Avantax, Inc. · GETTEX:3EV
Avantax — Blucora — Q3 2017 Earnings Presentation
37 slides from Avantax's earnings presentation, Oct 26, 2017
Slide 1: Investor Presentation 3Q 2017
Investor Presentation October 26, 2017 3Q 2017
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
2 Forward-Looking Statements and Non-GAAP Financial Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the
Slide 3: Empowering people's goals by optimizing taxes
3 Source: U.S. Bureau of Labor Statistics Empowering people’s goals by optimizing taxes. We specialize in it. Americans spend more on taxes than on their mortgage, groceries and clothing, combined. Yet few firms focus on tax, and many avoid it altogether.
Slide 4: Investment Highlights
4 • Demonstrated revenue, segment income and non-GAAP EPS growth • Our business portfolio is positioned with significant organic growth opportunities • Strong cash flow generating business, strengthened balance sheet • Diversified revenue streams with multiple growth drivers and positive industry ta
Slide 5: 2016 Overview
5 2016 Overview Blucora’s tax-smart solutions empower people’s goals by leveraging one of life’s largest expenses – taxes $42.7 B Assets Under Administration $12 B Assets Under Management 4.3M Consumer e-Files 21K Professional Users 5 Wealth Management • #1 Tax-Focused Independent Broker Dealer • We
Slide 6: Multi-Year Transformation
6 Multi-Year Transformation Integrated Tax-Smart Platform Reduced Customer Concentration Increased Recurring Revenue 2014 3Q’17 LTM Customers Accounting for more than 5% of Revenue Tax-Optimized Wealth Management Tax Prep 0% 20% 40% 60% 80% 100% 2014 3Q'17 LTM 13% 77% 6.3x Divested Non-Core Assets B
Slide 7: Continued Momentum
7 2014 2015 2016 2017 E* $0.70 $0.88 $1.06 $1.36 2014 2015 2016 3Q'17 LTM 2014 2015 2016 3Q'17 LTM Continued Momentum Revenue 7% CAGR Adjusted EBITDA 13% CAGR Non-GAAP EPS 25% CAGR Strengthening Balance Sheet $76 $82 $94 $105 $409 $437 $456 $499 2015 2016 3Q'17 6.3x 4.0x 2.6x LTM Free Cash Flow $72
Slide 8: Strong Third Quarter
8 Wealth Management • Revenue up 8% y/y • Assets Under Administration (AUA) +11% y/y to $42.7B • Assets Under Management (AUM) +17% y/y to $12.0B Strong Third Quarter New Record Tax Preparation • Revenue up 7% y/y • Investing & positioning for next tax season New Record Blucora Consolidated Revenue
Slide 9: Core Beliefs
9 Core Beliefs • Taxes are one of life’s largest expenses • Leveraging taxes is not maximizing a once-a-year refund, but rather helping people achieve their financial goals • The tax prep industry focuses consumers on maximizing a once-a-year refund, a reactive approach that ignores the greater goal
Slide 10: Purpose and Values
10 Purpose and Values Purpose Values Vision Strategic Statement “Tax-smart” leaders, earning world-class customer loyalty and trust We live by a CREDO… • Customer obsessed: We serve all customers with passion • Reliable: We always deliver on our commitments • Ethical: We respect all others and treat
Slide 11: Blucora Strategy
11 Accelerate Growth Capture organic growth opportunities Create clear competitive differentiation and customer value in each business Deliver on cross-brand migration & synergies, leverage data to offer personalized services Build Tax-smart Leadership Deliver tax-alpha through integrated products a
Slide 12: Financial Objectives (Next 3-5 Years)
12 Financial Objectives (Next 3-5 Years) Revenue Growth Adjusted EBITDA Growth Non-GAAP EPS Growth 5-8% 6-9% 15-18% Near-term Focus Organic growth requirements Continued de-levering Future Considerations Consolidation & capability M&A Return of capital (share repurchase) Capital allocation prioritie
