Liberty Tax Service Announces Fiscal Year 2016 Results
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Liberty Tax Service Announces Fiscal Year 2016 Results

VIRGINIA BEACH, VA - (Marketwired - Jun 14, 2016) - Liberty Tax, Inc. (NASDAQ: TAX) (the "Company"), the parent company of Liberty Tax Service, today reported its results for fiscal year 2016. The Company reported that total revenue increased 7% to $173.4 million and GAAP earnings per share of $1.38 up 126% vs prior year. Non-GAAP earnings per share were $1.41 up 4% vs prior year.

The total number of customers served in company-owned and independently-owned and operated franchise offices fell by 3.8% to 2.16 million. Tax returns prepared in U.S. offices fell 3.9%, while total returns in Canada offices fell 2.9%.

The Company is continuing to implement several new initiatives such as SiempreTax+, which is already one of the fastest growing tax preparation franchises in history, even out pacing the initial growth of Liberty Tax Service. The Company will also be focusing on customer retention and enhanced compliance efforts to address an evolving industry environment.

"Our franchisees and leadership team have worked hard to overcome challenges facing Liberty and the entire tax industry," said John Hewitt, CEO. "Liberty was founded on a principle of delivering friendly and accurate tax preparation. Improving our standards and delivering an exceptional customer experience remains our highest priority."

 
Fiscal 2016 Results
($ in thousands except per share data)   GAAP     Non - GAAP*  
    2016   2015   Change     2016   2015   Change  
Revenue   $ 173,429   $ 162,172   7 %   $ 173,429   $ 162,172   7 %
Operating expenses     140,941     146,780   -4 %     140,276     129,283   9 %
Income before taxes     30,478     13,501   126 %     31,143     30,998   0 %
Diluted EPS     1.38     0.61   126 %     1.41     1.36   4 %
*See reconciliation of GAAP to Non-GAAP measures in Table E
 

Highlights

  • The company reported revenue growth of 7% to $173.4 million.
    • Financial products revenue grew 22% to $45.3 million due to the company's new Refund Advance product as well as favorable pricing.
    • Tax preparation fees increased 39% to $19.3 million due to an increase in the number of company-owned offices.
    • Average net fee for tax preparation services in the U.S. increased 5.1%.
  • GAAP earnings per share increased 126% to $1.38 from $0.61. Non-GAAP earnings per share increased 4% to $1.41 from $1.36.
  • SiempreTax+ has successfully grown to 144 offices, an increase of roughly 150% over last season.

Dividend

On June 10, 2016, the Board of Directors approved a quarterly dividend to shareholders of $0.16 per share. The dividend will be paid on July 22, 2016 to holders of record of common stock and common stock equivalents on the close of business on July 12, 2016. 

Conference Call

At 4:30 p.m. Eastern time on June 14, 2016, the Company will host a conference call for analysts, institutional investors and stockholders. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:

U.S. 855-611-0856
International 518-444-5569
Conference ID code: 24717726

The call will also be webcast in a listen-only format. The link to the webcast may be accessed on the Company's investor relations website atwww.libertytax.com, under the "About" tab.

A telephonic replay of the call will be available beginning shortly after the call continuing until Tuesday, June 21, 2016, by dialing 855-859-2056 (domestic) or 404-537-3406 (international). The conference ID code is 24717726. 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. (NASDAQ: TAX) is the parent company of Liberty Tax Service. Liberty Tax is one of the fastest-growing tax preparation franchises and has prepared nearly 22 million individual income tax returns in more than 4,400 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 21,000 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 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 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 Statements of Operations  
Unaudited, amounts in thousands, except per share and share data  
                         
    Fiscal Years ended April 30,  
    2016     2015     $ change     % change  
Revenues:                            
  Franchise fees   $ 5,038     $ 6,246     (1,208 )   (19.3 %)
  Area developer fees     6,008       6,901     (893 )   (12.9 %)
  Royalties and advertising fees     80,274       80,469     (195 )   (0.2 %)
  Financial products     45,327       37,058     8,269     22.3 %
  Interest income     13,578       14,707     (1,129 )   (7.7 %)
  Tax preparation fees, net of discounts     19,292       13,877     5,415     39.0 %
  Other revenue     3,912       2,914     998     34.2 %
    Total revenues     173,429       162,172     11,257     6.9 %
                             
