GlobeNewswire Inc | Mar 9, 2021 04:10PM EST

March 09, 2021

KANSAS CITY, Mo., March 09, 2021 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) today released its financial results1 for the fiscal 2021 third quarter ended January31, 2021.

-- Company reiterates its revenue growth and earnings outlook for the fiscal year. -- Fiscal third quarter revenue was impacted by a delayed start to the U.S. tax season and a later-than-usual opening of IRS e-file resulting in a 41% decline to $308 million. These impacts were partially offset by an increase in small business payments processing and payroll volume at Wave, increased fees from Emerald Card transactions, and improved international results. -- GAAP loss per share from continuing operations2 increased from $(0.66) to $(1.27), and adjusted non-GAAP loss per share3 increased from $(0.59) to $(1.17), due to the decline in revenue, partially offset by a decline in operating expenses. Loss per share was also impacted by a lower effective tax rate and lower shares outstanding resulting from repurchases earlier in the year. As a reminder, the lower tax rate and share count negatively impact EPS in quarters in which the company reports a loss, but will be favorable on a full fiscal year basis.

"We're taking steps to build the capabilities necessary to execute on our Block Horizons strategy, as we continue to innovate in consumer tax, grow awareness of our small business offerings, and build out our financial products platform," said Jeff Jones, H&R Blocks president and chief executive officer. Despite seeing a delay to the start of the tax season, were well positioned to finish the fiscal year strong and to continue on our path toward long-term sustainable growth."

Fiscal 2021 Third Quarter Results From Continuing Operations

(in millions, except EPS) Q3 FY2021 Q3 FY2020Revenue $ 308 $ 519 Pretax Loss $ (284 ) $ (177 )Net Loss $ (232 ) $ (128 )Weighted-Avg. Shares - Diluted 183.4 194.1 EPS^2 $ (1.27 ) $ (0.66 )Adjusted EPS^2,3 $ (1.17 ) $ (0.59 )EBITDA^3 $ (221 ) $ (107 )

"We're on target to deliver our financial outlook for the year," said Tony Bowen, H&R Block's chief financial officer. "This will drive strong free cash flow and significant return of capital to our shareholders through dividends and share repurchases."

Key Financial Metrics

-- Fiscal third quarter revenue was impacted by a delayed start to the U.S. tax season and a later than usual opening of IRS e-file resulting in a decline of $211 million, or 41%, to $308 million. These impacts were partially offset by an increase in small business payments processing and payroll volume at Wave, increased fees from Emerald Card transactions, and improved international results. -- Total operating expenses decreased $100 million, or 15%, to $572 million primarily due to lower variable expenses related to the delayed start to the U.S. tax season, and reductions in travel, occupancy, and legal costs. -- Pretax loss increased $106 million to $284 million. -- GAAP loss per share from continuing operations increased from $(0.66) to $(1.27), and adjusted non-GAAP loss per share3 increased from $(0.59) to $(1.17), due to the decline in revenue, partially offset by the decline in operating expenses. Loss per share was also impacted by a lower effective tax rate and lower shares outstanding resulting from repurchases earlier in the year. As a reminder, the lower tax rate and share count negatively impact EPS in quarters in which the company reports a loss, but will be favorable on a full fiscal year basis.

Capital Structure

The company also reported the following related to its capital structure:

-- As previously announced, a quarterly cash dividend of $0.26 per share is payable on April 1, 2021 to shareholders of record as of March 16, 2021. H&R Block has paid quarterly dividends consecutively since the company went public in 1962. -- Fiscal year to date repurchases and retirements of common stock total approximately 9.5 million shares at an aggregate price of $150 million, or $15.83 per share. These repurchases were made in the second fiscal quarter. The company has approximately $600 million remaining on its authorization which runs through June 2022.

Discontinued OperationsFor information on Sand Canyon, please refer to disclosures in the companys reports on Forms 10-K, 10-Q, and other filings with the SEC.

Conference CallDiscussion of the fiscal 2021 third quarter results, outlook, and a general business update will occur during the companys 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 March 9, 2021. 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) 652-5951Conference ID: 1036306

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 https://investors.hrblock.com. The presentation will be posted on the Quarterly Results page at https:/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 March 9, 2021 and continuing for seven days by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 1036306. The webcast will be available for replay beginning on March 10, 2021 and continuing for 90 days at https://investors.hrblock.com.

