jtx sept 2006 jackson hewitt tax service presentation
TRANSCRIPT
8/8/2019 JTX Sept 2006 Jackson Hewitt Tax Service Presentation
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Investor PresentationInvestor Presentation
September 2006 UpdateSeptember 2006 Update
Michael Lister Michael Lister Chairman andChairman and
Chief Executive Officer Chief Executive Officer
08/31/200608/31/2006
Mark HeimbouchMark HeimbouchChief Financial Officer Chief Financial Officer
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Company BackgroundCompany Background
Leading nationwide franchisor providing full service, individual federaland state income tax preparation
Over 6,000 offices (89% franchised) +10%
3.7 million customers +10%
Total revenues of $273.7 million* +23%
Net income of $60.8 million* +32%
Diluted earnings per share of $1.67* +37%
2006 Growth*
*All figures as adjusted. Full reconciliation of adjustments provided in Appendix.
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Company Performance SinceCompany Performance Since
2004 Initial Public Offering2004 Initial Public Offering
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Commitment To Shareholder ValueCommitment To Shareholder Value
Since June 2004 IPO at $17.00 per share:
Dividend increased in each of first two years since IPO(cumulative change of 71%)
Share repurchase programs:
⎯ $61.3 million repurchased in 2005
⎯ New $75 million program announced in June 2006
Payout to shareholders of over 100% of prior year net income in both2006 and 2007 (upon intended completion of FY 2007 share repurchase
program)
Jackson Hewitt will have returnedover $150 million to shareholders since June 2004 IPO*
*Upon intended completion of share repurchase program announced June 2006.
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Competitive LandscapeCompetitive Landscape
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A Leading Player in Large Market A Leading Player in Large MarketU.S. Tax Return MarketU.S. Tax Return Market
19971997 -- Total U.S. MarketTotal U.S. Market
121 Million Tax Returns121 Million Tax Returns
20062006 -- Total U.S. MarketTotal U.S. Market
135 Million Tax Returns (Est.)135 Million Tax Returns (Est.)
20062006 -- Total Paid Preparer SegmentTotal Paid Preparer Segment
82 Mill ion Returns82 Mill ion Returns
Paid
Prepared50%
61mm
Self
Prepared50%
60mm
H&R
Block
19%
Other
77%
JacksonHewitt
4%
Paid
Prepared61%
82mm
Self
Prepared
39%53mm
Sources: Total paid preparer segment percentage based on IRS data as of May 5, 2006. H&R Block percentage based on 15.7 mil lion
total retail operations clients served per June 7, 2006 H&R Block press release.
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Profitable and HighProfitable and High--Growth Business ModelGrowth Business ModelTax Return GrowthTax Return Growth
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
J a c k s o n H
e w i t t T a x R e t u r n s ( 0 0 0 s )
JTX Tax Returns ('000s) 1,365 1,772 2,212 2,525 2,826 3,135 3,320 3,658
IRS Tax Return Growth 1.9% 1.8% 1.9% 0.7% -0.2% 0.5% 1.3% 1.2%
1999 2000 2001 2002 2003 2004 2005 2006
J T X : 1 5
% C A
G R
J T X : 1 5
% C A
G R
4.0%
2.0%
0.0%
-2.0%
I R
S T ax R e t ur n Gr ow t h IRS: 1% CAGRIRS: 1% CAGR
Est.Est.
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2006 Tax Season Review2006 Tax Season Review
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2006 Tax Season2006 Tax SeasonDrivers of GrowthDrivers of Growth
Targeted locations for expansion in under-penetratedterritories
Refocused marketing strategy with new advertisingcampaign
Enhanced products and services
Tax Return Growth of 10% andSame Store Sales Growth of 6% in 2006
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First Quarter Fiscal 2007First Quarter Fiscal 2007
ReviewReview
Q
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First Quarter ReviewFirst Quarter ReviewPrepare for tax season and continue return to shareholdersPrepare for tax season and continue return to shareholders
Sold 75 territories
On target for approximately 200 territory sales for current fiscalyear*, in line with prior year experience
Repurchased 1.1 million shares of stock for $34 millionduring first quarter
$75 million share repurchase program estimated for completionduring current fiscal year
*Updated as of August 24, 2006 analyst conference call.
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Growth OpportunitiesGrowth Opportunities
for 2007 and Beyondfor 2007 and Beyond
M lti l O t iti f G thM lti l O t iti f G th
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Multiple Opportunities for GrowthMultiple Opportunities for GrowthDrivers of GrowthDrivers of Growth
Increase the number of offices in existing territories
Increase the number of offices through the sale of newterritories
Increase the number of tax returns per office as officesmature
M lti l O t iti f G thM lti l O t iti f G th
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1 2 3+Offices per Terri tory
% o
f T e r r i t o r i e s i n E a c h C a t e
g o r y
2004 2005 2006
Company penetrates deeper into existing territories whileexpanding into new territories
46%
34%
38%
21%
25%
29%
Average 2 offices per territory41%
33%33%
Multiple Opportunities for GrowthMultiple Opportunities for GrowthFurther Penetrate Existing TerritoriesFurther Penetrate Existing Territories
M ltiple Opport nities for Gro thMultiple Opportunities for Growth
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154
235260 245
343
392
305
444
547
371
547
611
440
784
882
1 2 3 4 5+
Office Age
2006 Average Tax Returns Per Office
Retail Partners
Total Office
Storefronts
Average number of tax returns increases as office matures; Average number of tax returns increases as office matures;More than 50% of offices are less than 5 years old.More than 50% of offices are less than 5 years old.
