HRB
#All right.
There is a lot there, <UNK>, so thank you for that.
Let me take the beginning part, and make sure that we're clear on what we are saying in terms of the bank update, and then <UNK>, I think if you want to take them in general, and I will pipe if there's something I want to add.
I don't think we want to indicate anything other than there is no information at this time.
And while we are frustrated by the pace of the project, we don't see any reason why this transaction would not be approved on its merits.
So there is no signaling, there is no nothing other than this seems to be taking long.
That is, from our perspective, and probably many people would view it the same way.
I'm not sure the regulator does, and for those of you who deal with other banks and this whole industry, things are taking a long time in terms of any kind of deals that are being approved.
I don't want to speak for the regulators, but I don't think they think this is ---+ I think they feel they are being thorough and complete, as they approach this transaction.
So while it's frustrating, while I would have thought we would have had an answer by now, there is nothing, and hopefully we have gotten this through, there is nothing to indicate that anything other that this will move forward.
However the timing is something that is still in the hands of the regulators, and I think from their perspective, and again I can't speak for them, and I don't think they will speak about this, I think the timing is consistent with some of the ways they look at other deals.
As for what the implications of that are, and again I think everyone of us, also, I want to be very clear, we are not going to change our mind, if you will.
We do not want to be regulated as a savings and loan holding company any further, and we are ---+ our intention is to exit on holding and owning our own bank.
In terms of share counts and things like that, we will get to that at the appropriate time, but our intent has never wavered on this.
This is a particular transaction, we believe it will be approved, but that is not going to waver.
As for the long-term growth let me turn that over to <UNK>.
The broader point you are making really is about the investment thesis, and what I would say is that we continue to believe very strongly that our investment thesis remains true, specifically the growth levers that we've got, international growth, our digital growth, our Tax Plus strategy, we believe is on a favorable tailwind in this business.
We've had a good story on pricing, we've had a good story on mix.
The unit count has been disappointing, but we're narrowing down the issue, and actually if you neutralize this past season for EITC and EZ, we actually grew, and that's exactly what we wanted to do.
Importantly, and something that we have talked about before is, and that's why it got in my prepared remarks, is that all units are not created equal.
In fact, if you look at a lifetime value, there's a major discrepancy between a more sophisticated tax return client and one that has a more simple return.
So as an example, our decision to get rid of EZ was the right decision then, and we continue to believe was the right decision.
We gave up a lot of units but the overall client experience for those client who are left are better.
We will have a deeper relationship with them, and they are higher-value clients from a financial perspective.
The EITC solution is one we are working on, there's multiple solutions that we are talking about.
We talked about a couple of them publicly, we've got a couple of other ideas there.
That's one that we will be addressing more formally as we get into the next tax season, but overall, we believe very much that the investment thesis around the growth company remains solid here.
Yes, so, important point number one, is what <UNK> said, is we're getting out of this business, right.
That's just something we've committed to, we will get it figured out, it's been frustrating but we believe that the transaction we entered into with BofI and talked about with all of you many times is the way to go.
As a hypothetical, in the event that doesn't work out, was the next backup, there is a way to separate the going forward bank support that this Company needs to continue to sell Tax Plus products, which we're very committed to, and the actual formalities involved with having a bank balance sheet.
So effectively, we still want to be in the business of offering bank products, and we need a partner bank to do that, so think of that as one transaction.
We do have a legacy bank.
We've got deposits, we've got liabilities, other liabilities, we've got assets, that require a bank charter.
So we need to find a home for those, so that would have to be a second step of that transaction.
And frankly, it's really the second part that's the hang-up in terms of getting that taken care of, because whoever buys those will need to get approval from the regulator.
But clearly if you keep it small and go to a much larger bank, it makes it a little bit easier, so these are considerations that we've got.
But to finish up my response to your question, the plan we have with BofI is the right plan, and we believe on its merits will be approved.
I'm not in the forecasting business.
I think what we share, and we continue to work very closely with BofI, we are committed to them, I think they are a terrific partner.
We think the deal is going to be approved but as for timing, we've been wrong a couple of times on this, that's why I'm out of the timing business.
You have to keep in mind that we can be optimistic, they could be optimistic, but we're not the ones making the decisions here.
It's up to the regulator, so our position on this is it's better not to comment.
<UNK> and the BofI guys can do what they want to do, but I don't think there's any difference of opinion overall, it's really just how we want to represent the decision that regulator has to make.
Yes, just to be clear, I talked about it as a hypothetical, I didn't say we're making plans to restructure by any means.
And I guess the specific answer to your question is, the best estimate I can give you is in line with what we currently understand, the $0.07 to $0.09, but it would clearly be a reflection if there was feedback from a regulator, a different party may have a different viewpoint, we may structure it differently, but I couldn't answer those questions specifically right now, so I'd say $0.07 to $0.09 is still the right number.
