H&R Block Reports Fiscal 2022 Third Quarter Results; Increases Financial Outlook

May 10, 2022

KANSAS CITY, Mo., May 10, 2022 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) (the "Company") today released its financial results1 for the fiscal 2022 third quarter ended March 31, 2022.

  • The Company increased its fiscal year 2022 outlook due to strong tax season performance
  • Third quarter revenue was $2.1 billion, an increase of $78 million, or 4% to the prior year
  • Repurchased $226 million of shares outstanding in the quarter at an average price of $23.29; in fiscal year 2022, the Company has repurchased $550 million, retiring 13% of its shares outstanding

"I'm very pleased with our overall tax season, led by another year of share gains in Assisted. As a result of our strong financial results, we are raising our fiscal 2022 guidance," said Jeff Jones, H&R Block's president and CEO. "We grew small business clients, increased adoption of our virtual tools, and launched Spruce, our new mobile banking platform."

Fiscal 2022 Third Quarter Results and Key Financial Metrics

"Our third quarter financial performance and tax season results give us confidence to raise our fiscal year revenue and EBITDA outlook," said Tony Bowen, H&R Block's chief financial officer. "We also continued to be aggressive in share buybacks, retiring another 6% of shares outstanding, bringing the total amount retired since 2016 to nearly one third."

  • Total revenue of $2.1 billion increased by $78 million, or 4%, to the prior year. The increase was primarily driven by positive mix from a higher net average charge in the Assisted channel.
  • Total operating expenses of $1.2 billion increased by $44 million, or 4%, primarily due to greater field compensation and marketing expenses, partially offset by lower amortization and depreciation.
  • Pretax income increased by $33 million to $862 million.
  • Earnings per share from continuing operations2 decreased from $4.09 to $4.06 due to higher tax expense. Adjusted earnings per share2 from continuing operations was $4.11, flat to last year.

Capital Structure

The Company reported the following related to its capital structure:

  • Repurchased and retired approximately 10 million shares at an aggregate price of $226 million, or $23.29 per share in the fiscal third quarter.
  • A quarterly cash dividend of $0.27 per share will be paid on July 1, 2022 to shareholders of record as of June 8, 2022. H&R Block has paid quarterly dividends consecutively since the Company became public in 1962.

Since 2016, the Company has returned over $2.6 billion to shareholders in the form of share repurchases and dividends.

Fiscal Year 2022 Outlook

The Company increased its fiscal year 2022 outlook:

  • Previously, revenue was expected to be in the range of $3.25 to $3.35 billion. The Company now expects revenue to be in the range of $3.375 to $3.425 billion.
  • Previously, EBITDA3 was expected to be in the range of $765 to $815 million. The Company now expects EBITDA to be in the range of $850 to $875 million.

Depreciation & amortization and interest expense are now expected to be near the low end of previously given ranges. The tax rate is now expected to be lower, in the range of 14-16%.

Please refer to the supplemental presentation provided as part of today's webcast at https://investors.hrblock.com/financial-information/quarterly-results for more information.

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 third quarter results, preliminary tax season results, outlook, and a general business update will occur during the Company’s previously announced fiscal third quarter earnings conference call for analysts, institutional investors, and shareholders. The call is scheduled for 4:30 p.m. Eastern time on May 10, 2022. To access the call, please dial the number below approximately 5 minutes prior to the scheduled starting time:

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

Conference ID: 8081918

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 May 10, 2022 and continuing for seven days by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 8081918. The webcast will be available for replay beginning on May 11, 2022 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 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 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.

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. 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).
3Earnings before interest, tax, depreciation, and amortization (EBITDA) from continuing operations is a non-GAAP financial measure. Specific quantifications of the amounts that would be required to reconcile the company’s EBITDA outlook for FY22 to net income, the most directly comparable GAAP metric, are not available. Because of the variability of these and other items as well as the impact of future events on these items, management is unable to reconcile without unreasonable effort the expected range of EBITDA for FY22 to a comparable GAAP range.

