H&R Block (HRB) 1 Nov 222023 Q1 Earnings call transcript

Thank you for standing by, and welcome to H&R Block's First Quarter Fiscal 2023 Results 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] I would now like to hand the call over to Vice President, Investor Relations, Michaella Gallina. Please go ahead.

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

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

for live the Webcast of call Our XX a days. and is being broadcast replay be and available Webcast will

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

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

XXXX Horizons our an Tony and more on you, provide financials. us. our with for summary Today results joining Michaella. update I share and fiscal begin Good Block a will progress. thanks our Thank will of about Then everyone, afternoon, QX

and comparison performance increased done converting virtual expectations year quarter adoption ongoing just year first We've our we outlook. full over of of QX we our a While the is year, X% in of tools extensions good total and met which are saw the our our healthy in revenue, reaffirming fiscal small prior about quarter. X% to job

despite high environment. well also the inflationary expenses We managed

On outstanding last paid the with start which quarterly forward per bought XXXX. Overall, increase front, and to X% another I'm back October $X.XX dividend in share pleased to of of rest shares allocation our of our year. we is I'm of capital X% the looking an and fiscal

digit we volume we double the driven in momentum. charge. In are Beginning of the Business Wave. We and marketing see In year small opportunity deliver Small focusing both both on Business and which significant Block CPAs we a are and efforts business, is average meaningful. bold with and see to growth revenue continued our message by value we independent net runway of transformation tax Horizons QX tax third a broadened growth we with versus Small our with assisted gaining

payroll bookkeeping nicely early, by growing team and bookkeepers While our franchisees. driven dedicated and are of company

also the growth saw are upon in capitalizing two last ways. We year trends we

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the that response, small-business. in to and enables launched filed provides result simultaneously product significantly a This greater better tax level benefit of can protection having Block, self-serve of business a Second, two formation outcomes for significant help October clients saw to opportunity our the with legal and both entity. clients, and returns the individual entity. business In in their we an owners create incorporate we

can happening in you have good of a things lot we small-business. As see,

performance. to new drive He is has future assessing a to successfully business levers Wave, is review CEO our completing the of Turning strategic and onboarded.

invoice Wave was saw While activity we than payment customers volume, anticipated. less there increased

XX% As a quarter. result, revenue growth the in was

in platform the season. to this brought market we new banking Spruce financial our past to Moving that channel products, DIY recall mobile tax

shared tax of are approximately mobile know last difference the to to deposited refund amounts, relatively customers money set right are want We of and well metrics Well, which $XX average within to on feature, ability to results we've and aside we tax Spruce continued deposit tax season, allows efforts than to that marketing innovation this saving is added to our quarter currently around also health. as it why dollar than their deposits. XXX,XXX their effective million refund quarter customer year, with refund. Given pre-commitment the phone. recently in feature Last as with ways which smart that a customers spending small make purchases users nearest empowered enable a We is our the our up a timed signups the most enhancing financial their most more to improve they proven unique their away. one savings rather of the focus this checks to automatically portion in can the save account, round savings-related the to even their with their to tax do app. of We're capabilities the user by unchanged

users settings the One in challenges money clients on Spruce Card without having app assisted to the an process tax between able propositions of employer educating making preparing and this payroll. much make product their from simpler. is professionals decision of Emerald of their the within upcoming greatest value innovation, launch clients channel the this be process help Alongside In to the clear will back needs. release, we're their their best different change and for the to Spruce to switching engaging for load to payroll by go deposit

Experience, Block clients. both process to and right improving winning models great DIY, such in how a to as we we professionals return in early key driving tax hiring in the tool this exciting the and learning work capabilities serve the believe of client's a productivity. making customer resulting have and times. expanded we virtual blending the more is number underway. offerings, health, matching of multitude We're assisted increased Last experience our the signs and personalized strides a off professional. we're using as better, clients We complexity seeing Regarding approving with in of digital advancements human benefit three projects for help clients, for year, understand more makes customer by are than DIY of We've our a to the continuing Machine options and and these assisted are returns This for digital tax better and well as remote drop retention. increases online. positive a

increases expertise, Our them accelerate more been first by year enabling which serve to has tax clients. reshaped Pro role their to productivity

already for we've new fact, our of hired XX% this In role. to goal

last that and our Over strong, we've our months is the one doing number clients, proposition. DIY we highlight We've can effectively value more know strong, a that competitors' opportunity is few value DIY the offer is and research increasing been how we evaluated our product. product our clients have awareness our we and we with

our you'll be As enables us help well-positioned capabilities to everything to want, us or between. virtual however result, a and completely, market come with in see expanding person virtually, completely to new they all a In clients approach. in