I think, <UNK>, we're obviously looking, starting our planning for 2016, and we'll take a look at that.
I do think the investment we made in training, in marketing, really established us, certainly from the research we have gotten back, as the people to turn to when it comes to this issue.
I think our people were very well-prepared, handled all of the simple and complex areas of this tax law change.
I think our feedback on our marketing efforts was very strong.
So it was an investment, I think that we've established that.
Therefore do we have to spend that same level.
Probably not, but we're not prepared at this point to get into specifics going forward.
You'll obviously hear more about that in December.
Just to be clear, that is not a reflection.
We continue to be very bullish about the ACA in our business.
Reduction in investment is a reflection of the one-year startup costs going away, theoretically.
And also I think, and also all the feedback we got, which I think showed that investment was worthwhile.
We think most of the impact of the decision has been worked through the system at this point, so it's going to be mostly a non-issue for us last year.
And just as a reminder, we ran this free EZ promotion for several years.
It had a life, we did a lot of financial assessment of the value those clients, retention of those clients, propensity to buy new products.
We believe that the program had run its life.
We terminated the product, of course there was that one year benefit, because we started charging for it again, but we lost a lot of units.
There was a bit of an echo effect this year, but to be clear, our research and our belief is that a lot of those clients that left us are extremely price-sensitive, and all they will do is continue to shop around.
They are not loyal to any particular company, so any company declaring victory over capturing a bunch of those units I think is a little bit misguided as to what the real value of those clients are, unless they keep their prices at the low end.
I will take the first part, and <UNK>, you should add your perspective.
I do think it is.
I think it's a combination of not only the documentation requirements that will enhance next year, but also the sheer number of people who are going to be enrolled in the exchanges, coupled with, I think, a greater awareness that this is something you have to comply with.
Go ahead, <UNK>.
I think the Supreme Court ruling notwithstanding, that if you look at the drivers of volume going forward, <UNK> already mentioned them, compliance is a big factor.
We think that explained one of the big areas of the shortfall this year, but the doubling of enrollment, and the continuing climbs in enrollment, if you look at the CBO estimates, eventually climbing close to 20 million, will have a significant impact on the number of people impacted by ACA.
So we absolutely believe over the long run that it will be in the 20% to 25% range.
And again if you go back to our statements, we believed all along, we kept hedging on the first year, we weren't sure where it was going to land, so now we have, if you will, a baseline.
So we have felt all along that this would take a few years to really unfold, and we will see if that's true, but we do believe it will be.
What I would say, and then <UNK> correct me to augment this.
There was, the impact was about the same between both assisted and DIY.
There was not much of a shift either way, I think primarily because, as people walked into using their filing methods, and many, many people, a high, high percentage in this industry stay within their filing method.
There is some degree of switching, but I think that contributed to that.
There was not a material shift.
And the impact was about the same, whether you sought assistance or did it yourself.
I think just slightly higher in the assisted side, <UNK>, because of the client mix there, but I agree, we did not see any significant evidence of shifting going forward.
That doesn't mean that as complexity increases with more people having to go through the reconciliation process, and really facing the refund impacts of that, that we aren't going to see the potential for some shifting going forward.
What we have learned this year is when people do see refund impacts, and we do see delays in issuing of forms and corrected forms, that does have the potential to alter both filing behavior, timing and method, but we didn't see substantial impacts this year.
Do you want to take that.
We were actually very pleased with our retention rates overall on the assisted side, they crept up, it wasn't quite a point, but a little bit shy of that.
So all things being equal, which included by the way, the issues we talked about, so that's actually a very good result.
And <UNK>, why don't you talk about DIY.
On the online side, although I still think we have a lot of room for growth, in online we were up about 200 basis points, and in desktop software, we were up about 160 basis points.
Thanks, Anj.
Happy to.
Upon receipt of regulatory approval, what would happen is at that point, we would have what I would call mechanical close process with both the steps themselves that are really administrative in nature, we don't have for example financing contingencies and things like that.
The amount of time, there's like client notices, there's like Articles of Incorporation you have to exchange, there is some bid transfers that have to go through, and just very mechanical things.
That would be somewhere between 30 to 45 days.
Our preference is typically to try to close a transaction at the end of a month, it just makes all the accounting easier.
So that might have to factor in, but the 30 to 45 days would take to close the transaction, and then we would take effectively, effectively means not precisely, but effectively at the same point we would then no longer be deemed a savings and loan holding company, so call that concurrent as it were.
And at that point, we would wash our hands.
