Liberty Tax Service Reports U.S. Systemwide Revenue Increased 5.2% Through February 28
By: Liberty Tax Service | 4 Shares 130 Reads
Reports Fiscal 2013 Third Quarter Results
VIRGINIA BEACH, Va. - March 13, 2013 - (BUSINESS WIRE) - JTH Holding, Inc. (NASDAQ:TAX) (the “Company”), the parent company of Liberty Tax Service, today reported that systemwide revenue in the U.S. for the 2013 calendar year through February 28, 2013 increased 5.2% versus the same period last year.
“This season had the latest start that I have ever seen in my 44 years in the industry. As we expected, this shifted the early filing season later and we adjusted our office hours and customer service accordingly to accommodate these changes” “This season had the latest start that I have ever seen in my 44 years in the industry. As we expected, this shifted the early filing season later and we adjusted our office hours and customer service accordingly to accommodate these changes,” said John Hewitt, Chairman and CEO. “We are pleased that our customers continue to recognize the value in having a Liberty Tax office prepare their tax return for them.”
Through January 31, 2013, the number of U.S. customers the Company and its franchisees had served in the calendar year had declined 27.0% versus the same period in the prior year. By February 28, 2013, the number of U.S. customers the Company and its franchisees had served in the calendar year was lower by 1.4% versus the same period in the prior year.
“We are encouraged by our strong February numbers,” said Hewitt. “With the IRS beginning to accept the last of the tax forms in early March, finally all taxpayers can have their return filed. According to the IRS, total U.S. tax returns received were down 12.9% for the calendar year as of March 1, 2013, versus the calendar year of 2012 through March 2, 2012. Based upon the tax season to date and the change the IRS implemented with regard to the Earned Income Tax Credit form, we believe total tax returns in the United States will be flat to up 1% this filing season instead of up 1-2%.”
Third Quarter of Fiscal 2013 Results
Net income for the fiscal third quarter ended January 31, 2013, was $1.1 million, or $0.08 per share, compared to net income of $4.7 million, or $0.33 per share, in the prior year period. Net loss for the nine months ended January 31, 2013 was $11.7 million, or $0.92 per share, compared to a net loss of $4.6 million, or $0.41 per share, for the nine months ended January 31, 2012.
Revenues
Revenues for the three months ended January 31, 2013 decreased 14.3% to $30.5 million, versus $35.7 million in the prior year period. The decline in revenue was primarily due to the unprecedented delay in the start of tax season, which for the period caused decreases in royalties, advertising fees, financial products income and tax preparation fees. These revenue reductions were somewhat offset by an increase in interest income as the Company increased the amount of operating loans to franchisees to help fund their January operating costs, in light of reduced January revenue attributable to the late season start. Additionally, due to differences in the structure of the current year’s contract for the Instant Cash Advance (ICA) program, the net revenue from that program was recorded as financial product revenue instead of presenting revenue and expenses separately in the financial statements, as was the case in prior years. This change further decreased financial product revenue versus last year.
Revenue for the first nine months of the fiscal year decreased 9.5% to $44.6 million compared to $49.3 million in the prior year period. In addition to the reasons listed above, revenue in the nine months ended January 31, 2013 was also impacted by a decline in franchise fees due to an increased number of new franchisees purchasing territories from existing franchisees.
Operating Expenses
Operating expenses for the three months ended January 31, 2013 increased 2.2% to $27.6 million, versus $27.0 million in the prior year period. The increase was primarily due to an increase in personnel to support anticipated growth, operating additional company-owned stores and becoming a public company. This was somewhat offset by a decrease in general and administrative expenses as the Company restructured the financial product programs and the accounting for the 2013 ICA program requires a net presentation.
Operating expenses in the quarter included approximately $461,000 of costs associated with being a public company that were not incurred in the prior year quarter. Operating expenses for the first nine months of the fiscal year included approximately $1.5 million of costs associated with being a public company that were not incurred in the prior year.
Operating expenses for the first nine months of the fiscal year increased 12.6% to $62.1 million compared to $55.2 million in the prior year period.
Bank Waiver
At January 31, 2013, due to the delay in the start of the tax season, the Company was not in compliance with its leverage ratio requirement in its credit facility. The Company has obtained a waiver from its creditors and as of February 28, 2013, the outstanding amount on the revolving portion of its credit facility was $61.0 million, which would have been sufficient for compliance at January 31, 2013.