Our Block we're excited of the the to Horizons and impact and about magnitude this continues build progress work.

can on we Environmental, ESG Lastly, I'd report, that which website. found released Governance and Social like to our mention our annual or be recently

corporate and part has pleased I'm I'll doing. our culture work citizen is over planet a the just started. a we're people, been and that it with we're now publication, our of getting very Tony. third this to aspirations our With and ways turn While responsible in many Being that beginning, communities from annual connects the

which credit Thanks, everyone. quarter, million approximately our our in being X% XX. QX first the quarter. or year. last I'll capital Jeff, decreased $XX decrease to million the revenue Today year, onto over child review loaded Cards We Emerald year due allocation was $XX causing impact $XXX a advanced and the prior tax and million This for good the afternoon in of our practice fiscal results, outlook delivered

the also our year both in a of contemplated which expect second were We similar outlook. impact fiscal XXXX quarter, in

and from negative our charge businesses. a and our growth had completed which due expenses to increased our about and related lower and the annual to increase partially higher We process, million, exchange compensation at average compensation business. our an by declines we of million, net and foreign were or Australian contributed million quarter. offset increase approximately These consulting assisted an the addition, Total services. $XXX Canadian outsourced in $X expenses by in during in operating In X% expenses offset impact just primarily merit approximately technology $XX were Wave partially revenue

of XXXX about increased was about savings increase X.X%. will issued Recall of or historical Tax than $XX corporate which more largest million an Pro line levels, of field off quarter Interest rate result million, we million, interest X.X% approximately last $X expense a return $XX fluctuates material $XXX million, While in our salary we volumes. decrease that notes $XXX new variable June is was in as line or positions and an a paid loss XX% notes early, which of the is compensation, and item, million. in of at with EBITDA XX%.

Given $XXX rising a but borrowing that are compared we on as acting a of on be interest to deposit of $XXX year. share tax share million are in rate cash hedge. million environment, impacted, natural loss a our higher our loss line balances will credit cost rates Pre-tax the was while to [ph] loss to $X.XX increasing Loss XX% effective $X.XX from operations per our per $X.XX. from from the rate operations continuing $X.XX, continuing last from prior was adjusted increased XX.X% year, compared to and

this strong. a We quarter million outstanding repurchased shares an repurchase we our average $XX.XX. allocation, equates have price now $XXX capital remained Turning and This at X% since third to of to shares for million XXXX. our of X.X of shares another practice approximately

of year out summary, since reiterating of paid our $X.XX We are year outlook. X% XXXX XXXX. and also in last October, increase increase fiscal was which we to an dividend an In XX%

of to given in with rates. we seeing in rate headwinds foreign credit, year, our discussed, the I tax we the last am this effective roll are child tax As compared have off increase the the and pleased the guidance exchange

and that continue EBITDA growth, that faster. grows We line top even expect outpaces revenue, EPS to

longer-term off over now it year I we Jeff for remarks. target to a EPS addition, back the growing confident of XXXX. fiscal that, we're great we through Overall, closing annually In adjusted digits to some start. in provided in double are August will turn With

Tony. our help day driven our and closing, Thanks, on our and tax the last professionals, thank embody and over I'd focused franchisees to provide we've what's I'm in confidence the ahead to We're like communities. clients in and who momentum upon years. every purpose inspire associates building excited about couple

open line we'll operator for the questions. Now,

line Kartik Mehta Thank go Mehta. Please Kartik you, from first Our Instructions] comes Research. Northcoast ahead, [Operator of Jeff. question of the

Thanks. wanted the tax Hey, Tony. a returns expectations upcoming for tax to get hi Jeff, season. your on for I total perspective

season? increase, which on thoughts your your was why returns You know, tax expectations huge looking what and for probably at there an wondering XXXX such unusual, XXXX, looking and maybe was I'm at the tax X%, a are and upcoming increase

plus in be e-files expect on the ahead season takes we Jeff. employment, question this know in no know, the it's different of historically. et we where million of the years zone lot We to volumes, industry a have about IRS puts rates, the kick Kartik, which off. factor various volatility paper, XXX the be I'll last Hey, had et growth sure normal releases impacting changing and data, ended consider every and season We've but officially back we and as their tax There's dates, been you of don't couple and to know about year upcoming look until the we the X%. to to things for cetera, cetera.

