Q3 2021 H & R Block Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the H&R block third quarter fiscal 'twenty 'twenty, One earnings conference call.

At this time all participants are in a listen only mode at the.

The speaker's presentation, there will be a question and answer session to ask the question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.

I would now like to hand, the conference over to your host Vice President of Finance and Investor Relations Mr. Colby Brown.

Thank you good afternoon, everyone and thank you for joining us to discuss our fiscal 2021 third quarter results on the call today are Jeff Jones, our president.

CEO and Tony Bowen, our CFO.

We have posted today's press release on the Investor Relations website at HR block Dot com.

Also on the website you will find the link for the webcast containing today's presentation, which will be posted after this call. Some of the figures that we discussed today are presented on the non-GAAP basis, we've reconciled the comparable GAAP and non-GAAP figures on the schedules attached to our press release.

Before we begin our prepared remarks, I'll remind everyone that this call will include forward looking statements as defined under the securities laws.

Such statements are based on current information and management's expectations as of the state and are not guarantees of future performance forward looking statements involve certain risks uncertainties and assumptions that are difficult to predict as such our actual outcomes and results could differ materially.

You can learn more about these risks in our form 10-K for fiscal 2020, and our other SEC filings H&R block undertakes no obligation to publicly update these risk factors or forward looking statements.

At the conclusion of our prepared remarks, we'll have the Q&A session. During Q&A, we ask the participants limit themselves to one question with the follow up after which they may choose to jump back into the queue.

With that I'll now turn the call over to Jeff.

Thank you Colby good afternoon, everyone and thanks for joining us on.

I'm excited to provide an update today on the progress, we're making on our block horizon strategy.

As well as some perspective on the first half of the tax season.

Tony will follow with thoughts on our third quarter results.

Outlook for fiscal 'twenty, one and additional detail on our strategic investments.

The jump right in.

Following our Investor day in December with connected with many of you and have enjoyed hearing your perspectives.

Based on these conversations I thought it would be helpful to start with an update on block horizons, our long term strategy focused on three imperatives small business financial products and block experience.

As a reminder, small business and financial products are both categories with structural tailwind as well.

We have a right to compete and advantages that will help us win.

While these have been components of our business for years.

Historically, we havent made a concerted effort to target either opportunity.

By leveraging our trusted brand.

Relationships and technology platform, we will accelerate growth in both areas.

Over the next five years, they will become a more meaningful part of our business.

Helping to balance our current once a year purchase frequency.

And given our existing assets in these areas. These will not require significant investment as Tony will outline in more detail later.

Our third imperative block experience encompasses the new approach the tax as we blend digital capabilities and data with human expertise and care.

Through this imperative, we will continue to modernize the consumer tax business.

Blurring the historical lines between assisted and do it yourself.

And by digitally enabling our human advantage, we will increase the relevance of H&R block.

I'll now provide an update on each of these key areas starting with small business.

We're making progress on all three elements of our small business strategy.

The first expanding our reach to more small business owners to grow in tax which includes cross selling and fully integrating with wave.

Second growing our book, keeping and payroll services and block advisors.

Third embedding wave money at the center of the way of experience.

We've certified over 25000 professionals to serve the complex tax and financial needs of small business owners.

This is the Great example of the power of our scale.

We've also seen thousands of wave customers start to engage with the block advisors brand for their tax needs.

We're continuing to build new capabilities and bookkeeping and payroll.

And in mid February we launched or block advisors marketing campaign to drive awareness of our ability to serve small business owners unique needs and to reinforce our expertise as a trusted year round partner.

At <unk>, we continue the ship meaningful enhancement store platform that are providing significant value to small business customers.

These include the beta launch of the new invoicing features to allow small business owners to better manage their accounts receivable.

Enabling remote deposit capture for wave money.

In creating new client interfaces to allow users to manage their bookkeeping faster and on more devices.

These efforts are paying off as we grew third quarter revenue over 30% of wave.

