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Press release content from Globe Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

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

November 2, 2021 GMT

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.

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“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.

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  • 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 preparationfinancial 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.

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, 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. royalties7,358  22,652 
U.S. DIY tax preparation4,061  47,463 
International58,325  58,776 
Refund Transfers1,665  6,113 
Emerald Card®28,258  12,436 
Peace of Mind® Extended Service Plan24,836  27,192 
Tax Identity Shield®5,153  8,994 
Interest and fee income on Emerald AdvanceSM479  526 
Wave19,137  13,737 
Other9,745  12,290 
Total revenues192,624  417,346 
Compensation and benefits:   
Field wages56,079  92,545 
Other wages58,064  63,068 
Benefits and other compensation25,450  33,805 
 139,593  189,418 
Occupancy95,822  96,850 
Marketing and advertising10,073  15,492 
Depreciation and amortization35,715  38,237 
Bad debt1,043  520 
Other85,150  77,582 
Total operating expenses367,396  418,099 
    
Other income (expense), net284  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 SHARES178,099  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 operations140  858  (718) (83.7)%
Franchise operations75  335  (260) (77.6)%
Total Assisted215  1,193  (978) (82.0)%
        
Desktop17  326  (309) (94.8)%
Online53  701  (648) (92.4)%
Total DIY70  1,027  (957) (93.2)%
        
Total U.S. Returns285  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.