H&R Block, Inc. (HRB)

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H&R Block (HRB)

Q3 2013 Earnings Call

March 07, 2013 4:30 pm ET


Derek Drysdale - Director of Investor Relations

William C. Cobb - Chief Executive Officer, President, Director and Member of Finance Committee

Gregory J. Macfarlane - Chief Financial Officer

Susan P. Ehrlich - President of Financial Services

Jason Houseworth - President of U.S. Tax Services

Amy McAnarney - President of Retail Client Services


Kartik Mehta - Northcoast Research

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

Thomas Allen - Morgan Stanley, Research Division

Evan Hutto

Michael Millman - Millman Research Associates

Adam Liebhoff

Sandy Mehta

Steven J O'Brien - Jefferies & Company, Inc., Research Division

Anna Shtromberg

Joseph D. Janssen - Barrington Research Associates, Inc., Research Division



Good afternoon, and welcome to the H&R Block Fiscal 2013 Third Quarter Earnings Call. [Operator Instructions] My name is Rose, and I will be facilitating the audio portion of today's broadcast. It is now my pleasure to turn the call over to your host, Mr. Derek Drysdale, Vice President of Investor Relations. Go ahead, sir.

Derek Drysdale

Thank you, Rose, and good afternoon, everyone. Thank you for joining us today to discuss our fiscal 2013 third quarter results. Joining me on the call are Bill Cobb, our President and CEO; and Greg Macfarlane, our CFO. Other members of our senior management team will be available during the Q&A session. They include Jason Houseworth, President of U.S. Client Services; Amy McAnarney, President of U.S. Retail Client Services; and Susan Ehrlich, President of Financial Services.

In conjunction with this call, we have posted today's press release and slide presentation on the Investor Relations website at www.hrblock.com. Some of the figures that we'll discuss today are presented on a non-GAAP basis. We have reconciled the comparable GAAP and non-GAAP figures in the schedules attached to our press release and in the appendix of today's slide presentation.

Before we begin our prepared remarks, I'd like to remind everyone that this call will include forward-looking statements as defined under the securities laws. Such statements are based on current information and management's expectations as of this date and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties and assumptions that are difficult to predict. As a result, our actual outcomes and results could differ materially. You can learn more about these risks in our Form 10-K for fiscal 2012 and our other SEC filings. H&R Block undertakes no obligation to publicly update these risk factors or forward-looking statements. With that, I'd now like to turn the call over to Bill.

William C. Cobb

Thanks, Derek, and good afternoon, everyone. Earlier today, we released our U.S. tax return volume through February 28, as well as our fiscal 2013 third quarter earnings ended January 31. Obviously, there is a lot of noise this tax season. But we want you to walk away with 3 key points.

First, the entire tax industry has experienced unprecedented delays this season, which has created near impossible comparisons to last year's results through January 31 and February 28. We believe that industry-wide tax filings are running about 2 weeks behind the comparable period last year, and we expect that it will take the balance of the season for the industry to fully normalize. That said, the great thing about our business is that taxpayers must file by April 15. We continue to believe that industry filings this tax season will grow in line with historical levels of approximately 1% to 2%.

Second, we entered this season with a very thoughtful plan. And while we've had to make some adjustments due to these delays and competitive factors, I'm pleased with our execution to date. We noticed that many competitors substantially increased their marketing in December and January. We were pleased that in the light of the delays, our marketing was better timed. As I assess our marketing efforts so far this season, I believe our Chief Marketing Officer, Robert Turtledove, and his team have done an outstanding job. Everywhere I go, people compliment us on our new ad campaign, which focuses on the expertise of our Tax Professionals. While it's still early in the season, we believe we're outperforming the market thus far in both the Assisted and Digital categories. That said, there's obviously a lot of execution remaining until the industry fully normalizes by April 15.

And finally, in order for us to be a successful -- to be successful and drive long-term shareholder value, we must have a vision and clear goals to strengthen our overall industry position in fiscal 2013 and beyond. We've made good progress toward these goals, and this season's performance to date is in line with our long-term vision for the company.

Now with that summary, I'd like to take a few minutes to provide our analysis of the U.S. tax industry through February 28. As you know, the IRS typically begins accepting tax returns by mid-January. Heading into 2013, the IRS had originally planned to open its e-file system on January 22. So we already expected the season to be delayed by approximately 1 week. Then the delay was further exacerbated by 3 factors. First, significant tax legislation was signed into law in early January, which prompted the IRS to subsequently move its opening of e-file to January 30, just before the end of our fiscal third quarter. Second, the IRS and a number of states and other taxing jurisdictions did not begin accepting certain forms until this month. Third, we believe that the media coverage on the so-called fiscal cliff tax legislation and the associated e-file and form delays has led to changes in the timing of taxpayer filing patterns this season. We believe all these factors combined have led to industry-wide tax filings running about 2 weeks behind the comparable period last year.

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