Moving on the path towards pre pandemic levels.

And the financial products, our goal is to provide more value to our customers by transforming the emerald card into a fully featured consumer friendly mobile banking alternative.

We are in the design phase and are excited about what we continue to learn with consumers.

For this season, we added is simple new digital feature to the Emerald card.

The ability for customers to automatically setup for the mobile wallet on both Google pay and Apple pay directly from the <unk> block App.

This has resulted in a 10 X increase in customers using their mobile wallets, which tells us that we're providing meaningful value.

And in block experience, we're continuing to infuse human help into our DIY offerings and bring tax pro expertise to our customers. However, they want to be served.

I'll provide more detail on a minute.

We're seeing positive momentum in several areas.

Including adoption of digital tools and assisted.

DIY filers engaging more with our tax experts.

Continued operational improvements in our offices.

And the enhancements to the DIY user experience.

The progress we're making in each of these three strategic imperatives in such a short timeframe is a testament to the dedication and drive of our teams.

And further evidence that we are building from a position of strength.

Because we have existing assets across small business financial products in consumer tax.

It is important to emphasize that the investments we are making will be funded through cost savings with future investments being success based and tied to revenue growth.

Tony will provide additional color on this later in the call.

With that recap of block horizons.

Now I'd like to provide some perspective on the tax season.

We are executing on our playbook.

Digitally, enabling our assisted business and integrating human help into our DIY products to deliver of best in class experience. However, consumers one of all of their taxes.

It's early in the season, but we're seeing hundreds of thousands of our assisted clients choosing to interact with us digitally.

By uploading documents electronically through my block.

Using video chat or proving the completed return online.

And our continued focus on operational excellence in our offices is translating to a consistent experience from our customers that provides tremendous value.

All of these efforts are resonating as we continue to see strong client satisfaction scores.

We've also improved the DIY user experience around document important.

Offered additional support to help users understand the pandemic impact on their taxes.

And provided real time tax information updates for our mobile users.

Our work to personalize the experience and to make it faster for our customers to complete the return continues to resonate.

And finally, we're using data to offer of human help in the moments clients need it most.

<unk> and online assist and tax pro review of adoption significantly outpacing last year.

And as I mentioned earlier in small business tax we have seamlessly integrated the wave and block advisors experience, leading to increased adoption of our tax services by way of clients.

We're accomplishing all of this during another season in which the industry has experienced a delay on filings.

Which resulted primarily from the move of the IRS E file open date from January to mid February.

While the slow start in the industry has obviously impacted our results.

We've seen positive trends throughout the business.

I'm encouraged by what we're seeing in our efforts to blend human help with digital capabilities.

We're seeing greater uptake of our digital tools by assisting customers.

And the desire for more human help from our DIY customers as we continue to see the lines between these two categories blurring.

An example of this is the double digit increase in online assist returns that I mentioned earlier.

Which is remarkable considering the overall decline in returns due to the delayed start.

Elsewhere, we're seeing a meaningful lift in DIY net average charge as mix has been favorable and we've been able to partially closed the gap in pricing with our primary competitor.

And our efforts to deliver exceptional service in assisted are paying off with continued strong client satisfaction scores.

Well, we're off to a good start we recognize there is certainly a long way to go.

We're focused on executing our playbook in the second half of the season to build on our momentum in.

In summary, we're executing on our block horizon strategy seeing significant progress in key areas.

We're performing well on the tax season, and assuming an April 15th deadline are on track to deliver our financial outlook for the year.

With that I'll now hand, the call over to Tony.

Thanks, Jeff Good afternoon, everyone.

Today I'll provide an update on our third quarter results thoughts on our outlook for the fiscal year and additional color on the investments, we're making to support our strategic imperatives.

Starting with the third quarter, our results were significantly impacted by the delayed start to the tax season.

This resulted in the industry wide shift of returns from the first half into the second half.

