BLUCORA, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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, 2021.

Insight

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. Our mission is to
enable financial success by changing the way individuals and families plan and
achieve their goals through tax-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 management business includes the activities 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 a 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-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"). We acquired HKFS in July 2020 (the
"HKFS Acquisition") and subsequently rebranded it in order to create tighter
brand alignment through one common and recognizable brand. Any reference to
Avantax Planning Partners in this Form 10-Q is inclusive of HKFS.

Tax software

Our 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 and ancillary services for consumers, small business
owners, and tax professionals through its website www.TaxAct.com and its mobile
applications.

Macroeconomic Environment

Our Wealth Management business is directly and 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 response to inflationary
pressures, the Federal 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 September 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 2022 and 2023 in order to return inflation
to their 2% objective. These combined factors have all led to an increased risk
of economic recession and the potential for continued volatility and decline in
global financial markets.

Volatility and decline in global financial markets and their impact on the value of client assets and transactional activity negatively impacted Wealth Management revenues in the three and nine months ended September 30,

                      Blucora, Inc. | Q3 2022 Form 10-Q 19
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2022. This negative impact was offset, in part, by incremental cash sweep
revenue generated from an increasing interest rate environment. We expect that
cash sweep revenue will continue to increase in the fourth quarter of 2022 as
the full benefits of recent rate increases are fully realized. Based on the
target range for the federal funds rate, the signaling by the Federal Reserve
for additional rate increases during 2022, and current client asset values, we
expect incremental cash sweep revenue should more than offset the negative
impact that financial market volatility may have on Wealth Management revenues
and operating income for the year ended December 31, 2022. 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 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 2022 Form 10-Q 20
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                             RESULTS OF OPERATIONS

Summary
                                Three Months Ended September 30,                                                Nine Months Ended
($ in thousands)                                                                 Change                           September 30,                          Change
                                    2022                2021                $                %               2022               2021               $                %
Revenue:
Wealth Management               $  165,032          $ 169,135          $ (4,103)           (2.4) %       $ 494,104          $ 486,021          $ 8,083              1.7  %
Tax Software                         6,664              5,039             1,625            32.2  %         242,028            220,848           21,180              9.6  %
Total revenue                      171,696            174,174            (2,478)           (1.4) %         736,132            706,869           29,263              4.1  %
Operating income (loss):
Wealth Management                   27,626             19,564             8,062            41.2  %          59,920             60,356             (436)            (0.7) %
Tax Software                       (12,517)           (13,864)            1,347             9.7  %          99,372            100,472           (1,100)            (1.1) %
Corporate-level activity           (28,927)           (25,982)           (2,945)          (11.3) %         (77,282)          (102,255)          24,973             24.4  %
Total operating income (loss)      (13,818)           (20,282)            6,464            31.9  %          82,010             58,573           23,437             40.0  %
Interest expense and other, net     (9,749)            (8,295)           (1,454)          (17.5) %         (25,707)           (24,202)          (1,505)            (6.2) %
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)         1,726                774               952           123.0  %          (4,099)            (2,920)          (1,179)           (40.4) %
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, 2022compared to the three months ended September 30, 2021net loss decreased $6.0 million mainly due to the following factors:

• Increase in Wealth Management operating profit $8.1 million primarily due to the significant increase in cash sweep revenues during the period.

• The operating loss of the tax software sector decreased $1.3 million mainly due to rising consumer incomes and relatively stable operating expenses.

•Expenses within corporate-level activity increased $2.9 million primarily due
to incremental depreciation expense and consulting costs. Furthermore, interest
expense and other, net, increased $1.5 million, primarily due to rising interest
rates.

•The Company recorded an income tax benefit of $1.7 million, or an effective tax
rate of 7.3%, for the three months ended September 30, 2022, compared to an
income tax benefit of $0.8 million, or an effective tax rate of 2.7%, for the
three months ended September 30, 2021.

