H&R Block Reports FY23 Results; Announces a 10% Dividend Increase
Source: Nasdaq GlobeNewswire / 15 Aug 2023 16:05:01 America/New_York
KANSAS CITY, Mo., Aug. 15, 2023 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) (the "Company") today released its financial results1 for the fiscal year ended June 30, 2023.
- H&R Block reported full year revenue of $3.5 billion (+0.3% growth), earnings per share from continuing operations2 of $3.56 (+9% growth), and adjusted earnings per share from continuing operations2 of $3.82 (+9% growth)
- In the fourth quarter the Company repurchased $200 million of shares at an average price of $30.94; In FY23, the Company repurchased 9% of shares outstanding
- The Company today announced a 10% increase in its quarterly dividend to $0.32 per share
- The FY24 outlook guides to growth in revenue, EBITDA, and adjusted earnings per share
“We had a good finish to the year and I am pleased that we were able to grow revenue, deliver material EBITDA growth, and adjusted EPS that grew 9% despite the many headwinds we faced,” said Jeff Jones, president and CEO. “Our DIY strategy delivered, we demonstrated pricing power in the Assisted channel and saw positive customer satisfaction metrics, Small Business continued to be a growth driver, and we are executing on our Block Horizons strategy. We feel well positioned and look forward to FY24."
Fiscal 2023 Results from Continuing Operations and Key Financial Metrics
"We produced another year of robust free cash flow and repurchased a meaningful amount of shares outstanding. In addition, we announced a 10% dividend increase today, reflecting the Board's confidence in our business," said Tony Bowen, H&R Block's chief financial officer. "Since 2016, we have repurchased 37%3 of the Company and increased the dividend by 60%3."
Year Ended June 30, (in millions, except EPS) 2023 2022 Revenue $ 3,472 $ 3,463 Pretax Income $ 711 $ 659 Net Income $ 562 $ 561 Weighted-Avg. Shares - Diluted 157.2 171.4 EPS2 $ 3.56 $ 3.26 Adjusted EPS2 $ 3.82 $ 3.51 EBITDA2 $ 915 $ 890
- Total revenue of $3.5 billion increased by $9 million, or 0.3%, primarily driven by higher U.S. Assisted tax preparation revenues, partially offset by a decrease in Emerald Card® revenues.
- Total operating expenses of $2.7 billion increased by $5 million, or 0.2%, primarily due to higher field wages, partially offset by lower consulting and outsourced services.
- Pretax income of $711 million increased by $52 million, or 7.9%, primarily due to higher interest income in the current year and lower interest expense on borrowings due to the repayment of our $500 million 5.5% Senior Notes in May 2022.
- Earnings per share from continuing operations4 of $3.56 increased by $0.30, or 9.2%; adjusted earnings per share from continuing operations4 of $3.82 increased by $0.31, or 8.8%.
The Company reported the following related to its capital structure:
- In fiscal year 2023, the Company repurchased and retired approximately 15 million shares, or 9% of shares outstanding, at an aggregate price of $550 million, or $37.59 per share.
- The Company has approximately $700 million remaining on its $1.25 billion share repurchase authorization available through fiscal year 2025.
- The Company announced today that the Board of Directors increased the quarterly dividend by 10%, representing the seventh increase in seven years. The quarterly cash dividend is now $0.32 per share, payable on October 4, 2023, to shareholders of record as of September 7, 2023.
H&R Block has paid quarterly dividends consecutively since the Company became public in 1962. Since 2016, the Company has returned nearly $3.4 billion to shareholders in the form of share repurchases and dividends.
For fiscal year 2024 the Company expects:
- Revenue to be in the range of $3.530 to $3.585 billion.
- EBITDA5 to be in the range of $930 to $965 million.
- Effective tax rate to be approximately 23%.
- Adjusted Diluted Earnings Per Share5 to be in the range of $4.10 to $4.30.
Conference Call & Webcast
A conference call for analysts, institutional investors, and shareholders will be held at 4:30 p.m. Eastern time on Tuesday, August 15, 2023. During the conference call the Company will discuss fiscal 2023 results, outlook, and give a general business update. To join live, participants must register at https://register.vevent.com/register/BIc2731c264adc4c6887316fef4f02c795. 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/qmmca8vv 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 or follow @HRBlockNews on X.
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."
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.
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 continuing operations and 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; dividend growth is calculated as percentage growth from our April 2016 dividend to our October 2023 dividend.
