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H&R Block Reports Fiscal 2024 First Quarter Results; Full Year Outlook Reaffirmed

KANSAS CITY, Mo., Nov. 07, 2023 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) (the "Company") today released its financial results1 for the fiscal 2024 first quarter ended September 30, 2023.

  • First quarter revenue was $183.8 million, an increase of 2% to the prior year
  • The Company reaffirmed its previously announced outlook for fiscal year 2024
  • Repurchased $132.0 million of shares, retiring another 2% of shares outstanding during the first quarter

"We had a good start to the year and are reaffirming our outlook," said Jeff Jones, H&R Block's president and chief executive officer. "We continue to make progress across our Block Horizons imperatives, and we remain committed to delivering value to shareholders through our capital allocation. I am proud of the work that is being done and feel well-positioned to deliver results this fiscal year."

Fiscal 2024 First Quarter Results and Key Financial Metrics

"First quarter results met expectations and we repurchased another $132.0 million of shares outstanding," said Tony Bowen, H&R Block's chief financial officer. "Our financial position is strong as we head into the second quarter."

  • Total revenue of $183.8 million increased by $3.8 million, or 2%, to the prior year. The increase was primarily due to higher U.S. assisted tax preparation revenues driven by an increase in net average charge, partially offset by lower Emerald Card® revenues.
  • Total operating expenses of $390.1 million increased by $1.0 million, as a result of higher corporate wages and bad debt, partially offset by lower marketing and advertising and consulting expenses.
  • Pretax loss decreased by $9.0 million to $212.4 million, primarily due to higher revenues and interest income in the current year.
  • Loss per share from continuing operations2 increased from $(1.05) to $(1.11) and adjusted loss per share from continuing operations2 increased from $(0.99) to $(1.05), due to fewer shares outstanding.

Capital Allocation

The Company reported the following related to its capital structure:

  • Repurchased and retired 3.3 million shares at an aggregate price of $132.0 million, or $40.43 per share in Q1.
  • The Company has approximately $568.1 million remaining on its $1.25 billion share repurchase authorization available through fiscal year 2025.
  • As previously announced, a quarterly cash dividend of $0.32 per share is payable on January 4, 2024 to shareholders of record as of December 5, 2023. H&R Block has paid quarterly dividends consecutively since the Company became public in 1962.

Since 2016, the Company has returned more than $3.5 billion to shareholders in the form of share repurchases and dividends, buying back over 38% of its shares outstanding3.

Fiscal Year 2024 Outlook Reaffirmed

The Company continues to expect:

  • Revenue to be in the range of $3.530 to $3.585 billion.
  • EBITDA4 to be in the range of $930 to $965 million.
  • Effective tax rate to be approximately 23%.
  • Adjusted Diluted Earnings Per Share4 to be in the range of $4.10 to $4.30.

Conference Call

A conference call for analysts, institutional investors, and shareholders will be held at 4:30 p.m. Eastern time on Tuesday, November 7, 2023. During the conference call the company will discuss fiscal 2024 first quarter results, outlook, and give a general business update. To join live, participants must register at https://register.vevent.com/register/BIc49f8941ac46494e8665e8f15794a2dc. 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/973awt3i 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 EPS and 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:   Heather Woodard, (660) 864-3836, heather.woodard@hrblock.com
     


FINANCIAL RESULTS   (unaudited, in 000s - except per share amounts)
    Three months ended September 30,
      2023       2022  
REVENUES:        
U.S. tax preparation and related services:        
Assisted tax preparation   $         39,263     $         36,312  
Royalties             5,701               6,228  
DIY tax preparation             3,848               3,158  
Refund Transfers             1,142               1,284  
Peace of Mind® Extended Service Plan             24,847               24,770  
Tax Identity Shield®             4,580               5,167  
Other             10,980               9,360  
Total U.S. tax preparation and related services             90,361               86,279  
Financial services:        
Emerald Card® and SpruceSM             8,633               11,612  
Interest and fee income on Emerald AdvanceSM             298               614  
Total financial services             8,931               12,226  
International             60,565               58,834  
Wave             23,943               22,646  
Total revenues   $         183,800     $         179,985  
Compensation and benefits:        
Field wages             62,435               61,673  
Other wages             72,098               63,753  
Benefits and other compensation             35,248               34,832  
              169,781               160,258  
Occupancy             99,285               97,590  
Marketing and advertising             5,481               10,649  
Depreciation and amortization             30,225               33,624  
Bad debt             4,798               329  
Other             80,556               86,646  
Total operating expenses             390,126               389,096  
Other income (expense), net             9,836               3,611  
Interest expense on borrowings             (15,870 )             (15,824 )
Pretax loss             (212,360 )             (221,324 )
Income tax benefit             (49,487 )             (53,957 )
Net loss from continuing operations             (162,873 )             (167,367 )
Net loss from discontinued operations             (609 )             (1,054 )
Net loss   $         (163,482 )   $         (168,421 )
BASIC AND DILUTED LOSS PER SHARE:        
Continuing operations   $         (1.11 )   $         (1.05 )
Discontinued operations             (0.01 )             (0.01 )
Consolidated   $         (1.12 )   $         (1.06 )
WEIGHTED AVERAGE DILUTED SHARES             146,273               159,284  
Adjusted diluted EPS (1)   $         (1.05 )   $         (0.99 )
EBITDA (1)   $         (166,265 )   $         (171,876 )
         

(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   September 30, 2023   June 30, 2023
         
