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H&R Block Announces Fiscal 2015 Results

9 min read

9 min read

June 08, 2015

  • Total revenues increased $54 million, or 1.8%, to $3.1 billion1
  • Adjusted EBITDA margin of 30.8% consistent with prior year2
  • Earnings per share from continuing operations of $1.75

H&R Block, Inc. (NYSE: HRB), the world’s largest consumer tax services provider, today released its financial results for the fiscal year ended April 30, 2015. Revenues increased for the third consecutive year to $3.1 billion, or 1.8%, driven by successful implementation of the company’s pricing strategy and improved return mix in its retail locations, improved digital do-it-yourself (DIY) volume and monetization, and the impact of franchise acquisitions. This was partially offset by volume declines in its retail locations and negative impact of foreign exchange rate fluctuations. The company’s EBITDA margin of 30.8% was consistent with prior year. Earnings per share from continuing operations decreased 3.3% to $1.75.

Returns prepared by and through H&R Block declined 0.1% to 24.2 million worldwide. This was primarily due to a 4.4% decrease in U.S. assisted tax returns prepared, mainly driven by the continued decline of returns containing the Earned Income Tax Credit (EITC) and, to a lesser extent, the second-year impact of the company’s decision to discontinue the free federal 1040EZ promotion. The company believes the decline in volume was also exacerbated by the impact of industry-wide fraud. H&R Block’s DIY returns, including desktop and online, improved 8% due to product enhancements and improved consumer awareness.

“We saw positive changes in our assisted return mix, our DIY business did very well, both from a volume and a revenue perspective, and our tax professionals delivered expert ACA advice to their clients,” said Bill Cobb, H&R Block’s president and chief executive officer. “I’m pleased that despite the decline in volume we delivered top line revenue growth for the third consecutive year and achieved strong margins.”

The Affordable Care Act (ACA) brought increased complexity to the tax return preparation process for the first time during the 2015 tax season. Confusion, incorrect or delayed 1095-A information documents, and overall anxiety regarding refund impacts modified the timing of taxpayer filings and for some, materially impacted their refunds. Approximately 16% of H&R Block’s clients were directly impacted by the ACA, with the majority of such clients being those without qualifying insurance coverage and either paying the required penalty or obtaining an exemption. Increasing Marketplace enrollment, higher penalties, and new documentation requirements will impact taxpayer behavior for several years to come. H&R Block made significant investments in training, systems and marketing to ensure it is well positioned to serve taxpayers impacted by the ACA going forward.

During this tax season, the industry saw the increasing trend of concern around fraud. While H&R Block has been advocating for actions to address fraud for several years, meaningful attention is now being paid within the tax preparation industry to issues such as tax identify theft and improper EITC payments that continue to cost taxpayers billions of dollars. H&R Block has led the fight against tax fraud and remains focused on advocating for change that benefits consumers by strengthening anti-fraud measures. Commonsense measures such as consistent standards for all tax filings and mandatory certification for paid tax preparers, among other actions, are necessary to address these issues.

“This has been a challenging tax season impacted by changes in the timing of tax filings, the first year implementation of the ACA and the continued and growing issue of fraud in our industry,” added Cobb. “We’re focused on the future, and by investing in our infrastructure through enhanced training, the implementation of new tax preparation software in our assisted channel, and an upgrade of our offices, H&R Block is well positioned for success.”

Fiscal 2015 Results From Continuing Operations

“We increased revenues for the third consecutive year and continued to deliver strong bottom line results,” said Greg Macfarlane, H&R Block’s chief financial officer. “Additionally, our ongoing focus on productivity has allowed us to invest significantly back into the business while achieving targeted EBITDA margins and strong free cash flow.”

