Investor Relations


Press Release Details

H&R Block Reports Fiscal 2020 Results

June 16, 2020
  • Impacts of the COVID-19 pandemic and the extension of the U.S. federal tax filing deadline until July 15th resulted in lower fiscal 2020 revenue and earnings compared to the prior year.
  • The company ended the fiscal year with $2.7 billion1 in cash and announced a quarterly dividend of $0.26 per share.
  • An update on full tax season results will be included as a part of the fiscal 2021 first quarter earnings call.

KANSAS CITY, Mo., June 16, 2020 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) today released its financial results for the fiscal year ended April 30, 2020 and provided an update on its response to the COVID-19 pandemic.  The pandemic, along with the related extension of the U.S. federal tax filing deadline from April 15th to July 15th, resulted in lower revenue and earnings compared to the prior year.

The company will provide an update on its complete tax season 2020 results during its fiscal 2021 first quarter earnings call.

“This has obviously been a challenging time for everyone, and I'm so proud of how our associates, tax pros, and franchisees responded in the face of the pandemic," said Jeff Jones, H&R Block's president and chief executive officer.  "This has impacted our business and challenged us to be agile and innovative as we made broad changes to our operating model in order to continue to help our clients.  We remain committed to transforming our business and will use this opportunity to reimagine our future.”

Fiscal 2020 Results From Continuing Operations

"Prior to the disruption to the tax industry caused by the pandemic, we were on track to deliver on our financial outlook for fiscal 2020.  Our focus now is on executing during the first quarter as we navigate this difficult time," said Tony Bowen, H&R Block's chief financial officer.  "We have adequate liquidity to meet anticipated operating cash needs through the start of tax season 2021 and are taking measures to reduce expenses to continue to fund future growth."

(in millions, except EPS)   Fiscal Year 2020   Fiscal Year 2019
Revenue   $ 2,640     $ 3,095  
Pretax Income (Loss)   $ (3 )   $ 545  
Net Income   $ 6     $ 445  
Weighted-Avg. Shares – Diluted   198.1     206.7  
EPS2   $ 0.03     $ 2.15  
Adjusted EPS2,3   $ 0.84     $ 2.39  
Adjusted EBITDA3   $ 368     $ 799  

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 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).

Key Financial Metrics

  • Total revenues of $2.6 billion decreased $455 million, or 14.7 percent, due to lower U.S. tax return volumes, partially offset by the addition of Wave.
  • The COVID-19 pandemic and its effect on small businesses has impacted Wave's client volumes and revenues.  As a result, we evaluated Wave's goodwill during our fiscal fourth quarter, which resulted in an impairment of $106.0 million.  We remain confident in Wave's future, and in our ability to continue to deliver value to small business owners through Wave's innovative platform.
  • Total operating expenses of $2.6 billion increased $84 million, or 3.4 percent, primarily due to the impairment of Wave's goodwill, Wave's operating expenses, legal fees, and planned investments in technology, partially offset by compensation savings on lower tax return volume.
  • Pretax loss of $3 million compared to pretax income of $545 million in the prior year.
  • Earnings per share from continuing operations decreased $2.12 to $0.03; adjusted earnings per share from continuing operations decreased $1.55 to $0.84.

Dividends, Share Repurchases, and Debt Covenant

The company announced that its Board of Directors has declared a quarterly cash dividend of $0.26 per share, payable on July 1, 2020 to shareholders of record as of June 26, 2020H&R Block has paid quarterly dividends consecutively since the company went public 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 2020, the company repurchased 10.1 million shares for $247 million, at an average price of $24.36.  No share repurchases were made in the fourth quarter of fiscal 2020.  Approximately $750 million remains under the company's current share repurchase authorization, which expires in June 2022.

The company ended the fiscal year with $2.7 billion in cash, including $2.0 billion from its line of credit, which remains fully drawn.  The line of credit is subject to various conditions, including a covenant which requires us to maintain a debt-to-EBITDA ratio of 3.5 on April 30 of each year.  The company did not meet this covenant based on fiscal 2020 financial results but has obtained a waiver from its lenders for the period ended April 30, 2020 with no changes to any of the terms of the line of credit.

