UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

  
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20212022
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
bcor-20220930_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)
(972) 870-6400
(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☐ýAccelerated filerý☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ý No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of October 28, 2021, 48,718,71825, 2022, 47,884,243 shares of the registrant’s Common Stock were outstanding.


TABLE OF CONTENTS
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This report includes some of the trademarks, trade names, and service marks of Blucora, Inc. (referred to throughout this report as “Blucora,” the “Company,” “we,” “us,” or “our”), including Blucora, Avantax Wealth Management, Avantax Planning Partners, Avantax Retirement Plan Services, HD Vest, 1st Global, HKFS, and TaxAct. Each one of these trademarks, trade names, or service marks is either (i) our registered trademark, (ii) a trademark for which we have a pending application, (iii) a trade name or service mark for which we claim common law rights, or (iv) a registered trademark or application for registration that we have been authorized by a third party to use.
Solely for convenience, the trademarks, service marks, and trade names included in this report are without the ®, ™ or other applicable symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, and trade names. This report may also include additional trademarks, service marks, and trade names of others, which are the property of their respective owners. All trademarks, service marks, and trade names included in this report are, to our knowledge, the property of their respective owners.
References to our or our subsidiaries’ website addresses or the website addresses of third parties in this report do not constitute incorporation by reference of the information contained on such websites and should not be considered part of this report.

Blucora, Inc. | Q3 20212022 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 generate strong performance for our clients and the impact of the financial markets on our clients’ portfolios;
•our expectations concerning the revenues we generate from fees associated with the financial products that we distribute;
•our ability to attract and retain financial professionals, qualified employees, clients, and customers, as well as our ability to provide strong customer/client service;
•the impact of the COVID-19 pandemic on our results of operations and our business, including the impact of the resulting economic and market disruption, the extension of tax filing deadlines, and other related government actions;
•our ability to retain employees and acquired client assets following acquisitions;
•our future capital requirements and the availability of financing, if necessary;
•our ability to meet our current and future debt service obligations, including our ability to maintain compliance with our debt covenants;
•any downgrade of the Company’s credit ratings;
•our ability to generate strong performance for our clients and the impact of the financial markets on our clients’ portfolios;
•the impact of new or changing legislation and regulations (or interpretations thereof) on our business, including our ability to successfully address and comply with such legislation and regulations (or interpretations thereof) and increased costs, reductions of revenue, and potential fines, penalties, or disgorgement to which we may be subject as a result thereof;
•risks, burdens, and costs, including fines, penalties, or disgorgement, associated with our business being subjected to regulatory inquiries, investigations, or initiatives, including those of the Financial Industry Regulatory Authority, Inc. and the Securities and Exchange Commission (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;
•the compromising of confidentiality, availability or integrity of information, including cyberattacks;
•political and economic conditions and events that directly or indirectly impact the wealth management and tax preparation software industries;
•the impact of the continuing COVID-19 pandemic on our ability to respond to rapid technologicalresults 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, and 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;
•risksin customer behavior related to goodwill and other intangible asset impairment;
•our ability to develop, establish, and maintain strong brands;
•risks associated with the use and implementation of information technology and the effect of security breaches, computer viruses, and computer hacking attacks;
Blucora, Inc. | Q3 2021 Form 10-Q 3

•our ability to comply with laws and regulations regarding privacy and protection of user data;foregoing;
•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 ability to respond to rapid technological changes, including our ability to successfully release new products and services or improve upon existing products and services;
•risks related to goodwill and acquired intangible asset impairment;
Blucora, Inc. | Q3 2022 Form 10-Q 3

•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;
•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.others;
•disruptions to our business and operations resulting from our agreement to sell our Tax Software business (or the announcement thereof);
•our inability to successfully close the sale of our Tax Software business;
•our failure to realize the expected benefits of the transaction if it does close;
•if we are unable to secure financing on desirable terms after the consummation of the sale of our Tax Software business, our capital structure may include limited or no indebtedness and we may not be able to return capital to stockholders in the amount anticipated; 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, 2020, as supplemented by those identified under Part II, Item 1A, “Risk Factors” and elsewhere in this Form 10-Q,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. | Q3 20212022 Form 10-Q 4


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)amounts)
September 30,
2022		December 31,
2021
September 30,
2021		December 31,
2020		(Unaudited)
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$184,926 $150,125 Cash and cash equivalents$91,104 $134,824 
Cash segregated under federal or other regulations536 637 
Accounts receivable, net of allowance17,886 12,736 
Accounts receivable, netAccounts receivable, net25,683 21,906 
Commissions and advisory fees receivableCommissions and advisory fees receivable25,003 26,132 Commissions and advisory fees receivable20,486 25,073 
Other receivables468 717 
Prepaid expenses and other current assets, net11,119 10,321 
Prepaid expenses and other current assetsPrepaid expenses and other current assets19,670 18,476 
Total current assetsTotal current assets239,938 200,668 Total current assets156,943 200,279 
Long-term assets:Long-term assets:Long-term assets:
Property and equipment, net68,950 58,500 
Property, equipment, and software, netProperty, equipment, and software, net75,086 73,638 
Right-of-use assets, netRight-of-use assets, net20,818 23,455 Right-of-use assets, net19,753 20,466 
Goodwill454,821 454,821 
Other intangible assets, net304,435 322,179 
Goodwill, netGoodwill, net454,821 454,821 
Acquired intangible assets, netAcquired intangible assets, net288,610 302,289 
Other long-term assetsOther long-term assets14,519 4,569 Other long-term assets30,376 20,450 
Total long-term assetsTotal long-term assets863,543 863,524 Total long-term assets868,646 871,664 
Total assetsTotal assets$1,103,481 $1,064,192 Total assets$1,025,589 $1,071,943 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$8,932 $9,290 Accounts payable$3,804 $8,216 
Commissions and advisory fees payableCommissions and advisory fees payable18,297 19,021 Commissions and advisory fees payable13,803 17,940 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities75,375 56,419 Accrued expenses and other current liabilities33,948 65,678 
Deferred revenue—current5,469 12,298 
Lease liabilities—current4,429 2,304 
Current deferred revenueCurrent deferred revenue5,908 13,180 
Current lease liabilitiesCurrent lease liabilities5,112 4,896 
Current portion of long-term debtCurrent portion of long-term debt1,790 1,784 Current portion of long-term debt— 1,812 
Total current liabilitiesTotal current liabilities114,292 101,116 Total current liabilities62,575 111,722 
Long-term liabilities:Long-term liabilities:Long-term liabilities:
Long-term debt, netLong-term debt, net552,987 552,553 Long-term debt, net521,094 553,134 
Deferred tax liability, net29,502 30,663 
Deferred revenue—long-term5,553 6,247 
Lease liabilities—long-term34,020 36,404 
Long-term lease liabilitiesLong-term lease liabilities31,176 33,267 
Deferred tax liabilities, netDeferred tax liabilities, net19,546 20,124 
Long-term deferred revenueLong-term deferred revenue4,627 5,322 
Other long-term liabilitiesOther long-term liabilities7,992 24,919 Other long-term liabilities14,981 6,752 
Total long-term liabilitiesTotal long-term liabilities630,054 650,786 Total long-term liabilities591,424 618,599 
Total liabilitiesTotal liabilities744,346 751,902 Total liabilities653,999 730,321 
Commitments and contingencies (Note 8)Commitments and contingencies (Note 8)00Commitments and contingencies (Note 8)
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
Common stock, par value $0.0001 per share—900,000 shares authorized; 50,025 shares issued and 48,719 shares outstanding at September 30, 2021; 49,483 shares issued and 48,177 shares outstanding at December 31, 20205 5 
Common stock, par value $0.0001 per share—900,000 shares authorized; 50,955 shares issued and 47,774 shares outstanding as of September 30, 2022; 50,137 shares issued and 48,831 shares outstanding at December 31, 2021Common stock, par value $0.0001 per share—900,000 shares authorized; 50,955 shares issued and 47,774 shares outstanding as of September 30, 2022; 50,137 shares issued and 48,831 shares outstanding at December 31, 20215 5 
Additional paid-in capitalAdditional paid-in capital1,613,624 1,598,230 Additional paid-in capital1,632,569 1,619,805 
Accumulated deficitAccumulated deficit(1,226,095)(1,257,546)Accumulated deficit(1,197,585)(1,249,789)
Treasury stock, at cost—1,306 shares at September 30, 2021 and December 31, 2020(28,399)(28,399)
Treasury stock, at cost—3,181 shares as of September 30, 2022 and 1,306 shares as of December 31, 2021Treasury stock, at cost—3,181 shares as of September 30, 2022 and 1,306 shares as of December 31, 2021(63,399)(28,399)
Total stockholders’ equityTotal stockholders’ equity359,135 312,290 Total stockholders’ equity371,590 341,622 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$1,103,481 $1,064,192 Total liabilities and stockholders’ equity$1,025,589 $1,071,943 

See accompanying notes to unaudited condensed consolidated financial statements.notes.
Blucora, Inc. | Q3 20212022 Form 10-Q 5

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

Three months ended September 30,Nine months ended September 30, Three Months Ended September 30,Nine Months Ended
September 30,
2021202020212020 2022202120222021
Revenue:Revenue:Revenue:
Wealth management services revenue$169,135 $135,932 $486,021 $396,805 
Tax software services revenue5,039 39,421 220,848 202,990 
Wealth ManagementWealth Management$165,032 $169,135 $494,104 $486,021 
Tax SoftwareTax Software6,664 5,039 242,028 220,848 
Total revenueTotal revenue174,174 175,353 706,869 599,795 Total revenue171,696 174,174 736,132 706,869 
Operating expenses:Operating expenses:Operating expenses:
Cost of revenue:Cost of revenue:Cost of revenue:
Wealth management services cost of revenue120,641 96,122 343,174 282,332 
Tax software services cost of revenue2,323 2,692 12,330 9,759 
Wealth ManagementWealth Management105,301 120,641 338,819 343,174 
Tax SoftwareTax Software3,879 2,323 20,178 12,330 
Total cost of revenueTotal cost of revenue122,964 98,814 355,504 292,091 Total cost of revenue109,180 122,964 358,997 355,504 
Engineering and technologyEngineering and technology7,874 6,007 22,233 21,899 Engineering and technology7,474 7,874 24,598 22,233 
Sales and marketingSales and marketing28,399 31,018 140,809 150,785 Sales and marketing30,485 28,399 162,396 140,809 
General and administrativeGeneral and administrative23,102 18,605 71,619 63,533 General and administrative27,778 23,102 83,499 71,619 
Acquisition and integrationAcquisition and integration2,241 10,276 28,513 18,782 Acquisition and integration416 2,241 (4,710)28,513 
DepreciationDepreciation2,867 1,874 8,371 5,345 Depreciation3,839 2,867 9,907 8,371 
Amortization of other acquired intangible assets7,009 7,746 21,247 22,167 
Impairment of goodwill— — — 270,625 
Amortization of acquired intangible assetsAmortization of acquired intangible assets6,342 7,009 19,435 21,247 
Total operating expensesTotal operating expenses194,456 174,340 648,296 845,227 Total operating expenses185,514 194,456 654,122 648,296 
Operating income (loss)Operating income (loss)(20,282)1,013 58,573 (245,432)Operating income (loss)(13,818)(20,282)82,010 58,573 
Other loss, net(8,295)(11,963)(24,202)(23,386)
Interest expense and other, netInterest expense and other, net(9,749)(8,295)(25,707)(24,202)
Income (loss) before income taxesIncome (loss) before income taxes(28,577)(10,950)34,371 (268,818)Income (loss) before income taxes(23,567)(28,577)56,303 34,371 
Income tax benefit (expense)Income tax benefit (expense)774 (15,256)(2,920)(23,237)Income tax benefit (expense)1,726 774 (4,099)(2,920)
Net income (loss)Net income (loss)$(27,803)$(26,206)$31,451 $(292,055)Net income (loss)$(21,841)$(27,803)$52,204 $31,451 
Net income (loss) per share:Net income (loss) per share:Net income (loss) per share:
BasicBasic$(0.57)$(0.55)$0.65 $(6.09)Basic$(0.46)$(0.57)$1.09 $0.65 
DilutedDiluted$(0.57)$(0.55)$0.64 $(6.09)Diluted$(0.46)$(0.57)$1.06 $0.64 
Weighted average shares outstanding:Weighted average shares outstanding:Weighted average shares outstanding:
BasicBasic48,707 48,039 48,492 47,936 Basic47,847 48,707 47,981 48,492 
DilutedDiluted48,707 48,039 49,373 47,936 Diluted47,847 48,707 49,153 49,373 
Comprehensive income (loss):
Net income (loss)$(27,803)$(26,206)$31,451 $(292,055)
Other comprehensive income, net of income taxes— — — 272 
Comprehensive income (loss)$(27,803)$(26,206)$31,451 $(291,783)

















See accompanying notes to unaudited condensed consolidated financial statements.notes.
Blucora, Inc. | Q3 20212022 Form 10-Q 6

BLUCORA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In(Unaudited) (In thousands)
Additional paid-in capitalAccumulated deficitAccumulated other comprehensive loss
Common stockTreasury stock
SharesAmountSharesAmountTotal
Balance as of December 31, 202049,483 $5 $1,598,230 $(1,257,546)$— (1,306)$(28,399)$312,290 
Common stock issued for stock options and restricted stock units132 — 63 — — — — 63 
Stock-based compensation— — 5,520 — — — — 5,520 
Tax payments from shares withheld for equity awards— — (865)— — — — (865)
Net income— — — 27,646 — — — 27,646 
Balance as of March 31, 202149,615 $5 $1,602,948 $(1,229,900)$— (1,306)$(28,399)$344,654 
Common stock issued for stock options, restricted stock units, and employee stock purchase plan347 — 1,989 — — — — 1,989 
Stock-based compensation— — 4,720 — — — — 4,720 
Tax payments from shares withheld for equity awards— — (464)— — — — (464)
Net income— — — 31,608 — — — 31,608 
Balance as of June 30, 202149,962 $5 $1,609,193 $(1,198,292)$— (1,306)$(28,399)$382,507 
Common stock issued for stock options and restricted stock units63 — 328 — — — — 328 
Stock-based compensation— — 4,387 — — — — 4,387 
Tax payments from shares withheld for equity awards— — (284)— — — — (284)
Net loss— — — (27,803)— — — (27,803)
Balance as of September 30, 202150,025 $5 $1,613,624 $(1,226,095)$— (1,306)$(28,399)$359,135 
Additional paid-in capitalAccumulated deficitAccumulated other comprehensive loss
Common stockTreasury stock
SharesAmountSharesAmountTotal
Balance as of December 31, 201949,059 $5 $1,586,972 $(914,791)$(272)(1,306)$(28,399)$643,515 
Common stock issued for stock options and restricted stock units89 — — — — — — — 
Stock-based compensation— — (1,201)— — — — (1,201)
Tax payments from shares withheld for equity awards— — (917)— — — — (917)
Cumulative translation adjustment— — — — 272 — — 272 
Net loss— — — (315,494)— — — (315,494)
Balance as of March 31, 202049,148 $5 $1,584,854 $(1,230,285)$— (1,306)$(28,399)$326,175 
Common stock issued for stock options, restricted stock units, and employee stock purchase plan192 — 1,226 — — — — 1,226 
Stock-based compensation— — 3,904 — — — — 3,904 
Tax payments from shares withheld for equity awards— — (89)— — — — (89)
Net income— — — 49,645 — — — 49,645 
Balance as of June 30, 202049,340 $5 $1,589,895 $(1,180,640)$— (1,306)$(28,399)$380,861 
Common stock issued for stock options and restricted stock units10 — — — — — — — 
Stock-based compensation— — 4,517 — — — — 4,517 
Tax payments from shares withheld for equity awards— — (28)— — — — (28)
Net loss— — — (26,206)— — — (26,206)
Balance as of September 30, 202049,350 $5 $1,594,384 $(1,206,846)$— (1,306)$(28,399)$359,144 
Common stockAdditional paid-in capitalAccumulated deficitTreasury 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 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 
Common stock issued pursuant to stock incentive and employee stock purchase plans537 — 2,402 — — — 2,402 
Stock repurchases— — — — 230 (4,463)(4,463)
Stock-based compensation— — 3,683 — — — 3,683 
Tax payments from shares withheld for equity awards— — (467)— — — (467)
Net income— — — 39,425 — — 39,425 
Balance as of June 30, 202250,921 $5 $1,628,591 $(1,175,744)3,181 $(63,399)$389,453 
Common stock issued pursuant to stock incentive and employee stock purchase plans34 — 307 — — — 307 
Stock-based compensation— — 3,725 — — — 3,725 
Tax payments from shares withheld for equity awards— — (54)— — — (54)
Net loss— — — (21,841)— — (21,841)
Balance as of September 30, 202250,955 $5 $1,632,569 $(1,197,585)3,181 $(63,399)$371,590 
Common stockAdditional paid-in capitalAccumulated deficitTreasury 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 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 
Common stock issued pursuant to stock incentive and employee stock purchase plans347 — 1,989 — — — 1,989 
Stock-based compensation— — 4,720 — — — 4,720 
Tax payments from shares withheld for equity awards— — (464)— — — (464)
Net income— — — 31,608 — — 31,608 
Balance as of June 30, 202149,962 $5 $1,609,193 $(1,198,292)1,306 $(28,399)$382,507 
Common stock issued pursuant to stock incentive and employee stock purchase plans63 — 328 — — — 328 
Stock-based compensation— — 4,387 — — — 4,387 
Tax payments from shares withheld for equity awards— — (284)— — — (284)
Net loss— — — (27,803)— — (27,803)
Balance as of September 30, 202150,025 $5 $1,613,624 $(1,226,095)1,306 $(28,399)$359,135 




See accompanying notes.
Blucora, Inc. | Q3 2022 Form 10-Q 7

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

 Nine Months Ended September 30,
 20222021
Operating activities:
Net income$52,204 $31,451 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of acquired intangible assets35,131 32,498 
Stock-based compensation17,129 15,499 
Change in the fair value of acquisition-related contingent consideration(5,320)19,500 
Reduction of right-of-use lease assets1,103 2,694 
Deferred income taxes(578)(1,161)
Amortization of debt discount and issuance costs2,084 1,979 
Accretion of lease liabilities1,522 731 
Other non-cash items4,387 1,371 
Changes in operating assets and liabilities, net of acquisitions and disposals:
Accounts receivable, net(3,670)(5,008)
Commissions and advisory fees receivable4,587 1,129 
Prepaid expenses and other current assets160 (549)
Other long-term assets(14,887)(10,898)
Accounts payable(4,412)(358)
Commissions and advisory fees payable(4,137)(500)
Lease liabilities(3,788)(1,047)
Deferred revenue(7,967)(7,523)
Accrued expenses and other current and long-term liabilities(11,632)(5,417)
Net cash provided by operating activities61,916 74,391 
Investing activities:
Purchases of property, equipment, and software(17,154)(21,624)
Asset acquisitions(3,743)(3,823)
Net cash used by investing activities(20,897)(25,447)
Financing activities:
Proceeds from credit facilities, net of debt discount and issuance costs— (502)
Payments on credit facilities(35,906)(1,359)
Acquisition-related contingent consideration payments(14,548)(13,150)
Stock repurchases(35,000)— 
Proceeds from issuance of stock through employee stock purchase plan2,324 1,845 
Tax payments from shares withheld for equity awards(2,090)(1,613)
Proceeds from stock option exercises481 535 
Net cash used by financing activities(84,739)(14,244)
Net increase (decrease) in cash, cash equivalents, and restricted cash(43,720)34,700 
Cash, cash equivalents, and restricted cash, beginning of period134,824 150,762 
Cash, cash equivalents, and restricted cash, end of period$91,104 $185,462 
Supplemental cash flow information:
Cash paid for income taxes$2,408 $2,864 
Cash paid for interest$23,005 $21,626 







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

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


See accompanying notes to unaudited condensed consolidated financial statements.
Blucora, Inc. | Q3 20212022 Form 10-Q 8

BLUCORA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Description of the Business
Blucora, Inc. (the “Company,” “Blucora,” “we,” “our,” or “us”) operates 2two primary businesses: the Wealth Management business and the digital Tax Software business.
Wealth Management
Our wealth managementWealth 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 thea 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 basedemployee-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”). Our employee-based RIA model, which we refer to as “Avantax Planning Partners,” also includes Avantax Wealth Management total client assets that have beenWe acquired from Avantax Wealth Management financial professionals.
OnHKFS in July 1, 2020 we acquired all of the issued and outstanding common stock of HKFS (the “HKFS Acquisition”). The operations of HKFS are included and subsequently rebranded it in our operating results as part of the Wealth Management segment from the date of the HKFS Acquisition. On January 4, 2021, we announced the rebranding of HKFS to Avantax Planning Partners (the “Rebranding”). The Rebranding was designedorder to create tighter brand alignment bringing the Wealth Management business underthrough one common and recognizable brand.

