H&R Block (HRB) 11 May 222022 Q3 Earnings call transcript

Thank you for standing by, and welcome to H&R Block's Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation there will be question and answer session. [Operator Instructions] Please be aware that today's call may be recorded. [Operator Instructions] I would now like to turn the call over to Michaella Gallina, Vice President, Investor Relations. ahead. go Please

Good third Latif. and to welcome Thank fiscal afternoon, XXXX Block's quarter call. financial H&R you, everyone, results conference

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

available days. and is live, and be being will XX for broadcast webcast on call website Our replay the a

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

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

results to tax We're and discuss joining update on here the happy be Good and Michaella. everyone, an afternoon, us. you, for provide Thank our third quarter season. to thanks

small emerged Block we we and last of the seasons pandemic. progress our pleased has have Horizons our know, across In made to and strong you years, new about with we've great with I'm a block virtual we this been spruce tools quarter. H&R increase how robust in brought are business, digital and strong year. a continues feeling had we successful in blending As Block our in financial to clients this have assisted imperatives. in show human business lot tax over resulting market are trajectory, a adoption expertise, And driving from unique we the experience, platform several few Wave products, growth. In with competitive

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digits, of average path. growth, right and we're the charge revenue sign double result a customer As that the net increased great on a

new our build to operating continue we payroll test bookkeeping and Additionally, offerings models. and

the healthy no XX% as quarters. revenue quarter continues to impacted in lapping third longer grew Wave. to Turning be Growth despite pandemic

as of been growth revenue existing user successful increasing and trends and invoice both clients the year-over-year. have value in clients average attracting accelerating We volume average per new saw

was very bootstrapped when free grown she her has the beginning with As accounting one client recently needing shared and Wave from software.

growth focus to for the power through contract and know and XXXXs business. don't on didn't integrated I'd even I small our of In financial an helps I'm with actual invoicing brand leading We technology trusted payments be. said, "If in we opportunity January, our allowed Spruce. relationships. full where overall support there platform business growth workers, to pleased and our mobile launched Wave, imperative. have I combine believe features was her Our with She banking and our our platform, established which new

creation tested see trends. ways results are in deposits. early one, months few DIY of the meaningful multiple brought launch days our first four sign-up offer to have launches, and our season, positive customer of proud improve $XX shipped day a account journey. product. in we major These early We Spruce the when We're updates million pleased April, we're flows. seeing with In are points the to the and Throughout onboarding on the XXX,XXX product evaluating XX the monetization milestone improve and and we was within meaningful data our market and competitor of through we just a sign-ups flow and tax of we as continually iterations

These our additional example, We're merchants, than that driving reinforce out-of-network behavior client existed indicate later spending excited what been the we've spent fall. right at this with better ATM Spruce more engagement is and we're and has to more path that bridges For and saying. metrics withdrawals. in this the expected dollars gap marketplace. features release which interchange higher is on

of assisted excited to a efficiently season. we like work entering our business directly Spruce of tax prospect And acquisition part channels season. the new additional about adding are outside journey of customers I'm We as next tax now acquire the also

creating We've by adoption imperative, improving returns turn and benefit let's is digital successful such Experience. uploading as footprint been and leveraging documents digital and about our of human Now the efficiencies. expertise to in Block blending with and technology features My Block driving online. This third labor all has tools

our least as part from are We year. preparation with last more clients which of of process, than gaining one-fourth of virtual traction our tools their one at tax using tripled

in these future. know leverage adoption, for I'm excited While about tools I the the opportunity even more to there's clients

In a guide in crypto and crypto to also we In this we these and ability clients We year. our serve added experience saw the filers and questionnaire assisted provide a additional all, through we training to to in XX% assisted, our nearly increase complexities. retail expanded DIY, retail and dedicated pro handle cryptocurrency tax investors.

