U.S. Markets open in 4 hrs 41 mins
  • S&P Futures

    4,381.50
    -93.25 (-2.08%)
     
  • Dow Futures

    33,992.00
    -261.00 (-0.76%)
     
  • Nasdaq Futures

    14,308.00
    -193.00 (-1.33%)
     
  • Russell 2000 Futures

    2,008.40
    -23.30 (-1.15%)
     
  • Crude Oil

    0 (0)
     
  • Gold

    1,841.10
    -0.60 (-0.03%)
     
  • Silver

    24.34
    -0.37 (-1.50%)
     
  • EUR/USD

    1.1348
    +0.0031 (+0.2724%)
     
  • 10-Yr Bond

    1.7350
    -0.0120 (-0.69%)
     
  • Vix

    28.85
    +3.26 (+12.74%)
     
  • GBP/USD

    1.3555
    -0.0045 (-0.3321%)
     
  • USD/JPY

    113.6500
    -0.4500 (-0.3944%)
     
  • BTC-USD

    36,347.11
    +1,777.36 (+5.14%)
     
  • CMC Crypto 200

    823.79
    +13.18 (+1.63%)
     
  • FTSE 100

    7,494.13
    -90.88 (-1.20%)
     
  • Nikkei 225

    27,522.26
    -250.64 (-0.90%)
     

H&R Block Reports Fiscal 2022 First Quarter Results; Reiterates Fiscal Year Financial Outlook

  • Oops!
    Something went wrong.
    Please try again later.
·16 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • HRB

KANSAS CITY, Mo., Nov. 02, 2021 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) (the "Company") today released its financial results1 for the fiscal 2022 first quarter ended September 30, 2021.

  • Q1 results demonstrated continued momentum across the business and the Company reiterates its previously given fiscal year 2022 outlook.

  • The year over year quarterly results are not comparable due to last year’s tax season being extended to July 15, 2020, causing revenue and earnings to occur in the prior year first quarter that did not repeat in the first quarter ending September 30, 2021, as this year's tax season was extended only to May 17, 2021.

  • The Company repurchased $166 million of shares, retiring approximately 4% of the shares outstanding during the fiscal quarter.

"Our first fiscal quarter reflects continued momentum in the businesses, our ongoing commitment to returning capital to shareholders, and progress on our Block Horizons imperatives," said Jeff Jones, H&R Block's president and CEO. "Looking forward, we are well positioned for the 2022 tax season and I am more confident than ever in our ability to execute against our next phase of strategic growth."

Fiscal 2022 First Quarter Results Key Financial Metrics

"We have made significant financial progress over the past several years, and our business continues to be strong," said Tony Bowen, H&R Block's chief financial officer. "We’re off to a great start to our fiscal year and were able to repurchase $166 million of shares during the quarter."

Year over year quarterly results are not comparable due to last year’s tax season being extended to July 15, 2020 causing revenue and earnings to occur in the prior year first quarter that did not repeat in the first quarter ending September 30, 2021, as this year's tax season was extended only to May 17, 2021. Revenue recorded in last year's fiscal Q1 related to the extended tax season is estimated to be $246 million.

  • Total revenue of $193 million decreased by $225 million, or 54%, to the prior year. The decrease in revenue is entirely due to lower return volume because of the previous year's tax season extension. This was partially offset by Emerald Card revenue and strong growth from Wave.

  • Total operating expenses of $367 million decreased by $51 million, or 12%, primarily driven by lower tax pro compensation on lighter return volumes as the quarter took place after the 2021 filing deadline.

  • Pretax loss increased by $164 million to $197 million, entirely due to the decrease in revenue because of the previous year's tax season extension.

  • Loss per share from continuing operations2 increased from $0.32 to $0.84; adjusted loss per share from continuing operations increased from $0.24 to $0.78.

Capital Structure

The Company also reported the following related to its capital structure:

  • Fiscal year first quarter repurchases and retirements of common stock totaled approximately 6.8 million shares at an aggregate price of $166 million, or $24.37 per share. The Company has approximately $400 million remaining on its authorization which runs through June 2022.

  • As previously announced, a quarterly cash dividend of $0.27 per share was paid on October 1, 2021 to shareholders of record as of September 10, 2021. H&R Block has paid quarterly dividends consecutively since the Company became public in 1962.

Discontinued Operations

For information on Sand Canyon, please refer to disclosures in the Company’s reports on Forms 10-K, 10-Q, and other filings with the SEC.

Conference Call

Discussion of the fiscal 2022 first quarter results, outlook, and a general business update will occur during the Company’s previously announced fiscal first quarter earnings conference call for analysts, institutional investors, and shareholders. The call is scheduled for 4:30 p.m. Eastern time on November 2, 2021. To access the call, please dial the number below approximately 5 minutes prior to the scheduled starting time:

U.S./Canada (866) 987-6821or International (630) 652-5951

Conference ID: 5163538

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 https://investors.hrblock.com/financial-information/quarterly-results, and the presentation will be posted following the conclusion of the call.

