H&R Block (HRB) 7 Nov 232024 Q1 Earnings call transcript

Thank you for standing by, and welcome to H&R Block's First Quarter Fiscal Year 2024 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Vice President, Investor Relations, Michaella Gallina. Please go ahead.

Thank you, Latif. Good afternoon, everyone, and welcome to H&R Block's first quarter fiscal year 2024 financial results conference call.

Jeff Bowen, President our are Officer; Chief today Tony and Chief me Jones, and our Executive Joining Financial Officer.

issued or our we can today, a and release Earlier presentation, be downloaded at viewed website on live investors.hrblock.com. press which

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

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

with description of other a and see Form SEC uncertainties, please XX-K H&R periodically Block's quarterly reports For XX-Q our risks report Form on these filings. annual on and updated as

metrics discuss non-GAAP non-GAAP figures presented on some reconciled comparable our note of appendix are we'll presentation. GAAP a the today in and We basis. Please the

contains Jeff. X, no as of after only turn time-sensitive over the or Finally, accurate this circumstances revise to date to obligation H&R the XXXX. any reflect or otherwise events to this will that, call now content I statements information it call. With update November Block of today, of undertakes

Thank you, Michaella.

and Today, everyone, financials, including an QX the strength I Good joining sheet. Tony our of our discuss balance Block allocation Then will on begin for and Horizons summary afternoon, our results with a thanks update will provide us. our and strategic capital imperatives. of

season Assisted We in and had given year small share throughout reaffirming good both we are we were of year. While start the improved in we outlook. the strong our DIY a and very that fiscal a are early a pleased 'XX and extended lapped our portion is slightly last year our results, QX relatively and

manage well moment. which Horizons NAC, about expenses favorability demonstrated revenue, share on progress Block I'll grew a our and strategy, ongoing our continued to more With in we in

quarter. $XXX program, million in We our buying repurchase share continued also the

Horizons, and Block includes which small beginning with small into business go tax Wave. and services Let's deeper business,

the business which quarter, seeing small Assisted which in the with pleased long in X% focused and both signals in see are are payroll growing on We we're services formations, continuing small and early business opportunity clients and Overall, good trajectory our of launched and which last momentum, runway business. services bookkeeping and about includes of was total driving growing are tax revenue we double digits. feel a growth we the year. we

was in was line Turning to which with QX, Revenue Wave. growth in X% expectations. our

now new review to As path was of we've put leader strategic us put the in accelerate profitability. when the growth place. plan shared, underwent to a we business on a revenue We have and a

invoicing model, I platform business business plans, its as and accounting. free to advisory payroll I services. for through want primarily Before those and which by recap share monetized offering current provides tremendous small owners processing has Wave payment value Wave's well as

We shift solve and premium are value points deliver now pain beginning strategic features. that will more to customer monetize a

of which credit are invoices historically less credit platform share be card are not sent expand has to In Today, for paid space, customers wanting via to XX% methods enabled enable we a significant additional our Thus, and payment unlock small customers Wave's value provided. payments. our cards than beyond the through by businesses opportunity wallet. as or alternative bank there's of options Wave

making I revenue. and the this uptake that annual help where business. see recurring run receipts a business. better shifts expected small we of than been good opportunities heading. about feature, an premium features that their Last see the am customers or we're product's build and the additional to has subscription our in quarter, monthly This which mobile we a launched example is also generates excited We is opportunity we're other

products. financial to on move I'll Now

recall Spruce, was was tax first introduced channel. Assisted that 'XX the the in time season the product Regarding

have actions and utilizing for seamless the continuing drive the are the in deposit we deposit from customer channels innovation our experience. to to process and to and trends all payroll Our tax informed account our Spruce receive season, customers next improve. more creation their for sign-up continue learnings We've made direct

on app. XX, and flow tax As surpassed clients fiscal of the September DIY which within we we almost $XXX in are at and In customer sign-ups 'XX, engagement customer time, XXX,XXX million had includes deposits. the acquiring focused driving efficiently

