Document
false0000012659 0000012659 2019-08-28 2019-08-28


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): August 28, 2019

H&R BLOCK, INC.
(Exact name of registrant as specified in charter)
Missouri
1-06089
44-0607856
(State or other jurisdiction of
(Commission File Number)
(I.R.S. Employer
incorporation or organization)
 
Identification No.)

One H&R Block Way, Kansas City, MO 64105
(Address of Principal Executive Offices) (Zip Code)

(816) 854-3000
(Registrant's telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, without par value
HRB
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 







Item 2.02.    Results of Operations and Financial Condition.
On August 28, 2019, the Company issued a press release regarding the Company’s results of operations for the fiscal quarter ended July 31, 2019. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01.    Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number    Description
99.1    Press Release Issued August 28, 2019
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
H&R BLOCK, INC.
 
 
 
 
Date:
August 28, 2019
By:
/s/ Scott W. Andreasen
 
 
 
Scott W. Andreasen
 
 
 
Vice President and Secretary



Exhibit

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Exhibit 99.1
News Release
For Immediate Release: August 28, 2019
H&R Block Announces Fiscal 2020 First Quarter Results
KANSAS CITY, Mo. - H&R Block, Inc. (NYSE: HRB) today released its financial results for the fiscal 2020 first quarter ended July 31, 2019. The company normally reports a fiscal first quarter loss due to the seasonality of its tax business. The fiscal first quarter typically represents less than 5% of annual revenues and less than 15% of annual expenses.
Fiscal First Quarter Highlights1 
The company completed its acquisition of Wave, a rapidly growing financial solutions platform focused on changing the way small business owners manage their finances.
Fiscal first quarter financial results were in line with expectations, and the company reiterated its revenue and margin outlook for the full fiscal year.
Revenues increased 4%, to $150 million due to activity related to Wave, improved tax return volumes in both U.S. Assisted and DIY, and increased international tax preparation fees.
Loss per share from continuing operations2 was unchanged at $0.72.
The company repurchased and retired approximately 1.6 million shares at an aggregate price of $44 million, or $27.68 per share.
"I'm delighted that Wave is now officially part of H&R Block as we accelerate our efforts to better serve small businesses," said Jeff Jones, H&R Block's president and chief executive officer. "As we begin the second year of our strategic journey, we're off to a great start with momentum from last year driving improved tax results in the preseason. I'm excited as we build on our strong performance and learnings from fiscal 2019 to deliver our objectives for fiscal 2020."

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 fully diluted shares at the end of the corresponding period.









Fiscal 2020 First Quarter Results From Continuing Operations
(in millions, except EPS)
 
Q1 FY2020
 
Q1 FY2019
Revenue
 
$
150

 
$
145

Pretax Loss
 
$
(207
)
 
$
(199
)
Net Loss
 
$
(146
)
 
$
(149
)
Weighted-Avg. Shares - Diluted
 
202.0

 
207.7

EPS2
 
$
(0.72
)
 
$
(0.72
)
EBITDA3
 
$
(147
)
 
$
(137
)
 
 
 
 
 
"Our fiscal first quarter results were consistent with our expectations and reflect the seasonality of our business, as well as investments related to our enterprise strategy," said Tony Bowen, H&R Block's chief financial officer. "I'm pleased with the progress we are making on our strategy, and we remain on track to achieve our revenue and margin outlook for the fiscal year."
Key Financial Metrics
Fiscal first quarter results were in line with expectations.
Total revenues increased $5.2 million, or 3.6%, to $150.4 million due to activity related to Wave, improved tax return volumes in both U.S. Assisted and DIY, and increased international tax preparation fees. These revenues were partially offset by a change in the timing of revenue recognition related to the Peace of Mind® Extended Service Plan.
Total operating expenses increased $18.2 million, or 5.6%, to $345.5 million due to planned increases in compensation and other expenses. These increases primarily resulted from investments related to our technology roadmap and Wave, and were partially offset by lower depreciation and amortization expense.
Pretax loss increased $8.3 million, or 4.2%, to $207.1 million, while loss per share from continuing operations was unchanged at $0.72. The change in pretax loss, along with lower shares outstanding impacted loss per share. While beneficial on a full-year basis, the lower share count negatively impacts EPS in quarters in which the company reports a loss. These impacts were offset by an increased tax benefit.