looking to tax that's how we're So fiscal forward XXXX season.

somewhere the kind the around or saying of season? the are you XXX is million tax paper for e-file baseline Jeff, upcoming and So

specifically. mean, so -- data, paper. that will do zone don't expect end the we until the can't last we for know where plus that we e-files XXX that will IRS But the industry comment obviously we be year in somewhere Yes, on releases I from million

get So year, of growth. into and normal to expecting assumption again, our the working about going X% that's to industry the back

gain And about talk you you DIY and the I and to at know pricing, what I think it's market product, want you on Jeff, changes you're prepared about could you little DIY approach, share? I about marketing, looking then if bit if I'm can you I'm it's right talked having maybe cautious do think how if say, what be Perfect. kind but you wondering and if a wondering, the it's different make of holistically remarks, product a heard if your product

Yes, I appreciate question. the

had and we're You new growth. with pricing growth, know, years, client with but market We're recent pleased over when the with share. look we've revenue we pleased not pleased our ability back the we're

we to And last work our us our importantly, competitors' to looked so product over market. are talking that months, strong. I to have where is the that confirmed and our at understand customers several relative think we talking and everything And customers to has for the most

Now, more value. deliver. outlook know the the didn't in know and it's from and What our personalized less faster good much go we we're true to we messages our total us was, the aided but not And our a we about something to we to how we're what contemplated same mistake, you more our key, is spending, we way just this product make What there. is told that the so and market, really we're we've about it's know track starting have that customers about know done the relative historically as consistently talked value number is, We awareness. unaided offered offering, in before that they means the and know product. spending be improving no pricing, we're always we we and especially competitor place one about

board You know, with know being We that those some switch, this and transparent completely customers And upgrades. lean to them different are is should a marketing, the in for don't so and a things. we're in easy how we frustrated that customers know to that take understand to taking about to expect product, really of not how in channels, kind it industry you approach think they year. holistic sure the for approach we pricing in make us of in fully across

really it. Thanks, Jeff. appreciate I

Thanks, Kartik.

Thank you.

Goldman comes George next of the Our of question from line Tong Sachs.

Hi, afternoon. Good thanks.

you of expect growth X% that you tax and in category what for tax break You what for in volumes next DIY the the terms industry into Can you the season. expect expect that you assisted down mentioned category?

hey, Yes, George, Tony. is this

DIY assisted we think X% I getting said up if growing expect expectation is the growth, slightly to fairly it and for category, faster, X% years, that base which you of You flat likely we our to X% category number the overall a consistent, is X%, overall. call know, to what

you it. And category relative particularly Assists, to got to there? virtual positioned gain HRB competitors respect to important then about win Online of is and Online some Assist? share talk secondly, potentially Can is Block. with Okay, an initiatives in which your How for

Yes, George, is this Jeff.

different answered. So in your consumer our ways is is One DIY two get for Assist, the Online product access offering which questions to get simply help. to

and as us validate turning Tax well and is that second very return behalf. to Tax of both over file ability We utilize as Pro is your on our pricing review, The positioned here, feel to check and Pro our which value because tax to to well your work professionals our network and proposition.

As our to step get versus quick somebody We do. to very get a a professional we tested tax believe we like to directly answered. product competitors are that call intermediary we've an center questions

filer also expertise. channel that to a growth a so acquire as value us, to start And continues DIY help customers, be for but DIY both and demonstrating human you if of the

Live, the Relative to to follow up Great. competition? compared product to perhaps And how relative that. or TurboTax that performed a to, quick is just and TurboTax

price. virtual, somebody of in network, good ability Tax because in better. to forum where about because and but are is so Pricing on tricky our talk board, this gets the many add-ons there products and leverage to a quickly, true our Pro the about with feel expert pricing very the across based built our connect Our different of you in we start, SKUs

to DIY we value know so a assisted our very proposition strong. that for help is And filer

Got thank it. helpful, Very you.

you. Thank

you. Thank

Our of next from comes Schneeberger question Oppenheimer. Scott

the and you mentioned Tax a well Online maybe some year speed year think the Tax customer have that much. could just you I about question Jeff, you done that learned up talk the for this some discussing just lessons that I of connecting year? review, very all Thanks competitor following yes Pro, Assist last year. on had their I, speed. know increase and innovations to and afternoon. to yours, and innovations of last Pro major kind will this of they Good last

