SOURCE: Liberty Tax, Inc.

Liberty Tax, Inc.

August 28, 2015 06:30 ET

Liberty Tax Service Announces Fiscal 2016 First Quarter Results

VIRGINIA BEACH, VA--(Marketwired - Aug 28, 2015) - Liberty Tax, Inc. (NASDAQ: TAX) (the "Company"), the parent company of Liberty Tax Service, today reported results for the first quarter ended July 31, 2015.

"I am pleased with our sales efforts thus far, the progress we are making to expand our office count, and our ability to engage closely with our franchisees and area developers to improve return counts in existing offices," said John Hewitt, CEO. "We have developed several new pilot programs and continue to see progress and expansion with our SiempreTax brand."

As a seasonal business, the Company typically reports a loss in the first quarter when revenues are low and costs are ramping up to drive growth in the following tax season. The Company reported a net loss for the fiscal first quarter ended July 31, 2015, of $8.5 million, or $0.67 per share, which was unchanged from prior year. The Company reported an adjusted non-GAAP net loss of $0.65 per share, also in line with the prior year.

                                     
($ in millions except per share data)   GAAP     Non - GAAP*  
    Q1 2016     Q1 2015     Change     Q1 2016     Q1 2015     Change  
Revenue   $ 7.5     $ 7.8     -4.0 %   $ 7.5     $ 7.8     -4.0 %
Operating expenses     21.4       21.9     -2.1 %     21.0       21.4     -1.8 %
Loss before taxes     (14.3 )     (14.3 )   -0.2 %     (13.9 )     (13.8 )   0.3 %
Net Loss     (8.5 )     (8.6 )   -1.2 %     (8.3 )     (8.4 )   -0.8 %
Basic and Diluted EPS     (0.67 )     (0.67 )   0.0 %     (0.65 )     (0.65 )   0.0 %
                                             
*See reconciliation of non-GAAP to GAAP measures in Table D  

Income Statement
Revenues for the three months ended July 31, 2015 decreased to $7.5 million from $7.8 million in the prior year period. Revenue from Area Developer ("AD") fees declined $0.2 million because revenue from some prior year sales has now been fully recognized over the ten year life of the related agreements.

Balance Sheet
The Company had a cash balance of $4.4 million at July 31, 2015. The Company has drawn $16.6 million on its revolving credit facility as of July 31, 2015 compared to $13.8 million at the prior year's quarter end. During the first quarter we typically draw on this facility to provide for cash used in operations and for operating loans to franchisees.

Operational Results
During the first quarter of fiscal 2016, the Company sold 37 new U.S. and Canadian territories, compared to 30 new territories during the prior year period. In order to project total office count, other factors, including the opening of previously sold territories and terminations, must be considered as well. The Company expects the total office count to increase over last year.

Dividend
On August 27, 2015, the Board of Directors approved a quarterly dividend to shareholders of $0.16 per share. The dividend will be paid on October 22, 2015 to holders of record of common stock and common stock equivalents on the close of business on October 15, 2015.

Conference Call
At 8:30 a.m. Eastern time on August 28, 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: 4280497
     

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, under the "About" tab.

A telephonic replay of the call will be available beginning shortly after the call continuing until Friday, September 4, 2015, by dialing 855-859-2056 (domestic) or 404-537-3406 (international). The conference ID code is 4280497. 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 U.S. generally accepted accounting principles, please see the section of the accompanying Table D 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
Amounts in thousands
                 
    July 31,     April 30,     July 31,
    2015     2015     2014
Current assets:   (Unaudited)           (Unaudited)
  Cash and cash equivalents   $ 4,418     $ 21,387     $ 8,649
  Current receivables, net     64,400       65,927       59,308
  Assets held for sale     6,357       5,160       5,425
  Income taxes receivable     7,901       -       10,946
  Deferred income tax asset     6,773       6,921       3,636
  Other current assets     2,552       6,470       3,058
    Total current assets     92,401       105,865       91,022
                         
  Property, equipment, and software, net     37,937       36,232       38,866
  Notes receivable, non-current, net     21,146       20,753       15,575
  Goodwill     3,283       3,377       3,009
  Other intangible assets, net     13,339       14,672       12,786
  Other assets     3,220       3,247       2,207
    Total assets   $ 171,326     $ 184,146     $ 163,465
                       
