Q4 2020 Blucora Inc Earnings Call

February 17, 2021

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Blue Corps fourth quarter 2020 earnings Conference call. At this time, all participants are in a listen only mode.

After the Speakers' presentation there'll be a question answer session.

I ask a question during this session and we need to press Star then one on your telephone please be advised that today's conference is being recorded.

If you'll probably I guess low system and they started as he works with Snot Brager.

I'd now like to hand, the call over to <unk>.

Investor Relations. Please go ahead.

Thank you and welcome everyone to <unk> fourth quarter 2020 earnings conference call.

By now you should have had the opportunity to produce a copy of our earnings release and supplemental information.

And not reviewed these documents they are available on the Investor Relations section of our website at <unk> Dot com and <unk>.

And good day, but Chris Walters, Chief Executive Officer, and Martin Goldman Chief Financial Officer.

Before and again, let me remind everyone that today's discussion contains forward looking statements based on the environment as we currently see it and that's.

And only as of the current day.

Such they include risks and uncertainties and actual results and events could differ materially from our current expectations.

Please refer to our press release, and our other SEC filings, including our form 10-K, and other reports for more information on the specific risks and uncertainties, we assume no obligation to update and our forward looking statements except as required by law.

We will discuss both GAAP and non-GAAP financial measures today, our earnings release and supplemental financial information are available on <unk> Dot Com and include a full reconciliation of.

Each non-GAAP financial measure discussed to the nearest applicable GAAP measure.

With that let me hand, the call over to Chris.

Thank you D and good morning, everyone.

2020 was a challenging but more importantly, a transformative year for <unk> Corp.

Even as we navigate and unprecedented global pandemic, the company's new leadership team and refreshed board of directors and repositioned our unique portfolio of profitable taxi focused tech enabled businesses to sustainably grow long term and build shareholder value as an integrated company and it helps consumers build and preserve their.

Yes.

This is a big opportunity.

It addresses and enormous untapped and underserved market for consumers and taxes are one of life's biggest expenses, but who have traditionally not had access to effective long term tax planning strategies and tools.

And of course unique solution integrates powerful, but easy to use tax focus technology and it.

Extensive and highly trusted and network of tax and financial professionals and valuable data at scale to deliver holistic textbook guess planning and financial guidance that kind of efficient way enable wealth preservation and creation.

But of course compelling mission opportunity and solutions are the reason I was so excited to become CEO a year ago. They are also the reasons I'm, even more optimistic about our long term outlook today.

And I look back on the lessons, we've learned and the tremendous progress we have made over the past 12 months.

This morning, I'd like to review fiscal 'twenty and 'twenty, beginning with a short term impact of the pandemic on our results and then turning to the long term progress we are making strengthening the foundation of our business and the connections between them for sustainable long term growth.

Mark will then review our financial results in more detail.

Before diving into our results and outlook I first want to thank our employees for not wavering and their dedication to our customers. Despite the challenges of the pandemic.

And I want to thank our financial professionals, who have worked tirelessly to.

And to position their clients for success, both from a tax and wealth management perspective through this uncertain time.

Finally, I want to thank our customers for placing their trust in.

And us to ensure their financial wellbeing.

So let me begin first by reviewing the impact of the pandemic, which we have discussed on earlier investor calls this year.

In addition to the hardship and loss of just cause for many of our customers employees and financial professionals. The COVID-19 pandemic had a significant short term impact on last year's results.

First the unexpected tax filing extension resulted in approximately $20 million.

And of incremental cost and our tax preparation segment. These included increased marketing spend extended call center staffing and other costs as we work to finish a longer tax season, while simultaneously planning for the next.

Second beyond these direct COVID-19 impacts, we decided to strategically invest and our future by spending approximately $20 million on additional marketing to overcome the weaker performance for the first peak, but also more effectively drive sustainable unit correct.

Third and our wealth management segment as the fed funds rate fell to zero at the start of the pandemic the equivalent of 625 basis point reductions and interest rates. This caused sweep revenue for the year declined 87%.

And for and approximately $21 million impact on a segment and consolidated operating income.

In total these items impacted 2000, twenty's adjusted EBITDA by $61 million.

Now, let me turn to our progress and momentum and each of the businesses and across the company.

First our tax prep segment.

With $208 8 million and revenue tax act delivered its 23rd consecutive year of revenue growth last year, when adjusting for the sale of simple tax.

Overall, excluding the impact of the pandemic 'twenty and 'twenty was a positive year for the tax Act business as we've refocused its strategy and growing monetized units and feature driven ARP true and invested once again and marketing and product enhancements to drive near and long term growth.

