© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day. Ladies and gentlemen, my name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the H&R Block First Quarter Earnings Conference Call. [Operator Instructions] Thank you.
I’d now like to turn the call over to Mr. Colby Brown, Vice President of Finance and Investor Relations. Sir, you may begin.
Thank you, Ian. Good afternoon, everyone, and thank you for joining us to discuss our fiscal 2019 first quarter 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, a presentation for viewing is available via the webcast and will also be posted to the Investor Relations website after this call. Some of the features that we’ll discuss today are presented on a non-GAAP basis. We reconciled the comparable GAAP and non-GAAP figures, and the schedule is attached to our press release.
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 such, 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 the participants to 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 afternoon, everyone, and thanks for joining us. It's been about a year since I joined H&R Block, and I'm even more excited about the future of this company. The tax industry continues to grow in both the assisted and DIY channels, and we’re executing a strategy to take advantage of opportunities in each plus developing new products that digitally enable human help and care, so H&R Block is available to people in any way they choose.
Of course, all of this is backed by solid cash flow and a strong financial position, allowing us to effectively balance investing for the future, while continuing to opportunistically return capital to shareholders and create long-term value.
On today's call, I want to spend time framing the opportunities we see and provide additional context for our strategy regarding the structure and evolution of the tax industry, how we're positioning H&R Block to win, and the initiatives and investments we're making in fiscal 2019. Tony will provide details on our first quarter results, which were in line with expectations, as well as additional insight into our fiscal 2019 outlook.
Let's start by talking about the industry, and why we see opportunities in both the assisted and DIY categories. The tax prep industry has enjoyed a stable and steady growth over decades. Since 2005, the industry grew on average 1% per year with assisted growing at an annual rate of 0.3% and DIY at 2.1%, and more recently the assisted category has grown two out of the last three years.
This growth has led to an increase in overall industry revenue as well which currently stands at $21 billion. And while 56% of all filings are done with the help of a tax professional, the assisted category represents the vast majority of industry revenues at approximately 87%.
A common question I've heard over the past few months is why would consumers choose assisted when low-cost technology-enabled DIY solutions make it attractive to do taxes on your own? The answer is that we continue to see the primary driver in choosing a method to be a person’s confidence with taxes much more so than the complexity of their situation, their comfort level with technology, their age, changes to tax laws, or the cost to file.
A proof point is that millions of consumers who use the tax prepare to file the 1040-EZ. These filers typically have a single W-2, no dependents or deductions, and few if any credits. Taxes cannot get any simpler, yet they still seek assistance because they want to know their taxes are done right and someone is standing behind them should questions arise.
Secondary to confidence in making a decision about tax preparation is convenience in costs. The definition of convenience varies for many consumers. Some may find it most convenient to stop by an office to have their taxes prepared in person while others may find it most convenient to do their taxes themselves from the comfort of home.
For all these reasons, we continue to see sustainable demand for both Assisted and DIY, and we're excited about the opportunities in both. To this point, much of what I've discussed is focused on the two filing methods that have defined the industry for the past several decades. This binary choice is evolving as consumer expectations change. While the past industry is early in its evolution to virtual, it creates opportunities for us which I'll discuss more in a minute.
To wrap up on the industry, I'd like to spend just a minute on the recent update to the tax code and how they may impact consumers. Over the past several decades, there have been numerous tax code changes and historically they have not resulted in major swings in filing behavior.
While tax rates are lower, we don't expect people to notice much of a difference when it comes to preparing their taxes even though, no longer itemized deductions will gather the same documents they have in the past and will provide the same information to determine whether to take the standard deduction.
Many filers who take the standard deduction also qualify for various credits and that process is largely unchanged. Of course, it's hard to predict exactly how consumers will react in the upcoming tax season, and whether this will cause a change from recent filing trends.
