Earnings call transcript Q4 2023

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Operator

Thank you for standing by, and welcome to H&R Block's Full Year 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]

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

Michaella Gallina

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

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

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

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

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

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

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

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

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

Jeff Jones

Thanks, Michaella.

provide our will Today detail. more thoughts 'XX progress Tony share strategy, and more our on our we within and we'll on fiscal performance 'XX, discuss continue fiscal an initial on results, outlook provide Horizons Block the update year year then I'll financial to in make

EPS X%. good Starting and growth, the EBITDA year of with to and finish adjusted revenue a material had We delivered growth, XXXX results. growth

knew child the due the at payments were tax the rollback beginning of onto we we facing were headwinds advanced discussed to card. loaded As credit that the Emerald of the we year,

filers the these pleased we exchange we extension. California's and had the deadline year, stimulus with returned despite challenges. Overall, impacts, I'm also the that to results sidelines foreign During produced

pricing be growth power XXX,XXX to We in in customer this also small to about and we Our our saw positive and meaningful metrics, the year, satisfaction mobile a delivered share channel driver, resulting sign-ups Spruce continued DIY platform. banking Assisted demonstrated new gains. added strategy tax business

capital our We story and of the XX% ongoing in increase million another repurchases share today shareholders. value completed dividend. alone, $XXX for QX announced addition, In driving allocation a is to

Entering and 'XX, which fiscal growth, a in to Tony more industry year well detail will discuss we the in are positioned expect later ordinary call. return

our Before that, let more about Block me progress. share Horizons'

business be our average imperative Wave. net tax driver. growth start This on Small revenue year, last growth top Business for fiscal the a Business includes that delivered and continues Tax NAC, which by Small grew strong X%. Let's led X% to with Assisted or growth of charge, year

see a runway nice opportunities services. We in of also longer-term

a we traction, and While launched early, gaining year, this payroll bookkeeping formation and tool. are business

than team continue Our we to all, the doubled conversion in and appointment see All ahead. growth Business new trends sales rates, are with the internal Small sale services. in opportunity accelerating more significant to in pleased

and revenue our profitability. priorities Wave, to Turning driving growth top are improving

grew average we per becoming customer year, our efficient XX%. revenue more quarter, with In full spend. the while the For user increased fourth revenue also acquisition

to anticipated roadmap also of manual working months. the We reducing has new coming bookkeeping. seconds, roll Its receipt feature data imports now in processing faster in been a robust a that on out scans launched and new than uptake we for other and features are

our on products financial imperative. Moving to

impact million our to the money, is in Spruce we're mobile with needs in its goal. address of banking and deposits. utilizing platform, and our clients. and solve Assisted through customer customers year learnings the progress XXX,XXX toward Spruce, seeing June XX, Regarding sign-ups be launch have committed Since that channel been we helping to from had we've first $XXX good

and the to money they A to now higher for customize in save are in These in want to accounts the balances percentage savings new a car. savings lives, users goals accounts grow. their order allow continues accumulating it emergency saving be or things savings of users whether

a these clients newest to in help Feedback visibility season. from feature, guardrails they've spending budget been control the them and utilizes are healthy watchlist, give users in out indicate focused we tools build From tax lives. habits. that and on flexible Our financial their of the missing that acquiring here, both

expertise human however fully virtual to want clients turn to let's they be between. all fully digital about tools Experience, to in-person Block which blending Now to everything is in with served, serve and

to and with especially delivered set results. we what we do In pleased we the were on out DIY,

of our growth growth product to and quarter, share multifaceted worked, easier the product, basis As share that by goal DIY improving as awareness increasing XX points offer switch to you we client of recall, it This by strategy growth. TurboTax. last by from online we and was we making XX, through and to reported April saw a return X.X%

fiscal to in looking momentum 'XX. forward are this We continuing

through successfully Assisted, NAC X% we In company April satisfaction while customer increased strong receiving XX, by metrics.