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, financial products and small business solutions. The company blends digital innovation with the human expertise and care of its associates and franchisees as it helps people get the best outcome at tax time, and better manage and access their money year-round. Through Block Advisors and Wave, the company helps small business owners thrive with disruptive 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 managements 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 Companys capital resources and financial condition, the expected use of proceeds under the Companys 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 Companys 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, 2020 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 companys actual estimated effective tax rate to differ from estimates include the companys 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.comMedia Relations: Angela Davied, (816) 854-5798, angela.davied@hrblock.com

__________________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.3 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).

CONSOLIDATED STATEMENTS OF (unaudited, in000sOPERATIONS -exceptpershareamounts) Three months ended January Nine months ended January 31, 31, 2021 2020 2021 2020 REVENUES: Service revenues $ 244,692 $ 419,955 $ 956,605 $ 691,762 Royalty, product 63,535 99,250 129,202 138,606 and other revenues 308,227 519,205 1,085,807 830,368 OPERATING EXPENSES: Costs of revenues 380,273 462,521 940,364 945,119 Selling, general 191,488 209,288 461,368 475,758 and administrativeTotal operating 571,761 671,809 1,401,732 1,420,877 expenses Other income 2,367 1,879 4,759 13,741 (expense), netInterest expense on (22,333 ) (26,305 ) (85,319 ) (68,682 )borrowingsLoss fromcontinuing (283,500 ) (177,030 ) (396,485 ) (645,450 )operations beforeincome tax benefitIncome tax benefit (51,669 ) (49,004 ) (35,730 ) (188,146 )Net loss fromcontinuing (231,831 ) (128,026 ) (360,755 ) (457,304 )operationsNet loss fromdiscontinued (1,163 ) (1,657 ) (4,706 ) (10,625 )operationsNET LOSS $ (232,994 ) $ (129,683 ) $ (365,461 ) $ (467,929 ) BASIC AND DILUTED LOSS PER SHARE:Continuing $ (1.27 ) $ (0.66 ) $ (1.92 ) $ (2.31 )operationsDiscontinued ? (0.01 ) (0.02 ) (0.05 )operationsConsolidated $ (1.27 ) $ (0.67 ) $ (1.94 ) $ (2.36 ) WEIGHTED AVERAGE 183,438 194,077 188,548 198,064 DILUTED SHARES

CONSOLIDATED BALANCE SHEETS (unaudited, in 000s - except per share data)As of January 31, January 31, April 30, 2021 2020 2020 ASSETS Cash and cash equivalents $ 280,249 $ 192,340 $ 2,661,914 Cash and cash equivalents - 181,159 169,447 211,106 restrictedReceivables, net 563,089 819,946 133,197 Prepaid expenses and other 196,145 120,229 80,519 current assetsTotal current assets 1,220,642 1,301,962 3,086,736 Property and equipment, net 162,765 197,569 184,367 Operating lease right of use 419,245 463,777 494,788 assetIntangible assets, net 381,264 433,074 414,976 Goodwill 745,616 838,830 712,138 Deferred tax assets and income 179,598 134,901 151,195 taxes receivableOther noncurrent assets 59,233 82,317 67,847 Total assets $ 3,168,363 $ 3,452,430 $ 5,112,047 LIABILITIES AND STOCKHOLDERS? EQUITYLIABILITIES: Accounts payable and accrued $ 160,880 $ 156,766 $ 203,103 expensesAccrued salaries, wages and 118,517 117,459 116,375 payroll taxesAccrued income taxes andreserves for uncertain tax 17,088 36,242 209,816 positionsCurrent portion of long-term ? 649,022 649,384 debtOperating lease liabilities 186,209 187,890 195,537 Deferred revenue and other 208,789 190,242 201,401 current liabilitiesTotal current liabilities 691,483 1,337,621 1,575,616 Long-term debt and line of 2,369,574 1,880,589 2,845,873 credit borrowingsDeferred tax liabilities andreserves for uncertain tax 302,120 172,954 182,441 positionsOperating lease liabilities 245,383 289,299 312,566 Deferred revenue and other 94,383 90,346 124,510 noncurrent liabilitiesTotal liabilities 3,702,943 3,770,809 5,041,006 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS? EQUITY: Common stock, no par, stated 2,187 2,282 2,282 value $.01 per shareAdditional paid-in capital 778,495 769,990 775,387 Accumulated other comprehensive (11,693 ) (25,391 ) (51,576 )lossRetained earnings (deficit) (616,518 ) (367,218 ) 42,965 Less treasury shares, at cost (687,051 ) (698,042 ) (698,017 )Total stockholders' equity (534,580 ) (318,379 ) 71,041 (deficiency)Total liabilities and $ 3,168,363 $ 3,452,430 $ 5,112,047 stockholders' equity