That said, our assessment of these changes combined with historical consumer filing behaviors lead us to believe there will not be significant changes in the patterns we've seen in recent years. For these reasons, we continue to believe that the overall industry will grow 1% to 2% for tax season 2019 with assisted return flat-to-slightly up and DIY returns up 2% to 3%. Clearly there's opportunity in this industry and given our 14% market share in both the Assisted and DIY categories, we have significant runway for growth.
I’d now like to provide additional details on the overarching objectives guiding our work for 2019. Starting with the Assisted business, we are focused on improving the value we deliver including an investment in price, developing and delivering on a clear brand promise to differentiate H&R Block to consumers, and improving the quality and consistency of our service delivery in the tax office.
In our DIY business, we will continue to invest to improve the product and user experience. We will price at a level that is competitive and provides value to our clients. And we will continue to communicate this value, growing awareness, and compelling consumers to switch to H&R Block.
And in virtual, we will innovate it as an emerging space, leading the industry as consumer expectations evolve. We currently offer multiple products that combine digital technology with the unmatched scale and expertise of our Tax Pro network to ensure taxpayers can access H&R Block whether they want little to no help, complete in-person assistance, or anything in between.
In our DIY product, clients have access to help through live chat while preparing their return. This is something we've offered for years and it is a great way to get a question answered by an expert.
Tax Pro Review is a powerful way for our DIY clients to benefit from knowing that one of our highly trained experts has reviewed their source document as well as their entire return to identify all available credits and deductions. At the end of the process, our Tax Pro then sign and file the returns.
Tax Pro Go, our virtual assisted offering, addresses the need of consumers who want assistance but don't want or have time to visit one of our offices. Clients upload their documents through the secure MyBlock portal and work virtually with the tax pro-matched to them to have their taxes seamlessly prepared, signed and filed by H&R Block.
Through products like Tax Pro Go and Tax Pro Review, we continue to be the only company to either complete or fully review a taxpayer’s return virtually and then sign it, reflecting our commitment to stand behind the work and our clients. We’re excited about the future of virtual and this start to how we will innovate to serve more clients in more ways.
As we outlined on our June call, we are investing in three specific areas in fiscal 2019, price, technology, and operational excellence. With respect to price, the reductions we’ve discussed will be targeted to assisted consumer segments where we believe we can win. The impact of these pricing reductions is reflected in our fiscal 2019 revenue outlook as a one-time reset. We’ll share more about our plans for pricing as we get closer to the tax season.
With technology, we are making investments to modernize our platform to enable more innovation and greater agility and to reduce spend over time. There are four key areas of investment. First, we’re building a new tax engine which will consolidate multiple systems, creating efficiencies and eliminating unnecessary and redundant work.
Second, we're investing in cross-channel capabilities to enable a seamless client experience across platforms, something that will be key as we innovate in virtual.
Third, we're migrating our physical data centers to the cloud which is more appropriate for the seasonality of our operating model and will allow us to be more agile and reduce cost.
And fourth, we’re optimizing our data architecture and analytics platform to allow for faster and deeper insight in the trend in our business. These investments are key to ensuring we achieve our long term strategic objectives and will require elevated spend over the next several years.
With respect to operational excellence, we're focused on improving the quality and consistency of service delivery in our offices. This work ranges from better execution of standard operating procedures to enhancing and differentiating the new client experience.
For our overall retention rate of 73%, our new client retention is significantly lower. Taking steps to improve the experience for new clients in order to improve retention is crucial for future growth. This work is the foundation to achieve our overall objectives of growing clients, revenue, and earnings over the long term, all of which are necessary for a successful H&R Block.
These investments are critical, and we do not intend them to result in continued margin declines in future years as we expect them to be offset by the top line growth and operating efficiency. Specifically, our expectation for long term sustainable growth includes assisted client growth including increased new client retention, continued DIY market share gain, an industry-leading position in virtual, and revenue and earnings growth over time.
