• H&R Block Reports Fiscal 2024 Second Quarter Results; Full Year Outlook Reaffirmed

    Source: Nasdaq GlobeNewswire / 06 Feb 2024 16:06:37   America/New_York

    KANSAS CITY, Mo., Feb. 06, 2024 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) (the "Company") today released its financial results1 for the fiscal 2024 second quarter ended December 31, 2023.

    • Revenue grew 8% as the Company saw a strong end to the extended filing season
    • The Company reaffirmed its previously announced outlook for fiscal year 2024
    • Repurchased $218.1 million of shares during the quarter, retiring another 3% of shares outstanding

    "I’m pleased with our Q2 performance, and our results reflect the progress we continue to make," said Jeff Jones, H&R Block's president and chief executive officer. "In the quarter, our refreshed Emerald Advance product performed well, we launched AI Tax Assist in our DIY Online product, and we continued to allocate capital by paying our quarterly dividend and repurchasing shares. We are well positioned for the tax season, and I’m looking forward to the rest of the year.”

    Fiscal 2024 Second Quarter Results and Key Financial Metrics
    "Our performance continues to meet expectations, and our capital allocation practice remains strong," said Tony Bowen, H&R Block's chief financial officer. "We feel good about our balance sheet and how we are positioned in the current environment, and I am confident in our ability to drive ongoing value for shareholders."

    • Total revenue of $179.1 million increased by $12.7 million, or 8%, to the prior year. The increase was primarily due to higher volumes and net average charge in the Assisted category combined with higher interest and fee income on Emerald AdvanceSM due to an increase in Emerald AdvanceSM Loans and an earlier start to the offering period in the current year.
    • Total operating expenses of $446.5 million decreased by $3.1 million, as a result of lower consulting and marketing and advertising expenses, partially offset by higher corporate wages resulting from higher headcount in the current year.
    • Pretax loss decreased by $15.1 million to $282.9 million.
    • Loss per share from continuing operations2 improved from $(1.43) to $(1.33) and adjusted loss per share from continuing operations2 improved from $(1.37) to $(1.27), due to a lower loss, partially offset by fewer shares outstanding.

    Capital Allocation

    The Company reported the following related to its capital structure:

    • As previously announced, a quarterly cash dividend of $0.32 per share is payable on April 3, 2024 to shareholders of record as of March 5, 2024. H&R Block has paid quarterly dividends consecutively since the Company became public in 1962.
    • Repurchased and retired 4.8 million shares at an aggregate price of $218.1 million, or $45.88 per share in the second quarter.
    • The Company has approximately $350.0 million remaining on its $1.25 billion share repurchase authorization available through fiscal year 2025.

    Since 2016, the Company has returned more than $3.8 billion to shareholders in the form of share repurchases and dividends, buying back over 40% of its shares outstanding3.

    Fiscal Year 2024 Outlook

    The Company continues to expect:

    • Revenue to be in the range of $3.530 to $3.585 billion.
    • EBITDA4 to be in the range of $930 to $965 million.
    • Effective tax rate to be approximately 23%.
    • Adjusted Diluted Earnings Per Share4 to be in the range of $4.10 to $4.30.

    Other Announcements

    • Today the Company separately announced that chief financial officer Tony Bowen has decided to retire. He is committed to a smooth transition and will remain at the Company into September of 2024. The press release can be found on the investor relations website at https://investors.hrblock.com/.

    Conference Call

    A conference call for analysts, institutional investors, and shareholders will be held at 4:30 p.m. Eastern time on Tuesday, February 6, 2024. During the conference call the Company will discuss fiscal 2024 second quarter results, outlook, and give a general business update. To join live, participants must register at https://register.vevent.com/register/BI161a9ef1a2c8484cb4c9c10131ac69ee. Once registered, the participant will receive a dial-in number and unique PIN to access the call. Please join approximately 5 minutes prior to the scheduled start time.

    The call, along with a presentation for viewing, will also be webcast in a listen-only format for the media and public. The webcast can be accessed directly at https://edge.media-server.com/mmc/p/4u8imwtm and will be available for replay 2 hours after the call is concluded and continuing for 90 days.

    About H&R Block

    H&R Block, Inc. (NYSE: HRB) provides help and inspires confidence in its clients and communities everywhere through global tax preparation services, financial products, and small-business solutions. The Company blends digital innovation with human expertise and care as it helps people get the best outcome at tax time and also be better with money using its mobile banking app, Spruce. Through Block Advisors and Wave, the Company helps small-business owners thrive with year-round bookkeeping, payroll, advisory, and payment processing solutions. For more information, visit H&R Block News or follow @HRBlockNews.