those shared We growth continue $XXX,XXX saw quarter, over with last also in clients and of we than to progress tools. see income. of higher the attracted And more adoption XX% in income virtual as we

on that focused is next and the into Although us, stimulus more return we sidelines, we're year. clients filers shows now the to the saw bringing new channel dynamic Assisted data behind

an its have to experiences technology better partnership our into may faster fuel we services industry-leading leading announcement, OpenAI entered recent Azure seen genAI for taxpayers. you to and As Microsoft and with from leverage

world models keep data been advanced have believe we in time, top the building capabilities we the some can for progress a priority. our to security we While continuing accelerate most further leveraging while in-house AI by

focused first, deliver and second, expenses enhanced two productivity; be experiences. areas: to We increase reduce using and to on will genAI initially customer

efforts excited Block. We have on and the dedicated teams these for working possibilities H&R about are we

lies services the over within features to few our products, back years, Horizons we're our ahead. strides significant made and in forward Looking strategy, last looking Block we've and what

Tony it our to over turn me outlook. to and financials let discuss Now,

Tony Bowen

Good Jeff. Thanks, afternoon, everyone.

and provide outlook our capital XXXX, our for practice. on strong Today, fiscal share review I'll allocation more results detail on year

We higher revenue, U.S. to an increase increase billion was delivered nearly $X.X due over $X million last The of of year.

offset by Assisted a revenue. tax revenues, preparation in Emerald card decrease partially

As a the of $XX the was advanced tax rollback the due over reminder, child card from Emerald the to credit. impact million

also We million. negative $XX foreign of impact had exchange a

we variables, were to I'm pleased top-line these Given the grow that able this year.

of operating We continued and footprint expenses services. primarily higher lower of footage. from Total consulting optimization about wages million, were offset billion, and efforts $X an approximately as increase field by our unnecessary to $X $X.X driven outsourced by eliminate square million we savings saw partially

draws. a last by year, interest compared of of rates due credit expense higher on our to partially notes expense decrease our on to $XX million, XX%, interest or million, $XX and offset about to lower Interest interest was expense line higher higher due

million, income Other interest income. to primarily $XX higher increased due

million, As an rates was interest $XX increase income discussed, of Pretax $XXX net about we've a benefit were given higher year. million, the X%. cash our throughout or position

continuing to per tax share meaningful aforementioned from or despite to increased increasing share Earnings $X.XX, from X%. XX% headwinds continuing earnings from effective increased $X.XX This rate from to from is XX%. operations as $X.XX well $X.XX, operations adjusted and our per growth as the

sell longer-term opportunity just to acquired this our feel about willingness We pleased supports how us franchise are revenue great over we growth. 'XX. Lastly, to locations in franchisees' with XXX and

at We of the clearly fourth the share completed million price in average half repurchases repurchases retired another already remains of shares fiscal $XX.XX. In first outstanding X% can results, million an in 'XX, our after in an you year the $XXX completing As of capital of of our see $XX.XX average of quarter at allocation strong. $XXX we story year. price

to million the we from million, XX% Over approximately float. have five last shares XXX of years, XXX outstanding or reduced

We repurchase is continue to great believe use of share a capital.

to mentioned also we today a As dividend. XX% Jeff earlier, increase announced the

decreasing years, dollars about is XX%. dividend capital the approach nice dividend, by shares, the the the Over the which so created we've has What that many great flywheel. paid is because we total five acquired increased has about have a despite increasing allocation been last

growing a shares. and As buy shared, flow, produce amount we've cash and meaningful significant consistently a dividend, pay back of we stable

over cash alone return million we generated more and shareholders. This of Our to goal amount free is shareholders year to a of free to flow similar XXX% flow returned or cash $XXX annually.

flow free the cap, XXX. is free market year 'XX, S&P calculated by fiscal For yield, cash over than more times which our three cash XX%, as was flow divided

Now turning 'XX our outlook. fiscal to year

me let assumptions the about more share made: First, we've

in changes are We is the believe do shows in not there that anticipated, and X%. that are next major year would average, will Data we behind usually year. and which this remained about to filers law line is return tax to This has with typical change assumption. growth year, industry employment the strong industry any of filers dynamics stimulus this next correlated historical foresee no now us,

to always increase assuming goal tax also market U.S. are our we We but is share, overall maintain share.

