H&R BLOCK INC Q3 FY2025 earnings call

• Industry shift: Clients shifted from DIY to Assisted, with Assisted category growing 170 basis points vs 90 basis points in DIY. Filing behavior shifted to later deadlines, with record-high volumes in final days of season.
• Assisted Channel: Redesigned client experience to improve conversion and retention, drove increase in Assisted client conversion for second year, higher client satisfaction scores, increased next season appointments, enhanced Second Look service with tenfold increase in new clients and 1/4 of reviews finding discrepancies.
• DIY: Revenue growth 8%, paid NAC strong at $81.55 (up 9%) with mix shift to complex SKUs, AI Tax Assist tool saw higher engagement, DIY clients upgrading to Tax Pro Review, MyBlock app increased fully virtual clients by 24%.
• Small Business: Assisted small business tax had high single-digit revenue growth; DIY small business SKUs improved with more custom experiences and top-of-funnel registrations. Year-round bookkeeping and payroll services had double-digit growth.
• Financial Products: Spruce had over 700,000 sign-ups, nearly 50% increase year-over-year, with cross-selling effective and smart tax refund feature saving clients average 26% of refund.

Assisted Channel: Company-owned Assisted volume increased, with improved volume and market share trends year-over-year. Assisted small business tax delivered high single-digit revenue growth. DIY: DIY revenue grew 8%, paid net average charge (NAC) up 9% with mix shift to more complex SKUs. Small Business: Assisted small business tax had high single-digit revenue growth; DIY small business SKUs improved with more custom experiences and year-round bookkeeping/payroll services had double-digit growth. Financial Products: Spruce had over 700,000 sign-ups, nearly 50% increase year-over-year, with effective cross-selling.

• Reiterated fiscal '25 outlook: Revenue expected in range $3.69 billion to $3.75 billion, EBITDA in range $975 million to $1.02 billion, effective tax rate ~13%, adjusted diluted EPS in range $5.15 to $5.35. Lower effective tax rate expected to provide one-time benefit of ~$0.50 to EPS.
• On plan for revenue, EBITDA slightly below midpoint due to higher legal fees and settlements.

• Forward-looking statements involve material risks and uncertainties; see H&R Block's SEC filings for description. Legal fees and settlements affected EBITDA outlook.

Q: Kartik Mehta asked about the industry shift to Assisted segment growing faster than DIY.

A: Jeff Jones said uncertainty makes consumers seek help, tax policy changes and conversations led to mix shift to Assisted, with consumers waiting to see if changes occurred.

Q: Scott Schneeberger asked about decline in franchise operations.

A: Tiffany Mason said they opportunistically buy back franchise locations, purchased 123 so far this fiscal year; Jeff Jones talked about focus on converting clients in company locations and improved conversion.

Q: Scott Schneeberger asked about DIY online paid being flat and free down.

A: Jeffrey Jones said DIY revenue grew, half from more complex clients, and it was an unprecedented promotional environment with disciplined investment in paying clients.

Q: George Tong asked about difference in Assisted volumes vs industry and competitive landscape.

A: Jeffrey Jones said improved performance trajectory in Assisted but largest DIY competitor's promotions didn't impact them yet.

Q: Alexander Paris asked about franchise location volume, NAC difference, impact of filing extensions, 1099-Ks, and dividend policy.

A: Tiffany Mason said franchise buybacks accounted for decline, NAC difference due to franchisee pricing and client mix; filing extensions had minor impact on fiscal '25; no material impact from 1099-Ks; dividend has payout ratio reviewed annually by Board.