H&R Block Reports Strong Fiscal 2021 Results; Increases Dividend

Tuesday, 15. June 2021 22:15
  • The Company achieved robust growth across total filing volumes, total market share, Assisted filings and market share, and Do-It-Yourself (DIY) revenue in the 2021 tax season. When including total tax season performance through the May 17, 2021 filing deadline, the Company substantially exceeded its original fiscal 2021 revenue and earnings outlook.
  • The Company announced a 4% increase in its quarterly dividend to $0.27 per share. This is the fifth increase in six years, resulting in a 35% total increase in that time frame.
  • The Company repurchased 2.11 million shares in its fiscal fourth quarter, resulting in total share repurchases of 11.6 million shares and $188 million, or $16.29 per share, for fiscal 2021.
  • The Company announced its fiscal year-end will change to June 30, effective immediately.

KANSAS CITY, Mo., June 15, 2021 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) (the “Company”) today released its financial results for the fiscal year ended April 30, 2021. The extension of the U.S. federal tax filing deadline from April 15 to May 17 resulted in the tax season concluding beyond fiscal 2021. Including performance through May 18, 2021, in fiscal 2021, would result in the Company substantially exceeding its original revenue and earnings outlook for 2021.

“I am proud of the outstanding growth across our business," said Jeff Jones, H&R Block's president and chief executive officer. "Our team provided help and inspired financial confidence for millions of consumers and small business owners this year. We made tremendous progress in our first year of Block Horizons, blending technology and digital tools with human expertise in tax, improving our offerings in small business, driving significant growth in Wave, and making progress on our new mobile banking platform.”

Fiscal 2021 Results From Continuing Operations

"Growth in total filings, strong performance from Wave, and proactive fiscal management resulted in a strong 2021 that exceeded our expectations," said Tony Bowen, H&R Block's chief financial officer. "We are confident in our future, as evidenced by increasing our quarterly dividend by 4% and repurchasing 6% of our shares outstanding this fiscal year."

(in millions, except EPS) Fiscal Year 2021 Fiscal Year 2020
Revenue $3,414  $2,640  
Pretax Income (Loss) $669  $(3) 
Net Income $590  $6  
Weighted-Avg. Shares - Diluted 188.8  198.1  
EPS2 $3.11  $0.03  
Adjusted EPS2,3 $3.39  $0.84  
Adjusted EBITDA3 $932  $368  

Key Financial Metrics

  • Total revenue of $3.4 billion increased by $774 million, or 29.3%, due to an increase in U.S. tax return volumes due to the extension of the 2020 tax season into our fiscal 2021, stronger mix in DIY, Emerald Card revenues related to federal stimulus payments, and strong growth from Wave.
  • Total operating expenses of $2.6 billion increased by $82 million, or 3.2%, due to an increase in variable labor, partially offset by impairment charges related to the pandemic in fiscal 2020, and lower bank partner fees and travel-related costs.
  • Pretax income of $669 million compared favorably to a pretax loss of $3 million in the prior year.
  • Earnings per share from continuing operations increased $3.08 to $3.11; adjusted earnings per share from continuing operations increased from $0.84 to $3.39.

Dividends and Share Repurchases

The company announced today that its Board of Directors increased the quarterly dividend by 4%, representing the fifth increase in the dividend in six years and a 35% total increase over that time frame. The quarterly cash dividend is now $0.27 per share, payable on July 1, 2021 to shareholders of record as of June 25, 2021. The Company has paid consecutive quarterly dividends since it became publicly traded in 1962. Future actions regarding dividends will be dependent upon the Board's approval following consideration of operating results, market conditions, and capital needs, among other factors.

In fiscal 2021, the company repurchased 11.6 million shares for $188 million, at an average price of $16.29. Share repurchases made in the fourth quarter of fiscal 2021 totaled $38 million. Approximately $564 million remains under the company's current share repurchase authorization, which expires in June of 2022.

Line of Credit
The Company amended its line of credit to a new five-year term, resulting in favorable rates, reduced capacity to better align with business needs, and lower costs. Additional details regarding this line of credit can be found in a related Form 8-K filing today.

Change in Fiscal Year

The Company announced a change to its fiscal year-end from April 30 to June 30, effective immediately. The change allows for better alignment of complete tax seasons in comparable fiscal periods and other related benefits. The Company plans to file a transition report on form 10-QT for the transition period of May 1, 2021, through June 30, 2021, later this summer. The Company’s fiscal 2022 will begin on July 1, 2021, and end on June 30, 2022.

