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Liberty Tax Service Announces Fiscal 2016 Second Quarter Results

By: Liberty Tax Service |  1,014 Shares     129 Reads

VIRGINIA BEACH, VA - (Marketwired) - December 09, 2015 - Liberty Tax, Inc. (NASDAQ: TAX) (the "Company"), the parent company of Liberty Tax Service, today reported results for the second quarter ended October 31, 2015.

"We are looking forward to the coming tax season," said John Hewitt, CEO. "We expect to see expansion in our store count and strong growth in existing store return counts reflecting a good market environment for paid tax preparation and new product offerings."

Due to the highly seasonal nature of the tax industry, the Company typically reports a loss in the first and second quarters of the fiscal year when revenues are low and costs are ramping up to drive growth in the following tax season. The Company had a reported and adjusted net loss for the fiscal second quarter ended October 31, 2015, of $9.1 million, or $0.71 per share, compared to a reported loss of $0.89 per share and an adjusted loss of $0.74 per share, in the prior period.

($ in millions except per share data)		GAAP											Non - GAAP*
		Q2 2016				Q2 2015				Change			Q2 2016				Q2 2015				Change
Revenue		$	7.9			$	7.7			1.8	%		$	7.9			$	7.7			1.8	%
Operating expenses			21.9				26.0			-15.5	%			21.9				22.7			-3.4	%
Loss before taxes			(14.5	)			(18.8	)		-22.7	%			(14.5	)			(15.5	)		-6.4	%
Net Loss			(9.1	)			(11.3	)		-19.9	%			(9.1	)			(9.4	)		-3.1	%
Basic and Diluted EPS			(0.71	)			(0.89	)		-20.2	%			(0.71	)			(0.74	)		-4.1	%
*See reconciliation of non-GAAP to GAAP measures in Table E

Income Statement

Revenue for the three months ended October 31, 2015 remained essentially flat, increasing to $7.9 million compared to $7.7 million in the prior year period.

Operating expenses for the three months ended October 31, 2015 decreased to $21.9 million driven by lower commission and Area Developer ("AD") expense along with lower depreciation and amortization. In addition, during the prior year we incurred severance and legal settlement costs which were adjusted out in the non-GAAP results, and did not recur this period.

Balance Sheet

The Company has drawn $57.3 million on its revolving credit facility as of October 31, 2015, compared to $51.7 million as of October 31, 2014. This increase was the result of the Company's payment of previously accrued legal settlements as well as an increase in franchisee lending.

Operational Results

On a year to date basis through November, the Company has sold 141 new U.S. and Canadian territories, compared to 127 new territories during the prior year period. In addition, 11 franchisees have sold their SiempreTax+ rights to other operators who plan to open new SiempreTax+ locations. In order to project total office count, other factors, including the opening of previously sold territories and terminations, must be considered. The Company expects the total office count to increase over last year.

Dividend

This week the Board of Directors approved our fourth consecutive quarterly dividend to shareholders of $0.16 per share. The dividend will be paid on January 22, 2016 to holders of record of common stock and common stock equivalents on the close of business on January 15, 2016.

Second Quarter Conference Call

At 8:30 a.m. Eastern time on Wednesday, December 9, 2015, the Company will host a conference call for analysts, institutional investors and stockholders. To access the call, please dial the number below approximately 5 to 10 minutes prior to the scheduled starting time:

U.S. 855-611-0856
International 518-444-5569
Conference ID Code: 81697221

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 continuing until Wednesday, December 16, 2015, by dialing 855-859-2056 (domestic) or 404-537-3406 (international). The conference ID code is 81697221. A replay of the webcast will also be available at the site listed above beginning shortly after its conclusion.

About Liberty Tax, Inc.

Founded in 1997 by CEO John T. Hewitt, Liberty Tax, Inc., is the parent company of Liberty Tax Service. Liberty Tax is the fastest-growing tax preparation franchise and has prepared almost 20 million individual income tax returns in more than 4,300 offices and online. Liberty Tax's online services are available through eSmart Tax, Liberty Online and DIY Tax, and are all backed by the tax professionals at Liberty Tax locations and its nationwide network of approximately 35,000 seasonal tax preparers. Liberty Tax also supports local communities with fundraising endeavors and contributes as a national sponsor for many charitable causes. For a more in-depth look, visit Liberty Tax Service and interact with Liberty Tax on Twitter and Facebook.