Share Repurchases and Dividends
During the first quarter of fiscal 2020, the company repurchased and retired approximately 1.6 million shares at an aggregate price of $44.1 million, or $27.68 per share.
As previously announced, a quarterly cash dividend of $0.26 per share is payable on October 1, 2019 to shareholders of record as of September 13, 2019. H&R Block has paid quarterly dividends consecutively since the company went public in 1962 and has increased its dividend in each of the past four fiscal years.
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.

3 The company reports non-GAAP financial measures of performance, including earnings before interest, tax, depreciation, and amortization (EBITDA) from continuing operations, EBITDA margin 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).



Conference Call
Discussion of the fiscal 2020 first quarter results, outlook, and a general business update will occur during the company’s previously announced fiscal first quarter earnings conference call for analysts, institutional investors, and shareholders. The call is scheduled for 4:30 p.m. Eastern time on August 28, 2019. 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: 8395479
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 August 28, 2019 and continuing for seven days by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 8395479. The webcast will be available for replay beginning on August 29, 2019 and continuing for 90 days at http://investors.hrblock.com.
About H&R Block
H&R Block, Inc. (NYSE: HRB) is a global consumer tax and small business services provider. Tax return preparation services are provided by professional tax preparers in approximately 11,000 company-owned and franchise retail tax offices worldwide, as well as through virtual channels and H&R Block tax software products for the DIY consumer. H&R Block offers small business financial solutions through its retail locations and online through Wave (waveapps.com). In fiscal 2019, H&R Block had revenues of $3.1 billion with over 23 million tax returns prepared worldwide. For more information, visit the H&R Block Newsroom.
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. 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, 2019 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. 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, and future actions of the company. 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


TABLES FOLLOW





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CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in 000s - except per share amounts)
 
 
 
Three months ended July 31,
 
 
2019
 
2018
 
 
 
 
 
REVENUES:
 
 
 
 
Service revenues
 
$
132,159

 
$
126,860

Royalty, product and other revenues
 
18,203

 
18,323

 
 
150,362

 
145,183

OPERATING EXPENSES:
 
 
 
 
Costs of revenues
 
229,392

 
221,560

Selling, general and administrative
 
116,136

 
105,740

Total operating expenses
 
345,528

 
327,300

 
 
 
 
 
Other income (expense), net
 
9,123

 
4,542

Interest expense on borrowings
 
(21,071
)
 
(21,190
)
Loss from continuing operations before income tax benefit
 
(207,114
)
 
(198,765
)
Income tax benefit
 
(61,390
)
 
(49,968
)
Net loss from continuing operations
 
(145,724
)
 
(148,797
)
Net loss from discontinued operations
 
(4,523
)
 
(3,873
)
NET LOSS
 
$
(150,247
)
 
$
(152,670
)
 
 
 
 
 
BASIC AND DILUTED LOSS PER SHARE:
 
 
 
 
Continuing operations
 
$
(0.72
)
 
$
(0.72
)
Discontinued operations
 
(0.02
)
 
(0.02
)
Consolidated
 
$
(0.74
)
 
$
(0.74
)
 
 
 
 
 
WEIGHTED AVERAGE BASIC AND DILUTED SHARES
 
202,037

 
207,673

 
 
 
 
 






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CONSOLIDATED BALANCE SHEETS
 
(unaudited, in 000s - except per share data)
 
As of
 
July 31, 2019
 
July 31, 2018
 
April 30, 2019
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
607,668

 
$
979,116

 
$
1,572,150

Cash and cash equivalents - restricted
 
157,786

 
131,376

 
135,577

Receivables, net
 
76,128

 
70,576

 
138,965

Prepaid expenses and other current assets
 
105,123

 
101,055

 
146,667

Total current assets
 
946,705

 
1,282,123

 
1,993,359

Property and equipment, net
 
199,679

 
227,003

 
212,092

Operating lease right of use asset
 
486,147

 

 

