Average Returns for U.S. and Canadian Offices Show Growth
U.S. Average Net Fee per Return Increased by 3.6%
VIRGINIA BEACH, Va., June 20, 2019 (GLOBE NEWSWIRE) -- Liberty Tax, Inc. (OTC PINK: TAXA) (the “Company”), the parent company of Liberty Tax Service, today reported its unaudited results for fiscal year 2019. The Company reported total revenue of $132.5 million. The Company’s revenue in fiscal 2019 was impacted by the Company’s adoption of ASC 606, “Revenues from Contracts with Customers” effective May 1, 2018. The Company experienced a net loss of $2.2 million, in fiscal 2019 resulting in a GAAP loss per share of $0.16. Non-GAAP earnings per share for fiscal 2019 (as defined in Table D) were $0.63. The Company delivered adjusted EBITDA (as defined in Table D) of $28.0 million in fiscal 2019 and net cash provided by operating activities of $17.1 million.
The average returns processed per U.S. office increased 5.62% to 470 returns compared to 445 in the prior year. Total U.S. federal assisted tax returns of 1.33 million were lower than the 1.49 million U.S. federal assisted tax returns in the prior year, due to reductions in the number of U.S. locations. Total returns processed in Canada increased to 0.39 million from 0.38 million.
“Despite incurring a significant amount of one-time expenses, the Company continues to deliver solid cash flows from operating activities,” commented Chief Executive Officer, Brent Turner. “As I begin work in the role of CEO, we are sharply focused on delivering results through meaningful initiatives that position our brand for growth. We have recognized the need for change and are well underway toward making those changes.”
Fiscal 2019 Results (unaudited)
| ($ in millions except per share data) | GAAP | Non - GAAP* | |||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||
| Revenue | $ | 132.5 | $ | 174.9 | -24% | $ | 134.2 | $ | 174.9 | -23% | |||||
| Operating expenses | 133.4 | 167.3 | -20% | 120.1 | 154.1 | -22% | |||||||||
| Income (loss) before taxes | (4.0) | 4.5 | -189% | 10.9 | 17.6 | -38% | |||||||||
| Net Income (loss) | (2.2) | 0.1 | -1697% | 8.7 | 8.5 | 2% | |||||||||
| Diluted EPS | (0.16) | 0.01 | -1700% | 0.63 | 0.60 | 5% | |||||||||
| *See reconciliation of Non-GAAP to GAAP financial measures in Table D and additional information under Non-GAAP Financial Information. | |||||||||||||||
Financial Highlights
- Adjusted EBITDA of $28.0 million compared to $35.2 million for fiscal year 2018 (see Table D).
- Net cash provided by operating activities was $17.13 million compared to $27.65 million for fiscal year 2018.
- Average net fees for tax preparation services in the U.S. increased 3.6%.
- The Company entered into a new $135 million Credit Facility last month and has full availability under the facility.
- The Company ended the fiscal year with $23.0 million of cash on hand and repaid the balance of its term debt of $12.0 million on May 1, 2019.
- The optional electronic filing fee charge for U.S. federal returns generated $2.68 million of revenue compared to $2.15 million in fiscal 2018 (gross versus net accounting adjusted for ASC 606).
- Average net fees for tax preparation services in U.S. Company-owned offices increased 14.1%.
- Revenue from franchise and Company-owned Canadian offices increased 1% in Canadian dollars.
About Liberty Tax, Inc.
Founded in 1997, Liberty Tax, Inc. (OTC PINK: TAXA) is the parent company of Liberty Tax Service. In the U.S. and Canada, last year, Liberty Tax prepared approximately two million individual income tax returns in more than 3,100 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 seasonal tax preparers. Liberty Tax also supports local communities with fundraising endeavors and contributes as a national sponsor to 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 U.S. generally accepted accounting principles, please see the section of the accompanying Table D titled “Reconciliation of Non-GAAP Financial Information to the Most Directly Comparable GAAP Financial Measures.”