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 2020 results, outlook, and a general business update will occur during the company’s previously announced fiscal 2020 earnings conference call for analysts, institutional investors, and shareholders.  The call is scheduled for 4:30 p.m. Eastern time on June 16, 2020. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:

U.S./Canada (866) 987-6821 or International (630) 652-5951
Conference ID: 5554906

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.  The presentation will be posted on the Quarterly Results page at http://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 16, 2020 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, 2020 and continuing for 90 days at http://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 is disrupting the tax industry by providing consumers price transparency and with digital platforms such as Tax Pro GoSM. H&R Block believes the best solutions blend digital capabilities with human expertise and care. 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.

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


 
CONSOLIDATED STATEMENTS OF OPERATIONS       (unaudited, in 000s -
except per share amounts)
    Three months ended April 30,   Year ended April 30,
    2020   2019   2020   2019
                 
REVENUES:                
Service revenues   $ 1,635,561     $ 2,063,941     $ 2,327,323     $ 2,691,727  
Royalty, product and other revenues   173,791     268,502     312,397     403,154  
    1,809,352     2,332,443     2,639,720     3,094,881  
OPERATING EXPENSES:                
Costs of revenues   767,157     863,521     1,712,276     1,756,922  
Impairment of goodwill   106,000         106,000      
Selling, general and administrative   268,603     317,650     744,361     722,167  
Total operating expenses   1,141,760     1,181,171     2,562,637     2,479,089  
                 
Other income (expense), net   1,896     5,144     15,637     16,419  
Interest expense on borrowings   (27,412 )   (21,837 )   (96,094 )   (87,051 )
Income (loss) from continuing operations before income taxes (benefit)   642,076     1,134,579     (3,374 )   545,160  
Income taxes (benefit)   178,616     249,810     (9,530 )   99,904  
Net income from continuing operations   463,460     884,769     6,156     445,256  
Net loss from discontinued operations   (3,057 )   (6,860 )   (13,682 )   (22,747 )
NET INCOME (LOSS)   $ 460,403     $ 877,909     $ (7,526 )   $ 422,509  
                 
BASIC EARNINGS (LOSS) PER SHARE:                
Continuing operations   $ 2.40     $ 4.36     $ 0.03     $ 2.16  
Discontinued operations   (0.01 )   (0.04 )   (0.07 )   (0.11 )
Consolidated   $ 2.39     $ 4.32     $ (0.04 )   $ 2.05  
                 
WEIGHTED AVERAGE BASIC SHARES   192,475     202,675     196,701     205,372  
                 
DILUTED EARNINGS (LOSS) PER SHARE:                
Continuing operations   $ 2.39     $ 4.32     $ 0.03     $ 2.15  
Discontinued operations   (0.02 )   (0.03 )   (0.07 )   (0.11 )
Consolidated   $ 2.37     $ 4.29     $ (0.04 )   $ 2.04  
                 
WEIGHTED AVERAGE DILUTED SHARES   193,726     204,199     198,108     206,724  
                 


CONSOLIDATED BALANCE SHEETS   (unaudited, in 000s - except per share data)
As of April 30,   2020   2019
         
ASSETS        
Cash and cash equivalents   $ 2,661,914     $ 1,572,150  
Cash and cash equivalents - restricted   211,106     135,577  
Receivables, net   133,197     138,965  
Prepaid expenses and other current assets   80,519     146,667  
Total current assets   3,086,736     1,993,359  
Property and equipment, net   184,367     212,092  
Operating lease right of use asset   494,788      
Intangible assets, net   414,976     342,493  
Goodwill   712,138     519,937  
Deferred tax assets and income taxes receivable   151,195     141,979  
Other noncurrent assets   67,847     90,085  
Total assets   $ 5,112,047     $ 3,299,945  
LIABILITIES AND STOCKHOLDERS’ EQUITY        
LIABILITIES:        
Accounts payable and accrued expenses   $ 203,103     $ 249,525  
Accrued salaries, wages and payroll taxes   116,375     196,527  
Accrued income taxes and reserves for uncertain tax positions   209,816     271,973  
Current portion of long-term debt   649,384      
Operating lease liabilities   195,537      
Deferred revenue and other current liabilities   201,401     204,976  
Total current liabilities   1,575,616     923,001  
Long-term debt and line of credit borrowings   2,845,873     1,492,629  
Deferred tax liabilities and reserves for uncertain tax positions   182,441     197,906  
Operating lease liabilities   312,566      
Deferred revenue and other noncurrent liabilities   124,510     144,882  
Total liabilities   5,041,006     2,758,418  
COMMITMENTS AND CONTINGENCIES        
STOCKHOLDERS’ EQUITY:        
Common stock, no par, stated value $.01 per share   2,282     2,383  
Additional paid-in capital   775,387     767,636  
Accumulated other comprehensive loss   (51,576 )   (20,416 )
Retained earnings   42,965     499,386  
Less treasury shares, at cost   (698,017 )   (707,462 )
Total stockholders' equity   71,041     541,527  
Total liabilities and stockholders' equity   $ 5,112,047     $ 3,299,945  
         