A replay of the call will be available beginning at 7:30 p.m. Eastern time on November 2, 2021 and continuing for seven days by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 5163538. The webcast will be available for replay beginning on November 3, 2021 and continuing for 90 days at https://investors.hrblock.com/financial-information/quarterly-results.

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, financial products, and small business solutions. The company blends digital innovation with the human expertise and care of its associates and franchisees as it helps people get the best outcome at tax time, and better manage and access their money year-round. Through Block Advisors and Wave, the company helps small business owners thrive with innovative products like Wave Money, a small business banking and bookkeeping solution, and the only business bank account to manage bookkeeping automatically. For more information, visit H&R Block News or follow @HRBlockNews on Twitter.

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 also include the expected impact of the coronavirus (COVID-19) pandemic, including, without limitation, the impact on economic and financial markets, the Company’s capital resources and financial condition, the expected use of proceeds under the Company’s revolving credit facility, future expenditures, potential regulatory actions, such as extensions of tax filing deadlines or other related relief, changes in consumer behaviors and modifications to the Company’s operations related thereto. 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 fiscal year ended April 30, 2021 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.

1

All amounts in this release are unaudited. Unless otherwise noted, all comparisons refer to the current period compared to the corresponding prior year period.

2

All 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, and free cash flow, 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).


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:

Angela Davied, (816) 854-5798, angela.davied@hrblock.com


FINANCIAL RESULTS

(unaudited, in 000s - except per share amounts)

Three months ended September 30,

2021

2020

REVENUES:

U.S. assisted tax preparation

$

33,607

$

207,167

U.S. royalties

7,358

22,652

U.S. DIY tax preparation

4,061

47,463

International

58,325

58,776

Refund Transfers

1,665

6,113

Emerald Card®

28,258

12,436

Peace of Mind® Extended Service Plan

24,836

27,192

Tax Identity Shield®

5,153

8,994

Interest and fee income on Emerald AdvanceSM

479

526

Wave

19,137

13,737

Other

9,745

12,290

Total revenues

192,624

417,346

Compensation and benefits:

Field wages

56,079

92,545

Other wages

58,064

63,068

Benefits and other compensation

25,450

33,805

139,593

189,418

Occupancy

95,822

96,850

Marketing and advertising

10,073

15,492

Depreciation and amortization

35,715

38,237

Bad debt

1,043

520

Other

85,150

77,582

Total operating expenses

367,396

418,099

Other income (expense), net

284

2,504

Interest expense on borrowings

(22,830

)

(34,697

)

Pretax loss

(197,318

)

(32,946

)

Income taxes (benefit)

(47,373

)

27,964

Net loss from continuing operations

(149,945

)

(60,910

)

Net loss from discontinued operations

(1,656

)

(1,346

)

Net loss

$

(151,601

)

$

(62,256

)

BASIC AND DILUTED LOSS PER SHARE:

Continuing operations

$

(0.84

)

$

(0.32

)

Discontinued operations

(0.01

)

Consolidated

$

(0.85

)

$

(0.32

)

WEIGHTED AVERAGE DILUTED SHARES

178,099

192,314

Adjusted diluted EPS (1)

$

(0.78

)

$

(0.24

)

EBITDA (1)

(138,773

)

39,988


(1)

All non-GAAP measures are results form 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

September 30, 2021

June 30, 2021

ASSETS

Cash and cash equivalents

$

891,739

$

1,434,381

Cash and cash equivalents - restricted

139,067

149,783

Receivables, net

56,829

88,932

Income taxes receivable

338,399

330,872

Prepaid expenses and other current assets

69,714

76,414

Total current assets

1,495,748

2,080,382

Property and equipment, net

141,006

139,276

Operating lease right of use assets

410,724

445,847

Intangible assets, net

337,451

351,093

Goodwill

749,409

754,521

Deferred tax assets and income taxes receivable

178,946

181,996

Other noncurrent assets

54,743

61,273

Total assets

$

3,368,027

$

4,014,388

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES:

Accounts payable and accrued expenses

$

156,605

$

164,269

Accrued salaries, wages and payroll taxes

54,816

168,989

Accrued income taxes and reserves for uncertain tax positions

155,137

238,863

Operating lease liabilities

201,179

214,190

Deferred revenue and other current liabilities

185,232

196,175

Total current liabilities

752,969

982,486

Long-term debt

1,984,512

1,983,719

Deferred tax liabilities and reserves for uncertain tax positions

303,476

301,658

Operating lease liabilities

221,184

244,932

Deferred revenue and other noncurrent liabilities

90,358

113,535

Total liabilities

3,352,499

3,626,330

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY:

Common stock, no par, stated value $.01 per share

2,099

2,167

Additional paid-in capital

770,683

779,465

Accumulated other comprehensive income (loss)

(11,089

)

88

Retained earnings (deficit)

(74,757

)

286,694

Less treasury shares, at cost

(671,408

)

(680,356

)

Total stockholders' equity

15,528

388,058

Total liabilities and stockholders' equity

$

3,368,027

$

4,014,388


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in 000s)

Three months ended September 30,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(151,601

)

$

(62,256

)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

35,715

38,237

Provision

1,850

Deferred taxes

(13,547

)

