H&r Block, Inc. · NYSE:HRB
H&r Block — Credit Suisse Global Services Conference 2011
28 slides from H&r Block's conference presentation, Mar 15, 2011
Slide 1: Credit Suisse Global Services Conference March 15, 2011
Credit Suisse Global Services Conference March 15, 2011 Exhibit 99.1
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation and various comments made in connection with it include certain estimates, projections and other forward-looking statements. The words "will," "plan," "estimate," "approximate," "project," "intend," "remain," "expect," "believe," and variations thereof an
Slide 3: Today's Agenda
Today's Agenda HRB Overview Industry Overview Financial Summary 3
Slide 4: H&R Block Overview
H&R Block Overview Largest tax return preparer in the world 23.2 mm returns prepared worldwide in FY10 550+ mm returns prepared since 1955 Only tax preparer capable of serving clients across the retail, online and software markets More than 13,000 retail offices worldwide with more than 100,000 tax
Slide 5: H&R Block business structure
|| H&R BLOCK’ Tax Services Bank H&R Block — October 2007 H&R Block Const Cl ~onsumer RSM Corporate McGladrey G&A H&R Block JH&R Block J&R Blok F Option Financial One Advisors
Slide 6: H&R Block Today
6 H&R Block Today H&R Block Today Fiscal 2010: Revenue: $3.0 billion $860 million $ 39 million Pretax Earnings: $ 867 million $ 88 million* $(142) million Pretax Margin: 29.2% 10.3%* N/A * Excludes $29.5 million of one-time charges for goodwill impairment , cost of M&P arbitration, and increased leg
Slide 7: Strong Brands
Strong Brands 7 ....but key opportunities exist to increase awareness: Retail Tax - 91% Digital - 51% H&R Block At Home(tm) RSM McGladrey - 27% Leveraging brand for greater client growth
Slide 8: Industry Overview: IRS Filings
Industry Overview: IRS Filings 8 Source: IRS; National Bureau of Economic Research (Measures IRS Calendar Year Filings) Total IRS filings have historically grown 1 to 2% annually Tax Season 2010 IRS filings down 1.7%; worst decline in ~40 years Filings likely to return to normal growth as unemployme
Slide 9: Industry Share
Industry Share 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 DIY 42% 41% 39% 38% 38% 39% 38% 38% 38% 38% 39% Assisted 58% 59% 61% 62% 62% 61% 62% 62% 62% 62% 61% Industry Overview: DIY vs. Assisted *TS08 IRS totals are adjusted for Economic Stimulus Act No shift from assisted to DIY since 2
Slide 10: Industry Overview: Segmentation
Industry Overview: Segmentation Share based upon tax season 2009 & 2010 estimates (Jan. 1 - Apr. 30) 11.2% HRB Retail 50.6% All Other Assisted 11.7% 21.9% Pen / Paper HRB Digital 4.6% 2009 131.6 Million U.S. Filers 2010 129.3 Million U.S. Filers 10.7% 50.3% 9.5% 24.9% 4.6% All other Digital Pen / Pa
Slide 11: Industry Overview: Unemployment
11 Industry Overview: Unemployment Unemployment Rates 2001 to 2010: Assisted & DIY Returns 68.9 70.8 73.9 74.3 75.6 74.6 77.7 79.5 82.3 81.3 78.9 49.8 50.1 47.2 46.3 45.9 47.5 46.7 47.8 49.7 50.3 50.4 4.0% 3.9% 5.7% 6.0% 5.7% 5.4% 4.9% 4.4% 5.0% 7.4% 10.0% 0 20 40 60 80 100 120 140 2000 2001 2002 20
Slide 12: Industry Overview: Unemployment (Northeastern University Study)
Industry Overview: Unemployment (Northeastern University Study) 18.4% 10.7% 7.5% 5.6% 4.0% 3.7% 3.3% 2.4% 2.0% 1.6% 4.8% 30.8% 19.1% 15.3% 12.2% 9.0% 7.8% 6.4% 5.0% 4.0% 3.2% 10.0% Below $12,160 $12,160- $20,725 $20,725- $29,680 $29,680- $39,000 $39,000- $50,000 $50,000- $63,000 $63,000- $79,100 $79
Slide 13: Prior Year Recap
Prior Year Recap 23.2 mm returns prepared worldwide; down 3% y/y 2nd consecutive year of significant early-season retail client loss Consolidated net income of $479 mm, or $1.43 per share 2nd highest net income from continuing ops in the company's history Generated free cash flow of ~$500 mm Substan
Slide 14: Tax Season 2011 Initiatives
