Liberty Tax Service Announces Fiscal Year 2015 Results

VIRGINIA BEACH, VA - (Marketwired) - June 18, 2015 - Liberty Tax, Inc. (NASDAQ: TAX) (the "Company"), the parent company of Liberty Tax Service, today reported its results for fiscal year 2015. The Company reported that the total number of customers served in the U.S. and Canada grew by 2.1% to 2.2 million. Tax returns prepared in offices in the U.S. grew 0.9%, exceeding the national paid preparer category growth rate, while total returns in Canada grew 9.3%.

"Despite one of the most challenging tax seasons in recent memory, we continued our track record of increasing the number of taxpayers we served faster than the overall market," said John Hewitt, CEO. "Unfortunately, the revenue growth we expected from the Affordable Care Act (ACA) did not materialize and delays in implementation of immigration reform also impacted our revenue this year. However, we made significant investments related to the ACA and the launch of the SiempreTax+ brand, and we are uniquely prepared to capitalize on future industry growth."

In response to the growing issue of identity theft fraud in the tax system, Liberty recently joined forces with the IRS, state tax authorities and other companies in the industry to develop a plan to combat identity theft tax fraud beginning in the 2016 tax season. The Company remains committed to protecting its customers and addressing this growing threat, and to further efforts to address other types of tax fraud, as well.

Fiscal 2015 Results

             
($ in thousands except per share data)   GAAP     Non - GAAP*  
    2015   2014   Change     2015   2014   Change  
Revenue   $ 162,172   $ 159,696   2 %   $ 162,172   $ 159,696   2 %
Operating expenses     146,780     124,875   18 %     129,283     124,226   4 %
Income before taxes     13,501     35,636   -62 %     30,998     34,102   -9 %
Diluted EPS     0.61     1.51   -60 %     1.36     1.45   -6 %
                                     
*See reconciliation of Non-GAAP to GAAP measures in Table F

Operational Highlights

  • U.S. systemwide revenue grew 4%.
  • SiempreTax+ was successfully launched with 57 stores in operation for the tax season, a record for a first year tax franchise.
  • Canadian systemwide revenue grew 10.5% (on a local currency basis) and returns processed grew 9.3%.
  • Licensed insurance agents were present in over 1,000 offices, ready to help the 23% of Liberty customers impacted by the ACA.

Revenues

  • Reported revenue increased 1.6% to $162.2 million.
  • Financial product revenue increased due to the Company's strategy to originate a larger portion of its financial products in house.
  • Growth in assisted tax preparation volume of 0.9% coupled with an increase in average net fee of 3.1% drove higher royalty and advertising revenue.
  • Franchise fee and other revenue were down as a result of lower cash payments received from franchisees.
  • Foreign exchange rates negatively impacted revenue by $0.8 million.

Operating Expenses

  • Reported operating expenses increased 17.5% to $146.8 million, compared to $124.9 million in the prior year. Adjusted operating expenses, as reported on Table F, increased 4.1% to $129.3 million. Investments in ACA initiatives and in launching the SiempreTax+ brand along with incremental advertising expense caused most of the increase.
  • Due to changes in the competitive landscape in the DIY market, the Company recorded an impairment of its online assets of $8.4 million. Additionally, the Company recorded $7.6 million in costs related to potential losses on two class action lawsuits, net of recovery from a vendor. These cases are now awaiting final approval from the courts. These items are excluded from the Company's adjusted results.

Balance Sheet and Cash Flow Highlights

  • During the year the Company repurchased $24.3 million in stock, net of options exercised, and initiated a quarterly dividend of 16 cents per share in the fourth quarter.
  • Cash and cash equivalents at April 30, 2015 were $21.4 million, down $24.7 million versus prior year, due to the share repurchases and dividend payment.

Dividend

On June 17, 2015, the Board of Directors has approved a quarterly dividend to shareholders of $0.16 per share. The dividend will be paid on July 22, 2015 to holders of record of common stock and common stock equivalents on the close of business on July 15, 2015.

Conference Call

At 8:30 a.m. Eastern time on June 18, 2015, 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: 48303673

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, under the "About" tab.