 Any reference to Avantax Planning Partners in this Form 10-Q is inclusive of HKFS.
Tax Software
TheOur Tax Software business consists of the operations of TaxAct, Inc. (“TaxAct,” the “Tax Software business,” or the “Tax Software segment”) and provides digital tax preparation services packaged tax software, and ancillary services for consumers, small business owners, and tax professionals through its website www.TaxAct.com and its mobile applications. We had referred to this business as the “Tax Preparation business” and “Tax Preparation segment” in previous filings.

TheOur 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.

In March 2020 and as a result of the COVID-19 pandemic, the Internal Revenue Service (“IRS”) extended the filing deadline for federal tax returns from April 15, 2020 to July 15, 2020. This filing extension resulted in the shifting of a significant portion of Tax Software segment revenue that would typically be earned in the first and second quarters of 2020 to the third quarter of 2020.

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

Segments
We have 2two reportable segments: (1) the Wealth Management segment and (2) the Tax Software segment.

Note 2: Summary of Significant Accounting Policies
Interim financial informationFinancial 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 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 Statesaccounting principles generally accepted accounting principlesin the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020.2021. Interim results are not necessarily indicative of results for a full year.
Cash, cash equivalents, and restricted cash
The following table presents cash, cash equivalents, and restricted cash as reported on the condensed consolidated balance sheets and the condensed consolidated statements of cash flows (in thousands):
September 30,
2021		December 31,
2020
Cash and cash equivalents$184,926 $150,125 
Cash segregated under federal or other regulations536 637 
Total cash, cash equivalents, and restricted cash$185,462 $150,762 
We generally invest our available cash in high-quality marketable investments. These investments include money market funds invested in securities issued by agencies of the U.S. government. We may invest, from time-to-time, in other vehicles, such as debt instruments issued by the U.S. federal government and its agencies, international governments, municipalities, and publicly held corporations, as well as commercial paper and insured time deposits with commercial banks. Specific holdings can vary from period to period depending upon our cash requirements. Such investments are reported at fair value on the condensed consolidated balance sheets.
Cash segregated under federal and other regulations is held in a separate bank account for the exclusive benefit of our Avantax Wealth Management clients and is recognized as restricted cash on the condensed consolidated balance sheets.
Asset Acquisitions
Acquisitions that do not meet the criteria to be accounted for as a business combination are accounted for as an asset acquisition. Using a cost accumulation model, the purchase price, including acquisition costs and any contingent consideration, if the contingencies are met for such contingent consideration at or near the acquisition date, is allocated to the acquired assets and assumed liabilities based upon their relative fair values as of the acquisition date and no goodwill is contemplated in the allocation process. Contingent consideration that is not earned at or near the acquisition date is capitalized as part of the cost of the assets acquired and is allocated to increase the eligible assets on a relative fair value basis.
We include the operations of an asset acquisition in our consolidated operating results beginning on the date of acquisition. The allocation of the purchase price to the assets acquired and liabilities assumed may require estimates, including but not limited to ones related to expected long-term revenues, future expected operating expenses, cost of capital, assumed attrition rates, and discount rates.
Goodwill
We assess goodwill for impairment at the reporting unit level, which consists of the Wealth Management reporting unit and the Tax Software reporting unit. We evaluate goodwill for impairment annually, as of November 30, or more frequently when events or circumstances indicate it is more likely than not that the estimated fair value
Blucora, Inc. | Q3 20212022 Form 10-Q 109

of one or moreA summary of our reporting unitssignificant accounting policies is less than its carrying amount. To determine whether it is necessary to perform a goodwill impairment test, we first assess qualitative factors to evaluate whether it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. We may elect to perform a goodwill impairment test without completing a qualitative assessment.
Beginningincluded in March 2020, the COVID-19 pandemic had a significant negative impact on the U.S. and global economy and caused substantial disruption in the U.S. and global securities markets, and as a result, negatively impacted certain key Wealth Management business drivers, such as client asset levels and interest rates. These macroeconomic and Company-specific factors, in totality, served as a triggering event that resulted in the testing of the goodwill of the Wealth Management reporting unit and the Tax Software reporting unit for potential impairment.
As part of the goodwill impairment tests, we compared the estimated fair values of the Wealth Management and Tax Software reporting units to their respective carrying values. Estimated fair value was calculated using Level 3 inputs and utilized a blended valuation method that factored in the income approach and the market approach. The income approach is an estimate of fair value that uses the present value of future discounted cash flows. Significant estimates used in the discounted cash flow model included our forecasted cash flows, our long-term rates of growth, and our weighted average cost of capital. The weighted average cost of capital factors in the relevant risk associated with business-specific characteristics and the uncertainty relatedNote 2 to the ability to achieveConsolidated Financial Statements in our projected cash flows related toAnnual Report on Form 10-K for the reporting unit or overall business. The market approach is an estimate of fair value that takes income-based valuation multiples for a set of comparable companies and applies the valuation multiple to each reporting unit’s income.
For the Wealth Management reporting unit, the carrying value of the reporting unit exceeded its estimated fair value by $270.6 million. Therefore, we recorded an impairment of goodwill of $270.6 million as of Marchyear ended December 31, 2020. For the Tax Software reporting unit, the carrying value of the reporting unit was significantly below its estimated fair value, and therefore, the goodwill of the Tax Software reporting unit was not considered impaired.
While2021. There have been no goodwill impairment triggering events were identified during the nine months ended September 30, 2021, the Wealth Management reporting unit is considered to be at risk for a future impairment of its goodwill in the event of a further decline in general economic, market, or business conditions, or any significant unfavorable changes in our forecasted revenue, expenses, cash flows, weighted average cost of capital, and/or market valuation multiples. We will continue to monitor for events and circumstances that could negatively impact the key assumptions in determining the estimated fair value of the Wealth Management reporting unit.

significant accounting policies since December 31, 2021.
Note 3: Segment Information and Revenue
We have 2two reportable operating segments: (1) the Wealth Management segment and (2) the Tax Software segment. Our Chief Executive Officer is the chief operating decision maker and reviews financial information presented on a disaggregated basis. This information is used for purposes of allocating resources and evaluating financial performance.
We do not allocate certain general and administrative costs (including personnel and overhead costs), stock-based compensation, acquisition and integration costs, depreciation, amortization of acquired intangible assets, acquisition and integration costs, executive transition costs, headquarters relocation costs,or contested proxy, transaction and other legal and consulting costs or impairment of goodwill to the reportable segments. Such amounts are reflected in the table below under the heading “Corporate-level activity.” In addition, we do not allocate interest expense and other, loss, net, or income taxes to the reportable segments. We do not report assets or capital expenditures by segment to the chief operating decision maker.
Blucora, Inc. | Q3 2021 Form 10-Q 11

Information on reportable operating segments currently presented to our chief operating decision maker and a reconciliation of operating income (loss) to consolidated net income (loss) are presented below (in thousands):
Three months ended September 30,Nine months ended September 30,Three Months Ended September 30,Nine Months Ended
September 30,
20212020202120202022202120222021
Revenue:Revenue:Revenue:
Wealth Management revenue$169,135 $135,932 $486,021 $396,805 
Tax Software revenue5,039 39,421 220,848 202,990 
Wealth ManagementWealth Management$165,032 $169,135 $494,104 $486,021 
Tax SoftwareTax Software6,664 5,039 242,028 220,848 
Total revenueTotal revenue$174,174 $175,353 $706,869 $599,795 Total revenue171,696 174,174 736,132 706,869 
Operating income (loss):Operating income (loss):Operating income (loss):
Wealth ManagementWealth Management$19,564 $17,498 $60,356 $51,827 Wealth Management27,626 19,564 59,920 60,356 
Tax SoftwareTax Software(13,864)16,234 100,472 60,646 Tax Software(12,517)(13,864)99,372 100,472 
Corporate-level activityCorporate-level activity(25,982)(32,719)(102,255)(357,905)Corporate-level activity(28,927)(25,982)(77,282)(102,255)
Total operating income (loss)Total operating income (loss)(20,282)1,013 58,573 (245,432)Total operating income (loss)(13,818)(20,282)82,010 58,573 
Other loss, net(8,295)(11,963)(24,202)(23,386)
Interest expense and other, netInterest expense and other, net(9,749)(8,295)(25,707)(24,202)
Income (loss) before income taxesIncome (loss) before income taxes(23,567)(28,577)56,303 34,371 
Income tax benefit (expense)Income tax benefit (expense)774 (15,256)(2,920)(23,237)Income tax benefit (expense)1,726 774 (4,099)(2,920)
Net income (loss)Net income (loss)$(27,803)$(26,206)$31,451 $(292,055)Net income (loss)$(21,841)$(27,803)$52,204 $31,451 
Revenues by major category within each segment are presented below (in thousands):Blucora, Inc.
Three months ended September 30,Nine months ended September 30,
2021202020212020
Wealth Management:
Advisory revenue$103,540 $82,612 $291,167 $227,672 
Commission revenue52,961 44,921 157,197 135,337 
Asset-based revenue5,659 4,351 16,514 18,911 
Transaction and fee revenue6,975 4,048 21,143 14,885 
Total Wealth Management revenue$169,135 $135,932 $486,021 $396,805 
Tax Software:
Consumer revenue$4,479 $38,482 $203,891 $186,724 
Professional revenue560 939 16,957 16,266 
Total Tax Software revenue$5,039 $39,421 $220,848 $202,990 
 | Q3 2022 Form 10-Q 10

Wealth Management revenue recognitionRevenue Recognition
Wealth management revenue primarily consists of advisory revenue, commission revenue, asset-based revenue, and transaction and fee revenue.
TheRevenues by major category within the Wealth Management segment and the timing of Wealth Management revenue recognition was as follows (in thousands):
Three months ended September 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Advisory revenue$— $103,540 $103,540 $— $82,612 $82,612 
Commission revenue22,372 30,589 52,961 16,884 28,037 44,921 
Asset-based revenue— 5,659 5,659 — 4,351 4,351 
Transaction and fee revenue1,213 5,762 6,975 1,067 2,981 4,048 
Total Wealth Management revenue$23,585 $145,550 $169,135 $17,951 $117,981 $135,932 
Blucora, Inc. | Q3 2021 Form 10-Q 12

Nine months ended September 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Advisory revenue$— $291,167 $291,167 $— $227,672 $227,672 
Commission revenue65,815 91,382 157,197 55,068 80,269 135,337 
Asset-based revenue— 16,514 16,514 — 18,911 18,911 
Transaction and fee revenue3,779 17,364 21,143 4,063 10,822 14,885 
Total Wealth Management revenue$69,594 $416,427 $486,021 $59,131 $337,674 $396,805 
Three Months Ended September 30,Nine Months Ended
September 30,
2022202120222021
Recognized upon transaction:
Commission$17,868 $22,372 $56,373 $65,815 
Transaction and fee1,307 1,213 3,813 3,779 
Total revenue recognized upon transaction$19,175 $23,585 $60,186 $69,594 
Recognized over time:
Advisory$95,070 $103,540 $306,394 $291,167 
Commission23,920 30,589 75,905 91,382 
Asset-based21,147 5,659 33,774 16,514 
Transaction and fee5,720 5,762 17,845 17,364 
Total revenue recognized over time$145,857 $145,550 $433,918 $416,427 
Total Wealth Management revenue:
Advisory$95,070 $103,540 $306,394 $291,167 
Commission41,788 52,961 132,278 157,197 
Asset-based21,147 5,659 33,774 16,514 
Transaction and fee7,027 6,975 21,658 21,143 
Total Wealth Management revenue$165,032 $169,135 $494,104 $486,021 
Tax Software revenue recognitionRevenue 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.
TheRevenues by major category within the Tax Software segment and the timing of Tax Software revenue recognition was as follows (in thousands):
Three months ended September 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Consumer revenue$4,479 $— $4,479 $38,480 $2 $38,482 
Professional revenue370 190 560 641 298 939 
Total Tax Software revenue$4,849 $190 $5,039 $39,121 $300 $39,421 
Nine months ended September 30,
20212020
Recognized Upon TransactionRecognized Over TimeTotalRecognized Upon TransactionRecognized Over TimeTotal
Consumer revenue$203,891 $— $203,891 $186,721 $3 $186,724 
Professional revenue14,626 2,331 16,957 13,822 2,444 16,266 
Total Tax Software revenue$218,517 $2,331 $220,848 $200,543 $2,447 $202,990 

Three Months Ended September 30,Nine Months Ended
September 30,
2022202120222021
Recognized upon transaction:
Consumer$5,974 $4,479 $222,198 $203,891 
Professional525 370 16,473 14,626 
Total revenue recognized upon transaction$6,499 $4,849 $238,671 $218,517 
Recognized over time:
Consumer$— $— $64 $— 
Professional165 190 3,293 2,331 
Total revenue recognized over time$165 $190 $3,357 $2,331 
Total Tax Software revenue:
Consumer$5,974 $4,479 $222,262 $203,891 
Professional690 560 19,766 16,957 
Total Tax Software revenue$6,664 $5,039 $242,028 $220,848 
Note 4: Asset Acquisitions
During the nine months ended September 30, 2021,2022, we completed several acquisitions in our Wealth Management business that met the criteria to be accounted for as asset acquisitions. We paid $3.8 million in totalTotal initial purchase consideration, including acquisition costs, which was allocated to the acquired assets and assumed liabilities, and primarily consisted of customer relationship intangibles. We are subject to additional contingent consideration payments on these acquisitions in 2021 up to a maximum of $5.2 million over a four-year period that are contingent upon meeting certain revenue thresholds related to the respective asset acquisitions.

Blucora, Inc. | Q3 20212022 Form 10-Q 1311

including acquisition costs and fixed deferred payments, was $4.1 million. This purchase consideration was 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 payable. As of September 30, 2022, the maximum future fixed and contingent payments associated with all prior asset acquisitions were $23.7 million, with specified payment dates from 2022 through 2026.
During the three months ended September 30, 2022, variable contingent consideration related to prior asset acquisitions became payable for approximately $1.5 million, which is included within the $23.7 million discussed above. This accrued consideration is within customer relationship intangibles and is expected to be paid during the fourth quarter of 2022.
Note 5: Debt
Our debt consisted of the following as of the periods indicated in the table below (in thousands):
 September 30, 2021December 31, 2020
 Principal
amount		DiscountDebt issuance costsNet 
carrying
value		Principal
amount		DiscountDebt issuance costsNet 
carrying
value
Senior Secured Credit Facility$561,797 $(3,322)$(3,698)$554,777 $563,156 $(4,173)$(4,646)$554,337 
Less: Current portion of long-term debt, net(1,790)(1,784)
Long-term debt, net$552,987 $552,553 
September 30,
2022		December 31,
2021
Senior Secured Credit Facility
Principal outstanding$525,438 $561,344 
Unamortized debt issuance costs(2,289)(3,371)
Unamortized debt discount(2,055)(3,027)
Net carrying value$521,094 $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 whichthat 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 (the(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 sheetsheets as part of the total deferred financing costs associated with the New Revolver.
As of September 30, 2021, 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 that mature on February 21, 2024 and May 22, 2024, respectively. As of September 30, 2021,2022, we had $561.8$525.4 million in principal amount outstanding under the Term Loan and no amountamounts outstanding under the New Revolver. Based on aggregate loan commitments as of September 30, 2021,2022, 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 maturity dateTerm Loan Maturity Date. On August 5, 2022, and as provided for within our Senior Secured Credit Facility, we voluntarily prepaid $35.0 million of May 22, 2024.principal outstanding under our Term Loan. At our election, this prepayment was first applied to the remaining quarterly principal amortization payments due on the Term Loan, with the remaining amount applied to the principal amount due at the Term Loan Maturity Date. In connection with this prepayment, we recorded a $0.2 million loss on extinguishment of debt for the proportionate amount of unamortized debt issuance costs and debt discount associated with the principal repaid. This loss is included within “Interest expense and other, net” of the condensed consolidated statements of operations.
Blucora, Inc. | Q3 2022 Form 10-Q 12

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 September 30, 2021,2022, the applicable interest rate on the Term Loan was 5.0%6.3%. 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 Leverage Ratio that ranges from 0.35% to 0.4%. Interest is payable at the end of each interest period.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 HKFS Acquisitionacquisition 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,
Blucora, Inc. | Q3 2021 Form 10-Q 14

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 September 30, 2021.

2022.
Note 6: Leases
Our leases are primarily related to office space and are classified as operating leases. Operating lease expense,cost, net of sublease income, is recognized in our accompanying condensed consolidated statements of comprehensive income (loss) in “General and administrative” expense for those net lease expensecosts related to leases used in our operations and within “Acquisition and integration” expense for those net lease expensecosts related to thean unoccupied lease resulting fromassumed in a previous acquisition on the acquisitioncondensed consolidated statements of 1st Global, Inc. and 1st Global Insurance Services, Inc. (together, “1st Global”) in 2019 (the “1st Global Acquisition”).operations.
Lease expense,Operating lease cost, net of sublease income, and cash paid on operating lease liabilities and lease liabilities obtained from new right-of-use assets for the three and nine months ended September 30, 20212022 and 20202021 were as follows (in thousands):
Three months ended September 30,Nine months ended September 30,
2021202020212020
Fixed lease expense$1,001 $1,566 $3,254 $5,652 
Variable lease expense462 191 707 778 
Lease expense, before sublease income1,463 1,757 3,961 6,430 
Sublease income(116)(464)(348)(1,119)
Total lease expense, net of sublease income$1,347 $1,293 $3,613 $5,311 
Additional lease information:
Cash paid on operating lease liabilities$602 $1,037 $1,047 $3,509 
Lease liabilities obtained from new right-of-use assets (1)
$— $1,352 $93 $21,766 
__________________________
(1)Lease liabilities obtained from new right-of-use assets for the nine months ended September 30, 2020 resulted from the new corporate headquarters lease that commenced in January 2020.
As of September 30, 2021, our weighted-average remaining operating lease term was approximately 10.6 years and our weighted-average operating lease discount rate was 5.4%.
Three Months Ended September 30,Nine Months Ended
September 30,
2022202120222021
Fixed lease cost$965 $1,001 $2,885 $3,254 
Variable lease cost258 462 1,023 707 
Operating lease cost, before sublease income1,223 1,463 3,908 3,961 
Sublease income(235)(116)(703)(348)
Total operating lease cost, net of sublease income$988 $1,347 $3,205 $3,613 
Additional lease information:
Cash paid on operating lease liabilities$1,297 $602 $3,788 $1,047 
Lease liabilities obtained from new right-of-use assets$262 $— $390 $93 
Blucora, Inc. | Q3 20212022 Form 10-Q 1513

OperatingRight-of-use assets and operating lease liabilities were recorded on the condensed consolidated balance sheets were as follows (in thousands):
September 30, 2021December 31, 2020
Lease liabilities—current$4,429 $2,304 
Lease liabilities—long-term34,020 36,404 
Total operating lease liabilities$38,449 $38,708 
September 30, 2022December 31, 2021
Right-of-use assets, net$19,753 $20,466 
Current lease liabilities$5,112 $4,896 
Long-term lease liabilities31,176 33,267 
Total operating lease liabilities$36,288 $38,163 
Weighted-average remaining lease term (in years)9.710.3
Weighted-average discount rate5.4 %5.4 %
The scheduled maturities of our operating lease liabilities on the condensed consolidated balance sheet as of September 30, 20212022 were as follows (in thousands):
Undiscounted cash flows:
Remainder of 2021$804 
20225,040 
20235,172 
20245,080 
20255,013 
Thereafter30,324 
Total undiscounted cash flows51,433 
Imputed interest(12,984)
Total operating lease liabilities$38,449 

Undiscounted cash flows:
Remainder of 2022$1,307 
20235,289 
20245,184 
20255,086 
20264,256 
Thereafter26,172 
Total undiscounted cash flows47,294 
Imputed interest(11,006)
Present value of cash flows$36,288 
Note 7: Balance Sheet Components
Prepaid expenses and other current assets net, consisted of the following (in thousands):
September 30, 2021December 31, 2020September 30, 2022December 31, 2021
Prepaid expensesPrepaid expenses$7,523 $9,643 Prepaid expenses$10,640 $13,138 
Forgivable loansForgivable loans5,670 4,316 
Other current assetsOther current assets3,596 678 Other current assets3,360 1,022 
Total prepaid expenses and other current assets, net$11,119 $10,321 
Total prepaid expenses and other current assetsTotal prepaid expenses and other current assets$19,670 $18,476 
Accrued expenses and other current liabilities consisted of the following (in thousands):
September 30, 2021December 31, 2020
Salaries and related benefit expenses$23,069 $19,317 
HKFS Contingent Consideration liability (1)(2)
25,400 17,900 
Contingent liability from 1st Global Acquisition (2)
16,828 11,328 
Accrued vendor and advertising costs2,254 2,606 
Accrued taxes1,630 240 
Other current liabilities6,194 5,028 
Total accrued expenses and other current liabilities$75,375 $56,419 
September 30, 2022December 31, 2021
Salaries and related benefit expenses$20,446 $26,417 
HKFS Contingent Consideration liability (1)
— 28,300 
Accrued legal costs996 2,871 
Accrued vendor and advertising costs4,812 3,777 
Accrued taxes2,785 — 
Accrued fixed and variable acquisition consideration2,414 837 
Other2,495 3,476 
Total accrued expenses and other current liabilities$33,948 $65,678 
__________________________
(1)As of September 30, 2021, this amount represents the estimated fair value of the second contingent consideration payment related to the HKFS Acquisition which is payable in the third quarter of 2022. As of December 31, 2020, this amount represents the estimated fair value of the first contingent consideration payment related to the HKFS Acquisition which was subsequently paid in the third quarter of 2021.
(2)For more information on the Company’s contingent liabilities, see "Note 8—Commitments and Contingencies."







