HR Block 2012 Annual Report Download - page 5

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3
After completing my first tax season, I continue to believe that we’re on pace with the long-term strategy we shared
at our investor conference last December. I also believe that we have many accomplishments to be proud of. We have
the best tax professionals in the industry and our assisted business continues to be very resilient. In digital, we have
a lot of momentum as we’ve now outpaced our two largest competitors for the second consecutive year. In both
assisted and digital, our clients are being served better, as evidenced by the significant improvement in our client
satisfaction and net promoter scores.
We’ve also made great strides on the innovation front with new products such as BlockLive and our mobile applications,
where the user experience is working beyond our expectations. This further solidifies us as the only tax preparation
company capable of serving clients Anyway Anywhere Anyhow they choose. And finally, we’ve resolved outstanding
litigation and shed non-core assets such as RSM McGladrey and ExpressTax, which should lead to better margins.
Today, we’re squarely focused on what we do best—tax preparation.
Going forward, we realize we must generate a better balance of client and earnings growth. We’ve already taken
several actions towards that goal:
■ After a thorough review, we rationalized our cost structure and identified ways to operate more efficiently.
This was an important step in becoming a nimbler, more profitable, and more client-centric company. We
expect these actions will add $85 to $100 million of pretax earnings to our bottom line in fiscal 2013.
■ Next, we believe RALs will largely lose their importance in the marketplace next tax season. This should
create a more level playing field and give us a competitive advantage, as we believe we have the best RAC
offering in the market. In light of the improving competitive landscape, we do not expect to continue the
free RAC promotion next year, but we have not yet made a decision on the appropriate pricing of RACs.
■ Third, International is our fastest growing business, with a five-year compound annual growth rate of
12 percent in revenue. Our brand continues to resonate well abroad and I’m excited that we are launching
several offices in India, our fourth international market. India’s current market of 30 to 35 million taxpayers
is growing rapidly as the Indian government updates its tax code so that it applies to more of its 1.2 billion
citizens. We plan to make prudent investments internationally focused on profitable and sustainable growth.
■ Fourth, we’re evaluating opportunities to significantly grow our financial services businesses by expanding
on the success of H&R Block Bank’s Emerald suite of products.
■ And finally, we’re now undergoing a comprehensive review of our value proposition and pricing across all
client segments. The goal is to ensure we continue serving our clients in the most effective manner, while
realizing a better balance of client and earnings growth.
Clearly, we’ve made some difficult decisions over the past year, but we believe they’re the right decisions to position
us for long-term earnings growth, margin expansion, and improved shareholder returns. We’re excited about the
opportunities we have in front of us to continue driving innovation and further improve our execution and client
service. The Board and I are also very pleased that our senior management team is now complete. We are confident
this is the right team to deliver better value for our clients, shareholders, employees and franchisees.
And finally, I’d like to thank you for your investment in H&R Block. Delivering value to our shareholders remains a top
management priority. Since I became CEO in May 2011, we’ve returned $778 million to shareholders through share
repurchases and dividends. Over that span, we repurchased and retired 12 percent of shares that were outstanding
at the end of fiscal 2011 and we increased the annual dividend by 33 percent to 80 cents per share. Altogether,
I believe our actions demonstrate that we have a lot of confidence in our business and that our philosophy on capital
allocation is shareholder friendly.
I value the support and confidence you’ve shown during an important time in H&R Block’s history. I look forward to
sharing our success with you in the years ahead.
Sincerely yours,
William C. Cobb
President & CEO, H&R Block, Inc.
Anyway Anywhere Anyhow