Forward Looking Statements
In addition to historical information, this press 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 strategic initiatives, and statements regarding future growth. These forward-looking statements 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 strategic plans related to Company-owned stores; uncertainties regarding the Company’s ability to meet its prepared returns targets; competitive factors; regulatory factors; the Company's effective income tax rate; litigation defense expenses and costs of judgments or settlements; costs associated with compliance efforts; and changes in market, economic, political or regulatory conditions. Additional information concerning these risks and uncertainties is contained in the Company’s filings 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 except as may be required by law.
| Table A | ||||||||||||||
| Liberty Tax, Inc. | ||||||||||||||
| Consolidated Statement of Operations | ||||||||||||||
| Unaudited, amounts in thousands, except per share and share data | ||||||||||||||
| Twelve months ended April 30, | ||||||||||||||
| 2019 | 2018 | $ change | % change | |||||||||||
| Revenues: | ||||||||||||||
| Franchise fees | $ | 2,766 | $ | 1,793 | 973 | 54.3 | % | |||||||
| Area Developer fees | 3,146 | 2,751 | 395 | 14.4 | % | |||||||||
| Royalties and advertising fees | 63,716 | 68,559 | (4,843) | -7.1 | % | |||||||||
| Financial products | 33,478 | 47,225 | (13,747) | -29.1 | % | |||||||||
| Interest income | 8,189 | 9,895 | (1,706) | -17.2 | % | |||||||||
| Assisted tax preparation fees, net of discounts | 14,611 | 26,645 | (12,034) | -45.2 | % | |||||||||
| Electronic Filing Fee | 2,675 | 10,772 | (8,097) | -75.2 | % | |||||||||
| Other revenue | 3,965 | 7,232 | (3,267) | -45.2 | % | |||||||||
| Total revenue | 132,546 | 174,872 | (42,326) | -24.2 | % | |||||||||
| Operating expenses: | ||||||||||||||
| Employee compensation and benefits | 39,822 | 50,003 | (10,181) | -20.4 | % | |||||||||
| Selling, general, and administrative expenses | 42,038 | 69,012 | (26,974) | -39.1 | % | |||||||||
| Area Developer expense | 15,584 | 16,564 | (980) | -5.9 | % | |||||||||
| Advertising expense | 12,532 | 12,326 | 206 | 1.7 | % | |||||||||
| Depreciation, amortization, and impairment charges | 14,084 | 14,416 | (332) | -2.3 | % | |||||||||
| Restructuring expense | 9,345 | 4,952 | 4,393 | 88.7 | % | |||||||||
| Total operating expenses | 133,405 | 167,273 | (33,868) | -20.2 | % | |||||||||
| Income (loss) from operations | (859) | 7,599 | (8,458) | -111.3 | % | |||||||||
| Other income (expense): | ||||||||||||||
| Foreign currency transaction gain (loss) | (113) | 63 | (176) | -279.4 | % | |||||||||
| Gain on sale of available-for-sale securities | - | - | - | 100.0 | % | |||||||||
| Interest expense | (3,023) | (3,181) | 158 | -5.0 | % | |||||||||
| Income (loss) before income taxes | (3,995) | 4,481 | (8,476) | -189.2 | % | |||||||||
| Income tax expense (benefit) | (1,839) | 4,346 | (6,185) | -142.3 | % | |||||||||
| Net Income (loss) | $ | (2,156) | $ | 135 | $ | (2,291) | -1697.0 | % | ||||||
| Net Income (loss) per share of Class A and Class B | ||||||||||||||
| common stock: | ||||||||||||||
| Basic and diluted | $ | (0.16) | $ | 0.01 | $ | (0.17) | -1700.0 | % | ||||||
| Weighted-average shares outstanding basic | 13,800,884 | 12,928,762 | 872,122 | 6.7 | % | |||||||||
| Weighted-average shares outstanding diluted | 13,800,884 | 13,977,748 | (176,864) | -1.3 | % | |||||||||
| Table B | |||||||
| Liberty Tax, Inc. | |||||||
| Consolidated Balance Sheets | |||||||
| Amounts in thousands | |||||||
| Apr 30, | Apr 30, | ||||||
| 2019 | 2018 | ||||||
| Current assets: | (Unaudited) | ||||||
| Cash and cash equivalents | $ | 22,983 | $ | 18,522 | |||
| Current receivables, net | 58,643 | 66,816 | |||||
| Bank Products receivable | 7,277 | 4,025 | |||||
| Assets held for sale | - | 8,941 | |||||
| Income taxes receivable | 1,784 | - | |||||
| Other current assets | 2,405 | 1,404 | |||||
| Total current assets | 93,092 | 99,708 | |||||
| Property, equipment, and software, net | 32,676 | 38,636 | |||||
| Notes receivable, non-current, net | 6,812 | 5,589 | |||||
| Deferred income taxes | 315 | 343 | |||||