Last quarter I share a number of actions we took during the off season to position our tax prep business for the long term and share a strong start to the tax year.

Right those for you today.

First we have worked to optimize and rationalize our entire marketing approach. We have moved from a costly agency model to a talented internal marketing team that holistic me manages the tax season, and most importantly continually builds in house expertise.

Our newly implemented marketing stack enables lead scoring multi touch attribution and a more rigorous approach to sales funnel management.

We have refreshed our messaging center around our value proposition and our ability to deliver a premium experience at a reasonable price point.

Second we have continued to enhance our core consumer product offering, including refinements to drive conversion of visitors whose tax situation Matt.

To the appropriate skus to paid customers.

Once we have acquired a visitor it's vital we get them to start their taxes, and then convert to a paid customer.

And then return the following year.

These all represent big levers to drive top and Bottomline growth and this business.

On this front, we achieved significant improvement and 2020 and are building on that success in 'twenty and 'twenty one.

We track and P S as a proxy for our product quality and we know that it correlates well with the conversion of starts to paid from police as well as with long term retention.

Third and something we're very bullish about we officially launched our hybrid assisted offering last month. As a reminder, this product is for customers who are looking for professional help alongside a DIY product.

In light of the pandemic demand for this product with significant as customers that would've gone into a store instead chose to do their taxes virtually with the help of and adviser.

Not having this available to all customers and 2020 limited and our opportunity to capitalize on market growth.

We're excited to address this opportunity and time for the current tax season and have received very positive feedback from our customers and our base of experts who serve and stuff.

And fourth we have made targeted strategic improvements and our tax pro software, including coverage for more tax situations and.

And and improved Onboarding experience for tax professionals.

Usually at this point and the season, we can offer and updated view of guidance for the tax prep business. Since peak, one would have been completed and we'd be preparing for peak. Two later this season.

And with the delayed start of the tax season, this year, which just officially began on Friday.

The business is really just getting going.

So and update would be premature.

For fiscal 'twenty and 'twenty, one we can reiterate the full year guidance. We provided during Q3 earnings which was for low single digit revenue growth and <unk>.

Segment operating income increase of at least $20 million relative to 2020.

We remain confident that we will deliver at least this level of financial performance.

More importantly, thinking beyond 2021 as the actions we are taking to reposition the business continue to gain traction.

The targeted result, and sustainable growth and this business with the goal of returning to above market top line growth and EBITDA flow through.

First by increasing conversion and our user funnel.

Through continued improvements and the product. This is an area where small improvements can drive significant incremental EBITDA.

The increased retention again through product improvements that are validated by higher NPS scores.

This too has outsized impact on total customer values and long term EBITDA growth.

So while we don't have immediate visibility into the current tax season, and the actions we've taken and continue to take aligned with our plan for the season.

Which is why we're reaffirming our guidance and further we believe there are multiple reasons to be optimistic about the mid to long term outlook for our tax prep business.

I'd now like to turn to wealth management.

Last year, we made further progress toward our longer term priority of offering our financial professionals and the industry's most flexible models and most powerful and easy to use tax focused wealth management technology and services.

We also continue to integrate previous acquisitions building, a strong foundation to resume long term organic asset growth.

As we have discussed Blue course, independent financial professionals have experienced a significant amount of change over the last several years, which has resulted in some predictable turnover.

While we expect additional turnover this year I'm excited that virtually all of the significant changes and the financial professionals experience are behind us.

And into 'twenty and 'twenty. One this allows us to focus on improving the experience of financial professionals and their clients.

And on retaining and strengthening our relationships with our financial professionals.

Today, we remain as optimistic about the growth potential of our differentiated tax focused wealth management strategy as ever.

And taxes key competitive advantage is combining tax and wealth management, and we believe that investments and our technology home office support teams and our financial professionals and their practices will drive sustainable long term growth and our wealth management business.

To remind everybody some event of a van taxes unique selling points with regard to financial professionals and their clients include.

We're the only firm to marry tax planning and preparation with financial planning.

And advisory for all U S taxpayers, not just ultra high net worth taxpayers.

We have the largest network of tax focused financial professionals from sole proprietors to large multi partner CPA firms.

We offer multiple affiliation models for tax professionals to provide wealth management services.

They're as an independent financial professional or through an affiliate model, where our in house financial professionals take on the work of the wealth manager.

Lastly, we offer tools training support and community that are uniquely tailored to the needs of tax focused financial professions.