For the nine months ended September 30, 2022compared to the nine months ended
September 30, 2021net income increased $20.8 million mainly due to the following factors:

•Wealth Management operating income remained relatively flat as additional cash transfer revenue offset headwinds caused by market volatility and additional personnel costs.

• Income from operations in the Tax Software segment decreased $1.1 million primarily due to increased customer support costs and strategic advertising and marketing expenses.

•Expenses within corporate-level activity decreased $25.0 million primarily due
to reduced acquisition and integration costs. Furthermore, interest expense and
other, net, increased $1.5 million, primarily due to rising interest rates.

•The Company recorded income tax expense of $4.1 million, or an effective tax
rate of 7.3%, for the nine months ended September 30, 2022, compared to income
tax expense of $2.9 million, or an effective tax rate of 8.5%, for the nine
months ended September 30, 2021.

                      Blucora, Inc. | Q3 2022 Form 10-Q 21
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                       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, or contested proxy,
transaction and other legal and consulting costs to the reportable segments.
Such amounts are reflected under the heading "Corporate-level activity." In
addition, we do not allocate interest expense and other, net, or income taxes to
the reportable segments.

Wealth Management
                                Three Months Ended September 30,                                                   Nine Months Ended
($ in thousands)                                                                    Change                           September 30,                          Change
                                    2022                   2021                $                %               2022               2021               $                %
Revenue                      $       165,032           $ 169,135          $ (4,103)           (2.4) %       $ 494,104          $ 486,021          $ 8,083             1.7  %
Operating income             $        27,626           $  19,564          $  8,062            41.2  %       $  59,920          $  60,356          $  (436)           (0.7) %
Segment margin                          16.7   %            11.6  %                                              12.1  %            12.4  %

For the three months ended September 30, 2022compared to the three months ended September 30, 2021Wealth Management operating income increased
$8.1 million mainly 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 $8.1 million primarily due to increases 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 was primarily 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 and volatility in global
financial markets, as discussed above.

•Wealth Management operating expenses increased $8.5 million primarily due to
$11.1 million of incremental personnel costs, partially offset by a $4.3 million
decrease in cost of revenue associated 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 trended 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 concentrated at higher payout levels.

                      Blucora, Inc. | Q3 2022 Form 10-Q 22
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•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 income

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 is as follows:

                                                                                         Three Months Ended September 30,                           Nine Months Ended
($ in thousands)                                                                                                                     Change           September 30,              Change
                                     Sources of Revenue          Primary Drivers             2022                   2021                $                      2022               2021                $
                                  Advisory                  - Advisory asset levels   $        95,070           $ 103,540          $ (8,470)               $ 306,394          $ 291,167          $ 15,227
  Financial professional-driven                             - Transactions
                                  Commission                - Asset levels
                                                            - Product mix                      41,788              52,961           (11,173)                 132,278            157,197           (24,919)
                                                            - Cash balances
                                  Asset-based               - Interest rates
                                                            - Number of accounts
                                                            - Client asset levels              21,147               5,659            15,488                   33,774             16,514            17,260
          Other revenue                                     - Account activity
                                                            - Number of financial
                                  Transaction and fee        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 rate                                         87.6   %            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 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 2022 Form 10-Q 23
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Business Metrics
($ in thousands)                                             September 30,                                  Change
                                                      2022                  2021                    $                     %
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
assets                                                   48.8  %            

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 professionals                 3,347                 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.
(3)The number of in-house/employee financial professionals includes licensed
financial planning consultants, all of which are affiliated with Avantax
Planning Partners.
(4)Calculation based on advisory and commission revenue for the three months
ended September 30, 2022 and 2021, respectively.

Client Assets. Historically 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-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 decreased $14.1 billion of the September 30, 2022 compared to
September 30, 2021mainly due to $14.3 billion unfavorable market trends, partially offset by net customer inflows.