This resulted in both lower return volume through January as well as a deferral of revenue related to the E file open date moving to February.

As a result, we reported revenue of $308 million for our third quarter of decline of 41%.

Was primarily related to the delayed return volume, while approximately 69 million was due to the deferral of tax prep fees and the delayed recognition of refund transfer fees in Q4.

Partially offsetting this decline was continued strong performance at wave, where we posted an increase of over 30% for the second consecutive quarter.

Additionally, Emerald card revenue improved due to low additional loads from the second round of stimulus from January and we saw improved performance in our international businesses.

Turning to expense total operating expenses decreased 15% to $572 million.

Approximately two thirds of the decline was related to variable compensation and project expenses, which was driven by lower return volume.

Additionally, marketing expenses were lower as we shifted spend of the fourth quarter.

Reductions in travel legal and occupancy costs account for the remainder of the decrease.

Interest expense declined $4 million, which reflects lower draws on our line of credit as well as a lower interest rate on our debt issuance earlier in the fiscal year.

The changes in revenue and expenses resulted in pre tax loss from continuing operations of $284 million.

GAAP loss per share increased from 66 to $1 27, while adjusted loss per share increase from 59 to $1 17.

Bill the majority of this change was driven by the increase in pretax loss was also impacted by a lower effective tax rate as well as lower shares outstanding resulting from repurchases earlier in the year.

As we've discussed while beneficial on a full year basis, the lower tax rate and share count negatively impacts EPS in quarters in which we reported a loss.

In discontinued operations, there were no changes to accrued contingent liabilities related to sand canyon during the quarter.

For additional information on sand Canyon, please refer to disclosures on the Companys reports on forms 10-K, and 10-Q and other SEC filings.

Turning to our outlook for the fiscal year, we expect industry volume to recover in the second half and then relatively flat for the tax season, assuming the deadline remains April 15th.

Based on these expectations and the positive trend as Jeff mentioned earlier, we continue to expect revenue in the range of three 5% to $3 6 billion and EBITDA of $950 million to $1 billion.

We have identified additional favorability in corporate taxes, and as such now expect our effective tax rate to come on at the low end of our 18% to 20% outlook range.

Turning to our strategic imperatives I'd like to spend some time on the related investments and how we plan to fund them.

As Jeff mentioned, our established operations in small business financial products and consumer tax provide a strong base from which to build.

It's also important to note that we're implementing each strategic imperative in phases over the next several years.

This allows us to take a methodical approach, making modest initial investments with incremental investments being funded through revenue growth.

In small business current investments are primarily in technology necessary to develop our capabilities.

Compensation as we build the team required to provide services and marketing to acquire customers.

In financial products. The investment this year is limited and is primarily related to product product design and experience.

This will continue into next year, because we invest in technology to support the mobile banking platform.

And in block experience, we continue to invest in technology, and new operating models to deliver expertise and care to consumers. However, they want to do their taxes.

All in these costs total approximately $20 million to $25 million in fiscal 'twenty. One we've done an excellent job this year of finding efficiencies and eliminating unnecessary spend to fund these investments.

To summarize how we're thinking about this our initial investments will be in the tens of millions of dollars not hundreds of millions.

We will fund them through cost reductions elsewhere in the business of.

Additional investments will be funded by incremental revenue growth.

And as a reminder, M&A is not a core part of our strategy.

Bill will remain open to opportunistically investing in external capabilities. When we believe it will drive the appropriate returns.

On a related note following our Investor day in December we received several questions regarding our baseline earnings and expected run rate going forward.

We understand the importance of providing this perspective and planning to do so following the conclusion of this fiscal year.

Ultimately our goal is to grow our top line at a rate on which we leverage our fixed cost, which translates to improved earnings and free cash flow.

This ability to generate a significant amount of cash while our strategic imperatives provide a platform for accelerated growth gives us confidence in our future and supports our capital allocation priorities, which remain consistent.

