HRB - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day. My name is Ian and I will be your conference operator today. At this time, I would like to welcome everyone to the H&R Block Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session [Operator Instructions]. you. Thank to over turn Mr. the turn now to call I'd Investor of Colby President and Relations. Brown, Vice Finance Sir, you may begin.

Colby Brown

XXXX Ian. thank us fiscal you you, for quarter Thank Good joining to morning, discuss everyone, and third results. our

Tony Investor are today today’s our CEO We've call the at Bowen, on hrblock.com. Jeff CFO. the On our release website President Jones, and and Relations press posted

the our comparable Some non-GAAP basis. a release. are presented GAAP non-GAAP of and on the to figures that we’ll schedules figures in reconciled press discuss the attached today We’ve

Before as future I of this as information we performance. statements will remind call will current our prepared of expectations begin remarks, the this Such everyone date include defined Laws. on management’s that forward-looking Securities and based statements are are and guarantees under not

involve are uncertainties statements certain predict. that to assumptions and difficult risks, Forward-looking

results our a result, As outcomes actual differ materially. could and

in more forward-looking Q&A our obligation XX-K other we a filings. session. H&R risks You Block and will prepared these can factors fiscal these update our no our conclusion learn have of XXXX At publicly the risk SEC Form undertakes remarks, about for statements. to or

back Q&A, the I’ll ask call During to themselves follow-up jump after With participants to queue. which Jeff. we they limit now to choose turn with question that, may one that the a over into

Jeffrey Jones

everyone Thank very am I us. We're results. you, pleased start for thanks tax with afternoon, Colby. and season off to Good joining and to the a our strong

the me we'll call. let Before on into outline areas details, I the jump cover today's

we'll quarter expectations fiscal second by the our year. the and seeing will provide the followed First, our finally results, term of for and third what our financial then I'll our long I'll work; perspectives strategy a outlook on talk half in for give next, we're review season on our results brief industry, Tony the about mid-season update

First on provide few a our let thoughts strategy. me

we're in fresh long-term our on As call we earnings QX talking strategy. discussed December, a our at look

This delivery. improve I make about their assisted and challenged you the about position growth. to and today, will had to specifics past sustainable differently deeper business and continue we to than we I ways the team long-term DIY to in work us our us our have can go share allow think for don't to decisions business that informed tell While to and to

expect late an provide We to fall. update in

the to the on result performance, X.X% in show a of February industry Turning day-to-day XX. till basis overall the from latest returns IRS decline

shift consistent ended At within an previous coming basis federal the up we're in seeing slightly shift volumes points, with expect basis on results this the years, While season is Based flat to of better is second industry with fillings in of to early Early till and are these than season shift the year. are assisted year, than preparation last the filers it results, remainder moderates the this early Consistent is last in at with season. half point season the the assisted prior to approximately seen a day-to-day DIY. the about declines shift in what few consistent experienced approximately continue we results prior, see with the tax typical we've as increase this year half. fairly DIY. DIY total X% of point which Last typically year-over-year in season from a change February the growth what industry on more a to years. years assisted likely show season, greater tax to then to methods, from so to season the XX industry

their brought that providers the year, We a three Block we is which three season is previous on trajectory. Turning one, momentum to do, We an client This early years. in drive delays larger help continuing industry who to filers the federal approach again to XXXXEZ. our Refund our these two the client-centric the our Advance which our in on goal to improve clients performance, year to areas; for loan promotions offering products second new was for strength extremely and multiple new two, been offered Refund than relevant more attract execution. is for everything that the competitive H&R focused last improved business, excellence, retention. outpace Refund brand. face us build tax promotions prep Advance act. In improve Block to promotions, season Advance operational half loan season improving demand receiving partnerships the first for an Assisted including the in H&R marketing refunds for and interest-free the and of has and three, This we with in due is the especially tax and

Given we year and second a the EITC our strong our execution, offer in declines. were positive client an results for and clients area of historical stabilized significant row,

