H&R Block Reports Fiscal 2024 Third Quarter Results; Expects to be Near the High End of FY24 Outlook

May 9, 2024

KANSAS CITY, Mo., May 09, 2024 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) (the "Company") today released its financial results1 for the fiscal 2024 third quarter ended March 31, 2024.

  • For the third quarter, the Company delivered revenue growth of 4%, net income growth of 7%, and earnings per share from continuing operations2growth of 18%
  • Through April 30, filing volumes increased year over year, driven by strong performance in DIY paid online clients, which grew 6%, partially offset by modest Assisted volume declines. Net average charge grew 7% in DIY paid online and 4% in Assisted
  • The Company now expects to be near the high end of its previously announced outlook for fiscal year 2024

"There are many things to be pleased about in the quarter, from our strong DIY performance, virtual tax growth, and positive trends in small business, to important progress for both Spruce and Wave. At the same time, I know we can execute better to improve the Assisted client experience for so many consumers who are choosing H&R Block," said Jeff Jones, H&R Block's president and chief executive officer.

Fiscal 2024 Third Quarter Results and Key Financial Metrics
"We now expect to finish fiscal 2024 near the high end of our outlook range," said Tony Bowen, H&R Block's chief financial officer. "This will be yet another year of topline growth, robust cash flow generation, and double-digit EPS growth that allows for continued, significant returns of capital to our shareholders through dividends and share repurchases."

  • Total revenue of $2.2 billion increased by $91.2 million, or 4%, to the prior year. The increase was primarily due to a higher net average charge and higher company-owned volumes in the Assisted category combined with higher online paid returns and a higher NAC, partially offset by lower royalties due to franchise acquisitions, and lower Emerald Advance revenues.
  • Total operating expenses of $1.3 billion increased by $27.5 million, primarily due to higher field wages due to higher company-owned volumes and higher legal fees and settlements, partially offset by lower marketing and advertising expenses primarily due to the timing of television advertising in the current year compared to the prior year.
  • Pretax income increased by $51.9 million to $907.4 million, primarily due to higher revenues in the current year.
  • Earnings per share from continuing operations2 increased from $4.14 to $4.87 and adjusted earnings per share from continuing operations2 increased from $4.20 to $4.94, due to higher net income and fewer shares outstanding from share repurchases.

Capital Allocation

The Company reported the following related to its capital structure:

  • As previously announced, a quarterly cash dividend of $0.32 per share is payable on July 3, 2024 to shareholders of record as of June 5, 2024. H&R Block has paid quarterly dividends consecutively since the Company became public in 1962.
  • In Q1 and Q2, the Company repurchased $350 million of shares outstanding.
  • The Company has approximately $350 million remaining on its $1.25 billion share repurchase authorization available through fiscal year 2025.

Since 2016, the Company has returned more than $3.8 billion to shareholders in the form of dividends and share repurchases, buying back over 40% of its shares outstanding3.

Fiscal Year 2024 Outlook

The Company now expects to be near the high end of its previously provided outlook, which was:

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

The effective tax rate is now expected to be in the range of 21-22% as compared to 23% previously.

Conference Call
A conference call for analysts, institutional investors, and shareholders will be held at 4:30 p.m. Eastern time on Thursday, May 9, 2024. During the conference call the Company will discuss fiscal 2024 third quarter results, outlook, and give a general business update. To join live, participants must register at https://register.vevent.com/register/BI3025442b56334c7683e88d633cd4f150. 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/2zqnvjkt 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 Diluted Earnings Per Share (EPS) and earnings before interest, tax, depreciation, and amortization (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: Teri Daley, (816) 854-3787, teri.daley@hrblock.com
   