Advisory assets decreased $4.4 billion as of September 30, 2022 compared to
September 30, 2021, and advisory assets as a percentage of total client assets
increased to 48.8% as of September 30, 2022, compared to 45.9% as of
September 30, 2021. The decrease in advisory assets was primarily caused by
$7.4 billion of unfavorable market changes, partially offset by net new advisory
assets of $3.0 billion which contributed to the increase in advisory assets as a
percentage of total client assets.

Financial Professionals. The number of our financial professionals decreased
5.2% as of September 30, 2022 compared to September 30, 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
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The decline in the number of finance professionals was partially offset by our continued recruitment and onboarding of independent finance professionals.

Advisory 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 (in thousands):

                                                                  September 30,                                 Change
                                                           2022                  2021                    $                    %

Asset Advisory – Independent Finance Professionals $29,735,365 $33,713,543 $(3,978,178)

              (11.8) %
Advisory assets-in-house/employee financial
professionals                                            4,494,178             4,701,444              (207,266)               (4.4) %
Retirement advisory assets-in-house/employee
financial professionals                                  1,213,012             1,382,402              (169,390)              (12.3) %
Total advisory assets                                 $ 35,442,555          $ 39,797,389          $ (4,354,834)              (10.9) %


Activity within our advisory assets was as follows (in thousands):

                                                     Three Months Ended September 30,                 Nine Months Ended September 30,
                                                        2022                    2021                     2022                    2021
Balance, beginning of the period                $      36,746,048          $ 39,440,985          $      42,179,051          $ 35,603,557
Net new advisory assets                                   514,293               621,205                  2,261,923             1,853,632

Market impact and other                                (1,817,786)             (264,801)                (8,998,419)            2,340,200
Balance, end of the period                      $      35,442,555          $ 39,797,389          $      35,442,555          $ 39,797,389
Advisory revenue                                $          95,070         

$103,540 $306,394 $291,167
Average advisory fee rate (1)

                                 26 bps                26 bps                     77 bps                78 bps


_________________________

(1)For the three months ended September 30, 2022 and September 30, 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, 2022 and September 30, 2021,
average advisory fee rate equals the sum of each quarterly average advisory fee
rate within the relevant year-to-date period.

For the three and nine months ended September 30, 2022, advisory assets declined
$1.3 billion and $6.7 billion, respectively, primarily due to unfavorable market
changes, partially offset by net new advisory assets. Net new advisory assets
benefited from organic growth and the conversion of off platform, direct to fund
assets, when appropriate for the client, to fee-based advisory platforms that
include ongoing management and which 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 declined during the nine months ended September 30, 2022, due to the
timing of market 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. 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
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Our commission income, by product category and by type of commission income, was as follows (in thousands):

                                    Three Months Ended September                                                   Nine Months Ended
                                                30,                                Change                            September 30,                           Change
                                       2022              2021                $                 %                2022               2021                $                 %
By product category:
Mutual funds                       $  16,339          $ 22,844          $  (6,505)           (28.5) %       $  53,635          $  70,395          $ (16,760)           (23.8) %
Variable annuities                    14,892            18,752             (3,860)           (20.6) %          46,961             55,247             (8,286)           (15.0) %
Insurance                              5,048             4,414                634             14.4  %          13,007             14,044             (1,037)            (7.4) %
General securities                     5,509             6,951             (1,442)           (20.7) %          18,675             17,511              1,164              6.6  %

Total commission revenue           $  41,788          $ 52,961          $ (11,173)           (21.1) %       $ 132,278          $ 157,197          $ (24,919)           (15.9) %

By type of commission:
Transaction-based                  $  17,868          $ 22,372          $  (4,504)           (20.1) %       $  56,373          $  65,815          $  (9,442)           (14.3) %
Trailing                              23,920            30,589             (6,669)           (21.8) %          75,905             91,382            (15,477)           (16.9) %
Total commission revenue           $  41,788          $ 52,961          $ (11,173)           (21.1) %       $ 132,278          $ 157,197          $ (24,919)           (15.9) %


As discussed in the sections above, the decline in transaction-based commission and trailing commission revenue for the periods shown in the above table was primarily due to unfavorable trading activity and financial market volatility. worldwide in the three and nine months ended September 30, 2022.