A telephonic replay of the call will be available beginning shortly after the call continuing until Thursday, June 25, 2015, by dialing 855-859-2056 (domestic) or 404-537-3406 (international). The conference ID code is 48303673. 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., is the parent company of Liberty Tax Service. Liberty Tax is the fastest-growing tax preparation franchise and has prepared almost 20 million individual income tax returns in more than 4,300 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.

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 and immigration 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 Balance Sheets
Unaudited, amounts in thousands
           
    April 30,     April 30,
    2015     2014
Current assets:              
  Cash and cash equivalents   $ 21,387     $ 46,080
  Current receivables, net     65,927       65,656
  Assets held for sale     5,160       4,413
  Deferred income tax asset     6,921       4,058
  Other current assets     6,470       5,325
    Total current assets     105,865       125,532
               
Property, equipment, and software, net     36,232       38,343
Notes receivable - non-current, net     20,753       15,824
Goodwill     3,377       2,997
Other intangible assets, net     14,672       14,295
Other assets     3,247       1,772
    Total assets   $ 184,146     $ 198,763
               
Current liabilities:              
  Current installments of long-term debt   $ 3,934     $ 6,797
  Accounts payable and accrued expenses     17,321       15,023
  Due to area developers     24,340       18,236
  Income taxes payable     2,147       9,676
  Deferred revenue - current     6,076       6,051
    Total current liabilities     53,818       55,783
               
  Long-term debt, excluding current installments     21,463       21,691
  Revolving credit facility     -       -
  Deferred revenue - non-current     7,640       8,059
  Deferred income tax liability     2,363       3,045
    Total liabilities     85,284       88,578
               
Stockholders' equity:              
  Special voting preferred stock, $0.01 par value per share     -       -
  Class A common stock, $0.01 par value per share     119       124
  Class B common stock, $0.01 par value per share     9       9
  Exchangeable shares, $0.01 par value     10       10
  Additional paid-in capital     4,082       9,402
  Accumulated other comprehensive income (loss), net of taxes     (697 )     66
  Retained earnings     95,339       100,574
    Total stockholders' equity     98,862       110,185
    Total liabilities and stockholders' equity   $ 184,146     $ 198,763
               

 

 
 
Table B
Liberty Tax, Inc.
Condensed Consolidated Statement of Operations
Unaudited, amounts in thousands, except per share and share data
 
    Three months ended 
April 30,
 
    2015     2014     % change  
Revenues:                      
  Franchise fees   $ 3,250     $ 4,671     -30.4 %
  Area developer fees     1,835       1,686     8.8 %
  Royalties and advertising fees     52,119       53,716     -3.0 %
  Financial products     23,031       24,030     -4.2 %
  Interest income     7,507       6,795     10.5 %
  Tax preparation fees, net of discounts     11,029       11,613     -5.0 %
  Other revenue     148       1,062     -86.1 %
    Total revenues     98,919       103,573     -4.5 %
                       
Operating expenses:                      
  Employee compensation and benefits     12,453       13,796     -9.7 %
  Selling, general, and administrative expenses     9,685       11,625     -16.7 %
  Area developer expense     17,721       17,876     -0.9 %
  Advertising expense     4,286       4,074     5.2 %
  Depreciation, amortization and impairment charges     3,045       3,687     -17.4 %
  Impairment of online software and assets     8,392       -     100.0 %
    Total operating expenses     55,582       51,058     8.9 %
    Income from operations     43,337       52,515     -17.5 %
                       
Other income (expense):                      
  Foreign currency transaction loss     43       2     NM  
  Interest expense     (339 )     (288 )   -17.7 %
    Income before income taxes     43,041       52,229     -17.6 %
  Income tax expense     16,298       19,898     -18.1 %
    Net Income   $ 26,743     $ 32,331     -17.3 %
                       
  Net income attributable to common stockholders Class A and Class B   $ 24,795     $ 30,047     -17.5 %
                       
Net income per share of Class A and Class B common stock                      
  Basic   $ 1.95     $ 2.28     -14.5 %
  Diluted     1.89       2.18     -13.3 %
                       
Weighted-average shares outstanding                      
  Basic     12,728,000       13,154,000     -3.2 %
  Diluted     14,156,000       14,853,000     -4.7 %
                         

 

 
 
Table C
Liberty Tax, Inc.
Condensed Consolidated Statement of Operations
Unaudited, amounts in thousands, except per share and share data
 