FINANCIAL RESULTS (unaudited, in 000s - except per share amounts)
  Three months ended March 31, Nine months ended March 31,
  2024 2023 2024 2023
REVENUES:        
U.S. tax preparation and related services:        
Assisted tax preparation $1,534,825  $1,453,049  $1,622,430  $1,530,577 
Royalties  141,915   150,163   153,070   161,337 
DIY tax preparation  198,570   167,022   215,529   182,330 
Refund Transfers  118,937   117,384   120,892   120,210 
Peace of Mind® Extended Service Plan  16,813   16,750   59,100   58,840 
Tax Identity Shield®  7,536   8,720   16,810   19,237 
Other  12,065   10,972   32,637   28,845 
Total U.S. tax preparation and related services  2,030,661   1,924,060   2,220,468   2,101,376 
Financial services:        
Emerald Card® and SpruceSM  41,160   44,358   61,493   68,448 
Interest and fee income on Emerald AdvanceSM  21,169   33,750   36,702   47,267 
Total financial services  62,329   78,108   98,195   115,715 
International  68,264   69,417   158,398   156,297 
Wave  23,580   22,064   70,656   66,651 
Total revenues $2,184,834  $2,093,649  $2,547,717  $2,440,039 
Compensation and benefits:        
Field wages  510,299   480,779   650,529   618,656 
Other wages  75,356   73,503   222,125   207,786 
Benefits and other compensation  99,653   100,368   170,964   169,477 
   685,308   654,650   1,043,618   995,919 
Occupancy  119,364   118,111   319,843   316,874 
Marketing and advertising  194,349   210,508   211,135   236,299 
Depreciation and amortization  30,672   32,313   91,004   98,660 
Bad debt  41,008   34,273   67,560   57,018 
Other  185,929   179,292   360,111   363,081 
Total operating expenses  1,256,630   1,229,147   2,093,271   2,067,851 
Other income (expense), net  5,224   13,224   20,982   21,020 
Interest expense on borrowings  (26,070)  (22,298)  (63,304)  (57,107)
Pretax income  907,358   855,428   412,124   336,101 
Income taxes  215,772   209,351   72,527   78,254 
Net income from continuing operations  691,586   646,077   339,597   257,847 
Net loss from discontinued operations  (849)  (2,648)  (2,097)  (6,418)
Net income $690,737  $643,429  $337,500  $251,429 
DILUTED EARNINGS PER SHARE        
Continuing operations $4.87  $4.14  $2.34  $1.62 
Discontinued operations  (0.01)  (0.02)  (0.02)  (0.04)
Consolidated $4.86  $4.12  $2.32  $1.58 
WEIGHTED AVERAGE DILUTED SHARES  141,540   155,561   144,594   158,488 
Adjusted diluted EPS(1) $4.94  $4.20  $2.54  $1.80 
EBITDA(1) $964,100  $910,039  $566,432  $491,868 
         


(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, 2024 June 30, 2023
     
ASSETS    
Cash and cash equivalents $794,617  $986,975 
Cash and cash equivalents - restricted  18,078   28,341 
Receivables, net  346,784   59,987 
Prepaid expenses and other current assets  105,873   112,183 
Total current assets  1,265,352   1,187,486 
Property and equipment, net  139,542   130,015 
Operating lease right of use assets  392,091   438,299 
Intangible assets, net  277,218   277,043 
Goodwill  787,634   775,453 
Deferred tax assets and income taxes receivable  287,810   211,391 
Other noncurrent assets  63,675   52,571 
Total assets $3,213,322  $3,072,258 
LIABILITIES AND STOCKHOLDERS’ EQUITY    
LIABILITIES:    
Accounts payable and accrued expenses $247,109  $159,901 
Accrued salaries, wages and payroll taxes  238,864   95,154 
Accrued income taxes and reserves for uncertain tax positions  351,721   271,800 
Operating lease liabilities  185,396   205,391 
Deferred revenue and other current liabilities  220,466   206,536 
Total current liabilities  1,243,556   938,782 
Long-term debt  1,490,570   1,488,974 
Deferred tax liabilities and reserves for uncertain tax positions  277,957   264,567 
Operating lease liabilities  214,990   240,543 
Deferred revenue and other noncurrent liabilities  116,055   107,328 
Total liabilities  3,343,128   3,040,194 
COMMITMENTS AND CONTINGENCIES    
STOCKHOLDERS’ EQUITY:    
Common stock, no par, stated value $.01 per share  1,709   1,789 
Additional paid-in capital  753,605   770,376 
Accumulated other comprehensive loss  (46,336)  (37,099)
Retained deficit  (200,296)  (48,677)
Less treasury shares, at cost  (638,488)  (654,325)
Total stockholders' equity (deficiency)  (129,806)  32,064 
Total liabilities and stockholders' equity $3,213,322  $3,072,258 
     


