H&R Block (HRB) 15 Aug 242024 Q4 Earnings call transcript

Thank you for standing by, and welcome to H&R Block's Fourth Quarter Fiscal Year 2024 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to Michaella Gallina, Vice President, Investor Relations. Please go ahead.

Thank you, operator. welcome Call. Block's and Financial Year everyone, Conference Results afternoon, to Fiscal H&R XXXX Good

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

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

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

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

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

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

this information otherwise update content H&R events obligation this or revise the call. August date accurate to the Block statement undertakes contains to XXXX. after today, of of or any reflect XX, Finally, of as no only call circumstances time-sensitive

With turn over that, it I to will Jeff. now

for us thanks and everyone, afternoon, Good today. joining

discuss we'll and our financial We to 'XX the will up progress imperatives. performance fiscal make Horizons fiscal will we and it for then on begin full our sharing the for results Tony Then continue by outlook for year and open our Q&A. Block

grows and EPS that year revenue to another fiscal our of faster we am 'XX double-digit that were EBITDA with results, able pleased Beginning I growth. growth, deliver even

how consecutive strong. Performance higher satisfaction ongoing paid driven were resulted with and we NAC by Pro to client Tax AI which new pleased as customer scores client for fast our with the as momentum able remained Our in Assist, DIY launch was I conversion its was business Review market product. in well our year. growth Tax and second strength share continued gains

able our NAC. remained continued in higher small with were Assisted to grow to and we year. also Assisted, In Trends tax brand resonate positive this value clients, business

value In our practice. for shareholders addition, to continuing allocation we're capital drive through

dividend fact, XX% a the more billion, In shares XXXX prior increased authorization than authorization. as our repurchased repurchase new which quarterly another announced through $X.X well today, of of replaces increase and as to dividend today, the we XX% outstanding. Since XX% we've

our to first, more we outlook to will Looking 'XX, our in positioned our clients X turn we of make Tony our fiscal to important for imperatives. let Horizon shareholders, me about strategy, Block feel all But progress moment. a share and to well where deliver and in continue

and small Starting year mid-single in the growth. had bookkeeping of We trends business. double-digit with remain NAC entity payroll another strong, in delivering and X%, year revenue grew another digits. good tax had growth

Our fulfillment a [ conversion, client alongside and dedicated live we see ahead. central have our services to of ] opportunity model, lot driven sales continue team

the priorities revenue I'm and Wave. drive the pleased that's key last in to our year been accelerate made Turning profitability. to progress growth on with

our than a to have launched business better. their paid called designed manage recently with empower product, subscription we products further receipt performing You'll owners new both business solution This, to recall been These small along better paid [indiscernible]. are anticipated.

For X%. full was the revenue year, growth

'XX. business We expect trends losses and ongoing the in continue positive improve fiscal to the in

Moving on our financial imperative. to products

We're XX% has June with XX, deposit Spruce, this growth pleased customer Assisted positive banking we're Spruce sources billion our of its pleased the coming platform, this and milestone season. in see Since sign-ups, and nontax year. launch mobile are nearing with in $X both nearly through trends DIY the XXX,XXX a channels We and performance deposits. from to of

last XX% increased In deposits year-over-year. month, fact,

help people out with focused tax in and to is Spruce team acquiring time, new money. that its be excited on about We're continuing months, deliver be in At the our coming innovations users rolling season. of same better the the out to is mission we'll on and

which with feel Experience, great between. Block human every however virtual about all to care. turn person in we're serve digital in We they to and tools be is expertise blending about to fully positioned let's to served. way want Fully Now clients how in

continues results. the In pleased to DIY, with our we're strategy deliver, and

this NAC, year. As translated I in clients growth of paid meaningful revenue growth had strong which and mentioned, we to XX%