Block, to exceed their office. H&R filers expectations in the promotions drives must While we don't

machine now are more clients including enhancement, our tax occupation-specific engaged are filers. providing more process which Our provide expertise to for new advice the like learning utilizes C in pros value-added people our and Schedule

for personalized Additionally, of they the are in taxpayers affected. future to impact clients offering variables many assessment the new make this laws. The law of it ultimately know we're new our tax difficult how

into second season adjust the have provide XX,XXX in half. is great pay And and learn, XX these to nearly down gains this assisted with determine more our the tax offer IRS early new to or our Client expectations we're need. our and category to achieved expect with in increased clients clients of down driven X.X% assisted Block This volume our pleased of in line volume share withholding. just results, day-to-day then we personalized assisted we Our a so H&R performance advice, e-files overall tax example and X.X%. basis law to pros the if less while, is and value how comparable they will the with by the these them on do appropriately retention. positive February moderate how results many were translated under efforts a Collectively

promotion, Turning population to for of federal DIY, allows year More both free. to significant for second state file Block filing which Zero a H&R the tax portion this and their marks season the taxes our

strengthened places partnerships frequent to also Block more the most. bring the H&R they in to We consumers our

basis make to These improved and enhancements increased products on online X.X%. X.X% share continue capture tax and filers. volume positive drop strong comparable and to we H&R drag Block have our DIY seeing switch product with pre-populate our we're and IRS to driven Till easier Additionally, XX, day-to-day new ever results in translated with it increased forms February DIY for than and making information from market further to self-employed clients. gains by e-files new efforts results and a capability,

their experts all knowing tax, DIY in a identified which represent between. Both. needs version redesign and that to I'd We and This improved they or the previously trained of taxpayers peace and mind to credits our product of review Pro Now watch and Best has for Tax tax help, of for to Block return assistance way product available from per to in-person products Pro Review, is ways on little update meet deductions called no provide like begin count to has accuracy. Tax evolving our of one designed benefit highly clients complete our innovative includes also been want virtual of These Go. the consumer whether new an powerful reviewed have an anything can of innovative H&R range an on

The and both in going optimize has understand year the been forward. over but feedback filer a on our their upload time. portal assistance, positive. documents their this needs soft MyBlock meaning of virtual did comprehensive experience us prepared. a a Pro want of and one are don't volume our We update of tax of through forming want to time seamlessly visit assist product Go, in assisted will has pricing, attracted more client also have to offices. enhancing have our the these to Pro in types to virtually product Clients recons order did Tax this on Tax with work consumer products while launch Initial upfront one to products Go these the We're order who secure the with who season, of been pros our offering. of This view taxes products the or learnings focus to

results, week, Block we Now Last like the to covered promotion brought half our I'd that discuss new early season H&R as more plans season. back to off half to of drive I've the brand. the look second for the we clients

are we to we're to Additionally, with financial deliver them to provide our to more can deliver drive results in far. client in access In credit we experience. LendingTree an our continue and and easy clients to information exceptional help our space, the DIY optimize their help. with improve so partnering summary, And that product conversion order value, pleased

execution and excellence, of new on promotions call the results we value-enhancing is laser-focused that, to partnerships focus driving Our and on With discuss Tony second and over the our for the season. I'll hand operational results financial to outlook. half and products remain

Tony Bowen

Thanks Jeff. everyone. Good afternoon,

our midpoint pleased mentioned, with we results are the tax this Jeff at As of season.

were results line with our in financial financial and track on quarter December. we're provided to the in third Our we outlook expectations achieve

of with typically result X% increase million. saw charge inflationary business. into quarter This get the fiscal seasonality or are our total in an report volumes not during Starting representative third year-over-year to details, X% results average net U.S. a increase quarter to our performance. of increases of due in XX million [safety] of our a reminder as I business. through third we primarily the loss we Before $XX Therefore, client is and planned of January $XXX the full-year revenues, in

advertising lower well $X to partially cost, total planned Turning expenses. contractors timing and operating primarily expense, variable associates. to labor to related marketing which million as to higher of conversion due the The of is or revenue to cost cost due by million offset full-time increase compensation were $XXX the as U.S. expenses to X% compensation in increases increased in increased

in due a advance As refund $X,XXX addition the XX% of we increase loan ended mentioned, average results amount the at the able on tier, saw level the totaled to refund maintain last same and million approximately XX% loan over the while advance loan increased cost for were year. the $X.X applications Jeff per program of XX, to last positive this season. February we In year

