Liberty Tax Service Reports Fiscal 2016 Third Quarter Results
"Despite a slow start to the tax season industry wide, we are pleased that the Company delivered double digit growth in the quarter in both revenue and earnings per share," said
($ in millions except per share data) | GAAP | Non - GAAP* | ||||||||||||||||
Q3 2016 | Q3 2015 | Change | Q3 2016 | Q3 2015 | Change | |||||||||||||
Revenue | $ | 53.6 | $ | 47.7 | 12.5 | % | $ | 53.6 | $ | 47.7 | 12.5 | % | ||||||
Operating expenses | 44.7 | 43.4 | 2.9 | % | 44.7 | 39.3 | 13.6 | % | ||||||||||
Income before taxes | 8.2 | 3.6 | 130.7 | % | 8.2 | 7.6 | 7.9 | % | ||||||||||
Net Income | 4.7 | 1.9 | 146.9 | % | 4.7 | 4.1 | 15.5 | % | ||||||||||
Diluted EPS | 0.34 | 0.13 | 161.5 | % | 0.34 | 0.29 | 17.2 | % | ||||||||||
*See reconciliation of non-GAAP to GAAP measures in Table E | ||||||||||||||||||
Income Statement
Revenues for the three months ended
Reported operating expenses increased 2.9% to
Balance Sheet
The Company had a balance of
Operational Results - Offices and Return Count
The Company reported an increase in permanent store locations of 196 stores and a decline in seasonal locations of 51. Increases in the number of permanent office locations is an important driver of future return count growth.
During the calendar year, through
Dividend
The Board of Directors has approved our fifth consecutive quarterly dividend.
The quarterly dividend of
Third Quarter Conference Call
At
U.S. 855-611-0856
International 518-444-5569
Conference ID Code: 57683085
The call will also be webcast in a listen-only format. The link to the webcast can be accessed on the Company's investor relations website at www.libertytax.com, under the "About" tab.
A telephonic replay of the call will be available beginning shortly after the call and continue until
About
Founded in 1997 by CEO
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 E&F titled "Non-GAAP Financial Information."
Forward Looking Statements
In addition to historical information, this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including implied and express statements regarding future growth. These forward-looking statements, as well as Company guidance, are based upon the Company's current expectations and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties and speak only as of the date on which they are made, the Company's actual results could differ materially from these statements. These risks and uncertainties relate to, among other things; uncertainties regarding the Company's ability to attract and retain clients; the ability to continue to pay a quarterly dividend; the effect of health care reform on tax preparation-related revenue; the impact of the launch of a new franchise brand; uncertainties regarding the Company's ability to meet its prepared returns targets; competitive factors; the Company's effective income tax rate; litigation defense expenses and costs of judgments or settlements; and changes in market, economic, political or regulatory conditions. Information concerning these risks and uncertainties is contained in the Company's annual report on Form 10-K and in other filings by the Company with the
Table A | ||||||||||||||
Liberty Tax, Inc. | ||||||||||||||
Condensed Consolidated Balance Sheets | ||||||||||||||
Amounts in thousands | ||||||||||||||
January 31, | April 30, | January 31, | ||||||||||||
2016 | 2015 | 2015 | ||||||||||||
Current assets: | (Unaudited) | (Unaudited) | ||||||||||||
Cash and cash equivalents | $ | 1,787 | $ | 21,387 | $ | 3,150 | ||||||||
Current receivables, net | 149,886 | 65,927 | 124,482 | |||||||||||
Assets held for sale | 11,164 | 5,160 | 5,613 | |||||||||||
Income taxes receivable | 16,303 | - | 17,434 | |||||||||||
Deferred income tax asset | 3,354 | 6,921 | 7,574 | |||||||||||
Other current assets | 21,188 | 6,470 | 18,371 | |||||||||||
Total current assets | 203,682 | 105,865 | 176,624 | |||||||||||
Property, equipment, and software, net | 41,216 | 36,232 | 42,615 | |||||||||||
