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H&R Block, Inc. (NYSE:HRB) Q4 2019 Earnings Conference Call June 11, 2019 8:30 AM ET
Colby Brown - VP, Finance & IR
Jeffrey Jones - President & CEO
Tony Bowen - CFO
- Colby Brown - 财务和IR的副总裁
- 杰弗里琼斯 - 总裁兼首席执行官
- Tony Bowen - 首席财务官
Kartik Mehta - Northcoast Research
Jeff Silber - BMO Capital Markets
Thomas Allen - Morgan Stanley
George Tong - Goldman Sachs
Scott Schneeberger - Oppenheimer
Chris Howe - Barrington Research
Mario Cortellacci - Macquarie Capital
Michael Millman - Millman Research
- Kartik Mehta - Northcoast Research
- Jeff Silber - BMO资本市场
- 托马斯艾伦 - 摩根士丹利
- 乔治·汤 - 高盛
- Scott Schneeberger - 奥本海默
- 克里斯豪 - 巴林顿研究
- Mario Cortellacci - 麦格理资本
- 迈克尔米尔曼 - 米尔曼研究
Good day, ladies and gentlemen and welcome to the H&R Block Fiscal 2019 Earnings Call. At this time, all participants are in a listen-only mode and later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, this conference is being recorded.
I would now like to hand the call over to Mr. Colby Brown, Vice President of Finance and Investor Relations. You may begin.
美好的一天，女士们，先生们，欢迎来到H＆R Block 2019财年的收益电话会议。 此时，所有参与者都处于只听模式，之后我们将进行问答环节，当时会有说明。 [操作员说明]作为提醒，正在记录此会议。
我现在想把这个电话交给财务和投资者关系副总裁Colby Brown先生。 你可以开始吧。
Thank you, Amanda. Good morning, everyone, and thank you for joining us to discuss our fiscal 2019 results. On the call today are Jeff Jones, our President and CEO; and Tony Bowen, our CFO. We've posted today’s press release on the Investor Relations website at hrblock.com. Additionally, presentation for viewing is available via the webcast and will also be posted to the investor relations website after this call.
Some of the figures that we'll discuss today are presented on a non-GAAP basis. We reconcile the comparable GAAP and non-GAAP figures in the schedules attached to our press release and presentation.
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 this date and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties and assumptions that are difficult to predict. As a result, our actual outcomes and results could differ materially. You can learn more about these risks in our Form 10-K for fiscal 2018 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 will have a Q&A session. During Q&A, we ask that participants limit themselves to one question with a 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 morning, everyone, and thanks for joining us. 2019 was the great year for H&R Block and what was the first step of executing the strategy we’ve rolled out last summer, our associates and franchisees delivered significant improvements in how we serve our clients. We introduced the large changes to the business and I couldn’t be more proud of how the team responded.
We ended the season with improved client service scores and overall return growth outpaced the industry. And our associates are energized by the direction we're heading which showed in our exceptionally strong associate engagement scores. As a result of the progress we've made in our tax business, we delivered financial results at the top end of our outlook ranges. The strength of our business has enabled us to return a significant amount of capital to shareholders and we just announced an increase in our dividend and an extension of our share repurchase authorization.
I'm also excited to share details about the announcement we made this morning regarding our acquisition of Wave. I'll share more about this later. We obviously have a lot to discuss. So let me walk you through what we'll cover on today's call. First I'll provide our perspective on the tax season for both the industry and H&R Block.
Next I'll discuss Wave and how they fit into our long-term strategy. Tony will then review our fiscal 2019 results, the financial impact of Wave, our fiscal 2020 outlook and capital allocation. Let's first look at tax season 2019 beginning with the overall industry. It was an unusual season with the government shutdown affecting the start of the season and changes to the tax code impacting refunds both contributed to an overall delay which continued throughout the season and likely resulted in an increase in extension filings.
This when industry returns being essentially flat to prior year which was lower than expectations. Consistent with prior years, industry results show a slight shift from assisted to DIY when taking into account the decline in paper returns which are typically more weighted to DIY be assisted to DIY shift was approximately 60 basis points which is consistent with the last several years and in line with our expectations.
Turning to our results, let me recap what we set out to do this year. We've made significant improvements this season and how we serve our clients. In our assisted business, we focused on enhancing the value we deliver while developing a clear brand promise to differentiate H&R Block. In DIY, we made investments to improve the product and grow awareness while pricing competitively to deliver tremendous value.
And in virtual, we offered consumers three distinct ways to access the expertise of our Tax Pro network. We achieved our objectives in each channel and are pleased with our results outperforming the overall market and taking DIY share for the third straight year. In the incentive business, we're excited about the progress we've made this year with significant operational improvements across every aspect of the business from field operations to experience for new clients to pricing.
谢谢你，科尔比。大家早上好，感谢您加入我们。 2019年是H＆R Block的重要一年，执行我们去年夏天推出的战略的第一步是什么，我们的员工和特许经营商在如何为客户服务方面取得了重大进步。我们介绍了业务的重大变化，我对团队如何回应感到无比自豪。
With respect to pricing, we addressed what was a significant pain points for our clients in two ways. First we led the industry with upfront transparent pricing and second we invested in price decreases for certain client segments and the feedback from both our clients and tax growth has been extremely positive. In fact client satisfaction scores around price for value increased nine points. Additionally, we focused on improving cash flow training, operational improvements to drive consistency in our offices and an enhanced experience for new clients.
Nearly, one-third of our Tax Pro increased their certification levels. We converted clients at a greater rate and we increased overall NPS by nine points. These initiatives are reflected in our volume results and assisted. While U.S. assisted volume declined 1.7%, this was expected due to the elimination of the free EZ promotion. Excluding free EZ, our assisted results were in line with the Industry which represents an improvement in our client's trajectory for the third consecutive year.
Turning to DIY, we achieved outstanding client growth of 6% driven by online growth of over 9%. We grew market share for the third year in a row with several factors contributing to this performance. We enhanced the experience for mobile users, leverage data and machine learning to make our product smarter and more personalized. We designed our health centers and made significant improvements to price transparency by launching DIY Price Preview.
What we saw others in the industry continue to rise prices, we focused on winning clients through great value and transparency. As a result, we've received tremendous feedback from our clients as evidenced by our NPS improvement of nine points. Our products also received numerous accolades including the Editor's Choice Award from PC Magazine for online tax preparation.
Finally, our virtual offerings also saw significant improvements in NPS and in total grew 75% as we attracted new clients and gave DIY filers affordable ways to get the help they needed. H&R Block is the only company able to serve consumers no matter how little or how much help they want. This year we introduced Ask a Tax Pro an on-demand service designed for the DIY filer that wants immediate answers to their questions.
We're excited about the opportunity with this product as over one-third of Ask a Tax Pro clients were new to our brand. Our next virtual product Tax Pro Review is for the DIY consumer who wants an expert review before submitting their return. Our results demonstrate meaningful progress with nearly 40% growth in new clients signaling that consumers understand the value in this product. Finally, this year was the national introduction of a mobile first fully assisted experience called Tax Pro Go which is the easiest way for consumers to have an expert prepare their taxes.
The initial results show that this product appeals to a younger higher income filers and nearly 60% of these clients are new to H&R Block. Adding a digital layer to our network of over 80,000 tax professionals is a great combination of expertise and ease. I'd like to now shift gears and discuss our enterprise strategy which we first shared with you last June. As a reminder, our strategic journey is driven by five pillars, elevate our company culture, longer sustainable brand position, win on customer experience, build operational excellence and invest for the long-term.
最后，我们的虚拟产品也在NPS方面取得了显着的进步，总共增长了75％，因为我们吸引了新客户，并为DIY文件制造商提供了经济实惠的方式来获得所需的帮助。 H＆R Block是唯一一家能够为消费者提供服务的公司，无论他们想要多少或多少帮助。今年，我们推出了Ask a Tax Pro为DIY文件管理器设计的按需服务，该服务器需要立即回答他们的问题。
我们很高兴有这个产品的机会，超过三分之一的Ask a Tax Pro客户对我们的品牌来说是新手。我们的下一个虚拟产品Tax Pro Review适用于在提交退货之前需要专家审核的DIY消费者。我们的结果显示了有意义的进展，新客户增长近40％表明消费者了解该产品的价值。最后，今年全国推出了一项名为Tax Pro Go的移动式首次完全辅助体验，这是消费者让专家准备税款的最简单方法。
We made excellent progress against each of these pillars in the first year and we will continue this work in fiscal 2020. I'd now like to spend some time talking about the last pillar and specifically about how we're investing for the long-term through our acquisition of Wave. This acquisition strengthens our trajectory and expands our reach within the large and growing small business market.
Wave is the strong strategic fit and I'm extremely excited to welcome such an innovative company with great product and an outstanding team to H&R Block. To start with why we see this as a great opportunity? Let’s first talk about the small business category and why it makes sense for us. There are approximately 31 million small businesses in North America and more than 100,000 new ones created every month. Additionally, roughly 57 million U.S. workers are freelancers. A staggering number that's expected to grow to nearly 87 million by 2027 representing over half of the U.S. workforce.
Small business owners struggle with cash flow, bookkeeping, payroll and tax preparation. In fact the primary reason businesses fail in the first year is poor financial management. Most do not use bookkeeping services and are instead using old fashioned methods such as keeping receipts in a shoe box or tracking their numbers on a simple Excel spreadsheet. Given our role in helping clients navigate the challenges of their financial lives, this represents a significant opportunity to deliver value and help small business owners successfully manage their complex financial needs. So this category clearly presents opportunity and in the market in which we have the right to compete.
It's also aligned well with our existing assets. Within our current client base, we serve a significant number of small business owners through both DIY and assisted tax credit. We also currently provide clients with bookkeeping and other related services. Acquiring this software platform allows us to accelerate our small business strategy, it also offers a unique opportunity over time to cross-sell and attract new clients to our tax business while helping our current tax clients with their small business needs through an innovative platform.
Importantly, there is essentially no overlap between what we offer in Wave’s existing services and technology which further enhances the strategic fit. And it goes beyond the services our two companies offer. During our first visit with the Wave’s team, it was clear that we share a common passion for building a great culture and delivering a superior user experience. The team of Wave is driven and they understand what their clients need as over half of Wave's associates have at one point owned their own business and it's the talented team of engineers continues to evolve the platform delivering innovative solutions to small business owners.
The dedication to quality has resulted in numerous awards including being named to the CB Insights Fintech 250 and recognition by Deloitte and KPMG as one of North America's fastest growing tech companies. In short, we are partnering with a fantastic team who are great at what they do. Let me provide little more detail about exactly what Wave offers to its clients. Wave is built for the small business owner not the accountant or bookkeeper. Its simple user experience on a single comprehensive platform is designed to empower those who don't have the time, the knowledge or the desire to manage their finances. Wave software platform includes accounting, invoicing and receipt tracking at no cost to the end user.
对质量的奉献已经获得了众多奖项，包括被命名为CB Insights Fintech 250，以及Deloitte和毕马威作为北美发展最快的科技公司之一。简而言之，我们正在与一支出色的团队合作，他们的工作非常出色。让我提供一些关于Wave为其客户提供的详细信息。 Wave是为小企业主而非会计师或簿记员而建的。它在单一综合平台上的简单用户体验旨在为那些没有时间，知识或愿意管理财务的人提供支持。 Wave软件平台包括对最终用户免费的会计，发票和收据跟踪。
Wave then generates revenue by providing payment processing, payroll services and bookkeeping services. This disruptive pricing model provides significant value to the customer and is built on a low cost of acquisition which positions the company well against other competitive offerings. In fact over 80% of its users have come to Wave through unpaid channels. As a result, Wave has grown rapidly and organically more than 400,000 small business owners actively use the platform each month and the company has increased revenue in each of the last 25 quarters. And there is opportunity for additional growth as Wave increases brand awareness and expands the platform to offer additional features.
Turning to transaction details, the purchase price of $405 million will be funded by available cash. We expect the transition to close within the next few months. Tony will provide additional details on the financial impact of the transaction and our approach to capital allocation later in the call. Wave will operate as a separate business unit and a strong management team will remain on board post transaction continuing the great work they’ve already started.
In summary, the Wave acquisition represents a strong strategic fit for H&R Block as we invest for the long-term. Wave has provided us the opportunity to accelerate our small business strategy drive growth and enhance shareholder value. I couldn't be more excited to welcome the Wave team. Before I turn it over to Tony, I'd like to thank our associates, Tax Pros and franchisees for embracing change and successfully executing year one of our strategic roadmap. Beyond delivering results for our clients, our team served our communities in ways we haven't in the past.
During our national convention, we dedicated over 6000 associate hours to volunteering in the community and later at more than 300 local events. Collectively these efforts clearly show that we live our purpose of providing health and inspiring confidence in our clients and communities everywhere. With that, I'll hand the call over to Tony.
谈到交易细节，4.05亿美元的购买价将由可用现金提供资金。我们预计转型将在未来几个月内完成。 Tony将在电话会议后期提供有关交易财务影响和我们的资本分配方法的更多详细信息。 Wave将作为一个独立的业务部门运作，一个强大的管理团队将继续留在交易后继续他们已经开始的伟大工作。
总之，随着我们长期投资，Wave收购代表了H＆R Block的强大战略契合。 Wave为我们提供了加速小型企业战略推动增长和提升股东价值的机会。欢迎Wave团队，我感到非常兴奋。在我将其转交给Tony之前，我要感谢我们的员工，税务专业人士和特许经营者，感谢他们接受变革并成功执行我们的战略路线图第一年。除了为客户提供成果外，我们的团队还以过去没有的方式为社区服务。
Thanks Jeff. Good morning everyone. Let me start with the financial objectives we outlined prior to the tax season and how our performance is measured up. Coming into fiscal 2019, we recognized the need to make investments in price, technology and operational excellence in order to achieve long-term growth. We outlined fiscal 2019 revenue expectations at $3.05 billion to $3.1 billion and EBITDA margin of 24% to 26%. I'm pleased to report that we hit the high end of both of these ranges. Looking at the detailed results, revenue was $3.1 million representing a 2% decline from the prior year.
This was expected and was driven by a decline in assisted revenue resulting from targeted price reductions. Our strong growth in DIY volume as well as improved mix helped offset the overall decrease in revenue. Regarding expenses, total operating expenses increased 3% driven by planned investments in technology as well as an increase in marketing.
The resulting EBITDA margin of 25.8% was at the high end of our outlook range. Moving through the remainder of the income statement, we saw other income increase due to higher interest rates on cash balances. Despite these higher rates, interest expense decreased due to lower draws on our line of credit compared to the prior year. Our effective tax rate for fiscal 2019 was 18.3% which was lower than our initial outlook due to discrete items recorded in the fourth quarter but represents an increase from fiscal 2018.
As a reminder, fiscal 2018 was unique as our effective tax rate of 6.3% was significantly lower due to the federal corporate tax rate change. The higher tax rate in fiscal 2019 along with revenue and expense changes mentioned earlier resulted in a decrease in EPS from $2.98 to $2.15.
Turning to the balance sheet, our financial position remains strong. We ended the year with nearly $1.6 billion of cash which was slightly higher than the prior year. 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 in the company's reports on Forms 10-K and 10-Q and other SEC filings.
I’d now like to provide some detail on the Wave acquisition and its impact of fiscal 2020. As Jeff mentioned, we’re acquiring all the Wave’s outstanding shares for a purchase price of $405 million which will be funded with available cash. We expect this transaction to close within the next few months. I’ll now provide our overall financial outlook for fiscal 2020 which includes the impact of Wave. I'll also share the Wave’s specific projections. Starting with revenues, we anticipate modest growth in the tax business following the recent year. Additionally, we expect that Wave will contribute $40 million to $45 million which represents nine months of ownership. The net result is total company revenue growth of 1.5% to 3.5%.
With respect to earnings, we anticipate total EBITDA dollars to be slightly higher than fiscal 2019 as we return to revenue growth. And while we will absorb Wave’s operating loss and related transactional costs of approximately $25 million to $30 million, we plan to offset these through other cost reductions to maintain the strong EBITDA level. As a result, we expect revenue growth will outpace EBITDA which will impact our margin. Therefore we are maintaining our EBITDA margin outlook range of 24% to 26% for fiscal 2020.
谈到资产负债表，我们的财务状况依然强劲。我们今年结束时的现金近16亿美元，略高于去年。在已终止的业务中，本季度与Sand Canyon相关的应计或有负债没有变化。有关Sand Canyon的其他信息，请参阅公司关于Form 10-K和10-Q以及其他SEC文件的报告中的披露。
As we execute Wave’s growth plans, we do expect it to be accretive over time. However given the choice to focus on top line growth, we do not expect Wave to be profitable in the near to medium term. Additionally, we expect amortization expense related to the Wave acquisition to be $40 million to $50 million in fiscal 2020. This may change and will be ultimately determined by the final purchase price allocation.
With respect to corporate taxes, we currently anticipate our rate to be 23% to 25%. As always, this may fluctuate should unanticipated discrete items occur during the fiscal year. I’d now like to switch gears and talk about our capital structure. Our capital allocation priorities remain the same. At the top of the list is maintaining adequate liquidity for our operational needs to account for our seasonality.
As I mentioned earlier, we ended the year with a strong cash position after another year of solid cash flow generation. We didn't make strategic investments back into the business that we believe deliver value to our clients ultimately benefiting our shareholders. In fiscal 2019, we made significant investments in pricing, technology and operational excellence. And now with the acquisition of Wave, we’re accelerating our growth making prudent investments to drive sustainable growth remains a key element of our capital allocation.
Last, we will deploy excess capital through quarterly dividend and share repurchases. I'm pleased that our Board of Directors approved a 4% increase in our dividend to an annual rate of a $1.04 of $0.26 per quarter. This represents our fourth consecutive year of increases. Over that time, our quarterly dividend has increased 30%. We remain committed to performing an annual review of the dividend after each fiscal year.
With respect to share repurchases, they are a key component of capital allocation and we remain committed to at a minimum repurchasing shares to offset dilution from equity grants. As such, our Board extended our previous share repurchase authorization by three years to June 2022 with approximately $1 billion remaining.
In fiscal 2019, we repurchased a total of 7.9 million shares for $185 million at an average price of $23.51. This includes approximately 3 million shares repurchased for $75 million during the fiscal fourth quarter. We will continue to be opportunistic in our share repurchase approach. Going forward, our capital allocation strategy will remain consistent. We will balance investments in the business to drive growth with capital returns to shareholders through dividends and share repurchases, maintaining that balance as well as a strong liquidity profile will enable us to drive shareholder value over the long-term.
And in summary, I'm pleased with our performance this year. We delivered what we said we would and we're well-positioned as we begin the second year of our strategy. We ended the year with a strong balance sheet and cash position allowing us to invest for future growth, while still returning capital to shareholders. And I'm excited about the acquisition of Wave and more broadly about the opportunity to drive sustainable growth in the future. With that, I will now turn the call back over to Jeff.
Thanks Tony. To recap, we had a great year. We achieved our objectives for fiscal 2019 and delivered what we promised with financial results at the top end of our outlook ranges. With a successful start on our strategic journey in the books, I couldn't be more excited about what lies ahead. We've made significant improvements in our tax business and we'll continue to innovate and drive operational excellence and we're strengthening our growth trajectory with Wave, a great strategic acquisition. With that, we'll now open the line for questions. Amanda?
谢谢托尼。 回顾一下，我们度过了美好的一年。 我们实现了2019财年的目标，并在我们展望范围的最高端实现了我们承诺的财务业绩。 随着我们在书中的战略旅程的成功开始，我对未来的前景感到兴奋。 我们在税务业务方面取得了重大进步，我们将继续创新并推动卓越运营，我们正在通过伟大的战略收购Wave加强我们的增长轨迹。 有了这个，我们现在打开问题的界限。阿曼达？
Thank you. [Operator Instructions] Our first question comes from the line of Kartik Mehta of Northcoast Research. Your line is open.
谢谢。 [操作员说明]我们的第一个问题来自Northcoast Research的Kartik Mehta系列。 你的线是开放的。
Good morning Jeff and Tony. Tony, I just want to make sure I understood the EBITDA margin guidance. If not for the Wave Financial acquisitions, would EBITDA margins increase, I guess it would be just give a little bit detail -- little bit more detail on how you are thinking about EBITDA margin guidance for FY 2020?
早上好杰夫和托尼。 Tony，我只想确保理解EBITDA保证金指引。 如果不是Wave Financial收购，EBITDA利润率会增加，我想这只会给出一些细节 - 关于你如何考虑2020财年的EBITDA利润率指引的更多细节？
Yes, thank you, Kartik. As we said, we do expect revenue growth of 1.5% to 3.5%. We do expect EBITDA dollars to increase in fiscal 2020. But given that revenue growth will outpace EBITDA growth, there will be slight degradation in EBITDA margins. 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. 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 that's been a key component of our plan for this year. So there would've been a lot of other moving parts and probably other investments if we haven’t went down the Wave path.
是的，谢谢你，Kartik。 正如我们所说，我们预计收入增长1.5％至3.5％。 我们预计2020财年EBITDA美元将会增加。但鉴于收入增长将超过EBITDA增长，EBITDA利润率将略有下降。 但仍处于24％至26％的范围内。 具体到你关于没有Wave的情况下的问题，很明显Wave正在亏本运营，我们正在亏本收购它并将其吸收到我们的EBITDA数字中。 我们正在通过其他费用减少抵消这一点。 我们很难说如果我们没有完成浪潮会是什么样子，我们显然已经在这个问题上工作了几个月，这是我们今年计划的一个关键组成部分。 因此，如果我们没有沿着Wave路走下去，那么会有很多其他活动部件和可能还有其他投资。
Okay. So I guess whatever the losses that are in Wave, you were able to offset those with other actions you were taking at the corporate level. Is that fair?
好的。 所以我想无论Wave中的损失如何，你都可以通过你在公司层面采取的其他行动来抵消这些损失。 那是公平的吗？
That's exactly right.
Okay. And then Jeff, as you look at the tax season and what you thought happened. Do you think there is a need for further price investments or are you satisfied very often do you think moving forward, you can get to a positive tax client comp?
好的。 然后杰夫，你看看税收季节和你认为发生了什么。 您是否认为需要进一步的价格投资，或者您是否经常对您认为前进感到满意，您可以获得积极的税务客户补偿？
Great question. So on the pricing component first, obviously there were two big pieces to this investment in 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.
And then just one last question. Jeff, there’s been a lot of talk about free solution as it concerns DIY. And I'm wondering your thoughts on all the conversations that happened and where H&R Block stands as far as your ability to offer the product and what's been set out there?
然后只是最后一个问题。 杰夫，有很多关于免费解决方案的讨论，因为它涉及DIY。 而且我想知道你对所发生的所有谈话的看法以及H＆R Block在你提供产品的能力和那里设置的内容方面的立场？
Yes thanks. This is what we call alliance program is one of four ways that you can file for free at H&R Block and it's a program that we've participated in for many years. This year at H&R Block, the Free File program grew about 8%, a little over 8% versus the Free File industry overall grew about 6%. So we feel good about the program. We feel good about the consumer's ability to find and choose the Free File Alliance at H&R Block as evidenced by the growth rate that we saw this year.
对了谢谢。 这就是我们所说的联盟计划是您可以在H＆R Block免费申请的四种方式之一，这是我们参与多年的计划。 今年在H＆R Block，免费文件计划增长了约8％，略高于8％，而Free File行业整体增长约6％。 所以我们对该计划感到满意。 我们对消费者在H＆R Block寻找和选择免费文件联盟的能力感到满意，我们今年看到的增长率证明了这一点。
Thank you very much. Appreciate it.
Thank you. The next question comes from the line of Jeff Silber of BMO Capital Markets. Your line is open.
谢谢。 接下来的问题来自BMO Capital Markets的Jeff Silber。 你的线是开放的。
Thank you so much. Just wanted to go back to the tax season and the impact of tax reform specifically. I know and maybe you guys didn’t say that but there was some thought in the industry that we might see less of a shift from assisted to DIY this past year because of all the confusion over tax reform. And it sounds like we had another 60 basis point shift in line with historical. Do you think that there was any impact of tax reform on the shift. Do you think we'll see more of a shift next year as customers get used to with the new tax laws and thanks.
非常感谢。 只是想回到税收季节和税收改革的具体影响。 我知道，也许你们没有这么说，但业内人士认为，由于对税制改革的所有困惑，我们可能会看到去年从辅助到DIY的转变较少。 而且听起来我们还有另外60个基点的变化与历史相符。 你认为税制改革对转变有什么影响吗？ 您是否认为明年我们会看到更多的转变，因为客户已经习惯了新的税法并感谢您。
Yes, this is Jeff. Thanks for the question. Just take one step backwards as we evaluate the tax reform going back over a year ago, we have done our own historical look at each time there had been a major change to tax law over history and obviously with our history, we're able to look back a long time and what we saw was never in history has there been a change to the tax law that created a significant shift in method type.
So as we prepared for tax legislation changes, we had that as a backdrop. And I think when we look at this season there were a lot of interesting dynamics starting with tax reform, then the government shutdown. We saw a shift from assisted to DIY as you said consistent with what we've seen in the last four or five, six years. We didn't see it accelerate at all. And we saw consumers looking for help in lots of different ways as evidenced by our trajectory in assisted, as evidenced by our growth in things like Tax Pro Review where consumers were looking for advice and making sure that they were making the right choice whether it was choosing us to do their taxes or validating the work they had done themselves.
And we think that that ecosystem that we're building to serve consumers in so many different ways is a great way to make sure we're listening to the consumer and being able to respond to them again whether they have a simple question or want someone to do all the work for them.
因此，在我们为税收立法变革做准备时，我们将其作为背景。而且我认为，当我们看这个季节时，从税制改革开始就有很多有趣的动态，然后是政府关闭。我们看到了从辅助到DIY的转变，正如您所说的那样，与我们在过去四，五，六年中看到的一致。我们没有看到它加速。我们看到消费者以许多不同的方式寻求帮助，这可以从我们在辅助方面的发展轨迹中得到证明，正如我们在Tax Pro Review等消费者寻求建议并确保他们做出正确选择（无论是选择我们的税收或验证他们自己完成的工作。
So let me ask the question maybe another way or dig a little bit deeper. In looking at your 2020 guidance for revenue, what's implied on both the assisted side and the DIY side in terms of volume and pricing?
Yes, thanks Jeff. This is Tony. I mean I think our base expectation would be a continued shift in similar level to what we saw this year. Obviously, we don't know what every individual consumer will do. I mean every year you have switching from DIY to assisted and assisted to DIY, the net migration if you will has been a net move to DIY. This year we saw DIY category grow 3% to 4% which is in line with what we thought, assisted category was down slightly.
We think that as Jeff mentioned in his opening comments was partly due to more people filing extension which we think impacts the assisted side a little bit more. So that will work itself out as we go into the May to October filing season but next year, I think we would expect our base view would be the same as we went into this year which is a DIY category will grow faster than the assisted category and ultimately it'll be determined by people's confidence in how they file their taxes which taxes are still complex and people need help.
And on the pricing side for both methodologies?
So we haven't announced exactly what our pricing strategy will be for next year for competitive reasons but we do not intend to reset further in pricing.
Okay. Thanks so much for the color.
Thank you, Jeff.
Thank you. And our next question comes from the line of Thomas Allen of Morgan Stanley. Your line is open.
谢谢。 我们的下一个问题来自摩根士丹利的托马斯艾伦。 你的线是开放的。
Hey good morning. Just on the Wave Financial acquisition, obviously it sounds like an exciting company. But could you just talk more about like why it makes sense to fit into H&R Block like what synergistic?
嗨，早安。 就收购Wave Financial而言，显然这听起来像是一家激动人心的公司。 但是你能不能更多地谈论为什么适合H＆R Block这样的协同作用呢？
Absolutely. This is Jeff. Maybe Tony and I will tag team that. So the point I would start is as we talked about on prior quarters, the reviews that we've been doing about the other pieces of our portfolio we already have beyond taxes and as I mentioned in the prepared remarks, we served small businesses today at H&R Block in terms of tax preparation. And we also serve them today in terms of bookkeeping especially through our franchisees.
And so that fact combined with the macro conditions in terms of the growth of small businesses really suggested to us that there was more we could do to serve small businesses. We approached Wave months ago really attractive by a few things about that company. Number one is they're really designed for the small business owner. Their product is widely viewed as simple, easy to use and for people that aren't great at managing their financials, that attracted us, the product roadmap and consistent sense of innovation of introducing new products, how fast they've been acquiring new clients and their revenue growth trajectory. And finally, I would say they have a very unique business model which is the core accounting software platform is free.
Most small businesses today don't use anything. And so a free proposition is a great way to get them off the sidelines. We don't do that today. So we do more tax and some bookkeeping. It's a macro trend that makes sense to try to do more with and this company is really positioned well with the small business owner and there's essentially no duplication with what we do today. So sorry if that's a bit more detail but all those things together is why we're so excited.
Okay, helpful. And then just on the assisted Tax Pro side, can you just talk about what the competitive response was like to your lower pricing and maybe you’ve been around loan programs some was offering and then how you expect that to trend next year? Thanks.
好的，乐于助人。 然后只是在辅助的Tax Pro方面，您能谈谈竞争对策对您的较低价格的影响吗？也许您已经参与了一些提供的贷款计划，以及您对明年趋势的看法？ 谢谢。
Sure. So we went into the season there was some anxiety I think by people that what the competitive response may be. And we didn't really see a lot of competitive response to pricing. Keep in mind that many of our competitors were already priced lower than H&R Block. That was part of the gap that we were trying to close. But the way we were able to take such a complex topic simplifying down to five core prices and communicate to people that you would know that upfront was a heavy lift and we didn't really see the market change as a result of it.
With respect to refund advance, our core product this year had a maximum loan tier of $3,000 and that was interest and fee-free. And that was something we felt strongly about this year. We didn't see competitors offer a higher loan tiers and we saw competitors offer a higher loan tiers with tiered interest rates as the loan amount increased. So when you take all that together, we will absolutely evaluate as we always do as we make decisions for what we do next year.
The only other thing I would add Thomas is it looks like the overall number of loans in the industry was fairly flat which is consistent with our results, our number of applications and number of loans that we provided was also fairly consistent with the prior year. So despite there being more competitive offers in the marketplace, it looks like the total refund advance loans was fairly flat year-over-year.
Helpful. Thank you.
Thank you. Our next question comes from the line of George Tong of Goldman Sachs. Your line is open.
谢谢。 我们的下一个问题来自Goldman Sachs的George Tong。 你的线是开放的。
Thanks. Good morning. Fiscal 2019 was an investment year for H&R Block from the perspective of pricing reductions and other technology and operational investments. Can you talk about how much of the technology and operational and marketing investments will carry over into next year?
谢谢。 早上好。 从降价和其他技术及运营投资的角度来看，2019财年是H＆R Block的投资年。 您能谈谈明年将有多少技术，运营和营销投资延续下去吗？
Absolutely. Good morning, George. So a few areas as you mentioned the first pricing. Again just to reiterate that's a one-year investment in price and we came in really where we expected and that will continue as we move forward. Operational excellence has a number of investments including things like optimizing our footprint. And that actually came in $15 million to $20 million better than expected. Technology has four or five dimensions of our investment in technology. Those are all multi-year investments and we do expect for the next couple of years to continue to invest at an accelerated rate as we talked about last year, no change there.
We're making great progress on the IT roadmap. Our investment and work in building our omnichannel tax engine is ahead of schedule and so we feel very good about the progress, the technology team is making and marketing finally this year, a combination of we have a number of new things introduced, the success that we saw and our ability to acquire customers with performance marketing and frankly the delay in the season all caused an elevated investment this year moving forward for next year, all of that's contemplated in the outlook we provided.
Got it. That's helpful. You've previously indicated that long-term EBITDA margins will likely not return to historical highs due to needs to invest in the business. Can you help frame what longer term EBITDA margins might look like given the work that you've done around required investments in the business?
得到它了。 这很有帮助。 您之前曾表示，由于需要投资该业务，长期EBITDA利润率可能不会回到历史高位。 根据您在业务中所需的投资所做的工作，您能否帮助确定长期EBITDA利润率？
Yes, as Tony mentioned this year, set Wave aside, we would have seen some small increases in EBITDA dollars. I mean we're absolutely focused on growing EBITDA dollars in margin expansion over time. We're not providing a long-term outlook in EBITDA margins today are reiterating that we think 27% to 30% probably isn't a level we're trying to get back to really just a reflection of continuing to invest to drive growth in the business and serve the consumer in new ways. But 24% to 26% for next year, we feel good about over time growing EBITDA dollars and with more growth ultimately being able to expand EBITDA margins as well.
是的，正如托尼今年提到的那样，将波浪放在一边，我们会看到EBITDA美元的小幅上涨。 我的意思是，随着时间的推移，我们绝对专注于增加息税扩张的EBITDA美元。 我们没有提供EBITDA利润的长期前景今天重申，我们认为27％至30％可能不是我们试图回归的水平，实际上只是反映继续投资以推动增长 企业以新的方式为消费者服务。 但明年24％至26％，随着时间的推移，我们对EBITDA的增长感到满意，并且随着更多的增长最终能够扩大EBITDA利润率。
Very helpful, thank you.
Thank you. Our next question comes from the line of Scott Schneeberger of Oppenheimer. Your line is open.
谢谢。 我们的下一个问题来自Oppenheimer的Scott Schneeberger。 你的线是开放的。
Thanks. Good morning everyone. First one I'd like to ask the H&R Block clearly took share in the Do It Yourself category this year, another large player also appeared to, Jeff could you comment on what you see as far as share going forward and this is really a question about the smaller players in the industry and feel free to loop in anything with the free filers discussion that you addressed little bit earlier? Thanks.
谢谢。 大家，早安。 第一个我想问H＆R Block今年明确地分享了Do It Yourself类别，另外一个大型玩家也出现了，杰夫你可以评论一下你所看到的未来份额，这真的是一个问题 关于行业中较小的玩家，可以随意通过免费的文件管理器讨论来解决这个问题吗？ 谢谢。
Yes, it's obviously we took share as you mentioned into took share as well. It's hard to know for sure all the players at this stage until we have all the full IRS data, Credit Karma likely gained a small amount of share and so we'll pay close attention as the IRS publishes all the final data about who exactly did what. But if I just take a step back, our investment in our DIY product is really focused on three simple parts of the strategy continuing to make the product better and better and ensuring that consumers know about it.
And we believe that we have a great value proposition and we'll continue to ensure that we maintain the right price advantage versus the market leader and that consumers know that there is a great alternative to others that have been used to. So the combination of those three things have really made a difference year-over-year and we'll continue to follow that strategy.
是的，显然我们就像你提到的那样分享了份额。 在我们获得所有完整的IRS数据之前，很难确定此阶段的所有参与者，Credit Karma可能获得少量份额，因此我们将密切关注，因为IRS发布了关于究竟是谁做的所有最终数据 什么。 但是，如果我退后一步，我们对DIY产品的投资真正集中在战略的三个简单部分，继续使产品更好，更好，并确保消费者了解它。
Thanks. And then my follow-up is two parter, Jeff, for you to start, please and then Tony to finish I'll ask it altogether. When in a prior question, Jeff you mentioned it sounds like it's still going to be a while before you can give a longer term view of what block may look like in three or four years. I realize it's still early days in this investment process. When do you think you might get a feel for a long-term margin comfort, the return on the investments that you're making, thoughts for that. Just on the timing and the future when we may get that and then obviously you mentioned there's four or five dimensions to IT and this Wave acquisition comes in not really core tax but a complementary business.
So Tony if you’d kind of hop on the end of Jeff comments and talk about free cash flow and capital spend for this upcoming year fiscal 2020 with obviously the increased dividend and the spend on Wave, just a discussion of the cash position over the course of this year and what may be left over for repurchases and or other investments. Sorry for the long multipart question but would love to get an answer.
I'll see if I can keep up with all the pieces. Let me just start with that. In the past, we were really anchored on an EBITDA margin level that reflected the fact that we just weren't investing in the business. So we reset to 24% to 26%. And when I look at the performance of our business in just year one, our ability to deliver that range invest in the business for long-term and we returned capital to shareholders and share repurchase and a dividend increase. That's a really nice combination of elements that we were able to deliver and we want to continue to do that.
Obviously, the investments we're making are in order to enable growth. So we believe we have to return to growing clients which means growing volume which means top line growth which means higher EBITDA dollars and we're more focused on doing that now than trying to pick an EBITDA margin range for some date in the future. And so we'll continue to stay close with you all as we move into year two and year three at the strategy. But I feel so good about how we executed year one, the plans we've put in place for year two and obviously the Wave acquisition gives us a new dimension to the strategy to both accelerate and expand work against small businesses and I’ll let Tony tag team.
Yes, thanks Scott. Our cash flow generation as I mentioned in my opening comments is still really strong. We ended the year with more cash than we have and probably the last four or maybe even five years with $1.6 billion at the end of the year. So even after the acquisition of Wave, we feel really good about rising the dividend and we still have plenty of cash flow to acquire shares opportunistically and that was our approach. This year we bought about $185 million in the open market. We'll continue to have that approach going into next year and still have plenty of flexibility. In addition to the cash on balance sheet, we have a $2 billion line of credit that still has four years remaining until its maturity. So lots of liquidity to do it, we need to fund future investments for growth, return capital through dividends and share repurchases.
是的，谢谢斯科特。 我在开场评论中提到的现金流量仍然非常强劲。 我们今年的现金收入超过了我们的收入，可能是最后四年甚至五年，年底时的收入为16亿美元。 因此，即使在收购Wave之后，我们对提高股息感到非常满意，而且我们仍有足够的现金流来机会性地获得股票，这就是我们的方法。 今年我们在公开市场上买入了大约1.85亿美元。 我们将继续采用这种方法进入明年，并仍然具有足够的灵活性。 除了资产负债表上的现金，我们还有20亿美元的信贷额度，到目前为止还有四年的期限。 因此需要大量流动资金，我们需要为未来的增长投资提供资金，通过股息回购资金并分享回购。
Thanks, appreciate it guys.
Thank you. The next question comes from the line of Alex Paris of Barrington Research. Your line is open.
谢谢。 下一个问题来自Barrington Research的Alex Paris系列。 你的线是开放的。
Good morning. This is Chris Howe sitting in for Alex.
早上好。 这是Chris Howe坐在Alex身边。
Good morning, Chris.
Good morning. I had two questions. The first one is on Wave. Can you comment on the timing of the deal. What was attractive to its timing now. And were there any other bidders for the business. And in relation to Wave, you mentioned it will be accretive longer term and can you comment around their customer distribution, the geographic distribution of their customers versus yours and how you envision their 400,000 small business customers moving into H&R Block or vice versa?
早上好。 我有两个问题。 第一个是Wave。 你能评论一下这笔交易的时间吗？ 现在对它的时机有什么吸引力。 是否还有其他竞标者。 关于Wave，你提到它会长期增加，你能评论他们的客户分布，客户与你的客户的地理分布以及你如何设想他们的40万小企业客户进入H＆R Block，反之亦然？
Sure, Chris. I’ll kick it off and see if we catch all those pieces. So the timing of the deal was just what the timing was. We approached them months ago in the context of us doing this review of the assets we had inside H&R Block already, there were no other bidders, they weren't for sale. And so we began conversations which resulted in today and today was just how the timing worked out. There was no magic about that is just how it all converged but there were no other bidders. And it all began with conversations with them several months ago. I’ll let Tony tag team on here with me.
当然，克里斯。 我会把它踢开，看看我们是否抓住了所有这些碎片。 因此，交易的时机恰好是时机。 我们几个月前在我们对H＆R Block内部的资产进行审查的背景下找到了他们，没有其他竞标者，他们没有出售。 所以我们开始谈话，这导致了今天和今天的时间安排。 没有任何魔力只是它如何融合，但没有其他竞标者。 这一切都始于几个月前与他们的对话。 我会让Tony和我一起在这里标记团队。
Yes, thanks Chris. So when you look at their customers today at 400,000 that we referenced in the opening comments about 60% of those are in North America. And as you would expect, the vast majority of those are in the U.S. with the remainder in Canada. They're only monetizing and charging for product features today in North America. So the 40% that set outside of North America today are using the product and are very happy with it. And it's entirely free. There's definitely an opportunity to roll out payments and some of the other features they have in North America and those other countries as they kind of build out their future product roadmap.
As far as opportunities for us to cross-sell, H&R Block services. I mean the reason, larger reason people are doing accounting for their small business is for tax reasons. And while that's why we think the strategic fit makes so much sense. You're doing it for kind of two reasons, one cash flow and the other one for tax reasons. Today they offer no tax services to speak their clients are currently asking for tax help throughout the year both with quarterly filings as well as year-end tax preparation. So we know there's going to be an opportunity down the road to put our capabilities together with theirs to serve their clients in additional ways.
That's great. That's very helpful. I have lots of questions but one more question about H&R Block excluding Wave. You mentioned the new client growth that you're seeing within Tax Pro, the Review product as well as Tax Pro Go. With the accretion that you're seeing in new clients and the tremendous growth here. What’s your outlook on retention of these clients. You mentioned Tax Pro Go has a younger higher income. I assume some of these new clients have a higher flight risk given their experimentation with a new tax service. Can you just comment on how you retain these clients going into next tax season?
那很棒。 这非常有帮助。 我有很多问题，但还有一个关于H＆R Block不包括Wave的问题。 您提到了您在Tax Pro，Review产品以及Tax Pro Go中看到的新客户增长。 随着你在新客户中看到的增长和这里的巨大增长。 您对这些客户保留的看法是什么？ 你提到Tax Pro Go有更高的收入。 我假设这些新客户中的一些人因为尝试新的税务服务而面临更高的航班风险。 您能否评论一下如何保留这些客户进入下一个税收季节？
Absolutely. So just again to frame the products that you're referencing that’s in the Virtual platform and the way that we thought about this is for most of history, the consumer really had two choices. And so as we build these products to allow them to access different degrees of help in digital ways, we think that attracts new people to the brand. We know the brand is well known it’s highly trusted for taxes.
And so we're now able to help people access us in new ways, this year when you remove the impact of Free EZ, we saw modest increases in retention in both DIY and in the assisted channel. And one of the things that we're paying close attention to is given the significant increases and positive client feedback from their experience this year how that might translate into retention for next year. Obviously that's an unknown but because of the significant improvements in what clients told us about their experience of H&R Block, we go into next year optimistic about what could happen to retention.
因此，我们现在能够以新的方式帮助人们访问我们，今年当您消除Free EZ的影响时，我们看到DIY和辅助渠道的保留率适度增加。我们正在密切关注的事情之一就是从今年的经验中获得了显着的增长和积极的客户反馈，这可能会转化为明年的留存率。显然这是一个未知数，但由于客户告诉我们他们的H＆R Block体验的重大改进，我们明年会对保留可能发生的事情持乐观态度。
Got it. Thank you for taking my questions.
Thank you. The next question comes from the line of Hamzah Mazari of Macquarie. Your line is open.
谢谢。 接下来的问题来自麦格理的Hamzah Mazari。 你的线是开放的。
Hey this is Mario Cortellacci filling in for Hamzah.
How are you?
Hey, how are you? Could you just walk us through how you think about your digital marketing, in terms of your digital market share today I guess where that can go in the future. I know you've been doing a lot of work in your brand awareness and digital and just want to see if you can give us an update on I guess what your brand awareness is in digital as of today and then maybe I don't know outside of your satisfaction scores or NPS, are you able to quantify any of the benefits that you've experienced from the big marketing push this year?
嘿，你怎么样？ 您能否告诉我们您对数字营销的看法，就您今天的数字市场份额而言，我想未来可能会发生什么。 我知道你在品牌知名度和数字化方面做了很多工作，只是想知道你是否可以给我们一个更新，我猜你的品牌知名度在今天是什么样的，然后我可能不知道 除了满意度分数或NPS之外，您能否量化今年大型营销推动所带来的任何好处？
Thanks Mario, this is Tony. So we gained market share this year in DIY as we shared, this is the third consecutive year of gaining that market share. So we feel like we're on a nice trend to continue to grow and as Jeff said, there's only two parts of the strategy that will continue and we don't see any reason why that market share gains will kind of happen next year and into the future. I just totally lost my train of thought.
谢谢马里奥，这是托尼。 因此，我们今年在DIY中获得了市场份额，这是连续第三年获得市场份额。 因此，我们觉得我们正处于一个继续增长的好趋势，正如杰夫所说，战略中只有两个部分将继续下去，我们认为没有任何理由说明为什么市场份额的增长会在明年发生， 走向未来。 我完全失去了思路。
Just on the benefits of the marketing push, we'll tag team a bit. There are several new things about the approach to marketing this year at the highest level was a move away from advertising national promotions and instead advertising what we think are the core elements of our value proposition, upfront transparent pricing. How that’s translated to what we call Price Preview and the DIY channel, also more about expertise and care things that make H&R Block differentiated and great. And so at the highest level we improved awareness of our DIY channel. We're only going to continue to be surprised by how much opportunity there is, people still don't know that H&R Block offers software and online products, we continue to work against that and then our performance marketing channels.
We've talked a lot about last year which is our ability to get very granular in targeting micro segments of consumers and delivering unique messages just to them. And we saw meaningful increases in traffic to hrblock.com which is really the starting point for those conversion to online and conversion to make an appointment in an office. So we're able to watch that from the funnel of awareness through traffic, through conversion and saw great improvements across the board.
仅仅是营销推动带来的好处，我们会对团队进行一些标记。今年最高级别的营销方法有几个新的方面是放弃广告全国促销活动，而是宣传我们认为是我们价值主张的核心要素，即前期透明定价。如何将其转化为我们所谓的价格预览和DIY渠道，还有更多关于使H＆R Block与众不同且卓越的专业知识和关怀事项。因此，在最高级别，我们提高了对DIY频道的认识。我们只会对有多少机会感到惊讶，人们仍然不知道H＆R Block提供软件和在线产品，我们继续反对，然后我们的绩效营销渠道。
Great. And just want to touch on the Wave acquisition, I mean just trying to understand the -- I guess what the return profile would look like versus I mean for you buying a company like Wave versus building something internally with the H&R Block brand behind it. Maybe you can walk us through your thought process or why you chose one versus the other, it could've been timing but maybe you can talk about returns as well?
非常好。 而且只是想触及Wave的收购，我的意思是只是想了解一下 - 我想回报的概况会是什么样的，而我的意思是你买了一家像Wave这样的公司而不是在内部用H＆R Block品牌建立一些东西。 也许你可以引导我们完成你的思考过程，或者为什么你选择一个与另一个相比，它可能是时机，但也许你也可以谈论回报？
Yes, I think obviously we don't underestimate how hard it can be to start from scratch building a software platform that's both this complex, this expansive and one of the things they've done extraordinarily well is keep it so simple and user friendly. And so they have an incredible product and engineering team, they've been working on this for nine years.
And so we just saw given all the things I said earlier, I won't repeat about why we were so excited about what they had done that it was just a better way to accelerate how we expand, what we offer to small business owners starting from scratch would just be a completely different profile than we just thought this was by far the best choice.
And Mario, I mean they've got a proven customer acquisition model that it's well on its way at a cost of acquisition per customer that's very, very attractive as we said 80% of the customers coming to Wave, and it’s quite organically which is really phenomenal in this part of the category. When we look at the return, we expect revenue to obviously continue to grow at an aggressive pace and as they continue to grow revenue, they're going to continue to fund investments to drive additional revenue opportunities but they will turn profitable some date in the future which we have built into our model and the overall ROI will be a really strong benefit to H&R Block and our shareholders.
而马里奥，我的意思是他们已经拥有一个经过验证的客户收购模式，它以每个客户的收购成本很好，非常非常有吸引力，因为我们说有80％的客户来到Wave，而且它是非常有机的，这是 在这部分类别中真的非常惊人。 当我们看到收益时，我们预计收入显然将继续以激进的速度增长，并且随着收入的不断增加，他们将继续为投资提供资金以增加收入机会，但他们将在某个日期转为盈利。 我们已经融入我们的模型和整体投资回报率的未来将对H＆R Block和我们的股东带来非常好的好处。
Great, thank you guys.
Thank you, Mario.
Thank you. And our next question comes from the line of Michael Millman of Millman Research. Your line is open.
谢谢。 我们的下一个问题来自Millman Research的Michael Millman。 你的线是开放的。
Thank you. Several questions. Why do you think that tax returns this past season were flat. You're saying people aren’t doing this much or buying -- thinking that they can get away with more. So secondly on the tax, do you have a concern that this is the more tax payers see that with little help they could do it themselves that they will turn to do it themselves. Could you tell us what your cost savings are expected to be this year and from what source could you -- in terms of Wave what is their R&D and how do they compete with Intuit who spends a huge amount on R&D and AI specifically and exactly what seems to be exactly the same market? Thank you.
谢谢。 几个问题。 为什么你认为上个季节的纳税申报表是持平的。 你说人们没有这么做或者购买 - 认为他们可以侥幸逃脱。 所以其次关于税收问题，你是否担心这是更多的纳税人看到的，只需要很少的帮助，他们就可以自己做，以便他们自己去做。 您能否告诉我们您今年的成本节约情况以及您可以从哪个方面获得成本 - 就Wave而言，他们的研发是什么？他们如何与Intuit竞争，后者在研发和人工智能上花费了大量资金，具体到底是什么？ 似乎是完全一样的市场？ 谢谢。
Thanks Michael, it's Jeff. I think we've got five or six things that we'll tick through. I think at the top of the list, I think we saw even though we don't know official data from the IRS yet, we saw pretty significant extension filing this year and so we think that drove a lot of what created the industry to be flat. I think there were questions about outcomes. There was
delay to the tax season, a number of things that caused an increase in extension filing.
So that's our belief on the first point, your second question about this migration to DIY, you just rewind a little bit prior to tax reform, the lion's share of American taxpayers took the standard deduction and that was even more at H&R Block and so post tax reform, we still saw people lion’s share who now qualify for the standard deduction and so we continue to believe and hear it from our clients constantly that even when we might judge their tax situation to be simple, they are not confident with the topic of taxes.
And there's really two things we hear consistently one is I want to get everything I deserve. And number two is I'm afraid I'll get in trouble if I get it wrong. And those are two consumer truths that have been true over time. And keep in mind for someone who qualifies for the standard deduction, they also likely are eligible for various credits. That process of understanding and filing for those credits is completely unchanged. And so that adds a level of knowledge and detail that for many, many people is just they'd rather have help. That said there is 50 bps shift and that's been consistent year-over-year over-year which is why we're also investing to have a great DIY product and value proposition and ensure that consumers have choices between those two. So that kind of represents the full spectrum and what we think we saw this year.
And specific to your question on cost savings, I mean there's a number of moving parts because you can imagine a couple of buckets. One would be the office closures that we did in FY 2019. It’s a one-time cost, it's rolling off. So that's going to be kind of a benefit year-over-year. We're also starting to see some save on the IT side. There's some data centers that we're able to close down as we migrate to the cloud. Obviously we're continuing to invest broadly in IT but there’s definitely specific parts that are starting to provide a return.
And then specific to your question on R&D for Wave, obviously they’re fraction of the size of QuickBooks and we’re not trying to show that this product is head to head with that market leader. But we do have a 200 plus team that is providing and building the great product and we think, based on user feedback and the surveys and research that we’ve done that the product is robust, the users are very happy with the experience and they continue to invest in building out those capabilities for future both revenue and product features.
So it’s a product that’s been around for nine years since its inception in 2010 and it’s continuing to add team members to invest in R&D both in Artificial Intelligence to do auto-categorization of different expenses and there’s a number of features that the product provides today and we’ll continue to get better over time.
If I have my data right, there is $28 million, $29 million, $30 million small businesses in U.S. and North America and just a few million currently use a product, QuickBooks Online or QuickBooks Self-Employed. So the vast majority of the market today is not using any product and one of the things we love about Wave’s value proposition is the core accounting software being free is the great way for a small business owner to get off the sidelines and try something and we’ve just seen over time once a user tries Wave’s product, we see great retention over time.
So with everything Tony said being true, we also like the size of the market and the fact that most small business owners today are using nothing.
如果我的数据是正确的，那么在美国和北美有2800万美元，2900万美元，3000万美元的小型企业，目前只有几百万人使用QuickBooks Online或QuickBooks Self-Employed。 因此，今天绝大多数市场都没有使用任何产品，我们喜欢Wave的价值主张之一就是免费的核心会计软件是小企业主离开场边尝试的好方法。 一旦用户尝试Wave的产品，我们就会看到，随着时间的推移，我们会看到很好的保留。
Can you give us an ideas, what the R&D expenses are? And will Block support them or contribute to that expenditures?
Yes, Michael, I mean as we shared the revenue that we’re expecting to pick-up for the nine months if we own them in FY 2020 would be $40 million to $45 million. We talked about their operating loss including transaction expenses being $25 million to $30 million. So that would give you a sense of kind of what the P&L looks like specific to Wave.
是的，迈克尔，我的意思是，如果我们在2020财年拥有这些收入，那么我们预计九个月内的收入将分别为4,000万美元至4,500万美元。 我们谈到了他们的经营亏损，包括交易费用为2500万至3000万美元。 这样就可以让你感受到P＆L对Wave特有的含义。
Thank you. And this does conclude our question-and-answer session for today. I’d like to turn the conference back over to Mr. Colby Brown for the closing remarks.
谢谢。 这确实结束了我们今天的问答环节。 我想把会议转回Colby Brown先生的闭幕词。
Thank you, Amanda and thank you everyone for joining. This will conclude today’s call.
Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone have a great day.
女士们，先生们，感谢您参加今天的会议。 这确实结束了该计划。 您现在可以断开连接。 每个人都有美好的一天。
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