H&R BlockHRB

The company reported earnings of $2.38 per share for the quarter, beating the $2.21 analysts expected. Revenue reached $1.14 billion, also coming in ahead of forecasts. For the full fiscal year, revenue grew 5 percent as the company successfully shifted its focus toward higher-value clients and expert-led services.

Management is sharing this success directly with owners by raising the quarterly dividend by 10 percent to 46 cents per share. The business also generated 23 percent more operating cash flow than last year. This reinforces our view that the company is a cash-generation machine that prioritizes returning profits to shareholders through both dividends and steady share buybacks.

See the full quarter, and how our tracked metrics did

Source: 8-K filing

Key highlights

• Profit and revenue outlook: For the full year ahead, the company expects revenue to land between $4.11 billion and $4.16 billion, which would be an increase from the $3.95 billion it made this year. It also predicts earnings will reach between $6.04 and $6.24 per share as it continues to shift toward higher value clients and expert services.
• Tax filing fees rising: Fees for assisted tax preparation, which is the money the company charges when a professional helps a client file, grew 5.7% for the full year. This growth is a key part of the strategy to earn more from each customer even when the total number of people filing taxes stays relatively flat.
• Aggressive share buybacks: The company repurchased and retired 10.5 million shares this year, which reduced the total number of shares outstanding by 7.9%. Reducing the share count makes each remaining share more valuable by giving owners a larger piece of the total profit.
• Dividend increase announced: The board raised the quarterly dividend by 10% to $0.46 per share, marking the ninth year in a row that the payout has grown. This increase, combined with share buybacks, meant the company returned $713.7 million to its owners over the last twelve months.
• Small business growth: Revenue from Wave, which is a software platform for small business bookkeeping and payroll, grew 12% to $122.7 million for the year. While it is still a small part of the total business, this growth helps the company earn money all year long rather than just during tax season.

Our take: This was a very strong finish to the year. The company is successfully charging more for its expertise and using its massive cash flow to retire 7.9% of its own shares, which significantly boosts the value for those who stay. It is a textbook example of a steady business getting more efficient.