Operating expenses:                            
  Employee compensation and benefits     42,882       41,079     1,803     4.4 %
  Selling, general, and administrative expenses     43,927       40,604     3,323     8.2 %
  Area developer expense     27,686       28,497     (811 )   (2.8 %)
  Advertising expense     16,420       18,308     (1,888 )   (10.3 %)
  Depreciation, amortization and impairment charges     10,026       9,900     126     1.3 %
  Impairment of online software and assets     -       8,392     (8,392 )   100.0 %
    Total operating expenses     140,941       146,780     (5,839 )   (4.0 %)
    Income from operations     32,488       15,392     17,096     111.1 %
                             
Other income (expense):                            
  Foreign currency transaction income (loss)     29       (2 )   31     1,550.0 %
  Interest expense     (2,039 )     (1,889 )   (150 )   (7.9 %)
    Income before income taxes     30,478       13,501     16,977     125.7 %
  Income tax expense     11,058       4,811     6,247     129.8 %
    Net income   $ 19,420     $ 8,690     10,730     123.5 %
Net income attributable to Class A and Class B common stockholders   $ 18,014     $ 8,057     9,957     123.6 %
                             
Net income per share of Class A and Class B common stock                            
  Basic   $ 1.41     $ 0.63     0.78     123.8 %
  Diluted     1.38       0.61     0.77     126.2 %
Weighted-average shares outstanding                            
  Basic     12,814,775       12,738,887     75,888     0.6 %
  Diluted     14,024,761       14,294,773     (270,012 )   (1.9 %)
                               
                               

 

   
Table B  
Liberty Tax, Inc.  
Condensed Consolidated Statements of Operations  
Unaudited, amounts in thousands, except per share and share data  
                         
    Three months ended April 30,  
    2016     2015     $ change     % change  
Revenues:                            
  Franchise fees   $ 2,513     $ 3,250     (737 )   (22.7 %)
  Area developer fees     1,517       1,835     (318 )   (17.3 %)
  Royalties and advertising fees     51,685       52,119     (434 )   (0.8 %)
  Financial products     27,545       23,031     4,514     19.6 %
  Interest income     6,075       7,507     (1,432 )   (19.1 %)
  Tax preparation fees, net of discounts     14,487       11,029     3,458     31.4 %
  Other revenue     592       148     444     300.0 %
    Total revenues     104,414       98,919     5,495     5.6 %
                             
Operating expenses:                            
  Employee compensation and benefits     14,429       12,453     1,976     15.9 %
  Selling, general, and administrative expenses     14,831       9,685     5,146     53.1 %
  Area developer expense     16,964       17,721     (757 )   (4.3 %)
  Advertising expense     2,348       4,286     (1,938 )   (45.2 %)
  Depreciation, amortization and impairment charges     4,400       3,045     1,355     44.5 %
  Impairment of online software and assets     -       8,392     (8,392 )   100.0 %
    Total operating expenses     52,972       55,582     (2,610 )   (4.7 %)
    Income from operations     51,442       43,337     8,105     18.7 %
                             
Other income (expense):                            
  Foreign currency transaction income     68       43     25     58.1 %
  Interest expense     (447 )     (339 )   (108 )   (31.9 %)
    Income before income taxes     51,063       43,041     8,022     18.6 %
  Income tax expense     18,775       16,298     2,477     15.2 %
    Net Income   $ 32,288     $ 26,743     5,545     20.7 %
Net income attributable to Class A and Class B common stockholders   $ 29,961     $ 24,795     5,166     20.8 %
                             
Net income per share of Class A and Class B common stock                            
  Basic   $ 2.33     $ 1.95     0.38     19.5 %
  Diluted     2.31       1.89     0.42     22.2 %
                             
Weighted-average shares outstanding                            
  Basic     12,877,919       12,728,341     149,578     1.2 %
  Diluted     13,967,568       14,155,818     (188,250 )   (1.3 %)
                             
                             

 

   
Table C  
Liberty Tax, Inc.  
Condensed Consolidated Balance Sheets  
Unaudited, amounts in thousands  
             
    April 30,     April 30,  
    2016     2015  
Current assets:                
  Cash and cash equivalents   $ 9,906     $ 21,387  
  Current receivables, net     74,122       65,927  
  Assets held for sale     9,886       5,160  
  Deferred income tax asset     3,496       6,921  
  Other current assets     5,838       6,470  
    Total current assets     103,248       105,865  
                 
Property, equipment, and software, net     40,957       36,232  
Notes receivable - non-current, net     23,504       20,753  
Goodwill     4,228       3,377  
Other intangible assets, net     16,270       14,672  
Other assets     7,524       3,247  
    Total assets   $ 195,731     $ 184,146  
                 
Current liabilities:                
  Current installments of long-term debt   $ 5,947     $ 3,934  
  Accounts payable and accrued expenses     14,064       17,321  
  Due to area developers     24,977       24,340  
  Income taxes payable     3,581       2,147  
  Deferred revenue - current     4,682       6,076  
    Total current liabilities     53,251       53,818  
                 