Current liabilities:                      
  Current installments of long-term debt   $ 1,958     $ 3,934     $ 3,042
  Accounts payable and accrued expenses     16,819       17,321       8,963
  Due to ADs     9,403       24,340       9,207
  Income taxes payable     187       2,147       -
  Deferred revenue - current     5,585       6,076       6,796
    Total current liabilities     33,952       53,818       28,008
                         
  Long-term debt, excluding current installments     20,858       21,463       21,103
  Revolving credit facility     16,556       -       13,822
  Deferred revenue - non-current     8,964       7,640       8,097
  Deferred income tax liability     3,673       2,363       4,657
    Total liabilities     84,003       85,284       75,687
                       
Stockholders' equity:                      
  Special voting preferred stock, $0.01 par value per share     -       -       -
  Class A common stock, $0.01 par value per share     119       119       118
  Class B common stock, $0.01 par value per share     9       9       9
  Exchangeable shares, $0.01 par value per share     10       10       10
  Additional paid-in capital     4,049       4,082       6,590
  Accumulated other comprehensive income (loss), net of taxes     (1,455 )     (697 )     184
  Retained earnings     84,591       95,339       80,867
    Total stockholders' equity     87,323       98,862       87,778
    Total liabilities and stockholders' equity   $ 171,326     $ 184,146     $ 163,465
                           
                           
                           
Table B  
Liberty Tax, Inc.  
Condensed Consolidated Statement of Operations  
Unaudited, amounts in thousands, except per share and share data  
                         
    Three months ended July 31,  
    2015     2014     $ change     % change  
Revenues:                        
  Franchise fees   $ 608     $ 704     $ (96 )   -13.6 %
  AD fees     1,604       1,825       (221 )   -12.1 %
  Royalties and advertising fees     1,745       1,694       51     3.0 %
  Financial products     308       457       (149 )   -32.6 %
  Interest income     2,006       2,194       (188 )   -8.6 %
  Tax preparation fees, net of discounts     623       515       108     21.0 %
  Other revenue     629       450       179     39.8 %
    Total revenues     7,523       7,839       (316 )   -4.0 %
                               
Operating expenses:                              
  Employee compensation and benefits     8,633       8,415       218     2.6 %
  Selling, general, and administrative expenses     7,759       7,525       234     3.1 %
  AD expense     726       741       (15 )   -2.0 %
  Advertising expense     2,609       2,882       (273 )   -9.5 %
  Depreciation, amortization, and impairment charges     1,670       2,299       (629 )   -27.4 %
    Total operating expenses     21,397       21,862       (465 )   -2.1 %
    Loss from operations     (13,874 )     (14,023 )     149     -1.1 %
                               
Other expense:                              
  Foreign currency transaction loss     (25 )     (1 )     (24 )   2400.0 %
  Interest expense     (401 )     (301 )     (100 )   33.2 %
    Loss before income taxes     (14,300 )     (14,325 )     25     -0.2 %
  Income tax benefit     (5,764 )     (5,681 )     (83 )   1.5 %
    Net loss   $ (8,536 )   $ (8,644 )   $ 108     -1.2 %
                               
Net loss per share of Class A and Class B common stock                              
  Basic and diluted   $ (0.67 )   $ (0.67 )   $ -     0.0 %
                               
Weighted-average shares outstanding basic and diluted     12,811,621       12,867,273       (55,652 )   -0.4 %
   
   
   
Table C  
Liberty Tax, Inc.  
Condensed Consolidated Statements of Cash Flows  
Unaudited, amounts in thousands  
    Three months ended July 31,  
    2015     2014  
Cash flows from operating activities:            
  Net loss   $ (8,536 )   $ (8,644 )
  Adjustments to reconcile net loss to net cash used in operating activities:                
    Provision for doubtful accounts     1,701       1,456  
    Depreciation, amortization, and impairment charges     1,670       2,299  
    Stock-based compensation expense     465       687  
    Gain on bargain purchases and sales of Company-owned offices     (117 )     (95 )
    Deferred tax expense     1,458       2,034  
    Changes in accrued income taxes     (9,860 )     (20,622 )
    Changes in other assets and liabilities     (2,241 )     142  
      Net cash used in operating activities     (15,460 )     (22,743 )
                 
