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

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KANSAS CITY, Mo., Feb. 01, 2022 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) (the "Company") today released its financial results1 for the fiscal 2022 second quarter ended December 31, 2021.

  • Second quarter revenue grew 12%, demonstrating continued momentum across the business.

  • Repurchased an incremental $159 million of shares in the quarter, retiring approximately 4% of shares outstanding. In the first half of the fiscal year share repurchases have totaled $325 million, or 7% of the float.

  • The Company reiterates its previously given fiscal year 2022 outlook.

  • The recent launch of SpruceSM, H&R Block's new mobile banking platform, is a meaningful milestone in the Company's strategic transformation.

"Our second quarter results highlight ongoing momentum in the business, progress on our Block Horizons strategy, and our commitment to returning capital to shareholders," said Jeff Jones, H&R Block's president and CEO. "We set an aggressive goal to bring Spruce to market in a short amount of time, and I am very pleased that we were able to deliver such a robust product out of the gate. We are continuing to execute across the business, and we feel well-positioned for tax season."

Fiscal 2022 Second Quarter Results and Key Financial Metrics

"Our performance in the first half of 2022 has been solid, and we are reiterating our outlook," said Tony Bowen, H&R Block's chief financial officer. "During the quarter, we continued our trend of creating value for shareholders by returning capital and reducing shares outstanding."

  • Total revenue of $159 million increased by $17 million, or 12%, to the prior year. The increase was primarily driven by strength in the Emerald Card and growth from Wave.

  • Total operating expenses of $436 million increased by $15 million, or 4%, driven by higher compensation, as well as banking charges because of the growth in payments processed, partially offset by lower depreciation and amortization expenses.

  • Pretax loss decreased by $2 million to $299 million due to higher revenues, partially offset by higher operating expenses and higher interest expense.

  • Loss per share from continuing operations2 improved from $1.38 to $1.09 due to the aforementioned items and from a discrete tax benefit during the quarter. Adjusted loss per share2 from continuing operations improved from $1.28 to $1.02.

The Company's next update related to tax season results and financial performance will be on its third quarter earnings call in May.

Capital Structure

The Company reported the following related to its capital structure:

  • Fiscal year second quarter repurchases and retirements of common stock totaled approximately 6.6 million shares at an aggregate price of $159 million, or $24.10 per share. The Company has approximately $239 million remaining on its authorization through June 2022.

  • As previously announced, a quarterly cash dividend of $0.27 per share was paid on January 3, 2022 to shareholders of record as of December 6, 2021. H&R Block has paid quarterly dividends consecutively since the Company became public in 1962.

Since 2016, the Company has returned over $2 billion to shareholders in the form of share repurchases and dividends.

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 second quarter results, outlook, and a general business update will occur during the Company’s previously announced fiscal second quarter earnings conference call for analysts, institutional investors, and shareholders. The call is scheduled for 4:30 p.m. Eastern time on February 1, 2022. 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: 9297549

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 February 1, 2022 and continuing for seven days by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 9297549. The webcast will be available for replay beginning on February 2, 2022 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 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 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 December 31,

Six months ended December 31,

2021

2020

2021

2020

REVENUES:

U.S. assisted tax preparation

$

30,845

$

34,020

$

64,452

$

241,187

U.S. royalties

3,404

5,357

10,762

28,009

U.S. DIY tax preparation

9,210

6,114

13,271

53,577

International

27,907

26,637

86,232

85,413

Refund Transfers

777

397

2,442

6,510

Emerald Card®

24,830

9,962

53,088

22,398

Peace of Mind® Extended Service Plan

17,315

18,570

42,151

45,762

Tax Identity Shield®

5,200

4,809

10,353

13,803

Interest and fee income on Emerald AdvanceSM

12,424

14,039

12,903

14,565

Wave

19,497

14,837

38,634

28,574

Other

7,407

7,223

17,152

19,513

Total revenues

158,816

141,965

351,440

559,311

Compensation and benefits:

Field wages

70,058

66,307

126,137

158,852

Other wages

64,067

63,568

122,131

126,636

Benefits and other compensation

30,207

27,650

55,657

61,455

164,332

157,525

303,925

346,943

Occupancy

99,296

99,029

195,118

195,879

Marketing and advertising

17,141

15,490

27,214

30,982

Depreciation and amortization

35,631

39,699

71,346

77,936

Bad debt

13,666

16,570

14,709

17,090

Other

106,050

93,200

191,200

170,782

Total operating expenses

436,116

421,513

803,512

839,612

Other income (expense), net

1,467

538

1,751

3,042

Interest expense on borrowings

(23,085

)

(21,489

)

(45,915

)

(56,186

)

Pretax loss

(298,918

)

(300,499

)

(496,236

)

(333,445

)

Income tax benefit

(109,845

)

(46,510

)

(157,218

)

(18,546

)

Net loss from continuing operations

(189,073

)

(253,989

)

(339,018

)

(314,899

)

Net loss from discontinued operations

(1,532

)

(1,762

)

(3,188

)

(3,108

)

Net loss

$

(190,605

)

$

(255,751

)

$

(342,206

)

$

(318,007

)

BASIC AND DILUTED LOSS PER SHARE:

Continuing operations

$

(1.09

)

$

(1.38

)

$

(1.93

)

$

(1.68

)

Discontinued operations

(0.01

)

(0.01

)

(0.02

)

(0.01

)

Consolidated

$

(1.10

)

$

(1.39

)

$

(1.95

)

$

(1.69

)

WEIGHTED AVERAGE DILUTED SHARES

173,378

183,883

175,739

188,099

Adjusted diluted EPS (1)

$

(1.02

)

$

(1.28

)

$

(1.80

)

$

(1.49

)

EBITDA (1)

(240,202

)

(239,311

)

(378,975

)

(199,323

)

(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

December 31, 2021

June 30, 2021

ASSETS

Cash and cash equivalents

$

336,250

$

1,434,381

Cash and cash equivalents - restricted

123,686

149,783

Receivables, net

301,055

88,932

Income taxes receivable

351,829

330,872

Prepaid expenses and other current assets

126,784

76,414

Total current assets

1,239,604

2,080,382

Property and equipment, net

140,459

139,276

Operating lease right of use assets

396,522

445,847

Intangible assets, net

334,557

351,093

Goodwill

759,183

754,521

Deferred tax assets and income taxes receivable

179,626

181,996

Other noncurrent assets

50,104

61,273

Total assets

$

3,100,055

$

4,014,388

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES:

Accounts payable and accrued expenses

$

155,841

$

164,269

Accrued salaries, wages and payroll taxes

62,524

168,989

Accrued income taxes and reserves for uncertain tax positions

78,921

238,863

Current portion of long-term debt

499,395

Operating lease liabilities

189,984

214,190

Deferred revenue and other current liabilities

184,775

196,175

Total current liabilities

1,171,440

982,486

Long-term debt

1,760,830

1,983,719

Deferred tax liabilities and reserves for uncertain tax positions

249,751

301,658

Operating lease liabilities

215,826

244,932

Deferred revenue and other noncurrent liabilities

74,863

113,535

Total liabilities

3,472,710

3,626,330

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY:

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

2,033

2,167

Additional paid-in capital

770,661

779,465

Accumulated other comprehensive income (loss)

(9,433

)

88

Retained earnings (deficit)

(466,856

)

286,694

Less treasury shares, at cost

(669,060

)

(680,356

)

Total stockholders' equity (deficiency)

(372,655

)

388,058

Total liabilities and stockholders' equity

$

3,100,055

$

4,014,388


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in 000s)

Six months ended December 31,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(342,206

)

$

(318,007

)

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

Depreciation and amortization

71,346

77,937

Provision

14,639

15,977

Deferred taxes

16,685

29,015

Stock-based compensation

13,233

13,359

Changes in assets and liabilities, net of acquisitions:

Receivables

(216,071

)

(248,184

)

Prepaid expenses, other current and noncurrent assets

(46,928

)

(61,070

)

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

(121,926

)

(14,798

)

Deferred revenue, other current and noncurrent liabilities

(50,882

)

(48,117

)

Income tax receivables, accrued income taxes and income tax reserves

(247,088

)

(146,215

)

Other, net

(4,373

)

(2,737

)

Net cash used in operating activities

(913,571

)

(702,840

)

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(39,371

)

(34,751

)

Payments made for business acquisitions, net of cash acquired

(19,333

)

(12,155

)

Franchise loans funded

(14,480

)

(20,064

)

Payments from franchisees

6,213

13,633

Other, net

9,527

(5,383

)

Net cash used in investing activities

(57,444

)

(58,720

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments of line of credit borrowings

(210,000

)

(2,050,000

)

Proceeds from line of credit borrowings

485,000

1,040,000

Repayments of long-term debt

(650,000

)

Proceeds from issuance of long-term debt

647,965

Dividends paid

(96,938

)

(100,198

)

Repurchase of common stock, including shares surrendered

(324,589

)

(150,782

)

Proceeds from exercise of stock options

4,067

1,133

Other, net

(7,423

)

(19,705

)

Net cash used in financing activities

(149,883

)

(1,281,587

)

Effects of exchange rate changes on cash

(3,330

)

11,030

Net decrease in cash and cash equivalents, including restricted balances

(1,124,228

)

(2,032,117

)

Cash, cash equivalents and restricted cash, beginning of period

1,584,164

2,769,947

Cash, cash equivalents and restricted cash, end of period

$

459,936

$

737,830

SUPPLEMENTARY CASH FLOW DATA:

Income taxes paid, net of refunds received

$

72,169

$

95,789

Interest paid on borrowings

36,539

50,472

Accrued purchase of common stock

4,845

Accrued additions to property and equipment

1,393

1,285

New operating right of use assets and related lease liabilities

73,710

46,954

Accrued dividends payable to common shareholders

46,497

47,689


(in 000s)

Three months ended December 31,

Six months ended December 31,

NON-GAAP FINANCIAL MEASURE - EBITDA

2021

2020

2021

2020

Net loss - as reported

$

(190,605

)

$

(255,751

)

$

(342,206

)

$

(318,007

)

Discontinued operations, net

1,532

1,762

3,188

3,108

Net loss from continuing operations - as reported

(189,073

)

(253,989

)

(339,018

)

(314,899

)

Add back:

Income tax benefit

(109,845

)

(46,510

)

(157,218

)

(18,546

)

Interest expense

23,085

21,489

45,915

56,186

Depreciation and amortization

35,631

39,699

71,346

77,936

(51,129

)

14,678

(39,957

)

115,576

EBITDA from continuing operations

$

(240,202

)

$

(239,311

)

$

(378,975

)

$

(199,323

)


(in 000s, except per share amounts)

Three months ended December 31,

Six months ended December 31,

NON-GAAP FINANCIAL MEASURE - ADJUSTED EPS

2021

2020

2021

2020

Net loss from continuing operations - as reported

$

(189,073

)

$

(253,989

)

$

(339,018

)

$

(314,899

)

Adjustments:

Amortization of intangibles related to acquisitions (pretax)

14,292

16,531

29,162

34,169

Tax effect of adjustments (1)

(1,922

)

2,086

(5,557

)

232

Adjusted net loss from continuing operations

$

(176,703

)

$

(235,372

)

$

(315,413

)

$

(280,498

)

Diluted loss per share from continuing operations - as reported

$

(1.09

)

$

(1.38

)

$

(1.93

)

$

(1.68

)

Adjustments, net of tax

0.07

0.10

0.13

0.19

Adjusted diluted loss per share from continuing operations

$

(1.02

)

$

(1.28

)

$

(1.80

)

$

(1.49

)

(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.