SOURCE: JTH Holding, Inc.

JTH Holding, Inc.

March 13, 2014 07:00 ET

Liberty Tax Service Reports Fiscal 2014 Third Quarter Results

Reports Increase of 7.7% in U.S. Tax Customers Served Through February 28

VIRGINIA BEACH, VA--(Marketwired - Mar 13, 2014) - JTH Holding, Inc. (NASDAQ: TAX) (the "Company"), the parent company of Liberty Tax Service, today reported net income for the third fiscal quarter ended January 31, 2014 of $4.1 million, or $0.28 per diluted share, compared to $1.7 million, or $0.12 per share, in the prior year period. The Company also reported that U.S. customers served during the calendar year through February 28, 2014 increased 7.7% and systemwide revenue increased 13.3% from the same period in the prior year. 

"We are pleased with the increases we are seeing this year and they are in-line with our expectations. We have continued to take market share even though we had fewer offices," said John Hewitt, CEO. "As we said in February, we were fortunate to be able to focus on our high performers, and the results so far this season speak for themselves. Our best performing franchisees embody our mission statement of 'Set the standard, improve each day and have some fun!' We are glad to be partners with them and look forward to helping them continue to expand their business and ours." 

Revenues
Revenues for the three months ended January 31, 2014 increased 8.3% to $40.7 million compared to $37.6 million in the prior year period. Revenues for the nine months ended January 31, 2014 increased 3.5% to $56.1 million compared to $54.2 million in the prior year period. The increase in revenue during both periods was primarily due to an increase in royalties and advertising fees, financial products and tax preparation fees. These revenue increases were mostly driven by higher volumes of returns and an increase in average net fees. In addition, much of the increase in tax preparation fees resulted from an increase in the number of online returns processed by the Company in part due to an acquisition of certain assets of an online tax preparation provider in early January 2014. These increases were partially offset by a decrease in franchise fees because the Company was unable to sell franchises during a portion of the second quarter of fiscal 2014 and a decrease in area developer fees due to the repurchase of several areas from area developers during fiscal 2014. 

Operating Expenses
Operating expenses for the three months ended January 31, 2014 increased 4.1% to $35.5 million compared to $34.1 million in the prior year period. Operating expenses for the nine months ended January 31, 2014 increased 5.1% to $73.8 million compared to $70.2 million in the prior year period. The increase in both periods was primarily due to an increase in general and administrative expenses, area developer expense and depreciation, amortization and impairment charges. 

The increase in general and administrative expense was related to one-time restatement costs and an increase in bad debt expense related to the higher number of office closures. The increase in area developer expense was directly related to the increase in royalties. The increase in depreciation, amortization and impairment charges was primarily due to additional amortization expense related to acquired customer lists and area developer rights, along with placing the Company's NextGen software into service in fiscal 2014 and thus beginning to depreciate it. These increases were partially offset by a decrease in advertising expense in anticipation of the later start to the tax season and shifting more of those costs into the fourth quarter of fiscal 2014. 

Balance Sheet
The Company had a cash balance of $3.7 million at January 31, 2014. The Company has drawn $104.6 million on its revolving credit facility as of January 31, 2014 compared to $108.1 million as of January 31, 2013, to provide cash used in operating activities and operating loans to franchisees. As of February 28, 2014, the Company had a balance of $9.7 million on its revolving credit facility compared to $61.0 million as of February 28, 2013. 

Operational Results
During the calendar year through February 28, 2014, the Company has processed 1,250,000 returns in offices and online, an increase of 7.7% when compared to the same period last year. The number of returns processed in offices increased 6.1% to 1,148,000 and the number of returns processed online increased 29.1% to 102,000 compared to the same period last year partly due to the acquisition of certain assets of an online tax preparation provider. 

Third Quarter Conference Call
At 8:30 a.m. ET on Thursday, March 13, 2014, the Company will host a conference call to discuss its results from the third quarter of fiscal 2014. To listen to the call, dial 855-611-0856 (domestic) or 518-444-5569 (international), conference ID code 41557018, 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 Thursday, March 13, 2014 and continuing until Thursday, March 20, 2014, by dialing 855-859-2056 (domestic) or 404-537-3406 (international). The conference ID code is 41557018. 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 16 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 over 30,000 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.

