Good afternoon. My name is Mike and I will be your conference operator today. At this time, I would like to welcome everyone to the H&R Block Second Quarter Earnings Call. [Operator Instructions] I will now turn the call over to Colby Brown, Vice President of Finance and Investor Relations. You may begin your conference.

Thank you, Mike. Good afternoon, everyone and thank you for joining us. On the call today are Bill Cobb, our President and CEO and Tony Bowen, our CFO. Today, we will discuss our fiscal 2017 second quarter results, our thoughts around the upcoming tax season as well as our financial outlook. During our prepared remarks, we will be presenting slides via the webcast, which will also be available on our Investor Relations website following the call. We have also posted today’s press release on the Investor Relations website at hrblock.com. Some of the figures that we will discuss today are presented on a non-GAAP basis. We reconciled the comparable GAAP and non-GAAP figures in the schedules attached to our press release. Before we begin our prepared remarks, I will 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 2016 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 in the queue. With that, I will now turn the call over to Bill.

Thank you, Colby. Good afternoon, everyone and thanks for joining us. I am extremely excited for the upcoming tax season and as we shared some of our plans today, I will hope you will be as well. I am proud of my leadership team and the dedication and tenacity they have shown coming off a challenging season. We have been hard at work developing and implementing a comprehensive and aggressive plan designed to deliver stronger results in tax season ‘17. That same spirit and dedication is echoed in the thousands of hardworking associates throughout H&R Block. I am now entering my sixth tax season and the level of enthusiasm displayed for the upcoming season is the best I have seen. I recently attended our company and franchise conventions and was motivated by the energy level of the attendees. We are all ready to deliver. Before diving into why we are energized for the upcoming season, I’d like to outline what we intend to cover during today’s call. First, we will have a short discussion about our second quarter results. Then I will provide some thoughts around how we will define success in both the short and long term. Next, I will share some key elements of our plans for the upcoming tax season. Tony will then review our second quarter financial results and our financial outlook for fiscal year ‘17. And finally, I will close out with thoughts on why we believe H&R Block is such a compelling investment. With that, let’s talk about our second quarter results. Overall, we are on track with our financial plans and Q2 results were in line with our expectations. We are pleased to report an increase in revenue and an improvement in both operating expenses and our pre-tax loss. Now that we have…

Thanks Bill. Let me start by taking a few minutes to review the results of the second quarter. As a reminder, due to the seasonality of our business, the results in the second quarter are not indicative of our performance for the full year. Additionally, this will be the last time in which year-over-year comparisons for the quarter are impacted by the divestiture of H&R Block Bank and the capital structure changes, which occurred last year. In the quarter, revenues increased approximately 2% to $131 million, primarily driven by foreign exchange in our international operations as well as improved product revenue in the U.S. Total operating expenses decreased from the prior year by $23 million or 6% due primarily to one-time costs of $21 million incurred in the prior year related to the divestiture of H&R Block Bank and our capital structure changes. Even excluding this impact, operating expenses declined due to our cost reduction efforts, which were mainly realized through lower compensation and benefits. Partially offsetting these reductions were occupancy and amortization expenses related to franchise and independent acquisitions in the prior year. The favorability in revenues and operating expenses were partially offset by increased interest expense as a result of the long-term debt issued in the second quarter of fiscal 2016 and prior year gain on sale of securities. Netting all of the changes, pretax loss improved 4% or $9 million. Our income tax benefit was lower in the quarter primarily due to a lower base tax rate. As a reminder, a reduction on our tax rate will be beneficial for the full fiscal year, but reduces the benefit in quarters in which we record a loss. I will provide additional thoughts on our income tax rate when discussing our outlook for the fiscal year. Finally, loss per…