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 March 31, Nine months ended March 31,
  2022 2021 2022 2021
U.S. assisted tax preparation $1,392,142  $1,290,892  $1,456,594  $1,532,079 
U.S. royalties  158,786   150,117   169,548   178,126 
U.S. DIY tax preparation  175,184   181,294   188,455   234,871 
International  65,232   62,869   151,464   148,282 
Refund Transfers  132,223   134,799   134,665   141,309 
Emerald Card®  50,660   73,647   103,748   96,045 
Peace of Mind® Extended Service Plan  17,222   17,668   59,373   63,430 
Tax Identity Shield®  9,078   8,643   19,431   22,446 
Interest and fee income on Emerald AdvanceSM  30,535   38,247   43,438   52,812 
Wave  20,111   16,082   58,745   44,656 
Other  10,584   9,306   27,736   28,819 
Total revenues  2,061,757   1,983,564   2,413,197   2,542,875 
Compensation and benefits:        
Field wages  435,345   409,741   561,482   568,593 
Other wages  78,584   78,181   200,715   204,817 
Benefits and other compensation  91,051   92,825   146,708   154,280 
   604,980   580,747   908,905   927,690 
Occupancy  111,405   113,759   306,523   309,638 
Marketing and advertising  196,582   183,109   223,796   214,091 
Depreciation and amortization  36,116   39,100   107,462   117,036 
Bad debt  45,051   46,066   59,760   63,156 
Other  182,258   169,546   373,458   340,328 
Total operating expenses  1,176,392   1,132,327   1,979,904   1,971,939 
Other income (expense), net  238   449   1,989   3,491 
Interest expense on borrowings  (23,746)  (22,471)  (69,661)  (78,657)
Pretax income  861,857   829,215   365,621   495,770 
Income taxes  186,884   69,543   29,666   50,997 
Net income from continuing operations  674,973   759,672   335,955   444,773 
Net loss from discontinued operations  (1,796)  (1,425)  (4,984)  (4,533)
Net income $673,177  $758,247  $330,971  $440,240 
Continuing operations $4.06  $4.09  $1.92  $2.35 
Discontinued operations  (0.01)  (0.01)  (0.03)  (0.02)
Consolidated $4.05  $4.08  $1.89  $2.33 
WEIGHTED AVERAGE DILUTED SHARES  165,612   184,905   174,142   188,133 
Adjusted diluted EPS (1) $4.11  $4.11  $2.11  $2.56 
EBITDA (1)  921,719   890,786   542,744   691,463 

(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 March 31, 2022 June 30, 2021
Cash and cash equivalents $1,041,740  $1,434,381 
Cash and cash equivalents - restricted  135,314   149,783 
Receivables, net  261,602   88,932 
Income taxes receivable  340,355   330,872 
Prepaid expenses and other current assets  89,025   76,414 
Total current assets  1,868,036   2,080,382 
Property and equipment, net  133,036   139,276 
Operating lease right of use assets  390,758   445,847 
Intangible assets, net  322,836   351,093 
Goodwill  764,428   754,521 
Deferred tax assets and income taxes receivable  236,792   181,996 
Other noncurrent assets  65,241   61,273 
Total assets $3,781,127  $4,014,388 
Accounts payable and accrued expenses $225,708  $164,269 
Accrued salaries, wages and payroll taxes  227,075   168,989 
Accrued income taxes and reserves for uncertain tax positions  337,363   238,863 
Current portion of long-term debt  499,395    
Operating lease liabilities  187,263   214,190 
Deferred revenue and other current liabilities  216,073   196,175 
Total current liabilities  1,692,877   982,486 
Long-term debt  1,486,530   1,983,719 
Deferred tax liabilities and reserves for uncertain tax positions  218,461   301,658 
Operating lease liabilities  210,866   244,932 
Deferred revenue and other noncurrent liabilities  127,537   113,535 
Total liabilities  3,736,271   3,626,330 
Common stock, no par, stated value $.01 per share  1,936   2,167 
Additional paid-in capital  767,869   779,465 
Accumulated other comprehensive income (loss)  (3,838)  88 
Retained earnings (deficit)  (56,790)  286,694 
Less treasury shares, at cost  (664,321)  (680,356)
Total stockholders' equity  44,856   388,058 
Total liabilities and stockholders' equity $3,781,127  $4,014,388 

