M c I n t i r e I n v e s t m e n t I n s t i t u t e 1 M C I NTIRE I NVESTMENT I NSTITUTE A T THE U NIVERSITY OF V IRGINIA Prepared by Sean Yu| 1/31/2012.

M c I n t i r e I n v e s t m e n t I n s t i t u t e 1

MCINTIRE INVESTMENT INSTITUTEAT THE UNIVERSITY OF VIRGINIA

Prepared by Sean Yu| 1/31/2012

Blucora, Inc. (BCOR)Long

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AGENDA

• Overview• Thesis• Valuation • Misperception• Risks

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BLUCORA BUSINESS OVERVIEW

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1996

Tax-Preparation software

June 2012InfoSpace: 70%

TaxAct: 30%

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BLUCORA FINANCIALS

Price: 15.13 Market Cap: 605.85

EV/EBITDA: 7.19 P/E: 14.71

EBITDA Margin: 25.41% FCF/NI Conversion: 116.05%

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THESIS

1• Strong search segment ensures constant growth

2• Successful acquisition of TaxAct brings diversification

and huge profitability

3• Stable business model results in healthy growth

4• Undervalued stock price provides room for long

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BUSINESS MODEL FOR SEARCH SEGMENT

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Syndicate results

Ad Cut

Customized and combined result

Value-added service

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STRING FINANCIALS FOR SEARCH SEGMENT

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HUGE MARKET OPPORTUNITIES BRING BLUCORA NUMEROUS NEW CUSTOMERS

• Search Market: 15% to 20% annual growth • Increasing need of customized search results & diverse

assess to search-> % of Distribution revenue increase

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INFOSPACE’S ABILITY TO ATTRACT NEW CUSTOMERS

• 4% CAGR for revenue form existing customers • 13 % CAGR for revenue form new customers

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NEW AND POTENTIAL SEARCH RESULTS SUPPLIERS BRING PROMINENT OPPORTUNITIES

• Added Yandex in 2011• Largest Russian search engine with 62% market share• Successful international case: 84% international revenue

in 2010 because launching of auction search website in Europe

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BLUCORA ALREADY PARTNERED WITH GOOGLE & YAHOO FOR MORE THAN 10 YEARS

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Partner for more than 10 years Just renew to

2014

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ONLINE FILLING HAS HUGE POTENTIAL MARKET

• TaxAct focused on online tax preparation• Tendency to use DIY software or services to fill tax • Online filling is the fastest growths segment in DIY

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BIGGEST ADVANTAGE OF TAXACT – LOW PRICE

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AMAZING EBITDA MARGIN OF TAXACT

• Constantly 50% Margin!

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EFFICIENT COST MANAGEMENT RESULTS IN HIGH MARGIN

• Online Filling: much less labor-intensive than other fillings

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SUCCESSFUL ACQUISITION OF TAXACT

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• Tried to acquired in 2010• Failed at the end of

2011 because of monopoly regulation. • InfoSpace took over

immediately with SAME price. • 3.7 x EV/EBITDA

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STORIES OF TAXACT OTHER THAN HIGH MARGIN

• 80% repeating business • TaxACT is building up customer base • Margin and profit will be even higher

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Healthy Growth Path

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LOW CAPITAL REQUIREMENT

• Blucora’s businesses require minimal capital

• % of PPE decreased from 3% to 1.1% in 2012

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STRONG FREE CASH FLOW PROVIDES ABILITY TOINVESTMENT

• FCF/NI Conversion is approaching 180%• The conversion is still 130% if we remove effect of loss

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LEADERS EXPERIENCES IN IB AND PE WILL HELP THE COMPANY CAPTURE GOOD DEALS LIKE

TAXACT

• Use the free cash wisely to capture next TaxACT

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InfoSpace: Steady Cash Flow

TaxACT: Seasonal but high margin

Perfect Combination

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STOCK PRICE IS UNDERVALUED

• Earning will grow at 25% CAGR over the next 5 year; industry average 18%.

• P/E ratio:14; EV/EBITDA: 7. Lower than both search company and Online tax Prep Companies.

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FUTURE TAX DEDUCTION

• Blucora has a lot of NOLs before that can deduct future 10 years’ tax

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VALUATION 1: P/E

• NOLs’ effect on Stock price: 148 (M)/ 40.74 (M) = $3.6 • Final target price: $23.84 + $3.6 = $27.44

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VALUATION 2: ESTIMATED MARKET CAP

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Final Price: 26.89

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MISPERCEPTION

• Q3 loss disprove Blucora’s ability to make profits– $4.3 million one-time loss on the warrant

• With competition from Google, Infospace’s future is not bright– Different business model

• Tax preparation business is unstable– Blucora has InfoSpace

• Decrease margin of TaxACT is not a good sign– Shifting from off-line software to online-service

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RISKS

• If some companies can get contract with Google, it will be a bad sign for Infospace

• If earning does not recover in Q4, investors will further lose confidences and we should doubt if the loss in Q3 was only out of one-time loss

• It's hard to find a deal as attractive as TaxACT, so if leaders make a bad acquisition, stock price will suffer

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