Thanks, Tony. I thought it was important to share all that detail regarding our plans and outlook, so thanks again, Tony. Before I conclude, I want to address the personnel change that we just announced in an 8-K filed this afternoon. Greg Macfarlane, our Senior Vice President of U.S. Retail Operations and Products, has decided to leave the company at the end of this month. Earlier this year, he transitioned to an operating role and performed as his usual high level, as evidenced by his many contributions to our tax season readiness. He will be missed. But we have a strong bench of leaders who are ready to seamlessly take over Greg’s responsibilities and execute our plans in season. Personally, I want to thank Greg for his leadership over the past 4.5 years in both his current role and previously as our CFO. I am grateful for his many contributions and his friendship. We wish Greg all the best as he pursues the next phase of his career. Now, I would like to wrap up by spending a few minutes discussing why we believe H&R Block is a strong long-term investment. H&R Block offers investors an opportunity for growth, value and stability. We participate in an industry that offers predictable and consistent growth. Tax filings in the U.S. have historically grown at 1% to 2% and we expect that to continue. Our Tax Plus products contributed over $400 million of revenue in fiscal year ‘16 and are a differentiator in the marketplace. While the addition of the Refund Advance product does not generate standalone revenue, it is expected to positively impact client volumes and increase the usage of other key products, such as our Emerald Prepaid MasterCard. Opportunity for growth in the DIY tax preparation category continue, we are the…

[Operator Instructions] The first question is from Gil Luria from Wedbush Securities.

Good afternoon. So I see you are giving us EBITDA margin guidance, in terms of revenue guidance though, if you are talking about not quite stemming the loss of volumes and having prices flat to down, is there going to be enough offset in digital, international and financial products to create any type of growth in revenue or should we expect overall revenue to decline in this fiscal year?

Thanks Gil. Yes. We are not going to provide specific guidance for the overall revenue number, obviously. I think ultimately, it will depend on the mix of clients what the final growth is in both our assisted and DIY business. To your point, we do have some upside potential from product revenue. Obviously, the franchise buybacks that we have been doing will also provide a benefit, but we are not going to put a specific revenue target for the upcoming season.

So then as a follow-up, in terms of the cost of the Refund Advance, $32 to $36 a loan, it sounds like order of magnitude, if you lend out the entire $1.65 billion, that’s about $50 million of costs, did you say that’s going to be contra revenue, where are we going to see that $50 million come out?

It will be in cost of revenue.

In cost of revenue?

Expense.

Yes, okay. Thank you very much.

Thanks Gil.

The next question is from George Tong from Piper Jaffray. George Tong, your line is open. The next question comes from Kartik Mehta from Northcoast Research.

Hey Bill. Hey Tony. Tony, I wanted to ask you a little bit about the EBITDA margin guidance, just to understand better, did you say it was going to be flat compared to last year or did you say at lower end of your 27% to 30% guidance, so more closer to 27%?

Yes. So the range Kartik is 27% to 30%. We think it’s going to be at the lower end of the range for this upcoming season, which – the statement I made was comparable to last year, which we ended at 27.6% on adjusted basis. We didn’t provide the exact number, but it’s in the 27% range.

Okay. And then I guess – I know in the past, you have not talked about cost cutting, but I look at what you are doing to drive clients the free RAL, the free 1040EZ, the free DIY and you are anticipating probably flat to slightly decline in pricing and so I am wondering, can you provide a little bit more detail about the cost cuts you are making so that will allow you to kind of stay in that 27% EBITDA margin range?

Yes. And Tony if you want to add anything at the end here, so part of what we have not specified exactly where the cuts are, but you can see from our numbers in the release, etcetera, our comp – compensation and benefits expense is down. As I said in my remarks, marketing expense will be down. There are also field expenses that will be down. So overall, when we did the cost reduction efforts last March and April that we announced in June, they were comprehensive. They were across the board and they were in anticipation of knowing that we are going to have to get very aggressive with some of our offers. So those are some of the specific areas that we are reducing, but at this point, we are not ready to talk about the exact number. I will add – and hen Tony, if you want to add anything. As you know, given that 76% of our business, our revenue is down in the fourth quarter, the large majority of the expense reduction will occur at that time, which is when we do our business.