    Fiscal Years ended 
April 30,
 
    2015     2014     % change  
Revenues:                      
  Franchise fees   $ 6,246     $ 7,844     -20.4 %
  Area developer fees     6,901       6,680     3.3 %
  Royalties and advertising fees     80,469       78,426     2.6 %
  Financial products     37,058       34,512     7.4 %
  Interest income     14,707       14,231     3.3 %
  Tax preparation fees, net of discounts     13,877       14,295     -2.9 %
  Other revenue     2,914       3,708     -21.4 %
    Total revenues     162,172       159,696     1.6 %
                       
Operating expenses:                      
  Employee compensation and benefits     41,079       38,399     7.0 %
  Selling, general, and administrative expenses     40,604       34,756     16.8 %
  Area developer expense     28,497       27,319     4.3 %
  Advertising expense     18,308       15,124     21.1 %
  Depreciation, amortization and impairment charges     9,900       9,277     6.7 %
  Impairment of online software and assets     8,392       -     100.0 %
    Total operating expenses     146,780       124,875     17.5 %
    Income from operations     15,392       34,821     -55.8 %
                       
Other income (expense):                      
  Foreign currency transaction loss     (2 )     (13 )   84.6 %
  Gain on sale of available-for-sale securities     -       2,183     -100.0 %
  Interest expense     (1,889 )     (1,355 )   -39.4 %
    Income before income taxes     13,501       35,636     -62.1 %
  Income tax expense     4,811       13,654     -64.8 %
    Net income   $ 8,690     $ 21,982     -60.5 %
                       
  Net income attributable to common stockholders Class A and Class B   $ 8,057     $ 20,411     -60.5 %
                       
Net income per share of Class A and Class B common stock                      
  Basic   $ 0.63     $ 1.57     -59.9 %
  Diluted     0.61       1.51     -59.6 %
Weighted-average shares outstanding                      
  Basic     12,738,000       12,991,000     -1.9 %
  Diluted     14,295,000       14,537,000     -1.7 %
                       

 

 
 
Table D
Liberty Tax, Inc.
Condensed Consolidated Statements of Cash Flows
Unaudited, amounts in thousands
 
    Fiscal Years ended April 30,  
    2015     2014  
Cash flows from operating activities:                
  Net Income   $ 8,690     $ 21,982  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Provision for doubtful accounts     5,726       8,692  
    Depreciation, amortization and impairment charges     18,292       9,277  
    Stock-based compensation expense related to equity classified awards     2,477       2,074  
    Stock-based compensation income related to liability classified awards     -       (872 )
    Gains on bargain purchases and sales of Company-owned offices     (414 )     (1,143 )
    Deferred tax expense     (3,545 )     2,605  
    Gain on sale of available-for-sale securities     -       (2,183 )
    Changes in other assets and liabilities     (6,709 )     3,050  
      Net cash provided by operating activities     24,517       43,482  
                 
Cash flows from investing activities:                
  Issuance of operating loans to franchisees     (93,365 )     (76,013 )
  Payments received on operating loans to franchisees     88,776       71,722  
  Purchases of Company-owned offices, area developer rights, and acquired customer lists     (8,246 )     (8,706 )
  Proceeds from sale of Company-owned offices and area developer rights     3,687       2,879  
  Proceeds from sale of available-for-sale securities     -       5,163  
  Purchases of property, equipment, and software     (11,463 )     (9,149 )
  Proceeds from sale of property, equipment and software     -       59  
      Net cash used in investing activities     (20,611 )     (14,045 )
                 
Cash flows from financing activities:                
  Proceeds from the exercise of stock options     11,983       13,979  
  Repurchase of common stock     (36,308 )     (13,079 )
  Payment of dividends     (2,205 )     -  
  Repayment of long-term debt     (5,850 )     (3,398 )
  Borrowings under revolving credit facility     154,633       137,391  
  Repayments under revolving credit facility     (154,633 )     (137,391 )
  Payment for debt issuance costs     (917 )     -  
  Tax benefit of stock option exercises     4,803       283  
      Net cash used in financing activities     (28,494 )     (2,215 )
                 