| Goodwill | 6,566 | 8,640 | |||||
| Other intangible assets, net | 19,161 | 22,837 | |||||
| Other assets | 1,379 | 2,250 | |||||
| Total assets | $ | 160,001 | $ | 178,003 | |||
| Current liabilities: | |||||||
| Current installments of long-term obligations | $ | 13,108 | $ | 18,113 | |||
| Accounts payable and accrued expenses | 13,672 | 14,521 | |||||
| Due to Area Developers | 17,282 | 17,906 | |||||
| Income taxes payable | 447 | 4,511 | |||||
| Deferred revenue - current | 3,679 | 2,021 | |||||
| Total current liabilities | 48,188 | 57,072 | |||||
| Long-term obligations, excluding current installments, net | 1,940 | 2,270 | |||||
| Deferred revenue and other - non-current | 5,622 | 4,692 | |||||
| Deferred income tax liability | 537 | 1,397 | |||||
| Long-term income taxes payable | - | 1,070 | |||||
| Total liabilities | 56,287 | 66,501 | |||||
| Stockholders' equity: | |||||||
| Special voting preferred stock, $0.01 par value per share | - | - | |||||
| Class A common stock, $0.01 par value per share | 140 | 128 | |||||
| Class B common stock, $0.01 par value per share | - | 2 | |||||
| Exchangeable shares, $0.01 par value per share | - | 10 | |||||
| Additional paid-in capital | 12,552 | 11,570 | |||||
| Accumulated other comprehensive loss, net of taxes | (1,910) | (1,347) | |||||
| Retained earnings | 92,932 | 101,139 | |||||
| Total stockholders' equity | 103,714 | 111,502 | |||||
| Total liabilities and stockholders' equity | $ | 160,001 | $ | 178,003 | |||
| Table C | |||||||
| Liberty Tax, Inc. | |||||||
| Consolidated Statements of Cash Flows | |||||||
| Unaudited, amounts in thousands | |||||||
| Twelve months ended April 30, | |||||||
| 2019 | 2018 | ||||||
| Cash flows from operating activities: | |||||||
| Net (loss) income | $ | (2,156) | $ | 135 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
| Provision for doubtful accounts | 8,738 | 12,396 | |||||
| Depreciation and amortization | 13,631 | 11,454 | |||||
| Amortization of deferred financing costs | 38 | 155 | |||||
| Impairment of goodwill and other assets | 453 | 2,962 | |||||
| Other loss including sale of property, equipment and software | 5,833 | 5,261 | |||||
| Stock-based compensation expense related to equity classified awards | 999 | 3,680 | |||||
| Loss (gain) on bargain purchase and sales of Company-owned offices | 694 | (2,401) | |||||
| Equity in gain of affiliate | (63) | (71) | |||||
| Deferred tax expense (benefit) | 586 | (2,369) | |||||
| Change in income taxes receivable | (6,886) | (798) | |||||
| Changes in other assets and liabilities | (4,738) | (2,759) | |||||
| Net cash provided by operating activities | 17,129 | 27,645 | |||||
| Cash flows from investing activities: | |||||||
| Issuance of operating loans to franchisees and Area Developers (ADs) | (68,283) | (73,796) | |||||
| Payments received on operating loans to franchisees and ADs | 67,556 | 72,647 | |||||
| Purchases of Company-owned offices, AD rights, and acquired customers lists | (229) | (2,926) | |||||
| Proceeds from sale of Company-owned offices and AD rights | 1,229 | 451 | |||||
| Purchases of property, equipment and software | (2,939) | (5,388) | |||||
| Net cash used in investing activities | (2,666) | (9,012) | |||||
| Cash flows from financing activities: | |||||||
| Proceeds from the exercise of stock options | 153 | 95 | |||||
| Repurchase of common stock and tax impact of stock compensation | (88) | 1 | |||||
| Dividends paid | (2,244) | (8,922) | |||||
| Repayment of other long-term obligations | (7,502) | (7,432) | |||||
| Borrowings under revolving credit facility | 123,615 | 178,251 | |||||
| Repayments under revolving credit facility | (123,615) | (178,251) | |||||
| Cash paid for taxes on exercises/vesting of stock-based compensation | (83) | (576) | |||||
| Net cash used in financing activities | (9,764) | (16,834) | |||||
| Effect of exchange rate changes on cash, net | (238) | 296 | |||||
| Net increase in cash and cash equivalents | 4,461 | 2,095 | |||||
| Cash and cash equivalents at beginning of year | 18,522 | 16,427 | |||||
| Cash and cash equivalents at end of year | $ | 22,983 | $ | 18,522 | |||
| Table D | |||||||||||||||||
| Liberty Tax, Inc. | |||||||||||||||||