Yes. I think to Bill’s point, we aren’t providing the specifics on the cost reductions. It’s obviously netted in our EBITDA margin outlook, but it really allowed us to be aggressive this year with adding the Refund Advance, bringing back 1040EZ, being aggressive in DIY, but we aren’t breaking out that each individual line of the cost lines – cost items.

Great. And just one last question Bill, Free 1040EZ, you have tried it in the past, then you decided not to do it again, for a while, you are bringing it back, I just wanted to kind of walk through what’s different this time, why bring it back, what did you learn and how will you do it differently?

It’s little hard to do it differently. It’s free. I think what changed Kartik was the industry. Obviously, Turbo got very aggressive with simple returns. We had many more offerings in the DIY space and in the assisted space, again simple returns. So I think to look back and try to project forward, it was a different time and a different place. There wasn’t the proliferation of free offerings. Now there is so for us to compete. And I think part of what we are trying to indicate in our – in how we are going forward is we are trying to compete across all filers, across all taxpayers throughout the entire season. So that is the difference, but we are – it was successful for us in terms of driving a number of clients and we think it will be successful again. Again, we do have in the offices, other ways to monetize that client. We actually have more ways than we had back then, such as the addition of the Tax Identity Shield, but we are – that is part of the reason we brought it back, but effectively, it was competitive conditions.

Thank you very much.

Thanks Kartik.

The next question is from Scott Schneeberger from Oppenheimer. Scott Schneeberger, your line is open.

Sorry. Hi, good afternoon, can you hear me?

I know this is going to be the first time in history Scott that you are quiet.

The mute button. I guess first question for you guys, a few moving parts, a lot of moving parts. It does look like it will be a challenge on the low end of the EBITDA margin guidance. So, I am curious just – if you would be so kind as to kind of rank order your priority of delivery, a 27% handle on EBITDA margin, arresting client growth or of relative pricing, although that’s probably fixed going into the season. How do you rank order those, Bill, as far as what you would like to deliver to the extent you can control? Thanks.

Yes. Scott – and Tony, if you have a different approach, I don’t view it as a rank order, we have crafted this plan, a lot of modeling, a lot of iterations, but this is designed to come together to yield a margin, as we said a couple of minutes ago, in line with where we wound up last year, but with a significant change in the client loss on the assisted side and client growth on DIY. Now, any change of this magnitude as aggressive as we are going, volume and mix will be indicators of this and we will adjust as we see forward, but we want to deliver across the board on what we have talked about here. So, I am not sure – and Tony, I don’t know if you have anything to add. I am not sure I would characterize it as rank order as opposed to this is a thorough and complete piece of plan.

The only thing I would add, Bill, is I think it’s a balance. I think it’s a balance across the financial health as well as changing the trajectory of the clients and we have talked about that from the beginning. I think that plan does exactly that. So, we haven’t really thought about them as trade-offs, but more of a balance of price, investment and promotions, cost reductions and ultimately maintaining a good EBITDA margin. So, it’s really a balance across all aspects.

And Scott – and again, these are – this is a qualitative factor. I made some comments in there. We are playing to win. When I was at the convention this year, we have a charged-up franchise and company teams. The sales and service move has been a big move for us with our company operations. So, I would like the fact that as we go forward with this plan that we just talked about, it’s being done in a way that we are going to swing the bat this year.

Okay, great. I am curious on the Refund Advance loans, it’s going to be tricky to maintain. Obviously, the client is not responsible for the bank fees, the tax preparer is. So you have new and existing clients that are going to take these. This is essentially a tool for a client acquisition. How are you managing that in delivery? Are you able to manage that in delivery? Thanks.

Yes. Ultimately, the approvals, application and approval process will be ran by MetaBank. We have got estimates from them on what we think that’s going to be. And to your point, this is a client acquisition vehicle for us. We are trying to drive new clients into the door. We do think that we are going to get some uplift in retention from prior clients as well, but the ultimate success of the program will be how many incremental clients we bring in during the offer period.