Blucora, Inc. | Q3 2022 Form 10-Q 14

Note 8: Commitments and Contingencies
HKFS Contingent liability from 1st Global Acquisition
On May 6, 2019, we closed the 1st Global Acquisition. As part of the 1st Global Acquisition, we assumed a contingent liability related to a regulatory inquiry and recorded the contingent liability as part of the opening balance sheet. We evaluated a range of probable losses, resulting in a contingent liability reserve balance (including accrued interest) of $11.3 million at December 31, 2020.
Blucora, Inc. | Q3 2021 Form 10-Q 16

In the second quarter of 2021, we re-evaluated the range of probable losses as a result of our on-going discussions with the SEC. While the regulatory inquiry, which is related to certain pre-acquisition matters, is still on-going, we increased our contingent liability reserve to $16.8 million as of June 30, 2021. The $5.5 million increase to the contingent liability reserve was recognized in “Acquisition and integration” expense on the accompanying condensed consolidated statements of comprehensive income for the nine months ended September 30, 2021.
As part of the 1st Global Acquisition, we purchased representation and warranty insurance from a third party to supplement the indemnification provisions of the stock purchase agreement, dated as of March 18, 2019, by and among 1G Acquisitions, LLC, an indirect wholly owned subsidiary of the Company, 1st Global, Inc. and 1st Global Insurance Services, Inc., certain selling stockholders named therein and joinder sellers (the “1st Global Sellers”) and SAB Representative, LLC, as the Sellers’ representative, pursuant to which, the 1st Global Sellers agreed, among other things, to indemnify us from certain losses arising from breaches of representation, warranties, and covenants. At this time, we cannot yet estimate with reasonable probability the recovery related to these matters from insurance or the 1st Global Sellers, if any.
Contingent consideration liability from HKFS AcquisitionConsideration Liability
On July 1, 2020, we closed the HKFS Acquisitionacquisition of Avantax Planning Partners, formerly “HKFS”, for an upfront cash purchase price of $104.4 million. The purchase price iswas subject to 2 post-closingvariable contingent consideration, or earn-out payments (the “HKFS Contingent Consideration”) by us.totaling a maximum of $60.0 million.
The amount ofamounts owed for the HKFS Contingent Consideration iswere determined based on advisory asset levels and the achievement of certain performance goals (i) for the period beginning on July 1, 2020 and ending on July 1,June 30, 2021 and (ii) for the period beginning on July 1, 2021 and ending on July 1,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 bewere required to pay for each earn-out period iswas $30.0 million. If the asset market values on the applicable measurement date fallfell below certain specified thresholds, we would not be required to make any earn-outno payment of consideration was owed to the Sellers for such period.
Based on advisory asset levels and the achievement of performance goals for the firsteach earn-out period, specified in the HKFS Purchase Agreement, we madepaid the full $30.0 million paymentto the Sellers in the third quarter of 2021. The estimated fair value2021 for the first earn-out, and $23.0 million in the third quarter of the HKFS Contingent Consideration liability2022 for the second earn-out period was $25.4 millionearn-out. There are no remaining contingent payments due to the Sellers as of September 30, 2021.2022. For additional information on the valuation of the HKFS Contingent Consideration liability, see "Note 9—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 both that it is both probable that a liability has been incurred and that 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.
Aside from the contingent liability related to the 1st Global Acquisition and the HKFS Contingent Consideration liability, weWe 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 September 30, 2021.2022.

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 9—9: Fair Value Measurements
In accordance with Accounting Standards Codification 820, Fair Value Measurements and Disclosures, certainCertain 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. | Q3 20212022 Form 10-Q 1715

Assets and liabilities measuredLiabilities Measured on a recurring basisRecurring 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
 September 30, 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$25,400 $— $— $25,400 
Total liabilities at fair value$25,400 $— $— $25,400 
  Fair value measurements at the reporting date using
 December 31, 2020Quoted 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$4,290 $4,290 $— $— 
Total assets at fair value$4,290 $4,290 $— $— 
HKFS Contingent Consideration liability$35,900 $— $— $35,900 
Total liabilities at fair value$35,900 $— $— $35,900 
  Fair value measurements at the reporting date using
 September 30, 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$4,327 $4,327 $— $— 
Deferred compensation assets4,292 4,292 — — 
Total assets at fair value$8,619 $8,619 $— $— 
HKFS Contingent Consideration liability$— $— $— $— 
Deferred compensation liabilities4,292 4,292 — — 
Total liabilities at fair value$4,292 $4,292 $— $— 
  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 cash equivalentsthem 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 the 2 post-closing earn-out payments resulting from the HKFS Acquisitionacquisition of Avantax Planning Partners, formerly “HKFS” (see "Note“Note 8—Commitments and Contingencies"Contingencies”). Based on advisory asset levels andThe final value of the achievementsecond earn-out was $23.0 million as of performance goalsJune 30, 2022 (the measurement date for the firstsecond earn-out period, we made the full $30.0 million payment inpayment) and was paid during the third quarter of 2021.
The2022. Prior to this measurement date, 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 $25.4 million as of September 30, 2021. 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 whichpreviously disclosed within our Annual Report on Form 10-K for the year ended December 31, 2021. The HKFS Contingent Consideration liability was previously included forecasted advisory asset levels at July 1, 2022, a risk-adjusted discount rate (which reflectsin “Accrued expenses and other current liabilities” on the risk in the advisory asset projection) of 12.0%, volatility of 24.8%, and a credit spread of 2.2%. Significant increases to the discount rate, volatility, or credit spread inputs would have resulted in a significantly lower fair value measurement, with a similar inverse relationship existing for significant decreases to these inputs. A significant increase to the forecasted advisory assets levels would have resulted in a significantly higher fair value measurement, while a significant decrease to the forecasted advisory asset levels would have resulted in a significantly lower fair value measurement.condensed consolidated balance sheets.
Blucora, Inc. | Q3 20212022 Form 10-Q 1816

A roll forward of the HKFS Contingent Consideration liability is as follows (in thousands):
HKFS Contingent Consideration liability
Balance as of December 31, 2020(1)$35,900
Change in fair value22,400 
HKFS Contingent Consideration first earn-out payment(30,000)
Valuation change recognizedBalance as expense (2)
of December 31, 2021		19,50028,300 
Change in fair value
(5,320)
HKFS Contingent Consideration second earn-out payment(22,980)
Balance as of September 30, 2021 (1)2022$25,400— 
_________________________
(1)See “Note 7—Balance Sheet Components” for the current portion of the HKFS Contingent Consideration liability as of September 30, 2021 and December 31, 2020.
(2)The changeChanges in the fair value of the HKFS Contingent Consideration liability is recognizedthis contingent consideration are reflected in “Acquisition and integration” expenses on the condensed consolidated statements of comprehensive income (loss). For the three months ended September 30, 2021, we recognized a valuation change of $1.7 million.

operations.
Fair valueValue of financial instrumentsFinancial Instruments
We consider the carrying values of accounts receivable, commissions and advisory fees receivable, other receivables, prepaid expenses, other current assets, financial professional loans, accounts payable, commissions and advisory fees payable, accrued expenses, and other current liabilities and deferred revenues to approximate their fair values primarily due to their short-term natures.
As of September 30, 2021,2022, the Term Loan’s principal amount was $561.8$525.4 million, and the fair value of the Term Loan’s principal amount was $562.5$520.2 million. As of December 31, 2020,2021, the Term Loan’s principal amount was $563.2$561.3 million, and the fair value of the Term Loan’s principal amount was $561.7$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.
As of September 30, 2021 and December 31, 2020, we had no amounts outstanding under the Revolver.

Note 10: Interest Expense and Other, Loss, Net
“Other loss,Interest expense and other, net” on the condensed consolidated statements of comprehensive income (loss)operations consisted of the following (in thousands):
Three months ended September 30,Nine months ended September 30,
2021202020212020
Interest expense$7,304 $7,254 $21,789 $17,410 
Amortization of debt issuance costs388 362 1,128 1,006 
Accretion of debt discounts290 276 851 414 
Total interest expense7,982 7,892 23,768 18,830 
Interest income— (2)(2)(27)
Gain on sale of a business— (349)— (349)
Non-capitalized debt issuance expenses— 3,687 — 3,687 
Other313 735 436 1,245 
Other loss, net$8,295 $11,963 $24,202 $23,386 

Three Months Ended September 30,Nine Months Ended
September 30,
2022202120222021
Interest expense$8,771 $7,304 $23,166 $21,789 
Amortization of debt issuance costs403 388 1,191 1,128 
Amortization of debt discount302 290 893 851 
Total interest expense9,476 7,982 25,250 23,768 
Interest income and other273 313 457 434 
Interest expense and other, net$9,749 $8,295 $25,707 $24,202 
Note 11: Income Taxes
Three months ended September 30,Nine months ended September 30,
 2021202020212020
Income tax benefit (expense)$774 $(15,256)$(2,920)$(23,237)

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.
The CompanyWe recorded an income tax benefit of $1.7 million and income tax expense of $4.1 million for the three and nine months ended September 30, 2022, respectively. We recorded an income tax benefit of $0.8 million and income tax expense of $2.9 million for the three and nine months ended September 30, 2021, respectively. For 2021, the Company prepared its interim tax provision by applying a year-to-date effective tax rate to each quarter. For 2020, the Company prepared its interim
Blucora, Inc. | Q3 2021 Form 10-Q 19

tax provision by applying an estimated annual effective tax rate. We believe using the actual year-to-date effective tax rate in 2021 results in the best estimate of the annual effective tax rate.
The Company’sOur effective income tax rate for the three and nine months ended September 30, 2022 and September 30, 2021 differed from the 21% statutory rate primarily due to the release of valuation allowances and the effect of state income taxes. We currently expect to continue to release portions ofmaintain a valuation allowances, which were previously recorded in connection with ourallowance 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 federal income tax liabilities.periods. The majority of these net operating losses will either be utilized or expire between 20212022 and 2024.
The Company recorded income tax expense of $15.3 million and $23.2 million for the three and nine months ended September 30, 2020, respectively. The Company’s effective income tax rate for the three and nine months ended September 30, 2020 differed from the 21% statutory rate primarily due to expiring net operating loss tax benefits, an adjustment to the valuation allowance against deferred tax assets for net operating losses expected to expire in future years, and non-deductible officer compensation expense.
Blucora, Inc. | Q3 2022 Form 10-Q 17

Note 12: Net Income (Loss) Per Share
“Basic net income (loss) per share” is calculated using the weighted average number of common shares outstanding during the applicable period. “Diluted net income (loss) 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 unvestedoutstanding restricted stock units.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 (loss) 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.
The calculations of basic and diluted net income (loss) per share were as follows (in thousands):
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Numerator:
Net income (loss)$(27,803)$(26,206)$31,451 $(292,055)
Denominator:
Weighted average common shares outstanding—basic48,707 48,039 48,492 47,936 
Dilutive potential common shares (1)
— — 881 — 
Weighted average common shares outstanding—diluted48,707 48,039 49,373 47,936 
Net income (loss) per share:
Basic$(0.57)$(0.55)$0.65 $(6.09)
Diluted$(0.57)$(0.55)$0.64 $(6.09)
Anti-dilutive shares (1)
4,616 3,165 2,076 2,869 
_________________________
Three Months Ended September 30,Nine Months Ended
September 30,
 2022202120222021
Numerator:
Net income (loss)$(21,841)$(27,803)$52,204 $31,451 
Denominator:
Basic weighted average common shares outstanding47,847 48,707 47,981 48,492 
Dilutive potential common shares (1)
— — 1,172 881 
Diluted weighted average common shares outstanding47,847 48,707 49,153 49,373 
Net income (loss) per share:
Basic$(0.46)$(0.57)$1.09 $0.65 
Diluted$(0.46)$(0.57)$1.06 $0.64 
Shares excluded (1)
3,384 4,616 921 2,076 
________________________
(1)Dilutive potentialPotential common shares were excluded from the calculation of diluted net income (loss) per share infor these periods because their effect would have been anti-dilutive. For the periods presented which have athree months ended September 30, 2022 and 2021, all potential common shares were excluded from the calculation of diluted net loss per share as their effect would have been anti-dilutive due to the net loss recognized for suchthe periods.
Note 13: Subsequent Events
On October 31, 2022, we entered into that certain Stock Purchase Agreement (the “Stock Purchase Agreement”) by and among the Company, TaxAct Holdings, Inc., Franklin Cedar Bidco, LLC (“Buyer”) and DS Admiral Bidco, LLC, pursuant to which we agreed to sell the Tax Software business to Buyer, an affiliate of Cinven, for $720.0 million in cash (subject to adjustment as set forth in the Stock Purchase Agreement), on the terms and subject to the conditions set forth in the Stock Purchase Agreement (the “TaxAct Sale Transaction”). The TaxAct Sale Transaction is subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions and is expected to close by the end of 2022.




Blucora, Inc. | Q3 20212022 Form 10-Q 2018

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, 2020.2021.
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 in achieving better long-term outcomes via holistic, tax-advantaged solutions.firms. Our mission is to empower people to improveenable financial success by changing the way individuals and families plan and achieve their financial wellnessgoals through data and technology-driventax-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 managementWealth 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 thea 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 basedemployee-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”). Our employee-based RIA model, which we refer to as “Avantax Planning Partners,” also includes Avantax Wealth Management total client assets that have beenWe acquired from Avantax Wealth Management financial professionals.
OnHKFS in July 1, 2020 we acquired all of the issued and outstanding common stock of HKFS (the “HKFS Acquisition”). The operations of HKFS are included and subsequently rebranded it in our operating results as part of the Wealth Management segment from the date of the HKFS Acquisition. On January 4, 2021, we announced the rebranding of HKFS to Avantax Planning Partners (the “Rebranding”). The Rebranding was designedorder to create tighter brand alignment bringing the Wealth Management business underthrough one common and recognizable brand.
As Any reference to Avantax Planning Partners in this Form 10-Q is inclusive of September 30, 2021, the Wealth Management business worked with a nationwide network of 3,529 financial professionals and supported $86.6 billion of total client assets, including $39.8 billion of advisory assets.HKFS.
Tax Software
TheOur Tax Software business consists of the operations of TaxAct, Inc. (“TaxAct,” the “Tax Software business,” or the “Tax Software segment”) and provides digital tax preparation services packaged tax software, and ancillary services for consumers, small business owners, and tax professionals through its website www.TaxAct.com and its mobile applications. We had referred to this business as the “Tax Preparation business” and “Tax Preparation segment” in previous filings.
COVID-19 PandemicMacroeconomic Environment
Beginning in March 2020, the COVID-19 pandemic has had a significant negative impact on the U.S. and global economy, caused substantial disruption in the U.S. and global securities markets, and as a result, negatively impacted both ourOur Wealth Management business is directly and Tax Software businesses.indirectly affected by macroeconomic conditions and the state of global financial markets. Recent geopolitical uncertainty resulting, in part, from Russia’s continued invasion of Ukraine and the measures taken in response, including government sanctions, as well as rising inflation have contributed to significant volatility and decline in global financial markets during 2022 to date. In addition,response to inflationary pressures, the various precautionary measuresFederal Reserve implemented five interest rate increases during the nine months ended September 30, 2022, including 75 basis point increases in each of the June, July, and accommodations taken by many governmental authoritiesSeptember 2022 Federal Open Market Committee (“FOMC”) meetings. As of September 30, 2022, the target range for the federal funds rate was between 3.0% and 3.25%, however the FOMC has signaled that it expects additional rate increases in the United States2022 and around the world2023 in order to limitreturn inflation to their 2% objective. These combined factors have all led to an increased risk of economic recession and the spread of COVID-19, as well aspotential for continued volatility and decline in global financial markets.
Volatility and decline in global financial markets and its impact on client asset values and transaction activity have negatively impacted Wealth Management revenues during the societal response, have had,three and could continue to have, annine months ended September 30,
Blucora, Inc. | Q3 20212022 Form 10-Q 2119

adverse effect on the U.S. and global markets and economy. The extent to which the COVID-19 pandemic may2022. This negative impact our resultswas offset, in the future will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and scope of the COVID-19 pandemic, the emergence of new variants of the virus, the likelihood of a resurgence of positive cases, the effectiveness, availability and acceptance of vaccines, global economic conditions during and after the COVID-19 pandemic and governmental actions that have been taken, or may be taken in the future, in response to the COVID-19 pandemic.
In our Wealth Management business, the amount ofpart, by incremental cash sweep revenue we generate continues to be affected by the lowgenerated from an increasing interest rate environment. In March 2020,We expect that cash sweep revenue will continue to increase in the Federal Reserve lowered itsfourth quarter of 2022 as the full benefits of recent rate increases are fully realized. Based on the target range for the federal funds rate, to 0.00-0.25%. As our cash sweep revenue is based on athe signaling by the Federal Reserve for additional rate derived from the federal funds rate, cash sweep revenue in all quarters subsequent to the first quarter of 2020 has been materially reduced. Weincreases during 2022, and current client asset values, we expect continued low levels of cash sweep revenue in future periods in which the federal funds rate is at reduced levels, although we may experience an increase inincremental cash sweep revenue should more than offset the federal funds rate increase.
In our Tax Software segment, our revenuenegative impact that financial market volatility may have on Wealth Management revenues and operating income generation is highly seasonal, with a significant portion of our annual revenue typically earned in the first two quarters of our fiscal year. During the third and fourth quarters, the Tax Software segment typically reports losses because revenue from the segment is minimal while core operating expenses continue.
As a result of the COVID-19 pandemic, the Internal Revenue Service (“IRS”) extended the filing and payment deadline for tax year 2019 federal tax returns to July 15, 2020. 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 and second quarters of 2020 to the third quarter of 2020. In addition, sales and marketing expenses were elevated in 2020 due to incremental investment in March 2020 to address weak performance through the first two months of the tax season, as well as increased marketing required due to the extended tax season. Further, the IRS was selected by the U.S. Congress as the vehicle for distribution of the first round of Economic Impact Payments (“EIP1”), which caused significant disruption to the 2020 tax season. As a result of the extension of the 2020 tax season and the EIP1 disruption, our results of operations for our Tax Software segment were negatively impacted in 2020 compared to prior years.
As a result of the continued impact of the COVID-19 pandemic, including disruptions associated with the distribution of the second and third rounds of Economic Impact Payments, the IRS delayed the start of the 2021 tax season and extended the filing and payment deadline for tax year 2020 federal tax returns from April 15, 2021 to May 17, 2021. In addition, the IRS 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 of 2021 to the second quarter of 2021.
The typical seasonality of our Tax Software business has been affected by these changes to the tax filing deadlines to May 17, 2021 for the 2020 tax year and to July 15, 2020 for the 2019 tax year. This change in seasonality has caused significant fluctuations in our quarterly and year-to-date financial results and 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 September 30, 2021 and 2020 as they would have been in previous years.
For additional information on the effects of the COVID-19 pandemic on our results of operations, see “Results of Operations” below. For more information on the risks related to the COVID-19 pandemic, see Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20202022. However, if further financial market volatility results in continued decline in client asset values or if the Federal Reserve does not increase, or decreases, the federal funds rate, Wealth Management revenues and operating income would be negatively impacted.
Sale of Tax Software Business
On October 31, 2022, we entered into that certain Stock Purchase Agreement (the “Stock Purchase Agreement”) by and among the Company, TaxAct Holdings, Inc., Franklin Cedar Bidco, LLC (“Buyer”) and DS Admiral Bidco, LLC, pursuant to which we agreed to sell the Tax Software business to Buyer, an affiliate of Cinven, for $720.0 million in cash (subject to adjustment as set forth in the Stock Purchase Agreement), on the terms and subject to the conditions set forth in the Stock Purchase Agreement (such sale, the “TaxAct Sale Transaction”). The TaxAct Sale Transaction is subject to the expiration or termination of the waiting period under the subheading, “The current COVID-19 pandemic could have a Material Adverse Effect.”Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions and is expected to close by the end of 2022.

