H&R Block (HRB) 2 Nov 212022 Q1 Earnings call transcript

Thank you for standing by, and welcome to H&R Block's First Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference maybe recorded. [Operator Instructions] I would now like to hand the conference over to your host, Michaella Gallina, Vice President, Investor Relations. Please go ahead.

Thank you, operator. welcome conference Block's call. and 'XX quarter everyone, results financial afternoon, to first H&R fiscal Good

Financial we Joining and presentation, on and Chief our Chief are which Executive Earlier me Jeff or hrblock.com. Officer; Tony Jones, can be website Bowen, viewed release at a press issued our downloaded President Officer. and today live our

days. Our on our available reply will call is be being broadcast for and XX webcast live and a website

may include Before statements I management comments like made of remind meaning to to involve and uncertainties These that statements we and could listeners forward-looking Federal in projected actual numerous statement begin, would any those risks Laws. due the within factors. results by Securities from forward-looking differ material

see reports Jeff. the on obligation and otherwise any of XX-K we'll presented company's November some I the non-GAAP H&R figures press after non-GAAP Block's For discuss circumstances in as Form of on other GAAP this statements With XXXX. note now basis. reflect of today, are call. and We this a periodically description undertakes annual information and accurate schedules presentation. time that, or will SEC in Furthermore, Form only of the to release please it X, Block these with attached quarterly events or metrics H&R call to our to as revise the contains today no content sensitive uncertainties, risks updated XX-Q to Please over update the the comparable date turn a filings. report on reconcile and

to about we really happy thanks and today our everyone first lot joining to and share. have afternoon, to a We're you and Good us. Michaella. you, Thank quarter, be with talk excited for

the revenue have thoughts we've Over our that met investors on our of I'll levers created the analysts, our share results several X% tax we the months, achieve Then, X%. of begin over and and on the and the target 'XX. summarizing quarter, will season value today providing last themes long-term we many emerged. several by beyond with on growth address I'll and perspective to past thoughts the have to years have we many

his value 'XX Block Finally, Tony outlook today. provide review of financials, on the our fiscal and thoughts will

to results, continue the business. see Turning momentum to our quarter first we in

effectively As XX a reminder, this that extended quarter Emerald only progress off We great through last Wave clearly ending versus and performance given September May not and initiatives. the as while our XX appropriately strong not investing is our season year, in tax Card XX we're and a to manage start. year does depict from growth comparable, saw our costs the July and revenue growth

a allocation On the dig we X% reduced this shares another into minute, by front, outstanding quarter. which we'll capital in

well-positioned 'XX, for we're tax As we number to of look season reasons. a

share, and years, invested have over to significant customers decade. pandemic. and and several experience gained past improvements via just learned technology more experience the and and as we've imperative. meaningfully season market in product we've our And Block note tax pivoted the quickly digital capabilities We during taken in our Over have efficiently best operate completed made our a

we today. With about retain Our the and and growth dig before progress value retail we we we crypto for that plans, investors. we've into where we are strong add building and product to really including the feel are and efforts to enhancements, continuing our our backdrop, proposition is made want to and good Overall, platforms I help clients highlight the serve. we're

Our business is strong.

million, the discuss of led cash have of shares dynamics, recent while of average XX% of grown are all flow of the allocation dividend these December, the earnings target drive of what revenue Horizons we to proven to cash Since With in done we positioned to investing share evidence robust Regardless of to flow long-term on the foot where of a an We've track have our We per long-term X% and year-to-year XX% are outstanding. Day have Investor for this adjusted announcing $XXX shareholders. and repurchased doing had increase an that cash growth let's capital most nearly quarter flow, capital with annual EPS since driving business now growth. our generating our shareholder at growth record growth. to Block we've sustainable a strategically returning X%. and our In and gas free XXXX our by ability XX%. actions quarter, growth total, We've shared foundation, deliver value. strategy ourselves last including

phase in are progress of next demonstrating confidence. transformation, innings our meaningful early we on focused the build this to of investor we're While

have place our levers to We multiple goal. achieve in

Let's with consistently averaging has time, of period of The historical start a long the tax industry industry. grown for X%. CAGR

grow and share to minimum, done the annually which satisfaction to experience. to We top last years, As so add we've at of simultaneously Block we, continue grows, the proven a line. that the of X And market we about with increased we'll we've customer anticipate industry improvements in make scores. can X will share, our a hold we growth will point holding