Slide 13: Roadmap for Value Creation
2016 2017 2018+ 13 Roadmap for Value Creation Stabilize and Reposition Foundation for Growth Growth Company Increase profit & grow share Increase profit & grow AUM Organic Reposition TaxAct HD Vest DOL & capability buildout Redesign & streamline organization Integrate HD Vest Organization Divestit
Slide 14: Wealth Management
14 Wealth Management
Slide 15: Our Market Position – HD Vest
15 Our Market Position – HD Vest Source: Investment News - 2016 ranking. Competitor A Top 25 Broker Dealers (Total Assets) Tax-Focused Broker Dealers (Total Assets) Competitor B
Slide 16: Financial Performance – HD Vest
16 Financial Performance – HD Vest Revenue $40.3 $43.0 $46.3 $50.5 13% 13% 15% 15% 0.06 0.08 0.1 0.12 0.14 0.16 0.18 0 5 10 15 20 25 30 35 40 45 50 55 60 2014 2015 2016 LTM 3Q'17 Segment Income & Margin 40.8% 27.0% 20.5% 11.7% Other Fee-based Transactional Trails 3Q’17 $273 $286 $280 $297 $32 $33 $3
Slide 17: Favorable Industry Trends Positioned for Sustained Growth
17 Favorable Industry Trends Positioned for Sustained Growth Source: Cerulli – U.S. Broker/Dealer Marketplace 2016 7000 9000 11000 13000 15000 17000 19000 21000 23000 25000 2011 2012 2013 2014 2015 2016 2017 2018 2019 ~8% CAGR ~8% CAGR Actual Forecast Assets Served by Advisors Growing 8% 34 36 40 25
Slide 18: Differentiated Business Model
18 Differentiated Business Model 1. Recruiting 2. New Customers 3. Tax Focus 4. Teamwork Train Existing Tax-Pros to be Wealth Mgmt. Advisors Advisors have existing client base …with trusted relationship Offer Tax-Smart Investing …integrated with tax management Family Atmosphere: Chapters, Mentors, S
Slide 19: Organic Business Opportunities
19 Organic Business Opportunities Strong Position with Significant Organic Opportunity Highest Potential Advisors Evaluate - Recruit Technology Upgrades Significantly Increase Support Leverage Proprietary Tax-Smart Platform 1. Optimize Advisor Success & Productivity 3. Improve End-Client Penetration
Slide 20: Key Takeaways – Wealth Management
20 Key Takeaways – Wealth Management • LT Growth in assets served by advisors • Independents taking share • Continued shift to fee-based Favorable Industry Trends Already strong business with significant organic growth opportunities Differentiated business model, uniquely positioned • Optimize advis
Slide 21: Tax Preparation
21 Tax Preparation
Slide 22: TaxAct Performance
22 TaxAct Performance $0 $20 $40 $60 $80 $100 $120 $140 $160 19 Consecutive Years of Growth $- $10 $20 $30 $40 $50 $60 $70 $80 $90 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 TY 2011 TY 2012 TY 2013 TY 2014 TY 2015 TY 2016 Preparer Online Segment Income E-files (Mil) Segment Income ($Mil) • YTD through Sept
Slide 23: Market Overview
23 34% 35% 36% 37% 39% 40% 41% 46% 47% 46% 46% 46% 46% 46% 14% 13% 13% 12% 11% 11% 10% 6% 5% 5% 5% 4% 3% 3% 2011 2012 2013 2014 2015 2016 2017 Online Leader Online Leader Online Leader Retail Leader Retail Leader Retail Leader TaxAct TaxAct TaxAct Other Other Other 0% 20% 40% 60% 80% 100% 2014 (TY13
Slide 24: Market Overview (continued)
Deductions, Credits & Investments $37.00 $54.99 $79.99 33% - 54% Business Owner $47.00 $79.99 $114.99 41% - 59% 24 Market Overview (continued) Savings H&R Block • DDIY is fastest growing segment of market, but only commands 12% of industry revenue • DDIY volumetric leader growing category with focus
Slide 25: Differentiated Business Model