At the top of the list is maintaining adequate liquidity for our operational needs to account for our seasonality.

Next we will fund the investments I discussed earlier.

Finally, we will deploy excess capital through quarterly dividends and share repurchases.

We're committed to continuing our dividend with the goal of increasing it over time.

The health of our business and our outlook for the future have allowed us to increase the dividend and for the last five years.

Amounting to a total increase of 30% during that span.

We are also committed to repurchasing shares to offset dilution and we'll opportunist opportunistically repurchase shares beyond that.

This fiscal year, we have repurchased 5% of shares outstanding and during my tenure as CFO, we have repurchased 19% of shares outstanding.

In summary, we're accomplishing great things in our tax business and are on track to deliver our financial objectives for the fiscal year.

And our prudent measured investments in our strategic imperatives are putting us on a path towards long term growth in revenue earnings and cash flow I couldnt be more excited about the future of H&R block.

With that I will now turn the call back over to Jeff.

Thanks, Tony.

For Q&A I'd like to take a moment to thank our franchisees tax pros and associates, who continue to deliver for our customers and who deserve all of the credit for the progress we're making on block horizons the debt.

Dedication and resolve they've shown over the past 12 months are truly remarkable.

I am confident in where H&R block is heading we're redefining the tax category blending human expertise and care with technology and data delivering more value for our customers.

And we're making good progress in our small business and financial products strategic imperatives, which will be key growth drivers in the future.

We're not only poised to deliver on this year's outlook, but are also well positioned for an even stronger future.

I look forward to sharing more with you when we report our full year results in June.

With that we'll now open the line for questions operator.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw.

Of all your question press the pound key please standby, while we compile the Q&A roster.

Our first question comes from the line of Jeff Silber of BMO capital markets. Your question. Please.

Thank you so much appreciate the color I just was wondering on your reiteration of your financial outlook for this year. If you can give us some color on what we should expect from both the volume and net average charge perspective by your different product lines.

Hey, Geoff it's Jeff Jones, I'll start us off and Tony can tag team on if he wants.

So as part of our overall financial outlook for the year, we expect the hold share in the assisted business.

We like where we're positioned today, obviously a lot of business left but we think we're on track to do that.

We expect to grow share in the DIY business.

Really building on the strength of this combination of a great competitive pricing a much improved product and continuing to build awareness of that offering in the market.

With respect the pricing again I'll split it out.

This is another year of where we have held net flat in the assisted business.

And we believe as we pay close attention to client satisfaction scores that continued to be very strong.

The clients are seeing the value for price paid and we expect to be able to get back to inflationary level price increases moving forward.

In the DIY business. This was a year, where we felt our price advantage versus our largest competitor had gotten too great.

And so we intentionally took price in DIY. This year and you can see that starting to play out in the results to date.

Okay. That's really helpful. I appreciate it.

I know, we're only a couple of weeks or two weeks three weeks into tax season, and I know, sometimes comparisons to the IRS data are a little bit misleading, but based on what you know do you think you gained share in both channels. So far this tax season.

So far this season, we were really pleased with our results, we like where we are.

To your point.

There's a lot of noise given the delay in the season and when we look ahead to the balance of the season.

We know how we have to continue to execute the playbook.

On the right value continuing to reiterate the digital capabilities, we're seeing nice consumer uptake of our virtual capabilities. We're seeing DIY clients continued to upgrade into human health. So really all of those things we feel good about the progress and we.

Like where we stand so far in the season.

Okay fantastic. Thank you so much thanks, Jeff.

Thank you. Our next question comes from Jeff Goldstein of Morgan Stanley. Your line is open.

Hey, guys.

Add some more color about what youre seeing in terms of the assisted customer base. So far so is it new customers is it better retention of existing customers and then are there more people coming to the platform because tax situations of gotten more difficult given COVID-19 and in things like working from home or maybe opening of new brokerage accounts just just any.