4 All per share amounts are based on continuing operations and fully diluted shares at the end of the corresponding period. The company reports non-GAAP financial measures of performance, including adjusted EPS, 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 GAAP.
5 Adjusted Diluted EPS and 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, email@example.com Jordyn Eskijian, (816) 854-5674, firstname.lastname@example.org Media Relations: Heather Woodard, (660) 864-3836, email@example.com FINANCIAL RESULTS (unaudited, in 000s - except per share amounts) Three months ended June 30, Year ended June 30, 2023 2022 2023 2022 REVENUES: U.S. tax preparation and related services: Assisted tax preparation $ 636,561 $ 638,018 $ 2,167,138 $ 2,094,612 Royalties 49,294 55,694 210,631 225,242 DIY tax preparation 132,428 130,631 314,758 319,086 Refund Transfers 23,100 28,228 143,310 162,893 Peace of Mind® Extended Service Plan 36,341 35,264 95,181 94,637 Tax Identity Shield® 19,028 19,683 38,265 39,114 Other 16,407 18,225 45,252 45,961 Total U.S. tax preparation and related services 913,159 925,743 3,014,535 2,981,545 Financial services: Emerald Card® and SpruceSM 16,203 21,696 84,651 125,444 Interest and fee income on Emerald AdvanceSM 287 543 47,554 43,981 Total financial services 16,490 22,239 132,205 169,425 International 78,834 79,871 235,131 231,335 Wave 23,663 22,220 90,314 80,965 Total revenues $ 1,032,146 $ 1,050,073 $ 3,472,185 $ 3,463,270 Compensation and benefits: Field wages 223,086 247,421 841,742 808,903 Other wages 66,064 83,974 273,850 284,689 Benefits and other compensation 51,053 60,194 220,530 206,902 340,203 391,589 1,336,122 1,300,494 Occupancy 111,293 106,639 428,167 413,162 Marketing and advertising 49,956 60,448 286,255 284,244 Depreciation and amortization 31,841 34,716 130,501 142,178 Bad debt 3,383 12,018 60,401 71,778 Other 118,960 133,059 482,041 506,517 Total operating expenses 655,636 738,469 2,723,487 2,718,373 Other income (expense), net 14,472 465 35,492 2,454 Interest expense on borrowings (15,871 ) (18,621 ) (72,978 ) (88,282 ) Income from continuing operations before income taxes 375,111 293,448 711,212 659,069 Income taxes 71,158 68,757 149,412 98,423 Net income from continuing operations 303,953 224,691 561,800 560,646 Net loss from discontinued operations (1,682 ) (1,988 ) (8,100 ) (6,972 ) Net income $ 302,271 $ 222,703 $ 553,700 $ 553,674 DILUTED EARNINGS PER SHARE: Continuing operations $ 1.97 $ 1.37 $ 3.56 $ 3.26 Discontinued operations (0.01 ) (0.01 ) (0.05 ) (0.04 ) Consolidated $ 1.96 $ 1.36 $ 3.51 $ 3.22 WEIGHTED AVERAGE DILUTED SHARES 153,512 163,283 157,248 171,435 Adjusted diluted EPS(1) $ 2.05 $ 1.43 $ 3.82 $ 3.51 EBITDA(1) $ 422,823 $ 346,785 $ 914,691 $ 889,529
(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 June 30, 2023 2022 ASSETS Cash and cash equivalents $ 986,975 $ 885,015 Cash and cash equivalents - restricted 28,341 165,698 Receivables, net 59,987 58,447 Income taxes receivable 35,910 202,838 Prepaid expenses and other current assets 76,273 72,460 Total current assets 1,187,486 1,384,458 Property and equipment, net 130,015 123,912 Operating lease right of use asset 438,299 427,783 Intangible assets, net 277,043 309,644 Goodwill 775,453 760,401 Deferred tax assets and income taxes receivable 211,391 208,948 Other noncurrent assets 52,571 54,012 Total assets $ 3,072,258 $ 3,269,158 LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES: Accounts payable and accrued expenses $ 159,901 $ 160,929 Accrued salaries, wages and payroll taxes 95,154 154,764 Accrued income taxes and reserves for uncertain tax positions 271,800 280,115 Operating lease liabilities 205,391 206,898 Deferred revenue and other current liabilities 206,536 196,107 Total current liabilities 938,782 998,813 Long-term debt 1,488,974 1,486,876 Deferred tax liabilities and reserves for uncertain tax positions 264,567 226,362 Operating lease liabilities 240,543 228,820 Deferred revenue and other noncurrent liabilities 107,328 116,656 Total liabilities 