Effect of exchange rate changes on cash and cash equivalents, net     (105 )     (155 )
      Net increase (decrease) in cash and cash equivalents     (24,693 )     27,067  
Cash and cash equivalents at beginning of period     46,080       19,013  
Cash and cash equivalents at end of period   $ 21,387     $ 46,080  
                 

 

 
 
Table E
Liberty Tax, Inc.
Non-GAAP Financial Information
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, 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                    
                                           
Three Months Ended April 30, 2014  
  Revenues   Expenses   Income from Operations   EBITDA   Income before Taxes   Net Income   Diluted EPS  
                                           
As Reported $ 103,573   $ 51,058   $ 52,515   $ 56,204   $ 52,229   $ 32,331   $ 2.18  
                                           
Adjustments:                                          
Restatement costs   -     (52 )   52     52     52     32     -  
                                           
As Adjusted   103,573     51,006     52,567     56,256     52,281     32,363     2.18  
                                           
Stock-based compensation expense   -     (680 )   680     680                    
                                           

 

(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 F
Liberty Tax, Inc.
Non-GAAP Financial Information
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, 2015  
  Revenues   Expenses   Income from Operations   EBITDA   Income before Taxes   Net Income
(4)
  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(3)   -     (1,883 )   1,883     1,883                    

 

                                           
Fiscal Year Ended April 30, 2014  
  Revenues   Expenses   Income from Operations   EBITDA   Income before Taxes   Net Income   Diluted EPS  
                                           
As Reported $ 159,696   $ 124,875   $ 34,821   $ 44,085   $ 35,636   $ 21,982   $ 1.51  
                                           
Adjustments:                                          
Gain on available-for-sale securities   -     -     -     (2,183 )   (2,183 )   (1,347 )   (0.09 )
Executive severance(1)   -     (614 )   614     614     614     379     0.03  
Reclassification of stock-based compensation expense(2)   -     872     (872 )   (872 )   (872 )   (538 )   (0.04 )
Restatement costs   -     (907 )   907     907     907     559     0.04  
  Subtotal of adjustments   -     (649 )   649     (1,534 )   (1,534 )   (947 )   (0.06 )
                                           
As Adjusted   159,696     124,226     35,470     42,551     34,102     21,035     1.45  
                                           
Stock-based compensation expense(3)   -     (1,974 )   1,974     1,974                    
                                           

 

(1) Includes stock-based compensation expense
(2) Related to conversion from equity to liability instruments
(3) Excludes costs related to executive severance
(4) 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,
    2015   2014
Franchisees            
  U.S.     1,907     1,959
  Canada     125     145
    Total Franchisees     2,032     2,104
             
Offices(1)            
  U.S.            
    Franchised     3,944     3,995
    Company-Owned     125     180
      Total U.S.     4,069     4,175
             
  Canada            
    Franchised     202     227
    Company-Owned     57     36
      Total Canada     259     263
             
  Total            
    Franchised     4,146     4,222
    Company-Owned     182     216
      Total Offices     4,328     4,438
             
Tax Returns Processed            
  U.S.     1,907,000     1,890,000
  Canada     340,000     311,000
    Total Returns Processed in Offices     2,247,000     2,201,000
             
  Online(4)     167,000     187,000
    Total Tax Returns Processed     2,414,000     2,388,000
             
Systemwide Revenue ($ in thousands)(2)            
  U.S.   $ 413,200,000   $ 397,300,000
             
  Canada (CDN $)     26,400,000     23,900,000
  Canada (USD $)     21,761,483     21,789,091
             
US Average Net Fee Per Return(3)   $ 217   $ 210
             

 

(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 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.
(3) The net average fee per tax return prepared reflects amounts for our franchised and company-owned offices.
(4) Previously reported online return counts for 2014 have been restated to reflect accepted e-files only. No changes were made to previously reported returns for office counts

Source: Liberty Tax, Inc.

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

 

###

Share this Story:

Comments:

comments powered by Disqus

Franchise News Room »


News By Industry »


Subscribe to Franchising.com Express

A Franchise Update Media Production
Franchise Update Media | P.O. Box 20547 // San Jose, CA 95160 // PH. (408) 402-5681
Copyright © 2001 - 2017. All Rights Reserved.

In Loving Memory Of Timothy Gardner (1987-2014)