Asset-based income. Asset-based income primarily includes financial product manufacturer referral program fees, cash sweep programs, asset-based pension plan service fees and other asset-based income.

For the three and nine months ended September 30, 2022, compared to the three
and nine months ended September 30, 2021, asset-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, 2022, respectively, driven by
increases in the federal funds rate. The increases in cash sweep revenue were
partially offset by reduced fees from sponsorship programs. Due to the timing of
rate increases and the non-linear nature of upside associated with these
increases, and with expectation of additional rate increases by the Federal
Reserve in 2022, cash sweep revenue is expected to continue to increase for the
remainder of the year.

Revenue from transactions and fees. Transaction and fee income primarily includes support fees charged to finance professionals, fees charged for executing certain transactions in client accounts and other fees related to services provided and other account fees, as generally set forth in agreements with finance professionals, clients, financial institutions and retirement. plan sponsors.

For the three and nine months ended September 30, 2022, compared to the three
and nine months ended September 30, 2021, transaction and fee revenue remained
relatively flat.

                      Blucora, Inc. | Q3 2022 Form 10-Q 26
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Tax Software
                                                                                                                      Nine Months Ended
($ in thousands)                    Three Months Ended September 30,                    Change                          September 30,                          Change
                                        2022                   2021               $                %               2022               2021                $                %
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, 2022, compared to the nine months ended
September 30, 2021, Tax Software operating income decreased $1.1 million due to
the following factors:

•Tax Software revenue increased $21.2 million due to a $18.4 million increase in
consumer revenue and a $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 increased $22.3 million primarily due to
increased investments in seasonal customer care support and tax experts and an
increase in strategic advertising and marketing spend. These incremental costs
were the primary drivers of the reduction in segment margin shown in the table
above.

Sources of Revenue

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 Xpert Assist.

We classify Tax Software revenue into two different categories: consumer revenue
and professional revenue. Consumer revenue is derived from products and services
sold directly to customers 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 (in thousands):

                              Three Months Ended September                                                Nine Months Ended
                                           30,                              Change                          September 30,                          Change
                                  2022              2021              $                %               2022               2021                $                %
Consumer                      $   5,974          $ 4,479          $ 1,495            33.4  %       $ 222,262          $ 203,891          $ 18,371             9.0  %
Professional                        690              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 commodity tax software customers using the number of accepted federal tax electronic files made through our digital software and 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.

                                                           Nine Months 

Ended

(In thousands, except as otherwise indicated)                September 30,                                    Change
                                                     2022                      2021                  Units                 %
Total e-files (1)                                     5,658                     5,492                    166                3.0  %
Consumer:
Consumer e-files (1)                                  3,232                     3,144                     88                2.8  %
Professional:
Professional e-files                                  2,426                     2,348                     78                3.3  %
Units sold (in ones)                                 21,051                    20,808                    243                1.2  %
Professional e-files per unit sold (in ones)          115.2                     112.8                    2.4                2.1  %


____________________________

(1)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, 2022, compared to the nine months ended
September 30, 2021, e-files across each category, and professional units sold,
increased primarily due to growth in market share from favorable customer
retention and acquisition, both of which benefited from our investments in
strategic marketing spend and customer care support.

Enterprise level activity

Certain enterprise-level activities, including certain general and administrative expenses (such as personnel and general expenses), stock-based compensation, acquisition and integration costs, depreciation, amortization of acquired intangibles and contested proxies, transaction costs and other legal and advisory fees, are not allocated to our reportable segments.