Tax Season 2011 Initiatives Retail: Stem early-season client and share loss Launch free federal 1040 EZ offer More compelling marketing message to drive traffic into our offices Continued enhancements to client service and staffing Free 2nd Looks Digital: Aggressively promote "free" to drive traffic
Slide 15: Tax Season YTD 2/28: Retail
Tax Season 11 YTD 2/28: Retail 15 Total retail returns up 3.2%; regaining lost share 1040 EZ offer very effective New client growth up 25%; best in >6 years Improved client retention and satisfaction FY11 total retail clients expected to be up 50 to 150 bps y/y Net Tax Prep Fees down 4.1% Net Avg. C
Slide 16: Tax Season 2011 YTD 2/28: Digital
Tax Season 2011 YTD 2/28: Digital 16 Total digital returns up ~13% Taking share in online; returns up 30% Website traffic up 30% Improving conversion rates
Slide 17: McGladrey
McGladrey* Provides tax, accounting, and business consulting Mid-market focus: Privately held U.S. businesses with $30 mm - $1B in revenue $42B mid-market opportunity; RSM has 3.5% market share 5th largest U.S. accounting firm* Increasing brand awareness and consideration FY10 Results: Continued ind
Slide 18: Financial Summary - Five Year
Financial Summary - Five Year 18
Slide 19: Tax Services: Consistent Profitability
Tax Services: Consistent Profitability (CHART) Savings & Loan Crisis Dot.com bubble Real estate implosion, bank failures, & recession 9/11 attacks Asian & Russian financial crisis Japanese asset bubble Black Monday Market Earnings consistency through numerous severe global economic events 19
Slide 20: Capital Allocation
Capital Allocation Targeted Capital Structure Maintain investment grade ratings Maintain sufficient liquidity Maintain access to capital markets Reinvestment Grow the core business Acquisitions Opportunistic accretive acquisitions (TaxAct) Share Repurchase & Dividends Current dividend yield of 3.8%*
Slide 21: Return to Shareholders
Return to Shareholders $2.8 billion Dividends Share Repurchases ($ millions) ($ millions) $1.5 billion 21 $223 $463 $317 $519 $527 $254 $181 $0 $99 $250 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Fiscal Year $108 $116 $126 $138 $143 $160 $172 $184 $199 $201 2001 2002 2003 2004 2005 2006 2007
Slide 22: Conclusion
Conclusion Positioning for long-term profitable growth Significant free cash flow generation - "Death and Taxes" Driving better execution and improved cost discipline Very low capital requirements Acquisitions limited to growing core businesses (TaxAct) Committed to delivering long-term shareholder
Slide 23: Appendix Slides
7 H&R BLOCK’ Appendix Slides
Slide 24: Claim Activity by Vintage Year
Claim Activity by Vintage Year $740 million in rep & warranty claims asserted since May 2008 Within the most recent 12 months, 97% of asserted claims relate to 2006 and 2007 (CHART) 28% of claim volume 72% of claim volume 24 Sand Canyon
Slide 25: Claim Activity by Counterparty
Claims mainly asserted by whole-loan investors, monoline insurers and securitization trustees Approximately 2% of claim activity has come from the GSEs * Private-label securitizations 25 (CHART) Sand Canyon Claim Activity by Counterparty
Slide 26: Portfolio Performance
Portfolio Performance * Excludes loans sold with servicing released where current loan status information is unavailable 26 $28 billion or 68% 2005 to 2007 original principal balance of mortgage loans that have not been paid-in-full and remain subject to recourse provisions $13 billion or 32% Sand C
Slide 27: Reserve Roll-Forward
Reserve Roll-Forward 27 (millions) FY11 Q3 YTD FY10 FY09 Beginning balance $188 $207 $243 Losses from loan repurchases and indemnifications (8) (19) (36) Payments under indemnity agreement dated April 2008 (25) -- -- Ending balance $155 $188 $207 Sand Canyon
Slide 28: Credit Suisse Global Services Conference March 15, 2011
Credit Suisse Global Services Conference March 15, 2011
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