draws to on improved due expense credit loss $XX lower line of through Moving saw from prior our pretax of $X the all by this compared together, the income million year. continuing the statement, remainder million. Putting interest to we operations decrease

federal and solely third was share is company's tax legislation. $X.XX unique the in be impact loss on changes rate $X.XX enacted be from will to update X%, our fiscal to increased a range from the an effective in year However, rate, X% recently XK resulting changes range corporate The tax expect our fiscal the to fiscal these now of anticipated is our per tax the $X.XX the from due rate as impact to negative filed January. tax to We provided in quarter favorable effective which in basis. previously year to

fiscal XX% our range. expected For is to beyond, 'XX tax effective rate to be XX% in the and

As core our fiscal changes we anticipate business to taxes. to the a from impact recent any in individual reminder, don't 'XX

offer outlook on 'XX fiscal We business core clarity changes will our more on impact when our potential of in these December. the we provide

agreement discontinued operations the a 'XX. related made in payments in settlement of Corporation to were $X.X from previously Sand which accrued quarter, Turning settlement and million Canyon to fiscal

please refer information and in on and company's Sand SEC the filings. disclosures Canyon, XXQ reports additional on other XXK forms For to

entity been always legal operated a H&R As as Block. from a Canyon Sand has separate reminder, and is

we position We December. Overall, provide our line to to financial In any improvement we thoughts enhancements. on be and promotional now client to our trajectory client continue in arguments. experience expect with on legal Assisted, for to strong expect outlook I'd provided like our our 'XX. veil-piercing driven offers we potential by outlook results fiscal continue in in the believe is

projection turn inflationary on we continue of we In consistent modestly are overall message investments, price and EBITDA to repurchase planned that to shares for we with anticipate to of expect as year. net the with December. in XX% Considering impact back continue increase volumes fiscal at fiscal over we With high that, client average moderate, We QX. we No remainder and the are now The net the respect call repurchases on outlined result did margin significant range. growth to deliver is share end capital our repurchases, increases With not this cost revenue revenue the 'XX. call QX track inflationary the Jim. share allocation, to DIY, in with the charge any of to to expect shared regarding in XX% 'XX. I'll consistent the

Jeffrey Jones

with pleased in DIY performance our we're clients Assisted so delivering both we channels. our In are Tony. the industry as far outperformed and Thanks summary, this for season and

half, keenly the result line the focused report we look With plans to season. in full-year sharing June. our our on we second moderate We the when of executing we the While results open to for expect in more future now Ian? that, questions. remainder our for are we'll forward

Operator

Our first question line from from Oppenheimer. Scott instructions] [Operator Schneeberger the of is

Scott Schneeberger

Thanks. and the end when and a versus Jeff just off, of follow commentary clarification you Hey, or if up we X.XX% please. HRB just industry expect X.XX% start the reports on this might also to any could IRS could a from what performance week DIY we the results and IRS I Assisted rehash at to it in see have if versus Tony, have

Tony Bowen

then and Assisted down excuse me, February was we and IRS increased X.X% our category, and XX. and those X.X% increased Yes DIY day-to-day Jeff's through X.X% IRS or e-files so, down going back business the comments, in X.X% are the both in down is are X.X%, assisted to opening

Scott Schneeberger

Thanks Tony.

as Just season this and guys February little start you for very January and looks versus it of past. congratulations the obviously strong it looks well that, following lot a year were was gate, up, the to throughout a later like out strong

on So, bit start, a feel comment you that what marketing it attribute little if more strong thanks? for the start please immediate guys be honing that products, the to initial just strong could you

Jeffrey Jones

so Jeff, in as Tony this it's may Scott, kick Hey well. add and off I'll

year open open itself January, and business the early I changing play our really we in think come offices. the just EITC than higher the was and date I despite e-file loan as and in a did this starting season had So, promotions solid see and great came in strong we with saw the in in of so around clients travel country, trajectory that and tier for refund I so an delay as We example, events. out ready early network past also with execution the out we

the So, the to I did really in us off business. a combination assisted those of get things think start help good

Tony Bowen

just Yeah than in pulls the clients to advance we saw think last Scott, and add I product earlier year. to refund definitely that

clients row, of retention years lot coming a in we're earlier. clients think advantage lift for and having product that driving prior two it's and really I of a new that in from seeing it clients obviously is take just coming benefit

definitely growth the we fee for that we're offering, knowing to us then off product So have got the strong income that second early. year, a think I tax start

Operator

And from from our Capital next question is Silber the BMO Markets. line of Jeff

Jeff Silber

Thank the to about you you or on but so focused half your you well. be talked anything want moderation you're to season am will because refund I solely not offering much. In we of of the as DIY in expectations that fine is talk Assisted, for about half some second But season. the specifically comments, in second if advance tax is Assisted there need else understand?