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 U.S. generally accepted accounting principles, please see the section of the accompanying Tables E and 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 and immigration 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 U.S. Securities and Exchange Commission. The Company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Table A
Liberty Tax, Inc.
Condensed Consolidated Balance Sheets
Amounts in thousands
				October 31,				April 30,				October 31,
				2015				2015				2014
Current assets:				(Unaudited)								(Unaudited)
	Cash and cash equivalents			$	3,963			$	21,387			$	4,605
	Current receivables, net				71,439				65,927				66,577
	Assets held for sale				9,658				5,160				5,398
	Income taxes receivable				17,473				-				20,647
	Deferred income tax asset				3,727				6,921				4,013
	Other current assets				2,384				6,470				3,789
		Total current assets			108,644				105,865				105,029
	Property, equipment, and software, net				39,695				36,232				41,635
	Notes receivable, non-current, net				23,199				20,753				22,294
	Goodwill				3,157				3,377				2,978
	Other intangible assets, net				14,002				14,672				12,134
	Other assets				3,616				3,247				2,553
		Total assets		$	192,313			$	184,146			$	186,623
Current liabilities:
	Current installments of long-term debt			$	4,922			$	3,934			$	1,965
	Accounts payable and accrued expenses				9,166				17,321				11,798
	Due to ADs				8,138				24,340				8,010
	Income taxes payable				-				2,147				-
	Deferred revenue - current				6,265				6,076				7,224
		Total current liabilities			28,491				53,818				28,997
	Long-term debt, excluding current installments				18,121				21,463				22,119
	Revolving credit facility				57,301				-				51,711
	Deferred revenue - non-current				7,655				7,640				8,368
	Deferred income tax liability				4,747				2,363				5,158
		Total liabilities			116,315				85,284				116,353
Stockholders' equity:
	Special voting preferred stock, $0.01 par value per share				-				-				-
	Class A common stock, $0.01 par value per share				119				119				117
	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				4,115				4,082				1,365
	Accumulated other comprehensive income (loss), net of taxes				(1,572	)			(697	)			(112	)
	Retained earnings				73,317				95,339				68,881
		Total stockholders' equity			75,998				98,862				70,270
		Total liabilities and stockholders' equity		$	192,313			$	184,146			$	186,623

 

Table B
Liberty Tax, Inc.
Condensed Consolidated Statement of Operations
Unaudited, amounts in thousands, except per share and share data
				Three months ended October 31,
				2015				2014				$ change				% change
Revenues:
	Franchise fees			$	906			$	1,324			$	(418	)		-31.6	%
	AD fees				1,524				1,649				(125	)		-7.6	%
	Royalties and advertising fees				1,273				1,199				74			6.2	%
	Financial products				207				200				7			3.5	%
	Interest income				2,309				1,784				525			29.4	%
	Tax preparation fees, net of discounts				339				391				(52	)		-13.3	%
	Other revenue				1,313				1,187				126			10.6	%
		Total revenues			7,871				7,734				137			1.8	%
Operating expenses:
	Employee compensation and benefits				8,183				9,679				(1,496	)		-15.5	%
	Selling, general, and administrative expenses				8,752				10,339				(1,587	)		-15.3	%
	AD expense				656				924				(268	)		-29.0	%
	Advertising expense				2,490				2,979				(489	)		-16.4	%
	Depreciation, amortization, and impairment charges				1,838				2,029				(191	)		-9.4	%
		Total operating expenses			21,919				25,950				(4,031	)		-15.5	%
		Loss from operations			(14,048	)			(18,216	)			4,168			-22.9	%
Other expense:
	Foreign currency transaction loss				-				(9	)			9			-100.0	%
	Interest expense				(486	)			(566	)			80			-14.1	%
		Loss before income taxes			(14,534	)			(18,791	)			4,257			-22.7	%
	Income tax benefit				(5,464	)			(7,463	)			1,999			-26.8	%
		Net loss		$	(9,070	)		$	(11,328	)		$	2,258			-19.9	%
Net loss per share of Class A and Class B common stock
	Basic and diluted			$	(0.71	)		$	(0.89	)		$	0.18			-20.2	%
Weighted-average shares outstanding basic and diluted					12,775,565				12,680,306				95,259			0.8	%

 