Intangible assets, net
 
419,391

 
354,831

 
342,493

Goodwill
 
821,278

 
507,941

 
519,937

Deferred tax assets and income taxes receivable
 
142,416

 
131,683

 
141,979

Other noncurrent assets
 
94,384

 
101,457

 
90,085

Total assets
 
$
3,110,000

 
$
2,605,038

 
$
3,299,945

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
Accounts payable and accrued expenses
 
$
122,156

 
$
145,471

 
$
249,525

Accrued salaries, wages and payroll taxes
 
48,166

 
37,468

 
196,527

Accrued income taxes and reserves for uncertain tax positions
 
182,928

 
178,313

 
271,973

Operating lease liabilities
 
186,355

 

 

Deferred revenue and other current liabilities
 
193,364

 
202,744

 
204,976

Total current liabilities
 
732,969

 
563,996

 
923,001

Long-term debt
 
1,493,289

 
1,495,006

 
1,492,629

Deferred tax liabilities and reserves for uncertain tax positions
 
199,714

 
231,292

 
197,906

Operating lease liabilities
 
292,818

 

 

Deferred revenue and other noncurrent liabilities
 
100,406

 
122,735

 
144,882

Total liabilities
 
2,819,196

 
2,413,029

 
2,758,418

COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
Common stock, no par, stated value $.01 per share
 
2,367

 
2,420

 
2,383

Additional paid-in capital
 
759,449

 
752,109

 
767,636

Accumulated other comprehensive loss
 
(22,736
)
 
(16,034
)
 
(20,416
)
Retained earnings
 
250,740

 
163,567

 
499,386

Less treasury shares, at cost
 
(699,016
)
 
(710,053
)
 
(707,462
)
Total stockholders' equity
 
290,804

 
192,009

 
541,527

Total liabilities and stockholders' equity
 
$
3,110,000

 
$
2,605,038

 
$
3,299,945

 
 
 
 
 
 
 






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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(unaudited, in 000s)
 
Three months ended July 31,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net loss
 
$
(150,247
)
 
$
(152,670
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
38,605

 
40,432

Provision for bad debt
 
552

 
1,617

Deferred taxes
 
6,825

 
9,595

Stock-based compensation
 
6,674

 
4,359

Changes in assets and liabilities, net of acquisitions:
 
 
 
 
Receivables
 
60,519

 
66,202

Prepaid expenses, other current and noncurrent assets
 
(9,917
)
 
(12,161
)
Accounts payable, accrued expenses, salaries, wages and payroll taxes
 
(284,643
)
 
(203,482
)
Deferred revenue, other current and noncurrent liabilities
 
(45,769
)
 
(40,760
)
Income tax receivables, accrued income taxes and income tax reserves
 
(99,929
)
 
(89,661
)
Other, net
 
(6,499
)
 
966

Net cash used in operating activities
 
(483,829
)
 
(375,563
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Capital expenditures
 
(15,181
)
 
(12,057
)
Payments made for business acquisitions, net of cash acquired
 
(394,411
)
 
(1,449
)
Franchise loans funded
 
(2,806
)
 
(1,805
)
Payments from franchisees
 
2,647

 
5,104

Other, net
 
50,944

 
3,645

Net cash used in investing activities
 
(358,807
)
 
(6,562
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Dividends paid
 
(52,512
)
 
(52,104
)
Repurchase of common stock, including shares surrendered
 
(36,456
)
 
(101,665
)
Proceeds from exercise of stock options
 
1,206

 
1,355

Other, net
 
(12,431
)
 
(17,494
)
Net cash used in financing activities
 
(100,193
)
 
(169,908
)
 
 
 
 
 
Effects of exchange rate changes on cash
 
556

 
(1,153
)
 
 
 
 
 
Net decrease in cash and cash equivalents, including restricted balances
 
(942,273
)
 
(553,186
)
Cash, cash equivalents and restricted cash, beginning of period
 
1,707,727

 
1,663,678

Cash, cash equivalents and restricted cash, end of period
 
$
765,454

 
$
1,110,492

 
 
 
 
 
SUPPLEMENTARY CASH FLOW DATA:
 
 
 