The thing to call out on the trends and demographics of what Youre seeing in the assist the channel.

Yes, Jeff you had a number of the little nuanced questions. There, let me see if I can catch them, all but I think just in general in the assisted channel.

We continue to see.

Nice uptake of our digital capabilities.

We think that's a reflection probably of some of the pandemic and just people embracing new ways of doing their taxes.

We also see about 50% of all of our new clients in assisted being millennial.

That's another important demographic shift that we've seen for a couple of years that remains true.

What else.

What other pieces you Tony Yes, I mean, the one thing I would mention is when we look at our performance of new and prior Jeff News are doing relatively well so we're nowhere attracting.

The incremental new clients of the brand, which is the which is a really good sign.

Our market share right now it looks really strong on the assistance side, but we also know that we over index on market share earlier in the season and with the tax season being delayed <unk>.

Comparability year over year is a little bit unusual obviously that will moderate a bit by the end, but to Jeff's point now a really good start across the business and Theres a lot of positive metrics to point to but we also know there's a lot of tax season to go and we're preparing to execute.

Okay. That's all very helpful. And then this may fall under what you said about long term baseline earnings in giving guidance later this year, but I just wanted to ask it a slightly different way. So if you look at the EBITDA guide for the year and I know, it's an odd year, given the tax deadline shift, but if you normalize it it seems like your bill.

Low the EBITA margin you were at in 2019. So so maybe just high level you could talk about the puts and takes there as it is of conservatism is that of investments around some of the new initiatives, maybe just help us through of kind of like the EBITDA Bridge from then to now.

And anything you could talk about moving forward.

Yes, it's a great question, Jeff and there has been a lot of moving parts from FY 19 to FY 'twenty one per sure.

I think one of the things I would call out is and this year, obviously, we're talking about it relative to outlook not to your to your first point. We also know that this year is going to include some one time expenses related to Covid debt I don't view as kind of run rate and Thats. Some of the things that will adjust out for when we get to the end of the year.

<unk>.

Because there are a lot of unusual things when we think about compensation being higher this year due to you know a lot of the tax season happening in Q1, and obviously on a full tax season happening in part of Q3 on into Q4. We've also had some expenses related to some of the things we've done on our offices around sick leave as well as just by.

And different materials to keep our clients on associates say, so all of those things add up and I think are impacting our margin.

When we think about comparing back to FY 19, that's probably a longer conversation because there have been a lot of moving parts part of this is.

The client volume and change from FY 19 through FY 'twenty, one as we talked about last year. We were really pleased with how we ended the tax season in both assisted and DIY, but we aren't we're operating with suboptimal network for a good portion of the tax season, where we didn't have all of our offices open we didn't have all of our tax pros at full.

Force and that definitely you know resulted in some modest client decline that is now built into the new baseline going forward, we will see where we end this year, but those are all pieces of the puzzle that helped kind of connect the dots from FY 19 to 21.

Got it thanks for the color.

Thanks, Jeff.

Thank you. Our next question comes from Scott Schneeberger of Oppenheimer. Your question. Please.

Thanks, very much good afternoon.

I guess from first question D.

Why the.

The net average charge change the plus 15% year over year, which is very strong Jeff you referenced.

Narrowing the gap with the the leader in the industry, but this year you didn't really raise rates on your products. So I'm curious could you break down a little bit more of what's driving the net is it is it less free returns is what's driving the mix or.

I think you did increase price of rate and self employed is that particularly strong we can just call a level deeper on that thanks.

Yes, I think you really hit on a couple of the things that are driving that increase was <unk>.

<unk>.

More people move into deluxe was.

Was the piece of the puzzle.

Self employed as you commented on those are all intentional strategies to grow NAV this year.

Take a step back we believe that it's important for us to maintain the price advantage.

But we just saw that gap widening. So these are some of the first moves we've made the start to close that gap and youre seeing that reflected in the knack improvements in DIY so far.

And just following on that you mentioned just now.