In summary, we're excited for the steps we're taking in 2019. We will continue to share more details as we approach the tax season and will update you on our progress.
With that, I’ll hand the call over to Tony to discuss our first quarter financial results and outlook.
Thanks Jeff. Good afternoon, everyone.
Before I get into the details of our Q1 results, as a reminder, we typically report our loss during the fiscal first quarter due to seasonality of our business. Therefore, first quarter results are not representative of our full-year performance.
Starting with revenues, we saw a year-over-year increase of $7 million or 5% to $145 million. That is primarily the result of timing of revenues related to our Peace of Mind and Tax Identity Shield products, partially offset by lower revenues and refund transfer.
Turning to our expense, total operating expenses increased $4 million or 1$ to $327 million, primarily due to increased compensation and consulting expenses, which were partially offset by lower depreciation and amortization and bad debt expense.
Also included in operating expenses repayments of $1 million related to our footprint optimization. The revenue increase show an improvement in pretax loss and continuing operations at $6 million or 3%.
Loss per share however increased $0.10 to $0.72 due to a lower effective tax rate which negatively impacts quarter with a seasonal loss. Our effective tax rate for the first quarter was in line with our outlook at 25% compared to 38% in the prior year.
Turning to 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, 10-Q and other SEC filings.
Moving on to capital allocation, on our June call, we announced we are returning to opportunistic share repurchase and would at a minimum repurchase enough shares to offset dilution from equity grants.
During the first quarter, we repurchased 4.2 million shares at a total cost of $97 million. The average purchase price is $23.27. We will continue to be opportunistic in our approach going forward.
I’d now like to provide some additional context from the fiscal 2019 outlook we discussed last quarter which reflected the investments to enable our strategic objectives. Overall, we continue to expect fiscal 2019 results to be in line with the outlook we provided in June.
As a reminder, we expect total revenues to $3.05 billion to $3.1 billion, EBITDA margin of 24% to 26% and an effective tax rate of 23% to 25%. All of the revenue outlook reduction is due to our investment in price partially offset by DIY, international and franchise buybacks and also represents approximately half of the change in EBITDA from fiscal 2018.
EBITDA was further impacted by the one-time costs related to our footprint optimization of $15 million to $20 million. The majority of this amount will be recognized in the second quarter. The remainder of the reduction in EBITDA is attributable to the technology investments mentioned by Jeff as well as inflationary increases in expenses.
While much of the focus has been around margin, the midpoint of our outlook results in earnings per share at levels comparable to fiscal 2017. Essentially we are investing a benefit of lower corporate taxes back into the business with the intent to grow revenue and earnings in fiscal 2020 and beyond.
In summary, our robust cash generation and healthy balance sheet have enabled us to make these strategic investments in our business which will position us to grow clients, revenue and earnings sustainably over time.
With that, I will now turn the call back over to Jeff.
Thanks Tony.
I hope the initial information we shared today provides more context regarding the industry where we're headed and our financial outlook. We're focused now on our plans for the year and look forward to sharing more with you as we get closer to tax season.
With that, we’ll now open the line for questions. Ian?
[Operator Instructions] Our first question comes from the line of George Tong from Goldman Sachs.
You've guided to a $170 million decline in EBITDA in 2019 year-over-year at the midpoint. A portion of that decline is attributable to one time in recurring investments. Can you discuss how spending is tracking with respect to branch closures, technology investments that you’ve touched on earlier, and other operational enhancements?
I think, overall, obviously we’re only one quarter end of the year, but so far, we’re obviously tracking. I think the results we reported in Q1 were in line with our expectations. Specific to the footprint optimization, we had about $1 million of that that hit in Q1. The majority of the $15 million to $20 million will hit in Q2 possibly a little bit lingering onto Q3. But for the full year, we’re definitely on track to meet our outlook.
And then as a follow-up, can you provide some preliminary thoughts around what long-term EBITDA margins may be relative to the old target of 27% to 30%?
