H&R Block, Inc. (HRB)

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H&R Block, Inc. (HRB)

F1Q10 Earnings Call

September 4, 2009 8:30 am ET

Executives

Scott Dudley – VP IR

Russ Smyth – President and Chief Executive Officer

Becky Shulman – Chief Financial Officer

Charles Elliott (C.E.) Andrews – President, RSM McGladrey

Joan Cohen – Chief of Staff

Robert Turtledove – Chief Marketing Officer

Analysts

Kartik Mehta - FTN Midwest Research

Sloan Bohlen - Goldman Sachs

Andrew Fones - UBS Investment Research

Scott Schneeberger - Oppenheimer

Michael Millman - Millman Research

Bill Carcache – Fox-Pitt Kelton

Presentation

Operator

Welcome everyone to the H&R Block first quarter earnings conference call. (Operator Instructions) Mr. Dudley you may begin your conference.

Scott Dudley

Good afternoon everybody and thank you for joining us to discuss our first quarter fiscal 2010 results. Presenting on the call today are Russ Smyth, President and CEO and Becky Shulman, Chief Financial Officer. Following their opening remarks we will have a Q&A session. During that time we have other members of our senior management team here to be available during that time.

To start, let me provide our Safe Harbor statement. Comments made on this call may contain forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of 1934. Such statements are based upon current information and management's expectations regarding the company, speak only as of the date on which they are made, are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict.

Therefore actual outcomes and results could materially differ from what is expressed, implied, or forecast in such forward-looking statements. Such differences could be caused by a number of factors including risks described from time to time in H&R Block's press releases and Forms 10-K, 10-Q, 8-K and other filings with the SEC.

H&R Block undertakes no obligation to publicly release any revisions to forward-looking statements to reflected events or expectations after the date of these remarks. H&R Block provides a detailed discussion of risks factors in periodic SEC filings and you are encouraged to review these filings.

Earlier this morning we issued a press release announcing our results and that is available at our website at hrblock.com. To give as many participants as possible an opportunity to ask a question, we ask that when called upon you limit your query to one initial question and one related follow-up if needed.

So with that, let me now turn the call over to Russ Smyth.

Russ Smyth

Thanks Scott and good morning everyone. Thank you for joining us and happy Labor Day weekend. As most of you know the tax business is generally concentrated in the fourth quarter so our first quarter results are not nearly as significant as they become later in the year. However, since our last earnings call we have made several management changes, experienced some changes in our market environmental conditions and we made some great progress on our plans for 2010 and beyond we want to share with you. After all, tax season is now only 118 days away. Later in the call you will also hear from Becky Shulman as she will cover our financial results for the quarter.

I would like to start by briefly highlighting our recent management changes which have strengthened our executive team as we position the company for long-term growth. We are delighted to have Robert Turtledove on board as Chief Marketing Officer to lead our strategic marketing efforts and the execution of our plans this tax season. Robert joined us three weeks ago bringing 25 years of broad consumer marketing experience with some of the world’s best brands and companies including Pepsi, Frito Lay, Pizza Hut and Lever Brothers. H&R Block is an iconic brand and we look forward to Robert’s leadership in leveraging this powerful asset as we pursue growth in clients and in market share.

On Monday of this week we announced Brian Worham as our new General Counsel. For 14 years Brian oversaw all legal and corporate compliance functions at Centex, one of the nation’s largest home builders and a publicly traded company before its recent merger with Pulte Homes. Brian’s breadth of legal experience, his business acumen and leadership skills make him a valuable addition to our team.

With these two additions plus C.E. Andrews having going us as President of RSM McGladrey and the changes we made in May to our existing management team structure, we now have a strong team in place that is working very well together as we prepare for the upcoming tax season.

Before we begin our comments about the state of the business I would like to make a few remarks about the external environment we expect to see this coming tax season. Based on IRS projections and unemployment data we believe the total number of tax returns filed will likely be down 1-2% this coming season. In addition we expect the do-it-yourself category will continue to gain a small amount of market share from assisted tax preparation primarily driven by growth in the digital online space. We don’t believe there will be any real change in trends from within the tax preparation industry as the digital players will expand their advertising and product features and the assisted competitors will continue to expand their network, albeit at a slower pace than last year.

Turning to the regulatory environment, we don’t believe the new tax law provisions resulting from the American Recovery and Reinvestment Act passed earlier this year will significant increase the number of filers as the Economic Stimulus Act did in 2008. However, various provisions such as the Make Work Pay product will increase the complexity of tax returns. Earlier this year the IRS also announced its intention to regulate unlicensed tax professionals and we support this proposal.

Read the rest of this transcript for free on seekingalpha.com