H&R Block Announces Fiscal 2018 Second Quarter Results In Line with Expectations

December 06, 2017

 

H&R Block, Inc. (NYSE:HRB) today released its financial results for the fiscal 2018 second quarter ended October 31, 2017.  The company normally reports a fiscal second quarter loss due to the seasonality of its tax business.  The fiscal second quarter typically represents less than 5% of annual revenues and approximately 15% of annual expenses.

Highlights1

  • Fiscal second quarter financial results were in line with expectations
  • Revenues increased $10 million, or 7%, to $141 million primarily due to increased international tax preparation fees, positive fluctuations in foreign exchange rates, and favorable preseason results in the U.S.
  • Loss per share from continuing operations increased $0.04, from $0.67 to $0.71, due to both an increase in net loss from continuing operations and a year-over-year reduction in average shares outstanding, which negatively impacts those quarters with a loss
  • The company expects continued improvement in client trajectory in fiscal 2018, leading to modest revenue growth and margins consistent with the prior year

“During my first two months at H&R Block, I have been encouraged by the hard work of our associates and franchisees and their dedication to delivering for our clients and shareholders,” said Jeff Jones, H&R Block’s president and chief executive officer.  “I’m confident in our plans for the upcoming tax season, which are centered on operational excellence, new products and partnerships, and compelling marketing and promotions.  We’re excited for the tax season to begin.”

Fiscal 2018 Second Quarter Results From Continuing Operations

(in millions, except EPS)   Fiscal Year 2018   Fiscal Year 2017
Revenue   $ 141     $ 131  
Pretax Loss   $ (236 )   $ (228 )
Net Loss   $ (148 )   $ (143 )
Weighted-Avg. Shares – Diluted   209.1     215.5  
EPS2   $ (0.71 )   $ (0.67 )
EBITDA3   $ (170 )   $ (160 )
         

Key Financial Metrics

  • Total revenues increased $10 million, or 7%, to $141 million primarily due to increased international tax preparation fees, fluctuations in foreign exchange rates, and favorable preseason results in both the Assisted and DIY categories in the U.S. 
  • Total operating expenses increased $18 million, or 5%, to $357 million primarily due to increases in compensation costs, along with increases in occupancy costs, related to prior year acquisitions of franchisees.
  • Pretax loss increased $8 million to $236 million.
  • Loss per share from continuing operations increased $0.04, from $0.67 to $0.71.   Approximately half of the increase was due to the reduction in share count, which will be accretive on a full year basis.

“Seasonal expenses increased in the second quarter, but we expect to continue last year’s improved financial performance this fiscal year, targeting modest revenue growth and margins consistent with the prior year,” said Tony Bowen, H&R Block’s chief financial officer. “We are focused on executing our operational plans for the upcoming tax season to deliver these results.”

Dividends

As previously announced, a quarterly cash dividend of $0.24 per share is payable on January 2, 2018 to shareholders of record as of December 4, 2017.  H&R Block has paid quarterly dividends consecutively since the company went public in 1962.

Discontinued Operations

During the fiscal quarter, there were no material changes in estimated contingent losses related to Sand Canyon Corporation.  For additional information, please refer to disclosures in the company’s reports on Forms 10-K, 10-Q, and other filings with the Securities and Exchange Commission.

Conference Call

Discussion of the fiscal 2018 second quarter results, future 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 8:30 a.m. Eastern time on December 6, 2017. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:

U.S./Canada (855) 702-5257 or International (213) 358-0868
Conference ID: 89668795

The call, along with a presentation for viewing, will also be webcast in a listen-only format for the media and public. The link to the webcast can be accessed directly at http://investors.hrblock.com

A replay of the call will be available beginning at 11:30 a.m. Eastern time on December 6, 2017, and continuing until January 8, 2018, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 89668795. The webcast will be available for replay beginning on December 7, 2017 at http://investors.hrblock.com

About H&R Block

H&R Block, Inc. (NYSE:HRB) is a global consumer tax services provider. Tax return preparation services are provided by professional tax preparers in approximately 12,000 company-owned and franchise retail tax offices worldwide, and through H&R Block tax software products for the DIY consumer. H&R Block also offers adjacent Tax Plus products and services. In fiscal 2017, H&R Block had annual revenues of over $3 billion with 23 million tax returns prepared worldwide. For more information, visit the H&R Block Newsroom.

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,” “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, earnings per share, cost savings, capital expenditures, dividends, share repurchases, liquidity, capital structure 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. 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, 2017 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 http://investors.hrblock.com.  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.
3 The company reports non-GAAP financial measures of performance, including earnings before interest, tax, depreciation, and amortization (EBITDA), 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: Colby Brown, (816) 854-4559, colby.brown@hrblock.com
Media Relations: Susan Waldron, (816) 854-5522, susan.waldron@hrblock.com

Full Press Release Including Tables

 

Contact the Media Desk

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