Table C
Liberty Tax, Inc.
Condensed Consolidated Statement of Operations
Unaudited, amounts in thousands, except per share and share data
				Six months ended October 31,
				2015				2014				$ change				% change
Revenues:
	Franchise fees			$	1,514			$	2,028			$	(514	)		-25.3	%
	AD fees				3,128				3,474				(346	)		-10.0	%
	Royalties and advertising fees				3,018				2,893				125			4.3	%
	Financial products				515				657				(142	)		-21.6	%
	Interest income				4,315				3,978				337			8.5	%
	Tax preparation fees, net of discounts				962				906				56			6.2	%
	Other revenue				1,942				1,637				305			18.6	%
		Total revenues			15,394				15,573				(179	)		-1.1	%
Operating expenses:
	Employee compensation and benefits				16,816				18,120				(1,304	)		-7.2	%
	Selling, general, and administrative expenses				16,512				17,838				(1,326	)		-7.4	%
	AD expense				1,381				1,665				(284	)		-17.1	%
	Advertising expense				5,100				5,861				(761	)		-13.0	%
	Depreciation, amortization, and impairment charges				3,507				4,328				(821	)		-19.0	%
		Total operating expenses			43,316				47,812				(4,496	)		-9.4	%
		Loss from operations			(27,922	)			(32,239	)			4,317			-13.4	%
Other expense:
	Foreign currency transaction loss				(25	)			(10	)			(15	)		150.0	%
	Interest expense				(887	)			(867	)			(20	)		2.3	%
		Loss before income taxes			(28,834	)			(33,116	)			4,282			-12.9	%
	Income tax benefit				(11,228	)			(13,144	)			1,916			-14.6	%
		Net loss		$	(17,606	)		$	(19,972	)		$	2,366			-11.8	%
Net loss per share of Class A and Class B common stock
	Basic and diluted			$	(1.38	)		$	(1.56	)		$	0.18			-11.5	%
Weighted-average shares outstanding basic and diluted					12,793,593				12,773,789				19,804			0.2	%

 

Table D
Liberty Tax, Inc.
Condensed Consolidated Statements of Cash Flows
Unaudited, amounts in thousands
					Six months ended October 31,
					2015				2014
Cash flows from operating activities:
	Net loss				$	(17,606	)		$	(19,972	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Provision for doubtful accounts				3,396				3,208
		Depreciation, amortization, and impairment charges				3,507				4,328
		Stock-based compensation expense				866				1,508
		Gain on bargain purchases and sales of Company-owned offices				(388	)			(287	)
		Deferred tax expense				5,578				2,158
		Changes in accrued income taxes				(19,620	)			(30,322	)
		Changes in other assets and liabilities				(13,052	)			(1,051	)
			Net cash used in operating activities			(37,319	)			(40,430	)
Cash flows from investing activities:
	Issuance of operating loans to franchisees					(26,326	)			(20,577	)
	Payments received on operating loans to franchisees					1,316				1,770
	Purchases of AD rights and Company-owned offices					(1,341	)			(2,701	)
	Proceeds from sale of Company-owned offices and AD rights					2,569				3,300
	Purchase of property, equipment, and software					(5,464	)			(7,129	)
			Net cash used in investing activities			(29,246	)			(25,337	)
Cash flows from financing activities:
	Proceeds from the exercise of stock options					344				8,145
	Repurchase of common stock					(1,711	)			(33,699	)
	Dividends paid					(4,415	)			-
	Repayment of amounts due to former ADs					(2,318	)			(4,211	)
	Repayment of other long-term debt					(308	)			(928	)
	Borrowings under revolving credit facility					57,668				52,874
	Repayments under revolving credit facility					(367	)			(1,163	)
	Payment for debt issue costs					-				(917	)
	Tax benefit of stock option exercises					532				4,273
			Net cash provided by financing activities			49,425				24,374
Effect of exchange rate changes on cash, net						(284	)			(82	)
			Net decrease in cash and cash equivalents			(17,424	)			(41,475	)
Cash and cash equivalents at beginning of period						21,387				46,080
Cash and cash equivalents at end of period					$	3,963			$	4,605

 

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.