Jeffrey Jones

as same and do Jones. I'll Hi let Jeff well. the Tony is Jeff this chime in

lot I factor expect our last we positive we all assisted really through when what that Obviously, through move So good a is how I'd estimate. to our on season. that of best we just know, the so is based moderating we of continued balance as consider promotion come. we're about see our second as last to we But business season. results terms we at through, we there kind see halfway of We the we Even year DIY the of are in In we what weeks look launched factor the week, what say we in about move we that’s XX% think, couple in. really seeing obviously performance. still the half last of season. the the started When feel performance, momentum

Tony Bowen

think don't I a add. I have lot to more

year, go, I got half, which of But performance a forecast you range and said, still we settling to here. of improved it think second last though claims even a Jeff first our year we in bit we were in the bit running year, a little didn't we're at add to little of think fairly back of while we half do on off have will we're lot As XX% tax from season down season the tax the if small the look part trying early so March the we lost also this side. gain get seeing we of we assisted that And share. a last

Jeff Silber

just if clients? that that And no to describe longer for correct? can things is of available half-off specific this Okay. the clarify terms is is in just few now, refund just And promotions you advance the available promotion, are

Jeffrey Jones

February and advance both refund so Free XX. XXXXEZ promotion on ended Yes,

essentially are client competitor. year done. whatever is half paid they those XX% a last pay at off So of

bring they experience only example pros, the And it's in it's their our him and independent our to we offer available half. to from their taxes into store new So, tax an for expertise trial clients. get for do receipt a will really, experience to and

Operator

And question Associates. our is from Michael Millman of the next Research Millman line from

Michael Millman

RAs, bit Could EZs about I and you that you what Thank number could and did new kind free to Free extent kind thing what was Thank a broadly was think how were repeat free last of you you. this EZs many? little year’s much for And it did the EZs for you you the new upgrade what get? do you. talk how more existing, same mentioned get particular business of What year, business? in

Jeffrey Jones

tier your $X,XXX. was new loan I loan this Michael, of RA new especially what the was take think the amount, offline, this higher question, year

really And value is proposition increases We awareness applications this $XXX, but quick as funds, advertising whether be value, to clear in value understand interest $XXX, and will was fees, -- execution, that a about free, grows on that and So, no a that $X,XXX this continue all all of access our us. we year we I to that in executing product loans local make just or was did did nice for to it national it offered think $X,XXX. we then in its solid and office to saw clients job really product sure channels clients.

Tony Bowen

to think just specific and question clients to that, I add priors. And or Michael your new about drive to

I obviously for we Advance those job about two together, we on in with did old nice EZ, but us disappointed clients, clients. will Refund it's really little you programs the specifically prior about clients. from new better and opportunity They a think talk we of get both how brought volume were of in lifting a think out think I years new clients programs and still when for saw new an I focused

As far in at towards detail share as bringing all that did that I we like don’t said how new. upgraded clients, that this programs more skewed clients than prior to nice we many point. job But but have want of and were a

Michael Millman

this Could you Free EZ of give of year? us rough size the program last and idea year the

Tony Bowen

we by this are point not Yeah, sharing at Michael. form

Michael Millman

Can this last we or smaller year assume it was than year? bigger

Tony Bowen

you I I to competitive the so Well, perspective. think share a not Free EZ, EZ, because provides said specifics think going we from information much for for that Free are

Michael Millman

Okay. I tried. Thank you.

Operator

line question Alex And our is Paris of next from Barrington Research.

