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CST: 14/12/2019 13:53:13   

Blucora Announces First Quarter 2019 Results

220 Days ago

IRVING, Texas, May 08, 2019 (GLOBE NEWSWIRE) -- Blucora, Inc. (NASDAQ: BCOR), a leading provider of tax-smart financial solutions that empower people’s goals, today announced financial results for the first quarter ended March 31, 2019.

First Quarter Highlights and Recent Developments

  • Increased total revenue by 10% year-over-year
  • Grew GAAP net Income by 37%, Adjusted EBITDA* by 26%, Non-GAAP net income* by 33%
  • Advisory assets grew 10% y/y, reaching record level and crossing 30% of total client assets for the first time
  • Strengthened balance sheet through strong cash flow, improving net leverage ratio to 0.8x at quarter-end, from 2.1x in prior year period
  • Tax preparation revenue expected to grow approximately 13% for the six months ended June 30, 2019 compared to the same period last year, with a segment margin of 58%
  • Closed acquisition of 1st Global on May 6, 2019, extending lead in tax-focused wealth management segment

“It’s been a strong start to the year for Blucora, with double-digit growth in revenue, segment income, and adjusted EBITDA, as well as both GAAP and Non-GAAP EPS,” commented John Clendening, Blucora’s President and Chief Executive Officer. "Our strong cash generation enabled us to end the first quarter with a net leverage ratio at its lowest level in years and below 1x, prior to the closing of the 1st Global acquisition. Additionally, our wealth management business grew advisory assets to a new record level of $14 billion, crossing the 30% of total client asset level for the first time.”

Summary Financial Performance: Q1 2019
($ in millions except per share amounts)

  Q1   Q1    
  2019   2018   Change
Revenue:          
Wealth Management $ 89.5     $ 92.1     (3 ) %
Tax Preparation $ 136.2     $ 113.9     20   %
Total Revenue $ 225.8     $ 206.0     10   %
Segment Income (Loss):          
Wealth Management $ 11.5     $ 13.1     (12 ) %
Tax Preparation $ 79.3     $ 58.8     35   %
Total Segment Income $ 90.8     $ 71.9     26   %
Unallocated Corporate Operating Expenses $ (7.1 )   $ (5.5 )   28   %
GAAP:          
Operating Income $ 70.1     $ 52.7     33   %
Net Income Attributable to Blucora, Inc. $ 62.2     $ 45.3     37   %
Diluted Net Income Per Share Attributable to Blucora, Inc. (EPS) $ 1.25     $ 0.93     34   %
Non-GAAP*:          
Adjusted EBITDA $ 83.7     $ 66.3     26   %
Net Income $ 77.2     $ 58.2     33   %
Diluted Net Income Per Share (EPS) $ 1.56     $ 1.20     30   %
* See reconciliations of all non-GAAP to GAAP measures presented in this release in the tables below.

Tax Season Update

Clendening continued, “Our tax preparation business had a strong finish to the tax season and once again demonstrated very strong financial performance. Based on these results we now expect full first-half 2019 tax revenue growth of approximately 13% versus the comparable period last year, which is above the high-end of our upwardly revised outlook range of 8-11%.”

 “This season we continued to make the tax filing experience easier and more rewarding for our customers, introducing an upgraded mobile experience, innovations like ten minute taxes - to streamline the experience for filers with simple returns, and refund marketplace – which rewarded filers with bonuses when refunds were placed on gift cards from national retailers. We also brought back our proprietary BluPrintTM financial assessment, which turns insights from a customer’s tax return into actionable recommendations to improve their financial lives, and this year included new partners with compelling solutions,” Clendening concluded.

(in thousands except %s) Tax seasons ended
  April 16, 2019   April 19, 2018   Change
E-files:          
Consumer 3,115   3,772   (17 ) %
Professional tax preparer 1,833   1,763   4   %
Total e-files 4,948   5,535   (11 ) %

Tax season begins on the first day that the IRS begins accepting e-files and ends on tax day +1. This information includes non-financial metrics used in measuring the performance of the consumer and professional tax preparer sides of the Tax Preparation business.

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 digital e-files above. Free File Alliance e-files were 158 and 188 for the tax seasons ended April 16, 2019 and April 19, 2018, respectively.

Second Quarter and Full Year 2019 Outlook

For the second quarter of 2019, excluding 1st Global, the Company expects revenues to be between $163.0 million and $166.5 million, GAAP net income attributable to Blucora, Inc. to be between $23.0 million and $26.0 million, or $0.46 to $0.52 per diluted share, Adjusted EBITDA* to be between $44.0 million and $47.0 million, and Non-GAAP net income* to be between $35.5 million and $38.5 million, or $0.71 to $0.77 per diluted share.

