Q2 2025 H&R Block Inc Earnings Call
Thank you for standing by, and welcome to H&R Block's second quarter fiscal year 2025 earnings conference call.
At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star-one-one on your telephone. To remove yourself from the queue, you may press star-one-one again.
Colby Brown: I would now like to hand the call over to Colby Brown, treasurer and interim vice president investor relations. Please go ahead
Speaker Change: Thank you, Lateef. Good afternoon, everyone, and welcome to H&R Block's Fiscal 2025 Second Quarter Financial Results Conference Call. Joining me today are Jeff Jones, our President and Chief Executive Officer, and Tiffany Mason, our Chief Financial Officer.
Speaker Change: Our call is being broadcast and webcast live, and a replay of the webcast will be available for 90 days.
Speaker Change: Before we begin, I'd like to remind listeners that comments made by management may include forward-looking statements within the meaning of federal securities laws.
Speaker Change: These statements involve material risks and uncertainties, and actual results could differ from those projected in any forward-looking statement due to numerous factors.
Speaker Change: For a description of these risks and uncertainties, please see H&R Block's annual report on Form 10-K and quarterly reports on Form 10-Q, as updated periodically with our other SEC filings.
Speaker Change: Please note, some metrics we'll discuss today are presented on a non-GAP basis. We've reconciled the comparable GAP and non-GAP figures in the appendix of our presentation.
Jeff Jones: H&R Block undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. With that, I'll now turn it over to Jeff.
Jeff Jones: Thank you, Colby. Good afternoon, everyone, and thanks for joining us.
Jeff Jones: I'll kick us off today with a recap of our results from the second quarter, provide an update on the progress we continue to make across each of our Block Horizon strategic imperatives, and then share more on the plans we are executing this tax season.
Jeff Jones: Tiffany will then discuss our financials, including the ongoing strength of our capital allocation practices.
Jeff Jones: Starting with our performance, the first half of the year was in line with our expectations.
Jeff Jones: Overall, we are well prepared to deliver in the second half of the fiscal year and I'm pleased to reaffirm our fiscal 25 outlook.
Jeff Jones: In the second quarter, we successfully wrapped up the extension season, and we're pleased to see continued strength in various aspects of our business, including small business services.
Jeff Jones: Total revenue, however, was flat year-over-year due to lower emerald advance volume.
Jeff Jones: From a capital allocation perspective, we continued our discipline practices highlighted by our share repurchase program, buying back another $190 million in the quarter and bringing our total repurchases for the year to nearly 5% of the float.
Now let's turn to our Block Horizon strategic imperatives.
Jeff Jones: Starting with small business. Assisted small business tax performed well again this quarter, delivering strong revenue growth.
Jeff Jones: In DIY, we continue to improve the appeal of our small business SKU.
Jeff Jones: Last season, we launched new custom experiences for clients tailored to their occupation, which drove a 7-point increase in conversion.
Jeff Jones: This year, we have increased the number of custom experiences from 5 to 20.
Jeff Jones: We also continue to see favorable trends in bookkeeping and payroll services, which altogether deliver double-digit revenue growth year over year.
Jeff Jones: At WAVE, our key priorities of accelerating revenue growth and driving profitability remain unchanged.
Jeff Jones: To that end, I'm pleased that we achieved revenue growth of 15% in the quarter.
Jeff Jones: Monetization trends are positive as we continue to see strong adoption of our high margin subscription products, pro tier and receipts.
Jeff Jones: We continue to focus on doing what is right for the small business owner and I feel good about the changes we are implementing to better serve them.
Jeff Jones: Overall, I'm pleased with our small business performance and remain excited about the continued growth opportunities ahead.
Jeff Jones: Turning to financial products, we continue to provide clients with options to help them simplify their financial lives and look for ways to enhance their overall financial health.
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Jeff Jones: Last month, we were pleased to raise the maximum amount of our refund advance loan, allowing filers to apply for a loan of up to $4,000, making it one of the largest no-interest, no-fee refund advance loans among national brands.
Jeff Jones: Spruce, our mobile banking platform, continues to deliver on its mission to help people be better with money.
Users and engagement have both grown at a healthy rate.
As of December 31st, we had 491,000 total sign-ups.
Jeff Jones: and customer deposits have more than doubled over the same period.