Chris Howard

agreement structure that my from tax these something push to expectations? additional This you or had possible in of increase announced for that each quarter. or those are a up is as versus I DIY, afternoon. the the your question been relates Good partnerships the partnerships I rebid of to, it in it last saw is X.X% comes what I in season? for Is Paris. regard Chris a Howard proposal knowledge going filling And is that How partnerships? you guess to guess, Alex to multi-year internal it

Jeffrey Jones

of three in off, and not overall DIY a it to business, value people good what very will tell it, its it. starting but a Chris, I the a lot at great we're I keep are is Jeff. helping DIY think this growth. seeing very to I we're product simple those I think think take us drive about oversimplify to so And things

we're represents were going a seeing to improvements not but way to the continue the units and both the partnerships, think Wal-Mart Block bring consumers can in Amazon where individual channel we I cases, And believe all we’re shop. partnerships this break and announced that sold. in customer two than Now out that we they brand just in the more to we H&R year it places performance,

and about long sites. both what term good your So, DIY good those structure, Amazon overall, they But had the we their online partnerships to Wal-Mart. as feel And on year promote with feel stores its various want about negotiate those business relationships question determine and to we we've each about in typically, performance. you products they specific

Chris Howard

and be helpful. has And that that any in contributor last perhaps you rates able more offerings? material and on. to you're regard one these of there mentioned new attach share be that a a Review Go That's Go, Are had later to question then soft regard launch seeing you Okay. to it'll in or would trends

Jeffrey Jones

No.

pros role DIY, in I portfolio. the leveraging providing that. think and all fill help tax products, the play of between both in those our Assisted we business they love do starting gaps therefore the fundamentally, to It's to and about

engage. in we're we positioned of we're Pro redesigned terms of just our Review to really well the not. about that of are to kind provide Go it for the more trying that So, versus Pro easy service cases, brand it's Go understand about more Tax to Tax as product And with trying they both attract Pro engage Pro Best clients we keep choose new. people user kind as to to Tax Review, we're on possible and experience, Both. think Tax whatever from marketing. competition. we a incredibly us

for what not we're I So in important integrate portfolio and this do the volume but products we getting next. contributors us learning really positive and large some expect to very improve that year,

Chris Howard

the you for color. Thank

Jeffrey Jones

you. Thank

Operator

question Hamzah of Macquarie. line our Mazari from And from is next

Unidentified Analyst

how walk we versus and is your customer rates for retention you filling in Hi should your us guys. This pricing about think [indiscernible] current Could targets? strategy Hamzah. through,

Jeff Jones

and Assisted Yeah, I different obviously think our pricing DIY. in very strategy

exactly inflationary went more and probably that's we're about You're asking expecting increases what the into year price We delivering. modest Assisted.

to the the wants for we we much to trajectory a nimble includes example, targeted bringing We we places last model more additional going tried value to living, that clients, approach forward be and know be early our a change clients got those of price, but and do about delivering. who over from been the over couple got and years in from Advance thing, loan for not pricing we perspective. our new fee think the not and breathing a there's enough Refund we're that no in we're where clients client refund how its adjust we're incremental we our no years, out definitely pricing trajectory. and pricing but couple but significant quickly made value of in to definitely a we season last figure think client feel change cost, only I that progress good the delivering

Unidentified Analyst

the and Thank DIY and update and that a us side? dynamic in just I'll competitive Could perspective be you one it seeing from you on turn over. you changes might any

Jeffrey Jones

positioned relative feel well like we DIY. the market we're in to Generally, leader

have we versus good As starting We're story. a more proposition celebrating review We value DIY earlier to tell price in really I that very competitive and we're more mentioned product. third-party and got TurboTax starting a our product. to see

we to TurboTax it. relative assess how So that's

seeing I'm what, think sure be good continue we at of beyond who excited results kind for us we're doing hard most tell that from network. it's I that might for and about but what stage to is improve the to else product this

Unidentified Analyst

guys. Thank you,

Jeffrey Jones

Thank you.

Operator

questions. Mr. it at other Colby And to now showing there's back no Brown. audio turn time, I'll I'm this

Colby Brown

Okay. call. Thanks joining again, This today's everyone for us. concludes

Operator

and you the Ladies does Block third for We conference quarter this conclude call. H&R your gentlemen, thank earnings participation.

may now disconnect. You

H&R Block (HRB) 6 Mar 182018 Q3 Earnings call transcript