I'm very encouraged by the progress, we're making with and <unk> to strengthen that business.

This progress should drive increased value of the company through our continued shift to advisory where it is and our clients' best interest.

Greater attention of client assets, and lastly, freeing up our financial professionals to drive additional asset acquisition.

First our newly organized product management team has partnered with our financial professionals and identified the key pain points that were not addressed over the last several years when the business was benefiting from higher interest rates.

We have made addressing these pinpoints a priority and expect our financial professionals to begin to see concrete improvements by the end of the second quarter.

Second.

We have moved forward integrating both first global and each campus.

Our acquisition of H Cat F S and are a which we have rebranded as a van tax planning partners or a P. P allowed.

Allowed us to enter into a fast growing and high margin segment of wealth management with a platform that is aligned with our tax focused wealth management strategy.

Just as importantly, the combination of anti <unk> planning partners and <unk> wealth management and creates a hybrid suite of wealth management capabilities, which we believe positions our business for even greater asset growth and value creation for a couple of reasons.

First the combination enables us to offer multiple options interested tax professionals seeking greater engagement with their clients through wealth management services.

We now have the ability to convert these professionals into financial professionals.

<unk> financial professionals and their practices or work with them on a referral basis.

The additional affiliate model increases the potential of bringing more of our tax pros into the wealth management business.

Second in addition to offering and affiliate model that removes the burden of running and independent wealth management business.

And allows financial professionals to focus on client servicing and growth.

Our in house raw and makes it possible to offer our independent financial professionals, a turnkey succession solution.

During the fourth quarter, we began executing this strategy by acquiring one of our top independent firms, which is now <unk>.

Key to expansion of the <unk> planning partners affiliation model and southern California.

We also completed a succession acquisition from retiring independent financial professionals.

These acquisitions provide multiple benefits for the company, including offering a compelling alternative affiliation model for high performing independent advisers and offering a glide path for those financial professionals looking to retire and shifting revenue.

The compelling captive or a financial model.

The third area of progress for our wealth management business last year was the launch of our unified Advisory program.

Which was one of my top priorities for last year.

So promise to financial professionals as part of the acquisition and it.

And previously delayed which is one of the major complaint share during my one on one interactions with our top financial professionals.

We believe the programs incentive structure and pricing are fair across our business and ensure and customers receive the options and the device to make the most sense for their financial goals.

Our expectation is that we will see an acceleration of the shift towards advisory assets throughout this year and we'll share more on the specific targets during our Q1 earnings call.

To summarize I'm very pleased with the progress, we're making but also I want to emphasize the team's focus.

On significant opportunities for improvement ahead, including.

Around service levels and technology experience for both financial professionals and their customers the integration of our core systems and processes and creating greater stability by ensuring future progress is focused on better experiences for our financial professionals and their customers rather than major changes.

We have much to be excited about and our wealth management business, our business model and financial professionals continue to shift towards higher growth higher margin and more strategic advisory models.

We are executing on our platform road map that delivers truly differentiated benefits for financial professionals.

With our integration of anti explaining partners moving forward on plan.

We are already seeing promising early results associated with our R&D.

And the multiple affiliation and succession planning options. It provides our financial professionals.

As well as.

Newly expanded initiatives like retirement planning services.

I'd now like to step back and look at the progress we've made strengthening our company and laying the groundwork to realize the potential of our two businesses together.

That's the foundation for the new repositioned good core last year, we began with the company's leadership.

Hiring or elevating and almost entirely new executive leadership team.

We also reorganized to create scale and areas for which we previously did not have any technology being the greatest example.

And 2020, we also added three new board members with valuable and differentiated experience and wealth management tax digital technology transformation and product development.

Whose expertise and diverse backgrounds, and align particularly well with our strategy to drive value within and between our businesses.

Our refreshed board now includes seven out of non directors, who have joined in the last four years Lastly, we made significant progress organizing our company wide team around common goals and culture.

We moved to a truly integrated vision for Blue Cora and our stakeholders.

I'm very excited to be part of this team starting 2021 with the opportunity to execute together for our first full fiscal year.

Also.

And I have discussed last year, we shifted our strategic focus towards sustainable growth across our tax prep and wealth management segments.

In addition, we are focused on a number of key opportunities to drive growth across the enterprise.

First we are moving forward with a plan to begin converting.

Our more than 23000 and tax pro users and two a van tax financial professionals are referral partners.

A VAT tax planning partners.