“We appreciate the support we have received from our bank syndicate and their understanding that the delay of the tax season merely shifted the timing of our revenue and the subsequent repayment on the line of credit. While we were only required to have support of 51% of our bank partners, we were happy to receive 100% approval of the waiver,” said Mark Baumgartner, CFO.
Fiscal 2013 Outlook
The Company is reiterating its net income and effective tax rate guidance of $20.0 million - $21.5 million and 38.6%, respectively. Revenue guidance is being updated to a range of $120 million - $125 million primarily due to accounting for the 2013 ICA program as net and the operation of fewer Company stores than previously projected.
Third Quarter Conference Call
At 4:30 p.m. ET on Tuesday, March 12, 2013, the Company will host a conference call to discuss its earnings. To listen to the call, dial 800-510-9661 (domestic) or 617-614-3452 (international), passcode 55071337, approximately 10 minutes prior to the start time of the call. 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 at www.libertytax.com.
A telephonic replay of the call will be available beginning shortly after the call on Tuesday, March 12, 2013 and continuing until Tuesday, March 19, 2013, by dialing 888-286-8010 (domestic) or 617-801-6888 (international). The participant passcode is 94444112. A replay of the webcast will also be available at the site listed above beginning shortly after its conclusion.
About JTH Holding, Inc.
Founded in 1997 by CEO John T. Hewitt, JTH Holding, Inc. is the parent company of Liberty Tax Service. As the fastest-growing tax preparation franchise ever, Liberty Tax Service has prepared over 10 million individual income tax returns. Liberty also offers an online tax service, eSmart Tax, which enables customers to do their own taxes wherever there’s a computer. eSmart Tax is backed by the tax professionals at Liberty Tax Service and its nationwide network of over 30,000 tax preparers, ready to offer their assistance at any time. For a more in-depth look at Liberty Tax Service, visit www.libertytax.com.
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 the Company’s anticipated growth and expansion of its business. These forward-looking statements, as well as the Company's 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; 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.
JTH Holding, Inc.
Condensed Consolidated Balance Sheets
Unaudited, amounts in thousands
January 31,
January 31,
April 30,
2013
2012
2012
Current assets:
Cash and cash equivalents
$
849
$
1,978
$
19,848
Receivables, net
140,690
129,154
76,776
Prepaid expenses and other current assets
31,330
24,927
5,655
Total current assets
172,869
156,059
102,279
Property, equipment, and software, net
31,978
23,002
23,948
Notes receivable, excluding current portion, net
51,445
49,122
35,863
Goodwill
1,913
1,913
1,913
Other intangible assets, net
24,561
22,303
22,158
Other assets, net
5,706
2,180
2,580
Total assets
$
288,472
$
254,579
$
188,741
Current liabilities:
Current installments of long-term debt
$
3,488
$
1,856
$
2,736
Accounts payable and accrued expenses
15,260
13,670
14,170
Due to area developers
21,727
21,574
21,893
Income taxes payable
-
-
6,689
Other current liabilities
6,861
9,628
4,492
Total current liabilities
47,336
46,728
49,980
Long-term debt, excluding current installments
24,776
2,665
26,249
Revolving credit facility
108,104
112,799
-
Other non-current liabilities
18,199
14,111
12,310
Total liabilities
198,415
176,303
88,539
Stockholders' Equity:
Class A preferred stock, $0.01 par value per share
-
2,129
2,129
Special voting preferred stock, $0.01 par value per share
-
-
-
Class A common stock, $0.01 par value per share
121
104
103
Class B common stock, $0.01 par value per share
9
9
9
Exchangeable shares, $0.01 par value
1
1
1
Additional paid-in capital
6,752
3,899
3,182
Accumulated other comprehensive income, net of taxes
810
71
676
Retained earnings
82,364
72,063
94,102
Total stockholders' equity
90,057
78,276
100,202
Total liabilities and stockholders' equity
$
288,472
$
254,579
$
188,741
JTH Holding, Inc.
