H&R Block misses the mark on Q1 earnings…

H&R Block

H&R Block released its first-quarter earnings results on Wednesday, revealing lower-than-expected revenue. The company’s stock opened on Wednesday at $26.80 and dropped nearly 7% after the earnings report.

The tax preparation company reported a net loss of $150.2 million, down from $152.7 million in the same quarter last year. This translates to a net loss per share of 74 cents, the same as it was in last year’s quarter.

H&R Block indicated in its report that the first-quarter loss is no cause for concern, “The company normally reports a fiscal first quarter loss due to the seasonality of its tax business.” The company continued, “The fiscal first quarter typically represents less than 5% of annual revenues and less than 15% of annual expenses.”

Since the start of 2019, H&R Block stock has increased by about 6%, compared to the S&P 500’s 14.5% gain.

H&R Block Q1 Earnings Highlights

Here are the key metrics from H&R Block’s Q1 2020 earnings report:

  • Revenue: $150 million
  • Loss Per Share: $0.74
  • Loss from Continuing Operations: $0.72 per share

Total revenue increased by 3.6% while operating expenses increased by 5.6% to $345.5 million.

Regarding the first-quarter results, H&R Block CFO Tony Bowen stated, “Our fiscal first quarter results were consistent with our expectations and reflect the seasonality of our business, as well as investments related to our enterprise strategy. I’m pleased with the progress we are making on our strategy, and we remain on track to achieve our revenue and margin outlook for the fiscal year.”

Quarterly Dividend

In the earnings report, the company also reaffirmed its quarterly cash dividend.

The cash dividend of 26 cents per share is payable on October 1 to all shareholders of record as of September 1. The company has increased its cash dividend in each of the last four fiscal years.

Stock Repurchasing

H&R Block also revealed that it repurchased and retired about 1.6 million shares in the first quarter of fiscal 2020.

The shares were repurchased for a total of $44.1 million, which equates to $27.68 per share.

What’s Next for H&R Block?

H&R Block has continued to underperform the market this year … But the company is taking several steps to address this issue.

First is the major acquisition of Wave Financial, a financial solutions platform dedicated to helping small business owners manage their finances.

In reference to this acquisition, H&R Block president and CEO Jeff Jones said, “This acquisition strengthens our growth trajectory and expands our reach within the large and growing small business market.  Wave is a strong strategic fit and I am extremely excited to welcome such an innovative company with great products and an outstanding team to H&R Block.”

The company is also coming off the first year of a multi-year plan to improve the performance of its DIY, Virtual, and Assisted tax preparation products.

In a conference call on Wednesday, Jones said, “As we enter the second year [of the multi-year strategy], we’re building on our learnings to continue innovating across all our platforms providing better service to our clients and enhancing our brand relevance.”

H&R Block hopes these efforts will improve the company’s performance in the forthcoming tax season.

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