Revenue

Search

Tax Preparation

Adjusted EBITDA

Non-GAAP Net Income

Non-GAAP Diluted EPS

Net Income (Loss)

GAAP Diluted Income (Loss) Per Share

Revenues

Cost of sales (includes amortization of acquired intangible assets of $2,014, $518, $5,606, and $2,248) ⁽²⁾

Gross profit

Expenses and other loss:

Engineering and technology ⁽²⁾

Sales and marketing ⁽²⁾

General and administrative ⁽²⁾

Depreciation

Amortization of intangible assets

Other loss, net ⁽³⁾

Total expenses and other loss

Income (loss) from continuing operations before income taxes

Income tax expense

Income (loss) from continuing operations

Discontinued operations: ⁽¹⁾

Loss from discontinued operations, net of taxes ⁽²⁾

Loss on sale of discontinued operations, net of taxes

Net income (loss)

Earnings per share - Basic

Income (loss) from continuing operations

Loss from discontinued operations

Loss on sale of discontinued operations

Net income (loss) per share - Basic

Earnings per share - Diluted

Income (loss) from continuing operations

Loss from discontinued operations

Loss on sale of discontinued operations

Net income (loss) per share - Diluted

Weighted average shares outstanding used in computing basic income (loss) per share

Weighted average shares outstanding used in computing diluted income (loss) per share

In the nine months ended September 30, 2011, the Company completed the sale of its Mercantila e-commerce business. The operating results of that business have been presented as discontinued operations for all periods presented. Income taxes related to discontinued operations were a benefit of $1.3 million for the nine months ended September 30, 2011. Income taxes related to discontinued operations were $0.6 million and $0.7 million for the three and nine months ended September 30, 2010, respectively. A loss, net of an income tax benefit of $5.1 million, on the sale of the Mercantila business was recorded for the nine months ended September 30, 2011. Revenue, operating expenses and income taxes, loss from discontinued operations and the loss on sale of these discontinued operations are presented below (in thousands):

E-Commerce

Revenue

Operating expenses and income taxes

Loss from discontinued operations, net of taxes

Loss on sale of discontinued operations, net of taxes

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

Stock-Based Compensation

Cost of sales

Engineering and technology

Sales and marketing

General and administrative

Discontinued operations

Total stock-based compensation expense

Other loss, net for the three and nine months ended September 30, 2012 and 2011 is allocated among the following captions (in thousands):

Other Loss, Net

Interest expense

Amortization of debt issuance costs and accretion of debt discount

Loss on derivative instrument

Gain on contingency resolution

Increase in fair value of earn-out contingent liability

Other

Total other loss, net

ASSETS

Current assets:

Cash and cash equivalents

Short-term investments, available-for-sale

Accounts receivable, net

Other receivables, net

Prepaid expenses and other current assets, net

Total current assets

Property and equipment, net

Goodwill

Other intangible assets, net

Deferred tax asset, net

Other long-term assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses and other current liabilities

Short-term portion of long-term debt, net of discount of $142

Derivative instruments

Total current liabilities

Long-term liabilities:

Long-term debt, net of discount of $517

Deferred tax liability

Other long-term liabilities

Total long-term liabilities

Total liabilities

Stockholders’ equity:

Common stock

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income (loss)

Total stockholders’ equity

Total liabilities and stockholders’ equity

Operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations:

Loss on sale of discontinued operations

Loss from discontinued operations

Depreciation and amortization of intangible assets

Stock-based compensation

Warrant-related stock-based compensation

Excess tax benefits from stock-based award activity

Deferred income taxes

Unrealized amortization of premium or accretion of discount on investments, net

Amortization of debt origination costs

Accretion of debt discount

Loss on derivative instrument

Earn-out contingent liability adjustments

Gain on resolution of contingent liability

Other

Changes in operating assets and liabilities:

Accounts receivable

Other receivables

Prepaid expenses and other current assets

Deferred tax assets and other long-term assets

Accounts payable

Accrued expenses and other current and long-term liabilities

Net cash provided by operating activities of continuing operations

Investing activities:

Business acquisition, net of cash acquired

Purchases of property and equipment

Change in restricted cash

Proceeds from sales of investments

Proceeds from maturities of investments

Purchases of investments

Net cash used by investing activities of continuing operations

Financing activities:

Proceeds from loan, net of debt issuance costs of $2,343 and debt discount of $953

Proceeds from sale of common stock

Repayment of debt

Excess tax benefits from stock-based award activity

Proceeds from stock option exercises and issuance of stock through employee stock purchase plan

Tax payments from shares withheld upon vesting of restricted stock units

Earn-out payments for business acquisition

Repayment of capital lease obligation

Net cash provided by financing activities of continuing operations

Discontinued operations:

Net cash used by operating activities attributable to discontinued operations

Net cash used by investing activities attributable to discontinued operations

Net cash used by discontinued operations

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents:

Beginning of period

End of period

Search:

Revenue

Cost of revenue ⁽¹⁾

Operating expenses

Search segment income

Search segment margin

Tax Preparation:

Revenue

Cost of revenue ⁽²⁾

Operating expenses

Tax Preparation segment income

Tax Preparation segment margin

Total segment:

Total revenue

Total cost of revenue

Total segment operating expenses

Total segment income

Total segment margin

Corporate:

Operating expense

Stock-based compensation

Depreciation

Amortization of intangible assets

Other loss, net

Income tax expense

Discontinued operations, net of taxes

Total corporate

Net income (loss)

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

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

Net income (loss) ⁽²⁾

Loss from discontinued operations

Depreciation and amortization of intangible assets

Stock-based compensation

Other loss, net ⁽³⁾

Income tax expense

Adjusted EBITDA ⁽⁴⁾

Net income (loss) ⁽²⁾

Loss from discontinued operations

Income from continuing operations ⁽²⁾

Stock-based compensation

Amortization of acquired intangible assets

Loss on derivatives

Cash tax impact of GAAP adjustments

Non-cash income tax expense from continuing operations ⁽¹⁾

Non-GAAP net income ⁽⁴⁾

Per share amounts

Income (loss) from continuing operations - diluted

Stock-based compensation - diluted

Amortization of acquired intangible assets - diluted

Loss on derivatives - diluted

Cash tax impact of GAAP adjustments - diluted

Non-cash income taxes per share - diluted

Non-GAAP net income per share - diluted

Weighted average shares outstanding used in computing diluted non-GAAP income per share and its components

Net income

Depreciation and amortization of acquired intangible assets

Stock-based compensation

Other loss, net ⁽⁴⁾

Income tax expense

Adjusted EBITDA

Net income

Stock-based compensation

Amortization of acquired intangible assets

Non-cash income tax expense from continuing operations

Non-GAAP net income

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

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

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

Other loss, net, primarily consists of interest expense, interest income, foreign currency gains or losses, and gains or losses from the disposal of assets, and the Company’s forward-looking guidance does not reflect potential gains or losses from derivative instruments.