BofI would then be responsible for our tax products going forward that are bank related, and we'd look forward to a successful tax season with them really running the engine for us.
That would be how the process works.
There's obvious considerations, we have historical blackout periods and things like that, but these are things that we well understand.
And our intent would be of course, just given the time line we have already gone through, to be fairly quick and expeditious in getting information back to you, the shareholder base, about what our plans and thinking would be.
So I'd say it's fairly much when we close, until we start talking to people more publicly what our plans and thinking are.
We are stating, as the holding company, at the parent company level, and we're actually regulated by the Federal Reserve Bank, that's the parent company regulated, the bank itself is regulated by the OCC.
So we follow the parent company under all the capital requirements and the things that bank holding companies typically are.
We have been in a period now for two years effectively, where we've been building capital to meet those requirements.
We don't believe there's any issues with the pace at which we're doing that.
So that's one thing I just want to set aside.
And of course, when the bank transaction completes, at that point, we would start with the $1 billion number we mentioned earlier, and any potential incremental debt we may want to raise, and of course, it also has impact on go forward capital policy at that point.
<UNK>, that's a great question that obviously we're contemplating right now.
We were surprised this year that the unit count was under 1%, so we are studying that, and I'm not trying to kick the can down the road, but I guess I am, to December.
We will look at that.
There is no obvious reason why it wouldn't.
It's been pretty consistent for 50-plus years, and pretty much in line with non-farm employment but we have to study when we get the full information, which frankly from the IRS perspective, we really don't get until the fall, that we can really understand why it was short this year.
More to come, but I think your supposition is not a bad one.
But we were surprised this year with the growth in the employment and everything that it didn't ---+ even to some extent, go towards the higher end of the 1% to 2% range.
We can certainly get a more detailed conversation off-line, but in general, I would say that at this point, we've had great success in the tax rate.
This year, we had 34.5%, in line with last year.
A lot of reasons for that were special one-off type things.
We had a couple good years there, and we're pretty happy with that.
What we said is the core-based tax rate for the Company continues to be 38% to 39% range.
At some point in the near future, we will give you a better indicator what we think that will be long-term, but for now I would keep it there.
And as we have said consistently, we think the right CapEx level for this Company is between 3% and 4% of revenues.
It's been a little higher than that, or trended towards the high-end, really as we made up a few years several years ago that were under spent.
We think we revert back to the 3% to 4%; that is the best guidance I can give you.
Nothing like we have seen this year would be my position.
We will continue on that path, as <UNK> said, in terms of ---+ we're in discussions right now.
That usually occurs after the tax season, it takes a while, so we really don't have anything to report except we will probably proceed in that manner again.
But as <UNK> said, not to the level that we did this past year.
Well, it's an interesting question, Mike.
I'd be anxious to hear <UNK>'s comment, would the balance due impact.
I can't see a reason why would impact do-it-yourself versus assisted, but maybe I'm missing the point there, because I think it's a matter of, no matter how you file, the balance due was higher this year for a variety of reasons.
In terms of the specific cost, we're not going to break out specifically what it cost.
Obviously, you can see in some of our numbers, we did increase marketing, we did increase training, we felt it was an important investment, we think it was a good investment.
But we are not going to break out anything specific
I can break the cost in three buckets for you, and <UNK> mentioned a couple of them.
The marketing cost for sure, which include merchandising, in-store merchandising, signs, and things like that.
That may be a season to season type of thing, it may not go up, it may not go down, because we continue to be very bullish about ACA.
The second bucket is really all the changes we had to make to our systems, programming changes that required a fair amount of hours, and those cost money.
Those for the most part are one-time in nature, we're not going to have that same level this coming season and beyond.
And then third is really the training, and there was, as you can imagine, a big blitz up front to get people up to speed on the law itself, the changes, but that's fairly durable now.
So most of that will go away next year.
We're not going to, as <UNK> said, quantify specifically, but these are not immaterial amounts of money that are in the non-recurring buckets.
<UNK>, do you want to give a perspective on that.
I think when we talk about complexity change, complexity is perceived.
If I have a balance due change, and ultimately I feel like because of that, I am now more complex than that's something that, I think getting back to your original question, <UNK>, that is something that I can stand, or I can understand.
But as far as how we approach the CPAs and the independents, not just on balance due, but in every aspect, we think about this as how do we create a superior experience, and that's something that we're certainly designing for as we look forward to next year and beyond.
I will say that, we mentioned it briefly, but I'll repeat it.
The 50% off promotion worked out really well from our perspective, and it was probably somewhat because of the balance due clients.
People saw that and felt that it may be a good chance to come talk to us, and so we were ---+ saw those intersection points quite clearly.
Okay, we would like to thank everyone for joining us, and this will conclude today's call.
