H&R Block (HRB) Posts Wider Than Expected 3Q Loss

(By Balaseshan) H&R Block Inc. (NYSE: HRB : 27.275, 2.305), a tax service provider, reported a wider quarterly loss due to revenue shortfall from the delays to start the U.S. tax season. Results missed consensus.

The company said the start of the 2013 U.S. tax season has been subject to an unprecedented delay that has caused changes in the timing of taxpayer filing patterns as a result of significant tax legislation being passed shortly before the traditional start of the tax season and the resulting delay in opening the Internal Revenue Service's (IRS) e-file system.

This year, the IRS opened its e-file system on Jan. 30, just before the end of H&R Block's fiscal third quarter on Jan. 31. In addition, the IRS and other taxing jurisdictions did not accept certain tax forms until early March. As a result, the company believes industry-wide tax filings through Feb. 28 have been delayed by up to two weeks versus the comparable prior year period.

Total U.S. tax returns prepared by and through H&R Block were lower by 5.8% through Feb. 28. The company estimates that industry-wide U.S. tax filings were down about 8% on a comparable date-to-date basis through Feb. 28. The company believes industry-wide U.S. filings will fully normalize and grow 1% to 2% by the end of the tax season.

Loss from continuing operations for the third quarter widened to $16.92 million or $0.06 per share from $3.57 million or $0.01 per share last year. The company typically reports a second quarter operating loss due to the seasonality of its U.S. tax business.

Adjusted net loss for the latest quarter was $60 million or $0.22 per share, compared to break-even in prior year, primarily driven by the delays to the start of the U.S. tax season.

Revenue for the quarter fell to $471.98 million from $663.28 million, primarily driven by timing issues from the IRS opening its e-file system on Jan. 30 and the resulting delays to the start of the U.S. tax season.

Analysts, on average, polled by Thomson Reuters had expected a loss of $0.01 per share on revenue of $563.60 million for the third quarter.

Service revenue decreased 30.9% to $362.19 million, while product and other revenues declined 28.2%.

Revenue from Tax Services were lower by $191 million or 29%.

"The delayed start to this tax season led to a material shift of business from our fiscal third quarter to our fiscal fourth quarter. As a result, our third quarter results are not indicative of the results we expect to achieve this fiscal year," said Greg Macfarlane, H&R Block's CFO.

HRB closed Thursday's regular session down 1.11% at $24.98. The stock has been trading between $14.35 and $25.59 for the past 52 weeks.

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