CONSOLIDATED STATEMENTS OF CASH FLOWS   (unaudited, in 000s)
Year ended April 30,   2020   2019
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income (loss)   $ (7,526 )   $ 422,509  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Depreciation and amortization   169,536     166,695  
Provision for bad debt   76,621     70,569  
Deferred taxes   (8,300 )   1,129  
Stock-based compensation   28,045     23,767  
Impairment of goodwill   106,000      
Changes in assets and liabilities, net of acquisitions:        
Receivables   (66,896 )   (73,648 )
Prepaid expenses and other current and noncurrent assets   39,377     (4,503 )
Accounts payable, accrued expenses, salaries, wages and payroll taxes   (124,019 )   54,827  
Deferred revenue, other current and noncurrent liabilities   (9,096 )   (13,758 )
Income tax receivables, accrued income taxes and income tax reserves   (87,423 )   (36,824 )
Other, net   (7,358 )   (4,225 )
Net cash provided by operating activities   108,961     606,538  
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Capital expenditures   (81,685 )   (95,490 )
Payments made for business acquisitions, net of cash acquired   (450,242 )   (43,637 )
Franchise loans funded   (35,264 )   (19,922 )
Payments from franchisees   39,919     32,671  
Other, net   57,041     (28,753 )
Net cash used in investing activities   (470,231 )   (155,131 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Repayments of line of credit borrowings   (1,335,000 )   (720,000 )
Proceeds from line of credit borrowings   3,335,000     720,000  
Dividends paid   (204,870 )   (205,461 )
Repurchase of common stock, including shares surrendered   (256,214 )   (189,912 )
Proceeds from exercise of stock options   2,075     2,532  
Other, net   (9,143 )   (10,854 )
Net cash provided by (used in) financing activities   1,531,848     (403,695 )
         
Effects of exchange rate changes on cash   (5,285 )   (3,663 )
         
Net increase in cash and cash equivalents, including restricted balances   1,165,293     44,049  
Cash, cash equivalents and restricted cash, beginning of the year   1,707,727     1,663,678  
Cash, cash equivalents and restricted cash, end of the year   $ 2,873,020     $ 1,707,727  
         
SUPPLEMENTARY CASH FLOW DATA:        
Income taxes paid, net of refunds received   $ 89,204     $ 132,982  
Interest paid on borrowings   87,426     82,442  
Accrued additions to property and equipment   1,185     6,159  
         


FINANCIAL RESULTS   (unaudited, in 000s - except per share amounts)
    Three months ended April 30,   Year ended April 30,
    2020   2019   2020   2019
REVENUES:                
U.S. assisted tax preparation   $ 1,175,129     $ 1,529,429     $ 1,533,303     $ 1,858,998  
U.S. royalties   133,767     185,643     193,411     243,541  
U.S. DIY tax preparation   166,861     222,422     208,901     261,413  
International   82,754     123,582     180,065     220,562  
Refund Transfers   101,893     120,519     154,687     169,985  
Emerald Card®   53,609     59,552     92,737     98,256  
Peace of Mind® Extended Service Plan   29,734     30,623     105,185     108,114  
Tax Identity Shield®   14,489     18,022     31,797     35,661  
Interest and fee income on Emerald Advance   27,087     26,414     60,867     58,182  
Wave   10,971         36,711      
Other   13,058     16,237     42,056     40,169  
Total revenues   1,809,352     2,332,443     2,639,720     3,094,881  
                 
Compensation and benefits:                
Field wages   398,582     488,600     678,813     751,392  
Other wages   40,159     64,950     218,548     217,061  
Benefits and other compensation   74,956     90,389     175,535     180,276  
    513,697     643,939     1,072,896     1,148,729  
                 
Occupancy   117,932     111,328     410,402     401,341  
Marketing and advertising   153,904     181,451     255,094     269,807  
Depreciation and amortization   44,127     40,682     169,536     166,695  
Bad debt   39,876     37,504     77,470     70,695  
Impairment of goodwill   106,000         106,000      
Other   166,224     166,267     471,239     421,822  
Total operating expenses   1,141,760     1,181,171     2,562,637     2,479,089  
                 