Jeff Jones: In fact, more than half of the deposits over the past year came from non-tax sources, demonstrating the year-round engagement clients have with Spruce.
Jeff Jones: Recently, we introduced the smart tax refund feature that allows clients to automatically commit their tax refund to savings at the time of deposit.
Jeff Jones: Clients can choose to set aside a portion of the refund to a specific savings goal or simply as extra savings.
Jeff Jones: And as we've done for the past two years, by electing to deposit their federal tax refund into their SPRUC account, clients can get access to their refund up to five days early.
Jeff Jones: You'll also recall that last year we introduced a high yield savings rate for spruce clients to earn interest on their savings accounts.
Jeff Jones: Despite the FDIC national savings rate averaging just 42 basis points,
Jeff Jones: We believe this is a very strong competitive advantage compared to others in the space.
Jeff Jones: Now let's move on to our third strategic imperative, block experience, which is all about blending digital tools with human expertise and care.
Jeff Jones: There's a reason why millions of taxpayers switched to H&R Block last year. We combine our innovative technology with human help to empower clients to get their maximum refund at tax time.
Jeff Jones: Our pricing is transparent, without the additional or hidden fees others may charge.
Jeff Jones: Our teams have been hard at work making data-driven improvements for this tax season, and we're well positioned to serve clients however they want to be served.
Jeff Jones: fully virtual to fully in person and every way in between.
Jeff Jones: As we celebrate our 70th anniversary this year, we remain committed to our purpose of providing help and inspiring confidence in our clients and communities everywhere.
Jeff Jones: In the DIY category, we continue to make significant improvements to the user experience, ensuring a smoother journey from start to finish.
Jeff Jones: For new clients, we've further simplified the onboarding process to help them easily select a product that fits their needs, giving them confidence in their tax outcome.
Jeff Jones: We've also continued to improve the speed of our import capabilities and switching to H&R Block from other competitors is now easier than ever, taking less than two minutes.
Jeff Jones: A key focus for us this year has been the enhancement of our Gen-AI powered AI Tax Assist tool, which is a strong competitive differentiator.
Jeff Jones: We have significantly expanded its coverage across a broader range of tax topics to deliver higher confidence and improved outcomes for our clients.
Jeff Jones: Importantly, we've seen greater conversion among new clients who leverage AI TaxAssist.
Jeff Jones: The tool is designed to understand and respond to complex tax scenarios with greater precision.
offering personalized guidance throughout the filing process.
Jeff Jones: We have also integrated advanced natural language processing capabilities to better understand and address client queries, making the experience more intuitive and user-friendly.
Jeff Jones: Once again, AI Tax Assist will be offered free of charge in all DIY paid SKUs, giving consumers unlimited access to the tool, as well as our tax professionals, ensuring our clients receive the expert help they want and need.
Jeff Jones: DIY clients also have the option for one of our expert tax pros to double-check their completed return, along with source documents, and file on their behalf through our tax pro review product, which has grown double digits annually for nearly a decade.
Jeff Jones: This further demonstrates clients' desire for human help and underscores the product's distinct value.
Jeff Jones: Our marketing is aggressively promoting the product enhancements we've made this season, and we're continuing to emphasize the ease of switching and unlimited access to expert help.
Jeff Jones: We are also introducing testimonials for clients who have switched to H&R Block and are more satisfied than they were with other brands.
Jeff Jones: Finally, we continue to work closely with the IRS to combat taxpayer identity fraud. This is an industry challenge, and we are committed to doing the right thing, which is at the core of being a trusted brand.
Jeff Jones: Overall, I'm excited about the plans we are executing in DIY and the progress we're making in this category.
Jeff Jones: In Assisted, we continue to provide our clients with transparent pricing, the ability to file however they choose, and genuine care and personalized advice from our expert tax pros, who on average have been with our brand for 10 years.
Jeff Jones: This deep experience and continuity underscore the trust and reliability we offer and clients can feel confident they're getting every dollar they deserve.
Jeff Jones: Our strong local value proposition is amplified by our extensive retail footprint, with nearly 9,000 H&R Block tax offices conveniently located within 5 miles of most Americans.
Jeff Jones: This accessibility ensures that clients can easily find and visit our offices for in-person support or access the same expertise virtually.
