H&R Block, Inc.

Thank you for standing by and welcome to H&R Block's third 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 aware that today's call may be recorded. Should you require any further assistance, please press star 0. I would now like to turn the call over to Michaela Galena, Vice President, Investor Relations. Please go ahead.

Thank you, Lateef. Good afternoon, everyone, and welcome to H&R Block's third quarter fiscal 2022 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.hrblocks.com. Our call is being broadcast and webcast live, and a replay will be available on the 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 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 press release and presentation. The content of this call contains time-sensitive information, accurate only as of today, May 10th, 2022. 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 are happy to be here to discuss our third quarter results and provide an update on the tax season. As you know, we have had several unique seasons over the last few years, and we are feeling great about how H&R Block has emerged from the pandemic. I'm pleased with our business trajectory, and we have made a lot of progress across our block horizons and paradigms. In small business, we've been successful in driving new assisted tax clients, and WAVE continues to show strong growth. In financial products, we brought Spruce to market with a robust competitive platform this quarter. And in block experience, we are blending our digital tools with human expertise, resulting in a strong increase in virtual adoption this year. We are delivering, and I'm pleased to share that we are raising our fiscal 2022 outlook, which Tony will share more about later in the call. I'll begin by discussing the progress we've made across our imperatives. share more on the tax season, and provide details on our results. Starting with small business, we're focused on growing our base of tax customers by leveraging the Block Advisors brand and serving more entrepreneurs through our WAVE platform. Driven by strong marketing and more advanced TaxPro training, our small business assisted tax clients grew 5% on top of the 4% growth reported last year. We also realized strong growth in net average charge this season of approximately 8%, primarily driven by favorable mix as we served more complex businesses, and to a lesser extent, low single-digit price increases. As a result of the customer and net average charge growth, revenue increased double digits, a great sign that we're on the right path. Additionally, we continue to build our bookkeeping and payroll offerings and test new operating models. Turning to Wave, growth continues to be healthy, as revenue grew 25 percent in the third quarter, despite no longer lapping pandemic-impacted quarters. We have been successful in attracting new clients and increasing the value of existing clients, as both average revenue per user and average invoice volume saw accelerating growth trends year over year. As one client recently shared, Wave has grown with her from the very beginning when she was bootstrapped and needing free accounting software. Our platform helped power growth through the full support of invoicing and integrated payments and even 1099s for contract workers, which allowed her to focus on her actual business. She said, quote, if I didn't have Wave, I don't know where I'd be. I'm pleased with our overall growth in our small business imperative. In January, we launched our new mobile banking platform, Spruce. We believed there was an opportunity to combine leading technology and features with our trusted brand and establish financial relationships. We are proud of the product we brought to market on day one, and the launch of Spruce within the DIY flow was a meaningful milestone in our journey. Throughout tax season, we tested multiple iterations of our sign-up offer and shipped four major updates as we continually improved the product. We're pleased with our early results and see ways to improve the account creation and onboarding flows. In just a few months, through April, we have 150,000 sign-ups and $60 million in customer deposits. These early data points are meaningful when evaluating the first 90 days of competitor launches, and we're seeing positive monetization trends. For example, our client spending behavior is better than expected, with more dollars spent at merchants, which is driving higher interchange, and more out of network ATM withdrawals. These metrics and engagement indicate that we're on the right path and reinforce what we've been saying. Spruce bridges the gap that has existed in this marketplace. We're excited to release additional features later this fall. We're now entering a new part of the journey as we work to efficiently acquire Spruce customers directly outside of tax season. And I'm also excited about the prospect of adding additional acquisition channels like our assisted business next tax season. Now let's turn to our third imperative, block experience. This is all about blending technology and digital tools with human expertise and has the benefit of creating labor and footprint efficiencies. We've been successful in driving digital adoption by leveraging MyBlock features such as uploading documents and approving returns online. We're gaining traction with a quarter of our clients using at least one of our virtual tools as part of their tax preparation process, which more than tripled from last year. While I'm