Bill Michalek - Vice President, Investor Relations John Clendening - Chief Executive Officer John Palmer - Principal Accounting Officer and Interim Principal Financial Officer Eric Emans - Chief Financial Officer

Dan Kurnos - Benchmark Company Brad Berning - Craig-Hallum Matthew Galinko - Sidoti

Good day, ladies and gentlemen, and welcome to the Q4 2017 Blucora’s Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And I would now like to turn the conference over to Mr. Bill Michalek, Vice President, Investor Relations.

Thank you and welcome everyone to Blucora’s fourth quarter 2017 earnings conference call. By now, you should have had the opportunity to review a copy of our earnings release, supplemental information and prepared remarks. If you have not reviewed these documents, all three are available on the Investor Relations section of our website at Blucora.com. I'm joined today by John Clendening, Chief Executive Officer, John Palmer, Principal Accounting Officer and Interim Principal Financial Officer and Eric Emans, our former Chief Financial Officer and current consultant for the company during the CFO transition. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it and speak only as of the current date. As such, they include risks and uncertainties, and actual results and events could differ materially from our current expectations. Please refer to our press release and our other SEC filings, including our Forms 10-K, 10-Q and other reports, for more information on the specific risk factors. We assume no obligation to update our forward-looking statements. We will discuss both GAAP and non-GAAP financial measures today, and the earnings release available on blucora.com includes the full GAAP and non-GAAP reconciliations. With that, let me hand it over to John Clendening.