While the company has considered this opportunity for some time. We believe the addition of event tax planning partners provides a much greater pathway to success and that existed in the past.

And we intend to accelerate execution on this front immediately after tax season.

Second tax act represents a unique assets to be leveraged within our wealth management business. It brings and that scaled digital marketing team and technology development group financial professionals Crave.

But can't readily access at most firms.

We have begun executing our plan to leverage our tax act business to help financial professionals with dedicated self service tools and Playbooks.

General high value warm leads and provide a full service agency offering that.

And that designs and executes a firm's marketing strategy.

Lastly, we are developing plans to leverage the product and technology leadership from tax act to enhance financial professionals productivity.

I look forward to sharing more on future calls.

It is an exciting time at Blue Cora, we finished a challenging but productive year, one that saw dramatic change for our business at the start and a return to stability and purposeful planning for the future toward the end.

We believe the steps that we've taken to reposition each business for sustainable growth coupled with continued execution of our strategy have the potential to create tremendous shareholder value.

With 'twenty and 'twenty behind Us and our company stronger for it and I'm more optimistic than ever about the future and look forward to sharing our progress throughout the year.

With that I'll turn it over to Mark to review, our Q4 performance in Q1 outlook.

Thank you, Chris and good morning, everyone I'd.

I'd like to provide some additional detail on our fourth quarter results and our outlook for Q1 2021 star.

Starting with fourth quarter results total revenue of $155 $2 million, which is above the upper end of our guidance range.

And GAAP net loss of $57 million or a negative $1 <unk> per share.

Our GAAP net loss was below our target range is due to two main factors.

A higher than forecasted impact of the accounting true up associated with the Ace cash right now as.

As I discussed last quarter, the change up or down and expectation associated with the earn out payments will run through the P&L.

And the performance of the <unk> planning partners business and Q4 as a result, it any more optimistic forecast for the business, resulting in a higher view and the total earn out consideration.

The second factor relates to higher than forecasted tax expense relating to a valuation allowance and our Nols.

This accounting driven result relates to our review of the three year accumulated position with the impact of the write down of the Inc. Steve Best brand name when we shifted to the <unk> brand materially driving the calculation.

Adjusted EBITDA, which excludes both of these factors was $2 2 million above the high end of our target range and.

Non-GAAP net income was negative $9 million or negative <unk> 19 per share both better than the high end of our target range.

Turning now to tax preparation.

Tax net revenue and the seasonally small fourth quarter was $5 $8 million and segment operating income was negative $11 million. Both just above the high end of our target range.

Moving to wealth management.

Results for meaningfully higher than the top end of our target range fourth quarter reported wealth management revenue was $149 4 million up 10% sequentially and included a 10% increase and legacy of HAE attacks.

This revenue growth was primarily driven by market improvement and 8% increase and trailing revenue and an 18% increase and transactional Commission revenue.

On a year over year basis total wealth management revenue was up 3%, which included revenue of $10 5 million from the VAT tax planning partners.

Wealth management segment operating income came in at $24 million above the high end of the target range, primarily due to better than expected top line performance.

Client assets increased 17% year over year to 83 billion.

Which included approximately $5 billion from the addition of their tax planning progress.

C based advisory assets were up 29% year over year to $35 6 billion.

This is a new record for advisory assets, even excluding a P P and advisory assets as a percentage of total client assets ended the quarter at 42, 9% up about 380 basis points from the same quarter last year also hitting a high watermark.

We saw net outflows and advisory assets of $140 million.

<unk> $203 million of net inflows that have and tax wealth management.

More than offset by outflows of $343 million at each campus, which were driven in part by the departure of inhouse financial professionals.

We always understood that could be a certain amount of attrition when we acquired <unk>.

Financial professionals prefer to operate and a smaller environment and achieve for instance, a partner that.

We continue to partner with our in house financial professionals to create an environment supportive of continued growth.

Total client assets had net outflows of just under $600 million, which.

Instead of net outflows of about $260 million from the VAT tax wealth management combined with the net outflows from the VAT tax planning and partners that I just mentioned.

At the corporate level unallocated corporate expenses came in at $7 $1 million.

During the quarter, we had about $2 5 million and integration costs related to <unk> and one day.

And $9 $5 million of transaction costs, the majority of which relates to the accounting impact of the earn out calculation.

We ended the quarter with cash and cash equivalents of $150 1 million.

Net debt of $413 million.

Our reported net leverage ratio at the end of the quarter was four three times compared to four five times at the end of the prior quarter.

We continue to be prudent from a capital allocation perspective.