Following the consummation of the TaxAct Sale Transaction, we plan to change our name from Blucora to Avantax and focus solely on our tax-focused wealth business. The TaxAct Sale Transaction is expected to yield after-tax net cash proceeds of approximately $620.0 million. We expect to use the net proceeds to pay down existing indebtedness and return excess capital to stockholders.
Blucora, Inc. | Q3 20212022 Form 10-Q 2220

RESULTS OF OPERATIONS
Summary
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
($ in thousands)($ in thousands)Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
20212020$%20212020$% 20222021$%20222021$%
Revenue:Revenue:Revenue:
Wealth ManagementWealth Management$169,135 $135,932 $33,203 24 %$486,021 $396,805 $89,216 22 %Wealth Management$165,032 $169,135 $(4,103)(2.4)%$494,104 $486,021 $8,083 1.7 %
Tax SoftwareTax Software5,039 39,421 (34,382)(87)%220,848 202,990 17,858 9 %Tax Software6,664 5,039 1,625 32.2 %242,028 220,848 21,180 9.6 %
Total revenueTotal revenue$174,174 $175,353 $(1,179)(1)%$706,869 $599,795 $107,074 18 %Total revenue171,696 174,174 (2,478)(1.4)%736,132 706,869 29,263 4.1 %
Operating income (loss):Operating income (loss):Operating income (loss):
Wealth ManagementWealth Management$19,564 $17,498 $2,066 12 %$60,356 $51,827 $8,529 16 %Wealth Management27,626 19,564 8,062 41.2 %59,920 60,356 (436)(0.7)%
Tax SoftwareTax Software(13,864)16,234 (30,098)(185)%100,472 60,646 39,826 66 %Tax Software(12,517)(13,864)1,347 9.7 %99,372 100,472 (1,100)(1.1)%
Corporate-level activityCorporate-level activity(25,982)(32,719)6,737 21 %(102,255)(357,905)255,650 71 %Corporate-level activity(28,927)(25,982)(2,945)(11.3)%(77,282)(102,255)24,973 24.4 %
Operating income (loss)(20,282)1,013 (21,295)(2,102)%58,573 (245,432)304,005 124 %
Other loss, net(8,295)(11,963)3,668 31 %(24,202)(23,386)(816)(3)%
Total operating income (loss)Total operating income (loss)(13,818)(20,282)6,464 31.9 %82,010 58,573 23,437 40.0 %
Interest expense and other, netInterest expense and other, net(9,749)(8,295)(1,454)(17.5)%(25,707)(24,202)(1,505)(6.2)%
Income (loss) before income taxesIncome (loss) before income taxes(28,577)(10,950)(17,627)(161)%34,371 (268,818)303,189 113 %Income (loss) before income taxes(23,567)(28,577)5,010 17.5 %56,303 34,371 21,932 63.8 %
Income tax benefit (expense)Income tax benefit (expense)774 (15,256)16,030 105 %(2,920)(23,237)20,317 87 %Income tax benefit (expense)1,726 774 952 123.0 %(4,099)(2,920)(1,179)(40.4)%
Net income (loss)Net income (loss)$(27,803)$(26,206)$(1,597)(6)%$31,451 $(292,055)323,506 111 %Net income (loss)$(21,841)$(27,803)$5,962 21.4 %$52,204 $31,451 20,753 66.0 %
For the three months ended September 30, 20212022, compared to the three months ended September 30, 2020,2021, net loss decreased $1.6$6.0 million primarily due to the following factors:
•Wealth Management segment operating income increased $2.1$8.1 million primarily due to a $33.2 millionthe significant increase in cash sweep revenue partially offset by a $31.1 million increase in operating expenses. Wealth Management segment results for 2020 were negatively affected by suppressed client asset levels and transaction activity in 2020 resulting fromduring the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020.period.
•Tax Software segment operating incomeloss decreased $30.1$1.3 million primarily due to a $34.4 million decrease inincreased consumer revenue mostly resulting from the earlier tax filing and payment deadlines in 2021 versus 2020. In addition,relatively flat operating expenses decreased $4.3 million primarily due to reduced sales and marketing expenses.
•Expenses within corporate-level activity decreased $6.7increased $2.9 million primarily due to an $8.0 million decrease in acquisition and integration costs, partially offset by an increase of $1.6 million in expenses associated with other legalincremental depreciation expense and consulting costs.
•Other loss, Furthermore, interest expense and other, net, decreased $3.7increased $1.5 million, primarily due to the recognition of $3.7 million of non-capitalized debt issuance expenses related to the $175.0 million Term Loan increase in the three months ended September 30, 2020.rising interest rates.
•The Company recorded an income tax benefit of $0.8$1.7 million, or an effective tax rate of 7.3%, for the three months ended September 30, 2021. This2022, compared to an income tax expensebenefit of $15.3$0.8 million, or an effective tax rate of 2.7%, for the three months ended September 30, 2020.2021.
For the nine months ended September 30, 20212022, compared to the nine months ended September 30, 2020,2021, net income increased $323.5$20.8 million primarily due to the following factors:
•Wealth Management segment operating income increased $8.5 million primarily due to an $89.2 million increase in revenue, partially offset by an $80.7 million increase in operating expenses. Wealth Management segment operating income benefited from $7.2 million inwas relatively flat as incremental operating income resulting from the HKFS Acquisition, which was largely offset by a $6.2 million decrease in cash sweep revenue. In addition, Wealth Management segment results for 2020 were negatively affectedrevenue offset revenue headwinds caused by suppressed client asset levelsmarket volatility and transaction activity in 2020 resulting from the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020.incremental personnel costs.
•Tax Software segment operating income increased $39.8decreased $1.1 million primarily due to a $22.0 million decreasean increase in operating expenses, primarily from reduced salescustomer care support costs and strategic advertising and marketing expenses, and a $17.9 million increase in revenue.spend.
Blucora, Inc. | Q3 2021 Form 10-Q 23

•Expenses within corporate-level activity decreased $255.7$25.0 million primarily due to the recognition of a $270.6 million goodwill impairment and $10.2 million in executive transition costs for the nine months ended September 30, 2020. These decreases were partially offset by an increase of $9.7 million inreduced acquisition and integration expenses, an increase of $8.3 million in stock-based compensationcosts. Furthermore, interest expense and a $7.3other, net, increased $1.5 million, increase in expenses associated with contested proxy and other legal and consulting costs for the nine months ended September 30, 2021.primarily due to rising interest rates.
•The Company recorded income tax expense of $2.9$4.1 million, or an effective tax rate of 7.3%, for the nine months ended September 30, 2021, which represented the Company’s state income taxes on current period income. This2022, compared to income tax expense of $23.2$2.9 million, or an effective tax rate of 8.5%, for the nine months ended September 30, 2020. The effective tax rate was 8.49% as of September 30, 2021 as compared to an effective tax rate of 8.64% at September 30, 2020.2021.
Blucora, Inc. | Q3 20212022 Form 10-Q 2421

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, acquisition and integration costs, executive transition costs, headquarters relocation costs,or contested proxy, transaction and other legal and consulting costs or impairment of goodwill to the reportable segments. Such amounts are reflected under the heading “Corporate-level activity.” In addition, we do not allocate interest expense and other, loss, net, or income taxes to the reportable segments.
Wealth Management
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
($ in thousands)($ in thousands)Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
20212020$%20212020$% 20222021$%20222021$%
RevenueRevenue$169,135 $135,932 $33,203 24 %$486,021 $396,805 $89,216 22 %Revenue$165,032 $169,135 $(4,103)(2.4)%$494,104 $486,021 $8,083 1.7 %
Operating incomeOperating income$19,564 $17,498 $2,066 12 %$60,356 $51,827 $8,529 16 %Operating income$27,626 $19,564 $8,062 41.2 %$59,920 $60,356 $(436)(0.7)%
Segment marginSegment margin12 %13 %12 %13 %Segment margin16.7 %11.6 %12.1 %12.4 %
For the three months ended September 30, 20212022, compared to the three months ended September 30, 2020,2021, Wealth Management segment operating income increased $2.1$8.1 million primarily due to the following factors:
•Wealth Management revenue decreased $4.1 million primarily due to decreases of $11.2 million and $8.5 million in commission and advisory revenues, respectively. These revenue headwinds were primarily caused by the significant financial market volatility and decline discussed in the Macroeconomic Environment section above. These decreases were partially offset by a $15.5 million increase in asset-based revenue which benefited from incremental cash sweep revenue generated from increases in the federal funds rate.
•Wealth Management operating expenses decreased $12.2 million primarily due to a $15.1 million decline in cost of revenue associated with advisory fees and commissions paid, partially offset by $2.2 million of incremental personnel costs. Advisory fees and commissions paid trended consistently with the decrease in commission and advisory revenues discussed above. Increased personnel costs reflect our strategic investments to drive growth through enhanced sales and service capabilities that support our financial professionals.
•The significant increase in cash sweep revenue during the period was the primary driver of the 510 basis point increase in segment margin. We expect for segment margin to continue to benefit from incremental cash sweep revenue for the remainder of the year.
For the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, Wealth Management segment operating income decreased $0.4 million primarily due to the following factors:
•Wealth Management revenue increased $33.2$8.1 million primarily due to a $20.9increases of $17.3 million and $15.2 million in asset-based and advisory revenues, respectively. Asset-based revenue benefited from incremental cash sweep revenue generated from increases in the federal funds rate, while the increase in advisory revenue an $8.0 million increase in commission revenue, and a $2.9 million increase in transaction and fee revenue. Revenue increaseswas primarily resulted from increased client asset levels and the timing of market movements relative to when clients are billed. These increases were partially offset by a $24.9 million decrease in commission revenue which was negatively impacted by unfavorable transaction activity which were favorable compared to the suppressed client asset levels and transaction activityvolatility in 2020 resulting from the COVID-19 pandemic and relatedglobal financial market disruption beginning in the second quarter of 2020.markets, as discussed above.
•Wealth Management operating expenses increased $31.1$8.5 million primarily due to $11.1 million of incremental personnel costs, partially offset by a $24.5$4.3 million increasedecrease in cost of revenue resulting from increasedassociated with advisory fees and commissions paid. Increased personnel costs reflect our strategic investments to drive growth through enhanced sales and service capabilities that support our financial professionals. Advisory fees and commissions paid which has been primarily driven by an increasetrended consistently with the associated changes in revenues discussed above, while payout ratios remained relatively flat between the two periods as the financial market volatility during the first three quarters of 2022 offset previous expansion in the number of financial professionals withconcentrated at higher payout levels due to improved market performance and the alignment of our payout grids, combined with an increase in sales and marketing expenses. This increase in cost of revenue has resulted in a decrease in segment margin for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.
For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, Wealth Management operating income increased $8.5 million primarily due to the following factors:
•Wealth Management revenue increased $89.2 million primarily due to a $63.5 million increase in advisory revenue, a $21.9 million increase in commission revenue, and a $6.3 million increase in transaction and fee revenue, partially offset by a $2.4 million decrease in asset-based revenue. Revenue increases primarily resulted from increased client asset levels and transaction activity, which were favorable compared to the suppressed client asset levels and transaction activity in 2020 resulting from the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020. In addition, Wealth Management revenue for the nine months ended September 30, 2021 increased due to $20.7 million of incremental revenue resulting from the HKFS Acquisition. These increases were partially offset by a $6.2 million decrease in cash sweep revenue due to a decline in interest rates at the end of the first quarter of 2020.
•Wealth Management operating expenses increased $80.7 million primarily due to a $60.8 million increase in cost of revenue as a result of increased advisory fees and commissions paid to financial professionals, as well as incremental expenses resulting from the HKFS Acquisition and increases in sales and marketing expenses in our Avantax Wealth Management business. The increase in advisory fees and commissions paid has been primarily driven by an increase in the number of financial professionals with higher payout levels due to improved market performance and the alignment of our payout grids.levels.
Blucora, Inc. | Q3 20212022 Form 10-Q 2522

•The market volatility discussed above, coupled with an increase in our fixed operating costs, has caused margin compression for the nine months ended September 30, 2022. However, the significant increase in cash sweep revenue during the three months ended September 30, 2022 predominately offset this compression, resulting in a relatively flat segment margin. For the remainder of the year, we expect for incremental cash sweep revenue to more than offset the compression discussed above, and for segment margin to increase on a year-over-year basis.
Sources of revenueRevenue
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 wasis as follows:
Three months endedQTDNine months endedYTD
(In thousands, except percentages)September 30,ChangeSeptember 30,Change
Sources of RevenuePrimary Drivers20212020$20212020$
Financial professional-drivenAdvisory- Advisory asset levels$103,540 $82,612 $20,928 $291,167 $227,672 $63,495 
Commission- Transactions
- Asset levels
- Product mix		52,961 44,921 8,040 157,197 135,337 21,860 
Other revenueAsset-based- Cash balances
- Interest rates
- Number of accounts
- Client asset levels		5,659 4,351 1,308 16,514 18,911 (2,397)
Transaction and fee- Account activity
- Number of financial
  professionals
- Number of clients
- Number of accounts		6,975 4,048 2,927 21,143 14,885 6,258 
Total revenue$169,135 $135,932 $33,203 $486,021 $396,805 $89,216 
Total recurring revenue$145,311 $117,822 $27,489 $414,966 $337,081 $77,885 
Recurring revenue rate85.9 %86.7 %85.4 %84.9 %
($ in thousands)Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
Sources of RevenuePrimary Drivers20222021$20222021$
Financial professional-drivenAdvisory- Advisory asset levels$95,070 $103,540 $(8,470)$306,394 $291,167 $15,227 
Commission- Transactions
- Asset levels
- Product mix		41,788 52,961 (11,173)132,278 157,197 (24,919)
Other revenueAsset-based- Cash balances
- Interest rates
- Number of accounts
- Client asset levels		21,147 5,659 15,488 33,774 16,514 17,260 
Transaction and fee- Account activity
- Number of financial
  professionals
- Number of clients
- Number of accounts		7,027 6,975 52 21,658 21,143 515 
Total revenue$165,032 $169,135 $(4,103)$494,104 $486,021 $8,083 
Total recurring revenue$144,512 $145,311 $(799)$430,184 $414,966 $15,218 
Recurring revenue rate87.6 %85.9 %87.1 %85.4 %
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 despite these fluctuations 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.
Blucora, Inc. | Q3 20212022 Form 10-Q 2623

Business metricsMetrics
(In thousands, except percentages and as otherwise indicated)September 30,Change
20212020$%
Client assets balances:
Total client assets$86,647,743 $76,152,721 $10,495,022 14 %
Brokerage assets$46,850,354 $43,733,735 $3,116,619 7 %
Advisory assets$39,797,389 $32,418,986 $7,378,403 23 %
Advisory assets as a percentage of total client assets45.9 %42.6 %
Number of financial professionals (in ones):
Independent financial professionals (1)
3,498 3,956 (458)(12)%
In-house/employee financial professionals (2)
31 19 12 63 %
Total number of financial professionals3,529 3,975 (446)(11)%
Advisory and commission revenue per financial professional (3)
$44.3 $32.1 $12.2 38 %
Quarterly production retention rate: (4)
TTM Financial professional-driven revenue (5)
$585,307 $491,829 
TTM Financial professional-driven revenue related to independent financial professionals who departed in the quarter (5)
$12,157 $5,366 
TTM Financial professional-driven revenue, less that related to independent financial professionals who departed in the quarter (5)
$573,150 $486,463 
Quarterly production retention rate (4)
97.9 %98.9 %
____________________________
($ in thousands)September 30,Change
20222021$%
Client assets balances:
Total client assets (1)
$72,592,882 $86,647,743 $(14,054,861)(16.2)%
Brokerage assets (1)
$37,150,327 $46,850,354 $(9,700,027)(20.7)%
Advisory assets (1)
$35,442,555 $39,797,389 $(4,354,834)(10.9)%
Advisory assets as a percentage of total client assets48.8 %45.9 %
Number of financial professionals (in ones):
Independent financial professionals (2)
3,311 3,498 (187)(5.3)%
In-house/employee financial professionals (3)
36 31 5 16.1 %
Total number of financial professionals3,347 3,529 (182)(5.2)%
Advisory and commission revenue per financial professional (4)
$40.9 $44.3 $(3.4)(7.7)%
___________________________
(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 171) that partner with Avantax Planning Partners.
(2)(3)The number of in-house financial/in-house/employee financial professionals includes licensed financial planning consultants, all of which are employees ofaffiliated with Avantax Planning Partners.
(3)(4)Calculation based on advisory and commission revenue for the three months ended September 30, 20212022 and 2020,2021, respectively.
(4)Quarterly production retention rate is a non-GAAP financial measure. We believe quarterly production retention rate is an important measure of our quarterly retention of financial professional-driven revenue (which consists of advisory revenue and commission revenue). Management uses quarterly production retention rate to measure the impact of financial professional departures on our business. Quarterly production retention rate is calculated by dividing (x) the difference of (i) total financial professional-driven revenue for the trailing-twelve-month period then ended minus (ii) financial professional-driven revenue for the trailing-twelve-month period then ended related to independent financial professionals that departed in the quarter by (y) total financial professional-driven revenue for the trailing-twelve-month period then ended. As quarterly production retention rate is a measure of retention during a quarter, it also includes quarterly production from independent financial professionals who departed in prior quarters in the trailing-twelve-month period, and therefore does not show production retention rate over longer periods of time.
(5)For the trailing-twelve-month period then ended.
Client assets.Assets. TotalHistorically we have calculated total client assets to 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. Beginning in the second quarter of 2022, the calculation of total client assets also includes assets for which financial professionals licensed with Avantax provide administrative services to clients. Because we did not have relationships with financial professionals that had clients for whom we did not provide administrative services prior to the second quarter of 2022, our calculation of total client assets for any prior period would not have changed under our current calculation. To the extent that we or they 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 basedfee-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 $10.5decreased $14.1 billion atas of September 30, 20212022 compared to September 30, 20202021, primarily due to $12.6$14.3 billion of favorableunfavorable market change and reinvestment levels following the pandemic-influenced market downturn in 2020. Partially offsetting these increases werechanges, partially offset by net client outflowsinflows.
Advisory assets decreased $4.4 billion as of $2.2 billion.
AdvisorySeptember 30, 2022 compared to September 30, 2021, and advisory assets as a percentage of total client assets increased to 45.9% at48.8% as of September 30, 20212022, compared to 42.6% at45.9% as of September 30, 2020. This increase2021. The decrease in advisory assets was primarily duecaused by $7.4 billion of unfavorable market changes, partially offset by net new advisory assets of $3.0 billion which contributed to the HKFS Acquisition because over 90% of the
Blucora, Inc. | Q3 2021 Form 10-Q 27

client assets acquired were comprised of advisory assets. In addition,increase in advisory assets as a percentage of total client assets increased in our Avantax Wealth Management business.
While financial markets have substantially stabilized since the pandemic-influenced financial market conditions in 2020, we cannot predict with certainty the extent of the impact of the COVID-19 pandemic and future financial market fluctuations on our client assets. However, the continued volatility in the U.S. and global economy and uncertainty in financial markets due to the pandemic may cause declines in the amount of our total client assets. For more information on the risks associated with our Wealth Management business, see the “COVID-19 Pandemic” section within this Management’s Discussion and Analysis of Financial Condition and Results of Operations and “Item 1A. Risk Factors” under the subheading, “The current COVID-19 pandemic could have a Material Adverse Effect.” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020.
Financial professionals.Professionals. The Wealth Management business worked with a nationwide network of 3,529 financial professionals as of September 30, 2021. The number of our financial professionals decreased by 11% at5.2% as of September 30, 20212022 compared to September 30, 2020,2021, with the decrease primarily due to attrition related to lower revenue-producing financial professionals. Advisory and commission revenue per financial professional decreased 7.7% for the same period, primarily due to the decreases in advisory and commission revenues discussed above. The
Blucora, Inc. | Q3 2022 Form 10-Q 24

decrease in the number of financial professionals was partially offset by our continued recruitment and onboarding of independent financial professionals and the addition of financial professionals as a result of the HKFS Acquisition, which (as of the HKFS Acquisition date) included the addition of 19 in-house financial professionals and 131 licensed referring representatives at CPA firms that partner with Avantax Planning Partners.professionals.
Advisory revenue.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:follows (in thousands):
(In thousands, except percentages)September 30,Change
20212020$%
Advisory assets—independent financial professionals (1)
$33,713,543 $27,852,099 $5,861,444 21 %
Advisory assets—in-house/employee financial professionals (2)
4,701,444 3,422,173 1,279,271 37 %
Retirement advisory assets—in-house financial professionals (3)
1,382,402 1,144,714 237,688 21 %
Total advisory assets$39,797,389 $32,418,986 $7,378,403 23 %
_________________________
(1)Represents individual client and retirement advisory assets for which Avantax Wealth Management serves as the RIA.
(2)Represents individual client advisory assets for which Avantax Planning Partners serves as the RIA.
(3)Represents advisory assets for which Avantax Planning Partners provides retirement plan services and serves as the RIA.