Thanks Bill, and good morning everyone. Before I get started, I’d like to welcome Davinder Athwal who will be joining us as our new CFO starting February 21. Davinder comes to us from UGI Corporation with great prior experience with Nortel, IBM and PriceWaterhouseCoopers. We are fortunate to have someone with Davinder’s capabilities and leadership skills join the Blucora team. I am looking forward to working with him in taking Blucora to the next level of success. As excited as we are to have Davinder, we will be sad to see Eric go when his consulting arrangement ends. He’s been a terrific asset to the firm and a close partner of mine in our time together. I’m delighted he’s agreed to continue to be available to assist in onboarding Davinder as well as provide counsel from time to time. Turning to our results, Blucora capped off a very good year with strong fourth quarter performance, which exceeded the high-end of our guidance range. Fourth quarter revenue improved by 13% year-over-year to $97.8 million, Adjusted EBITDA loss was $1.3 million driven by our investments in our tax business. Non-GAAP net loss of $5.7 million, or $0.12 loss per share, represents a more than 30% improvement on a per-share basis, year-over-year, and GAAP net income was $10 million or $0.21 per diluted share, driven by the impact of tax reform, which resulted in a fourth quarter tax benefit of $31.8 million. We also continued to strengthen our balance sheet, reducing debt by another $8.2 million during the fourth quarter and lowering the interest rate on our term-loan facility by 75 basis points. We expect this rate change to result in annual cash interest savings of $2.6 million. Big picture, we have made good progress as we continue to build the foundation for long-term growth as laid out in the strategy we shared last November. At the business unit level, turning first to wealth management. HD Vest continued building momentum with Q4 revenue up 13% year-over-year to $93.8 million, above the high-end of our guidance expectations. Transaction revenue drove the majority of the outperformance, with better than expected advisor rep fees also contributing. Segment income also exceeded expectations coming in at $14.2 million, up 3% versus the year-ago period, driven primarily by the increased revenue and partially offset by increased operating expenses, which most notably included staging for our clearing conversion. Total assets under administration, or AUA, increased 14% year-over-year to $44 billion, setting a new record. Advisory assets under management, or AUM, were up 21% year-over-year to $12.5 billion, also a new record. Net inflows into AUM were $180 million in Q4, and AUM as a percent of AUA increased to 28.4%, up about 150 basis points from the year ago quarter and also hitting a high-water mark. There are a few additional updates I would call out here for HD Vest: First, the expected benefits of our new clearing arrangement are running ahead of schedule. We now expect that the break-even period following the conversion will be less than six months, rather than the six to nine months we had previously estimated. A large part of this is that we are one Fed Funds increase ahead of our original forecast at this point, which increases our sweep revenue. As a result, we are becoming increasingly comfortable with the upper portions of the expected range of $60 to $100 million in ten-year benefit to segment income and see the potential opportunity to perhaps even exceed it. We are also introducing some incremental detail on the first few years to help with modeling. For 2018 we assume breakeven to a small net benefit, which reflects the incremental investment. For 2019 we expect a net benefit between $6 million and $8 million, and for 2020 a benefit of between $8 and $10 million. Let me reiterate a couple of points here. First, we believe the new clearing partner will be a significant improvement for our advisors, which in turn should drive increased growth in both AUM and AUA by making it easier for them to better serve clients. Second, as we have shared, we will be looking for opportunities to accelerate growth with incremental investments, as well as drive increased segment income. However, it’s too early for us to share estimates for either of these. The second update is that we are expanding our addressable advisor market. For example, during the quarter we won a large advisor with approximately $220 million in assets from a large competitor. The conversion of those accounts started in January of this year. In addition, we are expanding our available market to now serve larger accounting firms with multiple partners and multiple offices. In Q4 we added a firm with $2 million in accounting revenue and in January of this year, added another firm with $7 million in accounting revenue. A third-party rule of thumb on potential AUA for every dollar of accounting revenue is about 100:1, so these two firms could represent close to a billion dollars that the advisors at those firms, once trained, could look to serve in wealth management. While we don’t plan to share this level of detail every quarter, we think it is important to share these data or proof points from time-to-time as indicators we are heading in the right direction. I attribute much of this success to the changes leadership is putting in place, to improve the advisor and client experience as well as the reputation that team and HD Vest have built in the marketplace. The third update relates to our advisor productivity improvements. On the front-end, early indications on our new recruiting process seem to be quite positive, with us now attracting even higher caliber advisors. As you may recall we rolled out predictive models to identify which tax pros are most likely to be successful as an HD Vest advisor. The new advisors have been getting licensed faster and ready to engage with clients earlier than we have typically seen in the past. It’s very early, but this is a good sign. Our process to reduce disengaged advisors or those with little to no assets, also continues in parallel. The first stage of this process, which concluded in Q4, centered around advisors that had diminimus assets and a debit balance with us. The result lowered our advisor count by about 300 advisors in the quarter. The second stage of the process includes a mandate that advisors achieve a minimum level of AUA within certain initial intervals. For existing advisors, we have asked that they generate $1 million in AUA by May of this year and $2.5 million by next January. We expect advisor counts could trend down by another 500 give or take by the May timeframe with overall performance and unit productivity continuing to improve. This should represent the bulk of the remaining reductions, although we will always look to optimize the business as we move forward. The last update on HD Vest that I’ll call out is that we continue to invest in the business to improve our support for advisors across the full lifecycle. We have a new learning and development program that is being implemented to help new advisors be more successful faster. We are putting a new practice management program in place for the mid-term advisors and now have a dedicated succession planning team for those later in the lifecycle. We have also made strides toward improving our service levels and have brought in a new Chief Operating Officer of HD Vest, with deep industry experience, to drive operating improvements and have increased staffing for our call center support; all on top of the benefits advisors and end clients will garner from moving to a new clearing partner, which will help improve transactional support. In summary, we continued to demonstrate progress in the quarter by improving our positioning for future quarters in the areas that drive value creation: growth in total AUA, increasing the proportion of assets that are fee-based AUM, and better participating in the economics that go with client cash. Turning to tax preparation. TaxAct had a strong finish to the year with Q4 revenue of $4 million, up 7% versus last year, driven by increased ARPU. Segment loss for the quarter was $10.5 million, up 72% on a year-over-year basis and in-line with the high-end of our guidance expectations, as we continued to prepare for tax season and invest in the business, including our cloud migration. Given the understandably keen interest in this year’s tax season, I will jump right to that. As you may be aware, the tax season is off to a very slow start this year, with total IRS filings down 10% and DDIY filings down 7% as of February 2. The drivers for the slow start center on the fact that the IRS opened a week later than last year, with some forms still yet-to-be finalized, and tax payer confusion associated with tax reform, which seems to have left some filers on the sidelines. You may recall that last year’s tax season was also slow out of the gates; when you put them together, so far this season the DDIY segment is down 26% from tax year 2015. While the season is off to a slow start, competitive intensity continues to grow, in particular with the volumetric leader increasing its marketing spend and with other players, predominately storefront players, ramping focus on Refund Advance Lines, which we do not currently offer. While we see strong progress in many areas, our performance lags the overall market, with total starts down 9% through February 12 and efiles down 14%, with modest improvement in monetized mix through the same period. Two points here. First, we expect the gap between efiles and starts to naturally close in coming weeks. Second, the business tends to make up ground in second peak given our focus on paying filers, who disproportionately file later in the season. We remain focused on driving monetized units through continued optimization of the site experience, optimized marketing, and new distribution arrangements, on which I’ll provide additional color in a moment. While it is obviously early, big picture, we see a path to achieving flat monetized units in tax year 2017. This expected result, combined with various pricing strategies, enable us to narrow the revenue outlook for the first half of 2018 by taking up the low-end of the range. We are now looking at a range of 8% to 10% growth versus our previous expectation of 7.5% to 10%. At the same time, due to the competitive nature of the industry this season we decided to dedicate additional marketing spend for the season, which would put segment margin at the low-end of our previous range, or about 55.5%. I’d draw your attention to two additional observations: First, while we are looking to achieve flat monetized units compared to last season, overall units are expected to decline with revenue growth being driven by ARPU. Second, the slow start means a continued shift from the first peak to the second, which in turn means that