Move up.

Presumably from basic of free to John walks.

Do you view this as primarily.

The dynamic of a lot of new brokerage accounts being opened and it's my understanding that if someone has some stock transactions that would drive them into the premium as opposed as opposed to the work could you just speak a little bits of the tier level and what's being delivered by by new brokerage accounts do you see that as of <unk>.

Meaningful driver of the tearing up.

And also have you can qualify what effects on which which tier level of things.

We're obviously aware of just the growth in retail investors and what that's meant to brokerage accounts so far in the pandemic.

We tend to under index in those type of clients in general So that's not really a driving force behind the move from free to the what's in our product.

Yeah on the other thing I would add Scott as you know we aren't seeing a lot of the those type of clients. So far this season, either right you know a lot of those brokerage statements come out later, so even if that's a bit of of driver by the and we arent seeing a lot of that early on I think it really is the <unk>.

Grade triggers that we have in the free product and across the lineup that's causing clients to upgrade is one of the main drivers of the increase for sure the other.

Thing I'd point out is online assist increase take rate as well as obviously.

The big tailwind for <unk> as well.

Excellent sounds good Tony and just one more if I can follow up Howard how are you with any of the assistance. How are your stores open there were times last year due to Covid that you add half of the platform was on available to be opened youre doing a great job with this with this hybrid model.

Of digital and store fronts, and just curious how open are you.

If you can compare to last year during the Covid period, how open are you as far as storefronts.

Yes, great Great question, and you have good memory as well Thats exactly right last year, there was not a single office open and what we would call normal and about half of the network was closed this year. The network is open.

What we're dealing with this year in a much much more minor way are those states that have capacity of restrictions.

Were they limit the number of people based on the square footage of the location.

That hasn't presented as a major issue at all to this point in the season, but that to the degree that we're operating in Covid situation is state level of capacity restrictions.

Great. Thanks, very much guys. Thanks Scott.

Yeah.

Thank you. Our next question comes from the line of Kartik Mehta of Northcoast Research. Please go ahead.

Hey, Jeff and Tony.

Jeff as you look at the season I know, it's early but your thoughts on kind of how.

What type of transition of mix, we will see from assisted and DIY is the endpoint any change from the past or any change in your expectations for the growth rate of those two segments.

Yes, Kartik for sure let me kick us off.

Before I talk about the mix I mean, obviously, we're focused on the total market to compete and we're focused on continuing to digitize the assisted business and continuing to offer of human health in the DIY business. So we literally see those lines continuing to blur.

You know I think it's also important to remember that.

We always see any migration that happens being greater in the early part of the season.

And then every year that moderates to a much different level towards the end of the season.

We're seeing that happen now.

In just the last week, we've seen that moderate over 100 basis points headed in the direction that it's headed in every year.

And the final the final point I'd make about it I guess until I hear your follow up is.

We are really the only business that has a large assisted business and the large DIY business and we're not seeing any signs in our own data of a major shift from one channel to the other.

And Jeff just.

I know that this might be way too early but.

Curious on your Emerald card, obviously, youre trying and you have improved that product any signs of statistics that you can talk about the good show that consumers are using adjusted for more than getting their tax refund and taking that and spending that tax refund.

Yes, and I appreciate the question a lot because I want to make sure to distinguish what we're doing this year with Emerald card.

<unk>, what we're building this separate from Emerald card for the future when we talk about financial products, because those are really different things there.

This year, we enabled the ability to.

Digitally provision the card in the Google pay or Apple pay and we've seen a significant increase in the usage of the card as it relates to that.

That's that's the this year.

That's quite different than building a fully featured mobile bank that were in development and now and that will start to launch and iterations over the next year.

And a lot more to say on that as we get deeper into the next year, but I just wanted to make sure to draw that distinction.

Thank you very much appreciate it.

Thanks Kartik.

Okay.

Thank you of our next question comes from Hamzah, Missouri of Jefferies. Please go ahead.