And when you have a client decline like we had last year, Tony is absolutely right, new clients are going to be the key. We want to make sure prior clients came in, too. So, we do not limit this. We want this to be a thorough offering. We want to create traffic in our offices, excitement in our offices. Tony and team did a terrific job working with our partners on upsizing the capacity. So, we are ready to go forward on January 9.

Thanks. And one more follow-up along the Refund Advance theme, the – you mentioned franchise buy-in. Do you have 100% franchise buy-in or participation in the Refund Advance? And I believe I heard they will be contributing in something less than that $32 to $36 per – Tony, could you just confirm that maybe elaborate to a little bit more? And then part of this question is also – it sounds like you have lower marketing expense last year. You had the sweepstakes that, I believe cost about $35 million. So, all of these initiatives we speak of are going to be less than that in the whole caboodle. If you could just – whatever you can share there, Tony? Thanks.

So, let me try to make sure I captured all that. So first of all, we are not going to disclose the specific around the franchisees. Let me say that the take-up of participation on this is extraordinarily high. I am not sure it’s at a record, but it is extraordinarily high in terms of franchise participation and obviously, it’s 100% on the company side. In terms of the cost to the franchisees, we are not going to give the exact number. I think Tony said it in his script, we gave you the – what the cost of each loan will be. The franchisees will pay a fee per loan. They will not participate in other costs. And they have been receptive to that, so that they can really have cost clarity around that, but I am not going to give you the exact number. With regard to marketing expense last year, our marketing expense was – in the K was $298 million. What we are saying is based on the reallocation we have done, the elimination of certain programs, etcetera, we will have a lower number on that line when we are finished with the tax season. However, I do think as I said we are taking a different approach to marketing, it’s going to have a new look, a new tone, a new value proposition and impact matters along – and I think we will have impact. I don’t think people will miss our offers as we go forward.

Yes. The only thing I would – and I am not sure exactly where you are going with your question, Scott, but the Refund Advance cost that we are paying are not part of marketing when we are setting that up. So, I wasn’t sure if you were tying that back to Refund Advance, but it’s really outside of marketing. But marketing, excluding Refund Advance, will be down this year.

It’s all in OpEx though, right, Tony?

Correct.

Okay, thanks. I will pass it on. Thanks, guys.

Thanks, Scott.

The next question is from Thomas Allen from Morgan Stanley.

Good evening. So, the biggest surprise for me for the quarter was the buybacks. So, can you just talk a little bit more about it? A) What’s your leverage today? B) You are going to realize the gains from those mortgages next quarter. Did you kind of pre-fund that? And then c – or did you do buyback ahead of that? And C), are you going to be buying back during tax season this year?

Yes. So, I think it’s just generally about buybacks and how we are thinking about it. So we have now done about – little less than $220 million for the first two quarters. As we have talked about, we are going to opportunistically buy when the price makes sense. You said – I think you said you were a little bit surprised. I think it’s in line with our expected capital plan over the next several years. Obviously, we are not going to talk about what we are going to do for the remainder of the year, but we will opportunistically purchase as we have said. And I think that covers most of it.

Well, I think Scott – Thomas also asked, will you be buying in tax season? Last year, we did. And again, I am not going to commit to whether we are or we aren’t, but we showed last year that we have the capability to do that. Whether we will, our stated approach has been not to disclose ahead of time whether we decide to take advantage of a price at a particular point in time, but last year we did prove that we are able to do that.

And just high level, I mean, can you just remind us of what your policy is on buybacks now? I think you guys did back away from the bigger target that you set a few years ago, right, last year? So, what’s it now, the strategy?

It’s a pretty big target.

We still have the $3.5 billion authorization remaining, that’s through June 2019. So that hasn’t changed.

Yes. There has been no backing off on that, Thomas.