Jeff Jones: Furthermore, assisted clients can get their taxes done on the same day, most in as little as one hour, making our services both accessible and convenient.
Jeff Jones: To capitalize on these strengths, we are increasing our local marketing to help ensure consumers understand this value.
Jeff Jones: This season, enhancing the experience for new clients is a top priority as we look to improve conversion with those who are coming to H&R Block.
Jeff Jones: We're committed to optimizing and elevating the new client experience by reengineering how we introduce clients to our brand.
Jeff Jones: Our approach is designed to quickly and deeply understand our clients and their tax situations while clearly setting and managing expectations throughout the process.
Jeff Jones: By providing clear guidance and communication from the onset, new clients will feel informed and confident about what to expect at each stage of the experience, making them more likely to file their return with H&R Block.
Jeff Jones: We have also made significant enhancements to our TaxPro matching algorithm to better pair clients with a tax professional best suited to their specific needs.
Jeff Jones: This personalized matching process benefits both clients and tax professionals, ensuring that clients receive the most relevant expertise and support tailored to their unique circumstances.
Jeff Jones: These strategic improvements, focused on personalized interactions, clear expectation management, and expert tax pro matching capabilities, are designed to enhance client satisfaction and drive higher conversion rates.
Jeff Jones: Ultimately, our goal is to deliver a superior, tailored experience that instills confidence in our services, improves conversion, and importantly, provides compelling value for clients to return year after year.
Jeff Jones: For those who believe the cost of assisted tax preparation is a barrier to entry, we are taking price out of the equation.
Jeff Jones: New clients can take advantage of our price match guarantee, which matches the price an individual paid to their previous tax preparer up to 50% off H&R Block's price.
Jeff Jones: This offer is designed to make our professional tax assistance more accessible, ensuring that a greater number of individuals can experience the value and expertise that we provide.
Jeff Jones: Another way we're demonstrating the value we deliver is through our second look service in which we review the last three years of a new client's tax returns to ensure they didn't leave any refund dollars on the table.
Jeff Jones: We're proud to offer this service to clients completely free and believe this represents a competitive advantage for us.
Jeff Jones: Second Look, along with Price Match Guarantee and the stronger refund advance offer I discussed earlier, are being aggressively marketed across all channels as we look to attract new clients to our brand.
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Jeff Jones: In addition to our efforts around new clients, we've also rolled out several enhanced features within MyBlock, H&R Block's digital front door, to improve nearly every aspect of the user experience.
Jeff Jones: Beyond uploading and storing tax documents, starting a DIY return, interacting with a tax professional, and reviewing, approving, and paying for a tax return, returning clients will now have a tailored start screen providing information on their tax professional and upcoming appointments.
Jeff Jones: and all clients will see an outcome reveal screen helping them understand their tax outcome and giving them further confidence in our expertise.
Jeff Jones: In summary, we are well positioned to deliver this tax season and in the second half of the fiscal year. With that, I will now pass it over to Tiffany to share more about our financial results.
Tiffany Mason: Thank you Jeff and good afternoon everyone. Having been at H&R Block for six months now, I've had time to dig deeper and develop a greater understanding of the business and our financial position.
Jeff Jones: This has only confirmed what I believed to be true when I joined. H&R Block is a great company with an amazing purpose, outstanding people, and strong financial profile.
Jeff Jones: H&R Block's investment thesis, which includes a resilient business, strong financial fundamentals, consistent cash flow generation, and a shareholder friendly capital return practice, is what initially drew me to the company.
Jeff Jones: This has been reinforced through my experience over the last several months.
Let me share with you the key components.
First, we operate in a very stable industry.
Our business model is tied to essential tax preparation services.
and annual need for millions of consumers and small businesses.
Jeff Jones: The consumer tax industry has grown at a 1% kegger for many decades. It is steadfast and resilient, and this is reflected in our performance.
Jeff Jones: Second, we have scale on our side with nearly 9,000 company and franchise offices across the country, 60,000 expert tax pros, and a robust DIY offering as well as strong brand recognition with a name that has been trusted for 70 years.
Jeff Jones: We have made strategic investments in our Block Horizons Imperatives, which include financial and small business services.