ASSETS        
Cash and cash equivalents   $         426,990     $         986,975  
Cash and cash equivalents - restricted             30,570               28,341  
Receivables, net             60,330               59,987  
Income taxes receivable             42,136               35,910  
Prepaid expenses and other current assets             71,814               76,273  
Total current assets             631,840               1,187,486  
Property and equipment, net             131,667               130,015  
Operating lease right of use assets             412,415               438,299  
Intangible assets, net             267,512               277,043  
Goodwill             770,820               775,453  
Deferred tax assets and income taxes receivable             248,642               211,391  
Other noncurrent assets             48,156               52,571  
Total assets   $         2,511,052     $         3,072,258  
LIABILITIES AND STOCKHOLDERS’ EQUITY        
LIABILITIES:        
Accounts payable and accrued expenses   $         149,892     $         159,901  
Accrued salaries, wages and payroll taxes             51,986               95,154  
Accrued income taxes and reserves for uncertain tax positions             205,919               271,800  
Operating lease liabilities             195,685               205,391  
Deferred revenue and other current liabilities             189,304               206,536  
Total current liabilities             792,786               938,782  
Long-term debt             1,489,514               1,488,974  
Deferred tax liabilities and reserves for uncertain tax positions             265,621               264,567  
Operating lease liabilities             224,365               240,543  
Deferred revenue and other noncurrent liabilities             83,650               107,328  
Total liabilities             2,855,936               3,040,194  
COMMITMENTS AND CONTINGENCIES        
STOCKHOLDERS’ EQUITY:        
Common stock, no par, stated value $.01 per share             1,757               1,789  
Additional paid-in capital             740,434               770,376  
Accumulated other comprehensive loss             (48,013 )             (37,099 )
Retained deficit             (393,621 )             (48,677 )
Less treasury shares, at cost             (645,441 )             (654,325 )
Total stockholders' equity (deficiency)             (344,884 )             32,064  
Total liabilities and stockholders' equity   $         2,511,052     $         3,072,258  
         


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   (unaudited, in 000s)
Three months ended September 30,     2023       2022  
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss   $         (163,482 )   $         (168,421 )
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization             30,225               33,624  
Provision for credit losses             1,098               1,077  
Deferred taxes             (37,757 )             16,918  
Stock-based compensation             7,550               7,654  
Changes in assets and liabilities, net of acquisitions:        
Receivables             4,981               3,702  
Prepaid expenses, other current and noncurrent assets             6,396               (2,669 )
Accounts payable, accrued expenses, salaries, wages and payroll taxes             (71,202 )             (129,908 )
Deferred revenue, other current and noncurrent liabilities             (42,657 )             (41,549 )
Income tax receivables, accrued income taxes and income tax reserves             (70,301 )             (41,659 )
Other, net             160               (435 )
Net cash used in operating activities             (334,989 )             (321,666 )
CASH FLOWS FROM INVESTING ACTIVITIES:        
Capital expenditures             (12,916 )             (16,161 )
Payments made for business acquisitions, net of cash acquired             (6,919 )             (16,507 )
Franchise loans funded             (5,380 )             (6,686 )
Payments from franchisees             937               2,270  
Other, net             388               (274 )
Net cash used in investing activities             (23,890 )             (37,358 )
CASH FLOWS FROM FINANCING ACTIVITIES:        
Dividends paid             (42,953 )             (43,093 )
Repurchase of common stock, including shares surrendered             (150,442 )             (202,845 )
Other, net             (1,803 )             (955 )
Net cash used in financing activities             (195,198 )             (246,893 )
Effects of exchange rate changes on cash             (3,679 )             (13,422 )
Net decrease in cash and cash equivalents, including restricted balances             (557,756 )             (619,339 )
Cash, cash equivalents and restricted cash, beginning of period             1,015,316               1,050,713  
Cash, cash equivalents and restricted cash, end of period   $         457,560     $         431,374  
SUPPLEMENTARY CASH FLOW DATA:        
Income taxes paid (received), net   $         58,337     $         (29,811 )
Interest paid on borrowings             19,792               19,792  
Accrued additions to property and equipment             3,316               4,704  
New operating right of use assets and related lease liabilities             38,468               52,265  
Accrued dividends payable to common shareholders             46,901               46,100  
Accrued purchase of common stock             10,003               32,356  
         


(in 000s)
    Three months ended September 30,
NON-GAAP FINANCIAL MEASURE - EBITDA     2023       2022  
         
Net loss - as reported   $         (163,482 )   $         (168,421 )
Discontinued operations, net             609               1,054  
Net loss from continuing operations - as reported             (162,873 )             (167,367 )
Add back:        
Income tax benefit             (49,487 )             (53,957 )
Interest expense             15,870               15,824  
Depreciation and amortization             30,225               33,624  
              (3,392 )             (4,509 )
EBITDA from continuing operations   $         (166,265 )   $         (171,876 )
         


(in 000s, except per share amounts)
    Three months ended September 30,
NON-GAAP FINANCIAL MEASURE - ADJUSTED EPS     2023       2022  
         
Net loss from continuing operations - as reported   $         (162,873 )   $         (167,367 )
Adjustments:        
Amortization of intangibles related to acquisitions (pretax)             12,555               12,696  
Tax effect of adjustments (1)             (2,936 )             (3,221 )
Adjusted net loss from continuing operations   $         (153,254 )   $         (157,892 )
Diluted loss per share from continuing operations - as reported   $         (1.11 )   $         (1.05 )
Adjustments, net of tax             0.06               0.06  
Adjusted diluted loss per share from continuing operations   $         (1.05 )   $         (0.99 )
         

(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.


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