The company expects 1st Global, from the period of May 6 through the end of second quarter, to add $25.5 to $27.0 million in revenue and $1 to $1.5 million in segment income. Amounts included in our 2019 outlook do not consider the effects of possible adjustments due to purchase accounting related matters from our recent acquisition of 1st Global.

For the full year 2019, excluding 1st Global, the Company expects revenues to be between $595.5 million and $608.5 million, GAAP net income attributable to Blucora, Inc. to be between $41.0 million and $51.5 million, or $0.81 to $1.02 per diluted share, Adjusted EBITDA* to be between $119.0 million and $129.0 million, and Non-GAAP net income* to be between $91.0 million and $101.5 million, or $1.80 to $2.01 per diluted share.

The company expects 1st Global from the period of May 6 through year end to add between $108.5 and $115.5 million in revenue and between $9 and $11 million in segment income.

The company continues to expect total acquisition-related integration cost of approximately $28 million, with an estimated $10 million being recognized in 2019 and $18 million in 2020, subject to the timing of certain items including platform reconfiguration at Fidelity. 

The company continues to believe the acquisition will generate between $23 million and $24 million of run-rate adjusted EBITDA* accretion by the end of 2019 (see Notes to Reconciliations of Non-GAAP Financial Measures below).

The second quarter and fiscal 2019 outlook for GAAP net income or loss attributable to Blucora assumes an estimated tax rate of approximately 6% to 8%.

Conference Call and Webcast

A conference call and live webcast will be held today at 8:30 a.m. Eastern Time during which the Company will further discuss first quarter results, its outlook for the full year 2019 and other business matters. We will also provide the prepared remarks for the conference call along with supplemental financial information to our results on the Investor Relations section of the Blucora corporate website at http://www.blucora.com prior to the call. The supplemental financial information has also been filed with the SEC on Form 8-K. A replay of the call will be available on our website.

About Blucora®

Blucora, Inc. (NASDAQ: BCOR) is on the forefront of financial technology, pioneering tax-smart financial solutions that empower people’s goals. Blucora operates in two segments including wealth management, through its HD Vest and 1st Global businesses, the No. 1 and No. 2 tax-focused broker-dealers, respectively, with a combined $66 billion in total client assets as of March 31, 2019, and tax preparation, through its TaxAct business, the No. 3 tax preparation software by market share with approximately 3 million consumer and professional users. With integrated tax and wealth management, Blucora is uniquely positioned to provide better long-term outcomes for customers with holistic, tax-advantaged solutions. For more information on Blucora, visit www.blucora.com.

Source: Blucora

Blucora Contact:

Bill Michalek (972) 870-6463

VP, Investor Relations

This release 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. When used in this release, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecasts,” “projects” and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, but not limited to: our ability to effectively implement our future business plans and growth strategy; our ability to effectively compete within our industry; our ability to attract and retain customers and productive financial advisors; our ability to realize all of the anticipated benefits of the acquisition of 1st Global, as well as our ability to integrate the operations of 1st Global; the availability of financing and our ability to meet our current and future debt service obligations and comply with our debt covenants; our ability to generate strong investment performance for our customers and the impact of the financial markets on our customers’ portfolios and investment behavior; political and economic conditions and changes and events that directly or indirectly impact the wealth management and tax preparation industries; our ability to successfully make technology enhancements and introduce new and improve on existing products and services; our expectations concerning the revenues we generate from fees associated with the financial products that we distribute; our ability to comply with laws and regulations, including, among others, those related to privacy protection and consumer data; our expectations concerning the benefits that may be derived from our new clearing platform and investment advisory platform; cybersecurity risks; our ability to maintain our relationships with third party partners; the seasonality of our business; litigation risks; our ability to attract and retain qualified employees; our assessments and estimates that determine our effective tax rate; the impact of new or changing tax legislation; our ability to develop, establish and maintain strong brands; our ability to protect our intellectual property; and our ability to effectively integrate other companies or assets that we may acquire. A more detailed description of these and certain other factors that could affect actual results is included in the Company’s filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this release, except as may be required by applicable law.



