KANSAS CITY, Mo., May 09, 2024 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) (the "Company") today released its financial results1 for the fiscal 2024 third quarter ended March 31, 2024.
- For the third quarter, the Company delivered revenue growth of 4%, net income growth of 7%, and earnings per share from continuing operations2 growth of 18%
- Through April 30, filing volumes increased year over year, driven by strong performance in DIY paid online clients, which grew 6%, partially offset by modest Assisted volume declines. Net average charge grew 7% in DIY paid online and 4% in Assisted
- The Company now expects to be near the high end of its previously announced outlook for fiscal year 2024
"There are many things to be pleased about in the quarter, from our strong DIY performance, virtual tax growth, and positive trends in small business, to important progress for both Spruce and Wave. At the same time, I know we can execute better to improve the Assisted client experience for so many consumers who are choosing H&R Block," said Jeff Jones, H&R Block's president and chief executive officer.
Fiscal 2024 Third Quarter Results and Key Financial Metrics
"We now expect to finish fiscal 2024 near the high end of our outlook range," said Tony Bowen, H&R Block's chief financial officer. "This will be yet another year of topline growth, robust cash flow generation, and double-digit EPS growth that allows for continued, significant returns of capital to our shareholders through dividends and share repurchases."
- Total revenue of $2.2 billion increased by $91.2 million, or 4%, to the prior year. The increase was primarily due to a higher net average charge and higher company-owned volumes in the Assisted category combined with higher online paid returns and a higher NAC, partially offset by lower royalties due to franchise acquisitions, and lower Emerald Advance revenues.
- Total operating expenses of $1.3 billion increased by $27.5 million, primarily due to higher field wages due to higher company-owned volumes and higher legal fees and settlements, partially offset by lower marketing and advertising expenses primarily due to the timing of television advertising in the current year compared to the prior year.
- Pretax income increased by $51.9 million to $907.4 million, primarily due to higher revenues in the current year.
- Earnings per share from continuing operations2 increased from $4.14 to $4.87 and adjusted earnings per share from continuing operations2 increased from $4.20 to $4.94, due to higher net income and fewer shares outstanding from share repurchases.
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 July 3, 2024 to shareholders of record as of June 5, 2024. H&R Block has paid quarterly dividends consecutively since the Company became public in 1962.
- In Q1 and Q2, the Company repurchased $350 million of shares outstanding.
- The Company has approximately $350 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 dividends and share repurchases, buying back over 40% of its shares outstanding3.
Fiscal Year 2024 Outlook
The Company now expects to be near the high end of its previously provided outlook, which was:
- Revenue to be in the range of $3.530 to $3.585 billion.
- EBITDA4 to be in the range of $930 to $965 million.
- Adjusted Diluted Earnings Per Share4 to be in the range of $4.10 to $4.30.
The effective tax rate is now expected to be in the range of 21-22% as compared to 23% previously.
Conference Call
A conference call for analysts, institutional investors, and shareholders will be held at 4:30 p.m. Eastern time on Thursday, May 9, 2024. During the conference call the Company will discuss fiscal 2024 third quarter results, outlook, and give a general business update. To join live, participants must register at https://register.vevent.com/register/BI3025442b56334c7683e88d633cd4f150. 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/2zqnvjkt 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.
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 Diluted Earnings Per Share (EPS) and earnings before interest, tax, depreciation, and amortization (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 March 31, | Nine months ended March 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| REVENUES: | ||||||||||||||||
| U.S. tax preparation and related services: | ||||||||||||||||
| Assisted tax preparation | $ | 1,534,825 | $ | 1,453,049 | $ | 1,622,430 | $ | 1,530,577 | ||||||||
| Royalties | 141,915 | 150,163 | 153,070 | 161,337 | ||||||||||||
| DIY tax preparation | 198,570 | 167,022 | 215,529 | 182,330 | ||||||||||||
| Refund Transfers | 118,937 | 117,384 | 120,892 | 120,210 | ||||||||||||
