H&R Block(HRB) - 2025 Q1 - Quarterly Results

Fiscal 2025 First Quarter Highlights Q1 2025 Performance Summary H&R Block reported a positive start to fiscal 2025, with a 5% increase in total revenue to $193.8 million, driven by higher company office volumes and increased net average charge | Metric (Three months ended Sep 30) | 2024 (in 000s) | 2023 (in 000s) | Change (YoY) | | :--------------------------------- | :------------- | :------------- | :----------- | | Total Revenues | $193,810 | $183,800 | +$10,010 (+5.4%) | | Total Operating Expenses | $422,141 | $390,126 | +$32,015 (+8.2%) | | Pretax Loss | $(232,261) | $(212,360) | $(19,901) | | Loss per share from continuing operations | $(1.23) | $(1.11) | $(0.12) | | Adjusted loss per share from continuing operations | $(1.17) | $(1.05) | $(0.12) | - Revenue increase was primarily due to higher company office volumes, a higher net average charge in the Assisted category, and higher international tax preparation revenues[2] - Operating expense increase was primarily due to higher tax professional wages in the U.S. and international, higher corporate wages, and an increase in legal expenses[3] Capital Allocation The company continued its capital allocation strategy, declaring a quarterly cash dividend and repurchasing 3.3 million shares for $209.6 million - A quarterly cash dividend of $0.375 per share is payable on January 6, 2025, to shareholders of record as of December 5, 2024[4] | Metric | Q1 FY25 | Since 2016 | | :-------------------------------- | :------ | :--------- | | Shares Repurchased | 3.3 million | Over 41% of shares outstanding | | Aggregate Price of Repurchases | $209.6 million | Over $4.1 billion (dividends & repurchases) | | Price Per Share | $63.51 | N/A | - Approximately $1.3 billion remains on the $1.5 billion share repurchase program, which does not have an expiration date[7] Fiscal Year 2025 Outlook H&R Block reaffirmed its full-year fiscal 2025 outlook, maintaining expectations for revenue between $3.69 billion and $3.75 billion and adjusted diluted EPS between $5.15 and $5.35 | Metric | FY2025 Outlook Range | | :------------------- | :------------------- | | Revenue | $3.69 to $3.75 billion | | EBITDA | $975 million to $1.02 billion | | Effective Tax Rate | Approximately 13% (resulting in a one-time benefit to EPS of approximately 50 cents) | | Adjusted Diluted Earnings Per Share | $5.15 to $5.35 | About H&R Block H&R Block, Inc. provides global tax preparation services, financial products, and small-business solutions, combining digital innovation with human expertise - H&R Block provides global tax preparation services, financial products, and small-business solutions[10] - The company blends digital innovation with human expertise to help clients with tax preparation and financial management using its mobile banking app, Spruce[10] - Through Block Advisors and Wave, H&R Block offers small-business owners bookkeeping, payroll, advisory, and payment processing solutions[10] Consolidated Financial Statements Consolidated Statements of Operations For Q1 2025, H&R Block reported total revenues of $193.8 million, a 5.4% increase year-over-year, but operating expenses rose 8.2% to $422.1 million, leading to an increased net loss of $(172.6) million | Metric (Three months ended Sep 30) | 2024 (in 000s) | 2023 (in 000s) | Change (YoY) | | :--------------------------------- | :------------- | :------------- | :----------- | | Total Revenues | $193,810 | $183,800 | +$10,010 (+5.4%) | | U.S. tax preparation and related services | $93,726 | $90,361 | +$3,365 (+3.7%) | | International | $64,855 | $60,565 | +$4,290 (+7.1%) | | Wave | $26,403 | $23,943 | +$2,460 (+10.3%) | | Total Operating Expenses | $422,141 | $390,126 | +$32,015 (+8.2%) | | Compensation and benefits | $184,183 | $169,781 | +$14,402 (+8.5%) | | Pretax Loss | $(232,261) | $(212,360) | $(19,901) | | Net Loss | $(172,576) | $(163,482) | $(9,094) | - Assisted tax preparation revenue increased to $42.96 million in 2024 from $39.26 million in 2023[15] - DIY tax preparation revenue decreased to $3.24 million in 2024 from $3.85 million in 2023[15] Consolidated Balance Sheets As of September 30, 2024, total assets decreased to $2.55 billion, driven by a reduction in cash, while stockholders' equity shifted to a deficiency of $(368.1) million | Metric (As of) | Sep 30, 2024 (in 000s) | Jun 30, 2024 (in 000s) | Change (QoQ) | | :-------------------------------- | :--------------------- | :--------------------- | :----------- | | Cash and cash equivalents | $415,860 | $1,053,326 | $(637,466) | | Total Current Assets | $611,603 | $1,239,476 | $(627,873) | | Total Assets | $2,549,967 | $3,218,810 | $(668,843) | | Total Current Liabilities | $795,885 | $977,328 | $(181,443) | | Total Liabilities | $2,918,032 | $3,128,216 | $(210,184) | | Total Stockholders' Equity (Deficiency) | $(368,065) | $90,594 | $(458,659) | - Goodwill increased slightly to $792.2 million from $785.2 million[16] - Long-term debt remained relatively stable at $1.49 billion[16] Condensed Consolidated Statements of Cash Flows For Q1 2025, net cash used in operating activities was $(328.6) million, while net cash used in financing activities significantly increased to $(284.5) million, primarily due to higher common stock repurchases | Metric (Three months ended Sep 30) | 2024 (in 000s) | 2023 (in 000s) | Change (YoY) | | :--------------------------------- | :------------- | :------------- | :----------- | | Net cash used in operating activities | $(328,581) | $(334,989) | +$6,408 | | Net cash used in investing activities | $(26,394) | $(23,890) | $(2,504) | | Net cash used in financing activities | $(284,450) | $(195,198) | $(89,252) | | Repurchase of common stock | $(238,376) | $(150,442) | $(87,934) | | Net decrease in cash and cash equivalents | $(636,176) | $(557,756) | $(78,420) | - Capital expenditures increased to $18.7 million in 2024 from $12.9 million in 2023[17] - Dividends paid increased to $44.65 million in 2024 from $42.95 million in 2023[17] Non-GAAP Financial Information About Non-GAAP Financial Measures H&R Block utilizes non-GAAP financial measures, including adjusted EPS and EBITDA, as key metrics for management and investors to assess ongoing operating performance - Non-GAAP financial measures are used to evaluate and compare the ongoing operating performance of the Company[6][20] - Key non-GAAP measures include adjusted earnings per share (EPS), earnings before interest, tax, depreciation, and amortization (EBITDA) from continuing operations, free cash flow, and free cash flow yield[6][21] - Adjustments for certain non-GAAP financial measures are related to amortization of intangibles from acquisitions and goodwill impairments[20] EBITDA Reconciliation For Q1 2025, EBITDA from continuing operations was $(187.6) million, derived by adjusting net loss for income tax benefit, interest expense, and depreciation and amortization | Metric (Three months ended Sep 30) | 2024 (in 000s) | 2023 (in 000s) | | :--------------------------------- | :------------- | :------------- | | Net loss - as reported | $(172,576) | $(163,482) | | Net loss from continuing operations - as reported | $(171,421) | $(162,873) | | Add back: Income tax benefit | $(60,840) | $(49,487) | | Add back: Interest expense | 15,847 | 15,870 | | Add back: Depreciation and amortization | 28,831 | 30,225 | | EBITDA from continuing operations | $(187,583) | $(166,265) | Adjusted EPS Reconciliation Adjusted diluted loss per share from continuing operations for Q1 2025 was $(1.17), an increase from $(1.05) in the prior year, primarily due to amortization of intangibles | Metric (Three months ended Sep 30) | 2024 | 2023 | | :--------------------------------- | :--- | :--- | | Diluted loss per share from continuing operations - as reported | $(1.23) | $(1.11) | | Adjustments, net of tax | 0.06 | 0.06 | | Adjusted diluted loss per share from continuing operations | $(1.17) | $(1.05) | - The primary adjustment is for amortization of intangibles related to acquisitions, which was $11.1 million (pretax) in 2024 and $12.6 million (pretax) in 2023[19] Additional Information Conference Call H&R Block hosted a conference call on November 7, 2024, to discuss its first quarter 2025 results, with a webcast available for replay - Conference call for Q1 2025 results was held on Thursday, November 7, 2024, at 4:30 p.m. ET[8] - A webcast of the call and presentation is available for replay for 90 days[9] Forward-Looking Statements The press release includes forward-looking statements reflecting management's current expectations about future conditions, which are subject to various risks and uncertainties - Forward-looking statements relate to future conditions, events, or results and are not strictly historical or current facts[12] - These statements are subject to risks and uncertainties that could cause actual results to differ materially, including economic, competitive, and regulatory factors described in the Annual Report on Form 10-K[14] - The Company disclaims any obligation to publicly update or revise any forward-looking statement, except as required by law[14] Investor and Media Relations Contact information for investor relations and media relations is provided for further inquiries regarding H&R Block's financial performance and corporate communications - Investor Relations contacts: Michaella Gallina and Jordyn Eskijian[14] - Media Relations contacts: Teri Daley and Media Desk[14]