Jeff Jones: and are leading into our digital transformation and AI advancements, paving the way for consistent performance and sustainable growth.
Third, our financial profile is compelling.
Jeff Jones: We deliver healthy margins and have generated over $650 million of free cash flow in each of the last three years.
Jeff Jones: Our balance sheet is strong, providing liquidity to meet our seasonal needs, while maintaining an investment-grade credit rating.
Jeff Jones: And our disciplined capital allocation priorities have been consistently applied over the years as we balance investments in the business, growth in the dividend, and returning excess cash to shareholders through share repurchases.
Jeff Jones: In short, our investment thesis is compelling and I have confidence in our ability to continue driving significant value for our shareholders.
Jeff Jones: Now, let's turn to our financial results for the second quarter.
Jeff Jones: As a reminder, Q2 represents approximately 5% of our annual revenue.
Jeff Jones: For the quarter, we delivered total revenue of $179 million, which was flat to the prior year.
Jeff Jones: Increases in revenue from WAVE and international tax preparation were offset by lower interest and fee income on Emerald Advance due to a decrease in loan volume.
Jeff Jones: Total operating expenses were $472 million, an increase of 6%, primarily due to higher tax, professional and corporate wages, increased health care costs,
Jeff Jones: and increase in occupancy costs and the timing of marketing expenses versus the prior year.
Jeff Jones: These increases were expected and have been contemplated in our outlook for the year.
Interest expense was 22 million dollars, flat to last year.
Jeff Jones: As a reminder, given the seasonality of our business, we typically operate at a loss in the first two quarters of our fiscal year.
Jeff Jones: Our pre-tax loss in the second quarter was $312 million compared to $283 million in the prior year. And our effective tax rate was 22.4% compared to 33.1% last year.
Jeff Jones: The EBITDA loss was $261 million compared to an EBITDA loss of $231 million last year.
Jeff Jones: While adjusted loss per share from continuing operations was $1.73 compared to $1.27 last year, due to a higher net loss and fewer shares outstanding as a result of share repurchases.
Jeff Jones: You'll recall in quarters with a loss, fewer shares outstanding increase the loss per share, but are accretive as we generate earnings for the full year.
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Jeff Jones: Our performance in the first half of the fiscal year was in line with our expectations, and we believe we are well positioned to deliver strong results this tax season.
Jeff Jones: As a result, we are reaffirming our fiscal 25 outlook, which was provided in today's earnings release.
Jeff Jones: For the full fiscal year, we continue to expect revenue to be in the range of $3.69 to $3.75 billion.
Jeff Jones: EBITDA to be in the range of $975 million to $1.02 billion.
Jeff Jones: The effective tax rate to be approximately 13%, which is lower than historical levels due to the closure of various matters under examination and the expiration of certain statutes of limitation. And adjusted diluted earnings per share to be in the range of $5.15 to $5.35.
Jeff Jones: The lower effective tax rate is expected to provide a one-time benefit of approximately $0.50 to EPS this fiscal year.
Jeff Jones: From a capital allocation perspective, our strong practices have yielded meaningful results.
Jeff Jones: In Q2, we repurchased a total of 3.2 million shares for $190 million at an average price of $58.65.
Jeff Jones: This brings our first half total share repurchases to $400 million, or about 5% of our float. This is a great use of capital, and I am pleased about what we have accomplished.
Jeff Jones: As a reminder, given our narrow trading windows during tax season, we have historically executed our share repurchases in the first half of the year. With that, I'll now turn the call back over to Jeff for closing remarks.
Jeff Jones: Thank you, Tiffany. Before wrapping up the call, I want to acknowledge the devastating wildfires in the state of California.
Jeff Jones: Our thoughts are with everyone who's been affected, including our associates, clients, and the broader community.
Jeff Jones: We are steadfast in our commitment to providing aid and fostering hope during these difficult times.
Jeff Jones: As the IRS has extended the tax filing deadline for those impacted, we remain well prepared and equipped to serve them this season.
Jeff Jones: In closing, I'm pleased with our performance from the first half of the year and confident in our ability to drive value for shareholders through our business results and capital allocation practices.
Jeff Jones: I'm grateful to our franchisees, tax professionals, and associates for the tremendous work they have done in getting us ready for this tax season.
