Liberty Tax Service Reports U.S. Systemwide Revenue Increased 5.2% Through February 28

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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