H&R Block(US:HRB)2022-08-16 20:44Financial Performance - Revenues for the year ended June 30, 2022, decreased by $125.4 million, or 3.5%, compared to the prior year due to lower tax return volumes [162]. - Net income from continuing operations for the year ended June 30, 2022, was $560.6 million, an 18.8% decrease from $690.5 million in the prior year [156]. - Total tax returns prepared worldwide decreased by 10.1% to 23,600, down from 26,261 in the previous year [157]. - U.S. assisted tax preparation revenues decreased by $45.8 million, or 2.1%, to $2.09 billion [161]. - EBITDA from continuing operations decreased by $161.9 million, or 15.4%, to $889.5 million [161]. - Adjusted net income from continuing operations for the year ended June 30, 2022, was $603.580 million, with adjusted diluted earnings per share at $3.51 [228]. - Net income from continuing operations was $590.2 million, a significant increase of $584.1 million or 9,487.6% compared to the prior year [170]. - Adjusted diluted EPS rose to $3.39, up by 303.6% from $0.84 in the previous year [170]. Operating Expenses - Operating expenses increased by $21.4 million, or 0.8%, to $2.72 billion [165]. - Marketing and advertising expenses rose by $19.5 million, or 7.4%, due to higher online advertising costs [165]. - Other operating expenses increased by $28.7 million, or 6.0%, totaling $506.5 million for the year ended June 30, 2022 [166]. - Total operating expenses rose by $52.6 million, or 18.9%, to $331.8 million, driven by a $25.7 million increase in compensation and benefits, and a $3.6 million increase in bad debt [180]. Cash Flow and Investments - Cash provided by operating activities totaled $808.5 million for the year ended June 30, 2022, compared to $761.2 million in the prior year [187]. - Cash used in investing activities increased to $76.5 million for the year ended June 30, 2022, primarily due to higher payments for business acquisitions [188]. - Cash used in financing activities totaled $1.3 billion for the year ended June 30, 2022, a decrease from $1.9 billion in the prior year, mainly due to the repayment of a $2.0 billion draw on the line of credit [189]. - Dividends paid amounted to $186.5 million for the year ended June 30, 2022, compared to $195.1 million in the prior year [190]. - Capital expenditures were $62.0 million for the year ended June 30, 2022, up from $53.1 million in the prior year, focusing on improvements to retail offices and technology investments [193]. Assets and Liabilities - As of June 30, 2022, cash and cash equivalents totaled $885.0 million, including $201.0 million held by foreign subsidiaries [198]. - The company reported current assets of $38.922 million and noncurrent assets of $1.698 billion as of June 30, 2022 [203]. - Current liabilities stood at $75.855 million, while noncurrent liabilities were $1.496 billion [203]. - The company has $1.6 billion in non-current intercompany receivables due from non-guarantor subsidiaries [203]. Debt and Interest - Interest expense on borrowings decreased by $11.2 million, or 11.3%, primarily due to lower borrowings on the company's CLOC [167]. - The long-term debt primarily consists of fixed-rate Senior Notes, meaning changes in interest rates will not impact consolidated pretax earnings until maturity or refinancing [232]. - The fixed-rate interest on Senior Notes is subject to adjustment based on the company's credit ratings [233]. - As of June 30, 2022, the company had no outstanding balance on its CLOC borrowings, which are generally seasonal and sensitive to interest rate changes during November through March [231]. Foreign Exchange and Risk Management - Foreign exchange rate risk is present due to operations in international markets, primarily involving the Canadian dollar and Australian dollar [234]. - The impact of foreign exchange rate changes resulted in a decrease of $8.1 million in international cash balances for the year ended June 30, 2022, compared to an increase of $13.5 million in the previous year [234]. - A 10% change in foreign exchange rates would impact consolidated pretax income by $2.8 million for the year ended June 30, 2022, and $3.2 million for the year ended June 30, 2021 [234]. - Cash balances, excluding restricted balances, would be affected by $18.5 million and $16.4 million as of June 30, 2022, and June 30, 2021, respectively, due to foreign exchange rate changes [234]. - The company generally uses foreign exchange forward contracts to mitigate currency exchange rate risk for loans to Canadian operations, with no forward contracts outstanding as of June 30, 2022 [235]. Contingencies and Tax Positions - The company has accrued liabilities for litigation and other related contingencies, with estimates of reasonably possible losses not deemed material as of June 30, 2022 [208]. - The company evaluates uncertain tax positions based on technical merits, with adjustments potentially affecting the effective tax rate on a quarterly basis [214]. - Goodwill impairment analysis is performed annually, with significant management judgment involved in revenue and expense forecasts [216]. - The company maintains a formal investment policy to minimize market risk exposure, focusing on liquidity and preserving principal and earnings [229].