Cash flows from investing activities:                
  Issuance of operating loans to franchisees     (12,333 )     (8,505 )
  Payments received on operating loans to franchisees     654       1,325  
  Purchases of AD rights and Company-owned offices     (336 )     (128 )
  Proceeds from sale of Company-owned offices and AD rights     2,239       643  
  Purchase of property, equipment, and software     (2,686 )     (2,814 )
      Net cash used in investing activities     (12,462 )     (9,479 )
                 
Cash flows from financing activities:                
  Proceeds from the exercise of stock options     279       4,543  
  Repurchase of common stock     (1,272 )     (22,620 )
  Dividends paid     (2,212 )     -  
  Repayment of amounts due to former ADs     (2,318 )     (3,840 )
  Repayment of other long-term debt     (282 )     (641 )
  Borrowings under revolving credit facility     16,556       13,849  
  Repayments under revolving credit facility     -       (27 )
  Tax benefit of stock option exercises     495       3,509  
      Net cash provided by (used in) financing activities     11,246       (5,227 )
                 
Effect of exchange rate changes on cash, net     (293 )     18  
    Net decrease in cash and cash equivalents     (16,969 )     (37,431 )
Cash and cash equivalents at beginning of period     21,387       46,080  
Cash and cash equivalents at end of period   $ 4,418     $ 8,649  
                 
                 
                 
Table D  
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 measure 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.  
   
For the three months ended July 31, 2015  
            Loss from                          
  Revenues   Expenses     Operations     EBITDA     Pretax Loss     Net Loss (1)     EPS  
                                                     
As Reported $ 7,523   $ 21,397     $ (13,874 )   $ (12,229 )   $ (14,300 )   $ (8,536 )   $ (0.67 )
                                                     
Adjustments:                                                    
Executive severance including stock-based compensation   -     (413 )     413       413       413       254       0.02  
As Adjusted $ 7,523   $ 20,984     $ (13,461 )   $ (11,816 )   $ (13,887 )   $ (8,282 )   $ (0.65 )
                                                     
  Stock-based compensation expense excluding severance related expense $ -   $ (373 )   $ 373     $ 373                          
                                                     
For the three months ended July 31, 2014  
            Loss from                          
  Revenues   Expenses     Operations     EBITDA     Pretax Loss     Net Loss     EPS  
                                                     
As Reported $ 7,839   $ 21,862     $ (14,023 )   $ (11,725 )   $ (14,325 )   $ (8,644 )   $ (0.67 )
                                                     
Adjustments:                                                    
Executive severance including stock-based compensation   -     (483 )     483       483       483       291       0.02  
As Adjusted $ 7,839   $ 21,379     $ (13,540 )   $ (11,242 )   $ (13,842 )   $ (8,353 )   $ (0.65 )
                                                     
  Stock-based compensation expense excluding severance related expense $ -   $ (494 )   $ 494     $ 494                          
                                                       
Three months ended July 31, 2015 compared to three months ended July 31, 2014  
  As reported year over year:                                                      
    $ change $ (316 )   $ (465 )   $ 149     $ (504 )   $ 25     $ 108     $ -  
    % change   -4.0 %     -2.1 %     -1.1 %     4.3 %     -0.2 %     -1.2 %     0 %
    As adjusted year over year:                                                      
    $ change $ (316 )   $ (395 )   $ 79     $ (574 )   $ (45 )   $ 71     $ -  
    % change   -4.0 %     -1.8 %     -0.6 %     5.1 %     0.3 %     -0.8 %     0 %
(1) The non-GAAP tax rate of 38.5% used above excludes the income tax effects of the non-GAAP income before tax adjustments described above and is consistent with our average and forecasted rate.  
   

Contact Information

  • CONTACTS:
    Investors:
    Kathy Donovan
    Liberty Tax, Inc.
    Vice President, Chief Financial Officer
    (757) 493-8855
    investorrelations@libtax.com

    Media: Martha O'Gorman
    Liberty Tax, Inc.
    Chief Marketing Officer
    (757) 301-8022
    martha@libtax.com