We season. strong to growth labor our a of in this efficiency productivity through tax resulting number improve initiatives, continue

more our our Block, components time, of over be limited network. estate. First, a with and with fulfillment our real the the of footage return nationwide office base availability have reduce network leverages square become possible. our in virtually, done My locations innovative the tax tax returns are as growth longer quickly we which of enables pro leverage to completed local as can the existing power get opportunity no to Coupled efficient to Clients and by

everything clients better in to us We are office also be person formats initiatives in Block make to our second to and in proud In they larger remote we These efficient, summary, Horizons. progress against fully continue we've imperatives, data. process in and strategic year testing different made to helping I'm and served, digital clients execute more workforces between. the support of all want of however the

the discuss some our thoughts on tax results, Before industry. I to wanted provide I

we've last year's tax shared, a including seasons growth. a row, As unprecedented unique we've in few had

to in XX, increase would And XXXX, is seasons that file. onetime compare XXX.X the included in This results decline returns April April as Last prior the file. were XX. as filed This million the mid-May. As now XX. and It's year's XXX.X Last filings an to that been time two July happen XX. May of have year, that IRS we was year, year's due given the likely ended it we deadline weeks have there additional this was important we a the there a in tax data to in extensions, in on to drop extra between season typically industry. and million reminder, context filings latest

expanded this industry extended comparable As narrow. to are the the as during and our as filed, period. more many to we expect offices the working we year-end August. open We'll fall calendar capacity in provide tax thoughts our becomes earnings more returns pros extensions more on gap capture possible and ensure with We and

given were time need been The The for true season. another to Block. help. is continues few delivered to when We assisted. could to people's especially demonstrate category it years for strength impacts. this strong away move last channel, same endemic its Turning natural from and the a have Yet

again In through in 'XX, million Compared addition to year. the We increased April we share XX.X we've nearly July, $XXX,XXX. year, May this $XX.X prepared XX, ended million XX tax meaningful to returns through gained clients share season slightly gains which to last compares last by which deadline. year's

tax credits, off. net expansion and filers child price driven which one-third saw modest charge retail was factors. some crypto driven mix. the and planned We also two average remaining filers to increase the was to an rolling earned About in by The and tax increases. income We first-time of two-thirds saw more complex our due by investors more was due

progress we've As good total, prior not our In by of our in is that and The we about the made. growth nearly strong. net been business, price very our over feedback have increased we've In the has the key $XXX,XXX resulting grown last a reminder, prior takeaway approximately overall net year. seasons share feel charge X%, charge three over increased and by average assisted in taken clients the average X% market grown we XX%. two really client years, revenue

This season, NAC improvement do-it-yourself million even net we compares million human us a driven increase returns two we've in $X.X completed new Improved The million year's DIY resulted and deadline. for last and in through of clients filers. approximately years, April among desire our tax over Moving revenue grow an XX%. May dynamic to pleased increase, average to X%. material to or charge. the I mix through And XX. continues pricing health results. last X.X online increase to see was This of $XX online our

of revenue continue is Block the especially We while proposition this dividend, cash share quite Block returning produced making are the light flow, our year's in saw progress tax We'll capital and the on several great its value of improved last last strategy our about with hold strong. macro a over pay Pro the for shareholders. growth eight growth am with We've very Horizons significant Throughout share story I tested improving to Tax didn't block we year. specific in second season, summary, Despite continuing enough we new good do months messaging street success double again focus digits, fact, years. our next versus the in the we In with mentioned, about strategy. half, DIY well I growing to be nine category. years optimistic strides client opportunistic in different value next future. backdrop. H&R and Review marketing and several tactics feel to overall brand our repurchase In as messaging. the we've significant grew grown The season the driven as the and

I'll our to it over Tony turn Now to cover financial results.

provide Jeff, on good quarter, will everyone. fiscal more the allocation I and on update results afternoon, our our capital Today, review outlook. strategy Thanks, an and for third share

billion, this we comparing million delivered year. results $XX our Total or of approximately of $X.X higher was net operating are the As year year $X.X offset increase quarter driven reporting Emerald our an primarily from marketing May $XXX mix by line 'XX, of X% lower revenue the approximately of a fiscal billion through revenue, to payments. was channel, of was compensation our prior over Interest million, last $X In partially season reminder, June, first approximately in charge X% of increased due amortization average were expenses year to higher The notes the depreciation. by new by primarily and by about or expense credit. Card driven assisted field partially that stimulus positive draws million, cadence, the increase the a this increase to million offset extended tax offset or which we fiscal and X%, season tax XX. by issued we approximately million due third lower last partially on on expenses and year's is year's lower $XX $XX an last of