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in 000s)Nine months ended January 31, 2021 2020CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (365,461 ) $ (467,929 )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization 117,163 125,409 Provision 25,642 37,517 Deferred taxes (39,858 ) 10,795 Stock-based compensation 20,744 22,699 Changes in assets and liabilities, net of acquisitions:Receivables (438,307 ) (684,323 )Prepaid expenses, other current and noncurrent (68,222 ) (1,990 )assetsAccounts payable, accrued expenses, salaries, (37,601 ) (166,204 )wages and payroll taxesDeferred revenue, other current and noncurrent (24,951 ) (55,064 )liabilitiesIncome tax receivables, accrued income taxes and (94,922 ) (282,488 )income tax reservesOther, net (2,906 ) (6,213 )Net cash used in operating activities (908,679 ) (1,467,791 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (47,996 ) (66,510 )Payments made for business acquisitions, net of (15,025 ) (450,282 )cash acquiredFranchise loans funded (24,957 ) (32,890 )Payments from franchisees 20,293 14,604 Other, net (6,427 ) 45,376 Net cash used in investing activities (74,112 ) (489,702 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of line of credit borrowings (2,320,000 ) (285,000 )Proceeds from line of credit borrowings 1,200,000 1,320,000 Repayments of long-term debt (650,000 ) ? Proceeds from issuance of long-term debt 647,965 ? Dividends paid (147,887 ) (154,827 )Repurchase of common stock, including shares (153,158 ) (256,199 )surrenderedProceeds from exercise of stock options 2,139 2,074 Other, net (21,884 ) (14,136 )Net cash provided by (used in) financing (1,442,825 ) 611,912 activities Effects of exchange rate changes on cash 14,004 (359 ) Net decrease in cash and cash equivalents, (2,411,612 ) (1,345,940 )including restricted balancesCash, cash equivalents and restricted cash, 2,873,020 1,707,727 beginning of periodCash, cash equivalents and restricted cash, end $ 461,408 $ 361,787 of period SUPPLEMENTARY CASH FLOW DATA: Income taxes paid, net of refunds received $ 96,965 $ 84,872 Interest paid on borrowings 78,098 65,972 Accrued additions to property and equipment 2,841 1,662 New operating right of use assets and related 93,381 251,284 lease liabilities

FINANCIAL RESULTS (unaudited, in 000s - except per share amounts) Three months ended January Nine months ended January 31, 31, 2021 2020 2021 2020REVENUES: U.S. assisted tax $ 154,489 $ 283,956 $ 541,139 $ 358,174 preparationU.S. royalties 23,902 44,965 67,427 59,644 U.S. DIY tax 21,681 34,089 94,331 42,040 preparationInternational 15,671 11,804 132,347 97,311 Refund Transfers 7 50,494 11,752 52,794 Emerald Card^ 21,951 16,657 48,801 39,128 Peace of Mind^Extended Service 16,101 16,954 72,871 75,451 PlanTax Identity Shield 4,927 8,138 19,129 17,308 ^Interest and feeincome on Emerald 27,590 32,741 28,754 33,780 Advance^SMWave 14,803 11,213 41,197 25,740 Other 7,105 8,194 28,059 28,998 Total revenues 308,227 519,205 1,085,807 830,368 Compensation and benefits:Field wages 127,002 165,435 306,551 280,231 Other wages 62,254 63,808 182,010 178,389 Benefits and other 39,637 45,397 105,581 100,579 compensation 228,893 274,640 594,142 559,199 Occupancy 100,823 102,788 297,881 292,470 Marketing and 66,825 84,760 94,953 101,190 advertisingDepreciation and 39,856 44,147 117,163 125,409 amortizationBad debt 25,790 36,527 28,759 37,594 Other 109,574 128,947 268,834 305,015 Total operating 571,761 671,809 1,401,732 1,420,877 expenses Other income 2,367 1,879 4,759 13,741 (expense), netInterest expense on (22,333 ) (26,305 ) (85,319 ) (68,682 )borrowingsPretax loss (283,500 ) (177,030 ) (396,485 ) (645,450 )Income tax benefit (51,669 ) (49,004 ) (35,730 ) (188,146 )Net loss fromcontinuing (231,831 ) (128,026 ) (360,755 ) (457,304 )operationsNet loss fromdiscontinued (1,163 ) (1,657 ) (4,706 ) (10,625 )operationsNet loss $ (232,994 ) $ (129,683 ) $ (365,461 ) $ (467,929 ) BASIC AND DILUTED LOSS PER SHARE:Continuing $ (1.27 ) $ (0.66 ) $ (1.92 ) $ (2.31 )operationsDiscontinued ? (0.01 ) (0.02 ) (0.05 )operationsConsolidated $ (1.27 ) $ (0.67 ) $ (1.94 ) $ (2.36 ) Weighted average 183,438 194,077 188,548 198,064 diluted shares EBITDA fromcontinuing $ (221,311 ) $ (106,578 ) $ (194,003 ) $ (451,359 )operations ^(1)