| Peace of Mind® Extended Service Plan | 16,813 | 16,750 | 59,100 | 58,840 | ||||||||||||
| Tax Identity Shield® | 7,536 | 8,720 | 16,810 | 19,237 | ||||||||||||
| Other | 12,065 | 10,972 | 32,637 | 28,845 | ||||||||||||
| Total U.S. tax preparation and related services | 2,030,661 | 1,924,060 | 2,220,468 | 2,101,376 | ||||||||||||
| Financial services: | ||||||||||||||||
| Emerald Card® and SpruceSM | 41,160 | 44,358 | 61,493 | 68,448 | ||||||||||||
| Interest and fee income on Emerald AdvanceSM | 21,169 | 33,750 | 36,702 | 47,267 | ||||||||||||
| Total financial services | 62,329 | 78,108 | 98,195 | 115,715 | ||||||||||||
| International | 68,264 | 69,417 | 158,398 | 156,297 | ||||||||||||
| Wave | 23,580 | 22,064 | 70,656 | 66,651 | ||||||||||||
| Total revenues | $ | 2,184,834 | $ | 2,093,649 | $ | 2,547,717 | $ | 2,440,039 | ||||||||
| Compensation and benefits: | ||||||||||||||||
| Field wages | 510,299 | 480,779 | 650,529 | 618,656 | ||||||||||||
| Other wages | 75,356 | 73,503 | 222,125 | 207,786 | ||||||||||||
| Benefits and other compensation | 99,653 | 100,368 | 170,964 | 169,477 | ||||||||||||
| 685,308 | 654,650 | 1,043,618 | 995,919 | |||||||||||||
| Occupancy | 119,364 | 118,111 | 319,843 | 316,874 | ||||||||||||
| Marketing and advertising | 194,349 | 210,508 | 211,135 | 236,299 | ||||||||||||
| Depreciation and amortization | 30,672 | 32,313 | 91,004 | 98,660 | ||||||||||||
| Bad debt | 41,008 | 34,273 | 67,560 | 57,018 | ||||||||||||
| Other | 185,929 | 179,292 | 360,111 | 363,081 | ||||||||||||
| Total operating expenses | 1,256,630 | 1,229,147 | 2,093,271 | 2,067,851 | ||||||||||||
| Other income (expense), net | 5,224 | 13,224 | 20,982 | 21,020 | ||||||||||||
| Interest expense on borrowings | (26,070 | ) | (22,298 | ) | (63,304 | ) | (57,107 | ) | ||||||||
| Pretax income | 907,358 | 855,428 | 412,124 | 336,101 | ||||||||||||
| Income taxes | 215,772 | 209,351 | 72,527 | 78,254 | ||||||||||||
| Net income from continuing operations | 691,586 | 646,077 | 339,597 | 257,847 | ||||||||||||
| Net loss from discontinued operations | (849 | ) | (2,648 | ) | (2,097 | ) | (6,418 | ) | ||||||||
| Net income | $ | 690,737 | $ | 643,429 | $ | 337,500 | $ | 251,429 | ||||||||
| DILUTED EARNINGS PER SHARE | ||||||||||||||||
| Continuing operations | $ | 4.87 | $ | 4.14 | $ | 2.34 | $ | 1.62 | ||||||||
| Discontinued operations | (0.01 | ) | (0.02 | ) | (0.02 | ) | (0.04 | ) | ||||||||
| Consolidated | $ | 4.86 | $ | 4.12 | $ | 2.32 | $ | 1.58 | ||||||||
| WEIGHTED AVERAGE DILUTED SHARES | 141,540 | 155,561 | 144,594 | 158,488 | ||||||||||||
| Adjusted diluted EPS(1) | $ | 4.94 | $ | 4.20 | $ | 2.54 | $ | 1.80 | ||||||||
| EBITDA(1) | $ | 964,100 | $ | 910,039 | $ | 566,432 | $ | 491,868 | ||||||||
(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 | March 31, 2024 | June 30, 2023 | ||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 794,617 | $ | 986,975 | ||||
| Cash and cash equivalents - restricted | 18,078 | 28,341 | ||||||
| Receivables, net | 346,784 | 59,987 | ||||||
| Prepaid expenses and other current assets | 105,873 | 112,183 | ||||||
| Total current assets | 1,265,352 | 1,187,486 | ||||||
| Property and equipment, net | 139,542 | 130,015 | ||||||
| Operating lease right of use assets | 392,091 | 438,299 | ||||||
| Intangible assets, net | 277,218 | 277,043 | ||||||
| Goodwill | 787,634 | 775,453 | ||||||
| Deferred tax assets and income taxes receivable | 287,810 | 211,391 | ||||||
| Other noncurrent assets | 63,675 | 52,571 | ||||||
| Total assets | $ | 3,213,322 | $ | 3,072,258 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | 247,109 | $ | 159,901 | ||||
| Accrued salaries, wages and payroll taxes | 238,864 | 95,154 | ||||||
| Accrued income taxes and reserves for uncertain tax positions | 351,721 | 271,800 | ||||||
| Operating lease liabilities | 185,396 | 205,391 | ||||||
| Deferred revenue and other current liabilities | 220,466 | 206,536 | ||||||
| Total current liabilities | 1,243,556 | 938,782 | ||||||
| Long-term debt | 1,490,570 | 1,488,974 | ||||||
| Deferred tax liabilities and reserves for uncertain tax positions | 277,957 | 264,567 | ||||||
| Operating lease liabilities | 214,990 | 240,543 | ||||||
| Deferred revenue and other noncurrent liabilities | 116,055 | 107,328 | ||||||
| Total liabilities | 3,343,128 | 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 | 753,605 | 770,376 | ||||||
| Accumulated other comprehensive loss | (46,336 | ) | (37,099 | ) | ||||
| Retained deficit | (200,296 | ) | (48,677 | ) | ||||
| Less treasury shares, at cost | (638,488 | ) | (654,325 | ) | ||||
| Total stockholders' equity (deficiency) | (129,806 | ) | 32,064 | |||||