Jeff Jones: As a reminder, we will provide a full update on the tax season during our Q3 call in early May.
Now, operator, we will open the line for questions.
Speaker Change: As a reminder, to ask a question, you will need to press star 1 1 on your telephone. To remove yourself from the queue, you may press star 1 1 again. Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Karthik Mehta of North Coast Research.
Karthik Mehta: Hey Jeff, hey Tiffany. Jeff, I know it's early, way early for the tax season, but I'd be interested to just get your perspective on total volumes for the industry, how you think they're trending, and maybe how block is faring so far.
Thank you for tuning in.
Jeff Jones: Hey Kardik, thanks for the question. Yeah, obviously we're just getting started with e-file opening last week and
Karthik Mehta: You know, we still are anticipating a normal year, which, you know, as we know, is back to 1% volume growth. That's in line with the historical trends. And, you know, we still see DIY growing slightly faster than assisted in the industry.
Karthik Mehta: You know, the one big news this year in the industry is $1099K.
Karthik Mehta: We don't have any incremental volume contemplated in our outlook, but our teams have developed the plans and are ready to execute.
Karthik Mehta: and I think it'll be a year of good learning. You know, millions of people are going to receive these documents for the first time and we know in the coming years those thresholds are going to continue to lower so that remains on the horizon.
Karthik Mehta: But right now I feel I feel very good to see our strategy start to come to life in the market Both the changes we've made to product experience and our marketing campaign. So, you know, all the business is still ahead of us
Karthik Mehta: And Jeff, just as a follow-up, are you seeing any difference in competition this year, either on the assistant side or DIY side?
Speaker Change: Well, I think we've all seen, you know, what Intuit has done and has tried to do in the assisted business in particular.
Speaker Change: And, you know, I think we understand pretty well what drives dissatisfaction with their consumers and that's largely been the basis for our plans in both assisted and DIY.
Speaker Change: But I would say, you know, that's probably the biggest news that has been news now for a couple of years. They recognize the value in the assisted business, you know, and are taking steps to make moves there.
Speaker Change: And just one final one, Jeff, are you changing any of your marketing strategies as a result of the competition?
Speaker Change: Well, we obviously always, you know, pay attention to competition, but as we're developing our marketing plans.
Speaker Change: You know, we don't know what competition is going to do, obviously, so we're really focused on what do we know the consumer needs, what do we think our strengths are, and this year, you know, the moves we've made in terms of things like our price match guarantee for new clients.
increasing our refund advance.
Speaker Change: SecondLook, which is an incredibly valuable product for consumers. We've made that very easy for our tax pros to execute. So those are three new things this year that are really designed to demonstrate the value that we deliver.
Perfect. Thank you so much.
Thanks.
Thank you.
Speaker Change: Our next question comes from the line of George Tom of Goldman Sachs. Please go ahead, George.
George Tom: Hi, thanks. Good afternoon. As you start to enter this tax season, can you talk about what you're seeing from the government, specifically from the IRS, both positive and negative, that could impact the industry and our block?
Speaker Change: Hey George, so listen, obviously there's change underway as the administration comes in.
Speaker Change: We're waiting for final appointment of an IRS commissioner. We've been through that many times with administrations. They appoint an interim. They announce a new head of the IRS. You know, we expect that to come.
Speaker Change: You know incoming Treasury Secretary Besson has committed to direct file remaining operational this tax season
Speaker Change: So, we're not aware of any changes coming there. And you know, as we've said all along, we've not seen any impact from direct file given how many companies, including us, already offer free tax prep.
Speaker Change: But, you know, we've been through many, many, many administration changes over time.
Speaker Change: And I think we have learned that you don't try to predict what will happen. You are ready for any changes that come because changes come every single year. And then we operationalize those to serve our clients. And that's obviously what we're doing this season as well.
Speaker Change: Got it, that makes sense. And then with respect to competition, if you look at independence, can you talk about what you're seeing from independence competitively and how H&R Block's price point for this year compares with what you're seeing from independence?
Speaker Change: Yeah, great question. And obviously, the label Independence covers a wide swath of very, very different kinds of organizations.
Speaker Change: from the mom-and-pop to the regionals and the sophisticated CPA shop. So, from a pricing standpoint, we have never tried to be the lowest priced provider.