Okay, perfect. And then just on the franchise and independent acquisitions, any expectation on how many returns that should add to the system in 2017? And then how many did it add in 2016? Thanks.

Yes. So, the – I think you asked about the franchise buybacks and acquisitions?

Yes, exactly, franchise and independents, exactly.

So, for the franchise buybacks, obviously we don’t add any incremental. We are just moving from franchise operations to company. So, it’s a little bit of left pocket to right pocket. We are going to do about 145 offices this year. On the competitor acquisitions, I mean, those locations typically do 1,000 returns an office. So, we would expect somewhere in the range of 6,000 to 8,000 and that’s fairly consistent over the last few years, Thomas.

Perfect. And then final question for me, with Greg leaving and Greg, you will be missed, who is going to be taking up his responsibilities? Thanks.

Yes. So, what I have done is I have moved different part – I am not replacing Greg per se. I am moving different parts of his team to different leaders. So, we are not going to talk about specifically that, but essentially, it reports in – my direct reports have absorbed some of that. So, we have kind of divvied it up. Greg had a very specific role that was really played to his strength. So what I have done is I have taken operations, areas move it to more operations people and product to marketing and things like that.

Helpful. Thank you.

Thanks, Thomas.

The next question is from Jeff Silber from BMO Capital Markets.

Thanks so much. I want to go back to the refund anticipation and I am going to ask a stupid question. Is that only available for customers that file returns through you? And is it also available for both assisted and DIY?

It’s not a stupid question and neither one. Yes, you have to file because the underwriting occurs after the return has been filed. Now, we are going to open up the ability to have a Refund Advance before e-file opens, but you still have to file the return and it is only available in retail offices or assisted offices. I don’t know if there is any more detail you want to give on the...

No, I think you covered.

And when you have products like this in the past, I am just curious if you have studied the stickiness of these customers, these new customers when you get in. Are – what are retentions on this group going forward?

Yes. I mean, obviously, this specific product is new to us. We have had refund anticipation loans in the old days, but those were a very different product and frankly, that was 6 plus years ago. We would expect retention to be in line with other new customers, so people are brought in by the offer. We wouldn’t expect retention to be materially different than other programs we run – that we ran in the past.

I think Jeff, the other piece that we will be learning this season is with the PATH Act, this puts a spin on this where people are delayed – well, there has been a lot of talk of refunds being delayed until February 15, the reality is that the funding to a particular taxpayer’s account or card or whatever really will occur to more like late February. So, this is a number of weeks that people will be waiting for cash at a time of the year when people are really looking for cash. We think that’s an advantage for this product. The other piece is this product is a – there is no interest there. And so no matter how long the refund is out, they have that access to that cash and are not going to be charged any interest there. So, from a consumer perspective, from a taxpayer perspective, it is about as client-friendly a loan as you are ever going to find.

Okay. If I could just sneak in one more, I know you are not giving specifics on the cost cut. But I am just wondering if you reviewed your office footprint, is that part of the cost cuts that we are going to see this year or is that something we may see going forward? Thanks.

Yes, Jeff. We have done normal kind of trimming around the office footprint, but we think overall our number of locations will be fairly consistent year-over-year. So, there won’t be – we obviously look at the profitability of all of our offices every year and always opened a few in new and expanding areas and we always closed a few that are underperforming, but it’s fairly modest in the grand scheme of things.

Yes. On balance, that was not a big part of the cost reductions.

Okay. I appreciate the color. Thanks so much.

Thanks, Jeff.

The next question is from George Tong from Piper Jaffray.

Hi, thanks for taking my questions. Can you discuss your overall pricing strategy in the assisted category for 1040As and 1040 forms, whether the intention is to decelerate pricing growth or whether the plan is to reduce prices?

Yes. I think for this tax season, we talked about – we are obviously going to have the 1040EZ offer. The rest of the forms will see modest price increases. We are going to slow our price increases going forward. We just think it’s important. I mean, given the client loss we have had the last few years, we are going to be much more slow to increase those prices in the coming years.