they This to between. human however, Now to blending imperative experience. about and to tools digital fully be empowering let's provide them health is all in-person experiences virtual fully clients while turn to with in choose, better served; Block for everything

have a MyBlock enhancements of year. number to this We made

at Within visibility prep are each have tax on stage a their status page. of the process now app, of the clients through home they where tracker will

next to provide a forms help clients' their our live we'll each one clients In paper delivering whether is in a and our getting at help consumption tax their to clients which for help will was they with digitally our which one cost our upload addition, them will step, and notifying have app to many them better The review tax the with commitment results new is documents is recommends action our that sustainability. documents ability also benefit approve of that new return to be and personalized strategy the easier environmental savings time call ways need or checklist online. from stage to ahead in made be expert reduce sign to of for aligns to a of and time. faster to and offices. This prepared we Clients print-less uploading access how professionals return

into Another within GenAI. leaning is experience Block priority

expenses on we the calls. customer on support we enhancing increasing to customer channel, the and to shared, prep reducing are experience, clients areas: we're and the focused second, and ability are first, experience; In our DIY AI initially exciting we've will the that productivity. X As innovations tax testing throughout field use working

year in initial result meaningful can All in not any phases. progress partnership in initiatives we're all, cost our through as savings these this are are we believe we time, making tangible with we but testing Over fiscal Microsoft. assuming

the leaders York. to industry recently Envision thought they during New experts fact, highlighted and in work our tour In

can see, to this are you our results year. progress, As continues make well-positioned and deliver to we team

turning fourth it commitment and Relations in sustainability transparency, I responsible Investor practices. annual want environmental, recently mention read Tony, you business fiscal to encourage published to ongoing visit to to it report that full. to 'XX, social we our our for governance website Before our year reflecting and I

will to I more that, to over now results. our financial things share With about pass Tony

expenses year. primarily due U.S.-assisted over of delivered increase Thanks, net revenues and $XXX in advertising tax consulting Jeff, and were well driven basis million, to lower increase Emerald we QX, an revenue, marketing by were increase or average the lower points of about $X The In as preparation Corporate million. debt was higher prior XX by afternoon, Total of million good as X% $XXX.X an partially Card $X.X expenses increase and year. everyone. offset an bad charge, operating higher wages or last than approximately revenues. were million and

higher million essentially million loss interest of Interest $XXX income to and about year. a was was Pretax to loss in by primarily EBITDA $X the the which $X of decreased million, year. improvement $XX expense current approximately to revenues $XXX.X million, from last due unchanged is million, X% year. prior an or

adjusted $X.XX XX.X% continuing while year. per operations effective Loss last per $X.XX from to last share Our compared tax to from compared XX.X% was $X.XX due last was to operations rate share year, loss fewer shares compared $X.XX was outstanding. to year continuing

accretive outstanding is loss we as a reminder, for fewer per earnings share loss, but year. shares As in increase the the full quarters with generate

that and year As revenue year even EPS, full to Jeff it EBITDA XXXX return reaffirming shared, calls we had topline a and grows the for faster. and total are algorithm growth, longer-term good outlook start that shareholder outpaces our

to Capital Turning Allocation.

In average retired for Our million robust. QX, Since repurchased practice a X.X X% total by shares float. XX%. This our million remains XXXX, price outstanding of we of an reduced of $XXX at another have we over shares $XX.XX.