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 restatement of the Company's historical financial statements, the costs associated with the restatement, the filing of the Company's periodic reports with the SEC, the Company's anticipated growth and expansion of its business, and the completion of the Company's franchise disclosure documents and related filings. 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, the impact of changes in our accounting practices on historical and future financial results; the consequences of any restatements of our financial statements; the timing for and results of the pending restatements, including our filings with the SEC; 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,
2014
    January 31,
2013
  April 30,
2013
Current assets:                    
  Cash and cash equivalents   $ 3,742     $ 849   $ 19,013
  Receivables, net     133,566       129,586     71,306
  Available-for-sale securities     -       -     3,619
  Other current assets     31,418       34,430     9,195
    Total current assets     168,726       164,865     103,133
                       
  Property, equipment, and software, net     37,553       31,978     33,037
  Notes receivable, excluding current portion, net     23,645       21,356     14,352
  Goodwill     6,279       5,721     5,685
  Other intangible assets, net     17,645       11,620     10,921
  Other assets, net     2,124       5,706     2,402
    Total assets   $ 255,972     $ 241,246   $ 169,530
                     
Current liabilities:                    
  Current installments of long-term debt   $ 6,649     $ 3,488   $ 3,400
  Accounts payable and accrued expenses     12,804       15,260     11,954
  Due to area developers     15,390       14,955     18,248
  Income taxes payable     -       -     5,897
  Deferred revenue - short-term portion     6,362       6,489     7,555
    Total current liabilities     41,205       40,192     47,054
                       
  Long-term debt, excluding current installments     22,337       24,775     24,283
  Revolving credit facility     104,592       108,105     -
  Deferred revenue - long-term portion     8,510       9,935     10,381
  Other non-current liabilities     2,030       382     5,976
    Total liabilities     178,674       183,389     87,694
                     
Stockholders' equity:                    
  Special voting preferred stock, $0.01 par value per share     -       -     -
  Class A common stock, $0.01 par value per share     122       121     120
  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     9,053       6,752     1,920
  Accumulated other comprehensive income, net of taxes     (129 )     810     1,194
  Retained earnings     68,242       50,164     78,592
    Total stockholders' equity     77,298       57,857     81,836
    Total liabilities and stockholders' equity   $ 255,972     $ 241,246   $ 169,530
                     
                     
 
 
JTH Holding, Inc.
Condensed Consolidated Statement of Operations
Unaudited, amounts in thousands, except per share and share data
                           
  Three months ended
January 31,
  Nine months ended
January 31,
  2014   2013     %
change
  2014     2013   %
change
Revenues:                                  
  Franchise fees $ 1,247   $ 1,698     -26.6%   $ 3,172     $ 4,503   -29.6%
  Area developer fees   1,311     1,741     -24.7%     4,994       5,742   -13.0%
  Royalties and advertising fees   22,081     20,188     9.4%     24,710       22,561   9.5%
  Financial products   9,864     8,039     22.7%     10,482       8,510   23.2%
  Interest income   3,001     3,140     -4.4%     7,435       8,339   -10.8%
  Tax preparation fees, net of discounts   2,054     1,445     42.1%     2,682       1,886   42.2%
  Other revenue   1,182     1,369     -13.7%     2,647       2,661   -0.5%
    Total revenues   40,740     37,620     8.3%     56,122       54,202   3.5%
                                   
Operating expenses:                                  
  Employee compensation and benefits   10,318     10,285     0.3%     24,603       24,566   0.2%
  General and administrative expenses   9,121     7,857     16.1%     23,131       19,783   16.9%
  Area developer expense   7,909     6,814     16.1%     9,442       8,646   9.2%
  Advertising expense   5,860     7,687     -23.8%     11,051       12,786   -13.6%
  Depreciation, amortization, and impairment charges   2,267     1,424     59.2%     5,590       4,447   25.7%
    Total operating expenses   35,475     34,067     4.1%     73,817       70,228   5.1%
    Income (loss) from operations   5,265     3,553     48.2%     (17,695 )     (16,026 ) -10.4%
                                   