    About Non-GAAP Financial Information

    This press release and the accompanying tables include non-GAAP financial information. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles, please see the section of the accompanying tables titled "Non-GAAP Financial Information."

    Forward-Looking Statements

    This press release contains forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as "expects," "anticipates," "intends," "plans," "believes," "commits," "seeks," "estimates," "projects," "forecasts," "targets," "would," "will," "should," "goal," "could" or "may" or other similar expressions. Forward-looking statements provide management's current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, client trajectory, income, effective tax rate, earnings per share, cost savings, capital expenditures, dividends, share repurchases, liquidity, capital structure, market share, industry volumes or other financial items, descriptions of management’s plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above. They may also include the expected impact of external events beyond the Company’s control, such as outbreaks of infectious disease (including the COVID-19 pandemic), severe weather events, natural or manmade disasters, or changes in the regulatory environment in which we operate. All forward-looking statements speak only as of the date they are made and reflect the Company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to a variety of economic, competitive and regulatory factors, many of which are beyond the Company's control, that are described in our Annual Report on Form 10-K for the most recently completed fiscal year in the section entitled "Risk Factors" and additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. You may get such filings for free at our website at https://investors.hrblock.com. In addition, factors that may cause the Company’s actual estimated effective tax rate to differ from estimates include the Company’s actual results from operations compared to current estimates, future discrete items, changes in interpretations and assumptions the Company has made, future actions of the Company, or increases in applicable tax rates in jurisdictions where the Company operates. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

    1All amounts in this release are unaudited. Unless otherwise noted, all comparisons refer to the current period compared to the corresponding prior year period.
    2All per share amounts are based on fully diluted shares at the end of the corresponding period. The Company reports non-GAAP financial measures of performance, including adjusted earnings per share (EPS), earnings before interest, tax, depreciation, and amortization (EBITDA) from continuing operations, free cash flow, and free cash flow yield, which it considers to be useful metrics for management and investors to evaluate and compare the ongoing operating performance of the Company. See "About Non-GAAP Financial Information" below for more information regarding financial measures not prepared in accordance with generally accepted accounting principles (GAAP).
    3Shares outstanding calculated as of April 30, 2016.
    4Adjusted EPS and EBITDA from continuing operations are non-GAAP financial measures. Future period non-GAAP outlook includes adjustments for items not indicative of our core operations, which may include, without limitation, items described in the below section titled “Non-GAAP Financial Information” and in the accompanying tables. Such adjustments may be affected by changes in ongoing assumptions and judgments, as well as nonrecurring, unusual, or unanticipated charges, expenses or gains, or other items that may not directly correlate to the underlying performance of our business operations. The exact amounts of these adjustments are not currently determinable but may be significant. It is therefore not practicable to provide the comparable GAAP measures or reconcile this non-GAAP outlook to the most comparable GAAP measures.


    For Further Information
       
    Investor Relations: Michaella Gallina, (816) 854-3022, michaella.gallina@hrblock.com
      Jordyn Eskijian, (816) 854-5674, jordyn.eskijian@hrblock.com
    Media Relations: Teri Daley, (816) 854-3787, teri.daley@hrblock.com