rate. the off will shared, in we that $XXX due new And planned, we X.X% as were maturing a for in notes in notes issued November. As savings given million, paid we interest May, originally X.X% the material result

quarter, discrete year. compared last X% per was higher to on share tax our to adjusted per the from tax was provide resulted tax income be $X.XX fiscal $XXX quarter year continuing our lower. while $X.XX, million million earnings third XX% decreased last rate, effective causing moment. the in $XXX from year. to was year. thoughts tax the I in planning share prior rate due rate flat year implemented will Earnings continuing $X.XX from our For to compared a to operations last And a operations to in that We rate pretax in the benefit,

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

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

to On and nearly than emphasize of This XXXX, have I we to share we of remaining price shares Turning million. XX million we note, retirement bought million more resulted XX% take in repurchased the outstanding, $XXX outstanding. have our million. totaling of only million price equates Since average we’ve under that In This our X% $XX $XX.XX, an shares almost moment practice. a XX 'XX, share fiscal allocation to totaling $XXX of to our shares retired want at repurchase of capital repurchase. shares an shares quarter, average our a In authorization. another at total of of the $XX.XX, one-third outstanding.

We and to a generating program. practices share strong have buyback paying remained the growing committed free have These even flow, are throughout pandemic. of robust cash history a our dividend stable

free H&R Block. by capitalization, market such, is as we an the defined believe of cash As yield, to by way flow flow highlight cash value free divided appropriate that

in If five approximately We free it's plan the more continue the of an once well flow line our we the of average double yield flow to That free our capitalization, last XXX. provide value fiscal feel XX%. than practice allocation capital growth you complete our year. average shareholder positioned S&P is current and our and cash by August divided our to take cash current to top through drive over update the market and years to

Finally, for turning 'XX. to fiscal our outlook

across revenue the increasing to now in billion. to are billion of $X.XXX $X.XXX As the billion guided range Jeff be strong shared, and Previously, P&L, financial expect outlook. we we to $X.XX results our be continue $X.XX to billion. to revenue of We

in prior $XXX Our expect now EBITDA $XXX was of be EBITDA and we to million. $XXX to to million million guidance $XXX million, range the

able also We guided of finishing closing XX%. in It's our be be increase for back our me a to pleased remarks. expense low to to I been XX% the range ranges year, and that, to I'm strong. expect rate of interest great the year end and we're depreciation over tax call turn let some outlook. and amortization the near and our lower the look With forward to Jeff previously to

Thank you, Tony.

we're millions proud complex, provided the going. once we've progress confidence help tax and seasons are people been owners. of and last The where We have made several for and small yet incredibly of business team again, our inspired

worked as Chief PayPal, engagement one Officer. she marketing was of across and welcome like Venmo country's has month by at Kress, I premier new us consumer leaders. Jill and Marketing platform, She and PayPal strategic I'd to new you. to I and I'd brand Jill led this portfolios. thank Wave, am team and our the thank from of hard-working adapt team, where tax but and Block our learnings her features strategy today and send success to who the to capital joined the am not executive growth. our driving launch also the to Our both innovation pros, course, drive in with team. joined the associates, thrilled ongoing I allocation continues and ability rapidly with build confident been our to a customer to shareholder Block's is Spruce Horizons. and who value as picture like meaningful franchisees who In and have part made to to our possible continue sincere only of closing, approach diligently want also Experience

on strong. finishing focused is the team year Our

line operator, will the for Now questions. open we

line Research. comes Mehta the from of Northcoast Kartik question of [Operator Instructions] Our first

open. line is Your

in market do and a think market. assisted with base you bit you're And you was what I gains little Jeff, talked about share wondering gaining the client well share? doing

gaining we guess the about just for and I let If share me clients your was kind thanks question from, you, think assisted Kartik, do heard question. we're I market of and what -- share

background. [Indiscernible]

journey in And quality, caught price obviously, includes a I That's I our best all what on America. in of its now starting and digitization. have that to value, absolutely been trajectory mean saw we're the assisted, complex is right. years to a see we of think it. I improve benefits Block seeing when the year some And we those at row more we're Street serving filers. two And benefit Main investments. this from multiyear

mix. see show increase, explained two-thirds NAC by that about was You up in the which

the advanced credit those income the were had or tax so or And credit tax filers crypto that retail and earned traders.