Other income (expense), net   1,896     5,144     15,637     16,419  
Interest expense on borrowings   (27,412 )   (21,837 )   (96,094 )   (87,051 )
Income (loss) from continuing operations before income taxes (benefit)   642,076     1,134,579     (3,374 )   545,160  
Income taxes (benefit)   178,616     249,810     (9,530 )   99,904  
Net income from continuing operations   463,460     884,769     6,156     445,256  
Net loss from discontinued operations   (3,057 )   (6,860 )   (13,682 )   (22,747 )
NET INCOME (LOSS)   $ 460,403     $ 877,909     $ (7,526 )   $ 422,509  
                 
BASIC EARNINGS (LOSS) PER SHARE:                
Continuing operations   $ 2.40     $ 4.36     $ 0.03     $ 2.16  
Discontinued operations   (0.01 )   (0.04 )   (0.07 )   (0.11 )
Consolidated   $ 2.39     $ 4.32     $ (0.04 )   $ 2.05  
                 
WEIGHTED AVERAGE BASIC SHARES   192,475     202,675     196,701     205,372  
                 
DILUTED EARNINGS (LOSS) PER SHARE:                
Continuing operations   $ 2.39     $ 4.32     $ 0.03     $ 2.15  
Discontinued operations   (0.02 )   (0.03 )   (0.07 )   (0.11 )
Consolidated   $ 2.37     $ 4.29     $ (0.04 )   $ 2.04  
                 
WEIGHTED AVERAGE DILUTED SHARES   193,726     204,199     198,108     206,724  
                 
Adjusted EBITDA from continuing operations (1)   $ 819,615     $ 1,197,098     $ 368,256     $ 798,906  
Adjusted EBITDA margin of continuing operations (1)   45.3 %   51.3 %   14.0 %   25.8 %
                 
(1) See "Non-GAAP Financial Information" for a reconciliation of non-GAAP measures.


         
NON-GAAP FINANCIAL MEASURES        
                 
    Three months ended April 30,   Year ended April 30,
NON-GAAP FINANCIAL MEASURE - EBITDA   2020   2019   2020   2019
                 
Net income (loss) - as reported   $ 460,403     $ 877,909     $ (7,526 )   $ 422,509  
Discontinued operations, net   3,057     6,860     13,682     22,747  
Net income from continuing operations - as reported   463,460     884,769     6,156     445,256  
Add back:                
Income taxes (benefit) of continuing operations   178,616     249,810     (9,530 )   99,904  
Interest expense of continuing operations   27,412     21,837     96,094     87,051  
Depreciation and amortization of continuing operations   44,127     40,682     169,536     166,695  
    250,155     312,329     256,100     353,650  
EBITDA from continuing operations   713,615     1,197,098     262,256     798,906  
Adjustments:                
  Impairment of goodwill   106,000         106,000      
Adjusted EBITDA from continuing operations   $ 819,615     $ 1,197,098     $ 368,256     $ 798,906  
                 
EBITDA margin from continuing operations (1)   39.4 %   51.3 %   9.9 %   25.8 %
Adjusted EBITDA margin from continuing operations (2)   45.3 %   51.3 %   14.0 %   25.8 %
                 
(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.


         
    Three months ended April 30,   Year ended April 30,
NON-GAAP FINANCIAL MEASURE - ADJUSTED EPS   2020   2019   2020   2019
                 
Net income from continuing operations - as reported   $ 463,460     $ 884,769     $ 6,156     $ 445,256  
                 
Adjustments:                
Amortization of intangibles related to acquisitions (pretax)   19,564     16,298     74,561     62,751  
Impairment of goodwill (pretax)   106,000         106,000      
Tax effect of adjustments(1)   (5,459 )   (3,775 )   (19,126 )   (14,891 )
Adjusted net income from continuing operations   $ 583,565     $ 897,292     $ 167,591     $ 493,116  
                 
Diluted income per share - as reported   $ 2.39     $ 4.32     $ 0.03     $ 2.15  
Adjustments, net of tax   0.62     0.07     0.81     0.24  
Adjusted income per share   $ 3.01     $ 4.39     $ 0.84     $ 2.39  
                 
(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

The accompanying press release contains non-GAAP financial measures.  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 believe removing the impacts of amortization of acquired intangibles and goodwill impairments provides a more meaningful indicator of performance and will assist in understanding our financial results.

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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Source: HRB Tax Group, Inc.