momentum success we're 'XX. In pleased the clients. the we in this AI client satisfaction across to use clients excited and impact GenAI improve channel, and about Consumer forward already higher-value NAC attracting which has I'm Product excited our for cases, fiscal being can Campbell of We're scores clear to with We tax his Tax the drive about is Officer, look serving potential welcomed His about our recently assisted Curtis efficiencies year XX industry the and cost savings. Assist performed have were growth, organization, years as where in future Tax continuing experience. of well, and we felt leadership. than Chief who and experience Global and and more improved President

about few we've our year 'XX. significant Horizons our positioning made last strides Block years, our products, plan and feeling in through I'm features very for the services Over and good fiscal

him H&R things about to turn a and outlook, I our over take incredible to his want Block. to thank to moment more tenure I financial for share Tony Before performance at

growth, been financial XX-year personal we experience and As with made insights success. to invaluable retire the key Tony industry on of team. a a to strategic Tony has and the our been career Block. have in our company, after playing integral acumen, shared part decision His call, an QX our transformation role

we his through Block years remain be come. us analyst and Under held we've $X.X challenges and navigate treasury During financial Block as He that H&R to for His has on senior Tony H&R executive roles. more felt than shareholders. his Ensuring opportunities. since numerous billion leadership CFO the on returned his as multiple tenure, with helped began strong footing. career to impact will

entire service we and of the extend retirement and his wish gratitude our future the Board him want to all of our his leadership, behalf years Block to and and I family best endeavors. for in Tony Directors, On of

organic may our that to franchising, you brings a in have retailer. that, and are track Tony at on CFO high-growth of a share step are working all auto a As leadership she Mason closely officially in to XX. services which I'm Driven Lowe's, will week, Tiffany she business. have company pleased home company, as proven Tiffany the financial we inorganic led services, Tony's at IPO. served through successful XX and transition growth record CFO September to omni-channel and spent Brands, a together improvement seamless XX announcement the role drove seen of where Tiffany our to recently years strong successor. and hired retail Prior EVP consumer ensure and into critical She a and most Fortune last

is companies In me. delivering Strategy team. a and engineer, and our in value history an have leadership steeped improving and enterprise in I'm and accomplished long-term industries long has join intelligence. the Scott in He's he strategy senior and worked of Curtis, execution. our private already large-scale has across Manuel addition, to to also Within overseeing Scott clients, reports Chief transform into member Block and our as added and H&R agile joined essential shareholders. to functions continue Operations another that leadership associates an this key I've delivers last as we to and to artificial innovation and thrilled more team. directly dynamic role, Scott Officer complex week senior Tiffany customer-centric innovative driving company, to equity is environments. Scott and our strong

With that, Tony, you. I'll to over now turn it

journey, incredible an at the I'm been career It's and grateful for Jeff. you, H&R I've Block. Thank had deeply

work been driving our and to thank instrumental and investors success. their extend I department finance gratitude our and and of and have First commitment Directors, I foremost, also in trust. for want our support my to whose associates shareholders Board to hard want

an 'XX paid delivered a time with category, or offset with partially increase to million, shareholders Emerald average primarily immensely company-owned We that, activity at As charge I back of the higher year charge fiscal lower have results. we and billion to $XXX Block higher revenue, in turn online DIY years proud to now that company, what value net will I'm drive average to of at look our combined by due for volumes in year. the $X.X net I accomplished I'm Assisted together. continue confident come. With the will Card the in of greater returns X% a in current my

due consulting and operating billion, in offset and outsourced year were $XX X% expense higher increase Total primarily to services. million, cost labor bad of partially lower the by $X.X debt or an expenses

and environment. year the Interest the an due of expense increase $XX was of our to over line X% rate higher credit prior higher draws on million,

