LOS ANGELES (AP) — H&R Block Inc. said Wednesday that its loss narrowed in its fiscal third quarter, as the nation’s tax preparer set aside a smaller provision for bad loans.
Half-way into the tax season, the company said it had prepared 5.1 percent more U.S. tax returns through the end of February, compared to the same period a year ago. It posted annual increases in returns prepared at retail stores and through its online and digital filing products.
Bill Cobb, H&R Block president and CEO, said in a conference call that the company is gaining market share in all digital categories, online, in software and free tax return filing lines.
“We are growing clients which is our number one stated goal,” Cobb said. “There (are) still millions of tax returns yet to be filed and we are committed to finishing the season strong to further improve our position.”
Block has stepped up efforts to compete with rival Intuit Inc., which has had a larger share than Block of the online do-it-yourself tax-prep business. Intuit sold nearly 22 million units of its TurboTax software during the last tax season, compared with about 6 million returns prepared using Block’s software.
In a bid to boost online tax filings, Block recently began offering mobile phone users with the Android operating system free tax filing services through April 17. It has also launched a service called Block Live, which matches one of its tax preparers and a customer in a video conference.
Through the end of February, Block prepared 9.3 million returns at retail locations, up 1.6 percent from a year earlier. Digital returns climbed nearly 13 percent, to 4.8 million, while returns filed online jumped 20.4 percent to 2.9 million, for two straight years of early season growth, the company said.
All told, tax preparation and related revenue climbed 10 percent during the quarter, fueled by growth in the number of tax returns prepared. But those gains were offset by a decline in financial product revenues.
That was partly due to a promotion that Block ran through Feb. 4, offering refund anticipation checks without charge to clients electing to deposit their tax refund on a Block prepaid MasterCard.
While the promotion led to a sharp increase in clients adopting the cards, it led to a $30.3 million drop in quarterly refund anticipation checks revenue.
Block, based in Kansas City, Mo., reported a loss of $3.3 million, or a penny per share, for the three months ended Jan. 31. That compares with a loss of $12.7 million, or 4 cents a share, a year earlier.
Revenue fell 2.5 percent to $663.3 million from $680.3 million.
Analysts polled by FactSet expected a profit of 4 cents a share on revenue of $694 million.
Shares ended regular trading down 12 cents to $15.87. The stock slipped another 49 cents, or 3.1 percent, to $15.38 in after-hours trading following the release of the company’s results.
Block set aside $52.9 million for bad debt and loan losses in the latest quarter, down from about $100 million a year earlier.
The company said that Sand Canyon Corp., formerly OptionOne, Block’s now-shuttered subprime mortgage unit, received $35 million in claims related to bad loans during the quarter. The claims that were found to be valid amount to estimated losses of $1.2 million, the company said.
Some $399 million in claims remained subject to review at the end of the quarter.
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