Notes receivable, non-current, net | 33,036 | 20,753 | 28,050 | |||||||||||
Goodwill | 4,069 | 3,377 | 3,185 | |||||||||||
Other intangible assets, net | 13,217 | 14,672 | 17,358 | |||||||||||
Other assets | 8,580 | 3,247 | 3,973 | |||||||||||
Total assets | $ | 303,800 | $ | 184,146 | $ | 271,805 | ||||||||
Current liabilities: | ||||||||||||||
Current installments of long-term debt | $ | 5,220 | $ | 3,934 | $ | 4,107 | ||||||||
Accounts payable and accrued expenses | 15,506 | 17,321 | 27,787 | |||||||||||
Due to ADs | 16,258 | 24,340 | 14,980 | |||||||||||
Income taxes payable | - | 2,147 | - | |||||||||||
Deferred revenue - current | 4,413 | 6,076 | 6,094 | |||||||||||
Total current liabilities | 41,397 | 53,818 | 52,968 | |||||||||||
Long-term debt, excluding current installments | 18,532 | 21,463 | 21,778 | |||||||||||
Revolving credit facility | 150,682 | - | 110,762 | |||||||||||
Deferred revenue - non-current | 7,206 | 7,640 | 7,777 | |||||||||||
Deferred income tax liability | 6,049 | 2,363 | 6,705 | |||||||||||
Total liabilities | 223,866 | 85,284 | 199,990 | |||||||||||
Stockholders' equity: | ||||||||||||||
Special voting preferred stock, $0.01 par value per share | - | - | - | |||||||||||
Class A common stock, $0.01 par value per share | 120 | 119 | 118 | |||||||||||
Class B common stock, $0.01 par value per share | 9 | 9 | 9 | |||||||||||
Exchangeable shares, $0.01 par value per share | 10 | 10 | 10 | |||||||||||
Additional paid-in capital | 6,385 | 4,082 | 2,049 | |||||||||||
Accumulated other comprehensive loss, net of taxes | (2,430 | ) | (697 | ) | (1,171 | ) | ||||||||
Retained earnings | 75,840 | 95,339 | 70,800 | |||||||||||
Total stockholders' equity | 79,934 | 98,862 | 71,815 | |||||||||||
Total liabilities and stockholders' equity | $ | 303,800 | $ | 184,146 | $ | 271,805 | ||||||||
Table B | |||||||||||||||||
Liberty Tax, Inc. | |||||||||||||||||
Condensed Consolidated Statement of Operations | |||||||||||||||||
Unaudited, amounts in thousands, except per share and share data | |||||||||||||||||
Three months ended January 31, | |||||||||||||||||
2016 | 2015 | $ change | % change | ||||||||||||||
Revenues: | |||||||||||||||||
Franchise fees | $ | 1,011 | $ | 968 | $ | 43 | 4.4 | % | |||||||||
AD fees | 1,363 | 1,592 | (229 | ) | -14.4 | % | |||||||||||
Royalties and advertising fees | 25,571 | 25,457 | 114 | 0.4 | % | ||||||||||||
Financial products | 17,266 | 13,370 | 3,896 | 29.1 | % | ||||||||||||
Interest income | 3,188 | 3,222 | (34 | ) | -1.1 | % | |||||||||||
Tax preparation fees, net of discounts | 3,843 | 1,942 | 1,901 | 97.9 | % | ||||||||||||
Other revenue | 1,379 | 1,129 | 250 | 22.1 | % | ||||||||||||
Total revenues | 53,621 | 47,680 | 5,941 | 12.5 | % | ||||||||||||
Operating expenses: | |||||||||||||||||
Employee compensation and benefits | 11,638 | 10,686 | 952 | 8.9 | % | ||||||||||||
Selling, general, and administrative expenses | 12,585 | 12,834 | (249 | ) | -1.9 | % | |||||||||||
AD expense | 9,340 | 9,178 | 162 | 1.8 | % | ||||||||||||
Advertising expense | 8,972 | 8,161 | 811 | 9.9 | % | ||||||||||||
Depreciation, amortization, and impairment charges | 2,118 | 2,527 | (409 | ) | -16.2 | % | |||||||||||
Total operating expenses | 44,653 | 43,386 | 1,267 | 2.9 | % | ||||||||||||
Income from operations | 8,968 | 4,294 | 4,674 | 108.8 | % | ||||||||||||
Other expense: | |||||||||||||||||
Foreign currency transaction loss | (14 | ) | (35 | ) | 21 | -60.0 | % | ||||||||||
Interest expense | (705 | ) | (683 | ) | (22 | ) | 3.2 | % | |||||||||
Income before income taxes | 8,249 | 3,576 | 4,673 | 130.7 | % | ||||||||||||
Income tax expense | 3,511 | 1,657 | 1,854 | 111.9 | % | ||||||||||||
Net Income | 4,738 | 1,919 | 2,819 | 146.9 | % | ||||||||||||
Less: Net income attributable to participating securities | (343 | ) | (140 | ) | (203 | ) | 145.0 | % | |||||||||
Net income attributible to Class A and Class B common stockholders | $ | 4,395 | $ | 1,779 | $ | 2,616 | 147.0 | % | |||||||||