X%, or million current income $XXX higher was of in to $XX million, revenues year. the increase an due Pretax primarily

year was effective XX.X% XX% prior versus in full Our the rate year. tax the for

million to Turning to year EBITDA. $XXX an increase in X%. compared of more We than the delivered $XXX million prior

pleased adjusted increased while share and willingness XX%. In offices. sell acquired us $X.XX 'XX, are total longer-term $X.XX from are than earnings year continuing we of pleased per how from or per FY revenue great supports earnings our XX%, operations growing franchise another about to from We and share revenue. feel with continuing faster strategy Earnings or to EBITDA $X.XX with to $X.XX this from We franchisees' operations growth. a increased to XXX of

drives strong. of remains meaningful year-to-year dividend material nuances, for our buy shareholders. significant shared, stable a We back disciplined capital Jeff Regardless and and value pay shares. As cash our approach story produce of a growing flow, allocation number

the XX%. $XX.X XX% We per also in a to quarterly announced today XXXX, by increased our dividend dividend Since share. we've increase

Since shares of million pleased repurchase a at price than $XX.XX. billion, In an repurchases $X.X we And of are to over $XXX million outstanding billion. price XXXX, an authorization XX shares FY average have today, at 'XX, of retiring share $XX.XX. $X.X new we for than announce of XX% more completed share more average repurchased of we

'XX FY our to turning outlook. Now

with begin assumptions the context we've me around Let made.

next growth we trends the or will industry with First, historical X%. be in year about believe line

market always that course, category, our assume goal, Second, but of grow share. to we maintain the share overall in tax will we is

taking year, we will franchise be which customer we with again continue lastly, Wave growth to satisfaction Fourth, drivers. expect revenue opportunistically. Third, repurchase business expect continue to to this single-digit we price, low locations we executed and scores successfully And strong. continue remaining to small

be tax to $X.XX to EPS is in our billion, which low the 'XX result, be $X.XX of rate to an $XXX range billion, range for FY approximately XX%. to revenue will billion of from of a effective $X.XX be As the range $X.XX, unusually in for in the EBITDA to of $X.XX to outlook million benefit

is of matters to and expiration the closures limitations. positively rate anticipated statute tax examination the impacted of under various due The of

$X.XX contribute fiscal 'XX. EPS to to approximately this in year expect We

X% of As X%, drive to cost believe annual range multiple our to growth EBITDA share faster. repurchase we levers revenue have our shared, in we for EPS leverage even to utilizing can structure to have and revenue outpace we while targeted grow we

well for the years come. and it All an serve closing, to in company's we and success as beyond. forward look In fiscal in are year honor 'XX all, continued CFO, the has to seeing positioned been to I

that, I to for closing With back some Jeff over it turn now will remarks.

Thank you, Tony.

I reflect to all strive we our communities I'm that our providing and grateful of accomplished, As associates we and for and in our purpose day, deliver inspiring on clients confidence on help Every everywhere. team.

the and thank sincere tax looking next to all our you forward franchisees associates I and to we our like would sharing who extend November. in I'm success make QX our to year possible. professionals meaningful and in will a results our accomplish our

will we the operator, questions. line for Now open

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

in of retirement. luck of the all, was working First you, pleasure Tony, your a with best it

Thanks, Kartik.

kind that over and on if Assisted to side? you maintain the next and season, tax look changes Block Jeff, market season needs make you this sure share of you your FY think what to tax at do 'XX that the compared

and I -- thank I a in this last no I execution and there's you. opportunity year question, last mean, bit call Assisted. office Kartik, traveled of in as our up the teed just saw I

And they're that coming brand. and We appointment, the lots making office. the lots enough. we of well to just choosing They're didn't deliver clients have are an

manage for focus with ultimately, really do as saw exactly do team better And more H&R on value? understand the and we the of How for understand the who And is the a deliver clients we we opportunity the those expectations? us time so particular, Block. coming in on don't clients, are How how that? And new do the go emphasis there's then help to we people should how that's even real we into how work process really at first entire we improve 'XX, experience? do

across but that next things year. attention many there's all the everyone's working on, so different And are teams businesses for that has

next net your just impact much flow. assuming on year? higher that operating cash was be flow cash free But free depreciation next again cash this flow higher any I'm year Obviously, Tony, will than the then, on changes line than year. free cash And income. CapEx other might flow

you're relative The mean and generating continues to net depreciation exceed CapEx, I right. cash flow free which is than of more we're why No. to amortization XXX% income.