Condensed Consolidated Income Statement
Unaudited, amounts in thousands, except per share and share data
Three months ended January 31,
Nine months ended January 31,
2013
2012
2013
2012
Revenues:
Franchise fees, net
$
1,760
$
1,529
$
6,422
$
6,920
Royalties and advertising fees
14,204
16,789
15,973
18,617
Financial products
8,039
11,158
8,510
11,449
Interest Income
3,544
3,016
9,169
7,623
Tax preparation fees, net of discounts
1,445
1,909
1,886
2,154
Other income
1,546
1,249
2,653
2,548
Total revenues
30,538
35,650
44,613
49,311
Operating expenses:
Employee compensation and benefits
10,285
7,902
24,566
20,111
General and administrative expenses
7,857
8,655
19,433
17,713
Advertising expense
7,687
8,770
12,786
12,389
Depreciation, amortization, and impairment
charges
1,728
1,647
5,357
4,965
Total operating expenses
27,557
26,974
62,142
55,178
Income (loss) from operations
2,981
8,676
(17,529
)
(5,867
)
Other income (expense):
Foreign currency transaction gains (losses)
(1
)
-
3
(4
)
Interest expense
(819
)
(674
)
(1,623
)
(1,506
)
Income (loss) before income taxes
2,161
8,002
(19,149
)
(7,377
)
Income tax expense (benefit)
1,049
3,325
(7,411
)
(2,749
)
Net income (loss)
$
1,112
$
4,677
$
(11,738
)
$
(4,628
)
Net income attributable to common
stockholders
$
1,033
$
3,772
Earnings per share:
Basic
$
0.08
$
0.33
$
(0.92
)
$
(0.41
)
Diluted
$
0.08
$
0.33
$
(0.92
)
$
(0.41
)
Weighted-average shares outstanding:
Basic
12,990,238
11,262,397
12,731,496
11,303,374
Diluted
14,066,208
14,147,312
12,731,496
11,303,374
JTH Holding, Inc.
Condensed Consolidated Statements of Cash Flows
Unaudited, amounts in thousands
Nine months ended January 31,
2013
2012
Net cash used in operating activities
$
(51,815
)
$
(44,191
)
Cash flows used in investing activities:
Issuance of operating loans to franchisees
(60,875
)
(56,920
)
Payments received on operating loans from franchisees
1,536
3,720
Purchases of AD rights and customer lists
(3,741
)
(3,574
)
Proceeds from sale of customer lists and other assets
2,252
788
Purchase of marketable equity securities
(2,980
)
-
Purchase of an equity method investment
-
(1,009
)
Purchases of property and equipment
(9,177
)
(7,554
)
Net cash used in investing activities
(72,985
)
(64,549
)
Cash flows from financing activities:
Proceeds from the exercise of stock options
1,592
37
Repurchase of common stock
(1,634
)
(2,612
)
Repayment of long-term debt
(2,227
)
(1,532
)
Borrowings under revolving credit facility
108,582
117,598
Repayments under revolving credit facility
(478
)
(4,799
)
Payment for debt issue costs
(281
)
-
Tax benefit of stock option exercises
269
458
Net cash provided by financing activities
105,823
109,150
Effect of exchange rate changes on cash, net
(22
)
(94
)
Net increase (decrease) in cash and cash equivalents
(18,999
)
316
Cash and cash equivalents at beginning of year
19,848
1,662
Cash and cash equivalents at end of year
$
849
$
1,978
Supplementary cash flow data:
Cash paid for interest, net of capitalized interest
$
1,596
$
1,322
Cash paid for taxes, net of refunds
6,958
7,090
JTH Holding, Inc.
U.S. Tax Operating Data
Tax Season 2013
Tax Season 2012
Percent Change
U.S. Franchisees
2,072
1,943
6.6
%
U.S. Offices
Tax Season 2013
Tax Season 2012
Percent Change
Franchise
4,028
3,845
4.8
%
Company-owned
234
75
212.0
%
Total U.S. Offices
4,262
3,920
8.7
%
U.S. Returns
CYTD 2/28/13
CYTD 2/28/12
Percent Change
Offices
1,081,472
1,120,339
-3.5
%
Online
79,415
57,487
38.1
%
Total U.S. Returns
1,160,887
1,177,826
-1.4
%
Contacts:
Investors JTH Holding, Inc. Darby Schoenfeld Director of Investor Relations 757-453-6047 darby.schoenfeld@libtax.com
Media JTH Holding, Inc. Martha O’Gorman Chief Marketing Officer 757-301-8022 martha@libtax.com
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