Jackson Hewitt Tax Service Inc. (JTX, Financial) filed Amended Annual Report for the period ended 2010-04-30.
Jackson Hewitt Tax Service Inc. has a market cap of $24.6 million; its shares were traded at around $0.85 with a P/E ratio of 3.2 and P/S ratio of 0.1. JTX is in the portfolios of Paul Tudor Jones of The Tudor Group.
We estimate that more than 139 million federal individual income tax returns will be filed in the United States in 2010. Historically, 60% or more of tax returns filed in the United States are prepared with the assistance of a paid tax return preparer. The market is highly fragmented and consists of tens of thousands of paid tax return preparers. In 2010, Jackson Hewitt was the second largest paid tax return preparer in the United States, with approximately 3% share of the paid tax return preparer market. Electronic filing continues to be an important component in the filing of individual income tax returns. In 2010, 72% of United States individual income tax returns filed through April 30 were filed electronically. Electronic filing provides the taxpayer with benefits, including acknowledgment of receipt of the filing, better accuracy and faster tax refund processing.
In 2010, our network consisted of 5,431 franchised offices and 976 company-owned offices and prepared 2.53 million tax returns. Our total revenues in 2010 were $213.8 million, including revenues from franchisees, consisting of royalty and marketing and advertising fees and other revenues (44% of total revenues), service revenues earned at company-owned offices (34% of total revenues), and financial product fees (22% of total revenues).
In 2010 we entered into an arrangement with Walmart which granted us the exclusive right to provide tax preparation services within Walmart stores during the 2010 and 2011 tax seasons. Under the expanded Walmart opportunity, we added a significant number of new Walmart store locations to our overall distribution network. In the 2010 tax season, we were located in approximately 1,770 Walmart stores with approximately 84% of these locations operated by our franchisees and approximately 16% operated by our company-owned offices. In 2010, approximately 17% of the tax returns prepared by our network were generated in Wal-Mart store locations. While we have seen an increase in overall tax return volumes due to our expanded relationship with Walmart, performance has lagged relative to our expectations as the absence of RAL product negatively impacted performance. We are continuing to work with Walmart to optimize our opportunity to operate in the 2011 tax year.
We have contractual arrangements with certain financial institutions that offer, process and administer the various financial products available in Jackson Hewitt Tax Service locations. We provide the financial institutions with exclusive access to select offices and certain technology support. In fiscal 2009, we had 100% coverage for our RAL and Assisted Refund program with Santa Barbara Bank & Trust, a division of Pacific Capital Bank, N.A. (SBB&T/PCB), providing the majority of these financial products to the Jackson Hewitt Tax Service offices and Republic Bank & Trust Company (Republic) providing the remainder. In December 2009, SBB&T/PCB informed us that they would not be in a position to originate RALs for the 2010 tax season based upon a directive received by them from their regulator. In January 2010, Santa Barbara Tax Products Group (TPG) acquired the tax products business from SBBT/PCB and we entered into an agreement with TPG whereby TPG would provide Assisted Refunds through Jackson Hewitt Tax Service offices during the 2010 tax season for approximately 50% of our Assisted Refund program. RALs were not available through TPG for the 2010 tax season. During the 2010 tax season, Republic provided approximately 50% of our RALs and Assisted Refunds programs compared to the prior year. Our contractual arrangement with Republic expires on October 31, 2012, subject to early termination rights by Republic and provides for their provision of RALs and Assisted Refunds for tax seasons 2011 and 2012 on similar terms and in similar amounts to the terms and amounts that existed for tax season 2010. We are currently seeking additional financial institutions and funding sources to provide RALs and Assisted Refunds for the 2011 tax season in an effort to secure a RAL and Assisted Refund program for our entire network. The regulatory landscape with respect to RALs remains uncertain and no assurance can be given with respect to the size, scope and economic terms of our financial product program for tax season 2011.
The Franchise Agreement. Under the terms of our franchise agreement, each franchisee receives the right to operate a tax return preparation business under the Jackson Hewitt Tax Service brand within a designated geographic area. Franchisees are required to utilize our proprietary tax return preparation ProFiler software and other proprietary operating methods and procedures in the operation of their business. Our current franchise agreement requires franchisees to pay us royalties equal to 15% of their revenues (the royalty is 12% for most territories sold before mid-year 2000) and marketing and advertising fees equal to 6% of their revenues. We also charge franchisees a $2.00 fee for each tax return that they file electronically with the IRS. The term of our standard franchise agreement is 10 years. Approximately 25% of our existing franchise agreements are up for renewal by the end of calendar year 2010.
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Jackson Hewitt Tax Service Inc. has a market cap of $24.6 million; its shares were traded at around $0.85 with a P/E ratio of 3.2 and P/S ratio of 0.1. JTX is in the portfolios of Paul Tudor Jones of The Tudor Group.