that So should continue. trend

us FY tax that's cash a cash forward. CapEx is flow by benefits because $XXX you more high north from with this cash some free for rate good say going normal 'XX unusually know, got. a pretty was year, of I'd Free As year. I operations, run that million. flow defined as flow it we think less of number of And But

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

contrast curious follow a I'm influence out and year? about you're there All as starting about the just and -- promise. now, And out is expecting. I'll for the tax Tony, that color earnings the developments going kind year, miss looking question of you're going election. you, right follow-up. things to thinking But high up candidates in thinking best. bit little Jeff, be to of the maybe how industry just on call the next get outlook growth next the given I'll X% you a quick other a could that the I you're to and Probably well. season what And then political next around level, to compare

in through the I'll and be for mean, filling contrast itself impact business have compare enough the election pundits. to really just an the have cycles been I seen we political candidates this tax election absolutely long leave many season. and never

trickles aren't on into trying terms policy impact, And it to the happen. whatever so happens to where potentially and of I in who predict mean make but that, as as consumer, may we that starts an impacts wins, it really and they will certainly the business down And whatever have then well. changes that's get how potentially positive we

as So a expect there's Each more season. that think we mentioned, it up. be something the about season, year, a little normal we always to pops Tony

it's it ability ready. I think years, whatever not to agenda don't into If have it we've XXXX-Ks great plan. respond things built on happen. to been proven a a the We the we're those of for are. couple will happens, if know

serve we'll that build win and we people wait the But focused do hang customers see. does can we're and we So products there, most and brand. to the what otherwise, out to and on our best do best experiences how to more

Jeff. that, appreciate I

Kartik Just I'll the more you, can opportunity for asked But share in follow-up about Assisted to then what there. and do get one and -- Tony. you market

the that that years job nice market a some last and are couple pulling done what the do-it-yourself of and of front. You've share Is the on keep levers position? try And sustainable? to you're

really experience of And is key the good with having the we that performance, an an always consumer starts for of excellent a as been and couple very the about feel years product. product, Well, nice said. easy it's you

to want Of every that's better, course, always do but the to we there's starting make point. better it always things year and

and We more have deliver unfolds, dynamic great we're price conversation That's season value moves. the that. to competitive as see and a we obviously doing competitively,

be after switch. very to aggressive that TurboTax very is And dissatisfied we've clients. made continue the then third to thing And we about going easy

granted. take And us have should not we follow anything against recipe to in We expect market very aggressive been how that them. for but you

on this Great. a again. like bit little to Appreciate looks year. My margin And It Tony, congrats expansion. is got question that. then, you

appears guidance the line. EBITDA year what next than levers in come? kind might in And imply is ranges as be type the -- the What can expansion of You of And revenue. of achieved the pass to opportunity there? kind Tiffany faster the you margin baton growing referenced where be to years of

the years. working appreciate you with and I really Scott, over Thanks,

that faster years, X.Xx we've term, can long number, of if So we've and percent than delivered over the rate, number EBITDA expenses, figuring talked the for that of we in about think hit drive I grow pretty can X-plus the structure, trying to out other EBITDA that takes to advantage consistently growing revenue a revenue invest of places. by taking business productivity, takes and managing just costs out in us advantage ways cost

And 'XX. EBITDA to you We as said, revenue than think has the several in margin years and in it faster obviously, growing expanded We growth again a will I even continue. row, line faster. to, and top EPS growing guided guided

got year credits we in 'XX. aren't always 'XX ERC in model the some Europe-specific the that benefit So This continuing year, another. over we working. nuances X of that have There's is

