H&R Block (HRB, Financial) ended the 2024 tax season on a high note, delivering a strong Q4 earnings report. The company announced a new $1.5 billion share repurchase authorization and a 17% increase in its quarterly dividend. Known for its assisted tax preparation services, HRB gained market share in the DIY segment for the second consecutive year and saw growth in its non-tax-related businesses.
Assisted Tax Preparation: Revenue increased by 2.5% to $652.4 million. HRB's brand is resonating with higher-value clients, enabling growth in net average charge (NAC). The small business segment also showed strength with mid-single-digit revenue growth.
DIY Tax Prep: Revenue edged higher by 1.4% to $134.3 million. Although Intuit (INTU, Financial) reported a stronger 9% revenue growth in its Consumer segment last quarter, it expects a 1% decline in total TurboTax units for FY24. HRB appears to be capturing some of those lost customers.
Expansion into Adjacent Areas: HRB has been diversifying into mobile banking and small business services, such as bookkeeping, payroll, and advisory. In June 2022, it launched Spruce, a mobile banking app with a debit card and connected savings account. Spruce has accumulated 476,000 sign-ups and is nearing $1 billion in customer deposits, with nearly half from non-tax sources this year.
Financial Services Segment: Revenue grew by 14% to $18.8 million, driven by interest and fee income.
Wave Segment: HRB's small business services segment posted a 9% revenue growth to $25.8 million, boosted by the launch of a new paid subscription product called Pro-Tier. Losses for Wave continue to shrink, and positive trends are expected to continue in FY25.
FY25 Outlook: HRB provided a muted outlook for the tax prep industry, forecasting about 1% growth, in line with historical trends. The company did not forecast additional market share gains but expects to benefit from pricing actions and continued revenue growth in the Wave and Small Business segments.
The main takeaway is that HRB ended the 2024 tax season positively, and its shareholder-friendly capital allocation strategy is resonating well with investors.