FY continue to single-digit take executed pricing, 'XX. low we expect successfully We as to in

to specific for Our scores strong. customer value remained price have satisfaction

remain capital locations, continue Additionally, to we and ongoing, with committed franchise see to in value allocation our share opportunistic buybacks. strategy repurchasing

a be fiscal 'XX per billion; effective $XXX adjusted in to to and to to EBITDA be approximately outlook range of of is the $XXX for: result, the the to $X.XX. million; to share As in $X.XXX in revenue tax million XX%; be earnings year our $X.XX be billion $X.XX range our rate of range to

are feel we In summary, we great how about positioned.

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

Jeff Jones

Tony. you, Thank

day and forward our tax like As and November. first help provide quarter looking sharing to we another I franchisees, communities and confidence year, our reflect in next accomplish the every I'd on the all in the associates, in embody our passing clients to who for am purpose I of everywhere. to and results will our year thank inspire professionals,

Now, operator, we for the line will open questions.

Operator

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

Kartik Mehta

back Tony. Assisted that next and DIY wondering total to you do growth of said tax returns. I'm Jeff, and I changes you year or anticipate going both of in that terms for growth? you Jeff. Hey, Tony anticipate what X% kind know normalized Hey,

Jeff Jones

potential while. our hasn't really, IRS, we the think Yes. normal, anticipate, from next doing any we we when it a has what for year. we normal do the potential But we been changes of always And put are we employment, the mean, I employment by what aware for coming as that Kartik. work seen trends we And what year what obviously, and about we year, in the things the not through industry we changes see do assumptions the industry, been the see channel. from through IRS. horizon on look about a think about are those together the trends, we've do some go general in Hey, strong,

you want to anything, Do add Tony?

Tony Bowen

about Assisted year, we this versus your think had fairly couple to be continues Assisted I mean an term, to though we Even the in DIY, Kartik, over flat. I grow DIY DIY a going we percent. Yes. believe is year question think unusual long

DIY. to Assisted from migration slight a probably So

Kartik Mehta

obviously, of Tony, or Jeff been you've then, lot returning shareholders. to And a capital

You unusual? -- XX% growth Was had sustainable? dividend year. dividend this increase the would something it this that a that year Is be

Tony Bowen

it. Yes, I take can

mean X%. the last years, I talked Obviously, the we've been think adjusted we our over it's though the been raised it's increase line. We dividend essentially about EPS dividend. dividend sustainable. doing in growing XX%, I bigger we've so increasing than a few even definitely

I given in think share the prefer price. take the flexibility volatility and being see when buybacks, do else all equal, can we to the stock we we advantage

comments, fact buy outstanding, that which my in I paid shares opening and is actually obviously we amount. dividends been we've the reducing total mentioned But reducing shares, back can in as

to see we've dividend shareholders. amount going which flywheel very this I which, XX% even is as slightly mentioned, creating this So, effect, dollars even even nice increasing the is you'll that we think flat I been year, dividend up being for though think and beneficial down,

Kartik Mehta

Perfect. appreciate you. I Thank it.

Jeff Jones

Kartik. Thanks,

Operator

our Please next for Thank standby question. you.