So on bit when EBITDA look it's a year-over-year range. guidance revenue that lower still being has a outpacing the but little at basis, you

still the is working. what Inflation we model kind out versus saw overall, has of So moderated pandemic. coming of the

still helpful. obviously a that but of normal things kind some for kind supplies more go rent of out merit rates. utilities other We're few up, like of were now increases that's and things So and those are seeing like of years control

model So is future. working, I think the foreseeable and continue work it the will for to

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

and also would wishes extend ahead. Tony. the to thanks to I congrats Best like

appreciate Thank it. George. you, I

Yes.

down XXXX expect How fast to outlook, mentioned tax into the for volumes, the expecting grow Assisted you're looking expectations to you X%. you season? industry those of DIY Can be do and at break both the So up you that categories? in

different rebound expectations I Assisted. DIY season. I to little years. this was last of extension next year, think have most of a But for unusual faster because grow would going into California expect little this kind recent bit than the most think than Yes. this thought recent some we are don't Obviously, the causing a one several our season upcoming over mean we I bit what tax

I trend. think with the that's consistent longer-term

Overall industry couple percent, X%, Assisted growing slightly probably growth of a of up. means DIY

time. our the I year-to-year, I term, mantra think but long that's slight been think a nuances, over -- the have been might that's trend. over the And for you longer

as with That's Okay. volumes Got would -- maintain and much words, case share, the goal is respect that is And stable? tax in In is And DIY? market reflection guidance to individually share to Assisted share versus Is Assisted be overall gaining a assume base other that helpful. you assumed guidance? market in it. -- to then of also how that the the of DIY? does expect

Yes.

-- share. we to to as recent want customers that we is want start that with many year. the the we think sure we did sure category make I And obviously, make maintain serving in most overall We we're as this growing.

So starting that's a place.

obviously, that, years, in lot of that's mean know few a trends the Assisted given over got DIY headwind I we business our has a and last tailwind. of the more

focus that try in But a changes of So Assisted as to wouldn't be said, the making and to get Jeff flat share. channel we're back surprising. lot to

expectation. the not So it's it's base share the the definitely tax being expectation. but is goal, category flat a across Overall current

approach I as tried than this number for year? guess, well. focus Got share higher or area was or last Assisted higher helpful. it. follow-up Assisted share market share -- year, to last trying on maintaining of a will stable such more market initiatives and I big be big you've year a just a drive of Given had to last in quick one focus maintain different That's market And on you in initiatives. year, the know Assisted. how

what choosing us exactly mentioned right. not how mean, news. do X us us the that coming things there, mentioned a they progress for we We big the and and it's about did of so job were we big had do we work, they're you're among last lot customer good with and people that slow Block. They that's did to at really to already, clients able see good and didn't shift look breakdown and reasons of starting a I going execution. they're this brand. was filers, EITC choosing fact and But year, didn't some in were a as I understand converting the of they're to them a decline with I the to that's more is are process we enough will, times is didn't the welcoming for new Yes, sure. we I And And and year. when with couple the mean, finish enough who -- George, they to communicating starting a fully the us, year journey the last

real So experience changes We know new And what with emphasis prep. the client about on during emphasis. which tax an and in to the area then team has clients, specifically been extra think working office. before, is is the after we on of

Alex question comes of from Research. Our the Paris of next Barrington line

can hear you me? Guys,

you. got We

Yes.

add listening. We'll just you. to thank you. wanted Good, I'd forward is like I'm Tiffany, sure to congratulations and working say miss Tony. to look my who with We to to definitely you

Thank you, been Alex. It's a pleasure.

over years. great So you've been the

here. Yes, same

So to a fiscal dive just little into bit XXXX the more guidance.

basically You EBITDA adjusted X% growth at at at growth about X%. revenue EPS and have growth X%,

you the have of assumption do what first sort in fiscal repurchases XXXX? So share is, for question

