Blucora: Strategically Positioned For A Bull Run

Blucora analysis report

Blucora (NASDAQ: BCOR) has been among the top stock picks of Amigobulls for close to three quarters now. Three quarters on and with stock gains of 56%, the company’s case of a bull run remains as strong as ever. While we have previously covered the company’s historical performance, we today highlight our future expectations from Blucora as we stand on the verge of the next earnings season and move into the new  year.

Blucora: Q3 2013 Performance

Blucora reported a solid topline growth in Q3 2013. The table below summarizes Blucora’s Q3 2013 earnings performance. The topline grew ahead of analyst expectations, with the company integrating the results of Monoprice into its consolidated results for Q3 2013. The company also saw an operating margin expansion and growth in EBITDA, after adjusting for one-time charges which included an equity impairment charge of $3.7 million. The Non-GAAP earnings per share (EPS) grew by 20% coming in at 30 cents per share.

Q3 2013 Q3 2012 YoY Change
Revenue including Monoprice (in millions of USD) 124.1 92.9 33.6%
Revenue excluding Monoprice (in millions of USD) 109.5 92.9 17.9%
Operating Margin 4.9% 4.0% 0.9%
Adjusted EBITDA 16.6 12.1 37.2%
Net Income Margin -5.2% -2.6% -2.6%
Non GAAP EPS (in $) 0.3 0.25 20.0%
EPS (in $) -0.16 -0.06 166.7%

We were impressed by the company’s Q3 performance. However, the numbers fail to capture some of the qualitative factors which make the company an attractive opportunity even today.

We today look at the management’s current strategy and where the company could be headed over the coming quarters. The company has completed two acquisitions over the last two years. The acquisition of TaxAct in 2012 and the Monoprice acquisition in 2013. The acquisitions have been a diversification from the company’s core business segment: Online search revenues. The company has been a search aggregator for over a decade now and the acquisition of TaxAct was a clear diversification from their core business. The acquisition of Monoprice in 2013 is also far from their core business. However, we believe the acquisitions bring two positive shifts for the company.

    • The reduced exposure to the online search aggregator business, where the company is subject to the changes in partners’ policies and ways of working. For example: A change in Google’s algorithm had a significant negative impact on Blucora’s search revenues in 2013.
    • The Monoprice acquisition provides a cushion against the cyclical nature of TaxAct which is a good move for the company.  The revenues of TaxAct are subject to the tax season every year and hence the Monoprice revenues will provide more stability to the revenues of the company.

We now move on to the management guidance for Q4 2013. With the earnings season just a few days away, the guidance and analyst expectations deserve their place in our coverage today.

Blucora Management Guidance Q4 2013

In millions of $ Q4 2013 Q4 2012 Growth
Total revenues including e-commerce 159.75 97.47 63.9%
Total revenues excluding e-commerce 118.75 97.47 21.8%
Search revenues 117 96.3 21.5%
Tax Prep 1.75 1.17 49.6%
e-commerce 41 -

The management’s Q4 2013 revenue guidance is in the range of $156 million - $164 million. At its midpoint the guidance represents a 64% Y/Y growth when we include the revenues of Monoprice and a 22% growth when expected revenues are adjusted for the Monoprice acquisition. The key segment to watch out in Q4 2013 will be the E-commerce (Monoprice) segment as this quarterly performance will form the base of future expectations from this segment, which could go on to become a major contributor to Blucora’s topline over the coming quarters.

We continue to hold our long term positive outlook on Blucora as we believe that the management has a clear strategy in place to drive the company’s performance over the coming quarters. Keep reading to see our earnings previews and the earnings results as the excitement of Q4 2013 earnings season sets in. Happy Investing!!

To see Blucora’s current stock price, please click here: (NASDAQ:BCOR)

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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