Company-level activity by category was as follows (in thousands):

                                  Three Months Ended September                                               Nine Months Ended
                                              30,                               Change                         September 30,                           Change
                                     2022              2021               $                %              2022               2021                $                 %
Unallocated corporate-level
general and administrative
expenses                         $   7,456          $  6,499          $   957            14.7  %       $ 22,428          $  18,452          $   3,976             21.5  %
Stock-based compensation             5,706             4,729              977            20.7  %         17,129             15,499              1,630             10.5  %
Acquisition and integration            416             2,241           (1,825)          (81.4) %         (4,710)            28,513            (33,223)          (116.5) %
Depreciation                         6,020             3,906            2,114            54.1  %         15,696             11,251              4,445             39.5  %
Amortization of acquired
intangible assets                    6,342             7,009             (667)           (9.5) %         19,435             21,247             (1,812)            (8.5) %
Contested proxy, transaction and
other legal and consulting costs     2,987             1,598            1,389            86.9  %          7,304              7,293                 11              0.2  %

Total activity at company level $28,927 $25,982 $2,945

            11.3  %       $ 77,282          $ 102,255          $ (24,973)           (24.4) %


For the three months ended September 30, 2022compared to the three months ended September 30, 2021business level activity increased $2.9 million
mainly due to the following factors:

• Depreciation expense increased $2.1 million primarily due to capitalized software costs for our Tax software Company.

•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 increased activity at the enterprise level:

•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 $25.0 million primarily
due to the following factors:

•Acquisition and integration expenses decreased $33.2 million, primarily due to
a $24.8 million decrease in the fair value adjustments recorded for the HKFS
Contingent Consideration liability between the two periods, and an $8.4 million
decrease in professional services and other expenses due to a reduction in
integration activities.

Partially offsetting this drop in activity at the enterprise level:

• Depreciation expense increased $4.4 million primarily due to capitalized software costs for our Tax software Company.

• Increase in unallocated general and administrative expenses $4.0 million
mainly due to additional personnel and insurance costs.

                               OPERATING EXPENSES

Cost of Revenue
                                  Three Months Ended September 30,                                                     Nine Months Ended
($ in thousands)                                                                       Change                            September 30,                           Change
                                      2022                   2021                $                 %                2022               2021                $                %
Wealth Management              $       105,301           $ 120,641          $ (15,340)           (12.7) %       $ 338,819          $ 343,174          $ (4,355)            (1.3) %
Tax Software                             3,879               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 revenue                     63.6   %            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.
The compensation of our in-house/employee financial professionals 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 Income section 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, cost of revenue increased $3.5 million. Tax Software cost of
revenue included incremental personnel and consulting costs and depreciation of
capitalized software. Continued investments in internally developed software for
the Tax Software business are expected to result 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 Income section above.
This decline was partially offset by $2.4 million of incremental forgivable
loans amortization.

Payout ratios to independent financial professionals are 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 concentrated at
higher payout levels.

                      Blucora, Inc. | Q3 2022 Form 10-Q 29
--------------------------------------------------------------------------------
Engineering and Technology
                                   Three Months Ended September                                              Nine Months Ended
($ in thousands)                                30,                             Change                         September 30,                         Change
                                       2022              2021              $               %              2022              2021               $                %
Engineering and technology         $  7,474           $ 7,874          $ (400)           (5.1) %       $ 24,598          $ 22,233          $ 2,365            10.6  %
Percentage of revenue                   4.4   %           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 consolidated statements of 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, 2022compared to the three months ended September 30, 2021engineering and technology spending remained relatively stable.

For the nine months ended September 30, 2022, compared to the nine months ended
September 30, 2021, engineering and technology expenses increased $2.4 million
primarily due to increases in personnel expenses in our Tax Software segment.