Earnings per share of Class A and Class B common stock: | |||||||||||||||||
Basic | $ | 0.34 | $ | 0.14 | $ | 0.20 | 142.9 | % | |||||||||
Diluted | 0.34 | 0.13 | 0.21 | 161.5 | % | ||||||||||||
Weighted-average shares outstanding basic | 12,795,367 | 12,679,286 | 116,081 | 0.9 | % | ||||||||||||
Weighted-average shares outstanding diluted | 14,002,356 | 14,227,163 | (224,807 | ) | -1.6 | % | |||||||||||
Table C | |||||||||||||||||
Liberty Tax, Inc. | |||||||||||||||||
Condensed Consolidated Statement of Operations | |||||||||||||||||
Unaudited, amounts in thousands, except per share and share data | |||||||||||||||||
Nine months ended January 31, | |||||||||||||||||
2016 | 2015 | $ change | % change | ||||||||||||||
Revenues: | |||||||||||||||||
Franchise fees | $ | 2,526 | $ | 2,996 | $ | (470 | ) | -15.7 | % | ||||||||
AD fees | 4,491 | 5,066 | (575 | ) | -11.4 | % | |||||||||||
Royalties and advertising fees | 28,589 | 28,350 | 239 | 0.8 | % | ||||||||||||
Financial products | 17,781 | 14,027 | 3,754 | 26.8 | % | ||||||||||||
Interest income | 7,503 | 7,200 | 303 | 4.2 | % | ||||||||||||
Tax preparation fees, net of discounts | 4,805 | 2,848 | 1,957 | 68.7 | % | ||||||||||||
Other revenue | 3,320 | 2,766 | 554 | 20.0 | % | ||||||||||||
Total revenues | 69,015 | 63,253 | 5,762 | 9.1 | % | ||||||||||||
Operating expenses: | |||||||||||||||||
Employee compensation and benefits | 28,454 | 28,736 | (282 | ) | -1.0 | % | |||||||||||
Selling, general, and administrative expenses | 29,097 | 30,809 | (1,712 | ) | -5.6 | % | |||||||||||
AD expense | 10,722 | 10,776 | (54 | ) | -0.5 | % | |||||||||||
Advertising expense | 14,072 | 14,022 | 50 | 0.4 | % | ||||||||||||
Depreciation, amortization, and impairment charges | 5,626 | 6,855 | (1,229 | ) | -17.9 | % | |||||||||||
Total operating expenses | 87,971 | 91,198 | (3,227 | ) | -3.5 | % | |||||||||||
Loss from operations | (18,956 | ) | (27,945 | ) | 8,989 | -32.2 | % | ||||||||||
Other expense: | |||||||||||||||||
Foreign currency transaction loss | (39 | ) | (45 | ) | 6 | -13.3 | % | ||||||||||
Interest expense | (1,592 | ) | (1,550 | ) | (42 | ) | 2.7 | % | |||||||||
Loss before income taxes | (20,587 | ) | (29,540 | ) | 8,953 | -30.3 | % | ||||||||||
Income tax benefit | (7,717 | ) | (11,487 | ) | 3,770 | -32.8 | % | ||||||||||
Net loss | $ | (12,870 | ) | $ | (18,053 | ) | $ | 5,183 | -28.7 | % | |||||||
Net loss attributible to Class A and Class B common stockholders | $ | (12,870 | ) | $ | (18,053 | ) | $ | 5,183 | -28.7 | % | |||||||
Net loss per share of Class A and Class B common stock: | |||||||||||||||||
Basic and Diluted | $ | (1.01 | ) | $ | (1.42 | ) | $ | 0.41 | -28.9 | % | |||||||
Weighted-average shares outstanding | 12,794,185 | 12,742,288 | 51,897 | 0.4 | % | ||||||||||||
Table D | |||||||||||
Liberty Tax, Inc. | |||||||||||
Condensed Consolidated Statements of Cash Flows | |||||||||||
Unaudited, amounts in thousands | |||||||||||
Nine months ended January 31, | |||||||||||
2016 | 2015 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | (12,870 | ) | $ | (18,053 | ) | |||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Provision for doubtful accounts | 4,589 | 4,453 | |||||||||
Depreciation, amortization, and impairment charges | 5,626 | 6,855 | |||||||||
Stock-based compensation expense | 1,348 | 2,002 | |||||||||
Gain on bargain purchases and sales of Company-owned offices | (470 | ) | (310 | ) | |||||||
Deferred tax expense | 7,253 | 144 | |||||||||
Changes in accrued income taxes | (18,283 | ) | (27,110 | ) | |||||||
Changes in other assets and liabilities | (55,476 | ) | (22,202 | ) | |||||||
Net cash used in operating activities | (68,283 | ) | (54,221 | ) | |||||||
Cash flows from investing activities: | |||||||||||
Issuance of operating loans to franchisees | (81,364 | ) | (74,298 | ) | |||||||
Payments received on operating loans to franchisees | 3,077 | 16,410 | |||||||||
Purchases of AD rights and Company-owned offices | (3,713 | ) | (8,218 | ) | |||||||
