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

By: Liberty Tax Service | 0 Shares 234 Reads

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.