| Reconciliation of Non-GAAP Financial Information to the Most Directly Comparable GAAP Financial Measures | |||||||||||||||||
| 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 that earnings before interest, taxes, depreciation, amortization and impairment ("EBITDA") and non-GAAP results should be evaluated, in addition to, and not as an alternative for, net income (loss) as determined in accordance with GAAP. We consider our non-GAAP financial results to be a useful metric for management and investors to evaluate and compare current year results with prior periods. Because not all companies use the same calculations, our definition of EBITDA may not be comparable to similarly titled figures from other companies. In addition, when evaluating non-GAAP results, we exclude certain items that are not considered to be part of future operating results. | |||||||||||||||||
| The following is a reconciliation of GAAP Net Income (loss) as shown in Table A to EBITDA. | |||||||||||||||||
| Twelve months ended April 30, | |||||||||||||||||
| 2019 | 2018 | ||||||||||||||||
| (in thousands) | |||||||||||||||||
| Net Income (loss) - as reported | (2,156) | 135 | |||||||||||||||
| Add back: | |||||||||||||||||
| Interest expense | 3,023 | 3,181 | |||||||||||||||
| Income tax expense (benefit) | (1,839) | 4,346 | |||||||||||||||
| Depreciation, amortization, and impairment charges | |||||||||||||||||
| As Reported | 14,084 | 14,416 | |||||||||||||||
| Included in restructuring expense* | 5,559 | 2,415 | |||||||||||||||
| Total Adjustments | 20,827 | 24,358 | |||||||||||||||
| EBITDA | 18,671 | 24,493 | |||||||||||||||
| *Impairments related to contract termination costs and property and intangibles included in Restructuring expense | |||||||||||||||||
| The following is a reconciliation of our non-GAAP financial measures to the most comparable GAAP financial measures. | |||||||||||||||||
| Amounts may not add or recalculate due to rounding. See page 9 for a description of the items excluded which we believe | |||||||||||||||||
| to not be considered part of future operating results. | |||||||||||||||||
| For the twelve months ended April 30, 2019 | |||||||||||||||||
| Loss from | Pre-tax | Net | Basic & Diluted | ||||||||||||||
| Revenues | Expenses | Operations | EBITDA | Loss | Loss | EPS | |||||||||||
| As Reported | 132,546 | 133,405 | (859) | 18,671 | (3,995) | (2,156) | $ | (0.16) | |||||||||
| Adjustments: (1) | |||||||||||||||||
| Executive severance and related costs including stock-based compensation | (933) | 933 | 933 | 933 | 677 | 0.05 | |||||||||||
| Executive recruitment costs | (725) | 725 | 725 | 725 | 526 | 0.04 | |||||||||||
| Shareholder litigation costs | (472) | 472 | 472 | 472 | 343 | 0.02 | |||||||||||
| Settlements, net of estimated recoveries (2) | (972) | 972 | 972 | 972 | 706 | 0.05 | |||||||||||
| Unsolicited offer costs (2) | (311) | 311 | 311 | 311 | 226 | 0.02 | |||||||||||
| Corporate governance costs | (303) | 303 | 303 | 303 | 220 | 0.02 | |||||||||||
| Divestiture of year-round accounting offices | 1,643 | (203) | 1,846 | 1,846 | 1,846 | 1,340 | 0.10 | ||||||||||
| Restructuring expense | (9,345) | 9,345 | 3,785 | 9,345 | 6,784 | 0.49 | |||||||||||
| Total Adjustments | 1,643 | (13,264) | 14,907 | 9,347 | 14,907 | 10,822 | 0.79 | ||||||||||
| Non-GAAP | 134,189 | 120,141 | 14,048 | 28,019 | 10,912 | 8,666 | $ | 0.63 | |||||||||
| For the twelve months ended April 30, 2018 | |||||||||||||||||
| Income from | Pre-tax | Net | Basic & Diluted | ||||||||||||||
| Revenues | Expenses | Operations | EBITDA | Income | Income | EPS | |||||||||||
| As Reported | 174,872 | 167,273 | 7,599 | 24,493 | 4,481 | 135 | $ | 0.01 | |||||||||
| Adjustments: (1) | |||||||||||||||||
| CEO Separation and related costs | (3,503) | 3,503 | 3,503 | 3,503 | 2,228 | 0.16 | |||||||||||
| Executive severance and related costs including stock-based compensation | (2,965) | 2,965 | 2,965 | 2,965 | 1,886 | 0.13 | |||||||||||
| Executive recruitment costs | (325) | 325 | 325 | 325 | 207 | 0.01 | |||||||||||
| Compliance Task Force and related costs | (881) | 881 | 881 | 881 | 560 | 0.04 | |||||||||||
| Shareholder litigation costs | (529) | 529 | 529 | 529 | 337 | 0.02 | |||||||||||
| Restructuring expense | (4,952) | 4,952 | 2,537 | 4,952 | 3,149 | 0.23 | |||||||||||