Highlight of Business Operations:
We are the second largest paid individual tax return preparer in the United States based upon the number of individual tax returns prepared and filed with the Internal Revenue Service (IRS). In 2010, our network consisted of 6,407 franchised and company-owned offices and prepared 2.53 million tax returns. We estimate our network prepared approximately 3% of all tax returns prepared by a paid tax return preparer (paid tax return preparer market). We had total revenues for 2010 of $213.8 million which consisted of fees paid by our franchisees, service revenues earned at company-owned offices and financial product fees. We believe our 2010 tax return volume and our financial performance were negatively impacted principally due to the lack of availability of RALs for approximately 50% of the Companys RAL program compared to the prior tax season.We estimate that more than 139 million federal individual income tax returns will be filed in the United States in 2010. Historically, 60% or more of tax returns filed in the United States are prepared with the assistance of a paid tax return preparer. The market is highly fragmented and consists of tens of thousands of paid tax return preparers. In 2010, Jackson Hewitt was the second largest paid tax return preparer in the United States, with approximately 3% share of the paid tax return preparer market. Electronic filing continues to be an important component in the filing of individual income tax returns. In 2010, 72% of United States individual income tax returns filed through April 30 were filed electronically. Electronic filing provides the taxpayer with benefits, including acknowledgment of receipt of the filing, better accuracy and faster tax refund processing.
In 2010, our network consisted of 5,431 franchised offices and 976 company-owned offices and prepared 2.53 million tax returns. Our total revenues in 2010 were $213.8 million, including revenues from franchisees, consisting of royalty and marketing and advertising fees and other revenues (44% of total revenues), service revenues earned at company-owned offices (34% of total revenues), and financial product fees (22% of total revenues).
In 2010 we entered into an arrangement with Walmart which granted us the exclusive right to provide tax preparation services within Walmart stores during the 2010 and 2011 tax seasons. Under the expanded Walmart opportunity, we added a significant number of new Walmart store locations to our overall distribution network. In the 2010 tax season, we were located in approximately 1,770 Walmart stores with approximately 84% of these locations operated by our franchisees and approximately 16% operated by our company-owned offices. In 2010, approximately 17% of the tax returns prepared by our network were generated in Wal-Mart store locations. While we have seen an increase in overall tax return volumes due to our expanded relationship with Walmart, performance has lagged relative to our expectations as the absence of RAL product negatively impacted performance. We are continuing to work with Walmart to optimize our opportunity to operate in the 2011 tax year.
We have contractual arrangements with certain financial institutions that offer, process and administer the various financial products available in Jackson Hewitt Tax Service locations. We provide the financial institutions with exclusive access to select offices and certain technology support. In fiscal 2009, we had 100% coverage for our RAL and Assisted Refund program with Santa Barbara Bank & Trust, a division of Pacific Capital Bank, N.A. (SBB&T/PCB), providing the majority of these financial products to the Jackson Hewitt Tax Service offices and Republic Bank & Trust Company (Republic) providing the remainder. In December 2009, SBB&T/PCB informed us that they would not be in a position to originate RALs for the 2010 tax season based upon a directive received by them from their regulator. In January 2010, Santa Barbara Tax Products Group (TPG) acquired the tax products business from SBBT/PCB and we entered into an agreement with TPG whereby TPG would provide Assisted Refunds through Jackson Hewitt Tax Service offices during the 2010 tax season for approximately 50% of our Assisted Refund program. RALs were not available through TPG for the 2010 tax season. During the 2010 tax season, Republic provided approximately 50% of our RALs and Assisted Refunds programs compared to the prior year. Our contractual arrangement with Republic expires on October 31, 2012, subject to early termination rights by Republic and provides for their provision of RALs and Assisted Refunds for tax seasons 2011 and 2012 on similar terms and in similar amounts to the terms and amounts that existed for tax season 2010. We are currently seeking additional financial institutions and funding sources to provide RALs and Assisted Refunds for the 2011 tax season in an effort to secure a RAL and Assisted Refund program for our entire network. The regulatory landscape with respect to RALs remains uncertain and no assurance can be given with respect to the size, scope and economic terms of our financial product program for tax season 2011.
The Franchise Agreement. Under the terms of our franchise agreement, each franchisee receives the right to operate a tax return preparation business under the Jackson Hewitt Tax Service brand within a designated geographic area. Franchisees are required to utilize our proprietary tax return preparation ProFiler software and other proprietary operating methods and procedures in the operation of their business. Our current franchise agreement requires franchisees to pay us royalties equal to 15% of their revenues (the royalty is 12% for most territories sold before mid-year 2000) and marketing and advertising fees equal to 6% of their revenues. We also charge franchisees a $2.00 fee for each tax return that they file electronically with the IRS. The term of our standard franchise agreement is 10 years. Approximately 25% of our existing franchise agreements are up for renewal by the end of calendar year 2010.
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