Good evening. Thank you.

No you you touched on this.

In your prepared remarks, the little better than in the Q&A, but just kind of flushing it out a little bird with the lines blurring between DIY and assisted.

What what exactly of the implications to your business.

Does the store base shrink a lot of.

How do you handle that.

You know is at war I know, it's early innings, Bart, but just talk us through how that impacts your business.

From just the margin standpoint, I know that the the net average charge matters too on both of those businesses, but just any thoughts there of regret.

Absolutely and let me try to hit a few points, which I think are all real potential implications for the business I think I would start with of it.

Important choice, we made for this year.

On Mac and the assisted that was different from our past and that was that the consumer will pay the assisted price no matter, how many digital capabilities. They use so using digital is not a downgrade of knack for assisted clients.

If you start as the D Y DIY client given the take rate, we're seeing with online assist and with tax Pro review, that's an important add on to knock on the DIY business.

So the more digital capabilities and human help get blurred the more we see positive benefit and really both of our assisted and DIY businesses.

Specifically in the assisted business.

We've really been focusing on building capabilities to serve the client.

Frankly faster than consumer demand has been happening over the last few years. So we think we're in a really good position now with ability to digitally upload your docs to have video and chat with tax pros to approve and pay online using my block is the centerpiece of that.

We're paying close attention to consumer adoption because of the business benefit as we see the consumer take rate accelerate is our ability to look closely at the physical retail footprint.

As we've talked about that footprint is 100% leased and every year, we have flexibility to open close of the reposition.

And then the second is with respect to labor utilization, both the number of pros and how those pros are deployed when youre not limited to of physical environment.

So really important upside in the P&L.

The important impact of margin.

And that's why we're paying such close attention to building the right capabilities that can shape consumer behavior over time.

Got it very helpful. And then just my follow up question is just around it's more of a clarification. I think you had sort of M&A is not part of the core strategy.

Does that mean, you just don't need to do M&A to sort of <unk>.

Execute on on the strategy of already their financial products, specifically or or small business. I know you did wave of wild back part, but just any thoughts on M&A there.

So the the important message we want to leave everyone with is the block horizon strategy is not of strategy dependent on M&A.

We also know and we've talked about debt, we will stay open if we see capabilities that would accelerate our growth in small business or financial products and that they made the right financial sense. They generated the right returns for the business. We are open to those but we're not trying to build an M&A.

Dependent on growth strategy.

And that's how we've tried to be transparent on both sides of that question.

Got it. Thank you so much thanks on them.

Yeah.

Thank you. Our next question comes from George Tong of Goldman Sachs. Your line is open.

Hi, Thanks, good afternoon.

On the tax season. This year was delayed because of the IRS accepted the file of just a little bit later could you asking the estimate perhaps how much revenue and volumes were shifted from fiscal <unk>. The fiscal <unk> to visit the late start based on prior years and based on what Youre seeing so far this tax season.

Yes, George I don't know if I have the exact way the number of the exact way that you ask it I mean, what we shared on the opening comments was from the volume we did do.

And the tax returns, we'd already essentially processed through the Q3 period. It was about $69 million of revenue that was directly shift into Q4 because of the E file delay alone I think the bigger part of it is the delay of the overall tax season and that I would just refer to you to look at the volume.

The release by the IRS and then our volume tables as well.

On the IRS is still showing whether it's 20% to 30% decline across the industry. So there's obviously a large volume delay that is now starting to catch up we see that on a week on week over week basis based on the data on the Irs's released.

That would be the bigger impact I think for us on the overall industry through January 31 period.

Alright, and I guess, just as a follow up to that.

Perhaps in the season that you've seen so far could you talk a little bit about how competitors are responding with respect of price in the assisted.

How competitive pricing is and how H R. B intends to respond but the go to market as it relates to pricing.

Yeah, George I'll kick that off and Tony can add in.

