H&R Block ((HRB)) has held its Q3 earnings call. Read on for the main highlights of the call.
H&R Block’s recent earnings call conveyed a generally positive sentiment, highlighting robust revenue and earnings growth, particularly in the Assisted and DIY segments. Despite facing challenges such as declining franchise location volumes and increased legal expenses, the company showcased significant growth across various segments, indicating a strong overall performance.
Revenue and Earnings Growth
H&R Block reported a 4% increase in revenue, a 5% rise in EBITDA, and a 9% growth in EPS for the third quarter of fiscal year 2025. This solid financial performance underscores the company’s ability to navigate market challenges and capitalize on growth opportunities.
Assisted Tax Segment Performance
The Assisted tax segment delivered impressive growth, with a 170 basis point increase. Improved volume and market share trends were noted year-over-year, alongside a tenfold increase in new clients using the Second Look service. Client satisfaction scores also saw an uptick, reflecting enhanced customer experiences.
DIY Segment Revenue Growth
The DIY segment experienced an 8% revenue growth year-over-year. The introduction of the AI Tax Assist tool in DIY paid SKUs significantly boosted conversion rates by 13 points. The DIY paid NAC stood strong at $81.55, marking a 9% increase compared to the previous year.
Small Business Revenue Growth
H&R Block’s small business segment recorded high single-digit revenue growth. Notably, Wave, the subscription product, achieved a 13% revenue increase, demonstrating the company’s successful expansion into the small business market.
Spruce Platform Growth
The Spruce mobile banking platform witnessed remarkable growth, with over 700,000 sign-ups, representing nearly a 50% increase from the previous year. This growth highlights the platform’s expanding user base and its potential as a significant revenue stream.
Franchise Location Declines
Franchise location volumes declined by 7.2%, primarily due to franchise buybacks. This decrease poses a challenge for H&R Block as it seeks to maintain its market presence and expand its franchise network.
Assisted Volume Decline
Total Assisted volumes saw a slight decline of 0.8%, contrasting with broader industry volume growth of approximately 1.7%. This indicates a need for strategic adjustments to regain momentum in this segment.
Legal Expenses Impact
Higher-than-anticipated legal fees and settlements are expected to impact EBITDA, bringing it slightly below the midpoint of the projected range. This underscores the importance of managing legal costs to maintain financial stability.
Forward-Looking Guidance
H&R Block reiterated its fiscal 2025 outlook, projecting revenue between $3.69 billion to $3.75 billion and EBITDA between $975 million to $1.02 billion. The company anticipates a shift in client preferences from DIY to Assisted tax preparation, with significant growth expected in the Assisted category. The effective tax rate is projected to be approximately 13%.
In summary, H&R Block’s earnings call highlighted a generally positive outlook, with strong growth in key segments like Assisted and DIY. Despite challenges such as declining franchise volumes and increased legal expenses, the company remains optimistic about its future prospects. The forward-looking guidance suggests continued revenue and earnings growth, reinforcing H&R Block’s position in the market.