 

For the three months ended October 31, 2015
										Loss from
			Revenues			Expenses				Operations				EBITDA				Pretax Loss				Net Loss				EPS
As Reported			$	7,871		$	21,919			$	(14,048	)		$	(12,210	)		$	(14,534	)		$	(9,070	)		$	(0.71	)
Adjustments:
Executive severance including stock-based compensation				-			-				-				-				-				-				-
Litigation settlements				-			-				-				-				-				-				-
Total adjustments				-			-				-				-				-				-				-
As Adjusted			$	7,871		$	21,919			$	(14,048	)		$	(12,210	)		$	(14,534	)		$	(9,070	)		$	(0.71	)
	Stock-based compensation expense excluding severance related expense		$	-		$	(401	)		$	401			$	401
For the three months ended October 31, 2014
										Loss from
			Revenues			Expenses				Operations				EBITDA				Pretax Loss				Net Loss				EPS
As Reported			$	7,734		$	25,950			$	(18,216	)		$	(16,196	)		$	(18,791	)		$	(11,328	)		$	(0.89	)
Adjustments:
Executive severance including stock-based compensation				-			(1,134	)			1,134				1,134				1,134				684				0.05
Litigation settlements				-			(2,130	)			2,130				2,130				2,130				1,284				0.10
Total adjustments				-			(3,264	)			3,264				3,264				3,264				1,968				0.15
As Adjusted			$	7,734		$	22,686			$	(14,952	)		$	(12,932	)		$	(15,527	)		$	(9,360	)		$	(0.74	)
	Stock-based compensation expense excluding severance related expense		$	-		$	(420	)		$	420			$	420
Three months ended October 31, 2015 compared to three months ended October 31, 2014
	As reported year over year:
		$ change	$	137		$	(4,031	)		$	4,168			$	3,986			$	4,257			$	2,258			$	0.18
		% change		1.8	%		-15.5	%			-22.9	%			-24.6	%			-22.7	%			-19.9	%			-20.2	%
As adjusted year over year:
		$ change	$	137		$	(767	)		$	904			$	722			$	993			$	290			$	0.03
		% change		1.8	%		-3.4	%			-6.0	%			-5.6	%			-6.4	%			-3.1	%			-4.1	%

 

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.

 

For the six months ended October 31, 2015
												Loss from
				Revenues				Expenses				Operations				EBITDA				Pretax Loss				Net Loss				EPS
As Reported				$	15,394			$	43,316			$	(27,922	)		$	(24,440	)		$	(28,834	)		$	(17,606	)		$	(1.38	)
Adjustments:
Executive severance including stock-based compensation					-				(413	)			413				413				413				252				0.02
Litigation settlements					-				-				-				-				-				-				-
Total adjustments					-				(413	)			413				413				413				252				0.02
As Adjusted				$	15,394			$	42,903			$	(27,509	)		$	(24,027	)		$	(28,421	)		$	(17,354	)		$	(1.36	)
	Stock-based compensation expense excluding severance related expense			$	-			$	(774	)		$	774			$	774
For the six months ended October 31, 2014
												Loss from
				Revenues				Expenses				Operations				EBITDA				Pretax Loss				Net Loss				EPS
As Reported				$	15,573			$	47,812			$	(32,239	)		$	(27,921	)		$	(33,116	)		$	(19,972	)		$	(1.56	)
Adjustments:
Executive severance including stock-based compensation					-				(1,617	)			1,617				1,617				1,617				975				0.08
Litigation settlements					-				(2,130	)			2,130				2,130				2,130				1,285				0.09
Total adjustments					-				(3,747	)			3,747				3,747				3,747				2,260				0.17
As Adjusted				$	15,573			$	44,065			$	(28,492	)		$	(24,174	)		$	(29,369	)		$	(17,712	)		$	(1.39	)
	Stock-based compensation expense excluding severance related expense			$	-			$	(914	)		$	914			$	914
Six months ended October 31, 2015 compared to six months ended October 31, 2014
	As reported year over year:
		$ change		$	(179	)		$	(4,496	)		$	4,317			$	3,481			$	4,282			$	2,366			$	0.18
		% change			-1.1	%			-9.4	%			-13.4	%			-12.5	%			-12.9	%			-11.8	%			-11.5	%
	As adjusted year over year:
		$ change		$	(179	)		$	(1,162	)		$	983			$	147			$	948			$	358			$	0.03
		% change			-1.1	%			-2.6	%			-3.5	%			-0.6	%			-3.2	%			-2.0	%			-2.2	%

SOURCE Liberty Tax, Inc.

Contacts:

Kathy Donovan
Investor Relations
Liberty Tax, Inc.
Vice President, Chief Financial Officer
(757) 493-8855
investorrelations@libtax.com

Martha O'Gorman
Media Relations
Liberty Tax, Inc.
Chief Marketing Officer
(757) 301-8022
martha@libtax.com

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