Blucora, Inc.
Preliminary Condensed Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share data)

  Three Months Ended March 31,
  2019   2018
Revenue:      
Wealth management services revenue $ 89,532     $ 92,082  
Tax preparation services revenue 136,236     113,883  
Total revenue 225,768     205,965  
Operating expenses:      
Cost of revenue:      
Wealth management services cost of revenue 61,374     63,064  
Tax preparation services cost of revenue 4,201     4,353  
Amortization of acquired technology     50  
Total cost of revenue (1)
65,575     67,467  
Engineering and technology (1) 6,529     5,131  
Sales and marketing (1) 55,572     55,253  
General and administrative (1) 18,874     14,866  
Depreciation 1,061     1,915  
Amortization of other acquired intangible assets 8,044     8,307  
Restructuring (1)     289  
Total operating expenses 155,655     153,228  
Operating income 70,113     52,737  
Other loss, net (2)
(3,958 )   (5,228 )
Income before income taxes 66,155     47,509  
Income tax expense (3,985 )   (1,963 )
Net income 62,170     45,546  
Net income attributable to noncontrolling interests     (205 )
Net income attributable to Blucora, Inc.: $ 62,170     $ 45,341  
Net income per share attributable to Blucora, Inc.:      
Basic $ 1.29     $ 0.97  
Diluted $ 1.25     $ 0.93  
Weighted average shares outstanding:      
Basic 48,161     46,641  
Diluted 49,542     48,665  

(1) Stock-based compensation expense was allocated among the following captions (in thousands):

  Three Months Ended March 31,
  2019   2018
Cost of revenue $ 520     $ 256
Engineering and technology 176     210
Sales and marketing (193 )   516
General and administrative 1,940     1,973
Total stock-based compensation expense $ 2,443     $ 2,955

(2) Other loss, net consisted of the following (in thousands):

  Three Months Ended March 31,
  2019   2018
Interest income $ (140 )   $ (40 )
Interest expense 3,776     4,181  
Amortization of debt issuance costs 172     203  
Accretion of debt discounts 38     47  
Loss on debt extinguishment     776  
Other 112     61  
Other loss, net $ 3,958     $ 5,228  



Blucora, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)

  March 31,
2019
  December 31,
2018
ASSETS      
Current assets:      
Cash and cash equivalents $ 149,762     $ 84,524  
Cash segregated under federal or other regulations 1,527     842  
Accounts receivable, net of allowance 24,113     15,721  
Commissions receivable 14,382     15,562  
Other receivables 7,450     7,408  
Prepaid expenses and other current assets, net 10,840     7,755  
Total current assets 208,074     131,812  
Long-term assets:      
Property and equipment, net 12,322     12,389  
Right-of-use assets, net 5,942      
Goodwill, net 548,770     548,685  
Other intangible assets, net 286,562     294,603  
Other long-term assets 11,047     10,236  
Total long-term assets 864,643     865,913  
Total assets $ 1,072,717     $ 997,725  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 10,230     $ 3,798  
Commissions and advisory fees payable 13,655     15,199  
Accrued expenses and other current liabilities 48,675     18,980  
Lease liabilities 6,493     46  
Deferred revenue 6,424     10,257  
Total current liabilities 85,477     48,280  
Long-term liabilities:      
Long-term debt, net 260,570     260,390  
Deferred tax liability, net 39,422     40,394  
Deferred revenue 7,890     8,581  
Lease liabilities 2,118     100  
Other long-term liabilities 6,186     7,440  
Total long-term liabilities 316,186     316,905  
Total liabilities 401,663     365,185  
       
Redeemable noncontrolling interests 2,517     24,945  
       
Stockholders’ equity:      
Common stock
5     5  
Additional paid-in capital 1,570,026     1,569,725  
Accumulated deficit (901,155 )   (961,689 )
Accumulated other comprehensive loss (339 )   (446 )
Total stockholders’ equity 668,537     607,595  
Total liabilities and stockholders’ equity $ 1,072,717     $ 997,725  



Blucora, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)

