H&r Block, Inc. · NYSE:HRB
H&r Block — Investor Presentation (July 2020)
44 slides from H&r Block's investor presentation, July 2020
Slide 1: Investor Presentation July 2020
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Slide 2: Safe Harbor Statement
Safe Harbor Statement Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or vari
Slide 3: H&R Block profile
H&R Block profile • Founded the tax industry in 1955 • Well-established tax operations in the U.S., Canada, and Australia • Approximately 23 million returns filed by or through H&R Block for the period including fiscal 2020 through the completion of the U.S. tax season in July 2020 • Average revenue
Slide 4: Investment thesis
Investment thesis 1. Market-leading position in tax with • Complete ecosystem and scaled network in the expansive, established tax unmatched competencies industry • Proprietary multi-channel approach to take advantage of opportunities in 2. Significant addressable market $21B tax industry 3. Ongoing
Slide 5: Tax season 2020
Tax season 2020
Slide 6: An unprecedented tax season
An unprecedented tax season • Tax season 2020 was unlike any other season due to the COVID-19 pandemic • Significant changes to tax filing behaviors due to stay-at-home orders in various state and local jurisdictions • Industry-wide tax filings were delayed due to the extension of the filing deadlin
Slide 7: H&R Block's operational response
H&R Block’s operational response Quickly turned to our crisis playbook to effectively and efficiently respond when the pandemic started to impact our business Significantly modified our operating model to comply with ever-changing city and state guidelines, including transitioning to primarily drop-
Slide 8: H&R Block's community response
H&R Block’s community response Joined American Express Provided Wave payments Offered free tax preparation Stand For Small to help customers with free Instant via Tax Pro Go for frontline support small businesses Payouts, giving entrepreneurs workers in May and June quick access to their cash 7
Slide 9: Efforts to digitally enable every aspect of our business
Efforts to digitally enable every aspect of our business is driving key improvements Growth in digitally- Significant increases in returns leveraging our digital capabilities, including enabled returns Tax Pro GoSM, Tax Pro ReviewSM, and our Approve Online feature Strong client Strong client feedbac
Slide 10: Our path forward
Our path forward
Slide 11: Accelerating our transformation and driving change
Accelerating our transformation and driving change • Our work to digitally enable our business is essential to our success in the long term as we launch innovative new products, modernize how we deliver expertise and care, and ensure the best-trained tax professionals in the industry can help client
Slide 12: Our strategic framework continues to guide us
Our strategic framework continues to guide us 11
Slide 13: Tax industry rooted in size and growth
Tax industry rooted in size and growth
Slide 14: Taxpayers choose level of help based on their confidence with taxes
Taxpayers choose level of help based on their confidence with taxes Assisted Do-It-Yourself (DIY) LOW Taxpayer’s Confidence with Taxes HIGH “I want someone to do it for me” “I can do it” • Assisted category remains resilient as a large portion • DIY filers prefer convenience, cost, and are confident
Slide 15: Assisted tax preparation methods remain the choice of over half of U.S. taxpayers
Assisted tax preparation methods remain the choice of over half of U.S. taxpayers • Despite conditions that should have contributed to a significant mix change from Assisted to DIY in tax season 2020, the shift was moderate ─ Prior to the pandemic, mix change was trending lower than in previous year
Slide 16: Addressable market is significant in both Assisted and DIY
Addressable market is significant in both Assisted and DIY 63M Assisted $21B $2.9B 140M $18.3B DIY Filing Market Size population 77M • Addressable market is large; Assisted share of industry revenue is dominant at 87% • Assisted return growth in two of past five years; consistent year-over-year DIY
Slide 17: U.S. tax industry is stable and resilient
U.S. tax industry is stable and resilient; both Assisted and DIY tax prep methods remain strong • On average, total U.S. filings grow ~1% annually and are highly correlated to non-farm employment • Both the Assisted and DIY categories are growing, though current unemployment levels may result in a c
Slide 18: Foundational strengths
Foundational strengths
Slide 19: Market-leading positions across traditional tax prep methods
Market-leading positions across traditional tax prep methods Assisted DIY 14.5% 14.9% TS19 H&R Block Assisted TS19 H&R Block DIY Market Market Share Share #1 #2 Industry Rank Industry Rank Source: H&R Block estimates of market participant and IRS data. Note: Data reflects tax season 2019 data given
Slide 20: Continuing to improve quality, consistency, and value of our Assisted experience
Continuing to improve quality, consistency, and value of our Assisted experience Led the industry with upfront, Digitized how our tax pros transparent pricing work through WorkCenter, enabling best-in-class service WorkCenter Enhanced standard operating Increased certification levels procedures (SOP
Slide 21: Focused on growing our DIY business
Focused on growing our DIY business • Leveraged AI and machine learning to remove questions 8.7 and steps in the workflow 8.0 8.0 7.5 • Streamlined new client onboarding process with “Switch in 7.0 Two Clicks” 7.0 6.8 ─ Clients can import or upload 98% of their tax documents 6.0 and drag-and-drop pr
Slide 22: Innovating to provide expertise and care in new ways
Innovating to provide expertise and care in new ways • We continue to digitally enable our business to deliver expertise and care in new ways as consumer needs evolve • Our efforts were accelerated as a result of the COVID-19 pandemic and resulted in a significant increase in the percentage of retur