(480

)

Stock-based compensation

6,847

7,781

Changes in assets and liabilities, net of acquisitions:

Receivables

35,913

29,016

Prepaid expenses, other current and noncurrent assets

8,610

1,673

Accounts payable, accrued expenses, salaries, wages and payroll taxes

(134,215

)

(37,546

)

Deferred revenue, other current and noncurrent liabilities

(27,990

)

(20,783

)

Income tax receivables, accrued income taxes and income tax reserves

(72,768

)

(52,698

)

Other, net

(1,438

)

(1,541

)

Net cash used in operating activities

(312,624

)

(98,597

)

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(15,620

)

(13,386

)

Payments made for business acquisitions, net of cash acquired

(4,265

)

(2,538

)

Franchise loans funded

(4,474

)

(7,913

)

Payments from franchisees

2,839

10,744

Other, net

2,067

1,100

Net cash used in investing activities

(19,453

)

(11,993

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments of line of credit borrowings

(2,000,000

)

Repayments of long-term debt

(650,000

)

Proceeds from issuance of long-term debt

647,965

Dividends paid

(48,996

)

(50,044

)

Repurchase of common stock, including shares surrendered

(165,800

)

(76,731

)

Proceeds from exercise of stock options

3,385

1,134

Other, net

(5,911

)

(19,131

)

Net cash used in financing activities

(217,322

)

(2,146,807

)

Effects of exchange rate changes on cash

(3,959

)

2,975

Net decrease in cash and cash equivalents, including restricted balances

(553,358

)

(2,254,422

)

Cash, cash equivalents and restricted cash, beginning of period

1,584,164

2,769,947

Cash, cash equivalents and restricted cash, end of period

$

1,030,806

$

515,525

SUPPLEMENTARY CASH FLOW DATA:

Income taxes paid, net of refunds received

$

38,419

$

79,343

Interest paid on borrowings

12,594

34,726

Accrued purchase of common stock

4,785

12,323

Accrued additions to property and equipment

6,273

1,816

New operating right of use assets and related lease liabilities

29,371

21,590

Accrued dividends payable to common shareholders

47,940

50,154


U.S. Operating Statistics

Three months ended September 30

2021

2020(1)

Change

% Change

Tax Returns Prepared: (in 000s) (2)

Company-owned operations

140

858

(718

)

(83.7

)%

Franchise operations

75

335

(260

)

(77.6

)%

Total Assisted

215

1,193

(978

)

(82.0

)%

Desktop

17

326

(309

)

(94.8

)%

Online

53

701

(648

)

(92.4

)%

Total DIY

70

1,027

(957

)

(93.2

)%

Total U.S. Returns

285

2,220

(1,935

)

(87.2

)%

Net Average Charge: (3)

Company-owned operations

$

239.31

$

241.41

$

(2.10

)

(0.9

)%

Franchise operations (4)

$

244.23

$

227.42

$

16.81

7.4%

DIY

$

43.22

$

46.21

$

(2.99

)

(6.5

)%


(1)

Represents a partial 2019 individual tax filing season, which was extended until July 15, 2020.

(2)

An assisted tax return is defined as a current or prior year individual or business tax return that has been accepted by the client. A DIY online return is defined as a current year individual or business tax return that has been accepted by the client. A DIY desktop return is defined as a current year individual or business tax return that has been electronically submitted to the IRS.

(3)

Net average charge is calculated as total tax preparation fees divided by tax returns prepared.

(4)

Net average charge related to H&R Block Franchise operations represents tax preparation fees collected by H&R Block franchisees divided by returns prepared in franchise offices. H&R Block will recognize a portion of franchise revenues as franchise royalties based on the terms of franchise agreements.


(in 000s)

Three months ended September 30,

NON-GAAP FINANCIAL MEASURE - EBITDA

2021

2020

Net loss - as reported

$

(151,601

)

$

(62,256

)

Discontinued operations, net

1,656

1,346

Net loss from continuing operations - as reported

(149,945

)

(60,910

)

Add back:

Income taxes (benefit)

(47,373

)

27,964

Interest expense

22,830

34,697

Depreciation and amortization

35,715

38,237

11,172

100,898

EBITDA from continuing operations

$

(138,773

)

$

39,988


(in 000s, except per share amounts)

Three months ended September 30,

NON-GAAP FINANCIAL MEASURE - ADJUSTED EPS

2021

2020

Net loss from continuing operations - as reported

$

(149,945

)

$

(60,910

)

Adjustments:

Amortization of intangibles related to acquisitions (pretax)

14,870

17,638

Tax effect of adjustments (1)

(3,635

)

(1,854

)

Adjusted net loss from continuing operations

$

(138,710

)

$

(45,126

)

Diluted loss per share from continuing operations - as reported

$

(0.84

)

$

(0.32

)

Adjustments, net of tax

0.06

0.08

Adjusted diluted loss per share from continuing operations

$

(0.78

)

$

(0.24

)


(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, EBITDA margin from continuing operations, adjusted diluted earnings per share from continuing operations and free cash flow. We also use EBITDA from continuing operations and pretax income of continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees.