Liberty Tax, Inc. I n v e s t o r P r e s e n t a t i o n J u n e

Transcription

1 Liberty Tax, Inc. I n v e s t o r P r e s e n t a t i o n J u n e

2 Forward-Looking Statement This presentation may contain forward-looking statements within the meaning of the federal securities laws. Forwardlooking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variations of words such as expects, anticipates, intends, plans, believes, seeks, estimates, projects, forecasts, targets, would, will, should, could, or may or other similar expressions. Forward-looking statements provide management s current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, income, earnings per share, capital expenditures, dividends, liquidity, capital structure or other financial items, descriptions of management s plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above. All forward-looking statements speak only as of the date they are made and reflect the Company s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive and regulatory factors, many of which are beyond the Company s control and that are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2016 in the section entitled Risk Factors, as well as additional factors we have described and may describe from time to time in other filings with the Securities and Exchange Commission which are available on the Company s website at You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties. 2

3 Agenda The Industry The Company Future Opportunities

4 The Industry is Large and Steadily Growing Three certainties in life: Death, Taxes and Change! U.S. Individual Tax Returns (in millions) P Source: IRS and Liberty estimates 4

5 Paid Preparer Market Share has Remained Consistent Growth in online DIY primarily from previous pen and paper filers, not taking from paid preparer segment. Paid Tax Preparation Do It Yourself 42% 41% 40% 38% 37% 37% 37% 40% 39% 40% 39% 40% 40% 40% 40% 40% 40% Emergence of shadow preparers 58% 59% 60% 62% 63% 63% 63% 60% 61% 60% 61% 60% 60% 60% 59% 58% 58% Source: Liberty Tax, Inc. estimates and IRS data 5

6 DIY Software Will Not Replace Paid Tax Preparers Taxes often are the most important financial transaction of the year Taxpayers lack confidence Want to ensure they maximize refund Taxpayers want human interaction/support People are capable of doing taxes, they just don t want to Brad Smith, Intuit CEO From 2010 to 2016, Nail salon revenue has grown 38% From 2010 to 2015, Landscape revenue has grown 19% Source: Forbes article (4/23/2014), Statista, Franchises 6

7 Agenda The Industry The Company Future Opportunities

8 Company Overview 1,800 franchises in U.S. and Canada Close to 4,100 locations 91% franchised 2.2 million tax returns prepared in FY 2017 in U.S., Canada and online Over $400M in Systemwide Revenue 8

9 Financial Performance ($ in millions except per share data) Revenue Adjusted EBITDA* & EPS* $148 $160 $162 $173 $174 $32 $35 $40 $45 $43 $43 $43 $118 $131 $1.00 $1.22 $1.39 $1.45 $1.36 $1.41 $ * Earnings per share and EBITDA adjusted for non-recurring items. 9

10 Agenda The Industry The Company Future Opportunities

11 Multiple Opportunities to Grow Revenue & Profit AD Buybacks Increase Returns per Store M&P Consolidation Financial Product Offerings Increase number of Liberty Stores Siempre Expansion Company Store Performance 11

12 Opportunities for Growth: Increase Number of Liberty Stores Liberty franchisees operate approximately 2 stores each, goal is to grow that to 5 stores Current Target # of Franchisees 1,900 1,900 Stores/Franchisee 2 5 Total Franchised Locations 3,800 9,500 At peak, both H&R Block and Jackson Hewitt franchisees operated >5 stores each 12

13 Opportunities for Growth: SiempreTax+ New brand focused on fast growing, underserved Hispanic market Launched in FY2015 with 57 locations in 16 states, grew to 159 locations in U.S. Population Projections (m) Service to Hispanic community is reinforced with over 800 Hispanic certified Liberty offices Other Asian-American African-American Hispanic Non-Hispanic White Source: U.S. Census Bureau, 2014 National Population Projections 13

14 Opportunities for Growth: SiempreTax+ Office Locations Over 25% Hispanic 10-25% Hispanic 5-10% Hispanic Less than 5% Hispanic Source: Opened in 2016 Opened in