Sure. So, obviously, the outlook we provided of 24% to 26% is specific to 2019. As we grow clients, grow revenue, we do expect EBITDA margin to improve. We don’t have a specific goal at this point of trying to get back to 30%. We believe that 30% was a level that didn’t show necessary investment in the business to facilitate that growth. So it's not a goal that we have in the short term, but we do expect EBITDA margin to improve as we grow revenue and clients.
And our next question is from the line of Thomas Allen from Morgan Stanley.
So in terms of your guidance and specifically on the revenue guidance of $3.05 billion to $3.1 billion, you clarified on a call that that reflects the assumption that the assisted market will grow flat to 1% in fiscal 2019. Can you talk about kind of the sensitivity to that number and kind of what gives you more confidence? Obviously, the concern is that with update to the tax code, you could see some declines there and you obviously gave some color on why you don't think that that's going to happen, but it’d be helpful to understand the sensitivity to that, and if there’s any kind of conservatism baked in? Thank you.
Yes. Just to clarify, the one point, I think our guidance for the assisted category was flat to slightly up. Overall category up 1 to 2 and DIY up about 2 to 3. So consistent, Thomas, with what we saw during this most recent tax season. I don’t know Jeff, if you want to add to the second question.
The only thing I would add is that, over the last couple of years we have seen improved performance in the assisted business, and between the combination of the adjustments we make in price, the way we're thinking about our value proposition and positioning, improving operational excellence and quality. Obviously, we need to continue to improve on the momentum we've been building in assisted, and ultimately get to growth with assisted clients, and that's how we're thinking about it over 2019 and beyond.
And then, one other -- in the press release, it was impressive that Tax Identity Shield generated $4.7 million of revenue in the quarter. That's obviously a new product for you, can you help us think about the outlook there? And also the cost of that, obviously, how should we think about the overall profitability of that business?
So, that product we launched a few years ago, we have been increasing the sales. The revenue that we recognized during the quarter was largely attributable to sales that happened during the tax season. We recognized those over a 5- to 12-month period, and we added some new product features during this most recent tax season, which allowed us to recognize it pretty evenly over the 12 months versus most of it occurring during the tax season, so that's driving the majority of the changes you see in the P&L, Thomas.
The profitability like a lot of our Tax Plus product is obviously a really good margin. We don't breakout the specific margin of that product versus the others, but obviously a really good margin and attributable to the overall business.
And our next question is from a line of Kartik Mehta from Northcoast Research.
Jeff, as you look at the business this year and with the changes happening in the tax code, will your digital marketing method need to change? You've had two consistent years of marketing methods that seems to have worked. And I was wondering with the changes happening, do you need to change that?
Thanks for the question. Obviously, we'll have a lot more to share about exactly how we're thinking about our marketing message and plans as we get into the Q2 call. But I think for now what I would say is when we did our strategic work, one of the things we realized was our marketing messages had not been helping to differentiate H&R Block.
We had largely been marketing the category messages, and over the last few months, we've been able to get much more clear on the points of our value proposition that help consumers rethink H&R Block and understand our differentiation.
A very simple example of that is when consumers understand that this is the brand that's available year around to help them that we don't close after tax season is over. As simple as that sounds, those are the kind of really specific proof points that will be part of our marketing message because we know what helps consumers to understand the ultimate value that we provide.
As we get closer to the season, we’ll have a lot more details to share about how we're thinking about positioning and how our messaging will change more broadly.
And do you anticipate any - maybe this is too early but for the tax season, the tax - is this part of the tax season being any different this year in terms of all the changes that are being put in place or would you anticipate kind of a normal start to the season?
I think at this point we're not expecting any material changes. Obviously, given the significant amount of change, the IRS is working through that detail now. We're working closely with them to make sure all of those changes are flipped into our software and our training. Assuming everything goes as planned I think we would start expecting them will start to the tax season but given how much work there is to do obviously a delay is possible.