Additionally, declared how buying Board decrease the quarterly yet are dividend. quickly the we shares. grown Directors total have out Since of dollars XXXX, because XX%, paid back cash to we dividend the last continue week, our of

Given sheet. of of the to also rates the I'd the and about like macro expectation balance strength more interest foreseeable high future, for our the environment share

We EBITDA continue with our most $X.X leverage over relatively the of about great debt billion in against $XXX long-term million low of our to recent feel year.

which Our XXXX. until smallest next XXXX, debt and of don't million we is that maturity another have until isn't our October of $XXX after tranche maturing tranche

from As are we've benefits our current full on for shared will our balance year. sheet positioned rise, exceed position and about good very our environment. we interest the we it cash a before, our basis, expense as P&L our how feel recurring short-term income short-term interest the Overall, in interest as rates

outpaces that financial our topline We that summary, revenue even EPS positive. EBITDA story faster. grows is and growth, drive In

trends. With shareholders, reliably hand and strong return closing practices I positions well capital allocation to the have our sheet to balance over macro will remarks. it that, us some Jeff back for We now to value for

tax Thanks, year-round thank our sincere our we our and like you that franchisees to to In and Tony. of a all purpose all I'd clients help I'm for confidence inspiring will do providing this extend on accomplish forward in they professionals to looking year. everywhere. associates, to closing, communities and deliver

will the line we for operator, open Now questions.

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

marketing focused same season, I at I'm on. eyes the on does we next wondering, season, season, we Jeff, into change? marketing the tax your on or tax thoughts go as just this strategy, go follow from you into you're do last tax that DIY as least know

Kartik. Yes,

in to marketing. is I So remembering things share. there's first mean a few very approach driven I our the we're that audience would

see particular So for we're audience. don't it's doing very likely you that a everything

to to a we have one. kind year. all So several replicate DIY obviously had that's We winning that We to of do. We performance. formula last want in jobs can different do number

when the priority client of We X winning loss that client really the evaluated with EITC buckets into the Assisted, the broke top list. at the year, we of also the down is know we in our end

of And think so about refund how advance, means those strong things for marketing media message the we timing and that of a several means reevaluation the use year. this It messages. channels the we different

So as we have things the those prepare upcoming reevaluated for been all season.

the as amount Does season to need you win that you to Jeff, other in know season. said make better? the available transfer tax And a the the product, to I any or you've tax make compete the feel to changes you require follow-on, EITC, you that changes bigger, just with refund last wanted

I know to continue feel question refund with We've proposition understand job that to done didn't last time. we about. to Yes, we signaled at it's the last that's fees the pricing that on a customer. enough being not starting for with more other right with are but how the message good we advance We year, in at that the value do interest. a business even looked the the the really the And market good to decided in point higher call, research great rate, and one communicate people a year and participate last refund and promising we coming and advance since where matters much audience of

something the in eliminated we that think as us. so And that is to for business be we've right

it's proposition. in message really about communicating value that earlier total our season So the

question comes Company. & of the next from Our line Scott Oppenheimer of Schneeberger

me? hear you Can

Yes, Scott, you. we got

Good. the I something Yes, some if California grand fiscal of as was wasn't in it's the us year not the to affect outperformance magnitude. had on started. any later just the to if The to -- looks like back see, impact. last quarter very much nice wondered. curious and revenue, this It had ask going year get it from mild just half I filings a

a environment. increase quarter, expense inflationary operating relatively just that. current modest was the so And also the on on And comment the just then in

a looks and in wages, job did later the consulting. like but obviously, also to you advertising that's Kartik's heavier nice per of it then So going you marketing be year, cited question, managing

is second to momentum curious the good question in manage kind keep quarter? of just expect So tax the there? tax season prior how to you the the expenses just up season part should in we And what of then and

Yes.

we of pick good all, OpEx. Tony comment first And say of I'll yes, remembering, about on and expectations. we last lapped in the season I'd year. a revenue But strong performance against extension So that, our piece can volume light so our feel

in gain share in did up happen California more about California, when And share slight leading XX. assisted then some the we tax a year DIY continuation which mix, increases and open, extension then we first the saw revenue. staffed. of and And in talked saw quarter. keeping offices to business price we saw we October helped mentioned, of we a the took last we we drive job winning favorable pros And think obviously, both in nice fair our some more we this As

together, things part all good So the put business, to when you the we as about of it say, year. the relatively but feel always a small start we is those

happy the on saw to modest expense very inflationary And see Yes. in side, QX. we increase We're with we pressure. are continuing the

an up So offset we're it's rent in But what we in flowing as Obviously, well we not continuing annual summer to that it's merit QX. can that's cycle did prices go completely dissipated. doing We're see to the this utilities. as that. P&L