Nine months ended March 31, 2022 2021
Net income $330,971  $440,240 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  107,462   117,037 
Provision  59,778   60,428 
Deferred taxes  (85,122)  5,763 
Stock-based compensation  19,988   21,232 
Changes in assets and liabilities, net of acquisitions:    
Receivables  (233,362)  (336,868)
Prepaid expenses, other current and noncurrent assets  (16,525)  (37,054)
Accounts payable, accrued expenses, salaries, wages and payroll taxes  122,112   257,034 
Deferred revenue, other current and noncurrent liabilities  36,960   30,783 
Income tax receivables, accrued income taxes and income tax reserves  36,244   (52,516)
Other, net  (5,378)  (4,723)
Net cash provided by operating activities  373,128   501,356 
Capital expenditures  (52,718)  (44,220)
Payments made for business acquisitions, net of cash acquired  (25,465)  (15,495)
Franchise loans funded  (18,468)  (26,745)
Payments from franchisees  17,714   28,477 
Other, net  7,831   7,969 
Net cash used in investing activities  (71,106)  (50,014)
Repayments of line of credit borrowings  (705,000)  (3,275,000)
Proceeds from line of credit borrowings  705,000   1,275,000 
Repayments of long-term debt     (650,000)
Proceeds from issuance of long-term debt     647,965 
Dividends paid  (143,435)  (147,887)
Repurchase of common stock, including shares surrendered  (555,247)  (188,892)
Proceeds from exercise of stock options  4,605   2,228 
Other, net  (13,389)  (19,680)
Net cash used in financing activities  (707,466)  (2,356,266)
Effects of exchange rate changes on cash  (1,666)  10,370 
Net decrease in cash and cash equivalents, including restricted balances  (407,110)  (1,894,554)
Cash, cash equivalents and restricted cash, beginning of period  1,584,164   2,769,947 
Cash, cash equivalents and restricted cash, end of period $1,177,054  $875,393 
Income taxes paid, net of refunds received $76,894  $100,118 
Interest paid on borrowings  58,009   77,398 
Accrued additions to property and equipment  1,336   977 
New operating right of use assets and related lease liabilities  126,726   94,260 
Accrued dividends payable to common shareholders  43,041   47,181 

(in 000s)
  Three months ended March 31, Nine months ended March 31,
NON-GAAP FINANCIAL MEASURE - EBITDA  2022  2021  2022  2021
Net income - as reported $        673,177         $        758,247         $        330,971         $        440,240        
Discontinued operations, net          1,796                  1,425                  4,984                  4,533        
Net income from continuing operations - as reported          674,973                  759,672                  335,955                  444,773        
Add back:        
Income taxes          186,884                  69,543                  29,666                  50,997        
Interest expense          23,746                  22,471                  69,661                  78,657        
Depreciation and amortization          36,116                  39,100                  107,462                  117,036        
           246,746                  131,114                  206,789                  246,690        
EBITDA from continuing operations $        921,719         $        890,786         $        542,744         $        691,463        

(in 000s, except per share amounts)
  Three months ended March 31, Nine months ended March 31,
Net income from continuing operations - as reported $674,973  $759,672  $335,955  $444,773 
Amortization of intangibles related to acquisitions (pretax)  13,979   16,229   43,141   50,398 
Tax effect of adjustments (1)  (4,545)  (11,699)  (10,102)  (11,467)
Adjusted net income from continuing operations $684,407  $764,202  $368,994  $483,704 
Diluted earnings per share from continuing operations - as reported $4.06  $4.09  $1.92  $2.35 
Adjustments, net of tax  0.05   0.02   0.19   0.21 
Adjusted diluted earnings per share from continuing operations $4.11  $4.11  $2.11  $2.56 

(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.