Liberty Tax Service Announces Fiscal Year 2014 Results: GAAP Diluted Earnings per Share Up 21%

VIRGINIA BEACH, VA - (Marketwired - Jun 18, 2014) - JTH Holding, Inc. (NASDAQ: TAX)

  • Systemwide revenue up 10.5%, to $421.2 million.
  • GAAP diluted earnings per share up 21% to $1.51.
  • Non-GAAP adjusted net income up 8% to $21.0 million.

JTH Holding, Inc. (NASDAQ: TAX), the parent company of Liberty Tax Service, today reported its financial results for fiscal year 2014. Total customers served in the U.S. and Canada including online grew 6% to 2.4 million. Tax returns prepared in offices in the U.S. grew 5%, exceeding the IRS reported growth rate of .7%. The Company's average net fee increased 6%. The increase in average net fee and the number of returns processed coupled with more customers utilizing financial products drove increased revenue. Operating expenses grew slightly slower than revenue. Diluted earnings per share increased 21% to $1.51. On an adjusted non-GAAP basis, diluted earnings per share increased 4% to $1.45.

"Fiscal 2014 proved to be another year of continued growth for the Company, with revenue growth of 8%, overall growth in tax returns filed of 6% and systemwide revenue growth of 10.5%. We grew faster than the entire industry and continue to gain market share from our competitors," said John Hewitt, Chairman and CEO. "Our franchisees are excited and motivated for next year and will continue to deliver outstanding service to our customers."

Revenues increased 8% to $159.7 million

  • Royalty and advertising revenue up 7%
  • Tax preparation revenue up 41%
  • Financial products revenue up 14 %

Growth in assisted tax preparation volume of 4% and an increase in average net fee of 6% drove higher royalties and advertising revenue. Tax preparation revenue was up largely because of the growth in the Company's online Do It Yourself ("DIY") business, primarily driven by the acquisition of certain assets of an online provider, and more revenue generated through our Company-owned offices. Financial product revenue increased due to a higher adoption of financial products by customers, and because the Company was able to negotiate more favorable terms with vendors.

Operating Expenses increased 7% to $124.9 million 

  • Selling, general and administrative expenses up 11%
  • Depreciation, amortization and impairment up 42%
  • Area Developer expense up 6%

The increase in selling, general and administrative expense was primarily due to supporting increased revenue and restatement-related expenses. The increase in depreciation, amortization and impairment expense was driven by the release of the first phase of the Company's next generation of tax preparation software (NextGen). The increase in area developer expense is a direct reflection of the increase in royalties.

Balance Sheet and Cash Flow Highlights

  • Cash and cash equivalents at April 30, 2014 were $46.1 million, up 142% versus prior year.
  • Cash net of debt at April 30, 2014 was $17.6 million.
  • Cash flow from operations totaled $43.5 million for fiscal year 2014, up 53% versus prior year.
  • Diluted weighted average share count rose to 14.9 million shares for the 4th quarter and 14.5 million shares for the year. This increase of approximately 3% versus prior year had the effect of reducing our full year earnings per share by $0.05.

The increase in cash was largely due to improved performance, higher collections on notes and accounts receivable and proceeds from the sale of available-for-sale securities. This increase in cash flow allowed for the outstanding balance on the line of credit to be paid on March 7, 2014, eighteen days earlier than in 2013, and for the repurchase of 800,000 shares of our Class A common stock in June 2014 from an affiliate in a privately negotiated transaction to reduce our share count.

Securities

The Company plans to withdraw the Registration Statement filed on Form S-1 in 2011. Our market cap has increased and we are no longer categorized as a smaller reporting company, making us eligible to file a Form S-3 in October 2014, once we have been current with all SEC filings for a full year. We expect to maintain our flexibility going forward by making the Form S-3 filing at that time.

Conference Call

At 8:30 a.m. Eastern time on June 18, 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: 53934581

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 Wednesday, June 25, 2014, by dialing 855-859-2056 (domestic) or 404-537-3406 (international). The conference ID code is 53934581. 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. 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 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 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 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; 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.

