KANSAS CITY, Mo., Dec. 06, 2018 (GLOBE NEWSWIRE) -- H&R Block, Inc. (NYSE: HRB) today released its financial results for the fiscal 2019 second quarter ended October 31, 2018.  The company normally reports a fiscal second quarter loss due to the seasonality of its tax business.  The fiscal second quarter typically represents less than 5 percent of annual revenues and less than 15 percent of annual expenses.

Fiscal Second Quarter Highlights¹

• Fiscal second quarter financial results were in line with expectations.
• Revenues increased $8 million, or 6 percent, to $149 million primarily due to increased Assisted tax preparation revenues and the timing of revenues related to the company's Tax Plus products.
• Pretax loss from continuing operations improved 2 percent to $232 million; loss per share from continuing operations² increased $0.12 to $0.83 due to a lower effective tax rate, which negatively impacts those fiscal quarters with a seasonal net loss.
• The company reiterated its financial outlook for the full fiscal year.

"We’re implementing a number of initiatives for the upcoming tax season that will significantly improve the way clients interact with H&R Block, including our industry-leading announcement of upfront, transparent pricing in all of our channels," said Jeff Jones, H&R Block's president and chief executive officer.  "This, combined with our innovative virtual tax offerings will help us deliver unique and better experiences to consumers, bring our brand promise to life, and allow us to deliver for the long term."

Fiscal 2019 Second Quarter Results From Continuing Operations

"The fiscal second quarter results reflect planned increases in expenses related to strategic investments being made in the business," said Tony Bowen, H&R Block's chief financial officer.  "We are focused on executing the operational elements of our strategy for the upcoming tax season, and remain on track to achieve our financial outlook for the fiscal year."

(in millions, except EPS)		Q2 FY2019				Q2 FY2018
Revenue		$	149			$	141
Pretax Loss		$	(232	)		$	(236	)
Net Loss		$	(171	)		$	(148	)
Weighted-Avg. Shares - Diluted		205.5				209.1
EPS2		$	(0.83	)		$	(0.71	)
EBITDA3		$	(169	)		$	(170	)

Key Financial Metrics

• Total revenues increased $8.0 million, or 5.7 percent, to $148.9 million primarily due to increased Assisted tax preparation revenues and the timing of revenues from Tax Identity Shield^®, partially offset by lower international revenues related to fluctuations in exchange rates.
  
• Total operating expenses increased $7.3 million, or 2.0 percent, to $364.1 million primarily due to increases in occupancy and compensation expenses, partially offset by lower depreciation and amortization and the timing of marketing expense.
  
• Pretax loss improved $4.3 million, or 1.8 percent, to $232.0 million.
  
• Loss per share from continuing operations increased $0.12, from $0.71 to $0.83, due to a lower effective tax rate, which negatively impacts those fiscal quarters with a seasonal net loss.

Dividends

As previously announced, a quarterly cash dividend of $0.25 per share is payable on January 2, 2019 to shareholders of record as of December 3, 2018.  H&R Block has paid quarterly dividends consecutively since the company went public in 1962.

Discontinued Operations

For information on Sand Canyon, please refer to disclosures in the company’s reports on Forms 10-K, 10-Q, and other filings with the SEC.

Conference Call

Discussion of the fiscal 2019 second quarter results, future outlook, and a general business update will occur during the company’s previously announced fiscal second quarter earnings conference call for analysts, institutional investors, and shareholders. The call is scheduled for 8:30 a.m. Eastern time on December 6, 2018. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:

U.S./Canada (855) 702-5257 or International (213) 358-0868
Conference ID: 8661109

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 http://investors.hrblock.com.  The presentation will be posted on the Webcasts and Presentations page at http://investors.hrblock.com following the conclusion of the call.

A replay of the call will be available beginning at 11:30 a.m. Eastern time on December 6, 2018, and continuing until January 6, 2019, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 8661109. The webcast will be available for replay beginning on December 7, 2018 and continuing for 90 days at http://investors.hrblock.com.

About H&R Block

H&R Block, Inc. (NYSE: HRB) is a global consumer tax services provider.  Tax return preparation services are provided by professional tax preparers in approximately 12,000 company-owned and franchise retail tax offices worldwide, and through H&R Block tax software products for the DIY consumer.  H&R Block also offers adjacent Tax Plus products and services.  In fiscal 2018, H&R Block had annual revenues of over $3.1 billion with over 23 million tax returns prepared worldwide.  For more information, visit the H&R Block Newsroom.

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. 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, 2018 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 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, guidance from the Internal Revenue Service, SEC, or the Financial Accounting Standards Board about the Tax Legislation, 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.

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 earnings before interest, tax, depreciation, and amortization (EBITDA) from continuing operations, EBITDA margin 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).

