H&R Block, Inc. (NYSE:HRB) Q4 2019 Earnings Conference Call Transcript
Jun 11, 2019 • 08:30 am ET
(Operator Instructions) Our first question comes from the line of Kartik Mehta of Northcoast Research. Your line is open.
Hi. Good morning, Jeff and Tony. I just (Technical Difficulty) the EBITDA margin guidance, if not for the Wave Financial acquisition, would EBITDA margins increase to -- so I guess if you could just give a little bit detail -- a little bit more detail on how you are thinking about EBITDA margin guidance for FY '20?
Yeah. Thanks, Kartik. As we said, we do expect revenue growth of 1.5% to 3.5%. We do expect EBITDA dollars to increase in fiscal '20, but given that revenue growth will outpace EBITDA growth, there will be slight degradation in EBITDA margin, but still in the 24% to 26% range. Specific to your question about what would it have been without Wave, obviously, Wave is operating at a loss and we're acquiring it at a loss and absorbing that into our EBITDA numbers. And then, we're offsetting that with other expense reductions. It's hard to say what it would have been if we hadn't done Wave. We've obviously been working on this for several months and it's been a key component of our plan for this year. So there would have been a lot of other moving parts and probably other investments if we hadn't went down the Wave path.
Okay. So I guess whatever the losses that are in Wave, you able to offset those with other actions you are taking at the corporate level, is that fair?
That's exactly right.
Okay. And then, Jeff, as you look at the taxes and what you thought happened, do think there is a need for further price investment or are you satisfied where you are and do you think moving forward, you can get to a positive tax client count?
Jeffrey J. Jones
Great question. So on the pricing component first. Obviously, there were two big pieces to this investment and this decision this year. One was strategically lowering prices for a select group of clients. The other was introducing the idea of upfront transparent pricing, which applied to everyone and really changed the conversation in the industry. We do not believe that we need to further reset prices. And remember, we're not trying to be the low price provider. What was really important to do this year was to balance pricing investment with core value proposition changes in terms of quality, operational excellence and how we market and communicate the benefits of H&R Block, all of those things working together. And as we continue to make these investments, ultimately, we believe we can and will return to Assisted client volume growth. Obviously, three years in a row, we've been able to improve our trajectory. And when you isolate the impact of Free EZ this year, we were in line with the industry. So, we think we're on the right path, but just to reiterate, we do not believe we need to make further investments to reduce price.