Proceeds from sale of Company-owned offices and AD rights | 2,851 | 3,690 | |||||||||
Purchase of available-for-sale securities | (4,999 | ) | - | ||||||||
Purchase of property, equipment, and software | (8,685 | ) | (9,532 | ) | |||||||
Net cash used in investing activities | (92,833 | ) | (71,948 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Proceeds from the exercise of stock options | 1,998 | 10,053 | |||||||||
Repurchase of common stock | (1,977 | ) | (35,910 | ) | |||||||
Dividends paid | (6,629 | ) | - | ||||||||
Repayment of amounts due to former ADs | (2,429 | ) | (4,211 | ) | |||||||
Repayment of other long-term debt | (726 | ) | (949 | ) | |||||||
Borrowings under revolving credit facility | 151,225 | 136,565 | |||||||||
Repayments under revolving credit facility | (543 | ) | (25,803 | ) | |||||||
Payment for debt issue costs | - | (917 | ) | ||||||||
Tax benefit of stock option exercises | 933 | 4,776 | |||||||||
Net cash provided by financing activities | 141,852 | 83,604 | |||||||||
Effect of exchange rate changes on cash, net | (336 | ) | (365 | ) | |||||||
Net decrease in cash and cash equivalents | (19,600 | ) | (42,930 | ) | |||||||
Cash and cash equivalents at beginning of period | 21,387 | 46,080 | |||||||||
Cash and cash equivalents at end of period | $ | 1,787 | $ | 3,150 | |||||||
Table E |
Liberty Tax, Inc. |
Non-GAAP Financial Information |
Unaudited, amounts in thousands, except per share data |
We report our financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, we believe certain non-GAAP performance measure and ratios used in managing the business may provide additional meaningful comparisons between current year results and prior periods. Reconciliations to GAAP financial measures are provided below. These non-GAAP financial measures should be viewed in addition to, not as an alternative for, our reported GAAP results.
Three Months Ended January 31, 2016 | |||||||||||||||||||||
Revenues |
Expenses |
Income from Operations |
EBITDA |
Pretax Income |
Net Income |
Diluted EPS |
|||||||||||||||
As Reported | $ | 53,621 | $ | 44,653 | $ | 8,968 | $ | 11,072 | $ | 8,249 | $ | 4,738 | $ | 0.34 | |||||||
Adjustments: | |||||||||||||||||||||
Executive severance including stock-based compensation | - | - | - | - | - | - | - | ||||||||||||||
Litigation settlements | - | - | - | - | - | - | - | ||||||||||||||
Total adjustments | - | - | - | - | - | - | - | ||||||||||||||
As Adjusted | $ | 53,621 | $ | 44,653 | $ | 8,968 | $ | 11,072 | $ | 8,249 | $ | 4,738 | $ | 0.34 | |||||||
Stock-based compensation expense excluding severance related expense | $ | - | $ | (482 | ) | $ | 482 | $ | 482 | ||||||||||||
Three Months Ended January 31, 2015 | |||||||||||||||||||||
Revenues |
Expenses |
Income from Operations |
EBITDA |
Pretax Income |
Net Income |
Diluted EPS |
|||||||||||||||
As Reported | $ | 47,680 | $ | 43,386 | $ | 4,294 | $ | 6,786 | $ | 3,576 | $ | 1,919 | $ | 0.13 | |||||||
Adjustments: | |||||||||||||||||||||
Litigation settlements | - | (4,066 | ) | 4,066 | 4,066 | 4,066 | 2,182 | 0.16 | |||||||||||||
Total adjustments | - | (4,066 | ) | 4,066 | 4,066 | 4,066 | 2,182 | 0.16 | |||||||||||||
As Adjusted | $ | 47,680 | $ | 39,320 | $ | 8,360 | $ | 10,852 | $ | 7,642 | $ | 4,101 | $ | 0.29 | |||||||
Stock-based compensation expense excluding severance related expense | $ | - | $ | (494 | ) | $ | 494 | $ | 494 | ||||||||||||
Table F |
Liberty Tax, Inc. |
Non-GAAP Financial Information |
Unaudited, amounts in thousands, except per share data |
We report our financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, we believe certain non-GAAP performance measure and ratios used in managing the business may provide additional meaningful comparisons between current year results and prior periods. Reconciliations to GAAP financial measures are provided below. These non-GAAP financial measures should be viewed in addition to, not as an alternative for, our reported GAAP results.