Speaker Change: That remains true. We know if someone only cares about price, they will find an independent somewhere who will do that for them.
completely reimagined the assisted tax experience in the office.
Speaker Change: increased the size of our refund advance, added second look, and we know that combination of offering are simply not things that independents offer. And so I feel good about our value proposition, but again recognizing there are many types of independents in the market.
Very helpful. Thank you.
Thanks, George.
Speaker Change: Thank you. Our next question comes from the line of Alex Paris of Barrington Research. Your line is open, Alex.
Alex Paris: Hi guys, thanks for taking my questions. I have a few cats and dogs here. First off, on 1099K, you had said that you have no incremental volume contemplated in your outlook.
Alex Paris: Is it a potential contributor to results this year? It could be significant. I think they've reduced the threshold from $20,000 to $5,000 for the gig economy. Is that right?
Alex Paris: Yeah, that's exactly right. Both, we haven't contemplated it, it could represent upside, and that is the threshold this year, and that threshold is going to go down to $600 if things remain true over the next two years. That's all right.
Alex Paris: All right, great. And then your comments with regard to direct file. You said Secretary of Treasury Besant has committed to it for this tax filing season, but I saw, I think we all saw, Elon Musk yesterday say that they have deleted the 18F agency. What is the 18F?
Agency.
Alex Paris: Well, I certainly can't speak for how the IRS builds their products other than to know that they had a third-party organization who was responsible for building DirectFile.
Alex Paris: That's all I can say about them. I don't know them personally.
Alex Paris: And listen, there are many things that are underfoot and changes and headlines and counter headlines that Direct File is still up and running this year, right?
Alex Paris: I think what's most important for us is we just stay focused on doing what we do and serving our clients And I can assure you that's the focus of the company
Speaker Change: And again, you know, this is free. You have a free offering. There's 30 other preparers that have free offerings. And sort of worst case scenario, I think you lose some free volume to direct file. Is that the right way to think about it?
Speaker Change: Yeah, I mean, I think as we've assessed it over time, you know, there is volume that counts as market share that delivers no financial value to the company.
Speaker Change: and so it is possible, although we compete for those free clients, obviously.
Speaker Change: It is possible that we could lose a client that counts in mark and share but doesn't deliver any financial value. That is conceptually true. But again, we feel very good about the millions of Freak Flyers we served last year and continue to offer that product.
Speaker Change: Great, and then just a couple of last little ones. What are the pricing plans for Assisted in DIY this year? In general, you can speak to them together or separately.
Speaker Change: Yeah, I will break them apart. I mean, in the assisted business, our pricing strategy has really remained consistent and that's low single digit price increase.
Speaker Change: remembering that delivering transparent pricing is incredibly important and now layering in for new clients the price match guarantee. So that's a value prop in the assisted business.
and D.I.Y.
Speaker Change: It's a more dynamic business. Our pricing is more dynamic. There's both base SKU pricing and attached pricing We have been Increasing our prices there as you know, but we also are still maintaining a price advantage relative to TurboTax and That's still consistent for our strategy for this year
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Speaker Change: Okay, and the refund advance loan, you increased its size to $4,000, or up to $4,000. What was it last year?
Speaker Change: 3,500. We had not increased that maxed here in a while.
Speaker Change: And you've kept it free. No interest rate or no fees.
That's right, which is quite differentiated, but particularly among independents.
and Tony Bowen. Thank you. Thank you.
Speaker Change: Okay, and then the last one is, and I don't want to beat it at horseover, but Emerald Advance, it's a small percentage of full-year revenue, but what would you attribute the weakness in interest and fee revenue in that line?
and one yeah
Speaker Change: Yeah, yeah, and I'll start, and if Tiffany wants to add in, she can, but, you know, obviously this is a partnership with Pathward, and, you know, this Emerald Advance season didn't end that long ago, so we're still really evaluating our performance, and I would say two things that we're digging into.
One is, you know, as we continually try to balance
approval rates with repayment rates.
Speaker Change: getting that mix right so we're approving client supply but we don't have the bad debt situation we had last year and we you know we tightened the underwriting guidelines for this year so we've got to evaluate you know that decision and anything to learn from it.