And then just a question, you talked about buying back about 4 million shares. Is that more than the dilution that would happen. And so, have you’ve gone above that and I guess with the intention to continue returning capital to shareholders in that manner?
It's a good question. So, yes, in June, we shared the amount that we expect to buyback off at the leasing which is about 2 million shares, but the 4 million is above that. I think it does show the opportunistic repurchases we made during the quarter and that’s our plan going forward as well.
And our next question is from the line of Scott Schneeberger from Oppenheimer.
I'd like to start asking in Do-It-Yourself specifically, with the tax code changes and you guys did address your views on itemized standard, but in Do-It-Yourself specifically, I would think that this would affect the tier level a bit. I'm just curious how you think about it. You don’t have to reveal your strategy individual, but how might this impact the industry in anything else you may want to elaborate as far as how the tiers your DIY offerings will be affected then?
It’s a really good question. Obviously, with the standard deduction change as well as the other tax code change, I do think you got to almost go back to the drawing board in how you price your products. And you're obviously taking that into account in our assisted business and thinking through it in DIY as well.
But one thing that’s a little bit unique for us is the fact that we had H&R Block were zero last year, which essentially was pre-itemized deductions for the majority of the tax seasons, so that isn't as a big of a headwind for us, because it’s maybe for some providers in the space.
But I do think you're going to see quite a few changes come out of a number of competitors to take that into account. Because historically, you did cause triggers to occur when you selected different items including itemizing and you have to take that into account for this upcoming year, so not a big of a headwind for us, but something more definitely building to our plans.
My second, these four categories of spend in technology – I’m a slow writer and I did not catch the fourth. But if you could just recap them? And then there’s two specific questions I have, so I’ll ask them upfront. One, could you specify when you recap them, which you expect to be one-time in nature in fiscal 2019 and which you expect to perpetuate? And then on item number 3, which I did catch, which was switching the data centers to the cloud, are you going to AWS, are you going to a sole provider, and is there an efficiency savings you anticipate from that item 3 specifically? Thanks. That’s all for me.
So, if I cut all the - Scott, it’s Jeff. The fourth point, in our words from the prepared remarks, were optimizing our data architecture and analytics platform, essentially meaning to build more robust capabilities to assess insight and make decisions in the business faster. So that’s the fourth.
All four of these are things that we believe we have to invest in over the next several years, not one time in 2019. Coming out of that spend, obviously, we think we get business benefits and also run rate benefits. But each of the four have work happening over the next several years. And I’m forgetting what the…
The other question was about on the cloud side specifically. So we are moving on Microsoft Azure product. And that will provide savings once we complete that migration which will take a few years to get into place. The total of all of these spend which is a multiyear roadmap, we do expect to be able to deliver lower IT spend over that period. So, once we get to the end of the road map, three to four years out, we do expect overall technology is going to be lower than it was in FY 2018 for example.
And our next question is from the line of Hamzah Mazari from the Macquarie.
This is Mario Cortellacci filling in for Hamzah. You've not given me much left to ask, but maybe you could walk us through how you see the competitive environment in the DIY side change with technology? Where your investments - I think you already covered that made on the tax side but are you completely indifferent to how - to the mix shifting more towards DIY versus Assisted? And maybe you can just kind of give us some color on that?
This is Jeff. I’ll kick it off and Tony can join in with me. But I think first of all, in the DIY space one of the observations that I had in coming here and the team was already on this path is that we've been improving and focusing on the user experience, in simplifying how easy it is to import and switch to H&R Block over the last couple of years.
And the great evidence for me was our third-party reviews continue to get better and better of people understanding that we're building a very competitive product in the marketplace. And we believe we have to keep doing that. We also know we have a very competitive price and that value proposition is working because we're growing share. We understand we have about 65% awareness that we're even in the DIY space.
