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H&R Block (HRB)
Q4 2013 Earnings Call
June 12, 2013 4:30 pm ET
Colby R. Brown - Vice President and Corporate Controller
William C. Cobb - Chief Executive Officer, President, Director and Member of Finance Committee
Gregory J. Macfarlane - Chief Financial Officer
Derek Drysdale - Director of Investor Relations
Kartik Mehta - Northcoast Research
Gil B. Luria - Wedbush Securities Inc., Research Division
Thomas Allen - Morgan Stanley, Research Division
Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division
Michael Millman - Millman Research Associates
Previous Statements by HRB
» H&R Block Management Discusses Q3 2013 Results - Earnings Call Transcript
» H&R Block's CEO Discusses F2Q 2013 Results - Earnings Call Transcript
» H&R Block Management Discusses Q1 2013 Results - Earnings Call Transcript
I would now like to turn the call over to Mr. Colby Brown. Sir, you may begin.
Colby R. Brown
Thank you, Keisha. Good afternoon, everyone, and thank you for joining us to discuss our fiscal 2013 results. As many of you know, I transitioned into the Investor Relation role last quarter and have enjoyed getting to know many of you. I look forward to working with you over the coming months.
Joining me on the call today 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.
In connection 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've 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'll now turn the call over to Bill.
William C. Cobb
Thanks, Colby, and good afternoon, everyone. Earlier today, we announced our results for fiscal year 2013, which ended April 30. As many of you know, this was a challenging season for the industry as a whole, and while we're continuing to analyze some of the details, there are 3 important takeaways from the season.
First, the challenges faced by the U.S. tax industry this year were unprecedented, resulting from late tax legislation, filing delays and an overall decrease in returns filed with the IRS. I'm proud that as an organization, we showed a tremendous ability to adapt to this unique environment and to execute on our plans in the U.S. Globally, I'm pleased that we again served more than 25 million clients worldwide. As the leader in the tax industry for over 58 years, H&R Block has become the largest tax preparer in the world, and our unmatched presence and expertise gives us an advantage as we look to 2014 and beyond.
Second, although we executed well on many of our initiatives this tax season, we have room for improvement. Difficult decisions were made this tax season, with a focus on growing the business profitably. And we delivered better financial results in fiscal 2013, achieving our margin expansion goals. I'm also pleased that we grew and took share from Intuit for the third consecutive year in the digital online category, which is the largest and fastest-growing category for do-it-yourself filers.
And finally, though there's still plenty of work ahead, we remain confident in our long-term strategy to be a global year-round tax-plus company. We continue to see growth opportunities in digital, financial services and international. And while some of these opportunities may take a few years to develop, I am optimistic about our ability to expand our business profitably and serve our clients better. In our core Assisted category, the value our tax professionals provide is only getting stronger as changes in legislation and economic conditions continue to add complexity to Americans' tax situations. The percentage of filers who choose to seek assistance has remained at close to 60% for the last 12 years, and growth in the digital do-it-yourself category continues to moderate as a number of pen-and-paper filers declines.
Our strong industry position and financial strength continues to give us a competitive edge as we look to 2014 and beyond.
With that summary, I'd like to take a few minutes to provide our thoughts on the U.S. tax industry. As I mentioned earlier, this was a challenging tax season for the entire industry as significant legislative changes in early January prompted the IRS to delay the opening of e-file to January 30. Additionally, certain forms issued by federal, state and various other taxing jurisdictions were unable to be filed as late as early March. With little time to react to these changes, these delays presented challenges to our industry to update systems and plan for operational needs throughout the season. Similarly, the delays confused and frustrated many taxpayers and significantly impacted the timing of filings during the season.
You will remember from our previous earnings call in March, we expected that these delays would impact the timing of filings, but that ultimately, the season would normalize to historical growth rates of 1% to 2% by the end of April. Nonfarm employment, which has historically been the best leading indicator for tax filing growth, was up 1.7% in calendar year 2012. Based on this indicator and other information we had at that time, we had little reason to believe that growth levels this year would be different than average historical levels.
Instead, at season's end, IRS returns were down approximately 1%, a result no one was expecting.
So what drove the decline and does this mean we've set a new expectation for future growth in IRS filings? At this point, we're still analyzing IRS and other industry data to understand many of the details. And it's likely going to take a few months before we have a complete picture of the 2013 tax season. There are, however, a few possible factors that we can point to.