Other income (expense):                                  
  Foreign currency transaction gains (losses)   (3 )   (1 )   200.0%     (15 )     3   -600.0%
  Gain on sale of available-for-sale securities   1,995     -     n/a     2,183       -   n/a
  Interest expense   (464 )   (819 )   43.3%     (1,066 )     (1,623 ) 34.3%
  Income (loss) before income taxes   6,793     2,733     148.6%     (16,593 )     (17,646 ) 6.0%
  Income tax expense (benefit)   2,737     1,060     158.2%     (6,244 )     (6,845 ) 8.8%
  Net income (loss) $ 4,056   $ 1,673     142.4%   $ (10,349 )   $ (10,801 ) 4.2%
                                     
  Net income attributable to common stockholders Class A and Class B $ 3,766   $ 1,554     142.3%                  
                                   
Net income (loss) per share of Class A and Class B common stock                                  
  Basic $ 0.29   $ 0.12     141.7%   $ (0.80 )   $ (0.85 ) 5.9%
  Diluted $ 0.28   $ 0.12     133.3%                  
                                   
Weighted-average shares outstanding                                  
  Basic   12,991,857     12,990,238           12,937,734       12,731,496    
  Diluted   14,654,666     14,069,939                        
                                   
                                   
   
   
JTH Holding, Inc.  
Condensed Consolidated Statements of Cash Flows  
Unaudited, amounts in thousands  
    Nine months ended January 31,  
    2014     2013  
Cash flows from operating activities:                
  Net loss   $ (10,349 )   $ (10,801 )
  Adjustments to reconcile net loss to net cash used in operating activities:                
    Provision for doubtful accounts     5,886       4,581  
    Depreciation, amortization and impairment charges     5,590       4,447  
    Amortization of deferred financing costs     250       217  
    Stock-based compensation expense related to equity classified awards     1,394       1,232  
    Stock-based compensation expense related to liability classified awards     (872 )     -  
    Gain on bargain purchases and sales of company-owned offices     (629 )     (178 )
    Equity in loss of affiliate     173       118  
    Deferred tax expense     955       4,952  
    Gain on sale of available-for-sale securities     (2,183 )     -  
    Changes in assets and liabilities decreasing cash flows from operating activities     (51,065 )     (56,383 )
      Net cash used in operating activities     (50,850 )     (51,815 )
                 
Cash flows from investing activities:                
  Issuance of operating loans to franchisees     (62,218 )     (60,875 )
  Payments received on operating loans from franchisees     1,532       1,536  
  Purchases of area developer rights, company-owned offices and acquired customer lists     (6,585 )     (3,741 )
  Proceeds from sale of company-owned offices and area developer rights     2,368       2,252  
  Purchase of available-for-sale securities     -       (2,980 )
  Proceeds from sale of available-for-sale securities     5,163       -  
  Purchase of property and equipment     (7,652 )     (9,177 )
      Net cash used in investing activities     (67,392 )     (72,985 )
                 
Cash flows from financing activities:                
  Proceeds from the exercise of stock options     6,122       1,592  
  Repurchase of common stock     (5,174 )     (1,634 )
  Repayment of long-term debt     (2,897 )     (2,227 )
  Borrowings under revolving credit facility     110,694       108,582  
  Repayments under revolving credit facility     (6,102 )     (478 )
  Payment for debt issue costs     -       (281 )
  Tax benefit of stock option exercises     554       269  
      Net cash provided by financing activities     103,197       105,823  
                 
Effect of exchange rate changes on cash, net     (226 )     (22 )
      Net decrease in cash and cash equivalents     (15,271 )     (18,999 )
Cash and cash equivalents at beginning of period     19,013       19,848  
Cash and cash equivalents at end of period   $ 3,742     $ 849  
                 
Supplementary cash flow data:                
  Cash paid for interest, net of capitalized interest   $ 851     $ 1,310  
  Cash paid for taxes, net of refunds     6,388       6,958  
                 
                 
   
   
JTH Holding, Inc.  
Operational Data  
Unaudited  
           
Tax returns processed(1)   CYTD 2/28/14   CYTD 2/28/13   Percent Change  
  U.S. offices   1,148,000   1,082,000   6.1 %
  Online   102,000   79,000   29.1 %
    Total tax returns processed   1,250,000   1,161,000   7.7 %
               
(1)Return counts are rounded to the thousands and percentages are calculated on rounded amounts  
   
   

Contact Information

  • CONTACTS:

    Investors:
    Darby Schoenfeld
    JTH Holding, Inc.
    Director of Investor Relations
    (757) 453-6047
    Email Contact

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