H&R Block : Q4 FY2023 Financial Results Conference Call Transcript

H&R Block FY23

Financial Results Conference Call Transcript

August 15, 2023

[Introduction & Forward-Looking Statements]

Michaella Gallina, Vice President, Investor Relations: Thank you, Lateef. Good afternoon, everyone, and welcome to H&R Block's full year fiscal 2023 financial results conference call. Joining me today are Jeff Jones, our president and chief executive officer, and Tony Bowen, our chief financial officer.

Earlier today, we issued a press release and presentation, which can be downloaded or viewed live on our website at investors.hrblock.com. Our call is being broadcast and webcast live, and a replay of the webcast will be available for 90 days.

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

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these risks and uncertainties, please see H&R Block's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as updated periodically with our other SEC filings.

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

Finally, the content of this call contains time-sensitive information accurate only as of today, August 15, 2023. H&R Block undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call.

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

[Opening Remarks]

Jeff Jones, President, and Chief Executive Officer: Thanks, Michaella. Today we'll provide an update on our fiscal year '23 results. Then, I'll share more on the progress we continue to make within our Block Horizons strategy, provide initial thoughts on fiscal year '24, and Tony will discuss our financial performance and outlook in more detail.

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[Results Overview]

Starting with 2023 results, we had a good finish to the year and delivered revenue growth, material EBITDA growth, and adjusted EPS growth of 9%. As we discussed at the beginning of the year, we knew we were facing headwinds due to the rollback of the advanced child tax credit payments that were loaded onto the Emerald Card. During the year we also had foreign exchange impacts, stimulus filers that returned to the sidelines, and California's deadline extension.

Overall, I'm pleased with the results we produced despite these challenges. Our DIY strategy delivered this year, resulting in meaningful share gains. We demonstrated pricing power in the Assisted channel and saw positive customer satisfaction metrics, small business tax continued to be a growth driver, and we also added about 150 thousand new signups to our Spruce mobile banking platform.

In addition, our capital allocation story is driving ongoing value for shareholders. We completed another 200 million dollars of share repurchases in Q4 alone and today announced a 10% increase to the dividend.

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Entering fiscal year '24, we are well positioned and expect a return to ordinary industry growth, which Tony will discuss in more detail later in the call. Before that, let me share more about our Block Horizons progress.

[Small Business & Wave]

Let's start with our Small Business imperative that includes tax and Wave. Small Business Assisted Tax continues to be a growth driver. This business delivered 6% revenue growth for the fiscal year, on top of strong growth last year, led by net average charge, or NAC, which grew 5%.

We also see a nice runway of longer-term opportunities in services. While early, bookkeeping and payroll are gaining traction, and this year we launched a business formation tool. Our new internal sales team more than doubled appointment to sale conversion rates, accelerating growth in services. All in all, we are pleased with the trends in Small Business and continue to see significant opportunity ahead.

Turning to Wave, our top priorities are driving revenue growth and improving profitability. For the full year, revenue increased 12%. In the fourth quarter we grew average revenue per user while also becoming more efficient with our customer acquisition spend. We also launched a

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

[Financial Products: Spruce]

Moving on to our Financial Products imperative -

Regarding Spruce, our mobile banking platform, we have been utilizing learnings from its first year in the Assisted channel to address and solve the needs of our clients. Since launch through June 30, we have had 300 thousand signups and 334 million dollars in customer deposits.

Spruce is committed to helping customers be good with money, and we are seeing progress toward that impact goal. A higher percentage of users are now saving money, and the balances accumulating in savings accounts continues to grow. These savings accounts allow users to customize goals in order to save for the things they want in their lives - whether it be emergency savings or a new car. Our newest feature, a budget watchlist, utilizes flexible guardrails to help build healthy spending habits. Feedback from users indicate that these tools give them the visibility and control that they have been missing in their financial lives.

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