September 30,Change
20222021$%
Advisory assets—independent financial professionals$29,735,365 $33,713,543 $(3,978,178)(11.8)%
Advisory assets—in-house/employee financial professionals4,494,178 4,701,444 (207,266)(4.4)%
Retirement advisory assets—in-house/employee financial professionals1,213,012 1,382,402 (169,390)(12.3)%
Total advisory assets$35,442,555 $39,797,389 $(4,354,834)(10.9)%
The activity within our advisory assets was as follows:follows (in thousands):
(In thousands, except as otherwise indicated)Three months ended September 30,Nine months ended September 30,


Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
Balance, beginning of the periodBalance, beginning of the period$39,440,985 $26,555,388 $35,603,557 $27,629,164 Balance, beginning of the period$36,746,048 $39,440,985 $42,179,051 $35,603,557 
Net increase in new advisory assets621,205 125,406 1,853,632 231,382 
Inflows from acquisitions— 4,178,729 — 4,178,729 
Net new advisory assetsNet new advisory assets514,293 621,205 2,261,923 1,853,632 
Market impact and otherMarket impact and other(264,801)1,559,463 2,340,200 379,711 Market impact and other(1,817,786)(264,801)(8,998,419)2,340,200 
Balance, end of the periodBalance, end of the period$39,797,389 $32,418,986 $39,797,389 $32,418,986 Balance, end of the period$35,442,555 $39,797,389 $35,442,555 $39,797,389 
Advisory revenueAdvisory revenue$103,540 $82,612 $291,167 $227,672 Advisory revenue$95,070 $103,540 $306,394 $291,167 
Average advisory fee rate (1)
Average advisory fee rate (1)
26 bps27 bps78 bps83 bps
Average advisory fee rate (1)
26 bps26 bps77 bps78 bps
_________________________
(1)For the three months ended September 30, 20212022 and September 30, 2020,2021, average advisory fee rate equals advisory revenue for the relevant quarterly period divided by the advisory asset balance at the beginning of the relevant quarterly period. For the nine months ended September 30, 20212022 and September 30, 2020,2021, average advisory fee rate equals the sum of each quarterly average advisory fee rate within the relevant year-to-date period.
Blucora, Inc. | Q3 2021 Form 10-Q 28

For the three and nine months ended September 30, 2021 compared to the three2022, advisory assets declined $1.3 billion and nine months ended September 30, 2020, advisory revenue increased $20.9 million and $63.5 million,$6.7 billion, respectively, primarily due to a year-over-year increase inunfavorable market changes, partially offset by net new advisory assets. The increase inNet new advisory assets was primarily duebenefited from organic growth and the conversion of off platform, direct to favorable market change, an increase infund assets, when appropriate for the client, to fee-based advisory assets resulting from the HKFS Acquisition,platforms that include ongoing management and net client inflows. In addition, advisory revenue recognized was negatively affected because such revenue was primarily based on the value of client assets within advisory accounts as of June 30, 2020, which were substantially affected by the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020.
For the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020, the average advisory fee rate decreased primarily due to our tiered fee structure, which has generated lower average fee rates as average client asset balances have increased. In addition, the average advisory fee rate decreased due to the lower advisory fee structure of HKFS.generate higher margins.
For the three months ended September 30, 2022, compared to the three months ended September 30, 2021, advisory revenues decreased $8.5 million, primarily due to the decline in global markets as discussed above. Although advisory assets remained relatively constant. Fordeclined during the nine months ended September 30, 2021, advisory assets increased $4.2 billion, primarily2022, due to favorablethe timing of market change and client inflows.declines relative to when clients are billed, advisory revenue increased $15.2 million. The average advisory fee rates between the two periods were relatively flat.
Commission revenue.Revenue. The Wealth Management segment generates two types of commissions: (1) transaction-based commissions and (2) trailing commissions. Transaction-based commissions, which occur when clients trade securities or purchase investment products, represent gross commissions generated by our financial professionals. The level of transaction-based commissions can vary from period-to-period based on the overall economic environment, number of trading days in the reporting period, market volatility, interest rate fluctuations, and investment activity of our financial professionals’ clients. We earn trailing commissions (a commission or fee that is paid periodically over time) on certain mutual funds and variable annuities held by clients. Trailing commissions are recurring in nature and are based on the market value of investment holdings in trail-eligible assets.
Blucora, Inc. | Q3 2022 Form 10-Q 25

Our commission revenue, by product category and by type of commission revenue, was as follows:follows (in thousands):
(in thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
20212020$%20212020$% 20222021$%20222021$%
By product category:By product category:By product category:
Mutual fundsMutual funds$22,749 $21,674 $1,075 5 %$70,300 $66,886 $3,414 5 %Mutual funds$16,339 $22,844 $(6,505)(28.5)%$53,635 $70,395 $(16,760)(23.8)%
Variable annuitiesVariable annuities18,752 16,168 2,584 16 %55,247 44,522 10,725 24 %Variable annuities14,892 18,752 (3,860)(20.6)%46,961 55,247 (8,286)(15.0)%
InsuranceInsurance4,414 4,145 269 6 %14,044 12,209 1,835 15 %Insurance5,048 4,414 634 14.4 %13,007 14,044 (1,037)(7.4)%
General securitiesGeneral securities6,951 2,934 4,017 137 %17,511 11,720 5,791 49 %General securities5,509 6,951 (1,442)(20.7)%18,675 17,511 1,164 6.6 %
Other95 — 95 N/A95 — 95 N/A
Total commission revenueTotal commission revenue$52,961 $44,921 $8,040 18 %$157,197 $135,337 $21,860 16 %Total commission revenue$41,788 $52,961 $(11,173)(21.1)%$132,278 $157,197 $(24,919)(15.9)%
By type of commission:By type of commission:By type of commission:
Transaction-basedTransaction-based$22,372 $16,884 $5,488 33 %$65,815 $55,068 $10,747 20 %Transaction-based$17,868 $22,372 $(4,504)(20.1)%$56,373 $65,815 $(9,442)(14.3)%
TrailingTrailing30,589 28,037 2,552 9 %91,382 80,269 11,113 14 %Trailing23,920 30,589 (6,669)(21.8)%75,905 91,382 (15,477)(16.9)%
Total commission revenueTotal commission revenue$52,961 $44,921 $8,040 18 %$157,197 $135,337 $21,860 16 %Total commission revenue$41,788 $52,961 $(11,173)(21.1)%$132,278 $157,197 $(24,919)(15.9)%
ForAs discussed in the sections above, the declines in transaction-based and trailing commission revenues for the periods shown in the table above were primarily due to unfavorable transaction activity and volatility in global financial markets during the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020:2022.
•Transaction-based commission revenue increased $5.5 million and $10.7 million, respectively, primarily due to an increase in transaction activity. Transaction-based commission revenue in 2020 was negatively affected by suppressed transaction activity as a result of the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020.
•Trailing commission revenue increased $2.6 million and $11.1 million, respectively, primarily due to increased client asset levels. Trailing commission revenue in 2020 was negatively affected by suppressed client asset levels as a result of the COVID-19 pandemic and related financial market disruption beginning in the second quarter of 2020.
Trailing commission revenue and transaction-based commission revenue remain susceptible to being adversely affected in future periods in which pandemic-influenced economic and market factors remain present.
Blucora, Inc. | Q3 2021 Form 10-Q 29

Asset-based revenue.Asset-Based Revenue. Asset-based revenue primarily includes fees from financial product manufacturer sponsorship programs, cash sweep programs, asset-based retirement plan service fees, and other asset-based revenues.
For the three and nine months ended September 30, 20212022, compared to the three months ended September 30, 2020, asset-based revenue increased $1.3 million primarily due to a $0.9 million increase in revenue generated from financial product manufacturer sponsorship programs, as well as a $0.3 million increase in asset-based retirement plan service fees following the HKFS Acquisition.
For theand nine months ended September 30, 2021, comparedasset-based revenue increased $15.5 million and $17.3 million, respectively. These increases were primarily due to incremental cash sweep revenue of $16.9 million and $19.2 million during the three and nine months ended September 30, 2020, asset-based revenue decreased $2.4 million primarily due to a $6.2 million decrease2022, respectively, driven by increases in the federal funds rate. The increases in cash sweep revenue as a result of lower interest rates,were partially offset by a $1.9 million increase in revenue generatedreduced fees from financial product manufacturer sponsorship programsprograms. Due to the timing of rate increases and a $1.7 million increase in revenue generated from asset-based retirement plan service fees following the HKFS Acquisition.
In March 2020,non-linear nature of upside associated with these increases, and with expectation of additional rate increases by the Federal Reserve lowered its target range for the federal funds rate to 0.00-0.25%. As ourin 2022, cash sweep revenue is based on a rate derived fromexpected to continue to increase for the federal funds rate, cash sweep revenue in all quarters subsequent toremainder of the first quarter of 2020 has been materially reduced. We expect continued low levels of cash sweep revenue in future periods in which the federal funds rate is at reduced levels, although we may experience an increase in cash sweep revenue should the federal funds rate increase.year.
Transaction and fee revenue.Fee Revenue. Transaction and fee revenue primarily includes support fees charged to financial professionals, fees charged for executing certain transactions in client accounts, and other fees related to services provided and other account charges as generally outlined in agreements with financial professionals, clients, financial institutions, and retirement plan sponsors.
For the three and nine months ended September 30, 20212022, compared to the three and nine months ended September 30, 2020,2021, transaction and fee revenue increased $2.9 million and $6.3 million, respectively, primarily due to incremental revenue generated from financial professional support fees, as well as for the nine months ended September 30, 2021 incremental transaction and fee revenue as a result of the HKFS Acquisition.
Tax Software
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
 20212020$%20212020$%
Revenue$5,039 $39,421 $(34,382)(87)%$220,848 $202,990 $17,858 9 %
Operating income (loss)$(13,864)$16,234 $(30,098)(185)%$100,472 $60,646 $39,826 66 %
Segment margin(275)%41 %45 %30 %
Tax Software revenue and operating income for the three and nine months ended September 30, 2020 were significantly impacted by the extension of the filing and payment deadlines for federal tax returns in the 2020 tax season. For additional discussion of the COVID-19 pandemic and its effect on current and prior year Tax Software segment results, please see the “COVID-19 Pandemic” section within this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
For the three months ended September 30, 2021 compared to the three months ended September 30, 2020, Tax Software operating income decreased $30.1 million due to the following factors:
•Tax Software revenue decreased $34.4 million primarily due to a $34.0 million decrease in consumer revenue and a $0.4 million decrease in professional revenue. The decreases primarily resulted from the earlier tax filing and payment deadline in 2021 versus 2020 and, to a lesser extent, from IRS delays in the processing of 2020 tax returns and refunds.
•Tax Software operating expenses decreased $4.3 million primarily due to decreased advertising and marketing expenses. Advertising and marketing costs in our Tax Software business were elevated in the third quarter of 2020 due to the extension of the extension of the 2019 tax returns to July 15, 2020.remained relatively flat.
Blucora, Inc. | Q3 20212022 Form 10-Q 3026

Tax Software
($ in thousands)Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
 20222021$%20222021$%
Revenue$6,664 $5,039 $1,625 32.2 %$242,028 $220,848 $21,180 9.6 %
Operating income (loss)$(12,517)$(13,864)$1,347 9.7 %$99,372 $100,472 $(1,100)(1.1)%
Segment margin(187.8)%(275.1)%41.1 %45.5 %
For the three months ended September 30, 2022, compared to the three months ended September 30, 2021, Tax Software operating loss decreased $1.3 million due to a $1.5 million increase in consumer revenue and relatively flat operating expenses. Consumer revenue benefited from an increase in consumer e-files associated with market share growth and the volume of customers that filed extensions when compared to the prior year.
For the nine months ended September 30, 20212022, compared to the nine months ended September 30, 2020,2021, Tax Software operating income increased $39.8decreased $1.1 million due to the following factors:
•Tax Software revenue increased $17.9$21.2 million primarily due to a $17.2$18.4 million increase in consumer revenue and a $0.7$2.8 million increase in professional revenue. The growth in revenue during the nine months ended September 30, 2022 was attributable to higher average revenue per unit and growth in market share from favorable customer retention and acquisition. These increases during the period were partially offset by an increase in the volume of customers that filed extensions when compared to the prior year. We expect to continue to benefit from higher average revenue per unit for the remainder of the year as customers complete returns associated with these extensions.
•Tax Software operating expenses decreased $22.0increased $22.3 million primarily due to decreasedincreased investments in seasonal customer care support and tax experts and an increase in strategic advertising and marketing expenses. Advertising and marketing expenses forspend. These incremental costs were the nine months ended September 30, 2020 were elevated due to incremental marketing efforts to address weak performance through the first two monthsprimary drivers of the 2020 tax season, as well as increased advertising and marketing resulting fromreduction in segment margin shown in the extended tax season.table above.
Sources of revenueRevenue
Tax Software revenue is derived primarily from the sale of digital tax preparation services, ancillary services, packaged tax preparation software, and multiple element arrangements that may include a combination of these items. Ancillary services primarily include refund payment transfer, audit defense, e-file concierge services, and expert filing assistance.Xpert Assist.
We classify Tax Software revenue into two different categories: consumer revenue and professional revenue. Consumer revenue represents Tax Software revenueis derived from products and services sold directly to customers and businesses primarily for the preparation of individual or business tax returns. Professional revenue represents Tax Software revenue derived from products sold to tax return preparers who utilize our offerings to service end-user customers.
Revenue by category was as follows:follows (in thousands):
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
 20212020$%20212020$%
Consumer revenue$4,479 $38,482 $(34,003)(88)%$203,891 $186,724 $17,167 9 %
Professional revenue560 939 (379)(40)%16,957 16,266 691 4 %
Total Tax Software revenue$5,039 $39,421 $(34,382)(87)%$220,848 $202,990 $17,858 9 %
Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
 20222021$%20222021$%
Consumer$5,974 $4,479 $1,495 33.4 %$222,262 $203,891 $18,371 9.0 %
Professional690 560 130 23.2 %19,766 16,957 2,809 16.6 %
Total Tax Software revenue$6,664 $5,039 $1,625 32.2 %$242,028 $220,848 $21,180 9.6 %
Business Metrics
We measure the performance of our Tax Software business using three sets of non-financial metrics, which we consider to be important indicators of the performance of our Tax Software business and are especially relevant through the end of a completed tax season. These non-financial metrics include key performance indicators for our total Tax Software business, in addition to the consumer and professional tax software portions of the Tax Software business:
•We measure our total tax software customers using the total number of accepted federal tax e-files completed by both our consumer tax software customers and our professional tax software customers.
•We measure our consumer tax software customers using the number of accepted federal tax e-files made through our software and digital services.
Blucora, Inc. | Q3 2022 Form 10-Q 27

•We measure our professional tax software customers using three metrics: (1) the number of accepted federal tax e-files made through our software, (2) the number of units sold, and (3) the number of e-files per unit sold.


Blucora, Inc. | Q3 2021 Form 10-Q 31

(In thousands, except percentages and as otherwise indicated)Nine months endedYTDYear-to-date period endedYTD
September 30,ChangeJuly 16,Change
(In thousands, except as otherwise indicated)(In thousands, except as otherwise indicated)Nine Months Ended
September 30,		Change
20212020Units%
2021 (1)
2020 (1)
Units%20222021Units%
Total e-files (2)
5,492 5,234 258 5 %5,421 5,149 272 5 %
Total e-files (1)
Total e-files (1)
5,658 5,492 166 3.0 %
Consumer:Consumer:Consumer:
Consumer e-files (2)
3,144 3,145 (1)— %3,122 3,113 9 — %
Consumer e-files (1)
Consumer e-files (1)
3,232 3,144 88 2.8 %
Professional:Professional:Professional:
Professional e-filesProfessional e-files2,348 2,089 259 12 %2,299 2,036 263 13 %Professional e-files2,426 2,348 78 3.3 %
Units sold (in ones)Units sold (in ones)20,808 20,288 520 3 %20,711 20,207 504 2 %Units sold (in ones)21,051 20,808 243 1.2 %
Professional e-files per unit sold (in ones)Professional e-files per unit sold (in ones)112.8 102.9 9.9 10 %111.0 100.8 10.2 10 %Professional e-files per unit sold (in ones)115.2 112.8 2.4 2.1 %
____________________________
(1)Tax season begins on the first day that the IRS begins accepting e-files and ends on filing deadline day plus one day. Due to the impact of the COVID-19 pandemic, the IRS extended the filing deadlines for federal tax returns relating to the 2020 and 2019 tax years to May 17, 2021 (with the filing deadline extended to June 15, 2021 for Texas, Louisiana, and Oklahoma) and July 15, 2020, respectively. In order to provide comparable tax season data, we provided the above metrics for the year-to-date periods ended July 16, 2021 and 2020 as these periods capture the activity of the entire tax season for each year.
(2)We participate in the Free File Alliance that is part of an IRS partnership that provides free electronic tax filing services to taxpayers meeting certain income-based guidelines. Free File Alliance e-files are included within total e-files and consumer e-files above.
For the nine months ended September 30, 20212022, compared to the nine months ended September 30, 2020,2021, e-files across each category, and the year-to-date period ended July 16, 2021 compared to the year-to-date period ended July 16, 2020, total e-filesprofessional units sold, increased 5%. This increase was primarily due to the increasegrowth in the number of professional tax software e-files, which resulted from increased market share from favorable customer retention and acquisition, both of which benefited from our investments in the professional tax software market.
For more information on the risks associated with our Tax Software business, see the “COVID-19 Pandemic” section within this Management’s Discussionstrategic marketing spend and Analysis of Financial Condition and Results of Operations and “Item 1A. Risk Factors” under the heading, “The current COVID-19 pandemic could have a Material Adverse Effect.” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020.
Blucora, Inc. | Q3 2021 Form 10-Q 32

customer care support.
Corporate-Level Activity
Certain corporate-level activity, including certain general and administrative costs (such as personnel and overhead costs), stock-based compensation, acquisition and integration costs, depreciation, amortization of acquired intangible assets, impairment of goodwill, executive transition costs, headquarters relocation costs, and contested proxy, transaction and other legal and consulting costs, is not allocated to our reportable segments.
Corporate-level activity by category was as follows:follows (in thousands):
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
 20212020$%20212020$%
Unallocated corporate-level general and administrative$6,499 $6,745 $(246)(4)%$18,452 $19,571 $(1,119)(6)%
Stock-based compensation4,729 4,517 212 5 %15,499 7,220 8,279 115 %
Acquisition and integration2,241 10,276 (8,035)(78)%28,513 18,782 9,731 52 %
Depreciation3,906 2,620 1,286 49 %11,251 7,452 3,799 51 %
Amortization of other acquired intangible assets7,009 7,746 (737)(10)%21,247 22,167 (920)(4)%
Contested proxy and other legal and consulting costs1,598 — 1,598 N/A7,293 — 7,293 N/A
Executive transition costs— 405 (405)(100)%— 10,225 (10,225)(100)%
Headquarters relocation costs— 410 (410)(100)%— 1,863 (1,863)(100)%
Impairment of goodwill— — — N/A— 270,625 (270,625)(100)%
Total corporate-level activity$25,982 $32,719 $(6,737)(21)%$102,255 $357,905 $(255,650)(71)%
Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
 20222021$%20222021$%
Unallocated corporate-level general and administrative expenses$7,456 $6,499 $957 14.7 %$22,428 $18,452 $3,976 21.5 %
Stock-based compensation5,706 4,729 977 20.7 %17,129 15,499 1,630 10.5 %
Acquisition and integration416 2,241 (1,825)(81.4)%(4,710)28,513 (33,223)(116.5)%
Depreciation6,020 3,906 2,114 54.1 %15,696 11,251 4,445 39.5 %
Amortization of acquired intangible assets6,342 7,009 (667)(9.5)%19,435 21,247 (1,812)(8.5)%
Contested proxy, transaction and other legal and consulting costs2,987 1,598 1,389 86.9 %7,304 7,293 11 0.2 %
Total corporate-level activity$28,927 $25,982 $2,945 11.3 %$77,282 $102,255 $(24,973)(24.4)%
For the three months ended September 30, 20212022, compared to the three months ended September 30, 2020,2021, corporate-level activity increased $2.9 million primarily due to the following factors:
•Depreciation expense increased $2.1 million primarily due to capitalized software costs for our Tax Software business.
•Contested proxy, transaction and other legal and consulting costs increased $1.4 million primarily due to incremental legal and consulting costs incurred in connection with the TaxAct Sale Transaction.
Partially offsetting this increase in corporate-level activity:
•Acquisition and integration expenses decreased $1.8 million, primarily due to the final remeasurement of the HKFS Contingent Consideration liability in the second quarter of 2022.
Blucora, Inc. | Q3 2022 Form 10-Q 28