15 Opportunities for Growth: Independent Tax Store Consolidation Independent tax stores prepare 64% of all paid returns Liberty 2% Jackson Hewitt 2% CPAs * 16% H&R Block 16% Mom and Pop's 64% Tax Year 2016 * Assumes CPAs do all returns > $100K AGI 15

16 Opportunities for Growth: Increase Returns Per Store Largest branded competitor processes three times more returns per store 1,186 Opportunity for expansion 433 Liberty H&R Block 16

17 Opportunities for Growth: Improve Company Stores Largest branded competitor processes 6x more returns per company-owned store and generates 5x more revenue Returns / Co. Store Office Revenue / Co. Store Office 1,203 $ $60 Liberty H&R Block Liberty H&R Block 17

18 Opportunities for Growth: Financial Products ~50% of U.S. Customers Use a Financial Product Refund Transfer Offers the speed of direct deposit Can defer payment of tax prep fee Refund Advance No cost to customer Earlier access to a portion of your refund Liberty has the most flexible offering for consumers NetSpend Card Fastest access to refund for consumer Low historic usage: opportunity to improve attachment rates 18

19 Liberty Tax, Inc. A p p e n d i x I

20 About Non-GAAP Financial Information We report our financial results in accordance with U.S. generally accepted accounting principles (GAAP); however, we believe that earnings before interest, taxes, depreciation, amortization and impairment ("EBITDA") and non- GAAP results should be evaluated, in addition to, and not as an alternative for, net income as determined in accordance with GAAP. We consider our non- GAAP financial results to be a useful metric for management and investors to evaluate and compare current year results with prior periods. Because not all companies use the same calculations, our definition of EBITDA may not be comparable to similarly titled figures from other companies. In addition, when evaluating non-gaap results, we exclude certain items that are not considered to be part of future operating results. 20

21 About Non-GAAP Financial Information Reconciliation of GAAP net income to non-gaap net income: ($, in thousands, except per share data) Fiscal Years Ended April 30, GAAP Net income $14,670 $16,383 $17,627 $21,982 $8,690 $19,420 $13,013 Impairment of software and acquired customer lists , Net gain on available-for-sale securities (2,183) - - (50) Costs associated with postponed IPO - 1, Executive severance & restructuring charge , Restatement costs Class action litigation settlements , Compliance Task force and related costs ,197 Accrued judgment ,700 Stock compensation related to liability classified awards - - 2,625 (872) Income tax effect - (503) (1,183) 588 (6,736) (242) (1,764) Non-GAAP Net income $14,670 $17,228 $19,494 $21,036 $19,451 $19,844 $15,974 Diluted net income per share: GAAP $1.00 $1.16 $1.25 $1.51 $0.61 $1.38 $0.94 Non-GAAP $1.00 $1.22 $1.39 $1.45 $1.36 $1.41 $1.15 Diluted sharecount 14,662 14,168 14,072 14,537 14,295 14,025 13,917 See "About Non-GAAP Financial Information" immediately following Appendix I for additional information regarding the measures included in this presentation. 21

22 About Non-GAAP Financial Information Reconciliation of GAAP net income to EBITDA and EBITDA to Adjusted EBITDA: ($, in thousands) Fiscal Years Ended April 30, GAAP Net income $14,670 $16,383 $17,627 $21,982 $8,690 $19,420 $13,013 Interest expense 1,954 1,854 2,039 1,355 1,889 2,039 2,557 Income tax expense 10,142 9,748 11,170 13,654 4,811 11,058 7,754 Depreciation, amortization and impairment charges 5,439 5,998 6,538 9,277 18,292 10,026 14,356 EBITDA $32,205 $33,983 $37,374 $46,269 $33,681 $42,542 $37,680 Net gain on available-for-sale securities (2,183) - - (50) Costs associated with postponed IPO - 1, Executive severance & restructuring charge , Restatement costs Class action litigation settlements , Compliance Task force and related costs ,197 Accrued judgment ,700 Stock compensation related to liability classified awards - - 2,625 (872) Adjusted EBITDA $32,205 $35,331 $40,424 $44,734 $42,787 $43,208 $42,404 See "About Non-GAAP Financial Information" immediately following Appendix I for additional information regarding the measures included in this presentation. 22