(1) See "Non-GAAP Financial Information" for a reconciliation of non-GAAP measures.

U.S. Operating Statistics January 1 through February 28 2021 2020 Change % Change Tax Returns Prepared: (in 000s) ^(1)Company-owned 3,273 3,910 (637 ) (16.3 ) %operationsFranchise operations 1,297 1,624 (327 ) (20.1 ) %Total Assisted 4,570 5,534 (964 ) (17.4 ) % Desktop 515 629 (114 ) (18.1 ) %Online 3,205 3,595 (390 ) (10.8 ) %Total DIY 3,720 4,224 (504 ) (11.9 ) % Total U.S. Returns 8,290 9,758 (1,468 ) (15.0 ) % Net Average Charge: ^ (2)Company-owned $ 219.43 $ 223.83 $ (4.40 ) (2.0 ) %operationsFranchise operations $ 211.01 $ 215.62 $ (4.61 ) (2.1 ) %^(3)DIY $ 27.70 $ 24.09 $ 3.61 15.0 %

(1) An assisted tax return is defined as a current or prior year individual or business tax return that has been accepted and paid for by the client. A DIY online return is defined as a current year individual or business tax return that has been accepted and paid for by the client. A DIY desktop return is defined as a current year individual or business tax return that has been electronically submitted to the IRS.(2) Net average charge is calculated as total tax preparation fees divided by tax returns prepared.(3) Net average charge related to H&R Block Franchise operations represents tax preparation fees collected by H&R Block franchisees divided by returns prepared in franchise offices. H&R Block will recognize a portion of franchise revenues as franchise royalties based on the terms of franchise agreements.

(in 000s) Three months ended January 31, Nine months ended January 31,NON-GAAPFINANCIAL 2021 2020 2021 2020MEASURE -EBITDA Net loss - $ (232,994 ) $ (129,683 ) $ (365,461 ) $ (467,929 )as reportedDiscontinuedoperations, 1,163 1,657 4,706 10,625 netNet lossfromcontinuing (231,831 ) (128,026 ) (360,755 ) (457,304 )operations -as reportedAdd back: Income taxbenefit of (51,669 ) (49,004 ) (35,730 ) (188,146 )continuingoperationsInterestexpense of 22,333 26,305 85,319 68,682 continuingoperationsDepreciationandamortization 39,856 44,147 117,163 125,409 ofcontinuingoperations 10,520 21,448 166,752 5,945 EBITDA fromcontinuing $ (221,311 ) $ (106,578 ) $ (194,003 ) $ (451,359 )operations

(in 000s, except per share amounts) Three months ended January 31, Nine months ended January 31,NON-GAAPFINANCIAL 2021 2020 2021 2020MEASURE -ADJUSTED EPS Net lossfromcontinuing $ (231,831 ) $ (128,026 ) $ (360,755 ) $ (457,304 )operations -as reported Adjustments: Amortizationofintangibles 16,293 19,179 52,176 54,997 related toacquisitions(pretax)Tax effectof 1,012 (4,956 ) (4,143 ) (13,667 )adjustments^(1)Adjusted netloss from $ (214,526 ) $ (113,803 ) $ (312,722 ) $ (415,974 )continuingoperations Diluted lossper share - $ (1.27 ) $ (0.66 ) $ (1.92 ) $ (2.31 )as reportedAdjustments, 0.10 0.07 0.26 0.21 net of taxAdjustedloss per $ (1.17 ) $ (0.59 ) $ (1.66 ) $ (2.10 )share

(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.