we will see a material shift in revenue and even more so in segment income from Q1 to Q2. As we have shared, our goal of restoring momentum in this business uniquely focuses on monetized units, with efforts mainly focused on four areas of opportunity; targeting high potential DDIY segments, activated through new marketing and improved filer experiences. transparent pricing, with marketable advantages versus the larger players, leveraging enhanced capabilities, diversifying revenue by extending our relationship with filers, leveraging the insight we can gain, with consent, from the tax form through partners as well as by leveraging our HD Vest unit I’d like to touch on a few of these. High-Potential Segments. During the off-season we worked hard to improve our competitive positioning for this tax season focused on enhancing the value proposition, particularly around our core focus segments within the gig-economy and disaffected Turbo Tax and H&R Block filers. As a part of this, we’ve launched new advertising, marketing and PR campaigns targeted toward the segments of the market we believe to be the most attractive. Some improvements customers are seeing this year include, a $100,000 accuracy guarantee which is unique relative to what has previously been in the marketplace. Others may offer a nominal guarantee, but we are putting real money behind the accuracy of our software. A personalized deduction maximizer that we believe is meaningfully differentiated relative to the competition. It can intuitively guide those in freelance professions to find the deductions most relevant to their profession to help ensure they don’t miss any opportunities and reduce their tax liability. This feature has helped get us off to a strong start with gig filers. Significantly enhanced mobile scope and capability with a fully redesigned experience that makes it easy for new users to get started with their return, including product recommendations based on the user’s situation as well as touch or face ID support for quick and secure login. Nearly 100% of users can now fully complete their taxes on mobile versus less than 10% last year. This is important because about 40% of our total traffic is on mobile. Streamlined ability to import last year’s tax information from competitors, import PDFs and upload pictures from your mobile device. At this point in the season we are pleased with the progress in the gig segment. We launched a new Freelancer SKU this year and it is currently tracking ahead of our expectations. Transparent and marketable pricing. While we continue to increase our federal pricing, we have maintained a strong advantage versus the volumetric leader of about 50%. In addition, we continue to present our pricing very clearly, from the very start of the experience so filers know what our prices are. Enhanced Capabilities. We began work to upgrade our capabilities before last tax season had ended. This includes investments in our people as well as introducing machine learning at key parts of the filer experience. In addition, we significantly enhanced our customer support capabilities including expanded chat support with tax specialists to help in completing the return; including late night and overnight hours. We migrated successfully to a new cloud platform, which makes us more secure, efficient and scalable. Revenue diversification through strategic partnerships and HD Vest. I’d like to take a moment now to talk about our strategic partnerships, which are important in enabling us to diversify our revenue in two ways. First, by creating new sources of customer acquisition rather than a complete dependence upon consumer marketing. Second, by extending customer relationships to new products and offers while we serve them more holistically across their financial lives. I’m pleased to share that we start this year with eight new partnerships with more on the way. For TaxAct, this is a major step, with many of these partnerships exclusive to TaxAct. I’m delighted with the traction we are gaining with firms that, like us, take a customer-centric approach to their products and services and who see the power of helping clients through understanding their situation as seen in their tax file information. With regard to new sources of customers acquisition, I’m pleased to share we have recently put in place two new arrangements each of which features product integration that enhances the client experience. One example of this is with our exclusive relationship with a leading provider of pre-paid debit and prepaid commercial cards. Through our integrated product, millions of customers will receive promotional offers to file their taxes with TaxAct, receive advanced customer verification, and can direct their refund directly onto their prepaid card. I’m also happy to announce an agreement with Fidelity Investments. Through our agreement and related technology integration with Fidelity, Fidelity customers will receive discounted pricing, can import their tax forms for a faster filing experience, and have their refund deposited directly into their Fidelity account. We are excited about this offering and the value it brings to customers. As an added benefit, all TaxAct customers will be able to import their Fidelity 1099 information into our software this tax season. This is important because Fidelity customers represent a large percentage of our filers seeking to import their 1099 tax forms into our software. These partnerships expand distribution of TaxAct through our partners’ large client channels which is a first for us. As it relates to deepening relationships with our customers, we have made significant strides in creating a cross-serve engine within the TaxAct experience for the benefit of our clients. It all starts with the BluPrintTM financial assessment, developed in partnership with HD Vest. The BluPrint financial assessment turns insights from a tax return into actionable recommendations designed to improve the filers’ financial situation. With the tax filer’s consent, we can use dozens of data points within the 1040 to offer financial insights and suggestions, which will save help them save on their taxes, lessen their debt burdens and improve their future financial health. We believe we can help the average U.S. filer save thousands of dollars with the insights and solutions we provide. This year, and we believe this is only the beginning, we will enable our customers to access product partnerships where they could: Reduce their taxes. Here, for example, by knowing the capital gains that a customer is paying, one of our HD Vest advisors can provide insights into tax planning and wealth strategies that may reduce that burden dramatically. Remember, this is what HD Vest has been doing for their clients for decades and we are now providing it to the self-directed filer as well. Reduce student debt or get a better deal on consumer debt. We can help identify how their interest rates and payments compare to the current market and assist them in refinancing through our product partner, potentially saving them hundreds of dollars per year. Manage risk through adding life insurance at a competitive rate. Generate more interest on their hard-earned money through a high-yield deposit account. Currently, we believe we are the only online tax software company that offers this type of insight and guidance into the financial health of our customers and provides comprehensive solutions which can save our customers real money now and for years to come. Think about this for a second. For the nominal cost of using our tax filing software, we can give the customer ways to save thousands of dollars. This is phenomenal value creation opportunity for our customers. For our filers with more complex tax situations, we identify potential opportunities for savings and can connect them with an HD Vest advisor do a free review of their return. We are testing this for this tax season, but we are optimistic about what this can do for our customers and our advisors. As noted earlier, we must gain the filer’s consent to use their information. I’m happy to share that we are seeing a large uptick in the percentage of filers who consent to allow us to use their tax information. While we will look to deepen all of our relationships and product integration with our partners, we believe these relationships can become a template for us in future tax seasons. We also believe that our approach is differentiated from our competitors, not only for customers where we believe we offer a more curated experience, but also for partners as we strive to allow our partners to remain front and center with regard to their customer relationships. Of course, we are in the early stages in the partnerships and synergies and we are not expecting material revenue contribution in the near-term, but it does give you a flavor for some of the opportunities we have and are exploring. It’s also a confirmation that we are pursuing and executing on the partnerships we said we’d start to roll out this year. Over time, we expect they will be a material channel for the distribution of our tax software and diversification of revenue. As we look back at the full year 2017, I have to say I am incredibly proud of what the team has accomplished, including; growing revenue by 12% to $509.6 million, growing adjusted EBITDA by 7% to $100.9 million, or by 13% on a pro-forma basis if you we're to normalize for $5.7 million in non-recurring transition expense. Growing non-GAAP earnings by 38% to $1.46 per share, further strengthening the balance sheet by paying down more than $90 million in debt and reducing our net leverage ratio from 4 times to 2.8 times. Growing total HD Vest assets by more than $5.5 billion, or 14%, and total advisory AUM by more than $2 billion, or 21%. Improving HD Vest revenue by 10%, achieving our 20th consecutive year of revenue growth at TaxAct, growing 15% and last but not least, bringing in great new talent throughout the organization, certainly including Bob and Sanjay as well as several new board members. Together the team developed and rolled out our strategy and generated outstanding financial results for 2017 while investing in the business to support future growth. As I approach my second anniversary with Blucora, I am as excited as ever about the prospects of this company. We have incredible opportunities and are taking the right steps to unlock that full potential. In 2017 we demonstrated strong performance and showed the type of opportunities available to us. The change in clearing partner for HD Vest is a great example. By signing one agreement we have the opportunity to bring in an incremental one to two years or more worth of segment income over 10 years in one of our businesses. Overall, we are very well positioned to capture the ample opportunities we see ahead of us. With that I will turn it over to John Palmer.