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in 000s)
Nine months ended March 31, 2024
 2023
     
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income $337,500  $251,429 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  91,004   98,660 
Provision for credit losses  61,359   49,174 
Deferred taxes  (58,223)  6,685 
Stock-based compensation  25,310   26,785 
Changes in assets and liabilities, net of acquisitions:    
Receivables  (348,106)  (237,395)
Prepaid expenses, other current and noncurrent assets  (18,037)  (17,438)
Accounts payable, accrued expenses, salaries, wages and payroll taxes  223,045   122,025 
Deferred revenue, other current and noncurrent liabilities  12,483   22,054 
Income tax receivables, accrued income taxes and income tax reserves  93,961   179,692 
Other, net  (32)  (3,285)
Net cash provided by operating activities  420,264   498,386 
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures  (53,831)  (56,661)
Payments made for business acquisitions, net of cash acquired  (43,163)  (47,740)
Franchise loans funded  (18,815)  (21,566)
Payments from franchisees  12,884   14,963 
Other, net  3,282   9,717 
Net cash used in investing activities  (99,643)  (101,287)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Repayments of line of credit borrowings  (1,025,000)  (970,000)
Proceeds from line of credit borrowings  1,025,000   970,000 
Dividends paid  (135,127)  (133,762)
Repurchase of common stock, including shares surrendered  (379,018)  (365,852)
Other, net  (6,358)  (5,973)
Net cash used in financing activities  (520,503)  (505,587)
Effects of exchange rate changes on cash  (2,739)  (7,880)
Net decrease in cash and cash equivalents, including restricted balances  (202,621)  (116,368)
Cash, cash equivalents and restricted cash, beginning of period  1,015,316   1,050,713 
Cash, cash equivalents and restricted cash, end of period $812,695  $934,345 
SUPPLEMENTARY CASH FLOW DATA:    
Income taxes paid (received), net $35,888  $(110,028)
Interest paid on borrowings  66,464   59,429 
Accrued additions to property and equipment  1,477   4,378 
New operating right of use assets and related lease liabilities  139,872   131,949 
Accrued dividends payable to common shareholders  44,648   44,163 
     


(in 000s)
  Three months ended March 31, Nine months ended March 31,
NON-GAAP FINANCIAL MEASURE - EBITDA 2024 2023 2024 2023
         
Net income - as reported $690,737 $643,429 $337,500 $251,429
Discontinued operations, net  849  2,648  2,097  6,418
Net income from continuing operations - as reported  691,586  646,077  339,597  257,847
Add back:        
Income taxes  215,772  209,351  72,527  78,254
Interest expense  26,070  22,298  63,304  57,107
Depreciation and amortization  30,672  32,313  91,004  98,660
   272,514  263,962  226,835  234,021
EBITDA from continuing operations $964,100 $910,039 $566,432 $491,868
         


(in 000s, except per share amounts)
  Three months ended March 31, Nine months ended March 31,
NON-GAAP FINANCIAL MEASURE - ADJUSTED EPS 2024
 2023
 2024
 2023
         
Net income from continuing operations - as reported $691,586  $646,077  $339,597  $257,847 
Adjustments:        
Amortization of intangibles related to acquisitions (pretax)  12,869   13,011   37,693   38,546 
Tax effect of adjustments(1)  (2,793)  (3,190)  (8,815)  (9,198)
Adjusted net income from continuing operations $701,622  $655,898  $368,475  $287,195 
Diluted earnings per share from continuing operations - as reported $4.87  $4.14  $2.34  $1.62 
Adjustments, net of tax  0.07   0.06   0.20   0.18 
Adjusted diluted earnings per share from continuing operations $4.94  $4.20  $2.54  $1.80 
         

(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.