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

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.

“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.”

Capital Allocation

The Company reported the following related to its capital structure:

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:

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.


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