Our ongoing priorities aside from unique strategic opportunities.

And support organic growth and.

And our financial professionals or interested in a different affiliation model.

And to retire and pay down the debt.

Our long term net leverage goal remains to be below three times and until we get closer to this target.

And have plans to repurchase shares.

With that let's turn to our first quarter 2021 outlook.

As Chris discussed given the delayed start of the tax season, we are not providing a Q1 outlook for tax act revenue or segment operating income, but are reaffirming our full year outlook of low single digit revenue growth and and.

Minimum of $20 million of additional segment operating income relative to 'twenty and 'twenty.

For our wealth management business, we expect first quarter revenue of between 150 to $155 $5 million and segment operating income of between 17 to $19 $5 million.

Lastly, we expect corporate unallocated expenses to be between seven five and $8 $5 million.

As the year progresses, our expectation is to hold an investor day likely late in Q2, where we will be able to share our longer term growth and margin targets.

Deeper view of the metrics driving performance for our businesses and lastly, the metrics by which we can track the success of our synergistic endeavors.

Includes our prepared remarks, we will now turn the call over to the operator for Q&A operator.

As a reminder to ask a question. Please press Star then one.

To your question, you asked and answered and you'd like to leave yourself and Mchugh pass the pocket.

Our first question comes from Chris Sadler with William Blair. Your line is open.

Hi, everybody and good morning.

A few questions on the tax business, maybe first just what kind of impact as the late start to the season had on your.

And your marketing efforts, both in terms of effectiveness and costs.

So a delay and the started the season and ultimately shifts the demand curve and some way consumers actually get keyed in on that start date, and that's one of the periods where demand ramps up and.

So you would expect for us and others and the and the industry, but some of the top of the funnel activities early in the season would still have an impact but that impact might be a little bit more muted than you would normally expect.

But it's critical and started the season to get out there and make sure that consumers are both aware of your branding and positioning and you're offering them, but there's likely to be some diminishment in terms of the impact of that spend.

Okay got it.

And then as you think through the the low single digit revenue growth target for the current tax season, and just help us think through the.

The tailwind and headwinds to that number and your view Chris.

I would think there.

They are tail winds around the refined marketing approach the new assisted offering.

And what's a pretty easy comp but.

And there is a headwind associated with what seems like a.

Kind of a reduced pricing.

Or and effort to widen the price and margin between yourself and other.

And the leader and the category. So anything there that you would point out is that fair or is there anything else that you would add.

And so the primary tailwind is our historic market growth that exist right.

This consistent shift over many years, which has been and the mid single digits and last year was more pronounced in terms of the shift from.

Prepare tax preparers to online offerings and so that's clearly a tailwind.

You've also got from a unit perspective.

Our return to a stronger value positioning is ultimately a helpful thing from a unit perspective, we also have making assistant available to all consumers coming in which is something that provides a and <unk> lift.

It's compelling.

There are some tailwind right now.

Revenue from a revenue perspective.

But really the lower pricing levels.

It does provide a bit of a drag this season.

In addition, some of the confusion and the market associated with the start date of the season stimulus payments.

And many of the things that are related to COVID-19.

And I'd have consumers.

Asking questions about what their tax situation is actually that can be beneficial force, but ultimately.

The some of the uncertainties for consumers.

Lead to some shifts in behavior and so there.

And just to.

Uncertainties will impact everyone in the industry and and consistent way.

Okay got it and.

Lastly, I just wanted to get your thoughts on partnerships and the tax business, especially any kind of.

Opportunities around White label deals just given the square credit Karma deal and the broader movement of financial services towards one stop shop platforms I would think that.

Digital wallets.

Become more and more calm and would want to add taxes and offerings. So.

Do you think that's a realistic opportunity for tax Act do you have it have you had any meaningful discussions to date and.

And then I'm also curious in that type of scenario would the digital wallet firm be able to utilize the consumers' tax data and so it got consent.

So it does present opportunity and the medium to long term. We have worked on partnerships. This year more extensively and we have and the past but not to the.

The extent or the full extent of what you described but our primary focus on partnerships.

Really been around traffic driving partnerships from brands that consumers have deep connections with and can logically be connected with our products and then also data partnerships that actually make the experience for taxpayers more frictionless and.

And I said in the medium and long term the opportunity that you described.

Clearly as compelling as those who are have banking products wealth products financial information offerings.

See the value and tax there could be some more integrated experience going forward.

And so just to address the last question you had around the use of data.

There's a.

There's some meaningful restrictions that the government has in place a 72016.

