H&R Block Reports Fiscal 2023 Third Quarter Results; Provides Update on FY23
KANSAS CITY, Mo. – H&R Block, Inc. (NYSE: HRB) (the “Company”) today released its financial results1 for the fiscal 2023 third quarter ended March 31, 2023.
- For the third quarter, the Company delivered revenue of $2.1 billion, an increase of 2%; earnings per share from continuing operations2 of $4.14, an increase of 2%; and adjusted earnings per share from continuing operations2 of $4.20, an increase of 2%
- Tax season ended with strong performance in DIY; Assisted realized 4% growth in net average charge alongside positive customer satisfaction metrics
- The Company is updating its fiscal year 2023 outlook due to softer than expected industry volume, its own Assisted volume, and the expected impact of foreign exchange rates
“Tax season 2023 was not the return to normal as anticipated post-pandemic. Consumers adjusted to smaller refunds, and many shifted to balance due. The industry contracted as those not required to file didn’t, and there was an impact from the IRS’ extending the filing deadline in certain states,” said Jeff Jones, H&R Block’s president and chief executive officer. “Despite these unusual dynamics, we were pleased to see our strategy work in DIY, continued strong growth in our virtual Assisted offering, and the benefit from pricing power and positive customer sentiment in our Assisted business as we grew penetration with higher income filers.”
Fiscal 2023 Third Quarter Results and Key Financial Metrics
- Total revenue of $2.1 billion, increased by $31.9 million, or 2%, to the prior year. The increase was primarily driven by a higher net average charge in the Assisted category, partially offset by lower software sales and a decline in online paid returns during the quarter compared to the prior year.
- Total operating expenses of $1.2 billion increased by $52.8 million, primarily due to higher field wages and the timing of advertising, partially offset by lower bad debt, legal fees, and consulting and outsourced services.
- Pretax income decreased by $6.4 million to $855.4 million.
- Earnings per share from continuing operations2 increased from $4.06 to $4.14 and adjusted earnings per share from continuing operations2 increased from $4.11 to $4.20, due to fewer shares outstanding from share repurchases.
- The Company has approximately $900.0 million remaining on its latest $1.25 billion share repurchase authorization available through fiscal year 2025.
- As previously announced, a quarterly cash dividend of $0.29 per share will be paid on July 6, 2023 to shareholders of record as of June 7, 2023. H&R Block has paid quarterly dividends consecutively since the Company became public in 1962.
Since 2016, the Company has returned more than $3 billion to shareholders in the form of share repurchases and dividends, buying back over one third of its shares outstanding3.
Fiscal Year 2023 Outlook
“Due to lighter than expected Assisted client volumes this season, as well as an expected foreign exchange impact of about $20 million, we are updating our full year outlook. Despite this change, I’m pleased that we still expect EBITDA and EPS to grow,” said Tony Bowen, H&R Block’s chief financial officer. “As we have shared, regardless of nuances year to year, we produce significant cash flow, pay a growing dividend, and buy back a meaningful amount of shares. We are confident in our ability to drive ongoing value for shareholders with these practices.”
Due to softer industry volumes, the Company now expects:
- Revenue to be in the range of $3.440 to $3.465 billion, from $3.535 to $3.585 billion
- EBITDA4 to be in the range of $895 to $910 million, from $915 to $950 million
- Adjusted diluted earnings per share4 to be in the range of $3.65 to $3.80, from $3.70 to $3.95
The Company continues to expect:
- Effective tax rate to be approximately 22%
- Double-digit adjusted earnings per share4 growth annually through 2025
A conference call for analysts, institutional investors, and shareholders will be held at 4:30 p.m. Eastern time on Tuesday, May 9, 2023. During the conference call the company will discuss fiscal 2023 third quarter results, tax season results, outlook, and give a general business update. To join live, participants must register at https://register.vevent.com/register/BI68ce638aa0fa4494a9cbc71e80cc3880. 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/rmcscxmc 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
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.
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 of continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees
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