'XX in over a take obviously, several I with don't time. we're trend happens assumed think consistent we've the price. you've targeting. the But Yes. opportunistic we I going approach driving as even similar to Obviously, obviously repurchase, some It years. specific we you repurchase the think to very But should of will share a the volatility done 'XX number we've and into in be gives Obviously, on which of seen did well. the is years. what stock advantage that's last we try last naturally be our I benefit. be to several what benefit in EPS some us But that share expect in obviously, mean, share

Great. in refresh first share the repurchasing the your of do you half of memory, my more year? And then seasonally, fiscal

buy reasons. this One come benefit, we on We better into we so in it And we call QX. a focus the couple typically year. of QX and in That's and get of is have earlier EPS it, the right. that a a do out for

lot typically season. tax Secondly, time of during in blackout we're a

the case. done So reason, season. years executed first been in of try to tax we've coming open season. half it do we most that have year. That We've isn't programs done market the out that tax the There XXbX-X of always during for where purchases of we've

always try the year. to of not it's the case, but the do So it half we generally, in first

regarding the growth And long-term algorithm. then Great.

have that some the for you're year I consensus. EBITDA I you entire Is XXXX, assume of just kind going ERC fiscal EBITDA this earlier range. that. revenue. to be not faster or to and guidance are numbers last at with repeat is low expect? of want question, it a But above you think growing versus growing the that there's revenue your built all clear. end realize For that I conservatism But is definitely Adjusted I than I said into explanation EBITDA some than perhaps in lower that is the growth to said, year. would slightly rate response

So [indiscernible] more. little bit just

a $XX retention is about Yes, credit employee yes, impact. -- million the employee retention the credit

which range, on end the end about $X in EPS of it's the lower I number that is the if received billion an Obviously, quite the a the a roll-off -- So from which incredible Top EBITDA it still feat. tax much that for the benefited has talked can of the the in try you comments. we over we in it higher, push even rate, 'XX. said, level bit it's opening where But if top the set guidance line is lower fact these numbers EBITDA range. to we as in in definitely wasn't is range, that achieve. And regardless,

tax exceeded incredible feat. if regular an I number that the even now GAAP EPS guiding to $X mean from on $X fact a it's or that's an in basis over a adjusted we is 'XX even and benefited rate and

So nuances, we to good same, the right. kind the about which the will, There's remains of P&L trajectory and is always but up year-over-year feel progress. you if the

expected Or to quarters? the the that gain that guidance, hit the above that you evenly going is Is -- tax to with share that the about benefit, over particular still quarter per result ask I a X wanted consensus. expect as that benefit, benefit. you to onetime Even excluding of there $X.XX that adjusted is tax EPS hit? a

No, Could the will quarter the we've audit will included fiscal we resolved why in it We're the statutes later in year, expire. that which be yet. definitely year, but and quarter in open sure will which exactly guidance range. hit is happen, the QX, once a we the kind it particular it could not be be of believe, in

Got you.

So the It's it's be you later or answered way year? that going question, the QX. unlikely in QX in to

Yes. by the the in -- but It's happen, possible. going happen end year. will We we aren't that's complete control when fiscal to it of of just

And then last I my you think question for is California.

I'm You revenue little California of got fall grow-over What's of that last does X XXXX then the 'XX fiscal much from that? I and California? assuming from spring. as boluses because October benefit to fiscal of the deadline that got How of contribute extended Because in for XX, XX you recall. a April to extra the because bolus revenue from

more And about probably drove much as mean the I because is Assisted extension California it year. it about prior saw, maybe Yes. the in category point of is X that way the how volume. think the up to industry you

think of you that all But -- driving is point equal X that's obviously, volume. not So X that of revenue. point doesn't of

it's So revenue XX% probably from of perspective. a that

So point of point X prep industry volume. -- of of revenue, about X/X tax of X

to turn to like conference now remarks. Michaella would Madam? for I the closing you. back Thank Gallina

and with Thanks, everyone, us. next forward look Latif, to speaking you quarter. We for thanks, joining

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

disconnect. may now You