Multiple Opportunities for GrowthMultiple Opportunities for GrowthOffice MaturationOffice Maturation
Multiple Opportunities for Additional GrowthMultiple Opportunities for Additional Growth
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Multiple Opportunities for Additional GrowthMultiple Opportunities for Additional GrowthExpanding Our Franchise NetworkExpanding Our Franchise Network
1/3 of territories remain available,including populous states such as:
New York, California, Michigan,Massachusetts, and Pennsylvania
About 75% of territories sold toexisting franchisees
200+ territories sold in each of pastseveral years
New entrepreneurs attracted tofranchise business model
2/3Territories
Unavailable Approx. 3,000
potential new
offices*
1/3
Territories Available Approx. 5,000
potential new
offices*
Ranked within Top 5 Best Franchise Overall 6 out of 8 years- Entrepreneur Magazine’s “ Annual Top 500 Franchises”
*Assuming 3 offices per territory.
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Financial Drivers That Have DrivenFinancial Drivers That Have Driven
SuccessSuccess
Profitable & HighProfitable & High--Growth Business ModelGrowth Business Model
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Profitable & HighProfitable & High--Growth Business ModelGrowth Business ModelSimple Business ModelSimple Business Model
DC == A Bxx xx
Franchise Returns(3.3 mil lion)
Company-ownedReturns
(400 thousand)
Avg. RevenuePer Return
($178)
FranchiseesFranchisees
& Company& Company--OwnedOwnedOfficesOffices
Royalty andMkt. & Adv. Rate
(19.2%)
Revenue Per Return($174)
Service Revenue($72 mil lion)
==
==
Royalty andMkt. & Adv. Revenue
($111 mil lion)
xx
xx
xx
FinancialFinancial
ProductProductFeesFees
Financial Product
Fees($74 mil lion)
New agreements with financial productproviders beginning in 2006
Note: Numbers are based on FY 2006 financial results and may not sum due to rounding.
Business DriversBusiness Drivers
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Business DriversBusiness DriversComponents of Revenue GrowthComponents of Revenue Growth
20042004 20052005 20062006
2%2% 6%6%
13%
3%3%
Conversions & Acquisitions 3% 1% 1%
23%
(5)%
18%
7%7%
5%5%
15%
(2)%
13%
5%5%
6%6%
4%4%
18%
GAAP Reconciliation
Other financial product revenue variability impact 2%
20%
Same store return growthSame store return growth
Revenue per return growthRevenue per return growth
New locationsNew locations
Total revenue growth
Annual historical GAAP revenue growth
Al l f igures are as adjusted. Ful l reconcil iat ion of adjustments provided in Appendix.
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33--5 Year Financial Targets*5 Year Financial Targets*
Total Revenues GrowthTotal Revenues Growth 14%14% -- 19% / year 19% / year
Income from OperationsIncome from Operations 5050 -- 100 bps / year100 bps / yearMargin GrowthMargin Growth
EPS GrowthEPS Growth 20%20% -- 25% / year 25% / year
These long-term targets have been in place since the IPOand are reaffirmed as of June 28, 2006
*Financial targets based on FY 2006 financial results, as adjusted. Full reconciliation of adjustments provided in Appendix.The Company intends to update its 3-5 year financial targets after the next fiscal year-end.
ConclusionConclusion
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ConclusionConclusion
Profitable Financial Model
Large and Growing Market
Commitment to Shareholder Value
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For more information, please contact:For more information, please contact:
David J. KrautDavid J. KrautVice President,Vice President,
Treasury & Investor RelationsTreasury & Investor Relations
(973) 630(973) [email protected]@jtax.com
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Appendix Appendix
Revenue Net Income and Diluted EPSRevenue Net Income and Diluted EPS
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Revenue, Net Income and Diluted EPSRevenue, Net Income and Diluted EPS(FY 2004, 2005, 2006(FY 2004, 2005, 2006 -- As adjusted reconciliations) As adjusted reconciliations)
(Amounts in millions) 2004 2005 2006
Total revenues, as reported 205.6$ 232.5$ 275.4$
Adjustment:
2005 SBB&T agreement (a) (13.2) (10.1) (1.7) Total revenues, as adjusted 192.4$ 222.4$ 273.7$
Net income, as reported 43.0$ 50.0$ 58.0$ Adjustments:
Change in SBB&T agreement (a) (13.2) (10.1) (1.7)
Stock-based compensation related to IPO - 4.5 - Write-off of deferred financing costs (b) 2.7
Litigation settlement charge/(recovery) 10.4 (0.6) - Litigation related costs - - 3.8 Bad debt reserve adjustment (2.0) - -
Independent public company costs (c) (4.9) - - Interest expense (c) (6.3) - -
Adjustment to as reported provision for income taxes 6.3 2.4 (1.9)
Rounding adjustment (0.1) - -
Net income, as adjusted 33.2$ 46.2$ 60.8$
Management believes the above presentation of total revenues, net income and earnings per share on an "as adjusted basis", which are non-GAAP
financial measures, is necessary to reflect the impact of the agreement with Santa Barbara Bank & Trust for the 2005 tax season as if such
agreement was in effect for all periods presented as well as to reflect the impact of adjusting certain significant items in the results of operations
in order to help investors compare, on an equivalent basis, the Company's financial results for the current periods presented to its financial
results for prior periods presented.
(a) Adjusted to reflect the impact of the Company's agreement with SBB&T that was effective for the 2005 tax season.(b) Non-cash charge associated with repayment of $175 million five-year floating rate notes and termination of $100 million
five-year revolving credit facility.
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