Thanks John. Good morning, everyone. I am going to provide a balance sheet update, commentary regarding the impact to Blucora of the Tax Cuts and Jobs Act and outlook for the first quarter 2018. Let’s begin with an update of the balance sheet. We exited the year with cash and cash equivalents of $60 million and net debt of $285 million. With tax season upon us, we expect to pay down an incremental $80 to $100 million in Term B debt in the first half of 2018. Achieving this level of debt pay down, coupled with our refinancing and repricing actions taken in 2017, we expect cash interest expense to be approximately $14 million in 2018, down from approximately $21 million in 2017. We will continue to prioritize debt pay down in an effort to decrease interest expense and accelerate net operating loss utilization. Shifting to the Tax Cuts and Jobs Act, the impact to 2017 was a significant non-cash benefit of approximately $21.4 million to the fourth quarter and full year 2017. This benefit was driven by the revaluing our deferred tax liabilities at the new statutory rate of 21% versus 35%. The deferred tax liabilities were created for GAAP purposes and relate to intangibles associated with the stock acquisitions of TaxAct and HD Vest. For 2018, we expect our GAAP effective tax rate to be in the range of 5% to 10% driven by the release of the current portion of valuation allowance in first quarter 2018. Further, we expect that the Tax Cuts and Jobs Act will not change the taxable income we are able to shield through utilization of our existing our net operating loss carryforwards. As of year-end, we had approximately $518 million in NOL carryforwards, with $274 million and $135 million expiring in 2020 and 2021, respectively. And while the reduction in the statutory rate lowers the taxes payable on taxable income, we continue to expect that we will not be a federal cash taxpayer in the near-term and cash taxes are expected to be in the range of 1% to 2% of adjusted EBITDA driven by state taxes. Closing out on the Tax Cuts and Jobs Act, I’d like to direct your attention to a couple of additional items of note. First, we expect a slight increase in our cash flows over the next few years driven by the elimination of corporate alternative minimum tax and refund of prior AMT payments totaling approximately $10 million. Second, our focus on debt pay down allows us to avoid the interest expense limitation imposed by the new law. Regarding the first quarter 2018 outlook for TaxAct, we expect that $104 million to $106 million or approximately 63% of the first half 2018 revenue to come in the first quarter and segment income of $48 million to $50.4 million. As John shared, we expect the season to be more back-end loaded, especially on margin. For HD Vest, we expect revenue between $89.5 million and $92 million and segment income of $10.5 to $12 million. I believe it's worth calling out that this segment income outlook includes $500,000 to $600,000 in clearing conversion costs. Normalizing for this non-recurring cost and including the benefit we would receive on sweep revenue alone under the new clearing arrangement, our HD Vest segment income outlook would increase by approximately $1 million for the quarter. We expect unallocated corporate operating expense of $5.6 million and $5.9 million and includes approximately $400,000 to $500,000 of non-recurring headquarter transition costs. This should represent the high-water mark for the year, as we do not expect any additional transition costs and first quarter includes the predominance of our audit costs. On a consolidated basis, we expect first quarter revenue between $193.5 million and $198 million, adjusted EBITDA between $52.6 million and $56.8 million, non-GAAP net income of $45 million to $49.7 million or a $0.92 to $1.02 per diluted share and GAAP income attributable to Blucora of $29.9 million to $36 million or $0.61 to $0.74 per diluted share. As a reminder, our quarterly outlook reflects consideration of several factors for our wealth management segment including but not limited to the following; a broad range for transactional revenue due to its inherent variability; and market volatility, including the impact to net flows and cash sweep balances. As a reminder any additional Fed Fund rate increases will only benefit us in the fourth quarter after the clearing firm transition has been completed. Lastly, our consolidated expectations for GAAP net income attributable to Blucora outlook excludes any impact to tax expense for discrete items and variable stock-based compensation granted to non-employee advisors. In closing, we expect to provide a full year outlook during our first quarter call and upon the completion of tax season. With that being said, the three to five-year growth ranges shared during our third quarter call are still applicable at the mid-to-high end of the ranges this year. As a reminder, here are those ranges, revenue growth of 5% to 8%, adjusted EBITDA growth of 6% to 9% and non-GAAP EPS growth of 15% to 18%. With that, I will turn the call over to the operator and we will take your questions.