Our pricing strategy in the assisted business is unchanged for this year, we feel very good about the reset we did a couple of years ago, we feel very good about the client feedback we're getting year over year in the value for price paid and.

And we feel very good about the the results that we're starting to see in terms of attracting new clients and where we're at from a share position.

As we've talked before we're.

Not trying to be the low price provider there will always be local competitors that offer a lower price that's not where we're trying to play.

And I think you'll also see from time to time different promotions that will be offered in the market, but we're focused on building a strong value offering.

Not dependent on lowering price more and is trying to stay out of the high low promotion gain that you see others, playing but again, we feel very good about our results and the clients that are choosing block.

Yeah, nothing that I think the I think that was Wilson.

Yes.

Got it very helpful. Thank you thanks George.

Thank you. Our next question comes from Michael Millman Millman Research. Please go ahead.

Thank you so couple of things one.

Are you seeing any.

Impact from Intuit.

Basically getting into assisted and if so.

How much.

Second secondly.

This is the second year that we've had the virus come.

Oh.

The strong at least around the <unk>.

Part of the tax season.

People, who now at two years sitting at home doing the taxes.

The kind of my H, well continue to do this and that.

Change the long term slope of the business.

Yeah, Michael I'll jump in first.

On your first question, we feel very good about our leadership stand in the assisted business.

Adding the digital capabilities that we're adding the results that we're seeing the client satisfaction scores improvements year over year.

I think when it's all said and done we'll report our business, perhaps they'll report their business and breakout of their volume in assisted who knows but where we stand right now we feel very good about the progress, we're making year over year in and where we are in the assisted business.

And your second question is just you know impacted.

Impact of the pandemic and is that causing a migration between channels I think the essence of your question.

And every year at this time, we see.

The shift of being a bit higher.

That has always moderated every year.

To be much lower by the end of the season.

We're already seeing that happen, there's been over 100 basis points moderation just in the last week in terms of that migration and then I think the final point I would reiterate is given that we have business in both the assisted and DIY categories. We're not seeing any significant shift from one channel to the other.

And to date as a result of Covid.

The only thing I would add on Jeff as you know last year, we look at the assisted category through October 15th at essentially ended flat. So despite there being an incredible environment, where people were forced to stay at home.

Encourage the stay at home I think it showed the resilience of the industry and we'll see where this in more this year and but we're seeing a lot of demand for our assisted products and to Jeff's point, we've got the ability to see it across all business lines and just doesn't feel like there's a big shift in how people think about doing their taxes, yes. Thank you.

And just one quick follow up if the.

Is the chatter suggests you're kind of suggesting that.

Having on the July 15th.

On this.

Increase the cost kind of on the same way last year on.

The SEC already built into your forecast.

Yes, obviously, we're paying close attention to all of the same chatter and headlines.

We don't see a reason to delay from the consumer perspective, but we respect everything the IRS has on their plate.

When that decision gets made if that decision gets made there's a number of things that we'll have to evaluate.

When is the decision made what is the ultimate date of the extension is it the same as last year, how much of business remains and then we'll have to re forecast our business to execute against that remaining part of the business.

Obviously, it's the second year on a row, if that happens that we would go through that process. So I.

I would expect us to be smarter this year as we've been through it once.

I mean, we said this in the opening comments, but you know on the outlook. We provided was assuming the tax season hits April 15th So to your point, Michael if that gets pushed out and there's not only expenses it will get pushed into Q1, but also revenue.

Last year, we were in the middle of the pandemic and people again were forced to stay at home. So even though the tax seasons extended we may not see you know.

The same level of volume shifts that we saw last year.

If it were to happen who knows obviously still of lot of a lot of questions up in the air.

Okay. Thank you thank.

Thank you.

Thank you at this time I would like to turn the call back over to the Colby Brown for closing remarks, Sir.

Alright, thanks for the teeth and thanks, everyone for joining us this will conclude today's call.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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