DIY just to of Thanks. assisted? a should and in H&R customers product industry see particular as the this regard curious, whole So Block and from hybrid what serving virtually what, with we

several we level capabilities, we've talking the for Obviously between see at is the customer now, seeking Absolutely. macro about lines these what help. because blurring years the been

competitors very these can coming help and that's or the when work starting and they expert help and get and we we button, finish, And help that yourself, them virtually hit answers because us to about. see that of leverage network is expertise versus a gives with strong not our we've those difference well Pro asset whether a Tax to answer but an we've tax get is, do we first to have they at that to office, channels. built connected that a in key we thing they so point the The good very of because in, be customer as want you to seen who relying on something somebody the has and And still center, feel actually a an a where tax growing largely new getting real question that questions. that's seen trained, to that confidence great be position stop has expert, to a to our want us experts call of

the we Do take we're the more add very to priced skew, where anything that? we increases. strong. especially and again, good fast today, do feel competition can, the relative that to into of making make our So expert Pros leveraging as and network experience how we to the proposition lean to price next And as want as we'll continue Tax competitor see lineup remains price we you sure more across each about in -- the the

and really important help introducing right was that sure piece time. we to when get also trying being making add product a the know we're as the really providing an sure figuring at we're just know, provide these every help at well. the upsell because moment, turn, of to screen balance introduce do on you I moment trying that's a, not, so initiative working we're want right single provide balancing think but is only important out the Yes, that's products, right that the to and we And have part experience to thing within year we is at make the the clients transparent, the also that to, right, this want want I at the we but that's a

mentioned the a option learning this machine what way to right. is, right. That's one see can in Yes, that's about to help. they the that them and if introduce we where And getting might experience models I frustrated as is the a use that can example, exactly be get customer

thanks side question That came me. up to Great, another brings guys. just that

this that just is your to with given very see we Will consumer gets marketing products, to but yes, was, inferences how and in using because how we were it, shown, the and will will will earlier, response much in attention timing or review when that the DIY you're of the of about of proactive to brand visibility push? Thanks. in year? Our Tony's the the be DIY marketing it you I think paired what there. provided visible marketing we that be that pick when much got Pro see Online Tax need improvement and for going Assist the product of recognition enhanced saying Jeff, be with

it if Yes, believe audience for. the depends I guess I'd it you're great question. that And we is answer best is, message way the

to every is, the right And relying reach to mean smarter and that smarter to continue by everyone. audience, so get about broadcasting right channel message not on what the I we

right that's is communication. to but delivered to or of may our based is predisposed that at the And most so our our for. who part in you I product, it not message audience it value But be it's that who see find possible would on ability all, that yes, prop

I Got the of one the then was if made may. two-thirds up X% year growth child crypto was, Assisted NAC from more credit. and and believe in it, The investors tax just thanks. that and And I a me portion then from that retail mix last

going of headwind that, the thinking the right I question kind what with season, this not kind give and of mixed a the specifically? what us you next from If year Thanks. could type where sense for tax should about of credit, is just was and child recurring we is, category that mix within tax anticipate this, was and this

Yes, but our saying Tony, we're by I'd we single guess good and tag we about do is and we than think price more I Obviously continue increases. team digit that differently off that in feel this, assisted, Assisted. start DIY that in pricing to pricing dynamic able low

in we've mentioned the child we've back remarks, one even outlook is contemplated our the tax number off As credit. prepared that of our headwind going and bit, in a roll the

It's we're we've want? aware of. do planned is And perspective. that Tony, headwind so for. main a the that's one one you revenue from And

XXXX and see think going that Yes, first a increase we business recur average was did off, and back charge benefit in just in well. other I Scott, roll one, the filer as got which about net we provided to XXXX, time didn't talked year, in last our that we that that assisted

we're that to the year, on that is which was want digit headwind, we get that this of increases for points, for you X we've charge to the mix but average year, that been other alluded price So talking us it low to. netting our think the targeted charge triangle about. about to you that And net kind average to net of the single that X against and, when call that full part land

thanks, Tony. Thanks Jeff. right, All Okay.

Scott. Thanks

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

call. conference Thanks today. our quarter XXXX Latif, thanks for and everyone us This concludes first joining earnings

participating. you Thank for

disconnect. now may You