H&R Block (HRB) Soars After-Hours on Improved Results, $3.5B Stock Buyback

H&R Block

Investors were pleased by the improved financial results of H&R Block in the first quarter of its fiscal 2016, and plan to buy back as much as $3.5 billion worth of shares following the completion of the sale of its banking unit.  As a result, the shares of the company traded higher after-hours today, September 1.

The stock price of H&R Block (NYSE:HRB) increased more than 7% to $35.40 per share around 5:28 in the afternoon in New York.

H&R Block financial results

H&R Block reported that a 3% increase in revenue to $138 million for the quarter. Its net loss from continuing operations declined from ($109) million or ($0.40) per share to ($97) million or ($0.35) per share.

According to the company its revenues from Tax Services climbed 2.7% to $133 million driven by higher Peace of Mind (POM) revenues and royalties.  Its total operating expense increased 6.6% to $297 million due to increased occupancy costs and amortization. Its pretax loss was $169 million, up by 12.5%.

H&R Block said its corporate interest expense on borrowing dropped $5 billion due to the repayment of senior notes in October, last year. Its pre-tax loss improved by $8 million to $18 million and income tax benefit increased due to favorable discrete items.

In a statement, H&R Block president and CEO Bill Cobb said, “We are pleased that we have successfully closed the bank transaction and are committed to ensuring a smooth transition for our clients as we prepare for the upcoming tax season. Our teams are now fully focused on developing and executing a strategy that ensures an exceptional client service experience. We look forward to delivering another successful tax year for both our clients and our shareholders.”

Stock buyback program and capital structure plans

H&R Block also announced the completion of the bank divestiture transaction and its intention to repurchase $3.5 billion shares until June 2019.  Additionally, the company plans to launch as a “modified Dutch auction” tender offer on September 2 to buy back as much as $1.5 billion of its common stock, which represents approximately 16% of its current market capitalization.

H&R Block Chairman Bob Gerard said, “We have a long tradition of returning capital to shareholders, and I’m pleased that we can now continue that tradition. Through a balanced and appropriate capital structure, we are positioned to consistently generate significant free cash flow, maintain seasonal access to liquidity, and continue to deliver reliable and meaningful shareholder returns.”