Sales and Marketing
                                Three Months Ended September                                                Nine Months Ended
($ in thousands)                             30,                              Change                          September 30,                          Change
                                   2022               2021               $               %               2022               2021                $                %
Sales and marketing            $  30,485           $ 28,399          $ 2,086            7.3  %       $ 162,396          $ 140,809          $ 21,587            15.3  %
Percentage of revenue               17.8   %           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-house/employee financial
professionals, the cost of temporary help and contractors, and back-office
processing support expenses for our Wealth Management business.

For the three months ended September 30, 2022compared to the three months ended September 30, 2021sales and marketing expenses increased $2.1 millionmainly due to the additional personnel costs of $1.6 million in our Wealth Management segment.

For the nine months ended September 30, 2022compared to the nine months ended
September 30, 2021sales and marketing expenses increased $21.6 millionmainly due to the following factors:

• Personnel costs in both segments increased $11.8 million.

• Strategic advertising and marketing costs in our Tax software augmented segment
$9.0 million.

For the remainder of the year, we expect to incur additional travel and conference costs associated with the reduction in travel restrictions and the timing of our National Wealth Management Conference.

General and Administrative
                                    Three Months Ended September                                                Nine Months Ended
($ in thousands)                                 30,                               Change                         September 30,                         Change
                                       2022               2021               $                %              2022              2021                $                %
General and administrative         $  27,778           $ 23,102          $ 4,676            20.2  %       $ 83,499          $ 71,619          $ 11,880            16.6  %
Percentage of revenue                   16.2   %           13.3  %                                            11.3  %           10.1  %

General and administrative (“G&A”) expenses primarily include personnel costs, the cost of temporary help and contractors, professional service fees, business development and management overhead, occupancy and office space, business taxes and insurance costs.

                      Blucora, Inc. | Q3 2022 Form 10-Q 30
--------------------------------------------------------------------------------

For the three and nine months ended September 30, 2022, 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 incremental personnel costs,
professional services fees, and hardware and software support and maintenance
fees.

Acquisition and Integration
                                Three Months Ended September 30,                                                   Nine Months Ended
($ in thousands)                                                                    Change                           September 30,                           Change
                                      2022                 2021               $                 %               2022              2021                $                  %

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 expenses                           416                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 revenue                    0.2    %           1.3  %                                               (0.6) %            4.0  %


Acquisition and integration expenses primarily relate to costs incurred for the
acquisitions of Avantax Planning Partners and 1st Global 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, 2022compared to the three months ended September 30, 2021acquisition and integration costs decreased $1.8 millionprimarily due to the final revaluation of HKFS contingent consideration liability in the second quarter of 2022.

For the nine months ended September 30, 2022compared to the nine months ended
September 30, 2021acquisition and integration costs decreased $33.2 millionmainly due to the following factors:

•The change in fair value of the HKFS Contingent Consideration liability
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 final settlement value
of the liability, reflecting a decrease in the fair value of the contingent
consideration due to a significant decline in advisory asset levels caused by
the financial market decline discussed in the sections above.

• Professional services and other expenses decreased $8.4 million due to a reduction in integration activities.

Depreciation and amortization of acquired intangible assets

                          Three Months Ended September                                              Nine Months Ended
($ in thousands)                      30,                              Change                         September 30,                         Change
                             2022               2021              $               %              2022              2021               $                %
Depreciation             $   3,839           $ 2,867          $  972            33.9  %       $  9,907          $  8,371          $ 1,536            18.3  %
Amortization of acquired
intangible assets            6,342             7,009            (667)           (9.5) %         19,435            21,247           (1,812)           (8.5) %
Total                    $  10,181           $ 9,876          $  305             3.1  %       $ 29,342          $ 29,618          $  (276)           (0.9) %
Percentage of revenue          5.9   %           5.7  %                                            4.0  %            4.2  %

Amortization of property, plant and equipment and software, net, includes the amortization of computer hardware and software (including internally developed software), office equipment and furniture, and leasehold improvements. The amortization of acquired intangible assets primarily includes the amortization of relationships with financial professionals, sponsors and clients, which are amortized over their estimated useful life.