Net limits the use of data. However, if consensus is provided and consumers have full awareness and other data may be used.

And then it can be used for the purposes that are outlined at the time they provide concern.

Got it okay.

Thank you Chris.

Our next question comes from Dan and Carnose with Benchmark Company. Your line is open.

Great. Thanks, Good morning, just a follow up Chris look we've seen some pretty aggressive ads out there now interesting places by the way so and a two part question.

One.

Taking a long time I think you've seen this from the beginning to get the.

Feature set the operating debt out there and it was always tax back being a big crop.

And it sort of screening out there, hey, we're 50% cheaper than and turbo.

Is it kind of a big departure from kind of narrowing that GAAP and so I'm just curious.

Obviously, you must feel pretty confident and what the data is telling you that this is sort of the right message and do you want to get out there and that the feature set you have is more than competitive to drive paid unit growth. So I'd just love to hear some color around that and then separately.

And the explicit kind of marketing channels as I said seen some of these assets.

And digital places it seems very digitally driven at this point and.

And I know, it's early but you guys are probably adjusting.

Your marketing strategy on the fly here given the delayed tax season, but just kind of love to hear it.

Sort of your thoughts on how you're spending evolved by channel as you think.

And the tax season progresses, and where youre seeing and some initial positive returns. Thanks.

Sure so in terms of the messaging, but we.

Extensively research anything that we actually put out there to ensure that the messages that we're conveying our ultimate other ones the consumers and really specific consumers that we're reaching with those marketing platforms are ultimately going to be most responsive to and so you know.

And for certain customers that price messaging is critically important.

And as consumers move further along and the funnel or.

And I have different kind of interests and different segments than we focus more on kind of feature benefits or refund maximization and so it's not one message that youll hear ulta.

Ultimately there is an overarching message and positioning for the brand and then a variety of messages and different channels.

Based on what we've tested and and what we think will be and consumers to respond most favorably.

In terms of the marketing mix, but we are using.

All channels of marketing and so typical top of the funnel marketing like TV and radio.

And often and this is not unique for us typically wait that a bit more.

Towards the front of the season, because all customers are still available at that point and time and it's important to get become top of mind for all customers and the market.

Something that you would expect and you should expect to continue to see.

As we progress through the season, and then we're using digital marketing.

Search display advertising and online video and social and then we're also doing some interesting things in terms of partnerships that I mentioned earlier and really traffic driving partnerships with brands, but actually.

And have deep connections with their customers and some some experimenting with some sponsorships.

And you'll see and certain markets.

Sports connections that we've made with teams where they have to be fan base, our deep connections with their fan base and ultimately were hopeful that those can actually.

And those connections can be capitalized onto to bring their customers our way.

Got it that's helpful and if I could just sneak one and on the wealth management side just in terms of your color I just wanted to sort of aggregate. Some of the comments you made and people like to focus on the attrition number even though it sort of some becoming less relevant and I just wanted to make sure I understand you did say further potential adviser attrition.

Probably on some more cleanup efforts on your side, but then you also talked about.

Synergies post tax season can accelerate.

Conversion from kind of attacks.

Over you know look I havent made that could be other way around and I just want to understand if we're expecting attrition through the course of the year.

And then subsequently even if we are at there is certainly more than enough improvements.

And Rev per advisor to offset that and see kind of improved growth.

And once you get this thing kind of level set.

Yes, we have.

A number of things that we're excited about this year that are going to continue to improve the advisor experience that said, it's normal and our business to actually have some advisor churn and that typically is at the lowest performing and of the spectrum.

We expect that to continue this year.

And ultimately as we make the improvements that we're so optimistic about in terms of day.

Advisor experience, we think the business will.

<unk> B and our position as we come out of the year to grow meaningfully.

There's a variety of things that offset that right. The performance of the advisers that are.

And we will continue with the business and then a variety of actions that we're taking to bring in new advisors, including what you referenced which is us marketing more aggressively to our tax pro base, where we have.

23000, plus tax professionals, and we have a longstanding relationship with and many of them could be.

<unk> partners and so there could be referral partners and that captive model or they ultimately could be independent advisers and so.

We actually will see some attrition, but are optimistic of the actions that we're taking.

And to bring in new folks and ultimately drive growth with the people that will remain with us.

And I will lead to a positive year.

Perfect. Thanks appreciate the color.

Yeah.

Again to ask a question. Please press Star then one.

There are no further questions I'd like to turn the call back over to Chris Walters for any closing remarks.