3,040,194 3,057,527 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY: Common stock, no par, stated value $.01 per share 1,789 1,936 Additional paid-in capital 770,376 772,182 Accumulated other comprehensive loss (37,099 ) (21,645 ) Retained earnings (deficit) (48,677 ) 120,405 Less treasury shares, at cost (654,325 ) (661,247 ) Total stockholders' equity 32,064 211,631 Total liabilities and stockholders' equity $ 3,072,258 $ 3,269,158 CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in 000s) Year ended June 30, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 553,700 $ 553,674 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 130,501 142,178 Provision for credit losses 52,290 66,807 Deferred taxes 49,579 (53,352 ) Stock-based compensation 31,326 34,252 Changes in assets and liabilities, net of acquisitions: Receivables (57,244 ) (37,889 ) Prepaid expenses and other current and noncurrent assets (7,011 ) (1,944 ) Accounts payable, accrued expenses, salaries, wages and payroll taxes (67,627 ) (19,645 ) Deferred revenue, other current and noncurrent liabilities (4,773 ) 7,342 Income tax receivables, accrued income taxes and income tax reserves 144,164 118,713 Other, net (3,064 ) (1,599 ) Net cash provided by operating activities 821,841 808,537 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (69,698 ) (61,955 ) Payments made for business acquisitions, net of cash acquired (48,246 ) (35,920 ) Franchise loans funded (21,633 ) (18,467 ) Payments from franchisees 27,350 30,899 Other, net 10,838 8,902 Net cash used in investing activities (101,389 ) (76,541 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of line of credit borrowings (970,000 ) (705,000 ) Proceeds from line of credit borrowings 970,000 705,000 Repayments of long-term debt — (500,000 ) Dividends paid (177,925 ) (186,476 ) Repurchase of common stock, including shares surrendered (568,952 ) (563,174 ) Proceeds from exercise of stock options 3,383 6,334 Other, net (7,498 ) (14,030 ) Net cash used in financing activities (750,992 ) (1,257,346 ) Effects of exchange rate changes on cash (4,857 ) (8,101 ) Net decrease in cash and cash equivalents, including restricted balances (35,397 ) (533,451 ) Cash, cash equivalents and restricted cash, beginning of the year 1,050,713 1,584,164 Cash, cash equivalents and restricted cash, end of the year $ 1,015,316 $ 1,050,713 SUPPLEMENTARY CASH FLOW DATA: Income taxes paid (received), net $ (45,539 ) $ 31,689 Interest paid on borrowings 69,554 81,960 Accrued additions to property and equipment 2,238 4,315 Accrued dividends payable to common shareholders 42,953 43,093 (in 000s) Three months ended June 30, Year ended June 30, NON-GAAP FINANCIAL MEASURE - EBITDA 2023 2022 2023 2022 Net income - as reported $ 302,271 $ 222,703 $ 553,700 $ 553,674 Discontinued operations, net 1,682 1,988 8,100 6,972 Net income from continuing operations - as reported 303,953 224,691 561,800 560,646 Add back: Income taxes 71,158 68,757 149,412 98,423 Interest expense 15,871 18,621 72,978 88,282 Depreciation and amortization 31,841 34,716 130,501 142,178 118,870 122,094 352,891 328,883 EBITDA from continuing operations $ 422,823 $ 346,785 $ 914,691 $ 889,529 (in 000s, except per share amounts) Three months ended June 30, Year ended June 30, NON-GAAP FINANCIAL MEASURE - ADJUSTED EPS 2023 2022 2023 2022 Net income from continuing operations - as reported $ 303,953 $ 224,691 $ 561,800 $ 560,646 Adjustments: Amortization of intangibles related to acquisitions (pretax) 12,865 13,151 51,411 56,292 Tax effect of adjustments(1) (1,599 ) (3,256 ) (10,797 ) (13,358 ) Adjusted net income from continuing operations $ 315,219 $ 234,586 $ 602,414 $ 603,580 Diluted earnings per share from continuing operations - as reported $ 1.97 $ 1.37 $ 3.56 $ 3.26 Adjustments, net of tax 0.08 0.06 0.26 0.25 Adjusted diluted earnings per share from continuing operations $ 2.05 $ 1.43 $ 3.82 $ 3.51
(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, 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.