JTH Holding, Inc.
Condensed Consolidated Balance Sheets
Unaudited, amounts in thousands
         
    April 30,
    2014   2013
Current assets:            
  Cash and cash equivalents   $ 46,080   $ 19,013
  Receivables, net     65,656     71,306
  Available-for-sale securities     -     3,619
  Assets held for sale     4,413     -
  Other current assets     9,383     9,195
    Total current assets     125,532     103,133
               
  Property, equipment, and software, net     38,343     33,037
  Notes receivable, excluding current portion, net     15,824     14,352
  Goodwill     2,997     5,685
  Other intangible assets, net     14,295     10,921
  Other assets, net     1,772     2,402
    Total assets   $ 198,763   $ 169,530
             
Current liabilities:            
  Current installments of long-term debt   $ 6,797   $ 3,400
  Accounts payable and accrued expenses     15,023     11,954
  Due to area developers     18,236     18,248
  Income taxes payable     9,676     5,897
  Deferred revenue - short-term portion     6,051     7,555
    Total current liabilities     55,783     47,054
               
  Long-term debt, excluding current installments     21,691     24,283
  Revolving credit facility     -     -
  Deferred revenue - long-term portion     8,059     10,381
  Other non-current liabilities     3,045     5,976
    Total liabilities     88,578     87,694
             
Stockholders' equity:            
  Special voting preferred stock, $0.01 par value per share     -     -
  Class A common stock, $0.01 par value per share     124     120
  Class B common stock, $0.01 par value per share     9     9
  Exchangeable shares, $0.01 par value     1     1
  Additional paid-in capital     9,411     1,920
  Accumulated other comprehensive income, net of taxes     66     1,194
  Retained earnings     100,574     78,592
    Total stockholders' equity     110,185     81,836
    Total liabilities and stockholders' equity   $ 198,763   $ 169,530
   
   
   
JTH Holding, Inc.  
Condensed Consolidated Statement of Operations  
Unaudited, amounts in thousands, except per share and share data  
                         
    Three Months Ended  
    April 30, 2014     April 30, 2013     $ change     % change  
Revenues:                              
  Franchise fees   $ 4,671     $ 4,219     $ 452     11 %
  Area developer fees     1,686       1,956       (270 )   -14 %
  Royalties and advertising fees     53,716       50,568       3,148     6 %
  Financial products     24,030       21,835       2,195     10 %
  Interest income     6,795       5,509       1,286     23 %
  Tax preparation fees, net of discounts     11,613       8,262       3,351     41 %
  Other revenue     1,062       1,062       -     0 %
    Total revenues     103,573       93,411       10,162     11 %
                               
Operating expenses:                              
  Employee compensation and benefits     13,796       13,433       363     3 %
  Selling, general and administrative expenses     11,625       11,428       197     2 %
  Area developer expense     17,876       17,090       786     5 %
  Advertising expense     4,074       2,507       1,567     63 %
  Depreciation, amortization, and impairment charges     3,687       2,091       1,596     76 %
    Total operating expenses     51,058       46,549       4,509     10 %
                                   
    Income from operations     52,515       46,862       5,653     12 %
                               
Other income (expense):                              
  Foreign currency transaction gains (losses)     2       (3 )     5     -167 %
  Gain on sale of available-for-sale securities     -       -       -     -  
  Interest expense     (288 )     (416 )     128     -31 %
    Income before income taxes     52,229       46,443       5,786     12 %
  Income tax expense     19,898       18,015       1,883     10 %
    Net income   $ 32,331     $ 28,428       3,903     14 %
                               
Net income attributable to common stockholders Class A and Class B   $ 30,047     $ 26,389     $ 3,658     14 %
                               
Net income per share of Class A and Class B common stock                              
  Basic   $ 2.28     $ 2.04     $ 0.24     12 %
  Diluted     2.18       2.01       0.17     8 %
                               
Weighted-average shares outstanding                              
  Basic     13,154,000       12,943,000       211,000     2 %
  Diluted     14,853,000       14,169,000       684,000     5 %
   
   
   
JTH Holding, Inc.  
Condensed Consolidated Statement of Operations  
Unaudited, amounts in thousands, except per share and share data  
                         
    Fiscal years ended April 30,  
    2014     2013     $ change     % change  
Revenues:                              
  Franchise fees   $ 7,844     $ 8,721     $ (877 )   -10 %
  Area developer fees     6,680       7,699       (1,019 )   -13 %
  Royalties and advertising fees     78,426       73,129       5,297     7 %
  Financial products     34,512       30,345       4,167     14 %
  Interest income     14,231       13,848       383     3 %
  Tax preparation fees, net of discounts     14,295       10,148       4,147     41 %
  Other revenue     3,708       3,723       (15 )   0 %
    Total revenues     159,696       147,613       12,083     8 %
                               