25 New Entrants: Free Leader: Free, Stores Hidden Fees & Charges $50++ ‘free’ filings $30 for copy of return Varied Tech: Clunky to Very Good Support: None to Good Sell Client Data Mass Referral Engine Backed by True Financial and Tax-Expertise BluVest- Assessment BluPrint- tax-smart robo HD Vest –
Slide 26: Win target segments, retain customers
26 Win target segments Retain customers, win-back former customers • High-potential sub-segments • High lifetime value • 70% paid retention • Marketing optimization • Partnerships • Distribution • BluVest™ • Referral to HD Vest Advisor Business Opportunities • Cloud migration • Next-Gen operations &
Slide 27: Key Takeaways – Tax Preparation
27 Benefitting from secular shift to DDIY Targeting higher value customer segments Enhancing platform Consistent growth in revenue and segment income Any tax reform/simplification expected to benefit DDIY Key Takeaways – Tax Preparation
Slide 28: Synergies
28 Synergies
Slide 29: Synergy Opportunities are Incremental Blucora Growth Opportunities
29 Convert TaxAct professional users to HD Vest financial advisors • Currently 21,000 TaxAct Pro users vs. 4,400 HD Vest Advisors Extend financial solutions to TaxAct DDIY tax filers • Currently 4.3 million TA filers vs. 345,000 HD Vest Customers • Examples include BluVest, BluPrint, Expert review C
Slide 30: Summary
30 Summary Completed Multi-Year Business Transformation Continued Momentum Through Third Quarter Recently Conducted Growth Strategy Work Positioned to Execute on Significant Organic Growth Opportunities Upper-Single-Digit Revenue Growth Across Both Businesses Strengthened Balance Sheet Improvement i
Slide 31: Appendix
Appendix
Slide 32: Preliminary Adjusted EBITDA Reconciliation
32 Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures Preliminary Adjusted EBITDA Reconciliation (1) (Unaudited) (Amounts in thousands) Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 Net income (loss) attributable to Blucora,
Slide 33: Preliminary Non-GAAP Net Income (Loss) Reconciliation
33 Preliminary Non-GAAP Net Income (Loss) Reconciliation (1) (Unaudited) (Amounts in thousands, except per share amounts) Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 Net income (loss) attributable to Blucora, Inc. (2) ($16,897) ($54,119) $16,991 ($45,897) Dis
Slide 34: Preliminary Non-GAAP Net Income Reconciliation (Per Diluted Share)
34 Preliminary Non-GAAP Net Income (Loss) Reconciliation (1) (Unaudited) (Amounts in thousands, except per share amounts) Per diluted share: Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 Net income (loss) attributable to Blucora, Inc. ($0.37) ($1.30) $0.36 ($1.
Slide 35: Notes to Reconciliations of Non-GAAP Financial Measures
35 Notes to Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures (1) We define Adjusted EBITDA as net income (loss) attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation, amortization of ac
Slide 36: Blucora Net Leverage Ratio
36 Blucora Net Leverage Ratio (In thousands except ratio, rounding differences may exist) 2015 2016 2017 FY 12/31 1Q 2Q 3Q 4Q FY 12/31 1Q 2Q 3Q CASH: Cash and cash equivalents $55,473 $67,955 $74,273 $71,165 $51,713 $51,713 $74,609 $78,312 $78,558 Available-for-sale investments 11,301 11,642 7,821 4
Slide 37: Operating Free Cash Flow Reconciliation
37 (In thousands, rounding differences may exist) 2015 2016 2017 FY 12/31 1Q 2Q 3Q 4Q FY 12/31 1Q 2Q 3Q Net cash provided by operating activities from continuing operations $24,308 (2) $68,721 (2) $22,165 ($2,349) ($2,567) $85,970 $52,900 $28,236 ($1,906) Purchases of property and equipment (1,512)