Revenue dropped to $2.64 billion for the recently ended year, off 14.7 percent from $3.1 billion. Results took a hit from $106 million impairment charge for its Wave operations.
Wave had 40-percent revenue growth through mid-March, but than went flat in April and May. “We've taken measures to ensure we are limiting operating losses at Wave without sacrificing key investments in the business,” CEO Jeff Jones said during the company’s recent webcast for earnings for fiscal 2020. However, because Block expects Wave to be negatively impacted by the effect of the pandemic, it took the impairment charge.
The major question for Block is how much business will shift from the fourth quarter for a normal tax season into the first quarter ending July 31 with the extension of tax deadlines to July 15.
“While it's natural to expect all volume loss in Q4 of fiscal '20 to shift into the first quarter of fiscal '21, that may not necessarily be the case,” CFO Tony Bowen said during the webcast. Bowen said while more stores are open than usual, the company of is operating with just half its network with a substantial portion of stores open unable to provide face-to-face service to clients. Block does not know how this will impact its ability to retain clients and attract new ones.
It’s clear taxpayers are taking advantage of the extension. “We recently did a survey of about 10,000 consumers who have not yet filed and asked them why, and the answer was “Because we don't have to yet,’” Jones said. “The second answer was around safety.”