And so we'll continue to aggressively market really like a challenger brand but we are in the DIY business and we believe that we have a right to be very competitive there and you’ll see us do that. But take one step back, what we're really starting to build is an ecosystem of help. And so, for those consumers that want complete help, they don't have confidence. We think our office should be the best solution for them; obviously, DIY on the other end.
But then the three current products in the middle of that continuum from live chat, to Tax Pro Review, that Tax Pro Go really represent our belief that we have to let our expertise available on the terms what our clients want. And while it's early in that virtual space we were still getting great feedback from consumers who were using the products.
And we're seeing new consumers come to H&R Block in our virtual products that weren't previously choosing another method. And so, that's why we're so excited about the entire ecosystem of being able to deliver for client.
And then, specific to your mix shift. I mean, obviously and we were focused on overall charge in the margin and we're able to deliver across segments. Assisted is obviously higher than DIY but we have a lot of DIY clients that actually have a higher charge and higher margin than some assisted clients.
But at the end of the day, we're focused on building the best experience that we can for any client and letting them choose the method that works best for them, and that's really how we're thinking about going forward.
And I know you guys are keeping your pricing strategy close to the vest for competitive purposes, but maybe you can walk us through how discussions are going so far? We know you're going to be lowering prices in assisted and maybe you can kind of give us an idea of what the DIY pricing could be? Or what that looks like versus competitors this year?
I mean, in assisted, we've obviously made a lot of progress this summer, more details to come. We’re definitely going to be lowering price for targeted consumer on that side of the business. In DIY, obviously, we have to wait and see what some of the competitors will be doing. But, as Jeff said in his opening comments, our goal is to be competitively priced in that product. Making sure that we're building a great product, growing awareness, but we definitely want price to be a key attribute that helps clients use H&R Block.
And our next question is from the line of Jeff Silber from BMO Capital.
Just following up with the question - earlier question about some of the investment in the business. I think the question with the impact longer term, I'm just curious, are any of the investments you're making that’s going to be helping you out in the current tax season?
Well, there is - yes, is the simple answer. We didn't highlight the natural investments we would make year-over-year in improving quality of delivery, in terms of the product improvements we're making in DIY. And those are things that we believe have the potential to impact the business this year.
The big investment in price, we believe is really - probably the most important revenue this year. And obviously, the way we’ll communicate that, exactly how we change price. We feel, we’ll be sharing later, but I think several things for this year and with price being at the top of the list.
And then, I know you had mentioned in terms of the timing of some of the cost, the onetime cost on the footprint. Where there any onetime cost that you incurred in the first quarter besides the small one you had mentioned earlier about the footprint?
Nothing that’s material that we would call out. Obviously, always a small asset write-offs or something else but nothing that’s material that would impact the overall results. I mean the fact that overall expenses only grew 1%. Obviously, we’re pleased with how the quarter came out.
And again nothing else from a seasonal expectation out of the ordinary expect the $15 million to $20 million that you called out?
As far as the rest of the season, no.
And our next question comes from the line of Michael Millman from Millman Research.
I think I missed - did you say you expect EPS to be flat this year flat with last - with 2017? And cover a lot of things, could you comment on what you're doing with EZ? Is that still a free product? And then sort of longer term question, is all the work that you're doing so that people can do their taxes sitting at home going to leave some of those people say, Geez, if I could sit at home and ask question and I sit at home and just do it yourself, myself instead of spending $150, spend $50?
So, your first question I'll let Jeff definitely chime in on this was the earnings per share question. What we were alluding to Michael is, if you look at essentially the EPS consensus number and you take the midpoint of our outlook as well as our EBITDA margin and tax effect, it approximates FY 2017 EPS.
So, we're not providing the guidance we’re just doing a reference point to say that it's in the zone of FY 2017 which is trying to highlight the point that we're essentially taking the corporate tax benefit that we received on a run rate basis and investing it back into the business and just trying to highlight that it's a broader story than just EBITDA margin because you have to go all the way to the bottom of the P&L.