Operating expenses:                              
  Employee compensation and benefits     38,399       37,998       401     1 %
  Selling, general and administrative expenses     34,756       31,212       3,544     11 %
  Area developer expense     27,319       25,736       1,583     6 %
  Advertising expense     15,124       15,293       (169 )   -1 %
  Depreciation, amortization, and impairment charges     9,277       6,538       2,739     42 %
    Total operating expenses     124,875       116,777       8,098     7 %
                                   
    Income from operations     34,821       30,836       3,985     13 %
                               
Other income (expense):                              
  Foreign currency transaction gains (losses)     (13 )     -       (13 )   100 %
  Gain on sale of available-for-sale securities     2,183       -       2,183     100 %
  Interest expense     (1,355 )     (2,039 )     684     -34 %
    Income before income taxes     35,636       28,797       6,839     24 %
  Income tax expense     13,654       11,170       2,484     22 %
    Net income   $ 21,982     $ 17,627       4,355     25 %
                                 
  Net income attributable to common stockholders Class A and Class B   $ 20,411     $ 16,102     $ 4,309     27 %
                               
Net income per share of Class A and Class B common stock                              
  Basic   $ 1.57     $ 1.26     $ 0.31     25 %
  Diluted     1.51       1.25       0.26     21 %
                               
Weighted-average shares outstanding                              
  Basic     12,991,000       12,783,000       208,000     2 %
  Diluted     14,537,000       14,072,000       465,000     3 %
   
   
   
JTH Holding, Inc.  
Condensed Consolidated Statements of Cash Flows  
Unaudited, amounts in thousands  
       
    Fiscal years ended April 30,  
    2014     2013  
Cash flows from operating activities:                
  Net income   $ 21,982     $ 17,627  
  Adjustments to reconcile net loss to net cash used in operating activities:                
    Provision for doubtful accounts     8,692       7,098  
    Depreciation and amortization     7,836       5,750  
    Amortization of deferred financing costs     334       301  
    Impairment of goodwill and other intangible assets     1,441       788  
    Loss on sale of property and equipment     75       -  
    Stock-based compensation expense related to equity classified awards     2,074       1,496  
    Stock-based compensation expense (income) related to liability classified awards     (872 )     2,625  
    Gain on bargain purchases and sales of Company-owned offices     (1,143 )     (777 )
    Equity in loss of affiliate     214       193  
    Deferred tax expense     2,605       4,119  
    Gain on sale of available-for-sale securities     (2,183 )     -  
    Changes in assets and liabilities decreasing (increasing) cash flows from operatingactivities     2,427       (10,779 )
      Net cash provided by operating activities     43,482       28,441  
                 
Cash flows from investing activities:                
  Issuance of operating loans to franchisees     (76,013 )     (75,605 )
  Payments received on operating loans to franchisees     71,722       68,782  
  Purchases of area developer rights, Company-owned offices and acquired customer lists     (8,706 )     (5,980 )
  Proceeds from sale of Company-owned offices and area developer rights     2,879       4,072  
  Purchase of available-for-sale securities     -       (2,980 )
  Proceeds from sale of available-for-sale securities     5,163       -  
  Purchases of property, equipment and software     (9,149 )     (11,928 )
  Proceeds from sale of property, equipment and software     59       -  
      Net cash used in investing activities     (14,045 )     (23,639 )
                 
Cash flows from financing activities:                
  Proceeds from the exercise of stock options     13,979       3,801  
  Repurchase of common stock     (13,079 )     (6,456 )
  Repayment of long-term debt     (3,398 )     (2,953 )
  Borrowings under revolving credit facility     137,391       121,216  
  Repayments under revolving credit facility     (137,391 )     (121,216 )
  Payment for debt issue costs     -       (289 )
  Tax benefit of stock option exercises     283       271  
      Net cash used in financing activities     (2,215 )     (5,626 )
                 
Effect of exchange rate changes on cash, net     (155 )     (11 )
      Net increase (decrease) in cash and cash equivalents     27,067       (835 )
Cash and cash equivalents at beginning of year     19,013       19,848  
Cash and cash equivalents at end of year   $ 46,080     $ 19,013  
                 
Supplementary cash flow data:                
  Cash paid for interest, net of capitalized interest   $ 1,179     $ 1,872  
  Cash paid for taxes, net of refunds     7,022       7,328  
   
   
   
JTH Holding, Inc.  
GAAP to Non-GAAP Reconciliation  
Unaudited, amounts in thousands, except per share and share data  
                 
We report our financial results in accordance with 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.  
                 