For the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, corporate-level activity decreased $6.7$25.0 million primarily due to the following factors:
•Acquisition and integration expenses decreased $8.0$33.2 million, primarily due to a $24.8 million decrease in the following factors. For the three months ended September 30, 2021, acquisition and integration expenses were $2.2 million, which primarily related tofair value adjustments recorded for the HKFS Acquisition. ForContingent Consideration liability between the three months ended September 30, 2020, acquisitiontwo periods, and integration expenses were $10.3an $8.4 million which included $5.9 million related to the acquisition of 1st Global, Inc. and 1st Global Insurance Services, Inc. (together, “1st Global”)decrease in 2019 (the “1st Global Acquisition”) and $4.4 million related to the HKFS Acquisition.
•Contested proxyprofessional services and other legal and consulting costs of $1.6 million were recognized in the three months ended September 30, 2021 with no comparable amount in the 2020 period.
For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, corporate-level activity decreased $255.7 million primarilyexpenses due to the non-recurrence of the following factors:
•For the nine months ended September 30, 2020, we recognized goodwill impairment of $270.6 million related to our Wealth Management reporting unit.
•Executive transition costs of $10.2 million were recognized for the nine months ended September 30, 2020 due to the departures of certain Company executives.a reduction in integration activities.
Partially offsetting this decrease in corporate-level activity:
•For the nine months ended September 30, 2021, acquisition and integration expenses were $28.5Depreciation expense increased $4.4 million which included $22.6 million relatedprimarily due to the HKFS Acquisition and $5.9 million related to the 1st Global Acquisition. For the nine months ended September 30, 2020, acquisition and integration expenses were $18.8 million, which included $10.6 million related to the 1st Global Acquisition and $8.2 million related to the HKFS Acquisition.capitalized software costs for our Tax Software business.
•Stock-based compensation expenseUnallocated general and administrative expenses increased $8.3 million. Stock-based compensation for the nine months ended September 30, 2020 was reduced by stock award forfeitures resulting from executive departures in 2020.$4.0 million primarily due to incremental personnel and insurance costs.
•Contested proxy and other legal and consulting costs of $7.3 million were recognized for the nine months ended September 30, 2021.
Blucora, Inc. | Q3 2021 Form 10-Q 33

OPERATING EXPENSES
Cost of Revenue
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
 20212020$%20212020$%
Wealth Management services cost of revenue$120,641 $96,122 $24,519 26 %$343,174 $282,332 $60,842 22 %
Tax Software services cost of revenue2,323 2,692 (369)(14)%12,330 9,759 2,571 26 %
Total cost of revenue$122,964 $98,814 $24,150 24 %$355,504 $292,091 $63,413 22 %
Percentage of revenue71 %56 %50 %49 %
($ in thousands)Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
 20222021$%20222021$%
Wealth Management$105,301 $120,641 $(15,340)(12.7)%$338,819 $343,174 $(4,355)(1.3)%
Tax Software3,879 2,323 1,556 67.0 %20,178 12,330 7,848 63.6 %
Total cost of revenue$109,180 $122,964 $(13,784)(11.2)%$358,997 $355,504 $3,493 1.0 %
Percentage of revenue63.6 %70.6 %48.8 %50.3 %
Cost of revenue consists of costs related to our Wealth Management and Tax Software businesses, which include commissions and advisory fees paid to independent financial professionals, payments made to CPA firms under fee sharing arrangements, amortization of forgivable loans issued to our financial professionals, third-party costs, and costs associated with the technical support team and the operation of our data centers. Data center costs include personnel expenses, the cost of temporary help and contractors, professional services fees, software support and maintenance, bandwidth and hosting costs, and depreciation (including depreciation related to software development costs in the Tax Software segment). Cost of revenue does not include compensation paid to in-house/employee financial professionals in our Wealth Management business. As theThe compensation of our in-house/employee financial professionals are employees of Avantax Planning Partners, their compensation is reflected in “Sales and marketing” expense.
For the three months ended September 30, 2022, compared to the three months ended September 30, 2021, cost of revenue decreased $13.8 million. The reduction in Wealth Management cost of revenue was primarily due to reduced advisory fees and commissions paid, which trended consistently with the associated changes in revenue discussed within the Segment Revenue & Operating Incomesection above. This decline was partially offset by increased depreciation of capitalized software development costs within Tax Software.
For the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020, cost of revenue increased $24.2 million$3.5 million. Tax Software cost of revenue included incremental personnel and $63.4 million, respectively, primarily dueconsulting costs and depreciation of capitalized software. Continued investments in internally developed software for the Tax Software business are expected to an increaseresult in increased depreciation in future periods. Within Wealth Management, advisory fees and commissions paid declined $6.4 million and trended consistently with the associated changes in revenue discussed within the Segment Revenue & Operating Incomesection above. This decline was partially offset by $2.4 million of incremental forgivable loans amortization.
Payout ratios to independent financial professionals which primarily resulted from an increaseare determined based on trailing twelve-month revenues and may not immediately correlate with changes in client assets during periods of significant market volatility. For both periods, payout ratios to independent financial professionals remained relatively flat as the financial market volatility during the first three quarters of 2022 offset previous expansion in the number of financial professionals withconcentrated at higher payout levels due to improved market performance and the alignment of our payout grids. The increase in cost of revenue was also the result of increased personnel costs in the Tax Software segment, as well as increased depreciation related to capitalized software costs in the Tax Software segment.levels.
Blucora, Inc. | Q3 2022 Form 10-Q 29

Engineering and Technology
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
($ in thousands)($ in thousands)Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
20212020$%20212020$% 20222021$%20222021$%
Engineering and technologyEngineering and technology$7,874 $6,007 $1,867 31 %$22,233 $21,899 $334 2 %Engineering and technology$7,474 $7,874 $(400)(5.1)%$24,598 $22,233 $2,365 10.6 %
Percentage of revenuePercentage of revenue5 %3 %3 %4 %Percentage of revenue4.4 %4.5 %3.3 %3.1 %
Engineering and technology expenses are associated with the research, development, support, and ongoing enhancements of our offerings, which include personnel expenses, the cost of temporary help and contractors, software support and maintenance, bandwidth and hosting, and professional services fees. Engineering and technology expenses do not include the costs of computer hardware and software that are capitalized, depreciated over their useful lives, and recognized on the condensed consolidated statements of comprehensive income (loss)operations as either “Cost of Revenue” or “Depreciation.” For more information, see the “Cost of Revenue” and “Depreciation and Amortization of Acquired Intangible Assets” sections contained within this discussion of “Operating Expenses.”
For the three months ended September 30, 20212022, compared to the three months ended September 30, 2020,2021, engineering and technology expenses remained relatively flat.
For the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, engineering and technology expenses increased $1.9$2.4 million primarily due to increases in personnel expenses and consulting fees in our Tax Software and Wealth Management businesses.
For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, engineering and technology expenses increased $0.3 million primarily due to an increase in personnel expenses in the Tax Software and Wealth Management segments, partially offset by decreased consulting fees in our Tax Software business.
Blucora, Inc. | Q3 2021 Form 10-Q 34

segment.
Sales and Marketing
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
($ in thousands)($ in thousands)Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
20212020$%20212020$% 20222021$%20222021$%
Sales and marketingSales and marketing$28,399 $31,018 $(2,619)(8)%$140,809 $150,785 $(9,976)(7)%Sales and marketing$30,485 $28,399 $2,086 7.3 %$162,396 $140,809 $21,587 15.3 %
Percentage of revenuePercentage of revenue16 %18 %20 %25 %Percentage of revenue17.8 %16.3 %22.1 %19.9 %
Sales and marketing expenses primarily consist of marketing expenses associated with our Tax Software business (including expenses related to marketing agencies and media companies) and our Wealth Management business, personnel expenses, compensation paid to Avantax Planning Partners in-housein-house/employee financial professionals, the cost of temporary help and contractors, and back officeback-office processing support expenses for our Wealth Management business.
For the three months ended September 30, 20212022, compared to the three months ended September 30, 2020,2021, sales and marketing expenses decreased $2.6increased $2.1 million, primarily due to a $6.8incremental personnel costs of $1.6 million decrease in our Wealth Management segment.
For the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, sales and marketing expenses increased $21.6 million, primarily due to the following factors:
•Personnel costs in both segments increased $11.8 million.
•Strategic advertising and marketing costs in our Tax Software business. Advertising and marketing costs in our Tax Software business were elevated insegment increased $9.0 million.
For the third quarter of 2020 due to the extensionremainder of the filingyear, we expect to incur incremental travel and payment deadline for tax year 2019 federal tax returns to July 15, 2020, thereby necessitating additional advertisingconference costs associated with reduced travel restrictions and marketing efforts. In contrast, the filing and payment deadline in most states for tax year 2020 federal tax returns was May 17, 2021. This decrease was partially offset by a $4.2 million increase in sales and marketing expenses intiming of our Wealth Management business due to incremental expenses following the HKFS Acquisition and increased headcount to support growth in the Wealth Management business.
For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, sales and marketing expenses decreased $10.0 million primarily due to a $26.7 million decrease in advertising and marketing costs in our Tax Software business. Advertising and marketing costs in our Tax Software business were elevated for the nine months ended September 30, 2020 primarily due to incremental marketing efforts in March 2020 to address weak performance through the first two months of the 2020 tax season, as well as increased marketing required due to the extended tax season. This decrease was partially offset by a $16.6 million increase in sales and marketing expenses in our Wealth Management business due to incremental expenses following the HKFS Acquisition and increased headcount to support growth in the Wealth Management business.national conference.
General and Administrative
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
($ in thousands)($ in thousands)Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
20212020$%20212020$% 20222021$%20222021$%
General and administrativeGeneral and administrative$23,102 $18,605 $4,497 24 %$71,619 $63,533 $8,086 13 %General and administrative$27,778 $23,102 $4,676 20.2 %$83,499 $71,619 $11,880 16.6 %
Percentage of revenuePercentage of revenue13 %11 %10 %11 %Percentage of revenue16.2 %13.3 %11.3 %10.1 %
General and administrative (“G&A”) expenses primarily consist of expenses associated with personnel expenses, the cost of temporary help and contractors, professional services fees, general business development and management expenses, occupancy and general office expenses, business taxes, and insurance expenses.
For the three months ended September 30, 2021 compared to the three months ended September 30, 2020, G&A expenses increased $4.5 million primarily due to the following factors:
•For the three months ended September 30, 2021, we recognized $1.6 million in expenses associated with other legal and consulting costs.
•Depreciation expense increased $1.3 million resulting from property and equipment placed into service at our new headquarters in July 2020.
For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, G&A expenses increased $8.1 million primarily due to the following factors:
•Stock-based compensation increased $8.3 million. Stock-based compensation for the nine months ended September 30, 2020 was reduced due to stock award forfeitures resulting from executive departures in 2020.
•For the nine months ended September 30, 2021, we recognized $7.3 million in expenses associated with contested proxy and other legal and consulting costs.
Blucora, Inc. | Q3 20212022 Form 10-Q 3530

•Depreciation expense increased $3.8 million resulting from propertyFor the three and equipment placed into service at our new headquarters in July 2020.
Partially offsetting these increases, we recognized $10.2 million of executive transition costs for the nine months ended September 30, 20202022, compared to the three and nine months ended September 30, 2021, G&A expenses increased $4.7 million and $11.9 million, respectively, primarily due to the departure of certain Company executives in 2020.incremental personnel costs, professional services fees, and hardware and software support and maintenance fees.
Acquisition and Integration
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
 20212020$%20212020$%
Employee-related expenses$(36)$264 $(300)(114)%$699 $1,326 $(627)(47)%
Professional services377 4,905 (4,528)(92)%1,620 11,447 (9,827)(86)%
Change in the fair value of HKFS Contingent Consideration1,700 (1,000)2,700 270 %19,500 (1,000)20,500 2050 %
Other expenses200 6,107 (5,907)(97)%6,694 7,009 (315)(4)%
Total$2,241 $10,276 $(8,035)(78)%$28,513 $18,782 $9,731 52 %
Percentage of revenue1 %6 %4 %3 %
($ in thousands)Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
 20222021$%20222021$%
Change in the fair value of HKFS Contingent Consideration$— $1,700 $(1,700)(100.0)%$(5,320)$19,500 $(24,820)(127.3)%
Professional services and other expenses416 541 (125)(23.1)%610 9,013 (8,403)(93.2)%
Total$416 $2,241 $(1,825)(81.4)%$(4,710)$28,513 $(33,223)(116.5)%
Percentage of revenue0.2 %1.3 %(0.6)%4.0 %
Acquisition and integration expenses primarily relate to costs incurred for the HKFS Acquisitionacquisitions of Avantax Planning Partners and the 1st Global Acquisition and consist of employee-related expenses, professional services fees, changes in the fair value of contingent consideration, and other expenses.
For the three months ended September 30, 2022, compared to the three months ended September 30, 2021, acquisition and integration expenses of $2.2decreased $1.8 million, were primarily relateddue to the HKFS Acquisition, which included a $1.7 million loss related to the increase in the fair valuefinal remeasurement of the liability related to the two post-closing earn-out payments (the “HKFS Contingent Consideration”). For additional information on the HKFS Contingent Consideration liability andin the contingent liability from the 1st Global Acquisition, see “Item 1. Financial Statements—Note 8.” second quarter of 2022.
For the threenine months ended September 30, 2020, acquisition and integration expenses included $5.9 million related2022, compared to the 1st Global Acquisition and $4.4 million related to the HKFS Acquisition.
For the nine months ended September 30, 2021, acquisition and integration expenses of $28.5decreased $33.2 million, were primarily composed of $22.6 million relateddue to the HKFS Acquisition, which included a $19.5 million loss related to the increasefollowing factors:
•The change in the fair value of the HKFS Contingent Consideration liability. In addition, acquisition and integration expensesliability decreased $24.8 million, primarily due to the timing of fair value adjustments recorded between the two periods. This change is inclusive of a $7.0 million gain recorded during the second quarter of 2022 for the nine months ended September 30, 2021 included $5.9 million related tofinal settlement value of the 1st Global Acquisition, which included an increaseliability, reflecting a decrease in the fair value of $5.5 million to the contingent liability reserve balance relatedconsideration due to a regulatory matter assumedsignificant decline in advisory asset levels caused by the financial market decline discussed in the 1st Global Acquisition. For the nine months ended September 30, 2020, acquisitionsections above.
•Professional services and other expenses declined $8.4 million due to a reduction in integration expenses included $10.6 million related to the 1st Global Acquisition and $8.2 million related to the HKFS Acquisition.activities.
Depreciation and Amortization of Acquired Intangible Assets
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
($ in thousands)($ in thousands)Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
20212020$%20212020$% 20222021$%20222021$%
DepreciationDepreciation$2,867 $1,874 $993 53 %$8,371 $5,345 $3,026 57 %Depreciation$3,839 $2,867 $972 33.9 %$9,907 $8,371 $1,536 18.3 %
Amortization of acquired intangible assetsAmortization of acquired intangible assets7,009 7,746 (737)(10)%21,247 22,167 (920)(4)%Amortization of acquired intangible assets6,342 7,009 (667)(9.5)%19,435 21,247 (1,812)(8.5)%
TotalTotal$9,876 $9,620 $256 3 %$29,618 $27,512 2,106 8 %Total$10,181 $9,876 $305 3.1 %$29,342 $29,618 $(276)(0.9)%
Percentage of revenuePercentage of revenue6 %5 %4 %5 %Percentage of revenue5.9 %5.7 %4.0 %4.2 %
Depreciation of property, equipment, and equipmentsoftware, net includes depreciation of computer equipment and software (including internally developed software), office equipment and furniture, and leasehold improvements. Amortization of acquired intangible assets primarily includes the amortization of financial professional, sponsor, and customer relationships, which are amortized over their estimated lives.
For the three and nine months ended September 30, 20212022, compared to the three and nine months ended September 30, 2020,2021, depreciation and amortization expense increased $0.3 million and $2.1 million, respectively, primarily due to increased depreciation resulting from property and equipment put into service at our new headquarters in July 2020 and an increase in capitalized software costs.did not materially change.
Blucora, Inc. | Q3 20212022 Form 10-Q 3631

Impairment of Goodwill
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
 20212020$%20212020$%
Impairment of goodwill$— $— $— N/A— $270,625 $(270,625)(100)%
Percentage of revenue— %— %— %45 %
INTEREST EXPENSE AND OTHER, NET
($ in thousands)Three Months Ended September 30,ChangeNine Months Ended
September 30,		Change
20222021$%20222021$%
Interest expense$8,771 $7,304 $1,467 20.1 %$23,166 $21,789 $1,377 6.3 %
Amortization of debt issuance costs403 388 15 3.9 %1,191 1,128 63 5.6 %
Amortization of debt discount302 290 12 4.1 %893 851 42 4.9 %
Total interest expense9,476 7,982 1,494 18.7 %25,250 23,768 1,482 6.2 %
Interest income and other273 313 (40)(12.8)%457 434 23 5.3 %
Interest expense and other, net$9,749 $8,295 $1,454 17.5 %$25,707 $24,202 $1,505 6.2 %
For the three and nine months ended September 30, 2020, we recognized goodwill impairment of $270.6 million related to our Wealth Management reporting unit.
OTHER LOSS, NET
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
20212020$%20212020$%
Interest expense$7,304 $7,254 $50 1 %$21,789 $17,410 $4,379 25 %
Amortization of debt issuance costs388 362 26 7 %1,128 1,006 122 12 %
Accretion of debt discounts290 276 14 5 %851 414 437 106 %
Total interest expense7,982 7,892 90 1 %23,768 18,830 4,938 26 %
Interest income— (2)2 100 %(2)(27)25 93 %
Gain on sale of a business— (349)349 100 %— (349)349 100 %
Non-capitalized debt issuance expenses— 3,687 (3,687)(100)%— 3,687 (3,687)(100)%
Other313 735 (422)(57)%436 1,245 (809)(65)%
Other loss, net$8,295 $11,963 $(3,668)(31)%$24,202 $23,386 $816 3 %
For the three months ended September 30, 20212022, compared to the three months ended September 30, 2020, other loss, net, decreased $3.7 million primarily due to the recognition of $3.7 million of non-capitalized debt-issuance expenses related to the $175.0 million increase in the Term Loan (as defined below) under the Senior Secured Credit Facility (as defined below) in the third quarter of 2020.
For theand nine months ended September 30, 2021, comparedinterest expense and other, net, increased $1.5 million and $1.5 million, respectively, primarily due to rising interest rates. The impact of rising interest rates on our interest expense was partially offset by our voluntary $35.0 million prepayment of principal outstanding under our Term Loan in August 2022. As the interest rate on our Term Loan is variable at the London Interbank Offered Rate, we expect for our interest expense to increase in future periods due to increasing interest rates.
INCOME TAXES
We recorded an income tax benefit of $1.7 million and income tax expense of $4.1 million for the three and nine months ended September 30, 2020, other loss, net, increased $0.8 million, primarily due to a $4.9 million increase in total interest expense. This increased interest expense was primarily due to higher outstanding debt balances following the $175.0 million increase in the Term Loan (as defined below) under the Senior Secured Credit Facility (as defined below) in the third quarter of 2020, which was partially offset by $3.7 million of non-capitalized debt issuance expenses that were also related to the Term Loan increase.
The Senior Secured Credit Facility, including the Term Loan and the Revolver (as defined below) thereunder, are described in more detail under “Liquidity and Capital Resources” below.
INCOME TAXES
(In thousands, except percentages)Three months endedQTDNine months endedYTD
September 30,ChangeSeptember 30,Change
 20212020$%20212020$%
Income tax benefit (expense)$774 $(15,256)$16,030 105 %$(2,920)$(23,237)$20,317 (87)%
The Company2022, respectively. We recorded an income tax benefit of $0.8 million and income tax expense of $2.9 million for the three and nine months ended September 30, 2021, respectively. For 2021, the Company prepared itsThe prior period interim tax provision was prepared by applying a year-to-date effective tax rate to each quarter. For 2020, the Company prepared itsincome before income taxes. The current period interim tax provision was prepared by applying an estimated annual effective tax rate. We believe usingrate to income before income taxes and by calculating the actual year-to-date effective tax rate in 2021 results ineffect of discrete items recognized during the best estimate of the annual effective tax rate.quarter (if applicable).
The Company’sOur effective income tax rate for the three and nine months ended September 30, 2022, and September 30, 2021 differed from the 21% statutory rate primarily due to the release of valuation allowances and the effect of state income taxes. We currently expect to continue to release portions ofmaintain a valuation allowances, which were previously recorded in connection with ourallowance 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 federal income tax liabilities.periods. The majority of these net operating losses will either be utilized or expire between 20212022 and 2024.