as focus block. segments being attracting multiple to are successful of we different kind right we so customer the And of customers, in on

[Indiscernible] was is I for in expectations share market it's us DIY? difficult. up Are know your for where end

said of number. year's think and than more probably comparing May kind of today's I extensions you last we're normal to XX numbers number

market blocks were tax expectations and this our between DIY each they So [Indiscernible] share or expect for season?

Yes.

gain more So in or we season. season. for in that up places, compete we competing now. to win a I hours, It's that more there's that business. hold share we're And absolutely think the remains. of expect to can why to the full pros more filing year be open we lot last able are And post effective to us showed be Obviously,

goodness in we review, revenue, DIY be filers filers. than we that. well NAC, do we're here. filing there's of grew type we to every share. but we poised to we extended do filers clients, know feel enough kind client grew to We those and this I grow In pro didn't go So new a grew tax to tend we period, like we want And assisted more can, DIY, lot after of grew

expect good deeper I into dramatically seeing I share and competing season. to would improve don't extension as even get So we're days, though our we still think

was hoping I for Actually, industry outlook.

industry [indiscernible] ]DIY? outlook just for on thoughts the between just Your

Yes.

you're me. that. what asking I sorry misunderstood So about

went So this flat after real last real be as slightly the the the year, expected filers down. meaningful DIY would that off. roll to variable to to being we the we assisted. into And And was a are industry year, migration onetime from there

XX to We back year, migration XX that more year, would bps the this normal go expected to bps.

DIY And if for get of we more based that, season, we of finish migration we we remain that ask news good assisted extensions over industry up now, that filers, next little filers months. that at actually we're may expect can't a so end convert a another that of of follow-up. think extension are We that but what seeing ahead know about. hear range the all It's definitely all as the in talked filed the will I up And extensions filers. most trying That's the you if industry. couple those bit. to the number see on you're Kartik, the

next George Sachs. comes from of Our Tong question Goldman

is Your line open.

at you're can assisted in As your you're you pricing the it you there, describe that look and how H&R with seeing especially category, independent dynamics competitive independents category, season? seeing tax changes pricing this Block's relates to as the that compares

the isn't all cover year-end question. at into year isn't call the so season dynamics. and obviously The the George, those over, over, we'll thanks dig more this for

I We are to this the think moves low-price our what I high and is, never than less we've provider. know would be that charge tried in that say more there we've independents at pricing, made now charge to for when independents level us. a quarter in

base benefited see not mix significant move modest of overall from across independents. As we then we increases NAC, our and year drive any price to did this the took competitive

that get data year-end we'll we'll industry this share we can much call. and when independent course, really the more summer, insight, assess all Of the have at later total

get modestly up would offset this didn't the would what doing from perspective. a there's have we few last But we given I trying I shocked Jeff we pressures from trend prices thing they're only own independent macro from add, views we've But tax industry into said, George, as And of the see be are obviously is And you go to would competitors P&L. pricing as data the in seen And expect, environment. if inflationary just years Yes. lot as a similar time, time a to do available. season. data their not don't

labor And following cost price increases the increases respect compare real pricing with up modest estate and environment? point at last on your in on just seeing How do to the with input increases that Block. current you're

it's Yes. I at line point. in would say fairly this

of to tied that lot costs a commission George, variable labor our of know, A you tax As basically is key based. are preparation. lot

the it as We and wages pressures. strong we're commensurate. well up share hourly but we're get up, will have definitely guiding work our those end just the We to revenue really more goes go some well, also managed to when we people were performance year. in the been as perspective revenue. as that do local this to our year, P&L some well the in as fact Obviously, of guiding as absorbed So that We'll expenses better well. with offices there's EBITDA