Got it. And back to EBITDA margins, since most of the cost reductions will come in probably late fiscal 4Q and some of the early season promotions will start in fiscal 3Q, how do you plan the balance the puts and takes between the cost to fund the promotions and the savings associated with restructuring?

Let me say one thing about this and then I will let Tony answer the specific about funding. We still do not know what the file date is. So, with our particular business, trying to manage the quarter is not an effective straight. It really does come down to the full season. So, we can’t recognize revenue until e-file opens. So, we don’t know that. So, if part of your question is around quarterly performance. That’s always hard to judge in our particular industry. Now, as far as funding, Tony, do you want to take that?

Well, I was trying to say essentially the same thing. I mean, we are really focused on, George, for the full fiscal year. I mean, I am not concerned about quarter-to-quarter results as much. And whether it’s – what occurs in the third quarter, to your point, we are going to be going out aggressive with promotions. Some of the cost savings are going to hit in Q4. We are really focused on how it impacts the full fiscal year.

But the CLOC, if that was part of your – will be the main funding mechanism.

Yes, we have plenty of funding liquidity to fund any e-file open date, so.

Right. I guess the question was around is there risk that the aggressive promotions will cost more than the cost that you eventually see down the line, the cost savings?

Yes. I mean, I think the biggest risk to our plan always is the client volume that’s coming into our assisted and DIY businesses and that’s no different this year.

Got it. Thank you.

Thanks, George.

The next question is from Hamzah Mazari from Macquarie.

Hi, this is Kayvon Rahbar filling in for Hamzah. Question for you guys surrounding leverage, how much more do you guys think you might have to be able to take on and still be investment grade? And would any of the potential future tax change implications have an affect on your appetite for leverage or decreasing it, what’s your thoughts around all that?

Yes. As far as leverage, we think we are at an appropriate level now. We shared this back in June. We have no plans to issue debt in the short-term. Obviously, as EBITDA profitability change in long-term, we’ll continue to evaluate, but we think the range that we are in now, which is 2.5x to 3x, is appropriate. We have no plans to do anything different. And I didn’t – I couldn’t quite hear you on the second part of your question.

Well, is any of the speculation around the tax changes that might be out 2, 3 years from now, would that impact any of that, any of the leverage?

I think it would if they took effect. But again, that’s more waiting until it actually happens.

Yes. I think – Tony has been clear that we are not seeking, at this point in time, any changes in our debt level. Now with regard to whatever policy changes emanate from Washington or state governments whatever, we will have to wait and see how that plays out.

Okay. Thank you.

Thank you.

The next question is from Anj Singh from Credit Suisse.

Hi guys. Thanks for taking my question. I just wanted to follow-up on that pricing question, I guess how should we be thinking about pricing, net pricing for the longer term and I guess related to that, should we expect the free 1040EZ promotion on this [Technical Difficulty] to be perennial offering?

Yes. Anj, I think you – two parts to your question. One, how are we think about pricing over the long-term, I am assuming in the DIY business and then the second part was are we assuming that 1040EZ is essentially – free EZ is here to stay, I think is your two questions, is that right?

More net pricing on the assisted side, I think this year you guys are talking about flat to slightly down, but how should we be thinking about that net pricing over the longer term?

Yes. I would say this year is a little bit of a reset, because by re-launching the free EZ, I mean, it’s the reason that we are flat to slightly down. The rest of our forms are taking a modest price increase. So I think going forward, we would expect essentially a modest level, which would probably be in the positive territory, because the main reason that it’s flat to down this year is simply because of the 1040EZ free promotion, but much more modest going forward.

Understood. And as it relates to the ACA and the percent of your filers that are impacted by the ACA, do you guys have any preliminary expectation for tax season ‘17?

I think our expectation at this point Anj is it will be consistent with last year. I think that’s our best estimate at this point.