  Three months ended March 31,
  2019   2018
Operating Activities:      
Net income $ 62,170     $ 45,546  
Adjustments to reconcile net income to net cash from operating activities:      
Stock-based compensation 2,443     2,955  
Depreciation and amortization of acquired intangible assets 9,354     10,359  
Reduction of right-of-use lease assets 904      
Deferred income taxes (972 )   (749 )
Amortization of premium on investments, net, and debt issuance costs 172     202  
Accretion of debt discounts 38     47  
Loss on debt extinguishment     776  
Cash provided (used) by changes in operating assets and liabilities:      
Accounts receivable (8,395 )   (1,961 )
Commissions receivable 1,180     (240 )
Other receivables (42 )   2,588  
Prepaid expenses and other current assets (3,085 )   (319 )
Other long-term assets (841 )   (1,109 )
Accounts payable 6,432     3,290  
Commissions and advisory fees payable (1,544 )   (278 )
Deferred revenue (4,524 )   (4,213 )
Accrued expenses and other current and long-term liabilities 6,946     556  
Net cash provided by operating activities 70,236     57,450  
Investing Activities:      
Purchases of property and equipment (1,243 )   (940 )
Net cash used by investing activities (1,243 )   (940 )
Financing Activities:      
Payments on credit facilities     (40,000 )
Proceeds from stock option exercises 283     2,534  
Proceeds from issuance of stock through employee stock purchase plan     703  
Tax payments from shares withheld for equity awards (2,425 )   (1,493 )
Contingent consideration payments for business acquisition (943 )   (1,313 )
Net cash used by financing activities (3,085 )   (39,569 )
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 15     (6 )
Net increase in cash, cash equivalents, and restricted cash 65,923     16,935  
Cash, cash equivalents, and restricted cash, beginning of period 85,366     62,311  
Cash, cash equivalents, and restricted cash, end of period $ 151,289     $ 79,246  



Blucora, Inc.
Preliminary Segment Information
(Unaudited)
(Amounts in thousands)

  Three months ended March 31,
  2019   2018
Revenue:      
Wealth Management (1) $ 89,532     $ 92,082  
Tax Preparation (1) 136,236     113,883  
Total revenue 225,768     205,965  
Operating income:      
Wealth Management 11,540     13,075  
Tax Preparation 79,272     58,806  
Corporate-level activity (2) (20,699 )   (19,144 )
Total operating income 70,113     52,737  
Other loss, net (3,958 )   (5,228 )
Income tax expense (3,985 )   (1,963 )
Net income $ 62,170     $ 45,546  

(1) Revenues by major category within each segment are presented below (in thousands):

  Three months ended March 31,
  2019   2018
Wealth Management:      
Commission $ 37,160   $ 42,870
Advisory 39,757   39,301
Asset-based 9,693   7,172
Transaction and fee 2,922   2,739
Total Wealth Management revenue $ 89,532   $ 92,082
Tax Preparation:      
Consumer $ 123,942   $ 101,912
Professional 12,294   11,971
Total Tax Preparation revenue $ 136,236   $ 113,883

(2) Corporate-level activity included the following (in thousands):

  Three months ended March 31,
  2019     2018  
Operating expenses $ (7,105 )   $ (5,541 )
Stock-based compensation (2,443 )   (2,955 )
Acquisition-related costs
(1,797 )    
Depreciation (1,310 )   (2,002 )
Amortization of acquired intangible assets (8,044 )   (8,357 )
Restructuring     (289 )
Total corporate-level activity $ (20,699 )   $ (19,144 )



Blucora, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

Preliminary Adjusted EBITDA Reconciliation (1)
(Unaudited)
(Amounts in thousands)

(In thousands) Three Months Ended March 31,
  2019   2018
Net income attributable to Blucora, Inc. (2) $ 62,170   $ 45,341
Stock-based compensation 2,443   2,955
Depreciation and amortization of acquired intangible assets 9,354   10,359
Restructuring   289
Other loss, net (3) 3,958   5,228
Net income attributable to noncontrolling interests   205
Acquisition and integration costs 1,797  
Income tax expense 3,985   1,963
Adjusted EBITDA $ 83,707   $ 66,340



Preliminary Non-GAAP Net Income and Non-GAAP Net Income Per Share Reconciliation (1)
(Unaudited)
(Amounts in thousands, except per share amounts)

  Three months ended March 31,
  2019   2018
Net income attributable to Blucora, Inc. (2) $ 62,170     $ 45,341  
Stock-based compensation 2,443     2,955  
Amortization of acquired intangible assets 8,044     8,357  
Restructuring     289  
Impact of noncontrolling interests     205  
Acquisition and integration costs 1,797      
Cash tax impact of adjustments to GAAP net income (411 )   (313 )
Non-cash income tax expense (1) 3,151     1,398  
Non-GAAP net income $ 77,194     $ 58,232  
Per diluted share:      
Net income attributable to Blucora, Inc. $ 1.25     $ 0.93  
Stock-based compensation 0.05     0.06  
Amortization of acquired intangible assets 0.17     0.18  
Restructuring     0.01  
Impact of noncontrolling interests     0.00  
Acquisition and integration costs 0.04     0.00  
Cash tax impact of adjustments to GAAP net income (0.01 )   (0.01 )
Non-cash income tax expense 0.06     0.03  
Non-GAAP net income per share $ 1.56     $ 1.20  
Weighted average shares outstanding used in computing per diluted share amounts 49,542     48,665  



Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance (1)

(Amounts in thousands)

  Ranges for the three months ending   Ranges for the year ending
  June 30, 2019   December 31, 2019
  Low   High   Low   High
Net income attributable to Blucora, Inc. $ 23,000   $ 26,000   $ 41,000   $ 51,500
Stock-based compensation 4,900   4,700   16,700   16,300
Depreciation and amortization of acquired intangible assets 9,800   9,600   38,700   38,200
Other loss, net (3)
4,300   4,100   16,600   16,200
Acquisition and integration costs     1,800   1,800
Income tax expense 2,000   2,600   4,200   5,000
Adjusted EBITDA $ 44,000   $ 47,000   $ 119,000   $ 129,000



Preliminary Non-GAAP Net Income Reconciliation for Forward-Looking Guidance (1)
(Amounts in thousands)

  Ranges for the three months ending   Ranges for the year ending
  June 30, 2019   December 31, 2019
  Low   High   Low   High
Net income attributable to Blucora, Inc. $ 23,000     $ 26,000     $ 41,000     $ 51,500  
Stock-based compensation 4,900     4,700     16,700     16,300  
Amortization of acquired intangible assets 8,000     8,000     32,200     32,100  
Acquisition and integration costs         1,800     1,800  
Cash tax impact of adjustments to net income (500 )   (500 )   (1,600 )   (1,600 )
Non-cash income tax benefit 100     300     900     1,400  
Non-GAAP net income $ 35,500     $ 38,500     $ 91,000     $ 101,500  
Per diluted share:              
Net income attributable to Blucora, Inc. $ 0.46     $ 0.52     $ 0.81     $ 1.02  
Stock-based compensation 0.10     0.09     0.33     0.32  
Amortization of acquired intangible assets 0.16     0.16     0.63     0.63  
Acquisition and integration costs         0.04     0.04  
Cash tax impact of adjustments to net income (0.01 )   (0.01 )   (0.03 )   (0.03 )
Non-cash income tax benefit     0.01     0.02     0.03  
Non-GAAP net income per share $ 0.71     $ 0.77     $ 1.80     $ 2.01  
Weighted average shares outstanding used in computing per diluted share amounts 50,300     50,150     50,500     50,400  



Notes to Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

(1)  We define Adjusted EBITDA as net income attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, depreciation and amortization of acquired intangible assets, restructuring, other loss, net, the impact of noncontrolling interests, acquisition and integration costs and income tax (benefit) expense. Restructuring costs relate to the relocation of our corporate headquarters that began in 2017.

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. Other companies may calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies. 

We define non-GAAP net income as net income attributable to Blucora, Inc., determined in accordance with GAAP, excluding the effects of stock-based compensation, amortization of acquired intangible assets, restructuring costs (described further under Adjusted EBITDA above), the impact of noncontrolling interests, acquisition and integration costs, the related cash tax impact of those adjustments, and non-cash income taxes. 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 unutilized, between 2020 and 2024. The aforementioned items are only included in non-GAAP net income in the periods they occurred.

We believe that non-GAAP net income and non-GAAP net income 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 have not been, or are not expected to be, settled in cash. Additionally, we believe that non-GAAP net income and non-GAAP net income per share are common measures used by investors and analysts to evaluate our performance and the valuation of our business. Non-GAAP net income and non-GAAP net income 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 and net income per share. Other companies may calculate non-GAAP net income and non-GAAP net income per share differently, and, therefore, our non-GAAP net income and non-GAAP net income per share may not be comparable to similarly titled measures of other companies.
   
(2)  As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited).
   
(3)  Other loss, net primarily includes items such as interest income, interest expense, amortization of debt issuance costs, accretion of debt discounts, and gain/loss on debt extinguishment.

Run-rate Adjusted EBITDA represents our projected Adjusted EBITDA following the completion of the acquisition as further adjusted to exclude acquisition and integration costs. We believe run-rate Adjusted EBITDA provides meaningful supplemental information regarding our expected performance for the same reasons described above regarding the use of Adjusted EBITDA. The Company does not provide an outlook for run-rate net income following the acquisition because it contains certain components, such as amortization expense and income taxes for which the Company lacks the necessary data in order to provide an accurate outlook. Because an outlook for run-rate net income following the acquisition cannot be made available without unreasonable effort by the Company, a reconciliation of the Company’s outlook for Run-rate Adjusted EBITDA against its outlook for net income is not provided.

 

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