Specific to EZ, obviously with the single 1040 that the IRS announced and has been working on changes, changes that a little bit. We'll share additional details on our second quarter calls for specific promotions and how we're thinking about it for the upcoming season.
But we definitely know that we need - promotions will be a key part of our portfolio and how we drive traffic. But obviously the 1040-EZ Form is being eliminated, so, some more changes to come there.
And then - sorry, Jeff's going to take. And then the third one, we hear question more about our tax preparers working from home or individual clients.
My question is, are you training individuals to be able to do it more and more do it themselves because they don't have to come to the office. There's - I guess some of the questions answered this year so, next year they have less questions and on and on.
Michael, it’s Jeff. So I’ll start off. I mean, obviously, what we're talking about is just how consumer behavior shifts over time. And consumers' has had options to do taxes themselves at home for years already.
As it relates to method type, we believe we have to have competitive products however the consumer wants to be served which I why we'll invest in DIY. But we're also investing, insuring or capturing our fair share of growth in the Assisted business.
And when you just think about the debate that happens about simplicity or complexity, one of the things that we know over recent history is that the vast majority of taxpayers already take the standard deduction. And the vast majority of those taxpayers use assisted to get help.
So when you take everything into account, the history of method shift over time, tax changes over time, we see consumer from consumer research that our own research and third party research, we know consumers are confused about taxes going into the year.
So our belief is that in the near term, we don't see big shifts in method type. And over the longer term, we think we have to be positioned to serve clients however they want to be served. And that's why we're focused on this continuum of help from DIY to Assisted and products in between.
And our next question comes from the line of Chris Howe from Barrington Research.
Most of my questions have been taken, sitting in for Alex Paris. And I just had a question around just last tax season. Maybe some of the takeaways or learning that you had this would be kind of outside of the box, as far as the mobile and desktop offerings. Were there any findings, surprises, lost opportunities that perhaps could be filled through improved functionality at this upcoming tax season?
This is Jeff. I’ll start off obviously with my first tax season here and so just to see things through some fresh eyes maybe I mean, on the positive side, again, seeing our performance in the DIY space and realizing this was a good product and a good value proposition and actively marketed, we could grow share, we need to do more of that. On the other side, I think one of our biggest opportunities is in new client retention.
It’s clearly an area where our overall retention has moved several hundred basis points over the last few years, so we know we can improve it. But in client retention is just a lot lower and so we're focusing on plans this year to how to really attack those new clients to come to us for the first time. We know that we can get it back at second and third year they become much stickier and so that's an example of something that I just thought this year that I know we have to be able to improve.
You answered two of my questions with that response. Thank you for that. And you probably already highlighted this but I just wanted to make sure. as far as your marketing mix and I'm guessing that will be sharing more when you provide further guidance into the future. But how would you assess your mix for digital versus television and how can you - what are some plans that are maybe in place moving forward to optimize and leverage your marketing spend?
So as it relates to the mix, I shared when I first arrived that I saw more opportunity for us to get kind of far more granular in terms of how we thought about acquisition of clients, engagement of clients, retention of clients what I would broadly put in the category of performance marketing and CRM. Television still plays a role for the business. It will continue to play a role for the business.
But when you think about channel performance and cost per acquisition and just getting more and more focused on some of those metrics, we've brought in a new CMO who’s been working hard getting ready for the season to ensure we have those kind of capabilities.
So, again a lot more as we get into the Q2 call on positioning and overall messaging, but I think what we're really focused now is on how we get out a very customer first level in terms of acquisition and performance marketing.
And at this time, we have no further questions. I'll now turn it back to the presenters.
Thanks everyone for joining us. This concludes today's call.
Ladies and gentlemen, this does conclude H&R Block's first quarter earnings conference call. Thank you for your participation. You may now disconnect.