H&R Block, Inc.

Thank you for standing by and welcome to H&R Block's first quarter 2022 earnings 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. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference may be recorded. Should you require any further assistance, please press star 0. I would now like to hand the conference over to your host, Michaela Galena, Vice President, Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and welcome to H&R Block's first quarter fiscal 22 financial results conference call. Joining me 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 will be available on our website for 14 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 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 the company's other SEC filings. Please note, some metrics we'll discuss today are presented on a non-GAAP basis. We've reconciled the comparable gap and non-gap figures in the schedules attached to our press release and in the presentation. Furthermore, the content of this call contains time-sensitive information, accurate only as of today, November 2nd, 2021. 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.

Thank you, Michaela. Good afternoon, everyone, and thanks for joining us. We're really happy to be with you today and excited to talk about our first quarter. And we have a lot to share. Over the past several months, we've met with many investors and analysts. And today, beyond our thoughts on the quarter, we'll address many of the themes that have emerged. I'll begin by summarizing our results and providing thoughts on tax season 22, then I'll share perspective on the value we have created over the last several years and the levers we have to achieve our long-term revenue growth target of 3% to 6%. Finally, Tony will review our financials, fiscal 22 outlook, and provide his thoughts on the value of Block today. Turning to our first quarter results, we continue to see momentum in the business. As a reminder, given that the tax season extended through July 15th last year versus only May 17th this year, our quarter ending September 30th is not comparable and does not clearly depict our performance and progress as we're off to a great start. We saw strong revenue growth from the Emerald Card and Wave and effectively managed costs while appropriately investing in our growth initiatives. On the capital allocation front, which we'll dig into in a minute, we reduced shares outstanding by another 4% this quarter. As we look to tax season 22, we're well positioned for a number of reasons. Over the past several years, we've invested meaningfully in technology and digital capabilities and have made significant product and experience improvements via our block experience imperative. We pivoted quickly and learned to operate more efficiently during the pandemic. And our customers have taken note as we've gained market share and just completed our best tax season in over a decade. Our value proposition is strong and we are continuing to add product enhancements, including help for retail and crypto investors. Overall, we feel really good about the platforms we're building and our efforts to retain the clients we serve. With that backdrop, and before we dig into our growth plan, I want to highlight the progress we have made and where we are today. Our business is strong. We have a proven track record of generating cash flow, driving EPS growth, and returning capital to shareholders. Since 2016, we've averaged annual free cash flow of $465 million, an increase of 29%. Including the most recent quarter, we've grown the dividend by 35% and repurchased nearly a quarter of shares outstanding. In total, these actions have led to an adjusted earnings per share growth of 78%. We've done all this while investing in the business and have strategically positioned ourselves for sustainable long-term growth. Regardless of year-to-year dynamics, our robust cash flow and capital allocation strategy are evidence of our ability to deliver shareholder value. With that foundation, let's now discuss what we are doing to drive growth. We have had our foot on the gas since announcing Block Horizons at our Investor Day last December, where we shared our long-term revenue growth target of 3 to 6 percent. While we are in the early innings of this next phase of our transformation, we're focused on demonstrating meaningful progress to build investor confidence. We have multiple levers in place to achieve our goal. Let's start with the industry. The tax industry has grown consistently for a long period of time, averaging a historical CAGR of 1 percent. As the industry grows, so will we. We've proven we can hold and grow market share, which we've done in four of the last five years. We've simultaneously increased customer satisfaction scores, and we will continue to make improvements to the block experience. We anticipate that holding share, at a minimum, will add about a point of growth annually to our top line. Now let's discuss the revenue contribution from pricing. As you recall, in 2018, we moved to an upfront transparent pricing model in our assisted channel, and we have essentially held pricing flat since then. In DIY, we have a 10% to 20% price advantage relative to our largest competitor. As a result of our significant product and experience improvements, We plan to take modest price increases in assisted this year. Something we'll evaluate annually. In DIY, our product is competitive, and because of our price advantage, we see additional opportunity over time. In summary, we believe we can add a couple points of revenue growth to our top line from price adjustments. We have a long track record of acquiring franchise partners, which will remain part of our ongoing strategy. Over the past five years, we've purchased on average 125 locations annually, typically from franchisees who are ready to exit for family or retirement reasons. We believe we can acquire a similar number each year through 2025, which will contribute nearly a point of growth to our top line. We view this to be a good use of capital given we're able to repurchase locations at attractive EBITDA multiples, optimize our footprint, and integrate the business into our company operations. Now let's walk through contributions from our three strategic imperatives. As you have heard throughout our call, Block Experience is about modernizing and growing the consumer tax business. It underpins much of the progress and ongoing strategy that we have discussed in our industry share and pricing assumptions. Our other two strategic initiatives, Small Business and Financial Products, layer on additional new growth levers. Starting with Wave, we're focused on increasing the value of the existing customer base and acquiring new clients. The value of the customer, as measured in average revenue per business, has grown significantly as we continue to innovate with new products and position Wave money at the center of the experience. WAVE's total revenue continues to grow more than 30% year over year. This is contributing about a point of growth annually to our consolidated top line. Beyond WAVE, upside in the small business imperative exists as we lean into tax services and bookkeeping with an emphasis on human health. We learned a lot last year and have evolved our marketing messaging in order to drive efficiency, and better target customers who can benefit from these products. We also see additional upside in our financial products imperative. The mobile banking solution we announced as part of our strategy last year supports our goal of serving and engaging with clients year-round. We've performed extensive market research to understand the consumer needs, and as a result, understand what it takes to succeed. We know there are 35 million underbanked consumers in the United States alone, a group we view as financially vulnerable and financially coping. Of this population, 8 million are current Block customers. They trust us with their most intimate financial details, use our existing products, and have an unmet need for additional banking. Thus, we're uniquely positioned as compared to other competitors who are starting from scratch to build brand awareness and trust. We've launched the beta product internally and plan to launch nationally in the early part of next tax season with our marketing efforts focused on existing DIY clients. As you would expect, we will leverage our interactions to incentivize clients to set up direct deposits. We'll continue to roll out features throughout the year and look forward to sharing more once it has officially launched. In summary, with respect to revenue growth, we have many levers working in tandem to reach our annual 3% to 6% growth target. Additionally, we're able to leverage our fixed cost structure so that EBITDA will grow faster than revenue. It's also important to note that we're funding our investments by reducing expenses across the company as part of our Fund the Future initiative. I want to emphasize how great I feel about the progress we've made and the path that we're on. We're continuing to execute against our strategic imperatives and are gaining momentum. I am more confident now than ever in our plans for Block Horizons 2025. Lastly, I'd like to mention that we published our second annual corporate responsibility report in September. We recognize the importance of environmental stewardship, social responsibility, and sound corporate governance. Some of our initiatives include championing diversity and inclusion, understanding and reducing our climate impact, supporting the communities we live and serve in, and transparent governance practices. Together, these enable us to achieve our long-term financial goals and benefit all our stakeholders. I'll now turn it over to Tony to cover our financial results.