pricing. from contribution revenue the discuss let's Now

a since in we upfront we As then. competitor. model XXXX, have flat an you largest DIY, to we to price essentially in recall, held sister pricing transparent pricing our advantage our XX% relative have In XX% and moved channel, to

significant In add assisted additional to couple to our our in of revenue opportunity take adjustments. our improvements, of growth advantage, price our points is a price top price believe we experience annually. modest summary, and result from will we increases product line DIY, year, we plan something of evaluate can we because see In this competitive, a As time. over and product we

will of long our We remain track franchise which strategy. part have a of ongoing partners, record acquiring

our which believe Over we a annually, We typically purchased at each optimizer multiples, growth of XXXX, view reasons. company We a can footprint, to to locations similar to the average given will family and to from the point past contribute top or integrate are on franchisees use EBITDA ready years, our line. good capital acquire be of attractive number we've operations. retirement this repurchase X business a XXX year through into for we're able exit nearly who locations

three imperatives. Now from through walk contributions strategic our let's

throughout you Block As heard the discussed our and modernizing strategy of our experiences share the ongoing assumptions. that and industry about It have much pricing call, business. in underpins and tax we have growing progress consumer

value Business levers. has continues in our line. customer position we're grown at XX% experience. with additional focused base the revenue grow Small measured the the average Wave we as consolidated customer, center other of existing new is total Financial two revenue Products the with continue business The significantly This acquiring innovate new increasing per initiatives, Our new Wave, Starting value and year-over-year. as strategic contributing layer and on growth the on annually than a more of top Waves to to about to point products growth of and of Money clients.

small benefit upside our to exist Wave, an better into health. lean bookkeeping in evolved target Beyond we last can from order efficiency and a and messaging with tax imperative as and have who emphasis the year lot marketing services, business in products. human We drive these learned customers on

were of our The market banking us trust our population, year year, financial round. from in with products who We positioned goal we and financial focused competitors, serving our compared performed part intimate imperative. extensive existing efforts X our research strategy customers. to clients as engaging Thus, next details, to trust. have and announced their this upside are need Of solution of million awareness product additional clients. of financially We've current as other in They also scratch needs, mobile for to supports our see and and additional to products, starting understand launched as there early a with an bank view understand beta takes the are banking. the in States result, tax coping. we the season, consumer succeed. existing XX Block to with group under use and are on We've unmet nationally vulnerable brand the financially We marketing and plan it as a United what million uniquely DIY launch know build consumers last most internally, part alone,

clients we throughout to to respect We'll sharing the In growth continue our many summary, tandem more features roll incentivize growth, forward look officially annual expect, in it working X% reach once with up and to would X% have out set year direct we to will to leverage deposits. you interactions launched. our target. to As revenue to has levers

grow gaining I cost path fixed as in the funding Additionally, plans the reducing so we're against important great will that part the than strategic to also initiative. on. leverage I structure, momentum. more that Future our we're our to about feel and revenue. now EBITDA company emphasize imperatives Fund our confident Block expenses across we've note want how by our progress It's faster investments our I to We're ever of that the than in made are XXXX. am Horizons continuing execute we're for to able

corporate sound mention annual environmental Lastly, in and recognize I'd second September. of like importance published responsibility, stewardship, responsibility report we our We to that the corporate social governance.

climate practices. Together, live to long-term turn our championing Some I'll the reducing over Tony now transparent goals communities and and our impact, financial all to governance of and to include supporting our benefit inclusion, these and us results. financial initiatives in, our we our understanding serve diversity cover and achieve stakeholders. enable it

review I'll Today results the the our quarter, have outlook our value provide in created first everyone. recap we thoughts afternoon, from Good Jeff. the and on Thanks, fiscal then business.

stub ends May August, to are and this year-end As fiscal year. which we In fiscal the to fiscal September summer June. first June our adjusted our you XXXX, the we of today QT And from period XX. we XXXX of released quarter reporting a recall, bridge for April

does given QX depict season only year to or progress season $XXX strong We million We XX% child last the revenue, related not to shared, revenue million. of this and the May Jeff to we of to performance is was Emerald extension through are the tax extended prior clearly $XXX decline As year XX delivered year. first $XXX not down quarter versus estimated year, and last and million entirely from continued the making. Card tax due July our incremental that Wave. growth payments, comparable in tax This the saw due XX

