Revenues

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Tax Preparation

E-Commerce

Adjusted EBITDA

Non-GAAP Net Income

Non-GAAP Diluted EPS

Net Loss*

GAAP Diluted EPS (Loss)*

Revenues:

Services revenue

Product revenue

Total revenues

Operating expenses:

Cost of revenues:

Services cost of revenue (includes amortization of acquired intangible assets of $1,906, $2,014, $5,773 and $5,605)

Product cost of revenue

Total cost of revenues ⁽¹⁾

Engineering and technology ⁽¹⁾

Sales and marketing ⁽¹⁾

General and administrative ⁽¹⁾

Depreciation

Amortization of intangible assets

Total operating expenses

Operating income

Other loss, net ⁽²⁾

Income (loss) before income taxes

Income tax benefit (expense)

Net income (loss)

Income (loss) per share:

Basic

Diluted

Weighted average shares outstanding:

Basic

Diluted

In the nine months ended September 30, 2012, an additional $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, 2013 and 2012 is allocated among the following captions (in thousands):

Stock-Based Compensation

Cost of revenues

Engineering and technology

Sales and marketing

General and administrative

Total stock-based compensation expense

Other loss, net for the three and nine months ended September 30, 2013 and 2012 is allocated among the following captions (in thousands):

Other Loss, Net

Interest income

Interest expense

Amortization of debt issuance costs

Accretion of debt discount

Loss on derivative instrument

Impairment of equity investment in privately-held company

Loss on debt extinguishment and modification expense

Other

Total other loss, net

ASSETS

Current assets:

Cash and cash equivalents

Short-term investments, available-for-sale

Accounts receivable, net of allowance of $31 and $10

Other receivables

Inventory

Prepaid expenses and other current assets, net

Total current assets

Property and equipment, net

Goodwill

Other intangible assets, net

Other long-term assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses and other current liabilities

Deferred revenue

Short-term portion of long-term debt, net of discount of $0 and $160

Derivative instruments

Total current liabilities

Long-term liabilities:

Long-term debt, net of discount of $264 and $468

Convertible senior notes

Deferred tax liability, net

Deferred revenue

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

Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation

Warrant-related stock-based compensation

Loss on derivative instrument

Depreciation and amortization of intangible assets

Excess tax benefits from stock-based award activity

Deferred income taxes

Unrealized amortization of premium on investments, net

Loss on equity investment in privately-held company

Impairment loss on equity investment in privately-held company

Amortization of debt issuance costs

Accretion of debt discount

Loss on debt extinguishment and modification expense

Interest expenses incurred but not paid due to refinance

Other

Cash provided (used) by changes in operating assets and liabilities:

Accounts receivable

Other receivables

Inventory

Prepaid expenses and other current assets

Other long-term assets

Accounts payable

Deferred revenue

Accrued expenses and other current and long-term liabilities

Net cash provided by operating activities

Investing activities:

Business acquisition, net of cash acquired

Equity investment in privately-held company

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

Financing activities:

Proceeds from issuance of convertible debt, net of debt issuance costs of $6,432

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

Debt issuance costs on credit facility

Repayment of debt

Stock repurchases

Excess tax benefits from stock-based award activity

Proceeds from stock option exercises

Proceeds from issuance of stock through employee stock purchase plan

Tax payments from shares withheld upon vesting of restricted stock units

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents:

Beginning of period

End of period

Revenue

Search

Tax Preparation

E-Commerce

Total revenue

Operating income (loss)

Search

Tax Preparation

E-Commerce

Corporate-level activity

Total operating income

Other loss, net

Income tax benefit (expense)

Net income (loss)

Net income (loss) ⁽²⁾

Depreciation and amortization of intangible assets

Stock-based compensation

Other loss, net ⁽³⁾

Income tax expense (benefit)

Adjusted EBITDA

Net income (loss) ⁽²⁾

Stock-based compensation

Amortization of acquired intangible assets

Accretion of debt discount on convertible notes

Loss on derivative instrument

Impairment of equity investment in privately-held company

Loss on debt extinguishment and modification expense

Cash tax impact of adjustments to GAAP net income

Non-cash income tax expense ⁽¹⁾

Non-GAAP net income ⁽⁴⁾

Per share amounts

Net income (loss) - diluted

Stock-based compensation - diluted

Amortization of intangible assets - diluted

Accretion of debt discount on convertible notes - diluted

Loss on derivative instrument - diluted

Impairment of equity investment in privately-held company - diluted

Loss on debt extinguishment and modification expense - diluted

Cash tax impact of adjustments to GAAP net income - diluted

Non-cash income tax expense 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 ⁽⁵⁾

Income tax benefit

Adjusted EBITDA

Net loss

Stock-based compensation

Amortization of intangible assets

Accretion of debt discount

Non-cash income tax benefit

Non-GAAP net income

Blucora’s Adjusted EBITDA is calculated by adjusting net income determined in accordance with the accounting principles generally accepted in the United States of America (“GAAP”), excluding the effects of 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 intangible assets, stock-based compensation expense, and other loss (income), net (which includes such items as interest expense, interest income, gains or losses on derivative instruments, other than temporary impairment losses on equity investments, losses on debt extinguishments and modifications, 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, gains on resolution of contingencies, and litigation settlements), as detailed above. Blucora’s management believes that Adjusted EBITDA provides meaningful supplemental information regarding the Company’s performance. Blucora uses 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. 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. Items excluded from Adjusted EBITDA should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income. Other companies may calculate Adjusted EBITDA differently and, therefore, Blucora’s Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

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

Other loss, net primarily includes such items as interest expense, interest income, derivative instrument gains or losses, accretion of debt discount, amortization of debt issuance costs, other than temporary impairment losses on equity investments, and losses on debt extinguishments and modification expenses.

The Company’s new definition of non-GAAP net income does not impact presentation of this non-GAAP financial measure for prior periods.

Other loss, net primarily includes such items as interest expense, interest income, derivative instrument gains or losses, accretion of debt discount and amortization of debt issuance costs, other than temporary impairment losses on equity investments, losses on debt extinguishments and modification expenses. The Company’s forward-looking guidance does not reflect potential gains or losses from derivative instruments.