Great. Thank you for joining us today and for your interest and Blue Cora and look forward to speaking with you next quarter.

Ladies and gentlemen, and this does conclude the program and you may now disconnect everyone have a great day.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Blue Corps fourth quarter 2020 earnings Conference call. At this time, all participants are in a listen only mode.

After the Speakers' presentation, there'll be a question and answer session.

And I ask a question during this session and we need to close stores and one of your telephone. Please be advised that today's conference is being recorded.

If you require additional system and they can start as he works with snap writer.

And now I turn the call over to <unk> Investor Relations. Please go ahead.

Thank you and welcome everyone to <unk> fourth quarter 2020 earnings conference call.

And I know you should have had the opportunity to review a copy of our earnings release and supplemental information.

And he was not renewed and these documents they are available on the Investor Relations section of our website after the call and Dot com and.

Good day, but Chris Walters, Chief Executive Officer, and Mark Nelson Chief Financial Officer.

Before and again, let me remind everyone that today's discussion contains forward looking statements based on the environment and we currently see it and speak only as of the current day.

Such they include risks and uncertainties and actual results and events could differ materially from our current expectations.

Please refer John press release, and our other SEC filings, including our form 10-K, and other reports for more information on the specific risks and uncertainties.

We assume no obligation to update our forward looking statements, except as required by law.

We will discuss both GAAP and non-GAAP financial measures today, our earnings release and supplemental financial information are available on <unk> Dot Com and include a full reconciliation of each non-GAAP financial measure discussed to the nearest applicable GAAP measure.

With that let me hand, the call over to Chris.

Thank you Dick and good morning, everyone.

'twenty and 'twenty was a challenging but more important to a transformative year for <unk> Corp.

Even as we navigate and unprecedented global pandemic, the company's new leadership team and refreshed board of directors repositioned, our unique portfolio of profitable taxi focus tech enabled businesses to sustainably grow long term and build shareholder value as an integrated company and it helps consumers build and preserve their.

Wealth.

This is a big opportunity.

And of course unique solution integrates powerful, but easy to use cash focus technology and <unk>.

Extensive and highly trusted and network of tax and financial professionals and valuable data at <unk>.

Gail to deliver holistic textbook guess planning and financial guidance that kind of efficient way enable wealth preservation and creation.

And of course compelling mission opportunity and solutions are the reason I was so excited to become CEO a year ago. They are also the reasons I'm, even more optimistic about our long term outlook today.

And I look back on the lessons, we've learned and the tremendous progress we have made over the past 12 months.

Mark will then review our financial results in more detail.

Before diving into our results and outlook I first want to thank our employees for not wavering and their dedication to our customers. Despite the challenges of the pandemic.

And I want to thank our financial professionals, who have worked tirelessly to.

And to position their clients for success, both from a tax and wealth management perspective through this uncertain time.

Finally, I want to thank our customers for placing their trust in.

And us to ensure their financial wellbeing.

So let me begin first by reviewing the impact of the pandemic, which we have discussed on earlier investor calls this year.

In addition to the hardship and loss of just cause for many of our customers employees and financial professionals. The COVID-19 pandemic had a significant short term impact on last year's results.

First the unexpected tax filing extension resulted in approximately $20 million.

And of incremental cost and our tax preparation segment.

<unk> increased marketing spend extended call center staffing and other costs as we work to finish a longer tax season.

Simultaneously planning for the next.

Second beyond these direct COVID-19 impacts, we decided to strategically invest and our future by spending approximately $20 million on additional marketing to overcome the weaker performance from the first peak, but also more effectively drive sustainable unit crutch.

Third and our wealth management segment as the fed funds rate fell to zero at the start and the pandemic the equivalent of 625 basis point reduction and interest rates. This caused sweep revenue for the year declined 87%.

Four and approximately $21 million impact on a segment and consolidated operating income.

In total these items impacted 2000, twenty's adjusted EBITDA by $61 million.

Now, let me turn to our progress and momentum and each of the businesses and across the company.

First our tax prep segment.

With $208 8 million and revenue tax act delivered its 23rd consecutive year of revenue growth last year, when adjusting for the sale of simple tax.

Overall, excluding the impact of the pandemic 'twenty and 'twenty was a positive year for the tax Act business and we've refocused its strategy and growing monetized units and feature driven ARP, two and invest and once again and marketing and product enhancements to drive near and long term growth.

Last quarter I share a number of actions we took during the off season to position our tax prep business for the long term and share a strong start to the tax year I'll reiterate those for you today.