[Operator instructions] Our first question comes from Dan Kurnos with Benchmark Company.

Great. Good morning. Nice quarter guys. Just a few things John, just a high level here since you did give some color on the advisor wins. That's pretty notable. Can we just kind of parse through sort of the balance between the churn and wins. You talked about what happened in Q4 and then potentially another up to 500 drop over through May as you kind of work through these underperforming advisors. And obviously that's not hurting your performance, but just trying to get a sense of underlying what we should expect, now that you've got some of these improvements to the process in place sort of the balance between both recruiting kind of what organic adds should sort of look like over the period since the reported numbers will obviously be choppy? And then just how we should think about sort of the pace of organic improvements efficiency improvements within your existing advisor base?

This is John Thomas. Before we get to that, I just want to make a slight correction. So earlier I misspoke. I said that, the tax -- the non-cash tax benefit that we recognized as a result of the Tax Cuts and Job Act, I said it's 22.4. The correct number is 21.4.

John, thanks for the clarification. And then Dan, thanks for your time and for the question. Good morning. Appreciate it. Couple of key thoughts on what to expect around advisors, kind of looking back on my prepared remarks as well. One thing to keep in mind big picture is the process that we're undertaking to prove not advisors with little or no assets have not been engaged that is going to take us through and flight to the next four quarters where we see net reduction in advisors. And I realize it's like that situation we are on the surface of the water, you're sort of seeing it go down, whereas underneath that there's actually some strong moves in terms of our productivity. We had in my estimation the best year. We've had in recorded history at HD Vest in the last year around recruiting. And that's in part due to the fact that, it was in mid-year that we began moving toward applying some of these more scientific techniques around pre-screening advisors. On the course of the coming couple of quarters we’ll more fully deploy improved on-boarding and those sorts of things that should get advisors, a better set of advisors out of the gate much more quickly. And as we noted -- and I noted in the prepared remarks, we're also seeing some really cool interest around practices that have been far bigger than we've focused on previously. And is often the case, we signed a few deals like that, we say ourselves holy cow, that's a market we should probably go after more aggressively. So, I can't share specific numbers with you on it Dan. Again, big picture will be trending down for the next play fourth quarters overall as we clean up the advisor base. And a lot of that we'll get done of course first and that's the whole point of the any good move when began and move on that was to not convert some advisors that are not going to be with us. But that said, we also want to give people a fair chance to demonstrate some engagement, drive some head way. So, we think we got, the right and profit balance on that.

Great. And then just - obviously in Q1 we had a bit of a correction. Your guide is still pretty healthy. I'm assuming that's on the back of sort of this continued strong net inflows. And I'm not sure if you guys gave it a net number in this quarter. But was there any - is there any kind of noise that you guys saw because obviously there were a significant amount of equity outflow over those couple or two or three weeks or whatever it was? Is there is there any kind of noise around that in Q1 and how that impacted inflows or outflows for the balance of the year?

Hey Dan this is Eric. Know I would say actually fourth quarter we had about 180 million of net inflows. So, it was a good quarter. We finished the year just under 800 million. It was a great year for us. And then heading into Q1, you know the visibility we've had through January has been very strong and that's that even before we're going to get some of these wins of the you know the large advisor that was mentioned in John's prepared remarks coming in. So, I think we actually set up very well, given some of the recruiting as well as through the first part of - through January in the first part of February our flows was as per contract.

Great. And then so that shift attacks here are kind of a lot of moving pieces. Q1 obviously a lot sort of lower, I think than most we're looking for. We know obviously you know into it is said, but you back half weighted you gave kind of a number - a number of reasons why I think we all sort of know the dynamics in the market place. So, I guess John, let me just stop and just ask you know getting back to the sort of flat paid filer growth with sort of your thought process, if I remember from your remarks in the last couple calls, I thought you might have even said it might take a year or two to get there. It sounds like maybe you're tracking a little bit ahead of that, but given the metrics we've seen so far in the period it's kind of hard to guess what can you -- can you give us -- tell us that gives us or gives you the confidence that you're going to achieve that number? And if you can tie that in to with sort of the marketing, the ROI, the channels you're pressing versus what we're seeing is a really aggressive marketplace, particularly from some of the smaller players as well. I think that would be helpful to frame the conversation?