Adjusted Net Income  
   
    Fiscal years ended April 30,  
    2014     2013   % change  
                     
Net income - as reported   $ 21,982     $ 17,627   25 %
                     
Add back (net of tax):                    
  Stock-based compensation expense (income) related to liability classified awards     (538 )     1,607   -133 %
  Severance including stock-based compensation/restructuring charge     379       260   46 %
  Net gain on available-for-sale securities     (1,347 )     -   100 %
  Restatement costs     559       -   100 %
Net income - as adjusted   $ 21,035     $ 19,494   8 %
                     
Earnings per diluted share - as adjusted   $ 1.45     $ 1.39   4 %
                     
                 
Adjusted EBITDA  
   
    Fiscal years ended April 30,  
    2014     2013   % change  
                     
Net income - as reported   $ 21,982     $ 17,627   25 %
  Interest expense     1,355       2,039   -34 %
  Income tax expense     13,654       11,170   22 %
  Depreciation, amortization and impairment charges     9,277       6,538   42 %
  Foreign currency transaction loss     13       -   100 %
  Stock-based compensation expense (income) related to liability classified awards     (872 )     2,625   -133 %
  Severance excluding stock-based compensation/restructing charge     514       425   21 %
  Net gain on available-for-sale securities     (2,183 )     -   100 %
  Restatement costs     907       -   100 %
  Litigation settlements     (24 )     187   -113 %
  Stock-based compensation expense     2,074       1,496   39 %
Adjusted EBITDA   $ 46,697     $ 42,107   11 %
 
 
 
JTH Holding, Inc.
Quarterly Financial Data
Unaudited, amounts in thousands, except per share and share data
                         
    Three Months Ended   Fiscal Year Ended
    July 31, 2013     October 31, 2013     January 31, 2014   April 30, 2014   April 30, 2014
Revenue   $ 8,065     $ 7,317     $ 40,740   $ 103,574   $ 159,696
Net income (loss)     (5,927 )     (8,478 )     4,056     32,331     21,982
Net income (loss) per share of Class A and Class B common stock:                                  
  Basic   $ (0.46 )   $ (0.66 )   $ 0.29   $ 2.28   $ 1.57
  Diluted     (0.46 )     (0.66 )     0.28     2.18     1.51
                                   
Weighted-average shares outstanding:                                  
  Basic     12,895,000       12,926,000       12,992,000     13,154,000     12,991,000
  Diluted     12,895,000       12,926,000       14,655,000     14,853,000     14,537,000
 
 
 
JTH Holding, Inc.
Operational Data
Unaudited
         
    Fiscal years ended April 30,
    2014   2013
Franchisees            
  U.S.     1,959     2,073
  Canada     145     138
  Total     2,104     2,211
             
Offices1            
  U.S.            
    Franchised     3,995     4,028
    Company-owned     180     234
      Total U.S.     4,175     4,262
             
  Canada            
    Franchised     227     231
    Company-owned     36     27
      Total Canada     263     258
             
  Total            
    Franchised     4,222     4,259
    Company-owned     216     261
      4,438     4,520
             
Tax Returns Prepared            
  U.S.     1,890,000     1,805,000
  Canada     311,000     311,000
  Total returns processed in offices     2,201,000     2,116,000
               
  Online     208,000     159,000
    Total tax returns processed     2,409,000     2,275,000
             
Systemwide Revenue2            
  U.S.   $ 397,300,000   $ 358,000,000
  Canada     23,900,000     23,200,000
  Total   $ 421,200,000   $ 381,200,000
             
Average Net Fee Per Tax Return3   $ 191   $ 180
   
1 We measure our number of offices per fiscal year based on franchised and Company-owned offices open at any point during the tax season.
2 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 our franchise royalties are derived from the operations of our franchisees, and because we maintain an infrastructure to support systemwide operations, we consider systemwide revenue to be an important measurement.
3 The net average fee per tax return prepared reflects amounts for our franchised and Company-owned offices.
   

Contacts:

Kathy Donovan
Investor Relations
JTH Holding, Inc.
Vice President, Chief Financial Officer
(757) 493-8855

Martha O'Gorman
Media Relations
JTH Holding, Inc.
Chief Marketing Officer
(757) 301-8022

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