HKFS Contingent Consideration 0.23       —       0.36       —    
Impairment of goodwill —       —       —       5.62    
Executive transition costs —       0.01       —       0.20    
Headquarters relocation costs —       0.02       —       0.03    
Contested proxy and other legal and consulting costs 0.05       —       0.12       —    
Cash tax impact of adjustments to GAAP net income (0.01 )     (0.01 )     (0.02 )     (0.02 )  
Non-cash income tax (benefit) expense (0.01 )     (1.24 )     (0.02 )     0.15    
Non-GAAP net income per share $ 1.28       $ 0.09       $ 2.32       $ 1.00    
Weighted average shares outstanding used in computing per diluted share amounts 49,385       48,092       49,241       48,172    

Adjusted EBITDA Reconciliation for Forward-Looking Guidance (1)
(Amounts in thousands)

  Ranges for the three months ending   Ranges for the year ending
  September 30, 2021   December 31, 2021
  Low   High   Low   High
Net income (loss) $ (34,000 )     $ (30,500 )     $ (8,500 )     $ 1,000  
Stock-based compensation 5,400       5,200       21,700       21,300  
Depreciation and amortization of acquired intangible assets 12,200       12,000       46,100       45,600  
Other loss, net 8,400       8,000       32,600       31,900  
Acquisition, integration, and contested proxy and other legal and consulting costs (4) 3,100       2,800       38,100       37,400  
Income tax expense (1,600 )     (1,500 )     1,500       1,800  
Adjusted EBITDA $ (6,500 )     $ (4,000 )     $ 131,500       $ 139,000  

Non-GAAP Net Income and Non-GAAP Net Income Per Share Reconciliation
for Forward-Looking Guidance (1)
(Amounts in thousands, except per share amounts)

  Ranges for the three months ending   Ranges for the year ending
  September 30, 2021   December 31, 2021
  Low   High   Low   High
Net income (loss) $ (34,000 )     $ (30,500 )     $ (8,500 )     $ 1,000    
Stock-based compensation 5,400       5,200       21,700       21,300    
Amortization of acquired intangible assets 7,000       7,000       28,300       28,200    
Acquisition, integration, and contested proxy and other legal and consulting costs (4) 3,100       2,800       38,100       37,400    
Cash tax impact of adjustments to net loss (500 )     (400 )     (2,200 )     (2,000 )  
Non-cash income tax benefit —       (100 )     (1,400 )     (1,400 )  
Non-GAAP net income $ (19,000 )     $ (16,000 )     $ 76,000       $ 84,500    
Per diluted share:              
Net income (loss) (3) $ (0.69 )     $ (0.62 )     $ (0.17 )     $ 0.02    
Stock-based compensation 0.11       0.11       0.43       0.43    
Amortization of acquired intangible assets 0.14       0.13       0.57       0.57    
Acquisition, integration, and contested proxy and other legal and consulting costs (4) 0.06       0.06       0.76       0.75    
Cash tax impact of adjustments to net loss (0.01 )     (0.01 )     (0.04 )     (0.04 )  
Non-cash income tax benefit —       —       (0.03 )     (0.03 )  
Non-GAAP net income per share $ (0.39 )     $ (0.33 )     $ 1.52       $ 1.70    
Weighted average shares outstanding used in computing per diluted share amounts 49,100       49,000       50,000       49,800    

Notes to Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measure

(1) We define Adjusted EBITDA as net income (loss), determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets, other loss, net, acquisition and integration costs, impairment of goodwill, executive transition costs, headquarters relocation costs, contested proxy and other legal and consulting costs, and income tax benefit (expense). Other loss, net primarily constitutes our interest expense, net of interest income. Acquisition and integration costs primarily relate to the acquisition of HKFS and the acquisition of 1st Global, including the increase to the contingent liability reserve related to a regulatory inquiry assumed in the acquisition of 1st Global. Impairment of goodwill relates to the impairment of our Wealth Management reporting unit goodwill in the first quarter of 2020. Executive transition costs relate to the departure of certain Company executives in the first quarter of 2020. Headquarters relocation costs relate to the process of moving from our Dallas and Irving offices to our new headquarters.

We believe that Adjusted EBITDA provides meaningful supplemental information regarding our performance. We use this non-GAAP financial measure for internal management and compensation purposes, when publicly providing guidance on possible future results, and as a means to evaluate period-to-period comparisons. We believe that Adjusted EBITDA is a common measure used by investors and analysts to evaluate our performance, that it provides a more complete understanding of the results of operations and trends affecting our business when viewed together with GAAP results, and that management and investors benefit from referring to this non-GAAP financial measure. Items excluded from Adjusted EBITDA are significant and necessary components to the operations of our business and, therefore, Adjusted EBITDA should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income (loss). Other companies may calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

We define non-GAAP net income as net income (loss), determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, acquisition and integration costs, impairment of goodwill, executive transition costs, headquarters relocation costs, contested proxy and other legal and consulting costs, the related cash tax impact of those adjustments, and non-cash income tax (benefit) expense. We exclude the non-cash portion of income tax expense because of our ability to offset a substantial portion of our cash tax liabilities by using deferred tax assets, which primarily consist of U.S. federal net operating losses. The majority of these net operating losses will either be utilized or expire between 2021 and 2024.

We believe that non-GAAP net income and non-GAAP net income per share provide meaningful supplemental information to management, investors, and analysts regarding our performance and the valuation of our business by excluding items in the statement of operations that we do not consider part of our ongoing operations or have not been, or are not expected to be, settled in cash. Additionally, we believe that non-GAAP net income and non-GAAP net income per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP net income and non-GAAP net income per share should be evaluated in light of our 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 (loss) and net income (loss) per share. Other companies may calculate non-GAAP net income and non-GAAP net income per share differently, and, therefore, our non-GAAP net income and non-GAAP net income per share may not be comparable to similarly titled measures of other companies.

(2) As presented in the condensed consolidated statements of operations (unaudited).

(3) Any difference in the “per diluted share” amounts between this table and the condensed consolidated statements of comprehensive income is due to using different weighted average shares outstanding in the event that there is GAAP net loss but non-GAAP net income and vice versa.

(4) The breakout of components cannot be determined on a forward-looking basis without unreasonable efforts.

 

Alex

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