Thanks for the question there as well. And big picture, we are executing the strategy that we laid out and I say that, it’s going to take us to get to the season before we can do all a whole assessment around our staging and the progress we're making in set strategy. As you point out competitive intensity is really high. And yet look at the performance that we've achieved to-date we do feel like we've experienced some real pauses, but we've got to face the fact too there’s some inefficiency that we've seen in those first couple weeks that we're now addressing as we go toward the rest of the season. And keep in mind a couple of points I think are most crucial. First of all, while the slow start is upon all of us. We are also slow starts than others as we pointed out that we’ve been shifting clearly in revenue segment income. But the other way to turn that is, look it’s quite early in the season. Right, so we get about two-thirds of units ahead of us. We would estimate and much more than that in terms of dollars. And so, when I say that we see a path to monetize units, it's for good reason. When we think about the levers that we can pull around get into that sort of outcome, we give them and I did touch a bit of that in the prepared remarks, but I put those into a couple different areas. Let me start with the work we're doing around conversion in and around modifying our merchandising if you will on-site. We get the benefit now of a couple of weeks – couple of our busy weeks under our belts now, and we've seen some nice improvements in areas like complete rates. We've seen improvements around usage of mobile thumbless making day versus last year and that’s important because you get that large percentage of folks that are spending some time at least on mobile. On top of that, relative to ways of expanding the pool of possible filer's, we are excited about a couple of deals that we explicitly mentioned as well as some others in the prepared remarks. It's fair to point out that we've just gone live on those in the last just few days. And so, it'd be certainly fair to point out, hey it's only been a few days so how do you know what we're going to get? We don’t. We have to go and do the work and execute and on the other hand it’s only been a couple days. And these could be things that create some material progress for us around getting there on a flat paid units. Now we did talk in the last call around slide to get to the bottom part of the year, reminder that we've talked about that taking some time. It is certainly a good reminder for everybody on the call here. But again, big picture a lot of season left. We're seeing some clear opportunities for improvement and we also see that in the last couple of weeks the real momentum begin to build in this business with our trend lines are far better than those first couple of weeks that preceded the IRS open. Eric would you add to that.

I think you hit on most of it. The one thing I would say is, is as we think about the partnership opportunities you can say we're going to be pretty aggressive because you know ultimately, we're trying to prove and work with our partners in a way that they see the value in it as much as we see the value in it. So, I think as you think about our revenue growth and getting that out flat monetize unit, there's a lot of levers we have as it relates to how we talk interact directly with our consumers. But also, we're going to be pretty aggressive in how we approach distribution opportunities because getting those plus points in this year will enable us for next year and its competitive market is being early on in this season we very important have another source of driving users to our products where we think distribution can help us with that. And ultimately be accretive to the LTV conversation long term.

Great. And so then let me just ask the last question then I'll hop back in queue just on the other side of that equation John and you did obviously talk about this you think you're still 50% below. I’ll say their name it to you from the volume metrics leader. But you know so at this point we were calculating kind of 33% to 50% delta on a form basis. It sounds like it's still pretty heavy from what we can tell pricings been pretty aggressive this season, I don't know if yet if people are taking prices up to offset the influx of free, if you're seeing that but it sounds like it has given you some more headway to increase your pricing pretty significantly. So, if you can just talk about how you expect pricing to pan out over the season kind of similar pace of play as last year? And then kind of the ultimate number up on pricing that could obviously offset the decline mostly driven by free units?

Thank you for the question Dan. So, you know as far as how we see the rest of the season unfolding, I think it's fair to say that we'd expect the same dynamic that we've seen previously with some increases happening industry wide as the second peak pushed out begins to take shape. I'm sure everybody has noticed that in the three to four weeks prior to the closing season you tend the larger players pull their third reported 00 pricing and begin charging for stake. So, we expect that that probably will happen. We don’t have a crystal ball but we expect that to happen and sort of inform our thinking as well. We have seen the raw materials, we did take up their pricing that gave us an opportunity early on to make some moves our pricing as well. I think the key thing to remember though are probably the - number one, we are committed and we talked about this in November. We're committed to maintaining a marketable difference in our pricing that we think can get folks who are sensitive and who choose to come our way. Over time we've got to keep beating that drum that's for sure. And we like the idea that we can at various part the funnel emphasizes those price differences. That said, we have this opportunity as you as you allude around taking our pricing up. And so, I can't share here for competitive reasons exactly where we're going to land there when we're going to land it, but this business affords us the opportunity as is our competitive position and pricing to be really nimble. And so as far as the season continues to unfold as you see competitors take action we've got ample opportunity to be nimble to really achieve a good balance we think between that idea of staying in a position where have remarkable advantage alongside that hitting our goals this year. You heard us from our guidance. And at the same time ensuring that we're growing the franchise over time. And now Eric talked about distribution it is a big area for us to ensure we're expanding the size of the pond, as well as better monetizing our uses that come in and file with us. But from a price point of view that's it -- that suggested that, I mentioned that and I want to confirm this too that there's market is to fine tune the merchandising on the site and maybe even further positioning of the offers themselves based on some learning early in the year. As you know it's pretty intense. As you know every time this year and so we're planning all start to optimize this thing over the balance of the season. And the way it’s with deposit there's more than two-thirds of revenue yet to be claimed still.

Great. Thanks for the color guys appreciate that. I hop back in queue.

Our next question comes from Brad Berning with Craig-Hallum.