$XX were our Fund in million, incremental we versus the imperatives. Regarding by savings, our rigor a line driven result a investing of decrease XX%, expenses credit. generate the line draws of our our great while just compensation will allows and invest as Future to we of refinancing in pro due XX% us tax ongoing Interest the the our on disciplined reduce extension by achieving debt positively credit year drive our cost Block primarily lower operating in a have We with long-term million, lower impact to our initiative position Total decrease changes initially was savings very attractive and Horizons appropriately at flow. prior which in I of rates, the made we to expense expense capital. spending The quarter were interest feel discussed. $XXX to debt expenses, of P&L about cash

our $XXX quarter, pre-tax million to the in the was For loss year. prior compared million, $XX

tax rate effective XX%. was Our

We we continue as year, XX% range benefits to to in discrete XX% fiscal certain expect the for rate to later 'XX. be of the realize in fiscal the tax items the full

total retire an Turning X.X shares price average the repurchases, at a bought us quarter, of the share $XX.XX. to in $XXX allowing of we million million

$X.XX, have this Jeff to per post commitment our $X.XX to of operations our the $X.XX approximately outstanding, million continuing reiterating to authorization. increased adjusted capital fiscal we start to to we a share our of are retired operations and continuing in and about our increased is $X.XX. share share 'XX repurchase while earlier, per quarter from we outlook. over Since year feel core Loss shareholders. from As good returning the repurchase nearly $XXX XXXX, a from on remaining of share In year loss summary, from shares element taking now highlighted

during there quarter. were Regarding liabilities to changes Canyon Sand to discontinued the no related operations, accrued contingent

filings. refer to XX.Q, disclosures the on on and please Forms reports additional XX-K and Canyon, other For company's information SEC on Sand

a how and provide deliberately significant we These to a years Block's improvements. better pricing we pressure few included our future. like thoughts in I'd some we're yet ago, value. A financials, on overarching choices closing, that put Before view operational to on H&R major technology, foundational short-term reset changes investments made

over trajectory. have business yielded We've reminded best changed And we robust our actions in Our Jeff us, completed season assisted as results. just our decade. dramatically tax a

grown generate our have easier to strong we year cash and have free assess provided to shares we While end have outstanding. But the bottom dividend flow, the our created results, normalizations tax make fiscal is, adjustment reduce changing noise. it and line deadlines dramatically

intact, borrowing total and X EPS created capital approximately XX% lies Block and that time nuances translated by to Horizons. 'XX to market of $X And effective And Further, allocation tax achievements ahead as even reduced that's growth debt into I discussed For our period, past and look costs growth normalizing past. to through we've free earlier, EPS lowered that core is our call creating the credit. footing flow. will years, back the nearly additional adjusted compressed tax or the we to year-to-year industry. on shareholders, our principles is over line turn of drive the after remain with trading didn't now in These upside rally. with We've forward an will the are Over Block continue our levers have H&R our season XX%. extension. Jeff we've allocation cash all and year Yet opportunity returned significantly These the this I broader billion solid business despite fiscal despite over in Jeff. rate refinancing capital of disciplined we exist the derisk performance. and business growth multiple been

summary, momentum drive confident We're opportunities value In proud and the are we come. our to of shareholder progress the Horizons. both our approach ability and The that business made. Block the with Tony. our Thanks, we've with allocation future capital to in in

progress associates, and our our our pros franchisees confidence want worldwide. As have inspire and our clients prepared hard I communities who in end driven to we tax and remarks, working thank

[Operator we'll Operator. open of Our line first Instructions] Now Northcoast from the Mehta of line for question Research. questions. the comes Kartik

Your question, please.

your tax numbers. release recent season Tony. all perspective the have and get Jeff the your Hey, on Hey, if upcoming thoughts changed IRS I and to Jeff, with want at of

the for question. Hey, thanks Kartik,

and the the I DIY. look accurate think I the in we and were But of So think share filers know if the growth occurred, filers. were to assisted year, last newest changes a of year through that XX, is direction but numbers terms overall industry October first on new they based I data growth slight time still loss coming in the share forward some in bit our number those the that

stimulus, benefit tax We return number know saw of them given filing, also year are et you to credits, they of that going the this unemployment some because child cetera.