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

George Tong

I you. the DIY to help income and And a assuming you talk that Hi. year. side, for internal the particular performance afternoon. dive in Thank this share focus you past share What initiatives with a wanted share some Assisted little had about Thanks. market for in what performance? on improve the lost to some year, category. categories? your lower some Good are Can bit assumptions of into next you're Assisted

Jeff Jones

in do This August happen. think good low earlier Jeff. refunds. about has focus us we simple a feel prepare the for particular, most three in here the for filers, clarity year We point starting sit proposition year. have is job teams in communicating very talked our as think their George, for lost is I to that those are The about happened we the of we as in to we what the the EITC Thank great I'll when why on In this year. consumers terms, real clear next we reasons question. year. are business the the I last about market Assisted income And being value better what looking in a this teams off. the Yes, you. call kick

share trying to Assisted. next In said we opening of to we expect looking be flat, terms comments, our to year we're always share in Assisted expectations, and grow our share in but as

doesn't change this DIY we three-pronged plans, feel took to strategy it just in and So, performance our share our tempering about improve And able we and again the very good to our continue year, anticipate expectations. it's that we being in DIY, next year. take

George Tong

the the helpful. AI. to there moving the in of which of industry, two you assess potential landscape? of the talk number space? the about parts program you're doing then, two developments how And if would generative strategically Can Free anything broader impact a response how and in these Got you tax changing And are it. That's -- are internally in prep to IRS' File

Jeff Jones

Yes. Excellent again.

very Gen are dedicated teams opportunity first mean, integrations. who We we prepared a in about leaning of I So, little in and absolutely have all, want our start AI, remarks about excited at building in talked but I this, to we're bit the with there.

and with side. side, cases, share those experience those public lot we're Microsoft two use Given on customer expense as one the to specifically. make a the detail our more initial OpenAI, partnership to ready Obviously, on one

well not. adoption technology The understood, generally is customer the is

We've specific so, a use journey to of learning very begin use excited that cases. And cases. deploying by two number we're very identified

year. savings learning, experience, that for ready and to parts. moving I opportunity but think on in More the business real get very it so, in we're could mean teams punchline the see cost detail, based leaning the is are and various fast what to we in And about come for customer in excited both and

would the simple the as we the a concern On this, the to threat real do material IRS like know in a it a Free free and option, terms, support over We here. ultimate isn't and tax entail, that that about prep see problem prep. consumers File is product really ability we've not there There profits ultimately and not cost to market that taxpayers there seen business. to are what that of for IRS' XX companies are clearer offering tax it organizations, make a already

with on said, Gen we what by stand to building and we're very experiences remarks about to respect very continue those to And I that AI, excited are so, great focused do we do. like And opportunity.

George Tong

much. Thank Got it. you very

Jeff Jones

Thanks, George.

Operator

Thank you. Please standby for our next question.

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

Scott Schneeberger

afternoon. Thank Good you.

question, first you than guide mid-single X% the want aspire my it For to more which to year. is I touch upon term, -- a growth, bit which about the what think implies to digits. X% next revenue lower little in for I longer like Looks

tailwinds the way little I'll what you in the takes, is, guess the see puts you the this I a year the lower? headwinds, have that So ask question as do upcoming and

Slide first is for five Tony, probably, this, of -- are the about market ongoing pricing, the order you revenue-related: part those bigger bullet what's all growth, you. get rank of XX, -- are go this -- assumptions is, talked what points drivers so four acquisition. we Could revenue that low second with year? for the you sense And industry growth next the bullet on Thank a share, franchise single-digit you the of your

Tony Bowen

lot saw it. it X%. 'XX. which to is there. I we're headwind to long-term 'XX, There's perspective I in at, looking in a bit of moderated. unpack There's Scott. right. I is guidance that little a thanks, at I contrary But in we've a mean the you're it's what go as our a that not through to Yes, range I'll from think looking set getting try we specific mean more X%

tax a had return that. we're we As think the have obviously, we to we Card being will either. season very rollback Tax of of crystal But unusual going things a Child talked ball we Emerald Credit impact the the to expected about a it normal. and to the headwind a into we offset. Obviously, number 'XX, and that of 'XX, in related We other had overlapping essentially don't

