H&R Block Inc posted a higher-than-expected quarterly profit on Friday as it charged more to prepare tax returns heading into the critical U.S. tax filing season.
The largest U.S. tax preparer posted net income of $47.4 million, or 14 cents per share, for the fiscal third quarter ended January 31, compared with a year-earlier loss of $47.4 million, or 15 cents per share.
Profit from continuing operations rose to $66.8 million, or 20 cents per share, more than twice the average analyst expectation of 9 cents per share, according to Reuters Estimates. Operating profit was $7.1 million, or 2 cents per share, a year earlier.
Since becoming H&R Block's chairman in 2007, Richard Breeden has refocused the Kansas City, Missouri-based company on tax preparation, and shed a money-losing subprime mortgage unit and a securities brokerage. H&R Block said it reduced debt by $2.5 billion in the last year.
Breeden is a private investor who previously chaired the U.S. Securities and Exchange Commission.
Quarterly revenue climbed 11 percent to $993.4 million, topping the average analyst target of $963.5 million.
Tax services revenue increased 15.1 percent, as the number of clients increased 3 percent and the average retail fee per return increased 11.1 percent to $191.68.
H&R Block's fiscal fourth quarter, which runs from February to April, encompasses the main U.S. tax filing season, and generates much of the company's annual profit and revenue.
Tax preparation revenue in February was up 6.5 percent, despite a 1.8 percent drop in total returns prepared. Chief Executive Russ Smyth said an increase in business from higher-income customers who generate materially higher fees offset a decline among lower-income customers.
In other businesses, pretax profit rose 62 percent at the RSM McGladrey consulting unit, while H&R Block Bank had a $3.3 million pretax loss because it added reserves for potential mortgage losses.
Smaller rival Jackson Hewitt Tax Service Inc said late Wednesday that quarterly profit rose 15 percent, but it expects tax season business to decline and was in talks to revise a lending agreement. Its stock fell 44.7 percent on Thursday.
H&R Block shares closed Thursday at $17.32 on the New York Stock Exchange. They began the year at $22.72.
(Reporting by Christopher Kaufman and Jonathan Stempel; Editing by Lisa Von Ahn and Jeffrey Benkoe)