  Long-term debt, excluding current installments     17,601       21,463  
  Revolving credit facility     -       -  
  Deferred revenue - non-current     7,056       7,640  
  Deferred income tax liability     6,322       2,363  
    Total liabilities     84,230       85,284  
                 
Stockholders' equity:                
  Special voting preferred stock, $0.01 par value per share     -       -  
  Class A common stock, $0.01 par value per share     120       119  
  Class B common stock, $0.01 par value per share     9       9  
  Exchangeable shares, $0.01 par value     10       10  
  Additional paid-in capital     7,153       4,082  
  Accumulated other comprehensive loss, net of taxes     (1,698 )     (697 )
  Retained earnings     105,907       95,339  
    Total stockholders' equity     111,501       98,862  
    Total liabilities and stockholders' equity   $ 195,731     $ 184,146  
                 
                 

 

   
Table D  
Liberty Tax, Inc.  
Condensed Consolidated Statements of Cash Flows  
Unaudited, amounts in thousands  
   
    Fiscal Years ended April 30,  
    2016     2015  
Cash flows from operating activities:                
  Net Income   $ 19,420     $ 8,690  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Provision for doubtful accounts     7,282       5,726  
    Depreciation, amortization and impairment charges     10,026       18,292  
    Stock-based compensation expense related to equity classified awards     1,863       2,477  
    Gains on bargain purchases and sales of Company-owned offices     (855 )     (414 )
    Deferred tax expense     7,384       (3,545 )
    Changes in accrued income taxes     1,758       (7,491 )
    Changes in other assets and liabilities     (17,061 )     782  
      Net cash provided by operating activities     29,817       24,517  
                 
Cash flows from investing activities:                
  Issuance of operating loans to franchisees     (101,552 )     (93,365 )
  Payments received on operating loans to franchisees     89,786       88,776  
  Purchases of Company-owned offices and area developer rights     (4,787 )     (8,246 )
  Proceeds from sale of Company-owned offices and area developer rights     2,934       3,687  
  Purchase of available-for-sale securities     (4,999 )     -  
  Purchases of property, equipment, and software     (10,692 )     (11,463 )
      Net cash used in investing activities     (29,310 )     (20,611 )
                 
Cash flows from financing activities:                
  Proceeds from the exercise of stock options     2,286       11,983  
  Repurchase of common stock     (1,977 )     (36,308 )
  Payment of dividends     (8,852 )     (2,205 )
  Repayment of long-term debt     (4,170 )     (5,850 )
  Borrowings under revolving credit facility     166,232       154,633  
  Repayments under revolving credit facility     (166,232 )     (154,633 )
  Payment for debt issuance costs     -       (917 )
  Tax benefit of stock option exercises     899       4,803  
      Net cash used by financing activities     (11,814 )     (28,494 )
                 
Effect of exchange rate changes on cash and cash equivalents, net     (174 )     (105 )
      Net decrease in cash and cash equivalents     (11,481 )     (24,693 )
Cash and cash equivalents at beginning of period     21,387       46,080  
Cash and cash equivalents at end of period   $ 9,906     $ 21,387  
                 
                 

 

 
Table E
Liberty Tax, Inc.
Non-GAAP Financial Information
Reconciliation of Other Non-GAAP Financial Measures
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 measures 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.
                               
Fiscal Year Ended April 30, 2016
    Revenues   Expenses     Income from Operations   EBITDA   Income before Taxes   Net Income   Diluted EPS
                                             
As Reported   $ 173,429   $ 140,941     $ 32,488   $ 42,543   $ 30,478   $ 19,420   $ 1.38
                                             
Adjustments:                                            
Executive severance(1)     -     (413 )     413     413     413     263     0.02
Executive Task Force and compliance related costs     -     (252 )     252     252     252     161     0.01
  Subtotal of adjustments     -     (665 )     665     665     665     424     0.03
                                             
As Adjusted   $ 173,429   $ 140,276     $ 33,153   $ 43,208   $ 31,143   $ 19,844   $ 1.41
                                             
Stock-based compensation expense(2)   $ -   $ (1,771 )   $ 1,771   $ 1,771                  
                                             
                                             
Fiscal Year Ended April 30, 2015
    Revenues   Expenses     Income from Operations   EBITDA   Income before Taxes   Net Income(3)   Diluted EPS
                                             
As Reported   $ 162,172   $ 146,780     $ 15,392   $ 33,682   $ 13,501   $ 8,690   $ 0.61
                                             