growing place growing a So, I place about I EPS range, think we And feel the growing feel of great outlook we've outlook. we've higher to all revenue I set EBITDA outlook a essentially revenue the three We've really about, achievable. faster talked set that's at more X% that's at set of than And XX%. revenue, to at the X% also like and the those to combined, as mid to get in end outlook early Spruce, Small even have delivering still in things that those, Business, the services of, from imperatives be experience. without innings we're to have in in But that whether we the growth have that's is EBITDA Block got at top growing incredible EPS growing healthy said, which of X% on like year. faster top-line a growth a I and digits, this double business We've growing, level. doing

said thing one went ETR incredible And growth mean, still tax we 'XX. were EPS a I overlapping rate then comments of XX% I I X%, up feel pretty we in in to is the about the And really we're change. But really, in opening show about. good XX%. 'XX,

completely head, how think, far these rank As things, we don't as stack have in do my clear. I that I

can we I essentially consistently. we grow than a the key with low having in smaller EPS but point additive. Assisted executing obviously drive client volume are that, and growth. some obviously, foundation. then the way buybacks it then, that's -- mean and DIY. kind in our of the franchise I revenue drivers And then are And of we're of of We about. those getting repurchase been The mean, doing think the I share layer single-digits, all of healthy to then both obviously, talked on we've EBITDA last puts But starts them as that's ones. is managing pricing the driver big that revenue. takes, are There other a revenue. expenses faster can

how it. I about So think that's

of about a digits But it. the end of a feat, there's parts. good day, growing the feel and said, incredible pretty lot think moving double is at EPS I like I I

Scott Schneeberger

Good answer. Tony. Thanks,

covered You looking for. what I was

As You're a that, faster revenue for to inflation? growth follow-on expecting EBITDA than you what obviously growth. guiding expense are

changing thinking rent, mentioned labor, are low-single inflation there? the marketing, year-over-year? you And about overhead, pricing of how anything And technology, you digits. Just year-over-year dramatically

So just is the what the on curious inflation side? assumption cost

Tony Bowen

definitely We're assuming inflation. Yes.

year. versus moderate last more little a it's think what we had I

you team, As line turnover when we're no less year revenues, pro cost impact. like competition in which look the labor seeing is is moderate We're relative labor] with know, in essentially those were a so bit and (ph), our inflation leaving broader broader [tax what Scott, variable -- largest wages expense direct things item, ago. to of running at you But less people they the little seeing a market. also less full-time from

costs I last and and we'll I'm supplies our up, some go built year. like what were at think we at a plan see continue but in into buckets moderated than more to hopeful utilities, running we rate

inflation. I you'll see think So,

it do obviously, than I overall, as ultimate grow a be last this earnings that And moderated bit like things items from year. bonus our accrual to faster revenue well. Obviously, more is to what about guided the But we saw being is goal. we've have to able and year. think will other we what little I think

Scott Schneeberger

saw even not than the assume too. The deadline But bit may, -- impact just Really since that I heard extension curious involved from a better trends of that And last you public what up getting we're if Jeff on what season. call, Thanks. yet. the we know expected. you been little -- California, in a here, one maybe I more, I have to

on last. But did just on extension bit curious little your you. to want better season comments this than versus Thank You -- guide. a your

Jeff Jones

in lonely, I extension that. Yes. come that share in appreciate mean, generally Thank our mean know still deadline California, we Yes, seasons, was feeling down you. will closer I and expect In year, specifically October I of we extensions volume I most Scott. we of we were to -- that. XX. this experienced the California to that

open But as everywhere. open We capture we're reminds are Tony offices keeping me, to volume. always not additional fully

to we're expense and preparing learning to side grow. are on on think for our what I the the for we the and So, teams can trying to focused balance this importantly, revenue doing compete side, just get ready tax fair share year capture But the to season most based 'XX.

Scott Schneeberger

much. Thanks very

Jeff Jones

you. Thank

Operator

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

Michaella Gallina

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

Operator

for you This participating. concludes today's conference call. Thank

You may now disconnect.

H&R Block (HRB) 15 Aug 232023 Q4 Earnings call transcript