Good morning everybody. Two follow up higher level questions for you and one is, you guys started to talk a little bit more about some synergies between the businesses and partnerships and some more concrete examples which is really good to hear about. Can you talk a little bit about how the path forward works on these; do you think that - we'll hear more about him at the end of the next quarter or is this something later in the year that you'll continue to learn from and we'll think about in 2019 as how do you learn from some of the things you're testing today? Just kind of give us a little bit of a roadmap to think about the curve of evolution and the synergies between the businesses and the partnerships you're looking for? And then the second follow up question is on the tax business, can you just kind of go a little bit higher level and talk about the evolution of the business do you expect over the next few years as we go through a continued competitive dynamics. Different models from some of the competitors? And then also the tax law changes and how you think about that impacts the business and business mix and portions. So that will probably be you know less sophisticated filings with less itemization, more standard deductions. Just kind of walk us through the evolution of how you think about the tax business going forward and monetizing that?

Hey Brad good morning and thanks for the question there. I think there are probably at least three there so keep me back on track if I don't get to the last one. As far as the path forward on synergy, I guess the way to the start to frame that up is the following; the linchpin of it all for us is the ability to share with our filer's, curated, customized, personalized offers that save them real money and get them better set up for their financial future. The catalyst in doing that really has its genesis and coming out of the HD Vest business and we've taken the software over there and the plated insight into what we call blue print. And so, in thinking about the evolution right, so last year we had a working 0.2 or whatever and blueprint out, we quickly pull together our global adviser. This year, we now have a handful of other partners built on top of a far more robust blueprint experience for the customer and important we've made huge strides in gaining the content of the filer, really important if we're going to go down the path for talking about here. And so, on the basis of where we started which is this we called last year we filled in a pretty good amount of the ultimate strategy here, but we're nowhere near done. And so, to bring a life to it, we've got inside this strategy high yield checking, we've got the opportunity for folks to get a better deal on the personal loans or student loans, better deal in life insurance. And these will have the benefit of extending our relations with customers. They will drive us realize ARPU per customer. And on top of that, and this is again to be proved out, there you'll have a more of an ongoing relationship with our customers because we can be cocky about these sorts of offers overtime, not just at the point of doing your taxes. So, where we see that unfolding, I would like to believe that we'll be able to round out the stable, if you will of offerings that we have right now for next tax season and keep on going. We'll keep it curated. We're not going to create a big fat marketplace of random offers like some others have created. I would think just the right numbers that get really bigger than this number. We expect to get to one part of your question. Yes, we do expect to give you an update next quarter and what we're seeing what we're learning because it's an important part of our strategy. One manifestation is that you could imagine having a different ROI in our marketing, if we become convinced that we can extend beyond just the tax stuff. Now what about HD Vest and all that, so HD Vest we're you know remain excited about the opportunities of HD Vest create our own version of a hybrid offering. We're doing some testing and learning on that this year to make sure the experience is a good experience for tax filers. But we think that there is a possibility that for some filers overtime that is getting some human advice and some real planning around tax. Not just did I felt that form right, a move to what my tax strategy? Just like people want a financial plan. We think there is need of opportunity that again we are going to test some of that this year. So, it's synergy there, but we've gotten quite excited around this medical mystery which is that the blueprint vehicle that then leads to extending the relationship in these other multiple ways.

I get the other questions as well Brad. So as far as kind of the evolution of the business overtime we clearly partnerships and gaining unique distribution is a part of that. But we have a participant is make sure we distinguish between those that drive through a larger pool of filer's fidelity example that net stand is the other one, to larger pool it is important for us. Given how difficult the consumer marketing world is and hence we come. And then second, there are these other partnerships that are all around monetization of the twin strategy, different partners, they had different role in achieving what we want to do strategically and, in our economics, and lean to push as hard as we possibly can to each of those. And again, provide an update at the end of the quarter. We also see opportunities on the pro-side that we've not yet, frankly a chance to get to. But will look to get to that down the road. And there's a real bright spot up in Canada as well, smaller country obviously than the U.S. But we'll probably give an update next quarter on Canada as well. As it relates to the new tax law, we're seeing by as we were in November when we talked about it a bit. And if there's - questions on that kind of the corporate impact, I'll turn to Eric amplify on those. Relative to consumer though certainly this year we saw, what we believe we see some confusion around the new tax laws, tax reform. It keeps people on the sidelines a bit as I referenced in my call. But we think if we think about sort of a couple of year impact of tax reform and what we expect to be in a couple of years versus one season or another, our view remains that we'll see more people choosing to file their taxes not with a storefront, but instead with a digital player. And for those with more sophisticated tax needs, I think we’ll see people come out of the storefront here a kind of upper end storefront. They'll move to more sophisticated tax - much like those we have at HD Vest it looks like bifurcation and the impact over time. That said, certainly with things like the change in standardized deduction, you can expect the industry to be putting on their collective separately. But putting their sort of treated thinking caps on it, if we had to reveal it with that change and you might see some repackaging. Who knows, we might see pricing moves that may have even been contemplated with some others moved early this year. But I think that sort of sums up from our perceptive. Eric anything to improvise?

I think that covers it.

Yeah that's very helpful. Real quick follow up on the refund advance. Have you seen that make a difference in the really part of the tax season? It sounds like you thought that was part of the reason for the reformats difference and that really part of the season, is that a fair assessment?

Yeah, we had some evidence of that. We reference that of having seen some of the dynamics around. Yeah, I think you can tell us like what advertising seems to be capturing people's attention. What are people paying attention to, some on the very spot that different competitors have out there. And it looks like there's sort of those rail messages struck a resonant chord among some of the some of the audience. We’ll continue to evaluate whether that, is there a way for that sort of offer and it make sense for us as an online player down the road. It certainly does seem to be an impact in the first part of the season.