 
Income taxes paid, net of refunds received
 
$
36,138

 
$
31,969

Interest paid on borrowings
 
15,519

 
15,519

Accrued additions to property and equipment
 
127

 
9,974

Accrued purchase of common stock
 
16,801

 

 
 
 
 
 






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FINANCIAL RESULTS
 
(unaudited, in 000s - except per share amounts)
 
 
 
Three months ended July 31,
 
 
2019
 
2018
REVENUES:
 
 
 
 
U.S. assisted tax preparation
 
$
32,992

 
$
31,104

U.S. royalties
 
6,859

 
7,571

U.S. DIY tax preparation
 
3,410

 
2,781

International
 
40,581

 
39,179

Refund Transfers
 
1,509

 
1,424

Emerald Card®
 
13,855

 
14,246

Peace of Mind® Extended Service Plan
 
32,837

 
36,577

Tax Identity Shield®
 
4,522

 
4,741

Interest and fee income on Emerald AdvanceTM
 
554

 
447

Wave
 
3,625

 

Other
 
9,618

 
7,113

 
 
150,362

 
145,183

Compensation and benefits:
 
 
 
 
Field wages
 
53,803

 
49,932

Other wages
 
53,837

 
47,822

Benefits and other compensation
 
26,474

 
22,931

 
 
134,114

 
120,685

Occupancy
 
92,152

 
90,726

Marketing and advertising
 
6,779

 
6,894

Depreciation and amortization
 
38,605

 
40,432

Bad debt
 
(968
)
 
(858
)
Other (1)
 
74,846

 
69,421

Total operating expenses
 
345,528

 
327,300

 
 
 
 
 
Other income (expense), net
 
9,123

 
4,542

Interest expense on borrowings
 
(21,071
)
 
(21,190
)
Pretax loss
 
(207,114
)
 
(198,765
)
Income tax benefit
 
(61,390
)
 
(49,968
)
Net loss from continuing operations
 
(145,724
)
 
(148,797
)
Net loss from discontinued operations
 
(4,523
)
 
(3,873
)
NET LOSS
 
$
(150,247
)
 
$
(152,670
)
 
 
 
 
 
BASIC AND DILUTED LOSS PER SHARE:
 
 
 
 
Continuing operations
 
$
(0.72
)
 
$
(0.72
)
Discontinued operations
 
(0.02
)
 
(0.02
)
Consolidated
 
$
(0.74
)
 
$
(0.74
)
 
 
 
 
 
Weighted average basic and diluted shares
 
202,037

 
207,673

 
 
 
 
 
EBITDA from continuing operations (2)
 
$
(147,438
)
 
$
(137,143
)
 
 
 
 
 
(1) 
We reclassified $2.2 million of supplies expense from its own financial statement line to other expenses for fiscal year 2019 to conform to the current year presentation.
(2) See "Non-GAAP Financial Information" for a reconciliation of non-GAAP measures.






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Three months ended July 31,
 
NON-GAAP FINANCIAL MEASURE - EBITDA
 
2019
 
2018
 
 
 
 
 
 
 
Net loss - as reported
 
$
(150,247
)
 
$
(152,670
)
 
Discontinued operations, net
 
4,523

 
3,873

 
Net loss from continuing operations - as reported
 
(145,724
)
 
(148,797
)
 
Add back:
 
 
 
 
 
Income taxes of continuing operations
 
(61,390
)
 
(49,968
)
 
Interest expense of continuing operations
 
21,071

 
21,190

 
Depreciation and amortization of continuing operations
 
38,605

 
40,432

 
 
 
(1,714
)
 
11,654

 
 
 
 
 
 
 
EBITDA from continuing operations
 
$
(147,438
)
 
$
(137,143
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended July 31,
 
Supplemental Information
 
2019
 
2018
 
 
 
 
 
 
 
Stock-based compensation expense:
 
 
 
 
 
Pretax
 
$
6,674

 
$
4,359

 
After-tax
 
4,963

 
3,274

 
Amortization of intangible assets:
 
 
 
 
 
Pretax
 
$
18,194

 
$
18,139

 
After-tax
 
13,531

 
13,622

 
 
 
 
 
 
 

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 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, EBITDA margin 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.