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 fiscal 2021 results, outlook, and a general business update will occur during the company’s previously announced fiscal 2021 conference call for analysts and investors that will be held at 4:30 p.m. Eastern Time on Tuesday, June 15, 2021. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:

U.S./Canada (855) 859-2056 or International (404) 537-3406

Conference ID: 2575807

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 https://investors.hrblock.com. The presentation will be posted on the Quarterly Results page at https://investors.hrblock.com following the conclusion of the call.

A replay of the call will be available beginning at 7:30 p.m. Eastern time on June 15, 2021 and continuing for seven days by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 5554906. The webcast will be available for replay beginning on June 17, 2021 and continuing for 90 days at https://investors.hrblock.com.

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, financial services and small business solutions. The company blends digital innovation with the human expertise 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 hrblock.com/news and follow @HRBlockNews.

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," "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 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 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.
__________________

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 weighted average fully diluted shares over the corresponding period.
3 Adjusted earnings per share from continuing operations and adjusted EBITDA from continuing operations are non-GAAP financial measures. 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
  Michaella Gallina, (816) 854-3022, michaella.gallina@hrblock.com
Media Relations: Angela Davied, (816) 854-5798, angela.davied@hrblock.com


CONSOLIDATED STATEMENTS OF OPERATIONS   (unaudited, in 000s - except per share amounts)
  Three months ended April 30, Year ended April 30,
  2021 2020 2021 2020
         
REVENUES:        
Service revenues $2,110,618   $1,635,561   $3,067,223   $2,327,323  
Royalty, product and other revenues 217,562   173,791   346,764   312,397  
  2,328,180   1,809,352   3,413,987   2,639,720  
OPERATING EXPENSES:        
Costs of revenues 901,728   767,157   1,842,092   1,712,276  
Impairment of goodwill    106,000      106,000  
Selling, general and administrative 340,900   268,603   802,268   744,361  
Total operating expenses 1,242,628   1,141,760   2,644,360   2,562,637  
         
Other income (expense), net 1,220   1,896   5,979   15,637  
Interest expense on borrowings (21,551)  (27,412)  (106,870)  (96,094) 
Income (loss) from continuing operations before income taxes (benefit) 1,065,221   642,076   668,736   (3,374) 
Income taxes (benefit) 114,254   178,616   78,524   (9,530) 
Net income from continuing operations 950,967   463,460   590,212   6,156  
Net loss from discontinued operations (1,715)  (3,057)  (6,421)  (13,682) 
NET INCOME (LOSS) $949,252   $460,403   $583,791   $(7,526) 
         
BASIC EARNINGS (LOSS) PER SHARE:        
Continuing operations $5.22   $2.40   $3.15   $0.03  
Discontinued operations (0.01)  (0.01)  (0.04)  (0.07) 
Consolidated $5.21   $2.39   $3.11   $(0.04) 
         
WEIGHTED AVERAGE BASIC SHARES 181,512   192,475   186,832   196,701  
         
DILUTED EARNINGS (LOSS) PER SHARE:        
Continuing operations $5.14   $2.39   $3.11   $0.03  
Discontinued operations (0.01)  (0.02)  (0.03)  (0.07) 
Consolidated $5.13   $2.37   $3.08   $(0.04) 
         
WEIGHTED AVERAGE DILUTED SHARES 184,354   193,726   188,777   198,108  
         


CONSOLIDATED BALANCE SHEETS (unaudited, in 000s - except per share data)
As of April 30, 2021 2020
     
ASSETS    
Cash and cash equivalents $934,251   $2,661,914  
Cash and cash equivalents - restricted 128,669   211,106  
Receivables, net 197,876   133,197  
Income taxes receivable 333,366   28,477  
Prepaid expenses and other current assets 105,562   52,042  
Total current assets 1,699,724   3,086,736  
Property and equipment, net 148,490   184,367
Operating lease right of use asset 437,246   494,788
Intangible assets, net 360,148   414,976  
Goodwill 757,659   712,138  
Deferred tax assets and income taxes receivable 182,848   151,195  
Other noncurrent assets 67,531   67,847  
Total assets $3,653,646   $5,112,047  
LIABILITIES AND STOCKHOLDERS’ EQUITY    
LIABILITIES:    
Accounts payable and accrued expenses $198,084   $203,103  
Accrued salaries, wages and payroll taxes 270,982   116,375  
Accrued income taxes and reserves for uncertain tax positions 287,404   209,816  
Current portion of long-term debt    649,384  
Operating lease liabilities 206,393   195,537  
Deferred revenue and other current liabilities 200,216   201,401  
Total current liabilities 1,163,079   1,575,616  
Long-term debt and line of credit borrowings 1,490,039   2,845,873  
Deferred tax liabilities and reserves for uncertain tax positions 279,351   182,441  
Operating lease liabilities 242,626   312,566  
Deferred revenue and other noncurrent liabilities 126,150   124,510  
Total liabilities 3,301,245   5,041,006  
COMMITMENTS AND CONTINGENCIES    
STOCKHOLDERS’ EQUITY:    
Common stock, no par, stated value $.01 per share 2,167   2,282  
Additional paid-in capital 783,292   775,387  
Accumulated other comprehensive income (loss) 4,786   (51,576) 
Retained earnings 248,506   42,965  
Less treasury shares, at cost (686,350)  (698,017) 
Total stockholders' equity 352,401   71,041  
Total liabilities and stockholders' equity $3,653,646   $5,112,047  
     


CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in 000s)
Year ended April 30, 2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income (loss) $583,791   $(7,526) 
           
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation and amortization 156,852   169,536  
Provision for bad debt 73,451   76,621  
Deferred taxes (22,583)  (8,300) 
Stock-based compensation 28,271   28,045  
Impairment of goodwill    106,000  
Changes in assets and liabilities, net of acquisitions:    
Receivables (150,933)  (66,896) 
Prepaid expenses and other current and noncurrent assets (49,498)  39,377  
Accounts payable, accrued expenses, salaries, wages and payroll taxes 150,635   (124,019) 
Deferred revenue, other current and noncurrent liabilities (1,160)  (9,096) 
Income tax receivables, accrued income taxes and income tax reserves (138,152)  (87,423) 
Other, net (4,746)  (7,358) 
  Net cash provided by operating activities 625,928   108,961  
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures (52,792)  (81,685) 
Payments made for business acquisitions, net of cash acquired (15,576)  (450,242) 
Franchise loans funded (26,917)  (35,264) 
Payments from franchisees 41,215   39,919  
Other, net 8,547   57,041  
Net cash used in investing activities (45,523)  (470,231) 
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Repayments of line of credit borrowings (3,275,000)  (1,335,000) 
Proceeds from line of credit borrowings 1,275,000   3,335,000  
Repayments of long-term debt (650,000)    
Proceeds from issuance of long-term debt 647,965     
Dividends paid (195,068)  (204,870) 
Repurchase of common stock, including shares surrendered (191,294)  (256,214) 
Proceeds from exercise of stock options 2,140   2,075  
Other, net (22,566)  (9,143) 
Net cash provided by (used in) financing activities (2,408,823)  1,531,848  
     
Effects of exchange rate changes on cash 18,318   (5,285) 
     
Net increase (decrease) in cash and cash equivalents, including restricted balances (1,810,100)  1,165,293  
Cash, cash equivalents and restricted cash, beginning of the year 2,873,020   1,707,727  
Cash, cash equivalents and restricted cash, end of the year $1,062,920   $2,873,020  
     
SUPPLEMENTARY CASH FLOW DATA:    
Income taxes paid, net of refunds received $236,459   $89,204  
Interest paid on borrowings 103,855   87,426  
Accrued additions to property and equipment 1,643   1,185  
     


FINANCIAL RESULTS (unaudited, in 000s - except per share amounts)
  Three months ended April 30, Year ended April 30,
  2021 2020 2021 2020
REVENUES:        
U.S. assisted tax preparation $1,493,968   $1,175,129   $2,035,107   $1,533,303  
U.S. royalties 158,826   133,767   226,253   193,411  
U.S. DIY tax preparation 218,724   166,861   313,055   208,901  
International 117,521   82,754   249,868   180,065  
Refund Transfers 151,577   101,893   163,329   154,687  
Emerald Card® 87,916   53,609   136,717   92,737  
Peace of Mind® Extended Service Plan 26,011   29,734   98,882   105,185  
Tax Identity Shield® 21,495   14,489   40,624   31,797  
Interest and fee income on Emerald AdvanceSM 24,676   27,087   53,430   60,867  
Wave 17,080   10,971   58,277   36,711  
Other 10,386   13,058   38,445   42,056  
Total revenues 2,328,180   1,809,352   3,413,987   2,639,720  
         
Compensation and benefits:        
Field wages 490,711   398,582   797,262   678,813  
Other wages 90,654   40,159   272,664   218,548  
Benefits and other compensation 102,566   74,956   208,147   175,535  
  683,931   513,697   1,278,073   1,072,896  
         