Speaker Change: And then second is we also are looking at, you know, we want to attract people top of funnel, but we want to attract well-qualified prospects to the top of the funnel. And so we'll continue to dig into could we have done anything different and how do we apply that for next year.
Speaker Change: this is a good product for its customers and so we feel good about that core offering but balancing prospects with underwriting and repayment you know we're just we're just trying to to get that as right as we can as we go forward
Speaker Change: That's great. Thank you so much. I'll get back into the queue. All right. Thank you.
Thank you.
Speaker Change: Our next question comes from the line of Scott Schneeberger of Oppenheimer & Company. Your question please, Scott.
Scott Schneeberger: Thanks. Good afternoon all. Just following up on that last one, Jeff, in your evaluation of Emerald Advance, is it something that you feel competitively differentiates or perhaps not and maybe it's something that you may not discontinue in future seasons?
Scott Schneeberger: Yeah, I mean, listen, Scott, we're not evaluating discontinuing the product. We see value in the product for the clients it serves. You may recall last year we relaunched a wholesale new product.
Scott Schneeberger: and in year one of that new product, you know, we saw great loan volume growth.
But we also saw bad debt growth.
and so this year we've managed that better.
Scott Schneeberger: both in terms of attracting prospects and delivering the right approval rates with our bank partner, but we have no plans that we're evaluating to discontinue it.
Speaker Change: Switching gears, on DIY it was pretty well telegraphed that your larger competitor was going to
Speaker Change: at a tier this year, and they in fact did. You all did not. But could you just kind of speak to the difference of kind of the tier levels? What a customer of H&R Block versus what a customer of TurboTax?
Speaker Change: gets on on each of these basic tiers. Do you essentially offer that in a different shape or fashion? I guess is what I'm getting at. Just how you differentiate the new standard versus your offerings. Thanks.
Speaker Change: what's covered by SKU Us vs. Competition. I guess I would just summarize it by saying we have to look at our base SKU lineup
Speaker Change: form coverage, pricing, and attach of things like AI tax assist and human health. And when you put all that together, we feel good about our core lineup of how we deliver value at the price point.
Speaker Change: and you know we continue to maintain a price advantage and as you've seen us do we'll continue to exploit
Speaker Change: Things like transparency in pricing and not being constantly upsold once you're in the experience. Things that we know are real pain points for their customers and things that we don't do.
Just a couple more from me, Jeff.
Speaker Change: summarize it for us and and you know if you want to differentiate it on on category that's fine but just a summary of your approach to market this year in that campaign and timing and increase or decrease see what it is in the first quarter but but you know for the full year what we should expect out of the marketing spend. Thanks.
Speaker Change: Okay, see if I can hit all those. Spend, no real meaningful change, all contemplated in our outlook. Timing, earlier than last year but not as early as we saw competition do obviously starting last fall.
Speaker Change: And if I summarize the campaign, I would say a few things. I mean, we are leaning in to the promise that it's better with Block.
Speaker Change: We are increasingly skewing into digital channels with more personalized experiences.
Speaker Change: We have vetted really specific competitive claims and have received great consumer feedback and testing about those claims.
and we're leaning into being really direct.
what Second Look delivers, what a bigger Refund Advance offers.
Speaker Change: those kind of things that we know our competition is trying to lean into and we've got really strong claims instead and so you'll see us in television, in email, in all digital channels lean into those claims very strongly.
Speaker Change: Great, thanks. And lastly, I don't think there's much magnitude, but you highlighted H&R Block data.
Speaker Change: in a release in early January. Things to know for the tax season 2025.
Speaker Change: Maximum additional child tax credit increasing to $1,700 per qualifying child. That shouldn't have any magnitude. Do you anticipate that change? That seems pretty standard year-to-year, but just curious if you think that could have an impact.
Scott Schneeberger: Scott, you cut off at the beginning of your question but at the end I think I heard you and yes I would consider that to be a customary year-over-year kind of change in the tax code that we don't expect to have any material impact on performance.
Speaker Change: Thanks. Perfect, Jeff. That was the question. Thanks so much. Okay. Thanks, Scott.
Thank you.
Speaker Change: I would now like to turn the conference back to Colby Brown for closing remarks, sir.
Speaker Change: Thank you, Lateef, and thanks, everyone, for joining us today. This concludes our second quarter fiscal 2025 financial results conference call.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.