Our newly implemented marketing stack enables lead scoring multi touch attribution and a more rigorous approach the sales funnel management.

We have refreshed our messaging center around our value proposition and our ability to deliver a premium experience at a reasonable price point.

Second we have continued to enhance our core consumer product offering, including refinements to drive conversion of visitors, whose tax situation match to the appropriate skus to paid customers.

Once we have acquired a visitor it's vital we get them to start their taxes, and then convert to a paid customer.

And then return the following year.

And these all represent big levers to drive top and bottom line growth and this business.

On this front, we achieved significant improvement in 'twenty and 'twenty and are building on that success in 'twenty and 'twenty one.

We track N P S as a proxy for our product quality and we know that it correlates well with the conversion of starts to paid completes as well as with long term retention.

In light of the pandemic demand for this product with significant as customers that would've gone into a store instead chose to do their taxes virtually with the help of and adviser.

Not having this available to all customers in 'twenty, and 'twenty limited and our opportunity to capitalize on market growth.

We're excited to address this opportunity and time for the current tax season and have received very positive feedback from our customers and our base of experts who service them.

And fourth we have made targeted strategic improvements and our tax pro software, including coverage for more tax situations and.

And and improved Onboarding experience for tax professionals.

However, with the delayed start of the tax season, this year, which just officially began on Friday.

The business is really just getting going.

So and update would be premature.

For fiscal 'twenty and 'twenty, one we can reiterate the full year guidance. We provided during Q3 earnings which was for low single digit revenue growth and <unk>.

Segment operating income increase of at least $20 million relative to 2020.

We remain confident that we will deliver at least this level of financial performance.

More importantly, thinking beyond 2021 as the actions we are taking to reposition the business continue to gain traction.

The targeted result, and sustainable growth and this business with the goal of returning to above market top line growth and EBITDA flow through.

First by increasing conversion and our user funnel through continued improvements and the product. This is an area where small improvements can drive significant incremental EBITDA.

The increased retention again through product improvements that are validated by higher NPS scores.

This too has outsized impact on total customer values and long term EBITDA growth.

So while we don't have immediate visibility into the current tax season, and the actions we've taken and continue to take aligned with our plan for the season.

Which is why we're reaffirming our guidance and further we believe there are multiple reasons to be optimistic about the mid to long term outlook for our tax prep business.

I'd now like to turn to wealth management.

We also continue to integrate previous acquisitions building, a strong foundation to resume long term organic asset growth.

As we have discussed blue cores independent financial professionals have experienced a significant amount of change over the last several years, which has resulted in some predictable turnover.

While we expect additional turn it over this year and makes.

Sighted that virtually all of the significant changes and the financial professionals experience are behind us.

Going into 'twenty and 'twenty. One this allows us to focus on improving the experience of financial professionals and their clients.

And on retaining and strengthening our relationships with financial professionals.

Today, we remain as optimistic about the growth potential of our differentiated tax focused wealth management strategy as ever.

To remind everybody some event of a van taxes unique selling points with regard to financial professionals and their clients include.

We're the only firm to marry tax planning and preparation with financial planning.

And advisory for all U S taxpayers, not just ultra high net worth taxpayers.

We have the largest network of tax focused financial professionals from sole proprietors to large multi partner CPA firms.

We offer multiple affiliation models for tax professionals to provide wealth management services, either as an independent financial professional or through an affiliate model, where our in house financial professionals take on the work of the wealth manager.

Lastly, we offer tools training support and community that are uniquely tailored to the needs of tax focused financial professions.

I'm very encouraged by the progress we are making with and event tax to strengthen that business.

This progress should drive increased value of the company through our continued shift to advisory where it is and our clients' best interest.

Greater attention of client assets, and lastly, freeing up our financial professionals to drive additional asset acquisition.

First our newly organized product management team has partnered with our financial professionals and identify the key pain points that were not addressed over the last several years when the business was benefiting from higher interest rates.

We have made addressing these pinpoints a priority and expect our financial professionals to begin to see concrete improvements by the end of the second quarter.

Second.

We have moved forward integrating both first global and each campus.

And our acquisition of H D S and are a which we have rebranded as a VAT tax planning partners or a P. P.

Allowed us to enter into a fast growing and high margin segment of wealth management with a platform that is aligned with our tax focused wealth management strategy.

Just as importantly, the combination of and tax planning partners and <unk> wealth management and creates a hybrid suite of wealth management capabilities, which we believe positions our business for even greater asset growth and value creation for a couple of reasons.