For Further Information

Investor Relations: Colby Brown, (816) 854-4559, colby.brown@hrblock.com
Media Relations: Susan Waldron, (816) 854-5522, susan.waldron@hrblock.com

CONSOLIDATED STATEMENTS OF OPERATIONS										(unaudited, in 000s - except per share amounts)
		Three months ended October 31,								Six months ended October 31,
		2018				2017				2018				2017
REVENUES:
Service revenues		$	127,267			$	127,923			$	254,127			$	252,618
Royalty, product and other revenues		21,604				12,931				39,927				26,038
		148,871				140,854				294,054				278,656
OPERATING EXPENSES:
Costs of revenues		250,815				240,019				472,375				467,734
Selling, general and administrative		113,319				116,846				219,059				212,095
Total operating expenses		364,134				356,865				691,434				679,829
Other income (expense), net		4,464				1,011				9,006				2,231
Interest expense on borrowings		(21,191		)		(21,265		)		(42,381		)		(42,542		)
Loss from continuing operations before income tax benefit		(231,990		)		(236,265		)		(430,755		)		(441,484		)
Income tax benefit		(61,053		)		(87,953		)		(111,021		)		(165,354		)
Net loss from continuing operations		(170,937		)		(148,312		)		(319,734		)		(276,130		)
Net loss from discontinued operations		(5,339		)		(5,254		)		(9,212		)		(8,003		)
NET LOSS		$	(176,276	)		$	(153,566	)		$	(328,946	)		$	(284,133	)
BASIC AND DILUTED LOSS PER SHARE:
Continuing operations		$	(0.83	)		$	(0.71	)		$	(1.55	)		$	(1.33	)
Discontinued operations		(0.03		)		(0.03		)		(0.04		)		(0.03		)
Consolidated		$	(0.86	)		$	(0.74	)		$	(1.59	)		$	(1.36	)
WEIGHTED AVERAGE BASIC AND DILUTED SHARES		205,520				209,065				206,596				208,500

CONSOLIDATED BALANCE SHEETS		(unaudited, in 000s - except per share data)
As of		October 31, 2018				October 31, 2017				April 30, 2018
ASSETS
Cash and cash equivalents		$	600,799			$	180,997			$	1,544,944
Cash and cash equivalents - restricted		122,507				100,665				118,734
Receivables, net		61,286				77,750				146,774
Income taxes receivable		18,745				—				12,310
Prepaid expenses and other current assets		87,665				85,204				68,951
Total current assets		891,002				444,616				1,891,713
Property and equipment, net		241,772				262,226				231,888
Intangible assets, net		364,524				406,440				373,981
Goodwill		507,191				493,059				507,871
Deferred tax assets and income taxes receivable		130,987				9,205				34,095
Other noncurrent assets		97,820				101,015				101,401
Total assets		$	2,233,296			$	1,716,561			$	3,140,949
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Accounts payable and accrued expenses		$	114,393			$	114,875			$	251,975
Accrued salaries, wages and payroll taxes		43,396				42,897				141,499
Accrued income taxes and reserves for uncertain tax positions		94,257				43,879				263,050
Current portion of long-term debt		—				1,004				1,026
Deferred revenue and other current liabilities		183,675				190,522				186,101
Total current liabilities		435,721				393,177				843,651
Long-term debt		1,491,328				1,493,828				1,494,609
Deferred tax liabilities and reserves for uncertain tax positions		235,799				138,024				229,430
Deferred revenue and other noncurrent liabilities		101,773				104,305				179,548
Total liabilities		2,264,621				2,129,334				2,747,238
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Common stock, no par, stated value $.01 per share		2,420				2,462				2,462
Additional paid-in capital		759,235				753,423				760,250
Accumulated other comprehensive loss		(18,880		)		(14,222		)		(14,303		)
Retained earnings (deficit)		(64,291		)		(433,556		)		362,980
Less treasury shares, at cost		(709,809		)		(720,880		)		(717,678		)
Total stockholders' equity (deficiency)		(31,325		)		(412,773		)		393,711
Total liabilities and stockholders' equity		$	2,233,296			$	1,716,561			$	3,140,949

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS		(unaudited, in 000s)
Six months ended October 31,		2018				2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(328,946	)		$	(284,133	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		81,925				88,390
Provision for bad debt		2,350				4,238
Deferred taxes		17,913				58,634
Stock-based compensation		11,839				11,627
Changes in assets and liabilities, net of acquisitions:
Receivables		75,324				77,958
Prepaid expenses and other current assets		(18,933		)		(19,283		)
Other noncurrent assets		9,147				8,984
Accounts payable and accrued expenses		(120,921		)		(85,846		)
Accrued salaries, wages and payroll taxes		(97,771		)		(141,491		)
Deferred revenue and other current liabilities		(10,408		)		3,775
Deferred revenue and other noncurrent liabilities		(70,606		)		(60,857		)
Income tax receivables, accrued income taxes and income tax reserves		(179,660		)		(296,023		)
Other, net		1,056				(14,430		)
Net cash used in operating activities		(627,691		)		(648,457		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(66,422		)		(56,750		)
Payments made for business acquisitions, net of cash acquired		(24,549		)		(27,522		)
Franchise loans funded		(8,915		)		(10,939		)
Payments received on franchise loans		11,689				10,322
Other, net		4,993				5,474
Net cash used in investing activities		(83,204		)		(79,415		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid		(103,484		)		(100,082		)
Repurchase of common stock, including shares surrendered		(102,096		)		(7,581		)
Proceeds from exercise of stock options		1,746				27,522
Other, net		(22,434		)		(26,717		)
Net cash used in financing activities		(226,268		)		(106,858		)
Effects of exchange rate changes on cash		(3,209		)		(1,147		)
Net decrease in cash, cash equivalents and restricted cash		(940,372		)		(835,877		)
Cash, cash equivalents and restricted cash, beginning of period		1,663,678				1,117,539
Cash, cash equivalents and restricted cash, end of period		$	723,306			$	281,662
SUPPLEMENTARY CASH FLOW DATA:
Income taxes paid, net of refunds received		$	50,197			$	76,451
Interest paid on borrowings		39,902				39,902
Accrued additions to property and equipment		4,765				3,874