Slide 23: Tax Plus products provide added value to clients
Tax Plus products provide added value to clients, both within and beyond tax season Tax Plus product revenues of $470M in fiscal 2019 H&R BLOCK H&R BLOCK EMERALD REFUND ADVANCE EMERALD ADVANCE® PREPAID MASTERCARD® • Pre-season line of credit up to $1,000 • Interest-free, no-fee loan, up to $3,500 •
Slide 24: Enhancing focus on small business
Enhancing focus on small business
Slide 25: Enhancing focus on Small Business
Enhancing focus on Small Business • Currently serve over 2 million small business clients in tax • Refined targeted marketing efforts to ensure small business owners know the expertise we provide in tax • Redesigned tax prep experience and improved tools to meet the varied needs of small businesses
Slide 26: Wave: A rapidly growing financial solutions platform
Wave: A rapidly growing financial solutions platform for the small business market Large and Expanding Market Strong Strategic Fit Disruptive Innovator Acquisition accelerates H&R Block’s small business strategy, providing new growth opportunities 25
Slide 27: Wave's robust platform serves the needs of small business owners
Wave’s robust platform serves the needs of small business owners Low customer acquisition costs combined with recurring revenue stream yields favorable customer lifetime value 26
Slide 28: Wave continues to innovate
Wave continues to innovate Recent product and feature innovations further simplify the financial lives of entrepreneurs Wave Money API / Integrations Instant Payouts • First-to-market, software powered • Opened API to extend functionality • Alleviates cash flow problems for small business bank accou
Slide 29: Financial results and capital allocation
Financial results and capital allocation
Slide 30: Significant recurring cash flow
Significant recurring cash flow 800 $751 • Cash-based, capital-light operating 700 model; capital expenditures represent 600 3% of revenues on average $511 500 $463 $432 • Consistent generation of significant 400 cash flow, with average free cash flow 300 before dividends of $437 million over last f
Slide 31: Capital allocation focused on driving sustainable growth
Capital allocation focused on driving sustainable growth and creating shareholder value Capital Allocation Priorities Maintain adequate liquidity and strong balance sheet 1 • Short-term funding provided through $2.0B line of credit maturing in September 2023 • Commitment to maintain Investment Grade
Slide 32: Balanced return of capital through dividends and share repurchases
Balanced return of capital through dividends and share repurchases Dividends Share Repurchases +30% $247M Dividend increase since FY16 Share repurchases FY20 7.0% 15% Current dividend yield1 Shares outstanding repurchased FY17 – FY20 1 As of July 28, 2020. 31
Slide 33: Environmental, Social and Governance
Environmental, Social and Governance
Slide 34: Commitment to our communities through Make Every Block Better
Commitment to our communities through Make Every Block Better In December 2019, H&R Block launched a new community impact platform, Make Every Block Better, that focuses on increasing human connections, supporting entrepreneurship, and combating loneliness in our communities Urban Neighborhood KCRis
Slide 35: Proactive and sound governance practices
Proactive and sound governance practices Robust shareholder engagement policy Committed to pay-for- Commitment to diversity of performance culture and skills, perspectives, and shareholder alignment experiences of Board members All directors, other than CEO, Annual director election are independent,
Slide 36: Executive pay aligns with shareholder value
Executive pay aligns with shareholder value • Our executive compensation decisions are influenced by a variety of factors, with the primary goals being to align management’s and shareholders’ interests and to link pay with performance • A significant portion of our executives’ compensation is “at-ri
Slide 37: Investment thesis
Investment thesis
Slide 38: Investment thesis
Investment thesis 1. Market-leading position in tax with • Complete ecosystem and scaled network in the expansive, established tax unmatched competencies industry • Proprietary multi-channel approach to take advantage of opportunities in 2. Significant addressable market $21B tax industry 3. Ongoing
Slide 39: Appendix
Appendix
Slide 40: Tax operating statistics
Tax operating statistics OPERATING STATISTICS: U.S. TAX RETURNS AND NET AVERAGE CHARGE May 1, 2019 through July May 1, 2018 through July % Change 17, 2020 17, 2019 (1) U.S. TAX RETURNS PREPARED: (in 000s) Company-owned operations 8,145 8,412 (3.2)% Franchise operations 3,324 3,389 (1.9)% Total assis
Slide 41: Consolidated financial results
Consolidated financial results Fiscal year 2020 reflects partial tax season data, impacting comparability CONSOLIDATED - FINANCIAL RESULTS (unaudited, in 000s - except per share amounts) CONSOLIDATED - FINANCIAL RESULTS (unaudited, in 000s - except per share amounts) Year ended April 30, 2020 2019 %
Slide 42: Consolidated balance sheets
Consolidated balance sheets Fiscal year 2020 reflects partial tax season data, impacting comparability CONSOLIDATED BALANCE SHEETS (unaudited, in 000s - except per share data) As of April 30, 2020 2019 ASSETS Cash and cash equivalents $ 2,661,914 $ 1,572,150 Cash and cash equivalents - restricted 21
Slide 43: Non-GAAP financial measures
Non-GAAP financial measures Fiscal year 2020 reflects partial tax season data, impacting comparability NON-GAAP FINANCIAL MEASURE - ADJUSTED EBITDA NON-GAAP FINANCIAL MEASURE - ADJUSTED EPS Year ended April 30, 2020 2019 Year ended April 30, 2020 2019 Net income (loss) - as reported $ ( 7,526 ) $ 42
Slide 44: Investor Presentation July 2020
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