excited about the adoption, I know there's even more opportunity for clients to leverage these tools in the future. We also expanded our ability to serve retail and cryptocurrency investors. In DIY, we added a dedicated questionnaire to guide crypto clients through the experience, and in Assisted, we provide additional TaxPro training to handle these complexities. In all, we saw a nearly 20% increase in our retail and crypto filers in Assisted this year. We continue to improve our labor efficiency through a number of initiatives, resulting in strong TaxPro productivity this season. First, our innovative fulfillment network leverages our nationwide TaxPro base to get returns done as quickly as possible. Clients are no longer limited by TaxPro availability in a local office and can leverage the power of our network. Coupled with MyBlock, which enables components of the return to be completed virtually, We have the opportunity to reduce the square footage of existing locations over time and become more efficient with our real estate. We are also testing different office formats in larger remote workforces to better support clients and process data. These initiatives make us more efficient helping clients, however they want to be served, in person to fully digital and everything in between. In summary, we continue to execute against all our strategic imperatives, and I'm proud of the progress we've made in the second year of Block Horizons. Before I discuss our results, I wanted to provide some thoughts on the tax industry. As we've shared, we've had a few unique tax seasons in a row, including last year's unprecedented growth. As a reminder, this year's deadline was April 18th, Last year's tax season ended on May 17, and in 2020, it was July 15. It's important to have that context as we compare results, given that the prior two seasons included additional time to file. This year, through the latest IRS data as of April 29, there have been 134.7 million returns e-filed in the industry. Last year, there were 138.6 million e-files. This decline is likely due to an increase in extensions, a drop in one-time filings, and the filings that would typically happen in the extra weeks between now and mid-May. As the calendar becomes more comparable and extensions are filed, we expect this gap to narrow. We expanded our capacity with more open offices and tax pros working to ensure we capture as many returns as possible during the extended period. We'll provide more thoughts on the industry in our year-end earnings call in August. Turning to assisted, the last few years were a time when it could have been natural to move away from the channel, especially given pandemic impacts. Yet this category continues to demonstrate its strength and people's need for help. The same is true for block. we delivered another strong season. In addition to the meaningful share gains last year, we slightly gained share again this year. We prepared 11.3 million returns through April 30, which compares to 11.6 million through last year's May 17 deadline. Compared to tax season 20, which ended in July, we've increased clients by nearly 300,000. We also saw an increase in our net average charge, which was driven by two factors. About two-thirds was due to mix. We saw more complex filers driven by the expansion of the child tax and earned income tax credits, more retail and crypto investors, and some first-time filers rolling off. The remaining one-third was due to planned modest price increases. As a reminder, We've not taken price in the prior three seasons, and client feedback has been very strong. In total, our net average charge increased approximately 8% over the prior year. In our assisted business, we feel really good about the progress we've made. The key takeaway is that over the last two years, we've grown market share, grown clients by nearly 300,000, and increased our net average charge by 5%, resulting in overall revenue growth of 10%. Moving to our DIY results, this tax season we completed 8.2 million returns through April 30. This compares to 8.7 million through last year's May deadline. I was pleased to see us grow new clients and increase our net average charge. Improved mix and dynamic pricing resulted in an online NAC improvement of approximately 3 percent. And over the last two years, we've driven a material increase in online revenue of $37 million, or 18 percent. The desire for human help continues to increase, even among do-it-yourself filers. In fact, TaxPro review again grew double digits, continuing its streak in eight of the last nine years. Despite the new client growth I mentioned, we didn't do enough to hold share in the category. Throughout the season, we tested different marketing tactics, and in the second half, saw success with specific DIY messaging versus overall block brand messaging. We'll focus the next several months on improving our strategy for next year. In summary, we feel very good about this year's tax season. as well as the progress and value we've driven over the last several years, especially in light of the macro backdrop. We've grown revenue and improved our value proposition while returning significant capital to shareholders. The H&R Block story is strong. We produce significant cash flow, pay a growing dividend, continue to be opportunistic with share repurchase, and are making great strides with our Block Horizons growth strategies. I am quite optimistic about our future. Now, I'll turn it over to Tony to cover our financial results.