| Total Adjustments | - | (13,155) | 13,155 | 10,741 | 13,155 | 8,367 | 0.59 | ||||||||||
| Non-GAAP | 174,872 | 154,118 | 20,754 | 35,233 | 17,636 | 8,502 | $ | 0.60 | |||||||||
| (1) The net income (loss) impact of the adjustments is calculated using the incremental tax rate for the period. | |||||||||||||||||
| (2) Adjustment included for prior period amounts. | |||||||||||||||||
| Table E | ||||||
| Liberty Tax, Inc. | ||||||
| Operational Data | ||||||
| Unaudited | ||||||
| Twelve months ended April 30, | ||||||
| 2019 | 2018 | |||||
| Franchisees | ||||||
| U.S. | 1,445 | 1,582 | ||||
| Canada | 144 | 138 | ||||
| Total Franchisees | 1,589 | 1,720 | ||||
| Offices | ||||||
| U.S. | ||||||
| Franchised | 2,737 | 3,047 | ||||
| Company-owned | 99 | 296 | ||||
| Total U.S. | 2,836 | 3,343 | ||||
| Canada | ||||||
| Franchised | 231 | 219 | ||||
| Company-owned | 41 | 48 | ||||
| Total Canada | 272 | 267 | ||||
| Total | ||||||
| Franchised | 2,968 | 3,266 | ||||
| Company-owned | 140 | 344 | ||||
| Total Offices | 3,108 | 3,610 | ||||
| Tax Returns Processed | ||||||
| U.S. | 1,334,000 | 1,487,000 | ||||
| Canada | 392,000 | 377,000 | ||||
| Total Returns Processed in Offices | 1,726,000 | 1,864,000 | ||||
| Online | 121,000 | 125,000 | ||||
| Total Tax Returns Processed | 1,847,000 | 1,989,000 | ||||
| Systemwide Revenue1 | ||||||
| U.S. | $341,900,000 | $366,900,000 | ||||
| Canada (CDN $) | 32,700,000 | 31,000,000 | ||||
| Canada (USD $) | 24,600,000 | 24,100,000 | ||||
| U.S. Average Net Fee Per Return2 | $256 | $247 | ||||
| 1 Our systemwide revenue represents the total tax preparation revenue generated by our franchised and company-owned offices. It does not represent our revenue. Because 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. | ||||||
| 2 The average net fee per tax return prepared reflects amounts for our franchised and company-owned offices. | ||||||
Non-GAAP Financial Information
The Company believes that EBITDA and non-GAAP net income (loss) should be evaluated, in addition to, and not as an alternative for, net income as determined in accordance with GAAP. Both metrics are used by management when evaluating the performance of the Company. Because not all companies use the same calculations, our definition of EBITDA may not be comparable to similarly titled figures from other companies. In addition, when evaluating non-GAAP financial information, we exclude certain items that are not considered to be part of future operating results and which management excludes when evaluating the performance of the Company. Descriptions of the items which are excluded are as follows:
Executive severance and related costs, including stock-based compensation: We exclude from our non-GAAP financial measures cash and non-cash stock-based compensation, related third-party expenses and perquisites associated with the separation of employment with executives of the Company.
Executive recruitment costs: We exclude from our non-GAAP financial measures one-time costs incurred to recruit and hire new executives.
Shareholder litigation costs: We exclude from our non-GAAP financial measures one-time costs incurred related to shareholder litigation.
Accrued judgment: We exclude from our non-GAAP financial measures recoveries of and accruals recorded in the period ending April 30, 2019.
Unsolicited offer costs: We exclude from our non-GAAP financial measures costs incurred related to the unsolicited offer received by the Company in November 2018.
Corporate governance costs: We exclude from our non-GAAP financial measures third-party consulting expenses related to corporate governance costs.
Divestiture of year-round accounting offices: We exclude from our non-GAAP financial measures loss on the disposal of assets, lost revenues and brokerage and lease expenses associated with the divestiture of our year-round accounting offices.
Restructuring: We exclude from our non-GAAP financial measures cash and non-cash expenses of restructuring activities. These costs include property and intangible impairments and exit costs.
CONTACT:
Michael S. Piper
Liberty Tax, Inc.
Vice President and Chief Financial Officer
(757) 493-8855
investorrelations@libtax.com