For the three and nine months ended September 30, 2022, compared to the three
and nine months ended September 30, 2021, depreciation and amortization expense
did not materially change.

                      Blucora, Inc. | Q3 2022 Form 10-Q 31
--------------------------------------------------------------------------------
                        INTEREST EXPENSE AND OTHER, NET

                         Three Months Ended September                                               Nine Months Ended
($ in thousands)                      30,                              Change                         September 30,                         Change
                             2022              2021              $                %               2022              2021               $               %
Interest expense         $   8,771          $ 7,304          $ 1,467            20.1  %       $  23,166          $ 21,789          $ 1,377            6.3  %
Amortization of debt
issuance costs                 403              388               15             3.9  %           1,191             1,128               63            5.6  %
Amortization of debt
discount                       302              290               12             4.1  %             893               851               42            4.9  %
Total interest expense       9,476            7,982            1,494            18.7  %          25,250            23,768            1,482            6.2  %
Interest income and
other                          273              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, 2022, compared to the three
and nine months ended September 30, 2021, interest 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, 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. The prior period interim tax provision was prepared by applying a
year-to-date effective tax rate to income before income taxes. The current
period interim tax provision was prepared by applying an estimated annual
effective tax rate to income before income taxes and by calculating the tax
effect of discrete items recognized during the quarter (if applicable).

Our 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
maintain a valuation allowance 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
periods. The majority of these net operating losses will either be utilized or
expire between 2022 and 2024.

                          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, net,
acquisition and integration costs, contested proxy, transaction and other legal
and consulting costs, and income tax (benefit) expense. Interest expense and
other, net primarily consists of interest expense, net. Acquisition and
integration costs primarily relate to the acquisitions of Avantax Planning
Partners and 1st 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 GAAP net income (loss), which we believe to be the most comparable GAAP measure, to Adjusted EBITDA, is shown below:

                                                    Three Months Ended September 30,              Nine Months Ended
($ in thousands)                                                                                    September 30,
                                                        2022                2021               2022               2021
Net income (loss)                                   $  (21,841)         $ (27,803)         $  52,204          $  31,451
Stock-based compensation                                 5,706              4,729             17,129             15,499
Depreciation and amortization of acquired
intangible assets                                       12,362             10,915             35,131             32,498
Interest expense and other, net                          9,749              8,295             25,707             24,202

Acquisition and integration – Excluding change in fair value of HKFS contingent consideration

                416                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 costs                                         2,987              1,598              7,304              7,293
Income tax (benefit) expense                            (1,726)              (774)             4,099              2,920
Adjusted EBITDA                                     $    7,653          $    (799)         $ 136,864          $ 142,376

Non-GAAP net income (loss) and non-GAAP net income (loss) per share

We define 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, acquisition and integration costs,
contested proxy, transaction and other legal and consulting costs, the related
cash tax impact of those adjustments, and non-cash income tax (benefit) expense.
We exclude the non-cash portion of income taxes 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 expire, if not utilized, between 2022 and 2024.

We believe that Non-GAAP Net Income (Loss) and 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) and 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) and 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) and Non-GAAP Net Income (Loss) per share
differently, and, therefore, these measures may not be comparable to similarly
titled measures of other companies.