Understood. Thank you for the insights.

Thank you. Our next question comes from Matthew Galinko with Sidoti.

Hey good morning gentlemen. You are - I'm not sure if you covered this already, but you did call out the large competitive advisor win in the script. Can you expand all on how they came to be, or how long you worked on it and you know I guess why they're still alternately prevailed?

Sure Matthew, thanks for the question. Good morning. So yeah, we've actually seen a couple of larger prospects turn into clients for us and if there is a - personally answer some of logistics there how long it takes? These deals it takes a little while. There's a good couple of months or even longer depending on the time of year depending on the type of practice that these folks have. And if you're of that size you're going to want to do a lot of time kicking in that next part. And so, the folks there and just a couple of folks as well in our offices were out visiting them, over a couple of months because they want to be absolutely sure, we'll make a change this big, we’ve made the right choice. And I think it a positive sign for us by the way, as they wanted them too quickly to be able to get as much of their accounts over as soon as they could get them over and that has a side benefit for us of course in terms of economics this year. And it's up that, it's early but they're already talking about, how many today are assuming we get it done right to begin introducing us some of their colleagues. What was most crucial? We stepped back on these larger deals and when I'm thinking in particular here, the fact that HD Vest focuses on tax preparers and really gets that idea that you can advise people better, if you have the insight that comes with, and the trust that comes with preparing their taxes. Other firms don't have that focus. Some firms even shy away from the standpoint of not being happy with advisors that have a tax practice. It's our bread and butter that's what we know how to do. We love it and you know if you're essentially a small business person right. These people are, they’ve built their own business, they are entrepreneurs. There are many small business people. And so, your partner always looks like this huge firm, right. Even though we're here we are small cap business which is definitely a part of it. The advisors we’re really huge. And so now he is making it to make sense be one of the partners to really get you and get your business. And that was the deciding element in winning this couple of larger advisors.

Got you. Okay. That's helpful. And then you cover capital priorities for 2018. I guess, we're starting to have a little bit of discussion about 2019. I guess, I'm just curious, if you could extend that a little bit and talk about is debt reduction still a priority once you take the $100 million or so off of the balance sheet this year or did things start to shift once you - once you've gone through the transition you will have completed by that point and you'll be on sort of different footing than this year?

Yes Matt, this is Eric. Thanks for the question. We have always talked about you know capital allocation. We would be open to things other than debt pay down once we got down to that three times net level as we have done our map and scratching all out on a piece of paper and knowing the value that the net operating loss carryforwards has for us. I would say debt pay down continues to be job one you get to that one and two times then I think you redo the math and say how does that look vis-a-vis other opportunities such as a share repurchase. I think also you know we said we would talk and look at things on M&A side that made sense that were very strategic for business. So, we I think we've earned that right too. And again, not as Matt involved in seeing how we can maximize not only the capability of the organization you know synergistic type M&A, but also at the same time how does that impact are our utilization of that asset. So right now, I would say into 2019, I don't I don't see any real change in our thinking. It's something that we talk about as a management team and we talk about at our board level. As you can imagine, so right now we feel comfortable signaling that debt continues to remain that priority and we'll update you of that if that changes.

The other thing to add there really is important color to is, the fact matter is we've now had the opportunity to deepen our leadership bench. We've had a chance to make some decisions around building our infrastructure. The clear conversion is a huge event for each HD Vest to upgrade the infrastructure tax act as a leadership team, though a new leadership team here and evolving one, we now get some real strength in these businesses. So, I wanted to add in some of that, clearly there's a focus on maximizing NOLs and considering what's most crucial in building shareholder value. But it’s also important to point out that business is now maturing to a point where, there are some other things will be able to look at which we wouldn’t have looked at before for the balance sheet reasons or because we just weren't ready as an organization.

Got it. Appreciate it.

Our next question is a follow-up question from Dan Kurnos with Benchmark Company.

Yeah sorry, quick housekeeping one. I don't know, Erica not one of your favorite topics corporate allocated - It wasn't an answer on the call but it's relevant for bottling this year. Obviously, it's been high to start the year. I don't know how much of the CFO transition expenses are embedded in there so, you give us some color on that? And then obviously you know we've expected that to trend down overtime. This is a step up from Q4 if you can just give us. And while it was John made the comments that it was a high watermark, if we could get a sense of how that's going to sort of play out over the balance of the year that would be helpful? Thank you.

Yeah. You bet, Dan its Eric. So, you know we talked about in the script it was roughly $400,000 to $500,000 of transition. I wouldn't characterize that all as the CFO, but there they are there. And thank you for following that out. But so that would lead your kind of in that given our guidance range over five, I like I think the right expectation for a bottling standpoint is that we'd like to keep it under five for the remaining four quarters. Q1 is usually our heaviest because we have a predominance of our audit fees that come through. So, I think that from a modelling standpoint you can keep it under five for the next four quarter.

Okay. Thank you.

And I'm not showing any further questions at this time I turn the call back over to our host.

Great. Thanks everybody for joining, we’ll talk to you next quarter.

Let me add my thanks as well really appreciate the questions and the focus here. And look forward to future updates. Take care everybody.

Ladies and gentlemen this concludes today's presentation you may now disconnect and have a wonderful day.