You mentioned lower a in marketing lower few a being little consulting bit and a little be bit QX. things expenses

QX. year for We key a us, we to and think management good continue guidance. that start. So off Expense focus a we're reaffirming we're is our will think in full obviously

you think organization there and being that pilot in seeing a Right. I angle a a follow-up, of any What with new to associated to hearing? And the year? IRS I'll industry could ask for kind are And program regard that preparation this with be just its here tax just also as And something developments then XXk, and you're that itself? mathematically, is level. different

pick plans year-end There do that place. that could ready always we year. in season contemplated a in the like is have actually. thoughtful when as book, should happened we're off. up capture outlook but legislation it not real place proceed some it opportunity last XX.XX change some it I'll We kicks that It's Yes. our will to in be believe first, possibility

to dialed the the briefing, their they even year. size think magnitude they'll and XX.XXK back in latest really and on that's they what So Scott, pilot this of respect with IRS,

on the that expect business. back the don't and been to But spoken including step planned. be than consumers There organizations, originally XX IRS clear. They in much had offer We tax us over preparation. that. smaller about be know loud take clear position We've the think just that, we they a very already if we that from free are our should

over changed. their view use be in our marketing dollars business really I it like believe changed. year And It product, on that be hasn't they'll time and plans So we of to supporting a taxpayer year -- the it sound and building find a in out. have a able product to does to just hard product

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

has important marketing, size and also the might is about increase example, returns filers, due upcoming the in impact proposition that refund in you season? other the an EITC average tax As balance Advance, the had which part, with materialize think of those how an but about a on in control prior over talk your HR Refund strategy demographic. tax over Can factors, less tax value for you season, decrease definitely an

in and focus if clients, degree control, obviously, for thank educate someone's that do we can has Yes, out help mean, I George, that why where tax understand the that we is them communicate in changed what you those are that call our what deploy to of of for it things about to they are except to we moment year. outcome this question. training can that's the to really and off-season next how we of professionals truth and

we definitely those ready tax addition Kartik's to So earlier I get comments question. marketing to with taken season that for steps have this the made in

And said, last pretty into and I a essentially got George, a Yes. the we've getting baseline big change year. is in, who's you we've this thing The would one year refunds of as new we saw add, believe amount going refunds.

no changes aren't major in drive expecting amount that. drop another solid refunds. the that There's we So of would tax

while refund it's getting a last customers kind side based went really I what point, expect down they're bit, the that's think So EITC Jeff's And now all And year's obviously. the little the results. important. understand education maybe to customers refunds, of still kind on of to about just really

heading DIY then And helpful. your normalization inflation you Assisted and your That's strategy and how it. would latest Got pricing in with thoughts pricing evolve Great. year? can of provide next trends, into on

And parts. we into of X it as Absolutely. split asked, you kind

for price year. On believe to this able is we're contemplated take assisted side, we our low in increases, plan the what's that which single-digit

year, say paid me heard value many times, on metrics. price and you've reevaluate that for customer satisfaction based As every we

DIY movement, more we to our good year. more attached products. how consider continued we are and In is about still advantage see There So SKUs, and actively we In what maintain it's into to late core which factors believe the feel and that to business, H&R that this it opportunity easy do dynamic. season obviously, a general, again early switch to we'll we'll between this season, and it, against price advantage market do is Block. year

of Paris next comes Alex from Our Research. Barrington question

Alex unmuted I phone, for on the Difficulty] And Gallina you to a Madam? please I'm back make not. handset. [Technical y to up. he are closing he if if like And see queues speaker has just turn our line to now lift pause would is sure back your and remarks. at conference Michaella

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

you today's for participating. call. concludes this And Thank conference

You may now disconnect.