                      Blucora, Inc. | Q3 2022 Form 10-Q 33
--------------------------------------------------------------------------------

A reconciliation of GAAP net income (loss) and GAAP net income (loss) per share,
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:
                                                    Three Months Ended September 30,             Nine Months Ended
($ in thousands)                                                                                   September 30,
                                                        2022                2021              2022               2021
Net income (loss)                                   $  (21,841)         $ (27,803)         $ 52,204          $  31,451
Stock-based compensation                                 5,706              4,729            17,129             15,499
Amortization of acquired intangible assets               6,342              7,009            19,435             21,247

Acquisition and integration – Excluding change in fair value of HKFS contingent consideration

                416                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 costs                                         2,987              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 compensation                                  0.12               0.10              0.35               0.31
Amortization of acquired intangible assets                0.14               0.14              0.40               0.43

Acquisition and integration – Excluding change in fair value of HKFS contingent consideration

               0.01               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 costs                                          0.06               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 earnings (loss) per share – Diluted $(0.20) $(0.26) $1.85 $2.05
Diluted weighted average number of shares outstanding

             47,847             48,707            49,153             49,373


____________________________

(1)Any difference in the "per diluted share" amounts between this table and the
condensed consolidated statements of operations is due to using different
diluted weighted average shares outstanding in the event that there is GAAP net
loss but Non-GAAP Net Income and vice versa.

                        LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents

Our principal source of liquidity is our cash and cash equivalents. As of
September 30, 2022, we had cash and cash equivalents of $91.1 million. 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 as of September 30, 2022 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, acquisitions that enhance our strategic position, financial
professional loans, contingent consideration associated with our acquisitions,
and share repurchases under share repurchase programs. For at least the next
twelve months, we plan to finance these cash needs and our regulatory capital
requirements at our broker-dealer

                      Blucora, Inc. | Q3 2022 Form 10-Q 34
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subsidiary largely through our cash and cash equivalents on hand and cash
provided by operating activities. Execution of our growth strategies in our
Wealth Management 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. Our future investments in our business through capital
expenditures or acquisitions, prepayment of debt to achieve optimal leverage
ratios, or our return of capital to stockholders through stock repurchases, will
be determined after considering the best interests of our stockholders.

Debt

In May 2017, we entered into a credit agreement (as the same has been amended,
the "Credit Agreement") with a syndicate of lenders that 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 (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 $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, 2022, we had $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, 2022, approximately $90.0 million
was available for future borrowing as of September 30, 2022 under the Senior
Secured Credit Facility, subject to customary terms and 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 Term Loan Maturity Date.
On August 5, 2022, and as provided for within our Senior Secured Credit
Facility, we voluntarily prepaid $35.0 million of 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, 2022, the
applicable interest rate on the Term Loan was 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, 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
--------------------------------------------------------------------------------

Credit Agreement Agent to apply certain updates to the Credit Agreement to effect the Fallback Rate, including a historical basis spread adjustment 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 acquisition 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, 2022.

For more information on the term loan, the new revolver and the credit agreement, see “Item 1. Financial statements – Note 5”.

TaxAct sales transaction

The TaxAct sale transaction is expected to yield net after-tax cash proceeds of approximately $620.0 million. We plan to use the net proceeds to repay existing debt and return excess capital to shareholders.

Share buyback plan

As of December 31, 2021, we had $100.0 million authorized under our stock
repurchase 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 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.

For fiscal year 2022, restrictions in our Credit Agreement capped our share
repurchases at $35.0 million. Subject to the terms of our Credit Agreement, a
portion of our future capital requirements during fiscal year 2023 may encompass
share repurchases under this plan.

Contractual obligations and commitments

On July 1, 2020we finalized the acquisition of Avantax Planning Partnersformerly “HKFS”, for an initial cash purchase price of $104.4 million. The purchase price was subject to variable contingent consideration or price supplements (the “HKFS Contingent Consideration”) totaling a maximum of
$60.0 million.

The amounts owed for the HKFS Contingent Consideration were determined based on
advisory asset levels (i) for the period beginning July 1, 2020 and ending June
30, 2021 and (ii) for the period beginning July 1, 2021 and ending 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

                      Blucora, Inc. | Q3 2022 Form 10-Q 36
--------------------------------------------------------------------------------

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 flow

Our cash flows consisted of the following (in thousands):

Nine month period ended September 30,

                                                                    2022                  2021             $ 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)

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