VIRGINIA BEACH, VA - (Marketwired - Aug 28, 2014) - Liberty Tax, Inc. (NASDAQ: TAX) the parent company of Liberty Tax Service, today reported results for the first quarter ended July 31, 2014. Due to the seasonality of the business, the Company typically reports a loss in the first quarter when revenues are low and costs are ramping up to drive growth in the following season. The Company reported a net loss for the fiscal first quarter ended July 31, 2014, of $8.6 million, or $0.67 per share, compared to a net loss of $5.9 million, or $0.46 per share, in the prior year period. The Company reported an adjusted non-GAAP net loss of $0.63 per share compared to an adjusted non-GAAP net loss of $0.49 per share in the prior period.
"During our first quarter, we are primarily focused on expanding our office count, improving operations and preparing for the next tax season," said John Hewitt, CEO. "We are just kicking off our selling season so it is difficult to predict the final numbers for this year, but we expect the Affordable Care Act to help drive significant growth for the next two to three years."
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The Company has been expecting a price increase of 5% due to the increased complexity of returns that will be required by the Affordable Care Act. However, a wide variety of exemptions have been issued by the government which will make it easier for taxpayers to file their returns this year without paying a penalty. Because the simpler return will cost less to prepare, the Company now expects to see a portion of this increase delayed until next year. The Company is projecting a 2 1/2-3% fee increase in 2015 related to the ACA. This increase is in addition to the standard annual increase.
Revenues for the three months ended July 31, 2014 decreased by 2.8% to $7.8 million, versus $8.1 million in the prior year period. Franchise fee revenue declined $0.3 million. Franchise fee revenue is recognized as cash is received, and cash payments on prior year franchise notes were lower.
Operating expenses for the three months ended July 31, 2014 increased 25.3% to $21.9 million, versus $17.4 million in the prior year period. This increase was primarily driven by investments in staff and management for the overall growth of the business, and an increase in depreciation, amortization and impairment charges due to the rollout of our NextGen software platform for online customers last year. During the prior year period the Company also recorded a $0.9 million one-time benefit due to the reclassification of stock options back to equity instruments and in the current year period, the Company incurred severance costs of $0.5 million. For the full year the Company expects revenue growth to outpace operating expense growth.
The Company had a cash balance of $8.6 million at July 31, 2014. The Company has drawn $13.8 million on its revolving credit facility as of July 31, 2014 compared to $16.5 million at the prior year's quarter end. During the first quarter we typically draw on this facility to provide for cash used in operations and for operating loans to franchisees.
During the first quarter of fiscal 2015, the Company was pleased to add 43 new franchisees, 26 of which purchased 28 new territories and the remaining 17 of which purchased at least one existing territory.
At 8:30 a.m. Eastern time on August 28, 2014, 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: 88168767
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.
A telephonic replay of the call will be available beginning shortly after the call continuing until Thursday, September 4, 2014, by dialing 855-859-2056 (domestic) or 404-537-3406 (international). The conference ID code is 88168767. A replay of the webcast will also be available at the site listed above beginning shortly after its conclusion.
Founded in 1997 by CEO John T. Hewitt, Liberty Tax, Inc., formerly known as JTH Holding, Inc., is the parent company of Liberty Tax Service. Liberty Tax is the fastest-growing tax preparation franchise and has prepared almost 18 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 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.
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."
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 and our eligibility to file a registration statement in the future. 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 effect of health care reform on tax preparation-related revenue; 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 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.
Kathy Donovan
Investor Relations
Liberty Tax, Inc.
Vice President, Chief Financial Officer
(757) 493-8855
Martha O'Gorman
Media Relations
Liberty Tax, Inc.
Chief Marketing Officer
(757) 301-8022