    FINANCIAL RESULTS (unaudited, in 000s - except per share amounts)
      Three months ended December 31, Six months ended December 31,
       2023   2022   2023   2022 
    REVENUES:        
    U.S. tax preparation and related services:        
    Assisted tax preparation $48,342  $41,216  $87,605  $77,528 
    Royalties  5,454   4,946   11,155   11,174 
    DIY tax preparation  13,111   12,150   16,959   15,308 
    Refund Transfers  813   1,542   1,955   2,826 
    Peace of Mind® Extended Service Plan  17,440   17,320   42,287   42,090 
    Tax Identity Shield®  4,694   5,350   9,274   10,517 
    Other  9,592   8,513   20,572   17,873 
    Total U.S. tax preparation and related services  99,446   91,037   189,807   177,316 
    Financial services:        
    Emerald Card® and SpruceSM  11,700   12,478   20,333   24,090 
    Interest and fee income on Emerald AdvanceSM  15,235   12,903   15,533   13,517 
    Total financial services  26,935   25,381   35,866   37,607 
    International  29,569   28,046   90,134   86,880 
    Wave  23,133   21,941   47,076   44,587 
    Total revenues $179,083  $166,405  $362,883  $346,390 
    Compensation and benefits:        
    Field wages  77,795   76,204   140,230   137,877 
    Other wages  74,671   70,530   146,769   134,283 
    Benefits and other compensation  36,063   34,277   71,311   69,109 
       188,529   181,011   358,310   341,269 
    Occupancy  101,194   101,173   200,479   198,763 
    Marketing and advertising  11,305   15,142   16,786   25,791 
    Depreciation and amortization  30,107   32,723   60,332   66,347 
    Bad debt  21,754   22,416   26,552   22,745 
    Other  93,626   97,143   174,182   183,789 
    Total operating expenses  446,515   449,608   836,641   838,704 
    Other income (expense), net  5,922   4,185   15,758   7,796 
    Interest expense on borrowings  (21,364)  (18,985)  (37,234)  (34,809)
    Pretax loss  (282,874)  (298,003)  (495,234)  (519,327)
    Income tax benefit  (93,758)  (77,140)  (143,245)  (131,097)
    Net loss from continuing operations  (189,116)  (220,863)  (351,989)  (388,230)
    Net loss from discontinued operations  (639)  (2,716)  (1,248)  (3,770)
    Net loss $(189,755) $(223,579) $(353,237) $(392,000)
    BASIC AND DILUTED LOSS PER SHARE:        
    Continuing operations $(1.33) $(1.43) $(2.44) $(2.48)
    Discontinued operations  —   (0.02)  (0.01)  (0.02)
    Consolidated $(1.33) $(1.45) $(2.45) $(2.50)
    WEIGHTED AVERAGE DILUTED SHARES  142,340   154,119   144,307   156,701 
    Adjusted diluted EPS(1) $(1.27) $(1.37) $(2.31) $(2.36)
    EBITDA(1) $(231,403) $(246,295) $(397,668) $(418,171)
             

    (1) All non-GAAP measures are results from continuing operations. See "Non-GAAP Financial Information" for a reconciliation of non-GAAP measures.

    CONSOLIDATED BALANCE SHEETS (unaudited, in 000s - except per share data)
    As of December 31, 2023 June 30, 2023
         
    ASSETS    
    Cash and cash equivalents $321,014  $986,975 
    Cash and cash equivalents - restricted  17,210   28,341 
    Receivables, net  397,453   59,987 
    Income taxes receivable  74,415   35,910 
    Prepaid expenses and other current assets  88,793   76,273 
    Total current assets  898,885   1,187,486 
    Property and equipment, net  137,153   130,015 
    Operating lease right of use assets  385,288   438,299 
    Intangible assets, net  275,230   277,043 
    Goodwill  789,068   775,453 
    Deferred tax assets and income taxes receivable  239,300   211,391 
    Other noncurrent assets  51,371   52,571 
    Total assets $2,776,295  $3,072,258 
    LIABILITIES AND STOCKHOLDERS’ EQUITY    
    LIABILITIES:    
    Accounts payable and accrued expenses $143,339  $159,901 
    Accrued salaries, wages and payroll taxes  65,774   95,154 
    Accrued income taxes and reserves for uncertain tax positions  151,332   271,800 
    Operating lease liabilities  185,424   205,391 
    Deferred revenue and other current liabilities  199,718   206,536 
    Total current liabilities  745,587   938,782 
    Long-term debt and line of credit borrowings  2,290,044   1,488,974 
    Deferred tax liabilities and reserves for uncertain tax positions  235,303   264,567 
    Operating lease liabilities  208,734   240,543 
    Deferred revenue and other noncurrent liabilities  69,279   107,328 
    Total liabilities  3,548,947   3,040,194 
    COMMITMENTS AND CONTINGENCIES    
    STOCKHOLDERS’ EQUITY:    
    Common stock, no par, stated value $.01 per share  1,709   1,789 
    Additional paid-in capital  746,734   770,376 
    Accumulated other comprehensive loss  (36,454)  (37,099)
    Retained deficit  (846,162)  (48,677)
    Less treasury shares, at cost  (638,479)  (654,325)
    Total stockholders' equity (deficiency)  (772,652)  32,064 
    Total liabilities and stockholders' equity $2,776,295  $3,072,258 
         


    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in 000s)
    Six months ended December 31,  2023   2022 
         