FINANCIAL RESULTS		(unaudited, in 000s - except per share amounts)
		Three months ended October 31,								Six months ended October 31,
		2018				2017				2018				2017
REVENUES:
U.S. assisted tax preparation		$	41,652			$	36,665			$	72,756			$	66,628
U.S. royalties		8,062				7,008				15,633				13,975
U.S. DIY tax preparation		2,994				4,263				5,775				7,489
International revenues		45,497				47,934				84,676				88,351
Revenues from Refund Transfers		560				1,135				1,984				3,951
Revenues from Emerald Card®		9,478				9,180				23,724				24,167
Revenues from Peace of Mind® Extended Service Plan		24,318				24,585				60,895				56,528
Revenues from Tax Identity Shield®		5,243				257				9,984				511
Interest and fee income on Emerald Advance		397				594				844				1,258
Other		10,670				9,233				17,783				15,798
		148,871				140,854				294,054				278,656
Compensation and benefits:
Field wages		59,096				57,716				109,028				105,839
Other wages		50,046				46,723				97,868				89,920
Benefits and other compensation		24,178				23,583				47,109				44,228
		133,320				128,022				254,005				239,987
Occupancy		104,880				94,907				195,606				185,198
Marketing and advertising		8,586				11,562				15,480				18,666
Depreciation and amortization		41,493				44,792				81,925				88,390
Bad debt		188				1,779				(670		)		4,238
Supplies		3,189				4,368				5,393				7,102
Other		72,478				71,435				139,695				136,248
Total operating expenses		364,134				356,865				691,434				679,829
Other income (expense), net		4,464				1,011				9,006				2,231
Interest expense on borrowings		(21,191		)		(21,265		)		(42,381		)		(42,542		)
Pretax loss		(231,990		)		(236,265		)		(430,755		)		(441,484		)
Income tax benefit		(61,053		)		(87,953		)		(111,021		)		(165,354		)
Net loss from continuing operations		(170,937		)		(148,312		)		(319,734		)		(276,130		)
Net loss from discontinued operations		(5,339		)		(5,254		)		(9,212		)		(8,003		)
NET LOSS		$	(176,276	)		$	(153,566	)		$	(328,946	)		$	(284,133	)
BASIC AND DILUTED LOSS PER SHARE:
Continuing operations		$	(0.83	)		$	(0.71	)		$	(1.55	)		$	(1.33	)
Discontinued operations		(0.03		)		(0.03		)		(0.04		)		(0.03		)
Consolidated		$	(0.86	)		$	(0.74	)		$	(1.59	)		$	(1.36	)
Weighted average basic and diluted shares		205,520				209,065				206,596				208,500
EBITDA from continuing operations (1)		$	(169,306	)		$	(170,208	)		$	(306,449	)		$	(310,552	)

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

		Three months ended October 31,								Six months ended October 31,
NON-GAAP FINANCIAL MEASURE - EBITDA		2018				2017				2018				2017
Net loss - as reported		$	(176,276	)		$	(153,566	)		$	(328,946	)		$	(284,133	)
Discontinued operations, net		5,339				5,254				9,212				8,003
Net loss from continuing operations - as reported		(170,937		)		(148,312		)		(319,734		)		(276,130		)
Add back:
Income taxes of continuing operations		(61,053		)		(87,953		)		(111,021		)		(165,354		)
Interest expense of continuing operations		21,191				21,265				42,381				42,542
Depreciation and amortization of continuing operations		41,493				44,792				81,925				88,390
		1,631				(21,896		)		13,285				(34,422		)
EBITDA from continuing operations		$	(169,306	)		$	(170,208	)		$	(306,449	)		$	(310,552	)
		Three months ended October 31,								Six months ended October 31,
Supplemental Information		2018				2017				2018				2017
Stock-based compensation expense:
Pretax		$	7,480			$	6,811			$	11,839			$	11,627
After-tax		5,715				4,402				8,989				7,525
Amortization of intangible assets:
Pretax		$	17,585			$	19,438			$	35,724			$	38,673
After-tax		13,503				12,557				27,125				25,029

NON-GAAP FINANCIAL INFORMATION

The accompanying press release contains non-GAAP financial measures.  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 may consider whether 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 EBITDA from continuing operations, EBITDA margin from continuing operations, and free cash flow. 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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