Blucora, Inc. | Q3 2021 Form 10-Q 37

The Company recorded income tax expense of $15.3 million and $23.2 million for the three and nine months ended September 30, 2020, respectively. The Company’s effective income tax rate for the three and nine months ended September 30, 2020 differed from the 21% statutory rate primarily due to expiring net operating loss tax benefits, an adjustment to the valuation allowance against deferred tax assets for net operating losses expected to expire in future years, and non-deductible officer compensation expense.
Blucora, Inc. | Q3 2021 Form 10-Q 38

NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA
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, interest expense and other, loss, net, acquisition and integration costs, impairment of goodwill, executive transition costs, headquarters relocation costs, contested proxy, transaction and other legal and consulting costs, and income tax (benefit) expense. Other loss,Interest expense and other, net primarily consists of interest expense, net and non-capitalized debt issuance expenses.net. Acquisition and integration costs primarily relate to the HKFS Acquisitionacquisitions of Avantax Planning Partners and 1st Global Acquisition. 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.Global.
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.
Blucora, Inc. | Q3 2022 Form 10-Q 32

A reconciliation of our Adjusted EBITDA toGAAP net income (loss), which we believe to be the most comparable GAAP measure, to Adjusted EBITDA, is presented below:
(In thousands)Three months endedNine months ended
September 30,September 30,
($ in thousands)($ in thousands)Three Months Ended September 30,Nine Months Ended
September 30,
20212020202120202022202120222021
Net income (loss)Net income (loss)$(27,803)$(26,206)$31,451 $(292,055)Net income (loss)$(21,841)$(27,803)$52,204 $31,451 
Stock-based compensationStock-based compensation4,729 4,517 15,499 7,220 Stock-based compensation5,706 4,729 17,129 15,499 
Depreciation and amortization of acquired intangible assetsDepreciation and amortization of acquired intangible assets10,915 10,366 32,498 29,619 Depreciation and amortization of acquired intangible assets12,362 10,915 35,131 32,498 
Other loss, net8,295 11,963 24,202 23,386 
Interest expense and other, netInterest expense and other, net9,749 8,295 25,707 24,202 
Acquisition and integration—Excluding change in the fair value of HKFS Contingent ConsiderationAcquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration541 11,276 9,013 19,782 Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration416 541 610 9,013 
Acquisition and integration—Change in the fair value of HKFS Contingent ConsiderationAcquisition and integration—Change in the fair value of HKFS Contingent Consideration1,700 (1,000)19,500 (1,000)Acquisition and integration—Change in the fair value of HKFS Contingent Consideration— 1,700 (5,320)19,500 
Impairment of goodwill— — — 270,625 
Executive transition costs— 405 — 10,225 
Headquarters relocation costs— 410 — 1,863 
Contested proxy and other legal and consulting costs1,598 — 7,293 — 
Contested proxy, transaction and other legal and consulting costsContested proxy, transaction and other legal and consulting costs2,987 1,598 7,304 7,293 
Income tax (benefit) expenseIncome tax (benefit) expense(774)15,256 2,920 23,237 Income tax (benefit) expense(1,726)(774)4,099 2,920 
Adjusted EBITDAAdjusted EBITDA$(799)$26,987 $142,376 $92,902 Adjusted EBITDA$7,653 $(799)$136,864 $142,376 
Non-GAAP net income (loss)Net Income (Loss) and non-GAAP net income (loss) per shareNon-GAAP Net Income (Loss) Per Share
We define non-GAAP net income (loss)Non-GAAP Net Income (Loss) as net income (loss), determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, gain on the sale of a business, acquisition and integration costs, impairment of goodwill, executive transition costs, headquarters relocation costs, contested proxy, transaction and other legal and consulting costs, non-capitalized debt issuance expenses, the related cash tax impact of those adjustments, and non-cash income tax (benefit) expense. We exclude the non-cash portion of income tax expensetaxes 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 beexpire, if not utilized, or expire between 20212022 and 2024. Gain on the sale of a business relates to the disposition of SimpleTax in the third quarter of 2019 and the subsequent working capital adjustment in the third quarter of 2020. Non-capitalized debt issuance expense relates to the expense recognized as a result of the Term Loan increase in the third quarter of 2020.
Blucora, Inc. | Q3 2021 Form 10-Q 39

We believe that non-GAAP net income (loss)Non-GAAP Net Income (Loss) and non-GAAP net income (loss)Non-GAAP Net Income (Loss) 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 that have not been, or are not expected to be, settled in cash. Additionally, we believe that non-GAAP net income (loss)Non-GAAP Net Income (Loss) and non-GAAP net income (loss)Non-GAAP Net Income (Loss) per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP net income (loss)Net Income (Loss) and non-GAAP net income (loss)Non-GAAP Net Income (Loss) 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 GAAP net income (loss) per share. Other companies may calculate non-GAAP net income (loss)Non-GAAP Net Income (Loss) and non-GAAP net income (loss)Non-GAAP Net Income (Loss) per share differently, and, therefore, our non-GAAP net income (loss) and non-GAAP net income (loss) per sharethese measures may not be comparable to similarly titled measures of other companies.
Blucora, Inc. | Q3 2022 Form 10-Q 33

A reconciliation of our non-GAAPGAAP net income (loss) and non-GAAPGAAP net income (loss) per share, to net income (loss) and net income (loss) per share, respectively, which we believe to be the most comparable GAAP measures, to Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) per share, respectively, is presented below:
(In thousands, except per share amounts)Three months endedNine months ended
September 30,September 30,
 2021202020212020
Net income (loss)$(27,803)$(26,206)$31,451 $(292,055)
Stock-based compensation4,729 4,517 15,499 7,220 
Amortization of acquired intangible assets7,009 7,746 21,247 22,167 
Gain on the sale of a business— (349)— (349)
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration541 11,276 9,013 19,782 
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration1,700 (1,000)19,500 (1,000)
Impairment of goodwill— — — 270,625 
Executive transition costs— 405 — 10,225 
Headquarters relocation costs— 410 — 1,863 
Contested proxy and other legal and consulting costs1,598 — 7,293 — 
Non-capitalized debt issuance expenses— 3,687 — 3,687 
Cash tax impact of adjustments to GAAP net income(331)(418)(1,523)(1,413)
Non-cash income tax (benefit) expense(197)14,987 (1,160)22,327 
Non-GAAP net income (loss)$(12,754)$15,055 $101,320 $63,079 
Per diluted share:
Net income (loss) (1)
$(0.57)$(0.54)$0.64 $(6.06)
Stock-based compensation0.10 0.09 0.31 0.15 
Amortization of acquired intangible assets0.14 0.16 0.43 0.46 
Gain on the sale of a business— (0.01)— (0.01)
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration0.01 0.23 0.18 0.41 
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration0.03 (0.02)0.39 (0.02)
Impairment of goodwill— — — 5.62 
Executive transition costs— 0.01 — 0.21 
Headquarters relocation costs— 0.01 — 0.04 
Contested proxy and other legal and consulting costs0.04 — 0.15 — 
Non-capitalized debt issuance expenses— 0.08 — 0.08 
Cash tax impact of adjustments to GAAP net income(0.01)(0.01)(0.03)(0.03)
Non-cash income tax (benefit) expense— 0.31 (0.02)0.46 
Non-GAAP net income (loss) per diluted share$(0.26)$0.31 $2.05 $1.31 
Weighted average shares outstanding - diluted48,707 48,203 49,373 48,184 
($ in thousands)Three Months Ended September 30,Nine Months Ended
September 30,
 2022202120222021
Net income (loss)$(21,841)$(27,803)$52,204 $31,451 
Stock-based compensation5,706 4,729 17,129 15,499 
Amortization of acquired intangible assets6,342 7,009 19,435 21,247 
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration416 541 610 9,013 
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration— 1,700 (5,320)19,500 
Contested proxy, transaction and other legal and consulting costs2,987 1,598 7,304 7,293 
Cash tax impact of adjustments to GAAP net income (loss)(319)(331)(1,631)(1,523)
Non-cash income tax (benefit) expense(3,071)(197)1,090 (1,160)
Non-GAAP Net Income (Loss)$(9,780)$(12,754)$90,821 $101,320 
Per diluted share:
Net income (loss) (1)
$(0.46)$(0.57)$1.06 $0.64 
Stock-based compensation0.12 0.10 0.35 0.31 
Amortization of acquired intangible assets0.14 0.14 0.40 0.43 
Acquisition and integration—Excluding change in the fair value of HKFS Contingent Consideration0.01 0.01 0.01 0.18 
Acquisition and integration—Change in the fair value of HKFS Contingent Consideration— 0.03 (0.11)0.39 
Contested proxy, transaction and other legal and consulting costs0.06 0.04 0.15 0.15 
Cash tax impact of adjustments to GAAP net income (loss)(0.01)(0.01)(0.03)(0.03)
Non-cash income tax (benefit) expense(0.06)— 0.02 (0.02)
Non-GAAP Net Income (Loss) per share — Diluted$(0.20)$(0.26)$1.85 $2.05 
Diluted weighted average shares outstanding47,847 48,707 49,153 49,373 
_____________________________________________________
(1)Any difference in the “per diluted share” amounts between this table and the condensed consolidated statements of comprehensive income (loss)operations is due to using different diluted weighted average shares outstanding in the event that there is GAAP net loss but non-GAAP net incomeNon-GAAP Net Income and vice versa.

Blucora, Inc. | Q3 2021 Form 10-Q 40

LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents
Our principal source of liquidity is our cash and cash equivalents. As of September 30, 2021,2022, we had cash and cash equivalents of approximately $184.9$91.1 million. Our Avantax Wealth Management broker-dealer subsidiary operates in a highly regulated industry and is subject to various regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have substantial monetary and non-monetary impacts on Avantax Wealth Management operations. As of September 30, 2021, Avantax Wealth Management met all capital adequacy requirements to which it was subject.
We generally invest our excess cash in money market funds that are made up of securities issued by agencies of the U.S. government. We may invest, from time-to-time, in other vehicles, such as debt instruments issued by the U.S. federal government and its agencies, international governments, municipalities, and publicly held corporations, as well as commercial paper and insured time deposits with commercial banks. Specific holdings can vary from period to period depending upon our cash requirements. Our financial instrument investments held atas of September 30, 20212022 had minimal default risk and short-term maturities.
Our Avantax Wealth Management broker-dealer subsidiary operates in a highly regulated industry and is subject to various regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have substantial monetary and non-monetary impacts on Avantax Wealth Management operations. As of September 30, 2022, Avantax Wealth Management met all capital adequacy requirements to which it was subject.
Historically, we have financed our operations primarily from cash provided by operating activities and access to credit markets. Our historical uses of cash have been funding our operations, servicing our debt obligations, capital expenditures, business combinationsacquisitions that enhance our strategic position, financial professional loans, contingent consideration associated with our acquisitions, and share repurchases under share repurchase programs. WeFor at least the next twelve months, we plan to finance these cash needs and our operating, working capital, regulatory capital requirements at our broker-dealer
Blucora, Inc. | Q3 2022 Form 10-Q 34

subsidiary and capital expenditure requirements for at least the next 12 months largely through our cash and cash equivalents. We also expect to have up to $25.0 millionequivalents on hand and cash provided by operating activities. Execution of cash outlays in the next 12 months as we continue to execute on our growth strategy related to asset acquisitionsstrategies in our Wealth Management business.business through strategic asset acquisitions is expected to remain a capital allocation priority during the next twelve months. However, the underlying levels of revenues and expenses that we project may not prove to be accurate, and, from time to time, we may make a determination to draw on the Revolver (as defined below) or increase the principal amount of the Term Loan (as defined below) to meet our capital requirements, subject to customary terms and conditions.
Since our results of operations are sensitive to various factors, including, among others, the level of competition we face, regulatory and legal impacts, and political and economic conditions, such factors could adversely affect our liquidity and capital resources. In addition, due to the COVID-19 pandemic, we have experienced and may continue to experience near- to mid-term volatility Our future investments in our results of operations that could further increase our liquidity needs. Due to this volatility, we have taken several measures to ensure proper liquidity levels and are maintaining flexibility in our cash flows. In July 2020, we increased the principal outstanding under our Term Loan to fund the HKFS Acquisition and have continued to retain a portion of these proceeds in order to provide additional workingbusiness through capital flexibility. In addition, in April 2021, we increased the amount available for borrowings under the Revolver from $65.0 million to $90.0 million. Overall, we believe these measures provide us with the capital flexibility to satisfy our obligations, fund our operations, and invest in our businesses.
For further discussion of the risks to our business related to liquidity, see “Item 1A. Risk Factors” under the heading “Existing cash and cash equivalents and cash generated from operations may not be sufficient to meet our anticipated cash needs for servicing debt, working capital, and capital expenditures” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020.
We may use our cash and cash equivalents in the future to invest in our current businesses, for repaymentexpenditures or acquisitions, prepayment of debt for acquiring companiesto achieve optimal leverage ratios, or assets, for stock buybacks, for returningour return of capital to stockholders or for other utilizations that we deem tothrough stock repurchases, will be indetermined after considering the best interests of our stockholders.
Indebtedness
In May 2017, we entered into a credit agreement (as the same has been amended, the “Credit Agreement”) with a syndicate of lenders whichthat 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 (the(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 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
Blucora, Inc. | Q3 2021 Form 10-Q 41

$90.0 $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”).
As of September 30, 2021,2022, we had $561.8$525.4 million in principal amount outstanding under the Term Loan and no amounts outstanding under the New Revolver. Based on aggregate loan commitments as of September 30, 2021,2022, approximately $90.0 million was available for future borrowing atas of September 30, 20212022 under the Senior Secured Credit Facility, subject to customary terms and conditions.conditions, including caps on the amount of Company share repurchases during each fiscal year based, in part, on specified Net Leverage Ratios. 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 maturity dateTerm Loan Maturity Date. On August 5, 2022, and as provided for within our Senior Secured Credit Facility, we voluntarily prepaid $35.0 million of May 22, 2024.principal outstanding under our Term Loan. At our election, this prepayment was first applied to the remaining quarterly principal amortization payments due on the Term Loan, with the remaining amount applied to the principal amount due at 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 September 30, 2021,2022, the applicable interest rate on the Term Loan was 5.0%6.3%. 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 Leverage Ratio that ranges from 0.35% to 0.4%. Interest is payable at the end of each interest period.period, typically quarterly.
By June 2023, all U.S. Dollar London Interbank Offered Rate (“LIBOR”) tenors will cease to be published and floating rate instruments that used U.S. Dollar LIBOR will need to shift to a substitute base index. To minimize disruption arising from such transition, the market has begun to shift to alternative fallback rates, such as Secured Overnight Financing Rate (“SOFR”) as a replacement benchmark for floating rate LIBOR based loans. Unless (i) such LIBOR tenors cease to be provided at an earlier date or (ii) we and the administrative agent to the Credit Agreement make an “early opt-in election” to replace the rate prior to cessation of LIBOR in accordance with the Credit Agreement, we will continue to have the option under the Credit Agreement to make drawdowns using 1-Day, 1-Month, 3-Month, and 6-Month tenor U.S. Dollar LIBOR until June 2023. The Credit Agreement Amendment provides for a process for transition to a fallback rate consistent with industry practice and permits the administrative
Blucora, Inc. | Q3 2022 Form 10-Q 35

agent to the Credit Agreement to apply certain updates to the Credit Agreement to effectuate the fallback rate, including a spread adjustment based on the historical basis between LIBOR and the fallback rate.
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 HKFS Acquisitionacquisition 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 the New Revolver Maturity Date.
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 September 30, 2021.2022.
For additional information on the Term Loan, the New Revolver, and the Credit Agreement, see “Item 1. Financial Statements—Note 5.”
ShareTaxAct Sale Transaction
The TaxAct Sale Transaction is expected to yield after-tax net cash proceeds of approximately $620.0 million. We expect to use the net proceeds to pay down existing indebtedness and return excess capital to stockholders.
Stock Repurchase Plan
On March 19, 2019,As of December 31, 2021, we announced thathad $100.0 million authorized under our board of directors authorized a stock repurchase plan pursuant to which we may repurchase up to $100.0 million of our common stock.plan. Pursuant to the stock repurchase plan, share repurchases may be made through a variety of methods, including open market or privately negotiated transactions. The timing and number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, restrictions in our Credit Agreement, and alternative investment opportunities. Our repurchase program does not obligate us to repurchase
Blucora, Inc. | Q3 2021 Form 10-Q 42

any specific number of shares, may be suspended or discontinued at any time, and does not have a specified expiration date. Any repurchases of our stock pursuant to the stock repurchase plan may materially reduce the amount of cash we have available and may not materially enhance the long-term value of our business or our stock.
For the three months ended September 30, 2022, we did not repurchase any shares of our common stock under the stock repurchase plan. For the nine months ended September 30, 2022, we repurchased approximately 1.9 million shares of our common stock under the stock repurchase plan for an aggregate purchase price of approximately $35.0 million. The remaining authorized amount under the stock repurchase plan as of September 30, 2022, was approximately $65.0 million. For the three and nine months ended September 30, 2021, we did not repurchase any shares of our common stock under the stock repurchase plan. As of September 30, 2021, there was approximately $71.7 million
For fiscal year 2022, restrictions in remaining capacity underour Credit Agreement capped our share repurchases at $35.0 million. Subject to the stock repurchase plan. As partterms of our overall capital allocation strategy, we will assess future share purchases against other alternative uses of capital, which include investments in our businesses, acquiring companies or assets, repurchasesCredit Agreement, a portion of our outstanding debt, and other uses offuture capital that we deem to be in the best interests of stockholders.

requirements during fiscal year 2023 may encompass share repurchases under this plan.
Contractual Obligations and Commitments
As partOn July 1, 2020, we closed the acquisition of the HKFS Acquisition, theAvantax Planning Partners, formerly “HKFS”, for an upfront cash purchase price paid by usof $104.4 million. The purchase price was subject to two post-closingvariable contingent consideration, or earn-out payments. payments (the “HKFS Contingent Consideration”) totaling a maximum of $60.0 million.
The amount ofamounts owed for the HKFS Contingent Consideration iswere determined based on advisory asset levels and the achievement of certain performance goals (i) for the period beginning on July 1, 2020 and ending on July 1,June 30, 2021 and (ii) for the period beginning on July 1, 2021 and ending on July 1,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 maximum aggregate amount that we would be required to pay for each earn-out period is $30.0 million. If the asset values on the applicable measurement date fall below certain specified thresholds, we would not be required to make any earn-out payment to the Sellers for such period.
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 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 $25.4 million as of September 30, 2021. While this amount was calculated in accordance with the fair value guidance contained in Accounting Standards Codification 820, Fair Value Measurements, there are a number of assumptions and estimates factored into this fair value (including a risk-adjusted discount rate), and the actual earn-out payment could differ from the estimated fair value.
Additional information on our contractual obligations and commitments can be found in our Annual Report on Form 10-K for the year ended December 31, 2020.
Off-Balance Sheet Arrangements
The Company has future commitments for contingent consideration pursuant to certain asset purchase agreements entered into to acquire certain wealth management companies in 2020 and the first nine months of 2021 to support growth in our Wealth Management business. As of September 30, 2021, the Company had obligations up to a maximum of $7.2 million that may be payable pursuant to specific payment schedules over the next four years upon meeting certain contingencies.
Blucora, Inc. | Q3 20212022 Form 10-Q 4336