    CASH FLOWS FROM OPERATING ACTIVITIES:    
    Net loss $(353,237) $(392,000)
    Adjustments to reconcile net loss to net cash used in operating activities:    
    Depreciation and amortization  60,331   66,347 
    Provision for credit losses  21,536   16,581 
    Deferred taxes  (35,525)  41,534 
    Stock-based compensation  17,525   17,893 
    Changes in assets and liabilities, net of acquisitions:    
    Receivables  (348,833)  (262,293)
    Prepaid expenses, other current and noncurrent assets  (7,395)  (32,983)
    Accounts payable, accrued expenses, salaries, wages and payroll taxes  (58,543)  (121,156)
    Deferred revenue, other current and noncurrent liabilities  (58,520)  (52,703)
    Income tax receivables, accrued income taxes and income tax reserves  (180,706)  (60,163)
    Other, net  1,201   (1,515)
    Net cash used in operating activities  (942,166)  (780,458)
    CASH FLOWS FROM INVESTING ACTIVITIES:    
    Capital expenditures  (32,708)  (41,495)
    Payments made for business acquisitions, net of cash acquired  (27,158)  (39,757)
    Franchise loans funded  (15,491)  (17,491)
    Payments from franchisees  2,747   3,861 
    Other, net  1,565   (4,208)
    Net cash used in investing activities  (71,045)  (99,090)
    CASH FLOWS FROM FINANCING ACTIVITIES:    
    Repayments of line of credit borrowings  (25,000)   (170,000)
    Proceeds from line of credit borrowings  825,000   750,000 
    Dividends paid  (89,854)  (89,193)
    Repurchase of common stock, including shares surrendered  (378,709)  (365,633)
    Other, net  4,011   3,639 
    Net cash provided by financing activities  335,448   128,813 
    Effects of exchange rate changes on cash  671   (7,790)
    Net decrease in cash and cash equivalents, including restricted balances  (677,092)  (758,525)
    Cash, cash equivalents and restricted cash, beginning of period  1,015,316   1,050,713 
    Cash, cash equivalents and restricted cash, end of period $338,224  $292,188 
    SUPPLEMENTARY CASH FLOW DATA:    
    Income taxes paid (received), net $72,160  $(114,385)
    Interest paid on borrowings  35,496   31,812 
    Accrued additions to property and equipment  4,036   2,499 
    New operating right of use assets and related lease liabilities  70,532   79,917 
    Accrued dividends payable to common shareholders  45,273   44,569 
         


    (in 000s)
      Three months ended December 31, Six months ended December 31,
    NON-GAAP FINANCIAL MEASURE - EBITDA  2023   2022   2023   2022 
             
    Net loss - as reported $(189,755) $(223,579) $(353,237) $(392,000)
    Discontinued operations, net  639   2,716   1,248   3,770 
    Net loss from continuing operations - as reported  (189,116)  (220,863)  (351,989)  (388,230)
    Add back:        
    Income tax benefit  (93,758)  (77,140)  (143,245)  (131,097)
    Interest expense  21,364   18,985   37,234   34,809 
    Depreciation and amortization  30,107   32,723   60,332   66,347 
       (42,287)  (25,432)  (45,679)  (29,941)
    EBITDA from continuing operations $(231,403) $(246,295) $(397,668) $(418,171)
             


    (in 000s, except per share amounts)
      Three months ended December 31, Six months ended December 31,
    NON-GAAP FINANCIAL MEASURE - ADJUSTED EPS  2023   2022   2023   2022 
             
    Net loss from continuing operations - as reported $(189,116) $(220,863) $(351,989) $(388,230)
    Adjustments:        
    Amortization of intangibles related to acquisitions (pretax)  12,269   12,839   24,824   25,535 
    Tax effect of adjustments(1)  (3,087)  (2,787)  (6,022)  (6,008)
    Adjusted net loss from continuing operations $(179,934) $(210,811) $(333,187) $(368,703)
    Diluted loss per share from continuing operations - as reported $(1.33) $(1.43) $(2.44) $(2.48)
    Adjustments, net of tax  0.06   0.06   0.13   0.12 
    Adjusted diluted loss per share from continuing operations $(1.27) $(1.37) $(2.31) $(2.36)
             

    (1)Tax effect of adjustments is the difference between the tax provision calculated on a GAAP basis and on an adjusted non-GAAP basis.

    Non-GAAP Financial Information

    Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Because these measures are not measures of financial performance under GAAP and are susceptible to varying calculations, they may not be comparable to similarly titled measures for other companies.

    We consider our non-GAAP financial measures to be performance measures and a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business. We make adjustments for certain non-GAAP financial measures related to amortization of intangibles from acquisitions and goodwill impairments. We may consider whether other significant items that arise in the future should be excluded from our non-GAAP financial measures.

    We measure the performance of our business using a variety of metrics, including earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations, adjusted EBITDA from continuing operations, adjusted diluted earnings per share from continuing operations, free cash flow, and free cash flow yield. We also use EBITDA from continuing operations and pretax income from continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees.


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