Adjustments:                                            
Executive severance(1)     -     (1,488 )     1,488     1,488     1,488     915     0.06
Litigation costs     -     (7,617 )     7,617     7,617     7,617     4,685     0.33
Impairment of online software and assets     -     (8,392 )     8,392     -     8,392     5,161     0.36
  Subtotal of adjustments     -     (17,497 )     17,497     9,105     17,497     10,761     0.75
                                             
As Adjusted   $ 162,172   $ 129,283     $ 32,889   $ 42,787   $ 30,998   $ 19,451   $ 1.36
                                             
Stock-based compensation expense(2)   $ -   $ (1,883 )   $ 1,883   $ 1,883                  

 

 
(1) Includes stock-based compensation expense
(2) Excludes costs related to executive severance
(3) The non-GAAP tax rate of 38.5% used above excludes the income tax effects of the non-GAAP income before taxes adjustments described above and is consistent with our average and forecasted tax rate.
 

 

   
Table F  
Liberty Tax, Inc.  
Non-GAAP Financial Information  
Reconciliation of Other Non-GAAP Financial Measures  
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 measures 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 April 30, 2016  
    Revenues   Expenses   Income from Operations     EBITDA     Income before Taxes     Net Income     Diluted EPS  
                                                       
As Reported   $ 104,414   $ 52,972     $ 51,442     $ 55,910     $ 51,063     $ 32,288     $ 2.31  
                                                       
Adjustments:                                                      
Executive Task Force and compliance related costs     -     (252 )     252       252       252       159       0.01  
  Subtotal of adjustments     -     (252 )     252       252       252       159       0.01  
                                                       
As Adjusted   $ 104,414   $ 52,720     $ 51,694     $ 56,162     $ 51,315     $ 32,447     $ 2.32  
                                                       
Stock-based compensation expense   $ -   $ (515 )   $ 515     $ 515                          
                                                       
                                                       
Three Months Ended April 30, 2015  
    Revenues   Expenses   Income from Operations     EBITDA     Income before Taxes     Net Income(1)     Diluted EPS  
                                                       
As Reported   $ 98,919   $ 55,582     $ 43,337     $ 54,817     $ 43,041     $ 26,743     $ 1.89  
                                                       
Adjustments:                                                      
Executive severance     -     129       (129 )     (129 )     (129 )     (79 )     (0.01 )
Litigation costs     -     (1,421 )     1,421       1,421       1,421       874       0.06  
Impairment of online software and assets     -     (8,392 )     8,392       -       8,392       5,161       0.37  
  Subtotal of adjustments     -     (9,684 )     9,684       1,292       9,684       5,956       0.42  
                                                       
As Adjusted   $ 98,919   $ 45,898     $ 53,021     $ 56,109     $ 52,725     $ 32,699     $ 2.31  
                                                       
Stock-based compensation expense   $ -   $ (475 )   $ 475     $ 475                          

 

 
(1) The non-GAAP tax rate of 38.5% used above excludes the income tax effects of the non-GAAP income before taxes adjustments described above and is consistent with our average and forecasted tax rate.
 
 

 

 
Table G
Liberty Tax, Inc.
Operational Data
Unaudited
     
    Fiscal years ended April 30,
    2016   2015
Franchisees            
  U.S.     1,856     1,907
  Canada     130     125
    Total Franchisees     1,986     2,032
             
Offices            
  U.S.            
    Franchised     3,967     3,944
    Company-Owned     258     125
      Total U.S.     4,225     4,069
             
  Canada            
    Franchised     210     202
    Company-Owned     52     57
      Total Canada     262     259
               
  Total            
    Franchised     4,177     4,146
    Company-Owned     310     182
      Total Offices     4,487     4,328
             
Tax Returns Processed            
  U.S.     1,832,000     1,907,000
  Canada     330,000     340,000
    Total Returns Processed in Offices     2,162,000     2,247,000
               
  Online     145,000     167,000
    Total Tax Returns Processed     2,307,000     2,414,000
             
Systemwide Revenue1            
  U.S.   $ 417,600,000   $ 413,200,000
               
  Canada (CDN $)     27,400,000     26,400,000
  Canada (USD $)     21,200,000     21,800,000
             
US Average Net Fee Per Return2   $ 228   $ 217
             

 

1 Our systemwide revenue represents the total tax preparation revenue generated by our franchised and company-owned offices.  It does not represent our revenue. But because franchise royalties are derived from the operations of our franchisees, and because we maintain an infrastructure to support systemwide operations, we consider growth in systemwide revenue to be an important measurement.
2 The net average fee per tax return prepared reflects amounts for our franchised and company-owned offices.
 

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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