next Schneeberger Group. comes Oppenheimer from question Scott Our of

Your line open. is

onetime you and up season, delta Kartik I the volume could might be just Could be extension guess a bit I volume say of out the mid-May industry filers the that the please to and little last year-over-year. that And delve season heard you questions. Jeff, of the once you following through up the $XXX.X end a more? $XXX.X. on of extension the into just chance remarks there that prepared you filers. that e-filed compared million that mentioned in broke year to

filers year? just they back And this of what they I and saw they were came year. a last onetime monetized how compare were you How behavior they how just year, So monetized follow-up. have maybe in last

is or this Tony. want Scott, Block? make just to to I the asking for specific industry Were more you sure. for

get could adjusted and any end on can by color the the would season. extension becoming start you there share obviously with of the helpful. full Block you thought be you the Let's But made opinion as industry you

like it So a expecting you're sounds lot.

and on Just Block there. then industry curious

Yes.

mentioned the speaking was about Jeff industry think that. you when I

the around which up time look right compare 'XX, that they're this mid-April, is it back at estimate season extensions look tax comparable time and do it's million what go extensions north probably last like tax we you now. So of to $X period and example, But against. a for ended you the year, season if

that at we be that a this in comments there could look on to period, path the e-file did like you If extended to million got is data maybe extension where last those that's being what don't filing industry probably and right ball. we slightly of an the that by who years, up, convert couple think the they flat basis lot file if industry just we we're compare normally who I crystal just it But picked opening down now. So have later. have X extensions the behaviors seeing shared people there's an a the that the feels used a of deadline would is filers filed because to of the up in

that we'll play advantage the that. is think data open definitely more out I that that us industry, make we're is see period, of more we're the hours, which sure extension taking more for people elevated and in why to So working and extended offices,

industry and not, tax extension it me when in this and revenue and on does following volume now tell care is do? to and if And see don't profitability I anticipated waiting the share, opposed expect period. if it that, that and I to open to kind you tell keeping And before miss sure how or by -- didn't see the expected see you time it you numbers didn't going were share of you to to give block are stores you might up specifically now now? we me you wasn't care season And and as if season overall, please I if but didn't, how

obviously, and days Yes. of what good contemplated early feel our I in the We delivered to mean, all through the we've April well. are as May well hit outlook. for about question, that's last trending then your

good feel about we outlook. So the year full

through business. so comments slides, far DIY couple business of years the in think, of April for January are have year. that as well through from metrics we January I ago. volume a or year X something XX opening our about this As XX shows But that in mentioned as our table which XX, the appendix as on January I actually assisted and we X two available like the X believe, through then May last website, overall volume, our a July,

Just data through two to than view. years XXX,XXX more so we're see to single day. that gain we've we're reconcile that two-year up And ago I And data all is over July. April obviously, tax did And the our which net point up show really made. up, charge XX, continuing full average think can way the just currently is the assisted through returns you the that's we've is can every the you we on back sharing, done to over X%. picked progress of key prep we top XX%. revenue point clients On XXX,XXX our a also about basis And assisted

a it's compare and the stuff look to way two ago, look the I at really year most across a July through really conservative just of you what against. through at think is So kind year years because to solid in, story. compared hard board. April story Obviously, to out just solid hard it's it this But it's

that. One more quick follow-up on

Slide that hadn't I before. fact, it XX, see I missed, In seen I

you So year the look. say, you is comparing end curious, this April two something a pandemic, give do three handy? of that years how assisted your compare But recouped How prior have that I'll point just have because years that Is volume you ago? were through, to to you ago? versus to at the the

compares off don't very it Scott, say but favorable. I it have Yes. I would hand,

we in pandemic the 'XX 'XX we to started, 'XX You in locations. first clients from remember when were as were down may forced close to

And share that view. that. back more to That's at from watermark kind very I a and of apples-to-apples faring something relative think of that 'XX an So can was perspective. we're well come high we year-end

to Thank the back you. this turn over Michaella time, remarks. I'd Gallina At for call closing like to

everyone, thank call. concludes for and Latif, This today's you, Thank you, us. joining

participating. for you Thank

You now disconnect. may