Understood. And one final one for me, on DIY, do you guys have any thoughts on a new competitor that seems to be popping up and offering a free promotion, we have seen news about Credit Karma perhaps getting into the game also on the DIY side, any thoughts on how that might change the dynamics for you and the broader DIY category would be helpful? Thanks.

Yes. And there was a press release put out today. I obviously haven’t spent a lot of time on it. This is a very different approach, because as I read the account of it, and like I said, I haven’t spent a lot of time on it, to come out with a tax product, which is essentially the business model is we are going to sell your taxpayer information advertisers, I am not sure is going to be great. We know this industry pretty well, and people are very protective of their information on their taxpayer information. So, I haven’t looked at it very closely, but that one stuck out, because obviously, one of our principles is we protect our clients’ privacy. We protect their data. We do not sell data. And it looks like this is fundamentally about selling data, which I don’t think is smart in tax preparation, but we will see.

Well, on the other thing I would add is, we do have a free product as well. I mean, we just said today that we are offering free fed loan free-state. So, free isn’t exactly new to the space. Obviously, their offer maybe a little bit broader. I am not familiar with all the details, but we do have a free offer as well.

Okay, got it. That’s helpful. Thank you for your time.

Thank you.

The next question is for Michael Millman from Millman Research.

Thank you. I guess I wanted to follow something from actually last quarter and that’s this definition of arresting the declines. It sounds to me as you are actually saying you still expect declines. So, my question is do you – what do you mean is that your declines you expect in each of the first half and the second half will be less than last year? And secondly, how long do you think it will take before you reach the point where you are actually increasing returns in the first half and the second year? I have a couple of other things.

Yes. I mean, what we are trying to indicate in our discussion was we had a large level of client decline last year. It would be, in our view, unrealistic to think that in 1 year, we would be able to move from losing clients to client growth. We do think we will significantly reduce the client loss this year and we do believe that in the future, we haven’t defined the future we will be at a position where we can grow clients in the assisted space.

Again, you are talking about both in the first half of this tax season and...

We are talking about the total tax season, Mike.

In the total tax season. In terms of reducing costs, some of those costs coming from the preparers. Are they having lower pay or different kinds of deals?

No, that’s just really a component of it. It’s more the full-time employees were impacted as we disclosed in June as well as a number of initiatives that we are no longer doing as well as, Bill mentioned, the marketing reduction as well.

No, we have not cut the pay of our taxpayer – tax preparers.

And regarding the RALs and so same thing for free EZs, you are doing what the rest of the industry is doing. What was your thinking in not trying to – obviously, it’s hard to be more aggressive than absolute zero, but in terms of assisted, having RALs at double $1,250 and such?

Well, I think what our approach is that we have been able to work with our bank partners and secure a very large amount of money of $1.65 billion. We are going to be able to offer clients a range of advances from $500, $750 and $1,250 on a client-by-client basis. So, we are looking to do a lot of loans to a lot of people and we will be marketing this aggressively. So, to try to – obviously, there is a – there is an underwriting component of this that we work with our partners on. There is, you can argue, a sweet spot, whether it – whether we will – we could have been $50 more or not, I am not – I think we have a terrific offer. I think we have terrific partners. I think we have a great user experience that will be seamless. It will be done at the desk and you complete your taxes. You are going to start the process right away. We believe that we are going to be able to tell people, we have to say for legal reasons, within 24 hours. But we think a very large majority of those people will find out very quickly within minutes to hours. So, I think this is going to be a very exciting initiative for us in the way we have set it up.

And what’s your assumption as to the percentage of potential clients for RALs that will be accepted by the banks?

Yes, we haven’t disclosed specific approval rates, but it’s very favorable from our perspective. We think we went with the industry leading underwriter that can provide a very good indication of potential tax liens and therefore approve at a very high rate for both new and prior clients.

Okay, thank you.

Thanks, Michael.

Thanks Mike.

That was the last question. At this time, I will turn the call back over to the presenters.

Okay. Thanks, everyone again for joining us today and this will conclude today’s call.