Actual Adjusted
(in millions, except EPS) Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2015 Fiscal Year 2014
Revenue $ 3,079 $ 3,024 $ 3,079 $ 3,024
EBITDA $ 949 $ 940 $ 951 $ 932
Pretax Income $ 743 $ 767 $ 745 $ 759
Net Income $ 487 $ 500 $ 488 $ 495
Weighted-Avg. Shares – Diluted 277.1 276.0 277.1 276.0
EPS $ 1.75 $ 1.81 $ 1.75 $ 1.79

Business Segment Financial Results and Highlights

Tax Services

  • Revenues increased 1.9% to $3.1 billion, driven by improvements in tax return mix in both the company’s assisted channel and DIY products, pricing increases, the impact of the franchise acquisitions, and DIY unit growth. Lower assisted return volumes and the impact of foreign currency translation partially offset the revenue increase.
  • S. assisted tax preparation fees and royalties increased 2.3% to $2.1 billion, primarily due to improved return mix, pricing increases, and the impact of franchise acquisitions, offset partially by lower return volumes.
  • DIY tax preparation fees increased 12.1% to $228.4 million due to client growth and improved monetization.
  • Revenues related to Tax Plus products (H&R Block Emerald Advance® Line of Credit, refund transfers (formerly known as refund anticipation checks), H&R Block Emerald Prepaid MasterCard®, Peace of Mind®, and Tax Identity ShieldTM) declined 4.3% to $413.1 million, as lower return volume negatively impacted product sales.
  • International return volume increased 3.9% and revenues increased 7.8% on a local currency basis.
  • On a U.S. dollar basis, international tax preparation revenues increased 3.8% due to the negative impact of foreign exchange totaling $17.9 million.
  • Total operating expenses increased 5.1% to $2.2 billion, mainly due to increased depreciation and amortization, compensation, marketing, and training and other costs related to the implementation of assisted tax software.
  • Adjusted non-GAAP pretax income declined 3.6% to $825.5 million.


  • Pretax loss improved by $18.8 million to $80.4 million, primarily as a result of lower interest expense due to the repayment of a $400 million note in October 2014 and reduced legal and consulting fees.
  • Effective tax rate from continuing operations was 34.5%.

Discontinued Operations

  • Sand Canyon Corporation (SCC), a separate legal entity from H&R Block, Inc., continued to engage in constructive settlement discussions with counterparties that have made a significant majority of previously denied representation and warranty claims.
  • During the third quarter, SCC entered into a settlement agreement to resolve certain of these claims. The settlement amount was fully covered by prior accruals and was paid in the fiscal third quarter.
  • SCC’s accrual for contingent losses related to representation and warranty claims was $150 million at April 30.

Balance Sheet

  • As of April 30, the company had unrestricted cash of $2.0 billion and total outstanding debt of $506.1 million.
  • Shareholder equity at April 30 was $1.8 billion.


A previously announced quarterly cash dividend of 20 cents per share is payable on July 1, 2015 to shareholders of record as of June 15, 2015. The July 1 dividend payment will be H&R Block’s 211th consecutive quarterly dividend since the company went public in 1962.

Fiscal 2015 Conference Call

In conjunction with the release of the fiscal 2015 results, the company will host a conference call at 4:30 p.m. Eastern time on June 8, 2015 for analysts, institutional investors, and shareholders to discuss the fiscal 2015 results, future outlook and a general business update. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:

U.S./Canada (866) 872-0323 or International (443) 842-7595

Conference ID: 8986376

The call 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.

A replay of the call will be available beginning at 7:30 p.m. Eastern time on June 8, 2015, and continuing until July 8, 2015, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 8986376. The webcast will be available for replay June 9, 2015 at http://investors.hrblock.com.

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 may contain 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,” “seeks,” “estimates,” “projects,” “forecasts,” “targets,” “would,” “will,” “should,” “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, income, earnings per share, capital expenditures, dividends, liquidity, capital structure 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 and which are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2014 in the section entitled “Risk Factors,” as well as additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. 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.

PDF of Release with Complete Tables Earnings Release June 2015

About H&R Block
H&R Block, Inc. (NYSE: HRB) is the world’s largest consumer tax services provider. More than 680 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2015, H&R Block had annual revenues of nearly $3.1 billion with 24.2 million tax returns prepared worldwide. 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. H&R Block Bank provides affordable banking products and services. For more information, visit the H&R Block Newsroom at http://newsroom.hrblock.com/.