Liberty Tax (TAX) Incurs Q1 Loss As Expected; Revenues Fall

Liberty Tax Service’s parent company, Liberty Tax, Inc. (NASDAQ:TAX) reported first-quarter fiscal 2017 (ending Jul 31) net loss of 68 cents per share, in line with the Zacks Consensus Estimate. Quarterly loss was a cent wider than the year-ago loss. Lower revenues were held responsible for the deterioration.

Including one-time items, reported loss came in at 73 cents per share, wider than 67 cents loss incurred in the year-ago quarter.

The company stated that it suffered seasonal first-quarter loss characterized by lower revenues and higher costs to positional itself well for the following tax season.

Behind the Headlines

Liberty Tax reported total revenue of $7.1 million, down 5% year over year but in line with the Zacks Consensus Estimate. The decline was due to lower area developer fees (as revenues from prior-year sales are now being fully recognized over the life of their agreements) as well as lower franchise fees, royalties and advertising fees and other revenues. However, the increase in interest income and tax preparation fees limited the upside.

Total operating expenses of $20.8 million decreased 0.7% year over year primarily due to employee compensation and benefits, selling, general, and administrative expenses, area developer expense, and advertising expense.

Before income tax, interest expenses, interest income, depreciation and amortization, the company digested a loss of $13.2 million, wider than $12.2 million in the year-ago quarter.

Loss from operations was nearly $15.2 million, wider than $13.9 million incurred in the year-ago quarter.

Financial Update

Liberty Tax exited the fiscal first quarter of 2017 with cash and cash equivalents of approximately $4.9 million, up 11.4% year over year.

Total assets increased 11.2% year over year to $190.3 million at the end of the quarter.

Total long-term debt amounted to $18.3 million as of Jul 31, down about 11.6% year over year.

Cash used in operations was $21.9 million in the quarter, higher than $15.5 million used in the year-ago quarter.

Dividend

The board of directors approved a quarterly dividend of 16 cents per share payable on Oct 24 to shareholders of record on Oct 14.

Zacks Rank

Liberty Tax presently carries a Zacks Rank #3 (Hold).

Performances of Other Business Service Providers

The bottom line at SouFun Holdings Ltd. (NYSE:SFUN) and Performant Financial Corporation (NASDAQ:PFMT) outperformed the Zacks Consensus Estimate in the last reported quarter, while that of Core-Mark Holding Company, Inc. (NASDAQ:CORE) came in line with expectation.

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