could make and But we perfect I RRC that would file. it crystal really ball there what's beneficial be many We not. like also to behavior to consumer believe programs is important think, again will return that say how or the that don't on have

doing things. we're So two really important

prepared and them our programs we're a what matter to Tony, I'm no as that so almost follow-up, our serve happens just the inflationary what that Block, well, reach talked and those filing. a that last think, the this several building into pressure, we year H&R there's developing about clients help to benefits is so last just 'XX? clients. were for is first during that and The new pressures, thing Labor And been over business anticipate flexibility FY inflationary I bit months we've learned every to be then that with in executed marketing largest on operations, to then doing, front COVID, to flex on wondering, educate we obviously, again, the demand, And the those what going finally, we're of

we and Kartik. obviously, I thanks, provided outlook mean, it's our contemplating that today. Yes, reiterated

monitoring, buckets. We two rent Labor different well line couple of a are our items. largest are Obviously, as as of

compensation which As compensation. is that generate. that percentage essentially is it's a tied they revenue up revenue line tax the of item, being you recall, their ends our to Pro And largest

revenue softness the the it's going that an good more with are cases where some There on landlords able it kind in of of we of of that rate. take like monitor real to already. we've some base of positions We'll paid some to advantage are stay done estate feel parts the with but things to competitive. we've time renegotiate country. hourly long-term, certain And adjust certain in been So over continue flexes those

to monitor long-term. So the well, constantly continue over it guidance, our in that's

Appreciate you Thank much. very it.

Thanks, Jeff

Thank you.

question next Scott Oppenheimer. Schneeberger comes of Our from

Your line is open.

I'll Good I start much. Jeff. guess very Thanks with afternoon.

couple that you in having I price the a now, some mentioned moderate quarters doing three category, done it increasing You think not a anticipate row after upcoming in assistant season.

it that for results in Just type what with season? question And season, year? you implications upcoming the increases applied? be on are pricing broad Just why your late mixed Thanks. the based curious result early volume it of thoughts of will be and will to assuming that's overall not follow-up asking. volume the then as a how expecting is, I'm I'm

I make Yes, let sure me all those. get

you're on price. Since moving not XXXX. absolutely after in right the So reset

the for couple earned this increase modest we us, points. And believe modest confidence have We of year. take kind means, to

in And seen we volume, move we've increase just taking we in feel in client to in given something given kind look seen mind, the seen as so satisfaction, what in we price year mix competitor, at there's year price assisted what still given we've that still Keep in And price advantage well gains, we've want quickly, our what and do the real that's of in with to each to good forward. And about a business about mix. as we price. we exploit advantage. everything grew the in assisted DIY we to opportunity Knack that can DIY But, we business. business largest then related XX% maintain last retention

grow to features for see like continue online between opportunity so example, more assist, And to pricing. revenue and pricing mix we additional through

both we're it businesses. season. our take And upcoming this step thinking we're in how of that's ready that to So about

outlook to has point been our clients in about well. that's for the price feedback implications. they're paying positive, as Scott think then the good receiving. specific really really earlier, value the contemplated I they're heard And feel Jeff's to volume the we've Obviously, all But

So clients volume expecting decline a we're on obviously impact as few result margin. changes. not not we're a expecting always plus a or the necessarily volume a pricing but minus, the There's of

color. just the an is on then, report. I it I ask your out, And a been kind would Appreciate the there's broke past. that to that's to multiyear technology overall in guess on now and down know in and into innings a you would be time Thanks. Jeff, update what love get buckets broken good it you investment of few progress

it you there. address update overall in just if of about If thinking kind way Thanks. just you of that a an it, or format, new could have

Scott. Absolutely,

exactly you're this has really facet So data architecture, to a cloud multiple of I tax data mean, every security, single in right. been stack, engine, and years, migration. our touching moving technology single

So it is really holistic.

it it investments, are different seeing been today. for making Had we anywhere, customer work you we the far more been kind we tax benefits on entirely of And these recall, that is a been digital experience. to difficult would cost. second is capabilities, are we two cetera. And reasons. has from enabling start the One deliver not the the to As enabling that et an pros may did first while, the big part, of

periods and years single then from And to And on next are has is The something half -- tax largely the seeing we're now of operating in that final and company most X the year the new multiple from benefits those and been transition tried we're finalizing we to lift transitioning tax successful. move So remains one over that are one history do the X in two now now. is cloud. the engine. our times engine. that engines the This plus hasn't to now. we in data biggest three track single to is to a of And absolutely

don't makes us starting that's to years what makes see couple we out. in, the is materialize the anything I know homestretch. cost that us in it So a really but when benefits

Right.

you. Thank

Our next Sachs. question Tong from George comes Goldman of

please. question Your

if is progress Zach the this and I bit initiatives? a the George Black Tong. kind on Hi, on with more for Lopez give of wondering Horizons can was just color little you

Absolutely. Thanks for the question.

of very products So financial three call with has Starting the digitizing block small essentially good. That's facets all very, one, we business, imperatives, business. initiatives, last been what our the strategic and progress experience.

is We way human experience, But with our help improving from be choose, are work assisted will that fully customers. to whatever always now virtually deployed about work imperative That in and the offering well underway. clients. is, they to clients DIY learning

professionals. Going we small one year, back there's last X%. business. would by our assisted business, launched about first of campaign which in and and We things to Advisors small customer first year, Block was for number trained certified business tax we small And the two top our acquisition grew XX,XXX I clients highlight our

wave real payroll doing business, continues unique segment money. that grow Wave side continuing plus, of scale the small payments this of to grow and business there comfortable XX% the And is business that serving owners bookkeeping, themselves. a On are small on to focus

Moving learned of improved into efforts, we've plans, this etcetera. last we've from customer our year, pros, tax acquisition certification our season,

we're track on the to and we be a money. So what that the update. and with internally, small business, we're And regularly in currently done we little been tax product the shipping releases refer Block then do. Money on to finally, two said feel with very And made that's we real progress season. announcement as a track has upcoming launch quick beta differentiated will when Block do we're that The would products. we we now we build since launch of our good financial We've to what code

perhaps Now, you thank on volume can discussion know level helpful. you at industry very if in assisted the mentioned just HRP? outlook earlier elaborate assisted I on about, you the wondering of I the and was growth volume.

absolutely. Well,

there about then that I that to was don't business. them file returning, filers. that we the be as there, think what our sidelines first again. the we environment into cause year's building clients, educate do this in we them level, industry know block, on I them operational early go know of back really to to lot macro of the mentioned many And growth many is versus to a time But value our will will of dynamics flexibility know have exactly how the that not, at and we driven which why of which by to ball can we're crystal at marketing a doing will is on,

So execute, together, the slightly that will flat may be what you put industry have all no we for we next can matter When be. demand down to that anticipated year.

Thank you.

Hamzah comes next Our of Mazari Jefferies. from question

open. is line Your

It's filling good in customer you revenue Gunning is, there how Ryan first Hamzah. this and tracking the dollar actually of portfolio is Hey, measure my just for a But afternoon. an and question flavor is could retention you us a or client basis? how count opportunity across give whether by that either on

great Absolutely. measured on blended XX% We seen in last customer it or we've jumped retention account, improvement year XX%. retention to from

new from XX% to jumped XX%. Our client retention

is we the definitely doing so in see an And retention. And work there's opportunity. we're that yes, driving improvement

continue prior we for more clients we do back and to every new single get think year. can So about to coming what

terms the Great, is, business pipeline you specifically scaling thinking to helpful. similar there just about follow-up either small Wave thanks. and/or in growth any how could Super initiatives? financial My or talk can M&A do you're products of about you

should is And us expect not but a make market if might eminent in that an we you Yes, dependent. don't capability. Ryan, and about absolutely. their M&A strategy strategy, Wave our Obviously, is continue required we the When And M&A our the that to continued we about there we'll talked we we is the feel announced deal look performance. Block strategy. believe Horizon on the announce. that M&A very to sense, good to That Horizon, fact not acquisition achieve and see our

you. Thank

time, there no turn closing are back I'd questions at Michaella to over As the further queue like remarks. call for this Gallina to in

quarter conference Latif you, This Thank today. thank you concludes everyone first results financial joining and call. our for XXXX us

now call. today's you may disconnect. for You concludes Thank participating This