Strict cost cutting at H&R Block pushed profits up 63 percent this year despite a difficult tax season in which it prepared slightly fewer returns than a year earlier.
The Kansas City company said Wednesday that it earned $433.9 million, or $1.58 a share, in its fiscal year that ended April 30. It earned $265.9 million, or 89 cents a share, a year ago.
Revenue rose less than 1 percent to $2.9 billion thanks to a nearly 10 percent increase during its fourth quarter that covers the heart of the tax season.
Block’s analysis showed fewer Americans filed tax returns this year, “a result no one was expecting,” chief executive Bill Cobb told analysts during a conference call.
Normally, the number of filings in the nation increases between 1 percent and 2 percent a year, Cobb said. He expects that trend to return.
Block, the nation’s largest tax preparation firm, prepared 22.175 million U.S. tax returns in the just completed tax season, down 0.7 percent from the 22.338 million it prepared a year earlier. It prepared 3.3 million returns outside the United States, an increase of 1.3 million from a year ago.
The company’s share of all tax business remained about the same. But Block said it gained ground on competitors in the still growing business of online tax services, where the number of returns Block handled grew 10.9 percent to 4.89 million.
Total digital returns prepared, which includes customers who use Block software on their computers, increased 4.9 percent to nearly 6.9 million.
Cobb said he was pleased the company’s cost-cutting efforts made it more profitable even in a year in which the number of returns it prepared had fallen.
The U.S. tax season got off to a late start this year as the Internal Revenue Service delayed accepting returns. It had cited last-minute tax changes in Congress’ effort to avoid steep spending and tax cuts known as the fiscal cliff.
Problems with electronic filing of some returns led to delayed refunds for thousands of Block customers this year. Those taxpayers had claimed tax credits for education expenses. The company did not mention the problem in its announcement or in the call with analysts.
In the conference call, Cobb said Block is working hard on how it can help customers under the coming health care changes. The company wants to set up agents in its offices to help customers enroll for health coverage through the health care exchanges that will pop up under the changes commonly called Obamacare.
Cobb said it is too early to know how that will work out. But Block plans to launch a pilot program in a state, which Cobb would not identify.
Block’s stock closed Wednesday at $28.83, down 57 cents, before the earnings report.