Occupancy 116,508   117,932   414,389   410,402  
Marketing and advertising 167,007   153,904   261,960   255,094  
Depreciation and amortization 39,689   44,127   156,852   169,536  
Bad debt 50,004   39,876   78,763   77,470  
Impairment of goodwill    106,000      106,000  
Other 185,489   166,224   454,323   471,239  
Total operating expenses 1,242,628   1,141,760   2,644,360   2,562,637  
         
Other income (expense), net 1,220   1,896   5,979   15,637  
Interest expense on borrowings (21,551)  (27,412)  (106,870)  (96,094) 
Income (loss) from continuing operations before income taxes (benefit) 1,065,221   642,076   668,736   (3,374) 
Income taxes (benefit) 114,254   178,616   78,524   (9,530) 
Net income from continuing operations 950,967   463,460   590,212   6,156  
Net loss from discontinued operations (1,715)  (3,057)  (6,421)  (13,682) 
NET INCOME (LOSS) $949,252   $460,403   $583,791   $(7,526) 
         
BASIC EARNINGS (LOSS) PER SHARE:        
Continuing operations $5.22   $2.40   $3.15   $0.03  
Discontinued operations (0.01)  (0.01)  (0.04)  (0.07) 
Consolidated $5.21   $2.39   $3.11   $(0.04) 
         
WEIGHTED AVERAGE BASIC SHARES 181,512   192,475   186,832   196,701  
         
DILUTED EARNINGS (LOSS) PER SHARE:        
Continuing operations $5.14   $2.39   $3.11   $0.03  
Discontinued operations (0.01)  (0.02)  (0.03)  (0.07) 
Consolidated $5.13   $2.37   $3.08   $(0.04) 
         
WEIGHTED AVERAGE DILUTED SHARES 184,354   193,726   188,777   198,108  
         
Adjusted EPS(1) $5.16   $3.01   $3.39   $0.84  
EBITDA(1) 1,126,461   713,615   932,458   262,256  
Adjusted EBITDA (1) 1,126,461   819,615   932,458   368,256  
Adjusted EBITDA margin (1) 48.4%  45.3%  27.3%  14.0% 
         

(1) All non-GAAP measures are results from continuing operations. See "Non-GAAP Financial Information" for a reconciliation of non-GAAP measures.


NON-GAAP FINANCIAL MEASURES    
         
        (in 000s)
  Three months ended April 30, Year ended April 30,
NON-GAAP FINANCIAL MEASURE - EBITDA 2021 2020 2021 2020
         
Net income (loss) - as reported $949,252  $460,403  $583,791  $(7,526) 
Discontinued operations, net 1,715  3,057  6,421  13,682  
Net income from continuing operations - as reported 950,967  463,460  590,212  6,156  
Add back:        
Income taxes (benefit) 114,254  178,616  78,524  (9,530) 
Interest expense 21,551  27,412  106,870  96,094  
Depreciation and amortization 39,689  44,127  156,852  169,536  
  175,494  250,155  342,246  256,100  
         
EBITDA from continuing operations 1,126,461  713,615  932,458  262,256  
Adjustments:        
Impairment of goodwill   106,000    106,000  
Adjusted EBITDA from continuing operations $1,126,461  $819,615  $932,458  $368,256  
         
EBITDA margin from continuing operations (1) 48.4% 39.4% 27.3% 9.9% 
Adjusted EBITDA margin from continuing operations (2) 48.4% 45.3% 27.3% 14.0% 
         

(1) EBITDA margin from continuing operations is computed as EBITDA from continuing operations divided by revenues from continuing operations.
(2) Adjusted EBITDA margin from continuing operations is computed as adjusted EBITDA from continuing operations divided by revenues from continuing operations.

      (in 000s, except per share amounts)
  Three months ended April 30, Year ended April 30,
NON-GAAP FINANCIAL MEASURE - ADJUSTED EPS 2021 2020 2021 2020
         
Net income from continuing operations - as reported $950,967   $463,460   $590,212   $6,156  
         
Adjustments:        
Amortization of intangibles related to acquisitions (pretax) 16,211   19,564   68,387   74,561  
Impairment of goodwill (pretax)    106,000      106,000  
Tax effect of adjustments(1) (11,741)  (5,459)  (15,884)  (19,126) 
Adjusted net income from continuing operations $955,437   $583,565   $642,715   $167,591  
         
Diluted earnings per share from continuing operations - as reported $5.14   $2.39   $3.11   $0.03  
Adjustments, net of tax 0.02   0.62   0.28   0.81  
Adjusted diluted earnings per share from continuing operations $5.16   $3.01   $3.39   $0.84  
         

(1) The tax effect of adjustments is the difference between the tax provision calculation 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 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.


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