Agreement”), the maximum aggregate amount that we were required to pay for each earn-out period was $30.0 million. If the asset market values on the applicable measurement date fell below certain specified thresholds, no payment of consideration was owed to the Sellers for such period.
Based on advisory asset levels for each earn-out period, we paid the full $30.0 million to the Sellers in the third quarter of 2021 for the first earn-out, and $23.0 million in the third quarter of 2022 for the second earn-out. There are no remaining contingent payments due to the Sellers as of September 30, 2022.
In addition, the Company has entered into several asset purchase agreements that are accounted for as asset acquisitions. These acquisitions may include up-front cash consideration, fixed deferred cash consideration, and contingent consideration arrangements. Future fixed payments are recognized as customer relationship intangible assets on the date of acquisition. Contingent consideration arrangements encompass obligations to make future payments to the previous sellers contingent upon the achievement of future financial targets. These contingent payments are not recognized until all contingencies are resolved and the consideration is payable. As of September 30, 2022, the maximum future fixed and contingent payments associated with these asset acquisitions was $23.7 million, with specified payment dates from 2022 through 2026. During the three months ended September 30, 2022, variable contingent consideration related to prior asset acquisitions became payable for approximately $1.5 million, which is included within the $23.7 million discussed above. This accrued consideration is within customer relationship intangibles and is expected to be paid during the fourth quarter of 2022.
Cash Flows
Our cash flows were comprised of the following:following (in thousands):
(In thousands)Nine months ended September 30,
 20212020Change ($)
Net cash provided by operating activities$74,391 $35,314 $39,077 
Net cash used by investing activities(25,447)(130,787)105,340 
Net cash provided (used) by financing activities(14,244)160,392 (174,636)
Net increase in cash, cash equivalents, and restricted cash$34,700 $64,919 $(30,219)
Nine Months Ended September 30,
 20222021$ Change
Net cash provided by operating activities$61,916 $74,391 $(12,475)
Net cash used by investing activities(20,897)(25,447)4,550 
Net cash used by financing activities(84,739)(14,244)(70,495)
Net increase (decrease) in cash, cash equivalents, and restricted cash$(43,720)$34,700 $(78,420)
Net cashCash from operating activitiesOperating Activities
Net cash provided by operating activities consists of net income, (loss), offset by certain non-cash adjustments, and changes in operating assets and liabilities, which were as follows:follows (in thousands):
(In thousands)Nine months ended September 30,
20212020Change ($)Nine Months Ended September 30,
Net income (loss)$31,451 $(292,055)$323,506 
Non-cash adjustments to net income (loss)73,111 341,466 (268,355)
20222021$ Change
Net incomeNet income$52,204 $31,451 $20,753 
Non-cash adjustments to net incomeNon-cash adjustments to net income55,458 73,111 (17,653)
Operating cash flows before changes in operating assets and liabilitiesOperating cash flows before changes in operating assets and liabilities104,562 49,411 55,151 Operating cash flows before changes in operating assets and liabilities107,662 104,562 3,100 
Changes in operating assets and liabilities, net of acquisitions and disposalsChanges in operating assets and liabilities, net of acquisitions and disposals(30,171)(14,097)(16,074)Changes in operating assets and liabilities, net of acquisitions and disposals(45,746)(30,171)(15,575)
Net cash provided by operating activitiesNet cash provided by operating activities$74,391 $35,314 $39,077 Net cash provided by operating activities$61,916 $74,391 $(12,475)
ForNet cash provided by operating activities for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020,2022, included $107.7 million of operating cash flows before changes in operating assets and liabilities increased $55.2and $45.7 million primarily due to an increase of $39.8 million in the operating income of our Tax Software business and an increase of $8.5 million in the operating income of our Wealth Management business. We also had a net increasechanges in operating cash flowsassets and liabilities. Non-cash adjustments to net income for the nine months ended September 30, 2021 due2022 primarily related to $3.7depreciation and amortization costs of $35.1 million, stock-based compensation of $17.1 million, changes in the fair value of the HKFS Contingent Consideration liability of $5.3 million, and $3.8 million of non-capitalized debt issuance expensesamortization related to payments made to financial professionals in the 2020 period with no comparable amount in the 2021 period.
support of ongoing growth programs. Changes in operating assets and liabilities for the nine months ended September 30, 2021 decreased $16.1were primarily impacted by $9.2 million primarily duein payments made to $16.8financial professionals in support of ongoing growth programs, $8.5 million of the total $30.0$23.0 million HKFS Contingent Consideration earn-out payment made in the third quarter of 2021.2022, and the timing of settlement for our working capital accounts. The remainder of the $30.0 millionHKFS Contingent Consideration earn-out payment is included in net cash flows from financing activities. In addition, the nine months ended September 30, 2021 also included $12.9 million in payments made to financial professionals in support of ongoing growth programs.
Net cash from investing activities
Net cash from investing activities were as follows:
(In thousands)Nine months ended September 30,
 20212020Change ($)
Purchases of property and equipment$(21,624)$(28,711)$7,087 
Business acquisitions, net of cash acquired$— $(102,425)$102,425 
Asset acquisitions, net of cash acquired(3,823)— (3,823)
Proceeds from sale of a business— 349 (349)
Net cash used by investing activities$(25,447)$(130,787)$105,340 
For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, net cash used by investing activities decreased $105.3 million primarily due to the cash outlay of $104.4 million for the HKFS Acquisition in the third quarter of 2020. During the nine months ended September 30, 2021, we paid $3.8 million, including acquisition costs, to complete several asset acquisitions in our Wealth Management business as part of our strategic growth strategy. Capital expenditures decreased $7.1 million in the nine months ended September 30, 2021 primarily due to the cash outlay in the nine months ended September 30, 2020 for leasehold improvements to our new corporate headquarters.
Blucora, Inc. | Q3 20212022 Form 10-Q 4437

Net cashCash from financing activitiesInvesting Activities
Net cash from financingused by investing activities consists of acquisitions and purchases of property, equipment, and software, and were as follows:follows (in thousands):
(In thousands)Nine months ended September 30,
 20212020Change ($)
Proceeds from credit facilities, net of debt issuance costs and debt discounts (1)
$(502)$226,278 $(226,780)
Payments on credit facilities(1,359)(66,078)64,719 
Proceeds from stock option exercises535 25 510 
Proceeds from issuance of stock through employee stock purchase plan1,845 1,201 644 
Tax payments from shares withheld for equity awards(1,613)(1,034)(579)
Acquisition-related contingent consideration payment(13,150)— (13,150)
Net cash used (provided) by financing activities$(14,244)$160,392 $(174,636)
_________________________
(1)The Company amended its Senior Secured Credit Facility in April 2021 to increase the borrowing capacity of its revolving line of credit from $65.0 million to $90.0 million. The Company did not borrow under the New Revolver or Term Loan during the nine months ended September 30, 2021. The Company recognized $0.5 million of deferred financing costs in other long-term assets on the condensed consolidated balance sheet that were paid in connection with this amendment.
Nine Months Ended September 30,
 20222021$ Change
Purchases of property, equipment, and software$(17,154)$(21,624)$4,470 
Asset acquisitions(3,743)(3,823)80 
Net cash used by investing activities$(20,897)$(25,447)$4,550 
For the nine months ended September 30, 20212022, compared to the nine months ended September 30, 2020,2021, net cash providedused by financinginvesting activities decreased $174.6$4.6 million primarily due to $175.0 millionreduced internally developed capital software expenditures.
Net Cash from Financing Activities
Net cash from financing activities primarily consists of new borrowings on the Term Loan, in part to fund the HKFS Acquisition,debt issuance and a net $10.0 million repayment on the Revolver inrepayments, common stock and stock-based awards transactions, and acquisition-related contingent consideration payments. Financing cash flows were as follows (in thousands):
Nine Months Ended September 30,
 20222021$ Change
Proceeds from credit facilities, net of debt discount and issuance costs$— $(502)$502 
Payments on credit facilities(35,906)(1,359)(34,547)
Acquisition-related contingent consideration payments(14,548)(13,150)(1,398)
Stock repurchases(35,000)— (35,000)
Proceeds from issuance of stock through employee stock purchase plan2,324 1,845 479 
Tax payments from shares withheld for equity awards(2,090)(1,613)(477)
Proceeds from stock option exercises481 535 (54)
Net cash used by financing activities$(84,739)$(14,244)$(70,495)
For the nine months ended September 30, 2020. This activity was partially offset by $13.2 million of cash outflow in2022, compared to the nine months ended September 30, 2021, that was a portionwe used $70.5 million more cash for financing activities, primarily due to the repurchase of approximately 1.9 million shares of our common stock under the $30.0stock repurchase plan for an aggregate purchase price of approximately $35.0 million, HKFS Contingent Consideration payment made inand the third quarter.voluntary prepayment of $35.0 million of principal outstanding under our Term Loan.
Critical Accounting Policies and Estimates
This Management’s Discussion and Analysis of Financial Condition and Results of Operations and the disclosures included elsewhere in this Quarterly Report on Form 10-Q are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and disclosure of contingencies.
The SEC has defined a company’s most critical In some cases, we could have reasonably used different accounting policies as the ones thatand estimates.
We have identified certain accounting estimates which involve a significant level of estimation uncertainty and have had or are the most importantreasonably likely to the portrayal ofhave a company’smaterial impact on our financial condition andor results of operations and which require a company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.operations. On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience, current conditions, and on various other assumptions that we believe to be reasonable under the circumstances and, based on information available to us at that time, we make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources, as well as identify and assess our accounting treatment with respect to commitments and contingencies. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions. The critical accounting policies thatestimates which we believe involveto be the more significant judgments and estimates usedmost critical in the preparation of our condensed consolidated financial statements involve wealth management revenue recognition, tax software revenue recognition, business combinations, goodwill impairment, and goodwill impairment.income taxes. We continually update and assess the facts, circumstances, and assumptions used in making both our critical accounting estimates and judgments related to our other significant accounting matters.
There have been no material changes in our critical accounting policies as disclosed under “Critical Accounting Policies and Estimates” in Part II, Item 7A7 and in Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Blucora, Inc. | Q3 2022 Form 10-Q 38

Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the financial instruments infor which we are exposed to market risk, as disclosed within our Annual Report on Form 10-K for the year ended December 31, 2021, during the nine months ended September 30, 2021.2022. As of September 30, 2021,2022, we had $561.8$525.4 million in principal amount of debt outstanding under the Term Loan of our Senior Secured Credit Facility, which carries a degree of interest rate risk. This debt has a floating rate portion of its interest rate tied to LIBOR. For further information on our outstanding debt, see “Item 1. Financial Statements—Note 5” and the section “Liquidity and Capital Resources” of
Blucora, Inc. | Q3 2021 Form 10-Q 45

“Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the subheading “Indebtedness.” A hypothetical 100 basis point increase in LIBOR on September 30, 20212022 would result in a $15.1$8.9 million increase in our interest expense until the scheduled maturity date in 2024.
For additional information, see Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2020.

2021.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated (pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934) the effectiveness of our disclosure controls and procedures as of September 30, 2021.2022. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e)) were effective as of September 30, 2021.2022.
Changes in Internal Control over Financial Reporting
Our internal control environment has been impacted by work-from-home requirements for our employees. These requirements began in March 2020 and have continued through the date of this report. While modifications were made to the manner in which controls were performed, these changes did not have a material impact on our internal control over financial reporting, and thereThere were no changes to our internal control over financial reporting during the threenine months ended September 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
See “Item 1. Financial Statements—Note 8” for information on ourregarding legal proceedings.
Item 1A. Risk Factors
Our business and future operating results may be affected by a number of risks and uncertainties that should be considered carefully. In addition, this Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual operating results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including the risks described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20202021 and the risks set forth below.
WeExcept as follows, we believe that there have been no material changes in our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 other than2021.
Our agreement to sell our Tax Software business (or the announcement thereof) may disrupt our business.
The Stock Purchase Agreement, dated as of October 31, 2022 (the “Stock Purchase Agreement”), by and among the Company, TaxAct Holdings, Inc., Franklin Cedar Bidco, LLC (“Buyer”) and DS Admiral Bidco, LLC generally requires us to operate the Tax Software business in the ordinary course of business consistent with past practice pending consummation of the transaction and restricts us, without Buyer’s consent, from taking certain specified actions with respect to the Tax Software business until the completion of the sale of the Tax Software business to Buyer on the terms and subject to the conditions set forth below. The occurrence of one or more ofin the events listed below couldStock Purchase Agreement (the “TaxAct Sale Transaction”). These restrictions may affect our ability to execute our business strategies, respond effectively to competitive pressures and industry developments and attain our financial and other goals, and these restrictions may have a material adverse effect on our business, prospects,financial condition, results of operations reputation, financial condition,and cash flows, or ability to continue current operations without any direct or indirect impairment or disruption, which is referred to throughout these risk factors as a “Material Adverse Effect.”flows.
RISKS ASSOCIATED WITH OUR BUSINESSES
Our business could be adversely affected as a result of actions of activist stockholders.
During 2021, we were the target of a proxy contest initiated by an activist stockholder, which required us to incur significant legalEmployee retention and consulting costs, proxy solicitation expenses, and administrative and associated costs, and required significant time and attention by our board of directors and management.
During the proxy contest, the activist stockholder targeted communications directly to our financial professionals and employees. As a result, itrecruitment may be more difficult for us to pursue our strategic initiatives or attract and retain financial professionals and qualifiedchallenging before the completion of the TaxAct Sale Transaction, as employees and business partners, any of which could have a material adverse effect onprospective employees may experience uncertainty about their future roles. If, despite our business, financial condition,retention and operating results.
We have, and may in the future, become partyrecruiting efforts, key employees depart or prospective key employees fail to litigation as a result of matters arising in connectionaccept employment with the proxy contest, which could serve asCompany because of issues relating to the uncertainty relating to the TaxAct Sale Transaction or a distractiondesire not to our board of directors and management and could require us to incur significant additional costs.
Blucora, Inc. | Q3 20212022 Form 10-Q 4639

remain either with TaxAct or the Company, our business, financial condition and results of operations could be materially adversely affected.
The TaxAct Sale Transaction could also cause disruptions to our business or business relationships, which could have a material adverse impact on our business, financial condition and results of operations. Parties with which we have business relationships, including customers, suppliers, clients and financial professionals, may experience uncertainty as to the future of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to alter their present business relationships with us.
The pursuit of the TaxAct Sale Transaction may place a significant burden on management and internal resources. The diversion of management’s attention away from day-to-day business concerns could materially adversely affect our business, financial condition and results of operations. Furthermore, we expect to incur significant costs, expenses and fees for professional services and other transaction costs in connection with the TaxAct Sale Transaction. A material portion of these expenses are payable by us whether or not the TaxAct Sale Transaction is completed.
The TaxAct Sale Transaction may not successfully close, and, even if it does, we may fail to realize all of the anticipated benefits of the TaxAct Sale Transaction, or those benefits may take longer to realize than expected.
We cannot be certain when or if the conditions for the TaxAct Sale Transaction will be satisfied or (if permissible under applicable law) waived. The TaxAct Sale Transaction cannot be completed until the conditions to closing are satisfied or (if permissible under applicable law) waived, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions. We or Buyer may terminate the Stock Purchase Agreement if the TaxAct Sale Transaction is not consummated by January 15, 2023.
In the event that the TaxAct Sale Transaction is not consummated for any reason, we will not receive any cash proceeds from the sale (except that in certain circumstances, we may be entitled to a termination fee). Additionally, if the TaxAct Sale Transaction is not consummated in a timely manner or at all, our ongoing business may be materially adversely affected, including due to negative reactions from financial markets and a decline in the price of our common stock to the extent that the current market price of our common stock reflects an assumption that the transaction will be completed, negative reactions from employees, customers, suppliers or other third parties, the diversion of management’s attention from pursuing other potential divestitures of the Tax Software business and higher than anticipated costs of pursuing the TaxAct Sale Transaction. If the TaxAct Sale Transaction is not completed, there can be no assurance that these risks will not materialize and will not materially adversely affect the price of shares of our common stock or our business, financial condition or results of operations.
Furthermore, even if the TaxAct Sale Transaction is consummated, we may fail to realize the strategic and financial benefits that management expects as a result of the transaction, including due to unforeseen difficulties in the separation of operations, services, products and personnel (including with respect to our provision of transition services to Buyer and Buyer’s provision of transition services to us), the diversion of management’s attention, the disruption of our business and the potential loss of key employees. Moreover, we may not realize the anticipated strategic and financial benefits of the TaxAct Sale Transaction within the currently anticipated timeframe, including, without limitation, if the period during which we are providing transition services is extended.
In connection with the consummation of the TaxAct Sale Transaction, we will be required to pay off our existing indebtedness under the Credit Agreement. If we are unable to secure financing on desirable terms after the consummation of the TaxAct Sale Transaction, our capital structure may include limited or no indebtedness, and we may not be able to return capital to stockholders in the amount anticipated.
Upon the closing of the TaxAct Sale Transaction, we expect to receive approximately $620.0 million of net after-tax proceeds. We intend to use these proceeds to pay off existing indebtedness and then enter into new financing arrangements and use the excess remaining cash to return capital to stockholders. The debt markets are unpredictable and subject to change. There can be no assurance that we will be able to enter into new financing arrangements on desirable terms, if at all. We will not be able to return capital to stockholders in the amount anticipated until we enter into acceptable financing arrangements.
Blucora, Inc. | Q3 2022 Form 10-Q 40

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 19, 2019, we announced that our board of directors authorizedThe Company has a stock repurchase plan pursuant to which we may repurchase up to $100.0 million of our common stock. Pursuant to the plan, share repurchases may be madestock through a variety of methods, including open market or privately negotiated transactions. As of September 30, 2022, the remaining authorized repurchases under the stock repurchase plan was $65.0 million.
The timing and numberfollowing table details our repurchases of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities. Our repurchase program does not obligate us to repurchase any specific number of shares, may be suspended or discontinued at any time, and does not have a specified expiration date.
Forcommon stock for the nine months ended September 30, 2021, we did not repurchase any shares of our common stock under2022 (in thousands, except the stock repurchase plan. As of September 30, 2021, there was approximately $71.7 million in remaining capacity under the stock repurchase plan.average price paid per share data):
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs
January 1-31, 2022190 $15.73 190 $97,007 
February 1-28, 2022524 $18.12 524 $87,510 
March 1-31, 2022931 $19.39 931 $69,463 
April 1-30, 2022230 $19.40 230 $65,000 
May 1-31, 2022— $— — $65,000 
June 1-30, 2022— $— — $65,000 
July 1-31, 2022— $— — $65,000 
August 1-31, 2022— $— — $65,000 
September 1-30, 2022— $— — $65,000 
Total1,875 $18.67 1,875 
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Blucora, Inc. | Q3 20212022 Form 10-Q 4741

Item 6. Exhibits
Exhibit
Number		Exhibit DescriptionFormDate of
First Filing		Exhibit NumberFiled
Herewith
2.1#8-KMarch 19, 20192.1
2.2#8-KJuly 1, 20202.1
2.38-KJuly 2, 20212.1
31.1X
31.2X
32.1*X
32.2*X
101The following financial statements from the Company's Form 10-Q for the fiscal quarter ended September 30, 2021, formatted in Inline XBRL: (i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Unaudited Condensed Consolidated Statements of Stockholders' Equity; (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Condensed Consolidated Financial StatementsX
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)X
Exhibit
Number		Exhibit DescriptionFormDate of
First Filing		Exhibit NumberFiled
Herewith
Stock Purchase Agreement, dated as of March 18, 2019, by and among 1G Acquisitions, LLC, 1st Global, Inc., 1st Global Insurance Services, Inc., the sellers named therein and joinder sellers, SAB Representative, LLC, as the sellers’ representative, and Blucora, Inc., as guarantor8-KMarch 19, 20192.1
Stock Purchase Agreement, dated as of January 6, 2020, by and among Blucora, Inc., Honkamp Krueger Financial Services, Inc., the sellers named therein, and JRD Seller Representative, LLC, as the sellers’ representative, as amended by First Amendment to Stock Purchase Agreement, dated April 7, 2020 and Second Amendment to Stock Purchase Agreement, dated June 30, 20208-KJuly 1, 20202.1
Third Amendment to Stock Purchase Agreement, dated June 29, 2021, by and among Spirit Acquisitions, LLC, Honkamp Krueger Financial Services, Inc., the sellers named therein, and JRD Seller Representative, LLC, as the sellers’ representative8-KJuly 2, 20212.1
Stock Purchase Agreement, dated as of October 31, 2022, by and among Blucora, Inc., TaxAct Holdings, Inc., Franklin Cedar Bidco, LLC and DS Admiral Bidco, LLC8-KNovember 1, 20222.1
Amended and Restated Bylaws of Blucora, Inc. dated August 14, 20228-KAugust 18, 20223.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Exchange Act rules 13a-14(a) and 15d-14(a))X
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Exchange Act rules 13a-14(a) and 15d-14(a))X
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350)X
Certification of Principal Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350)X
101The following financial statements from the Company's Form 10-Q for the fiscal quarter ended September 30, 2022, formatted in Inline XBRL: (i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations, (iii) Unaudited Condensed Consolidated Statements of Stockholders' Equity; (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Condensed Consolidated Financial StatementsX
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)X
____________________________
#Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Blucora, Inc. hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.
*The certifications attached as Exhibits 32.1 and 32.2 are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Blucora, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
Blucora, Inc. | Q3 20212022 Form 10-Q 4842

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
BLUCORA, INC.
By:/s/ Marc Mehlman
 Marc Mehlman
Chief Financial Officer
(On behalf of the registrant and as
Principal Financial Officer)
Date:November 4, 20211, 2022

Blucora, Inc. | Q3 20212022 Form 10-Q 4943