| Total liabilities and stockholders' equity | $ | 3,213,322 | $ | 3,072,258 | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | (unaudited, in 000s) | |||||||
| Nine months ended March 31, | 2024 | 2023 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 337,500 | $ | 251,429 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 91,004 | 98,660 | ||||||
| Provision for credit losses | 61,359 | 49,174 | ||||||
| Deferred taxes | (58,223 | ) | 6,685 | |||||
| Stock-based compensation | 25,310 | 26,785 | ||||||
| Changes in assets and liabilities, net of acquisitions: | ||||||||
| Receivables | (348,106 | ) | (237,395 | ) | ||||
| Prepaid expenses, other current and noncurrent assets | (18,037 | ) | (17,438 | ) | ||||
| Accounts payable, accrued expenses, salaries, wages and payroll taxes | 223,045 | 122,025 | ||||||
| Deferred revenue, other current and noncurrent liabilities | 12,483 | 22,054 | ||||||
| Income tax receivables, accrued income taxes and income tax reserves | 93,961 | 179,692 | ||||||
| Other, net | (32 | ) | (3,285 | ) | ||||
| Net cash provided by operating activities | 420,264 | 498,386 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Capital expenditures | (53,831 | ) | (56,661 | ) | ||||
| Payments made for business acquisitions, net of cash acquired | (43,163 | ) | (47,740 | ) | ||||
| Franchise loans funded | (18,815 | ) | (21,566 | ) | ||||
| Payments from franchisees | 12,884 | 14,963 | ||||||
| Other, net | 3,282 | 9,717 | ||||||
| Net cash used in investing activities | (99,643 | ) | (101,287 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayments of line of credit borrowings | (1,025,000 | ) | (970,000 | ) | ||||
| Proceeds from line of credit borrowings | 1,025,000 | 970,000 | ||||||
| Dividends paid | (135,127 | ) | (133,762 | ) | ||||
| Repurchase of common stock, including shares surrendered | (379,018 | ) | (365,852 | ) | ||||
| Other, net | (6,358 | ) | (5,973 | ) | ||||
| Net cash used in financing activities | (520,503 | ) | (505,587 | ) | ||||
| Effects of exchange rate changes on cash | (2,739 | ) | (7,880 | ) | ||||
| Net decrease in cash and cash equivalents, including restricted balances | (202,621 | ) | (116,368 | ) | ||||
| Cash, cash equivalents and restricted cash, beginning of period | 1,015,316 | 1,050,713 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 812,695 | $ | 934,345 | ||||
| SUPPLEMENTARY CASH FLOW DATA: | ||||||||
| Income taxes paid (received), net | $ | 35,888 | $ | (110,028 | ) | |||
| Interest paid on borrowings | 66,464 | 59,429 | ||||||
| Accrued additions to property and equipment | 1,477 | 4,378 | ||||||
| New operating right of use assets and related lease liabilities | 139,872 | 131,949 | ||||||
| Accrued dividends payable to common shareholders | 44,648 | 44,163 | ||||||
| (in 000s) | ||||||||||||
| Three months ended March 31, | Nine months ended March 31, | |||||||||||
| NON-GAAP FINANCIAL MEASURE - EBITDA | 2024 | 2023 | 2024 | 2023 | ||||||||
| Net income - as reported | $ | 690,737 | $ | 643,429 | $ | 337,500 | $ | 251,429 | ||||
| Discontinued operations, net | 849 | 2,648 | 2,097 | 6,418 | ||||||||
| Net income from continuing operations - as reported | 691,586 | 646,077 | 339,597 | 257,847 | ||||||||
| Add back: | ||||||||||||
| Income taxes | 215,772 | 209,351 | 72,527 | 78,254 | ||||||||
| Interest expense | 26,070 | 22,298 | 63,304 | 57,107 | ||||||||
| Depreciation and amortization | 30,672 | 32,313 | 91,004 | 98,660 | ||||||||
| 272,514 | 263,962 | 226,835 | 234,021 | |||||||||
| EBITDA from continuing operations | $ | 964,100 | $ | 910,039 | $ | 566,432 | $ | 491,868 | ||||
| (in 000s, except per share amounts) | ||||||||||||||||
| Three months ended March 31, | Nine months ended March 31, | |||||||||||||||
| NON-GAAP FINANCIAL MEASURE - ADJUSTED EPS | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Net income from continuing operations - as reported | $ | 691,586 | $ | 646,077 | $ | 339,597 | $ | 257,847 | ||||||||
| Adjustments: | ||||||||||||||||
| Amortization of intangibles related to acquisitions (pretax) | 12,869 | 13,011 | 37,693 | 38,546 | ||||||||||||
| Tax effect of adjustments(1) | (2,793 | ) | (3,190 | ) | (8,815 | ) | (9,198 | ) | ||||||||
| Adjusted net income from continuing operations | $ | 701,622 | $ | 655,898 | $ | 368,475 | $ | 287,195 | ||||||||
| Diluted earnings per share from continuing operations - as reported | $ | 4.87 | $ | 4.14 | $ | 2.34 | $ | 1.62 | ||||||||
| Adjustments, net of tax | 0.07 | 0.06 | 0.20 | 0.18 | ||||||||||||
| Adjusted diluted earnings per share from continuing operations | $ | 4.94 | $ | 4.20 | $ | 2.54 | $ | 1.80 | ||||||||
(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.