Nine Months Ended January 31, 2016 | ||||||||||||||||||||||||||||
Revenues |
Expenses |
Loss from Operations |
EBITDA |
Pretax Loss |
Net Loss |
Basic and Diluted EPS |
||||||||||||||||||||||
As Reported | $ | 69,015 | $ | 87,971 | $ | (18,956 | ) | $ | (13,369 | ) | $ | (20,587 | ) | $ | (12,870 | ) | $ | (1.01 | ) | |||||||||
Adjustments: | ||||||||||||||||||||||||||||
Executive severance including stock-based compensation | - | (413 | ) | 413 | 413 | 413 | 258 | 0.02 | ||||||||||||||||||||
Litigation settlements | - | - | - | - | - | - | - | |||||||||||||||||||||
Total adjustments | - | (413 | ) | 413 | 413 | 413 | 258 | 0.02 | ||||||||||||||||||||
As Adjusted | $ | 69,015 | $ | 87,558 | $ | (18,543 | ) | $ | (12,956 | ) | $ | (20,174 | ) | $ | (12,612 | ) | $ | (0.99 | ) | |||||||||
Stock-based compensation expense excluding severance related expense | $ | - | $ | (1,256 | ) | $ | 1,256 | $ | 1,256 | |||||||||||||||||||
Nine Months Ended January 31, 2015 | ||||||||||||||||||||||||||||
Revenues |
Expenses |
Loss from Operations |
EBITDA |
Pretax Loss |
Net Loss |
Basic and Diluted EPS |
||||||||||||||||||||||
As Reported | $ | 63,253 | $ | 91,198 | $ | (27,945 | ) | $ | (21,135 | ) | $ | (29,540 | ) | $ | (18,053 | ) | $ | (1.42 | ) | |||||||||
Adjustments: | ||||||||||||||||||||||||||||
Executive severance including stock-based compensation | - | (1,617 | ) | 1,617 | 1,617 | 1,617 | 988 | 0.08 | ||||||||||||||||||||
Litigation settlements | - | (6,196 | ) | 6,196 | 6,196 | 6,196 | 3,787 | 0.30 | ||||||||||||||||||||
Total adjustments | - | (7,813 | ) | 7,813 | 7,813 | 7,813 | 4,775 | 0.38 | ||||||||||||||||||||
As Adjusted | $ | 63,253 | $ | 83,385 | $ | (20,132 | ) | $ | (13,322 | ) | $ | (21,727 | ) | $ | (13,278 | ) | $ | (1.04 | ) | |||||||||
Stock-based compensation expense excluding severance related expense | $ | - | $ | (1,408 | ) | $ | 1,408 | $ | 1,408 | |||||||||||||||||||
Table G | ||||||||
Liberty Tax, Inc. | ||||||||
Operational Data | ||||||||
Unaudited | ||||||||
Tax returns processed1 | CYTD 1/31/16 | CYTD 1/31/15 | Percent Change | |||||
U.S. offices | 438,000 | 456,000 | -3.9 | % | ||||
Online2 | 21,000 | 23,000 | -8.7 | % | ||||
Total tax returns processed | 459,000 | 479,000 | -4.2 | % | ||||
Tax returns processed1 | CYTD 2/28/16 | CYTD 2/28/15 | Percent Change | |||||
U.S. offices | 1,094,000 | 1,140,000 | -4.0 | % | ||||
Online2 | 65,000 | 72,000 | -9.7 | % | ||||
Total tax returns processed | 1,159,000 | 1,212,000 | -4.4 | % | ||||
U.S. Offices3 | Change | |||||||
Permanent | 3,960 | 3,764 | 196 | |||||
Seasonal | 211 | 262 | (51 | ) | ||||
Processing Centers | 54 | 43 | 11 | |||||
Total office locations | 4,225 | 4,069 | 156 | |||||
1 | Return counts are rounded to the thousands and percentages are calculated on rounded amounts | |
2 | Previously reported online return counts for calendar years prior to 2016 have been restated to reflect accepted e-files only. No changes were made to previously reported returns for office counts. | |
3 | We measure our number of offices per fiscal year based on franchised and company-owned offices open at any point during the tax season | |
CONTACTS:
Investors:
Vice President, Chief Financial Officer
(757) 493-8855
investorrelations@libtax.com
Media:
Chief Marketing Officer
(757) 301-8022
martha@libtax.com
Source: