Good morning, everyone. I need you to take your seats really quickly. We'll get started here. Well, good morning, everyone. Thank you for braving the New York weather and coming to join us today. It's -- we're obviously based in Kansas City, where it's a balmy 55 degrees and sunny today. So I apologize for not bringing that up here with us. My name is Colby Brown. I'm the Vice President of Investor Relations. On behalf of the entire H&R Block management team, it's my pleasure to welcome all of you here as well as those of you participating via the webcast to H&R Block's December 2014 Investor Conference. We have an informative and exciting day planned and are glad you're able to join us. Before we get started, we have a few housekeeping items to take care of. Yesterday, we released our fiscal 2015 second quarter results. That release, as well as today's presentation, includes certain non-GAAP financial measures. We reconciled the comparable GAAP and non-GAAP figures in the schedules attached to the press release, and you can find both the release and the schedules on our Investor Relations web page at hrblock.com. I'd also like to remind everyone that today's presentation and various comments made in connection with it 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. Thus, our actual and results could differ materially. You can learn more about these risks in our Form 10-K for fiscal 2014 and our other SEC filings. H&R Block undertakes no obligation to publicly update these risk factors or forward-looking statements. Shortly after this morning's presentation is concluded, we'll post the slides on our website. And later this week, as a reminder, our webcast will be available for replay. To give you a sense of the agenda for today, opening presentations will run until approximately 10:00 Eastern. We'll then take a 15-minute break. Refreshments will be available throughout the morning. And a quick logistical note, restrooms are out the door and to your right. We then expect the Q&A to begin around 11:30 Eastern. So again, welcome, everyone. We're excited that you're here. Thank you for coming and we hope you enjoy the presentations. [Presentation]

Good morning, everybody. I want to thank CNN for my star turn, my little 4 minutes of fame. But I want to welcome you to this year's investor conference. We are pleased to have you join us. We'll review our fiscal 2014 performance and share with you where we see our opportunities for this coming tax season and beyond. So today, we will share with you a recap of our performance in fiscal 2014, the opportunities we see going forward and why we believe we're well positioned to drive value for our shareholders. But first, I want to address the elephant in the room, so to speak, and that is a few words about the bank. So we've had some people asked, "Why are you even doing an investor conference this year?" The thinking being that the bank divestiture is incomplete and we have nothing else to talk about. Now we did think we'd be done in time for this tax season. And as you know, we're still waiting for a decision from the regulators. But to be absolutely clear, we remain committed to divesting our bank and we expect BofI to be a solid partner. The regulators said that they needed more time. Like I said back in October, we can scratch our heads all we want. But they have been very thorough, extremely professional and we're going to take them at their word. We still believe that, on its merits, this transaction will be approved. So the truth is we're holding this conference because we have a lot of great things to tell you. And at the end of the day, if anything is crystal clear, I hope it's what I firmly believe to be true: That no one understands taxes like we do, no one understands the industry like we do and, most importantly, no one understands the behaviors and needs of our clients like we do. So with that as a foundation, I'm going to start off with an overview, then the other presentations will provide the deeper context. As most of you already know, we're the world's largest tax preparer. We're entering our 60th tax season here in the U.S., got over $3 billion in global revenue in fiscal 2014, which is more than all of our branded competitors, assisted and digital combined. Since 1955, we've filed over 650 million tax returns. And this past season, we filed over 24 million returns worldwide. And that's across more than 10,000 offices globally staffed by tens of thousands of tax professionals and associates worldwide. Clearly, Americans know us, use us and love us. We file 1 in every 7 U.S. tax returns. In fact, if you count all the branded tax preparers who sign their clients' tax returns, H&R Block tax pros signed 7 out of 10 of all these. Why? Because Americans know we are the most knowledgeable, the most accessible in the industry and we'll do their taxes right. And that value is delivered by our tax pros and associates who are the best in the industry. Our tax pros have an average tenure of 8 years and over 450 hours of training. We have over 7,500 enrolled agents, the highest credential awarded by the IRS. We have CPAs. We have attorneys. Over 1/3 of our tax pros have achieved certification as an H&R Block master tax adviser, which is our highest internal credential. Our tax pros are experts who go well beyond just simply answering tax questions. They are advisers to our clients. They prepare and sign our clients' returns and that's a very personal connection. And while our history is founded in assisted tax preparation, we're also making quite an impact on the DIY side. We've come a long way from our earlier DIY products to today's innovative and redesigned software that positions us well for the future. And while we are proud of our accomplishments here in the U.S., we're also proud of our global operations. This coming season, we're celebrating our 51st year in Canada. And at the end of October, we completed our 44th tax season in Australia, including the launch of a new DIY product there. And as many of you know, we entered India and Brazil a few years ago. We also have an emerging ex-pat business. And a point you may not be aware of, we have 28 tax offices on or near U.S. military bases around the world serving our armed forces. None of our competitors can say that. So now let's take a closer look at our performance this past fiscal year. Strong execution in 2014 based on our Tax Plus revenue growth strategy drove increased revenue, productivity and profitability. Total revenues rose $118 million, up 4% to over $3 billion. Complementing this revenue growth, EBITDA increased 8% to $940 million, which is an improvement of 24% since fiscal 2012. In fact, EBITDA margin grew 1 point to 31% of revenues in fiscal 2014. Overall, we continue to focus on driving profitable growth in assisted and digital and in our adjacent Tax Plus products. In assisted, we maintained our strong focus on clients. We prepared and filed 13.6 million U.S. returns, which was 17% of the assisted category. In digital, we saw double-digit growth in revenue. And although our growth in return count slowed, our strong execution and conversion and monetization led to this growth, marking the fourth year in a row now we've gained revenue share. And in a rapidly maturing industry, we think that's a very important measurement. And we saw a continuing progress with our Tax Plus strategy, which improves client service by offering integrated adjacent products. In 2014, revenues from our Tax Plus products increased 11% to $432 million. I'll talk about the performance of our Tax Plus products in more detail later this morning. But 2 key points here are that the tax preparation business and adjacent financial services products are clearly synergistic, which keeps our cost of acquisition low. Plus, these best-in-class products enhance the relationship with our clients, many of whom have come to trust and rely on these products year after year. All of this translates into driving value for our shareholders. In fiscal year 2014, free cash flow before dividends increased 73% to $663 million. Earnings per share last year increased 5% to $1.67. And in January, we will pay our 209th consecutive quarterly dividend. That's over 52 years and counting. And since I took over as CEO in May of 2011, we have returned $1.2 billion to our shareholders in share repurchases and dividends. This, despite, as many of you know, being prohibited from buying back shares since the summer of 2012. So we are pleased with our performance in 2014. Our direction is even clearer now as we've shed non-core businesses and are focused on tax preparation as our core competency. And as the #1 player in the tax preparation industry, it's also our role to lead the industry, to advocate for and to lead change that best serves the interest of taxpayers. You've heard me say that we don't take partisan positions on the tax code. Our job is simple. Do everything we can to ensure our clients receive the maximum refund to which they are entitled and to keep them out of trouble. But that doesn't mean we shouldn't, as the industry leader, educate policymakers on tax administration. And there are 2 tax administration issues that need to be addressed. The first is the issue of improper earned income credit payments. In its most recent report this year, the IRS estimated that there were $16 billion to $19 billion in improper EIC payments, either as a result of fraud or complexity due to honest taxpayer mistakes, $16 billion to $19 billion. And we know this improper payment rate, as a percentage of total EIC filings, has been over 20% for the past 10 years and estimates for 2014 range between 24% and 29% of total EIC filings. We also know that, among those applying for the EIC, there's been a significant migration from assisted to digital. This graph shows that the percent of those applying for the EIC who prepare and file their taxes digitally has grown from 28% in 2008 to 42% this past tax season. Why? I suspect, for some at least, it's because they don't have to answer as many questions to document their eligibility and we know there are some unscrupulous paid preparers who use off-the-shelf software to avoid the added scrutiny of answering additional questions and their potential liability because they don't have to sign the return. It makes no sense to have different documentation requirements. No sense at all. So we think that across all channels, all EIC filers, whether assisted or digital, should have to answer the same questions. Doing so would significantly reduce fraud and criminal activity, and we have told the treasury department that it needs to take action because the current policy makes no sense. The second tax administration issue is the lack of minimum standards for paid tax preparers. Currently, there are no federal standards in place, and only 4 states have such standards. In August of 2011, the IRS proposed new testing and continuing education requirements for tax preparers. But that's now on hold until it finds its way through Congress. So this year, the IRS implemented a new voluntary program. While we would have preferred a mandatory program, we welcome the voluntary program and we'll support Commissioner Koskinen's efforts for legislation to regulate tax return preparers. We continue to believe strongly that America needs genuine certification that includes mandatory testing and continuing education of all paid tax preparers. I've said it before: Cutting hair requires certification in all 50 states. So it surely makes sense that certification of paid tax preparers should be required in all 50 states, too. And while H&R Block continues to lead the way on these 2 issues, the silence of others in this industry is deafening. Frankly, I cannot understand why only H&R Block is talking publicly about these issues. Most of the competition isn't and you should wonder why. It's either because they don't know or they don't care, or is it because doing the right thing will hurt their businesses. So now let's get onto our lineup of speakers and the topics they're going to discuss this morning. First up, Kathy Collins, our Chief Marketing Officer. Her team has done extensive new research on consumer tax filing behavior, which she will share with you. Next up and playing hurt today -- these 40 -year-olds who are in great shape, they just can't get it together, but with a very -- a severely sore neck -- Jason Houseworth, our President of Global Digital and Product Management, he'll talk to you about the opportunities in the digital category. Then Shawn Moore, our Vice President of Development and Franchise Strategy, will break down the structure of the assisted tax preparation category. You'll get a better understanding of just how fragmented this industry is and Shawn will provide our insights. After Shawn, I'll be back to talk to you about investments in our core retail business, in technology, the look and feel of our offices and what's next for our Tax Plus products. We'll then take a break. And near the end of the morning, we'll have the 2 presenters you're probably most anxious to hear. Mark Ciaramitaro, our Vice President of New Business and Innovation, is one of the most knowledgeable people in the country on healthcare. He'll talk to you about the impact of the Affordable Care Act on taxes. I believe we've committed more resources to this initiative than anyone in the tax industry, and Mark will show you what we know, what we anticipate and what we're doing in the space. And then finally, Greg Macfarlane, our CFO, will talk to you about our overall financial outlook. Greg will synthesize everything you hear today into a cohesive investment thesis for Block. So that's our lineup. I'm going to close now with something that speaks to the essence of who H&R Block is, and I think it's truly the most important thing I've done since becoming CEO, and that's to define what guides us, our purpose, our vision and our values. Simply put, our purpose is to look at your life through tax and find ways to help. It all begins with taxes and how we look at life through the lens of tax. Only H&R Block does this. From there, our vision. The carefully chosen words of our vision make clear that we are the leading global consumer tax company, bringing tax and related solutions to clients year-round. But to have purpose and realize the vision, we also have to be grounded in values. We do the right thing, simple and clear. I hear it echoed in meetings across the organization as teams address opportunities and challenges. And to do the right thing means we believe in our people, we take care of our clients and we deliver for our shareholders. We pride ourselves on doing the right thing. And that includes our absolute commitment to creating additional value in this company. We're proud of our track record. Since May of 2011, our market value has more than doubled. Free cash flow was up significantly, and share buybacks and dividends have exceeded $1.2 billion. But we believe more value creation is on the horizon, and that horizon includes exiting our bank. And on that point, I do want to thank everyone here for your patience. I'm sure this hasn't been easy for you. I know it hasn't been easy for us. But we remain confident we're going to get this done and create even more value in this great company going forward. So with that, let's get on with the rest of the presentations. [Presentation]

Good morning. I'm Kathy Collins. I am the Chief Marketing Officer at H&R Block. And today, I'm going to share an evolved perspective of the tax industry through the eyes of the consumer and how our understanding of that perspective is reshaping how we approach the market today. As I thought about our approach, I wanted to start by addressing key questions floating around the tax category. Is consumer behavior changing? Has the complexity of the tax code changed how we think about filing our taxes? Are people moving to DIY as mobile devices become a way of life or to save money? Is the H&R Block retail model still relevant? As the leader in the tax preparation industry, we know this category better than anyone. In fact, we spend a great deal of time trying to truly understand the issues and questions that I just mentioned. So I plan to spend the next few minutes sharing with you our perspectives and what we have learned as we've studied the answers to these and other questions. First, let's set the stage. The tax prep industry is one of steady, but slow return growth, around 1% to 2% per year. And as you know, there is great diversity in competitors throughout the tax prep industry, with a large number of competitors in the retail category and fewer participants in the DIY category. Now Shawn and Jason are going to spend more time on the structure of the categories a little later, but I really want to focus on the consumer. H&R Block is, by far, the largest brand participating fully in 100% of the tax market. From assisted tax prep to do-it-yourself and anything in between, we serve clients the way they want to be served. Now what we've learned about the industry over the years may surprise you. For one, we have learned the decisions around tax prep are highly emotional for consumers. For many, it is the largest financial transaction of their year. It may trigger excitement or nervous, reluctance but typically, a high level of anxiety. So as a brand, we must understand the needs that drive their behaviors so we can deliver flawlessly for consumers. But who are these consumers? What is driving their behavior? And how can a brand like H&R Block continue to grow in a slow-growing, seemingly un-innovative environment? As the leader in tax, we took it upon ourselves to take a fresh look at the industry. We embarked on a long-term consumer research journey, which included a very large in-depth, qualitative and quantitative analysis of over 8,700 tax filers' behavior, attitudes and needs. Why did we do this? Well, at H&R Block, we love our data, but I wanted to leverage that data to an evolved level, to a level where we knew what the client's next move would be, maybe before he knew it himself. For starters, we really need to understand what outcomes consumers desire. What exactly do they want from their tax preparation provider? How do they then cluster together into viable marketable segments based on their needs? And then how do we market to them according to those needs? Before launching this research, we took pride in knowing a great deal about all tax consumers. Everyone wants expertise. Everyone wants convenience and everyone wants a low price, right? Every piece of research that's ever been done will validate those points. But because of our experience, we know that there was more to it. At H&R Block, we invest to better understand the entire spectrum of tax filers. Our digital competitors are focused on those who do it themselves. CPAs and independents simply cannot look at the whole category to this level of detail. And our branded retail competitors, they just haven't. But H&R Block has, with the simple objective of uncovering what drives growth in this industry. All of this began with one simple insightful question. What tax jobs are consumers trying to buy? The #1 job that consumers want to buy is getting the largest refund. While it may be surprising to you, but about 86% of all H&R Block clients across all income levels receive a refund. In fact, getting a refund does not depend on income level. Now it's obvious that lower income filers are almost certain to receive a refund. But even at income levels up to $180,000, nearly 1/2 of H&R Block filers receive a tax refund. This is why last year's ad campaign, Get Your Billion Back America, featuring 1 of our own tax pros, Richard Gartland, was so effective for us. It was a broad message. It impacts everyone regardless of age, income or even needs-based segmentation. Within just 4 weeks of that campaign -- starting that campaign, over 75% of American taxpayers knew the tagline. 90% of them tied it instantly back to H&R Block. Once again, because the idea of the largest refund unites all taxpayers. There are other uniters. Everybody wants accuracy of return, security of their tax documents, being treated with respect. These outcomes are universal. They are important to everyone. But it's the differences among taxpayers that lead us to more targeted growth ideas. So let me tell you about what some of those drivers are. The first true differentiator among consumers when it comes to tax prep is whether or not they want to buy help. That is whether or not they want assistance with their tax prep. Our study showed that 65% of all tax filers do want assistance when completing their taxes. This is a number very consistent with actual return data. The entire universe of taxpayers not rushing out to do it themselves, far from it. The perception of one's own ability is one of the most discriminating factors in our learnings. It had the most variance. While some are confident in their own abilities to file their own taxes and get the largest refund, most are not. And this number really has not changed all that much over time. In fact, historical filing patterns over the past 15 years showed that nearly 60% of the market utilizes assisted tax prep, while right around 40% does it on their own. But 90% of the total tax category revenues come from assisted tax prep, while just 10% from DIY programs. Bottom line, the research tells us there is great consumer demand for assisted tax prep. The H&R Block business model is alive and well. It also reinforces that we need more targeted approaches based on consumer needs. So this is where the real work begins. Think about the universe of tax filers. 135 million taxees and filers. A closer look at them reveal the variety of segments. Each of these segments cluster clients who are looking for the same outcomes. Each segment is based on specific needs of consumers. Some of those needs are being met today, some are not. Now it's important to remember that H&R Block fully participates in every segment of the tax prep market. Our competitors likely participate in 1 or 2 of these segments. And while I'm not going to walk you through all of the segments and all of the detail, I'm going to highlight some of the behaviors that influence tax filers and some key learnings from our work. So let's start with Jose. Jose is representative of the client who values speed and convenience above everything else. So Jose desires a shorter appointment length with little need for the relationship aspect of tax prep. He may be more cash strapped than other consumers. We can then customize the interview for Jose and the offering. First of all, we schedule Jose for 30 minutes as opposed to an hour. If we are running at all behind, we shoot him a text message to keep him updated. We welcome him and jump right into the interview. We eliminate any tax planning tips and we save those for his summary statement. And finally, we remind Jose of our no out-of-pocket payment option, which allows his tax prep fees to be deducted from his refund. So Jose walks out of the office having all of his needs met: convenience, maximum refund, tax expertise and paying nothing out of pocket. Now those filers that tend to complete their taxes later in the season are even more differentiated. Let's assume that Lori and Dan are in this later season segment. They are among the few who owe money to the IRS as opposed to expecting a refund. Their situation is more complex. They're waiting for financial statements and gathering all of their paperwork up until the very last minute. In their minds, only an enrolled agent will do. They view their situation as being too complex for just anyone to handle and there is no way either one of them will tackle this challenge on their own. Consumers like Lori and Dan expect their tax preparer to know everything about them. If anything material has changed in their lives, he will know that. They expect him to call them, pass on any reminders and find a time that one or both of them can come in and drop off their stack of documents. So Lori will walk in the office, she'll answer a few questions, hand over the goods and wait for the call that says, "They're done." Now she will anticipate some forward-looking tax tips from her tax guy. Let's look at 1 more filer who is part of a group clearly differentiated by confidence and convenience. Stephanie is a DIY-er. She is confident in our own ability to complete her tax return. She doesn't mind the challenge and feels that it is worth the time and effort. After all, for Stephanie and others like her in this segment, it's all about the lowest price. She simply believes that it is too expensive to pay someone else to do her taxes and she wants to invest as little as possible to get this job done. She also doesn't believe that the risk of preparing her own taxes is any greater than having someone else do them. She loves the sense of accomplishment she feels when she does complete the task. Now we know that Stephanie may reach a point of uncertainty while completing her own taxes, so we may pop up some sort of a window with a relevant tax tip or an invitation to chat with a tax professional during her interview process. And while there is a lot of inertia in the tax prep category, about 86% of all filers return to the same tax prep method they used the year prior. People do not always stay within 1 segment. There is some movement. Even the largest DIY player in the industry sees about 25% of their clients leave every year. That movement is typically the result of a life event or a life stage change. In the most general terms, complexity sparks uncertainty and uncertainty may drive filers to a tax professional. So let's see how this all plays out over the life of a taxpayer. A 21-year-old starting out oftentimes looks for assistance from his parents from the -- for the right tax prep method. After a few years, he may try DIY, trusting in his own abilities to get the job done. As that young adult ages, life gets more complex. By 40, they have marriage, kids, homeownership, oftentimes, new jobs or even their own business. By 60, they may have divorce or death of a spouse and they've hit their peak income. They likely have some investments. Their tax complexity is still high, but will soon start to drop off. So taxpayers may switch segments a couple of times throughout their lives. So you and as investors may be saying, "So what?" Here's the so what in all of these. At H&R Block, we understand client needs unlike anyone else in the industry. We have all this data. We know what people want. And now we have to bring it to life. Consumers expect more today, so we must use tools and practices to reach them directly, the right way. So the beauty of having all of these data, this in-depth understanding of our clients is that we have now typed our database. What does that mean? It means that we have assigned a segment designation to every consumer in our database based on a proprietary algorithm. From there, we are able to customize every client experience as well as our marketing initiatives. And what's even more powerful for client growth, our algorithm can be applied to people who are not yet our clients as well. Previously, we were only able to use those records to identify clients based on age, income or tax forms filed. He's a 1040. She's a younger 1040EZ. The problem with that, demographics and forms are not indicative of behavior. To complement this consumer intelligence, we have also invested significantly in our own new CRM, customer relationship management system through both campaign managements and real-time decision-making. So with every person in our database, we maintain a golden record of that person; who he is, what segment he falls into, how he has responded to marketing stimulus, et cetera. So for those who have opted in for a more personalized approach to marketing, we're excited about some of the new capabilities that are brought to life in the following examples: Our targeted marketing initiatives become, in some cases, as simple as a single keystroke, where, for example, clients will receive a product offer via e-mail at a discounted price the week they receive their W-2s, all based on past behavior. We can then tie those consumer segment needs right back to our marketing plans. So here's how I look at our marketing structure at H&R Block. First, we have our national strategy. We build our story around what we can own and what is most relevant to our consumers. We call this air cover, which is primarily broadcast as well as screen cover, our interactive marketing initiatives. These 2, air cover and screen cover, are our version of mass marketing. Last year, our air cover was around getting the greatest refund, Get Your Billion Back America. It's about who we are as a brand, what we can deliver and what makes us better. The second level of marketing is what we call win the block. This is our local marketing approach that focuses on single-mindedly driving consumers into our local offices. And the final level is what I've been talking about today. We are now able to leverage the data with a more customized direct-to-consumer approach. We target our clients with the right message, in the right channel at the right time. So for example, Lori and Dan, that I spoke of, we know they are late-season filers. We shoot them an e-mail newsletter that speaks specifically about relevant tax tips. We can go even deeper and target those being impacted by a new tax code change with a very specific message about what it means to him or her. Another example, for the Joses that I told you about, we will introduce a geo-targeted mobile advertisements and alerts because we know this segment is most reliant on their mobile devices. And let's look at my earlier example of Stephanie, our DIY-er. She files in early February each year. And if we noticed that she hasn't filed by February 10, we can send her an e-mail, possibly a discount offer, to remind her that we are the right brand for her and we have the product that best meets her needs. H&R Block invented and has evolved the tax industry, which is alive and thriving 60 years later. What I've talked about today, it's a work in progress, it's an evolution, but we will continue to innovate. We will test and learn. And by understanding more about our clients than anyone else, we're positioned to do just that. Thanks for your time. [Presentation]

Good morning. I'm Jason Houseworth, President of Global Digital Tax Solutions and Product Management. My role is to create great experiences for our tax clients, starting with our digital tax business as well as leading the client experience for all of our tax products in my dual role as Head of Product Management. Today, I plan on providing you with a brief scorecard summarizing tax season '14, before discussing the evolution of the DIY category, finishing with my perspective on what it will take to lead in digital. So let's begin by walking through our scorecard for the digital business in tax season 2014, a year highlighted by double-digit Tax Plus revenue growth, which was our primary objective for the year. The one in which we did not move the needle in terms of top of the funnel awareness that H&R Block makes tax software and therefore we saw little client growth. Growing awareness continues to be our #1 opportunity as a business. And as discussed at last year's investor conference, we launched year 1 of our product redesign last season, the first in a wave of changes that will literally change every 1 of our 6,000-page federal and state online products. Obviously, a big undertaking, but one that I believe couldn't have gone better. We improved conversion and we saw our contact rate or the percentage of contacts per registered unit materially drop. But the most important result of the redesign was the monetization we saw driving our double-digit revenue growth. I mentioned last year, during our investor conference, that we believe the redesign would improve the value perception a user has within the experience and we saw this result as a validation of our product innovation and testing process. However, it was only Phase 1. While mobile usage continues to explode, Phase 2 will ensure that every single page will be responsive. That is to say it will appear as if it was designed for the respective Smartphone or tablet device. This is clearly an opportunity, given our conversion on both of these devices dramatically trails our desktop and laptop results. I'll talk more about the importance of adapting all of our pages to be responsive later. But first, I'd like to talk to you about the do-it-yourself or DIY category. And as Kathy just referenced, this is the 40% of the overall tax market that says, "I'll do it myself." And that's versus the 60% of assisted filers, who prefer having someone help prepare their taxes. Now the DIY category is where I'm focused on serving and, unlike assisted, is one that has involved significantly over the past 20 years. Today, I'm going to review how DIY, as a category, has evolved, where we've been and where we are headed, along with what it will take to lead going forward. I'm going to start back when DIY was nearly all pen and paper in 1992; a time at which the category had roughly 55 million taxees and returns. Desktop was the first major shift, and its emergence for use in tax preparation was recognized by Intuit and H&R Block, with Intuit buying Chipsoft, the father of Turbotax; and H&R Block acquiring TaxCut. Desktop software not only created the ability for DIY-ers to electronically file a return, it also simplified tax form completion through an interview-based approach rather than direct form entry. And as a result, by 1995, it had over 5 million users. As the Internet emerged, tax filing shifted to follow. TaxACT was the first tax software to be primarily available online and it was the first to leverage freemium, the try-before-you-buy-it model, which gave even the reluctant DIY-er the ability to go and at least double check their work online for free. In 2002, companies in the tax software category formed what is known as the Free File Alliance, or FFA, in order to provide low- to moderate-income taxpayers, the ability to file a federal return for free through the irs.gov website. This also had an unintended consequence of giving rise to a number of .com sites that are what I'll call pen and paper on a web form. Sites that were able to spend just $26,000 for an FFA membership by creating the most basic tax software. You've got form entry, automated the arithmetic previously done by hand, e-filing, but little else. Even though the federal preparation was free, these sites monetized the service by charging to file a state return. By 2004, online had surpassed desktop with 10 million returns filed using online versus 8 million via desktop. And over the next decade, the growth of online continued, fueled by growth within the DIY category, primarily from pen and paper, but also from desktop users as online moved from the software of choice to the method of choice, for the majority of the DIY-ers, by 2006. In the past few years, the growth in online has accelerated due to the shift of Earned Income filers from assisted to DIY. And Bill mentioned this earlier, driven by the inconsistent documentation requirements for assisted versus DIY filing for this credit. In online, the credits -- pardon me, the requirements to verify are nowhere close to the stringent requirements that are forced on tax preparers, driving what the treasury's own data has reported as a $16 billion to $19 billion in improper EIC payments, which leads us to the DIY category today. Now at 55.9 million DIY tax season returns, online is the overwhelming choice, encompassing what I would call traditional online laptop or desktop users, with a growing pure mobile, and then you've got the multi-channel mobile users, or those who use some combination of mobile and traditional screens. This combined group of online users now contains 40 million returns, or 4x the amount of desktop software returns, leaving only 5 million of the most ardent pen-and-paper returns. This number is a stark contrast to the 55 million pen-and-paper returns present in 1992. But it's still roughly the same number of returns for the total DIY category. Despite over 20 years of change, including the introduction of desktop software, online or SaaS-based filing, free and freemium in online, as well as mobile and multi-channel filing. H&R Block has participated in the rise of the DIY category, nearly since the beginning. But we admittedly came late to innovate in the online space. In 2009, I would argue that we were like many of the small FFA tax solutions I mentioned earlier. We were simply pen and paper on a web form with supporting calculations and electronic filing. However, in 2010, we effectively relaunched our online product, not just with a new name, changing TaxCut to H&R Block, but refocusing our online product on streamline filing, including W-2 and 1099 import, adding audit support and representation for all free and paid products in 2011, becoming multi-channel in 2012 by releasing 8 new mobile apps, establishing MyBlock in 2012, in part to allow users to move seamlessly between assisted and DIY through a technology solution to keep their data and relationship with H&R Block, regardless of channel. And finally, last year, we introduced the first of a 2-year redesign to begin a path of personalization to ensure that the product adapts to each user, as they prepare their taxes online. These changes, to refocus our digital business on winning in online, have dramatically improved our registration to conversion by 5 points and resulted in a 17% CAGR in online revenue since 2010. We've repositioned ourselves in preparation for further evolution within the DIY category. Looking forward, I believe we will see DIY evolve in 2 important ways. The first is how the small value competitors created through the FFA will lose their ability to compete on price alone. Our view is that the even when value DIY-ers expect more than what I would call pen-and-paper as a web form, given that price is no longer a differentiator and they will begin to move upstream. The second is that the market leader, who is now using price to level the playing field with the value competitors, is continuing to fund its simple filer pricing by raising price on its most valuable, high net average charge clients. Schedule C and other more complex forms have been moved from basic to deluxe SKUs into premium and home and business SKUs, making this consumer pay $50 more each year. I believe H&R Block is well positioned to take advantage of both of these shifts. Our rebuilt online offering puts the expertise and tax services of the most of trusted tax advisers, together with innovative, easy-to-use tax software that is built to lead for what's next in the evolution of the DIY category. In order to win going forward, tax software or digital category providers will need to acquire and excel at 3 core components. First, product innovation or what I'll more specifically explain as the delivery to the consumer of intelligence as a service. Second, a multi-screen focus to design first for the Smartphone and tablet device. And third, a brand that has awareness and can support the full set of integrated Tax Services consumers expect. When I look at where tax offer will evolve, it's important to start by understanding how technology and software innovation will change in applications used every day by our DIY clients. In these applications, consumers will see software that leverages my data that's in the cloud, as well as information from the network or a shared set of knowledge that exists, that many refer to as big data. In order to deliver intelligence as a service, to answer much more complex questions, and a simple example is how Google is going beyond search by proactively offering content like driving time to an upcoming appointment I have on my calendar, weather for the location I'm at right now, and providing me scores for sports teams that I've recently searched. This synthesis of custom algorithms, as they apply my situation to an abstract set of shared information, will not only create meaningful solutions to more and more complex consumer problems or questions, but it will also anticipate how and when to do it. The delivery of intelligence as a service will have many applications. And in tax software, it will drive the software to become more personalized. In our case, the personal data is as rich as it gets. It's the individual's tax return and related data. And our shared knowledge is our internal CRM or client database that Kathy mentioned, which has everything from the high-level segment to the detailed clicks that each user takes that provides us with an even more dynamic user typing. Intelligence as a service advancements will make each user feel that the software was not only designed for them, but is always a step ahead. Tax season '15 will launch year 2 of our product redesign and delivers an example of this by creating a personalized navigation for every returning user. We recognize their unique situation from using the data that they had last year, and then we build an interview that only contains the relevant topics. But this is only scratching the surface when it comes to our usage of intelligence-as-a-service. With our redesign complete, we've now created a technical foundation for a number of these innovations that you'll see release later this year, as well as in the next few tax seasons. In addition to developing intelligence-as-a-service, leaders in tax software will need to design the delivery of their software to be multi-screen. We like to say that the rise of video-on-demand has created consumers with an expectation of play, pause and resume. Or it's an expectation that your solution should be one that I can begin at work on my laptop, continue on my tablet at home when I have a few spare minutes and do portions on my Smartphone. Another way to look at it would be from a negative perspective, which we saw last year when we still had screens in our program, like this example, that were not designed first for mobile device. Here you see the same screen ready for tax season 2015, designed from the beginning for a mobile or one-column screen format. For consumers who experienced screens that were suboptimal, we saw a 20 point drop in conversion versus those that spend 100% of the online experience in a full-screen browser. I'm happy to report that in the upcoming tax season, all 6,000 of our federal and state online product pages will be fully responsive to all devices. Our product will make this look and easy and meet the play, pause, resume expectation of consumers but our view is enabling this and keeping up with the pressure to be multiscreen will be something only the leaders in tax software will be able to do seamlessly. Finally, with the online category continuing to consolidate value and premium with price no longer a differentiator, I believe that all DIY-ers, not just those seeking a more premium online tax provider, will have a shared expectation that tax expertise and related services, like help from a tax adviser and audit support, are delivered part and parcel, at a great value. And as I said before, we are well positioned for this. Our software is consistently ranked #1 in this area because of our support of live tax experts during the preparation process, and the worry-free audit support and in-person representation all clients receive after filing. Finally, both value and premium consumer expectations will demand these tax services be built upon a great brand. We believe that with our product improvements in place, our greatest asset, and yet our greatest opportunity is our brand. Awareness that H&R Block makes tax software currently stands at 60%, a number that dwarfs the value competitors because it has taken significant investment to achieve, but by increasing still represents the largest opportunity to challenge the market leader. So I hope as you leave, in addition to taking some of the free tax software that's in the back of the room, you take away the following: The DIY category continues to evolve, driven by online, as a multi-screen web experience. The set of online solutions is also evolving as value and premium collapse, creating a sweet spot for H&R Block tax software, given we have the traits necessary to lead going forward. Thank you. [Video Presentation]

Good morning. My name is Shawn Moore, and I'm responsible for identifying competitors that fit into the H&R Block brand and acquiring and integrating those businesses into the H&R Block network. I would like to provide you a unique perspective on the competitive landscape within the assisted tax preparation category that you likely have not seen before. Then I will share with you that same landscape translates to an opportunity for H&R Block. But first, let's talk about the overall tax industry. It's a $19 billion market where assisted tax preparation makes up the lion's share. And as Kathy detailed earlier, it's a stable market, largely driven by consumer behavior. Tax filers tend not to change providers, unless there's a significant life event, which leaves the player in this industry space to literally compete on a client-by-client basis. But against whom are we competing? As you can see here, there are only a few branded competitors in the category. We certainly pay attention to what they're doing. But quite frankly, they are not the greatest threats to our market share. The CPAs and independents combined, have 78% of the assisted market. Clearly, the largest share, and thus, representing our greatest competition. And if you break it down even further, although our brand can stretch to capture share from CPAs, our true competitors are the independents, the mom and pops of the industry. This is where we invest a lot of our time and energy. So let's talk a little bit more about just who these independents are. You may not have noticed this, but you see these types of offices every day as you drive down the street. As you know, there are very low barriers of entry to the tax preparation industry. Combine that with the fact that it's a lucrative transaction, and it is no wonder the independent market has a multitude of owners and is highly fragmented. Many of these offices will pop up and only operate from January to April. Keep your eyes open this tax season, you'll see that income tax sign in the window of the strangest places. The reality is that our primary source to the competition is thousands of small businesses in which the owner is likely completing a large portion of the work themselves and operating in offices, just like the ones you're seeing now. So how do the independents compete? Essentially, there are 4 competitive variables in the tax industry: building client relationships and scaling their businesses; developing a recognized brand that consumers will trust; as in almost all business models, price is a competitive variable, either through the structure of the pricing model or the actual price point and potentially both; and the last variable is quality, both real and perceived. So now let's take a deeper dive into each of these variables, as they pertain to our true competitors: The independents. Most independents develop their businesses through relationships. These are likely people filing their returns for the family and friends on the kitchen table. Once they tap out of those relationships and referrals, they're challenged to attract new clients. Thus, as illustrated in the graph, nearly half of the independents are completing less than 100 returns annually. These owners find out that it is very difficult to scale because they needed to establish infrastructure, such as marketing, technology and even furniture. This is why you see only 5% of the market completing greater than 1,000 returns. Developing a brand takes time and a significant amount of investment. Obviously, these mom and pops have a presence in their local community, but they do not have the marketing dollars or the resources to differentiate themselves and compete on brand recognition. Often, independents don't convey the fact that they do taxes, instead, pointing to their primary businesses, as you can see in these pictures, of typical independent offices. For most tax filers, this is their biggest financial transaction of the year, and who they have complete their taxes matters. A brand matters because it carries with it reputation and trust. The reality is, independents have names, not trusted brands. Pricing is another lever that is often used in the industry. The question is, whether it's actually a differentiator in the assisted category. Before I give our point of view on that question, it's important to understand the 3 most common pricing models in the industry. First is charge by the hour, which is used commonly within the CPA category, where the clients are more complex and tax preparation is only one of the many services provided. The second is fixed pricing, which is sometimes used as a bait-and-switch strategy, with additional junk fees added to the return. Junk fees are charges included on a client's bill that are hard to justify, such as processing fees and technology fees. And finally, there's the variable model that is based on the complexity of the return. H&R Block uses this structure, which generally acts as a standard for the industry, including independents. However, as you can see, prices vary widely in the independent category, exemplifying the low-price elasticity within the market. Owners can and do charge whatever they want. Those at the high end of the range may be including hidden and/or junk fees. And those at the low end of the range, represent those preparing taxes at the kitchen table and family and friend pricing. With such a varied approach to pricing, it's clear that independents do not use price for differentiation. They just use it as the primary means of making money. And to reinforce that point, H&R Block is actually below the median of the market. So with the relationship, brand and price not being differentiators, that leaves us with quality. In fact, the biggest differentiation in independent category is quality. And quality varies in the industry as greatly as price. Due to the small size of the independents, most need other sources of revenue to ensure they can pay their operating expenses for the full year. Therefore, it's not surprising that 70% of the independents expand beyond tax preparation and provide other products and services. However, these services vary widely, and some are not even adjacent to the tax preparation. We've seen everything from bookkeeping, to notary, to insurance, to wedding services. You name it. Many owners are just trying to keep cash flow high enough in the off-season to survive, which makes perfect sense. Or doing taxes is just a way to supplement their primary income. In either case, the multiple service offerings actually creates a lack of focus on tax preparation, translating to less training, less expertise and a lower quality of return. In most industries such as food, transportation and healthcare, quality is a legitimate high-end variable. However, as I mentioned earlier, for some tax paper, the term quality may not refer to the level of service, but instead, the level of refund. Unfortunately, it is often low quality that attracts these filers. And what I mean by low quality is that the size of the tax refund certain owners provide is greater because they are not completing returns accurately. How do we know this? Through our prospecting of independents, we have completed due diligence on hundreds of independent business owners. Our review consists of comparing our local H&R Block office returns to that of the independent, including EIC and other tax credits. We also go on site and review the documentation of the key refund generating tax credits and look to identify any unusual patterns. For example, we reviewed several businesses earlier this year that had the exact same business expense deduction at the same exact dollar amount for every client. Finally, we talked to the business owners, and it's surprising what they're willing to share with us. It becomes evident fairly quickly whether we are working with someone who has a quality mindset. In fact, we are finding that nearly 1 in every 2 prospects we review have some form of noncompliance. And 1 in 4 are knowingly committing fraud. What this tells us is that many independents are differentiating their business by providing inflated refunds through fraudulent activity. I do this for a living, and the level of fraud in the industry continues to be shocking to me. Sadly, it's only getting worse. Let me share one more example. How many of you know who the fourth largest provider in 2013 in the assisted tax preparation category? It was Instant Tax Service, and it was not a small player. They had 150 locations and filed over 100,000 returns. However, Instant Tax was shut down due to egregious acts of fraud. Not just 1 or 2 franchisees, the entire network was shutdown. Often, you will hear of fines or suspensions or both, but completely shutting down a business is almost unheard of. I want to share a couple of quotes. First, from the court ruling where the court stated that Instant Tax prepared false tax documents, filed false documents with the IRS and encouraged others to do so. And the Assistant Attorney General of the Justice Department's Tax Division stated that Instant Tax "grew large through abhorrent means." This included things such as filing returns without customer authorization and forging customer signatures. And what is terribly unfortunate is after this happened, the franchisees didn't stop doing what they're doing. In fact, we've seen prior franchisees from this brand replace their signs, switch their names, only to continue their past ways. However, though fraud and low quality is pervasive in this industry, there are honest, good businesses out there. We have had some initial success already and believe that through acquiring good independents or having independents join H&R Block as franchisees, we can achieve an attractive rate of return. Also, consolidating the independent space allows us the ability to expand and enter into new client segments, stretching our brand to areas in which we may not have been as relevant, such as ethnic and/or expertise markets. Lastly, there's an arbitrage opportunity for us to take advantage of as well. We're able to acquire independents at a 3 to 4x EBITDA while we're trading close to 10x EBITDA. Now I mentioned the fragmented nature of the independent market earlier. Our focus is squarely centered on the independents that are completing greater than 100 returns, which provides us a candidate pool of 67,000 independents, locations and 34 million returns, representing $5 billion in revenue. We feel like this is a great opportunity for H&R Block, especially since we also know that the independent population is aging. In fact, with 63% of the independents, 55 years of age or older, it's likely these owners will soon be seeking succession plans. However, these are not the easiest businesses to sell. Prospective buyers are challenged to find financing due to little-to-no fixed assets attached to the business. Additionally, these are relationship businesses, and owners want to take care of their clients and staff. And finally, almost any sale will require 1 or 2-year trailing contingency repayment. Therefore, owners need to be thoughtful on who is purchasing their book of business. For these reasons, opportunity exists in the space for H&R Block as we are a reputable, capable buyer. Another advantage for us is the synergies we bring to the table that others don't have. First, we're able to offer high-quality financial products, on which we earn strong margins. Many independents don't even offer these products today. And if they do, they make little to no margin. Second, our field management is the best in the industry. We have decades of experience in operating a company and franchise network. Next, with our footprint, we're able to provide a flexible, creative solutions by consolidating locations, selling offices and other hybrids. And finally, we have an operational infrastructure that is second to none; exceptional training, technology, software and CRM capabilities that can be leveraged for any acquisition or conversion. And the independent space is not the only opportunity in which we are focused. There's another opportunity right in our own backyard. Currently, our own network in the U.S. is comprised of over 10,000 offices, of which 60% are company operated and 40% are franchised. Generally, the company owned and operated are in the urban and suburban markets, while we prefer to franchise the rural areas of the country. And while we're not looking to materially change that balance, we're working to reacquire 650 plus core urban offices we sold to franchisees, essentially reversing a short-term refranchising strategy that was executed prior to 2012. This year, we bought back a significant number of these offices. Unlike other capital-intensive businesses, this will be a long-term win for our company, as we are able to generate favorable earnings and positive cash flow to H&R Block's financials from offices that are company-owned versus operated as franchisees. So in closing, independents constitute 48% of the revenue in the assisted category and are true competitors in the assisted market. Fraud within the category is astoundingly widespread, and many of our independent categories are leveraging it as their key value proposition. And lastly, the independent space is highly fragmented, and our ability to successfully bring the best of the independents into the H&R Block brand presents an opportunity for us. Thank you for your time today. [Video Presentation]

As I mentioned in our opening comments, I'm going to talk to you now about how we are investing in our Retail business and what's next for our Tax Plus strategy. The investments we're making underscore our deep commitment to remaining the leading player in the tax preparation industry. We are the industry leader primarily for 4 reasons. Number one, our brand awareness. At 98%, we are well ahead of any competitor. Number two, our scale. We have the fifth largest retail footprint in the country. At over 10,000 offices in the U.S., no one in this industry comes close to our reach. Number three, the quality for which we are best known, our tax expertise. We have the best, most highly trained people in the business. And number four, what keeps us highly relevant, our innovation. And these factors all combine to give us a huge competitive advantage. But we know we have to continuously improve to maintain the very high relevance of this brand, to invest in key areas to make sure we continue to meet our client's expectations. And we're doing this in 4 areas: our technology, our people, our offices and our Tax Plus products. Let's start with technology. You may not realize this but H&R Block is as much a technology company as we are a retailer. We have to be. Our clients are digitally savvy and use digital channels. Further, we understand that an effective distributed network must be reliable, safe and secure, which goes toward our larger efforts of continually -- continuously enhancing the user experience. The first technology area I'll highlight is MyBlock, a great example of how we're enabling client interface, not just during the tax season, but every day of the year. You should think of MyBlock as the client's virtual filing cabinet. MyBlock enables the client to upload and share documents year-round with his or her tax pro, to check Emerald Card transactions and balances, to schedule an appointment. And MyBlock also allows us to content market to clients with product offerings, news and other information that's personal and relevant to them. In essence, it's the glue that binds us to our clients all year long. Today, fully 5 million of our clients are using MyBlock from both retail and digital, and that number is growing. So our competitors often talk about big data but we're focused on a whole lot of little data, client data. And MyBlock is a remarkable capability that provides convenience, information and security. It's another example of serving our clients anywhere, any way and any time they want and from all platforms. And this isn't just a nice thing to do for our clients. MyBlock is having a real impact. Here are a couple of facts. We've seen a 350% increase from 2013 to 2014 in the number of documents that our clients are uploading. And during the peak filing period this year, some 200,000 of our clients were logging into MyBlock daily. Now we've also made great progress with office technology integration. We've invested strategically in our multi-channel approach for locating offices, finding tax pros and setting appointments and obtaining client feedback. And our clients are empowered, too. As an example, in retail appointment setting, clients are now scheduling over 25% of these appointments through hrblock.com in the .com app. Another example is our recently redesigned Tax Pro Finder. Clients are now empowered through a simplified experience. And this new responsive design enables clients to easily navigate to find photos and information on thousands of tax pros. And they can access local tax office pages too. So whether it's in an office, by mobile, through the web or phoning our call centers, our office integrations are matching expertise to client needs across all platforms, laptops, tablets, mobile. Now another significant improvement this year, we're also moving to a new private, cloud-based core tax platform that we call Blockworks. This is a huge step forward in the technology our tax pros use to prepare and submit returns. In our 60-year history, we've gone from doing returns with pen and paper to a single automated system, and now to a common tax engine as part of our multi-year simplification strategy. Simply put, investing in our tax preparation program enables us to innovate faster and further enhance the client experience. To be clear, we're not changing everything this year. We are phasing in Blockworks over time to ensure a seamless transition. This includes ensuring redundancy and protection of our compressed revenue model and executing a rigorous training and certification program for our tax pros. Now my discussion of technology investments wouldn't be complete without talking about enterprise data security. Data breaches seem to be in the news just about every day now. It's on everybody's mind, and we are taking specific actions, such as continuously monitoring for threats and proactively defending against them. I'm not going to go into details here, but I can assure you that we've taken very important measures, such as hardening our network and training our people to mitigate threats. Now in addition to these investments in technology, we're also investing in our people. Enhancing the client experience all starts with our people, so we set aggressive client satisfaction targets. And over the past year, we increased our Net Promoter Score more than 3 points. We are now at almost 75%, which is a great rating. But we aren't satisfied. Our ultimate goal is a Net Promoter Score of 80%, a truly world-class level of service, and one that will place us among the top retail brands. To that end, we're also investing in our bench strength, hiring more first-year tax pros and more Spanish-speaking tax pros. We've also conducted extensive training for this coming tax season on Blockworks, on the tax implications of the Affordable Care Act and other complexities of the tax code. That's 2.5 million hours of training, which is triple what we did last year. Another key part of enhancing the client experience is the physical environment of our offices. You heard us talk in detail last year about our multi-year plan to improve the look and feel of our offices, and I'm happy to report that we've made significant progress since then. Today, over 87% of our company offices have undergone a makeover, all with new signage, giving us the best-looking, most professional offices in the industry. And we anticipate completing the remaining 13% of company offices and all franchise offices within a few years. Finally, we're investing in our array of Tax Plus products before, during and after the tax event, which we believe present a unique value proposition to our clients. As I said in my opening remarks this morning, we were pleased with our performance this past tax season. In particular, we saw an 11% increase in revenue from our Tax Plus products to $432 million. We delivered with a singular focus on the client experience. The Emerald Advance line of credit is an unsecured line of credit of up to $1,000. This product is unique. No one else in the industry has anything like it. It's offered to clients from November through January. We rolled it out November 24th, and we're getting a great response. Though the Emerald Advance has not been a direct source of revenue growth over the past few years, it does offer our clients value, as it meets their specific credit needs when they need it most. In turn, over 92% of Emerald Advance clients return to have their taxes done. And because we have a relationship with our clients and have access to their information, we know who may benefit the most from the Emerald Advance. Now with the refund transfer, our clients have an easy and convenient way to pay for their tax-preparation fees with no out-of-pocket expenses. And enable -- and it enables clients without a bank account to receive a direct deposit of their refund. We sold 5.5 million units in fiscal 2014. So this has proven to be a very important product for a significant portion of our clients. Revenues from the refund transfer increased 15% to $181 million, and the take rate increased 180 basis points. Now the crown jewel of our Tax Plus products is the Emerald Prepaid MasterCard, which continued its strong performance in 2014. This best-in-class product continues to win awards for its combination of low fee structure, exceptional features and convenience. A leading consumer advocacy organization just named it the #2 best prepaid card in the industry for the second straight year. And it won Best in category Top of Wallet at the 2014 Paybefore Awards. This past tax season, we issued 2.4 million Emerald Cards, with a total of $9.2 billion in deposits. Revenue was up 5% to $104 million. And cardholder engagement continues to improve, as evidenced by increased reload activity. Total unique reloaders were up 14% in fiscal year 2014, which is a critical metric for our year-round usage strategy. This translates to the top line with 2014 revenue per card growing 13% over the previous year. Our Emerald Card strategy remains straightforward. More cards with more usage. And we're doing several things to increase its appeal like expanding our reload network and getting lower reload fees for our clients. And our clients can now also get joint cards, in which they can add 1 person to the primary card account holder's account: family, relative, friend, as long as they are of legal age. And I'm very excited to introduce, new for this tax season, a sleeker, more contemporary Emerald Card. It's no longer prominently branded H&R Block. And it's more contemporary look, better captures its status as one of the best prepaid cards in the industry. So I'm very pleased to unveil it for you today, the new Emerald Prepaid MasterCard for 2015. I would like to thank our design consultant, Brian Kaufmann, from Viking Global Investors for his inspiration on the new design. Now our fourth Tax Plus product, Peace of Mind, is a well-established warranty-like product that helps clients who are concerned about the potential of an IRS audit. Anybody who's ever received a letter from the IRS knows that feeling. Now POM guarantees our U.S. clients that we will represent them if they are audited, and it also guarantees that Block will pay up to $5,500 of additional taxes owed, if it was our error. And this isn't just for sophisticated filers. 1040EZ clients accounted for the largest percentage increase in POM take rates last year. Overall, take rates on POM increased 4 points to 24% as we improved the offer flow during the tax interview and engagement by our tax pros. Now before I conclude, I'm pleased to announce that we've added a new Tax Plus product to the mix this year. And with what we're seeing in the tax-preparation industry right now, this product could not have been more timely or relevant. It hasn't hit the street just yet, but I wanted to give you a preview of it here today. As you know, identity theft is a huge and growing problem. Javelin Research, which tracks the industry, reported 13 million identity theft victims in 2013, a 30% increase just since 2010. And of course, we have all heard about the major retailer data breaches. And that leads us to the growing problem of tax identity theft, where criminals use personal identity information to file a fraudulent tax return and steal taxpayer refunds. Over 3 million taxpayers have been impacted since 2010, 3 million. How has this become such a pervasive problem? It's because the IRS system is built around the Social Security number. And in most cases, the IRS doesn't have a way to expeditiously compare and verify taxpayer identity with W-2 information. The established system is clearly vulnerable. Just watch this clip from a 60 Minutes episode that aired in September. [Presentation]

So that 60 Minutes segment covered a lot of ground. So what you saw was a highly condensed clip of the original segment. But it captures the essence of the tax identity theft problem. So what exactly can consumers do now to prevent tax identity theft? Truthfully, not much. They can file their taxes as early as possible in hopes of beating the bad guys to the punch. But that doesn't work if they're waiting on key tax documents. They can work hard to protect their personal information, but that's often beyond their control. They can pay for general identity theft monitoring and alerts, which may be a good idea. But the truth is none of these currently protect consumers against tax identity theft, which is where H&R Block comes in. We're doing something about this growing problem and that's why we're introducing our newest Tax Plus product, Tax Identity Shield. We worked hard over the last year to develop this innovative, affordable and effective solution to tax identity theft. Tax Identity Shield is exclusive to H&R Block, and we think our clients will welcome this solution to a growing problem. Here's what our product does. One, a pretax season scan to provide awareness of tax identity theft risk. Two, custom advice on how to reduce the risk. Three, a proactive defense to help protect future tax returns. Four, early detection of any fraudulent returns submitted via H&R Block with the tax e-file notification. And five, expert guidance and support with our restoration services in the event of tax identity theft. Another interesting point in this product is that we've partnered with Equifax to enable key capabilities such as the preseason tax identity theft risk assessment. We're very excited about Tax Identity Shield and really about being able to fill a need in the market. We'll be launching Tax Identity Shield in January nationwide. So to wrap up, you can see that we continue to make significant investments in our technology, our people, our offices and in our Tax Plus products. And this is all geared toward maintaining our high relevance in a competitive market, to making sure we are well positioned for the future and that H&R Block remains the market leader. We are now going to take a 15-minute break. Please return to your seats by 10:20. Thank you. [Break]

Everybody, if you could take your seats, we will get started in just about a minute. So if you can take your seats. Thank you. [Audio Gap] [Video Presentation]

Good morning. I'm Mark Ciaramitaro, and I lead our new business and new product initiatives, including our enterprise focus on the Affordable Care Act. Since the Patient Protection and Affordable Care Act was passed in 2010, the nexus of the law has been to enable health insurance enrollment for uninsured households. Going forward however, you will soon see that the tax consequences will play an equally important role. In fact, the reality is that the Affordable Care Act has ushered in the biggest change to the federal tax code in decades. With the upcoming tax season, millions of households will experience a new intersection between 2 highly complicated consumer arenas, healthcare and taxes. This intersection will take the form of new coverage requirements, tax credit reconciliations, potential tax penalties, and associated exemptions, new tax forms in just an overall increase in tax complexity. Last year, when we discussed ACA, we outlined the law's overall objective to increase coverage quality, affordability, and access using a number of tax-base carrot and stick mechanisms, including both the individual mandate and premium tax credits. We also provided the preliminary view that a significant number of H&R Block tax clients could be directly impacted by ACA. At that time, there was and unfortunately still is, pervasive consumer confusion regarding the tax implications of this law. We also introduced our intentions to provide marketplace consumer enrollment assistance via our partnership with GoHealth. Because the impact of the Affordable Care Act on the tax code is so pervasive, we believe that the combination of ACA with taxes will create new growth opportunities for H&R Block. We also believe that we are well-positioned to capitalize, both in the tax category and with new related services. However, we are in the early stages with potential changes on the law -- to the law on the horizon. Therefore, it'll take time for this opportunity to fully unfold. One of the biggest potential changes concerns the ongoing set of legal challenges to ACA. As many of you know, there has been a history of litigation around ACA, both at the District Court and Supreme Court levels. With regard to the upcoming Supreme Court case, King vs. Burwell, a decision for the plaintiff is coming somewhat could substantially disrupt the ability for millions of household to receive premium tax credits, in addition to undermining other key ACA provisions. There is an enormous amount of talk and chatter on this topic, but frankly, no one knows what the outcome will be. What we do know for sure, is that regardless of the decision, there will be a significant tax impact into 2016. So here is our game plan for today. We will start by reviewing the coverage results from 2014 with an eye towards understanding the magnitude of people that will be directly impacted by the tax consequences of ACA. We will also share findings from a recent survey of our H&R Block tax clients regarding this new law. Then we will quite literally dive into a more detailed explanation of the major ACA tax impacts, and use a few consumer scenarios to illustrate the emotional dimension of these impacts. Next, we will lay out where we have made substantial investments in order to serve our tax clients and capitalize on this unique opportunity to demonstrate our tax expertise. We will then provide a brief update regarding our enrollment services partnership with GoHealth, and we will close with our thesis regarding what we believe to be the headline opportunities that you as shareholders should care about. Let's start with 2014 coverage status. The technology issues associated with last year's launch of healthcare.gov have been well documented. While enrollments were initially slowed, by mid-April, over 8 million consumers had submitted applications nationwide. The latest Health and Human Services reports indicate that as of November, 6.7 enrollees were paid up with their major medical plans, with about 85% receiving government assistance through advance premium tax credits. It's important to keep in mind, however, that the total number of enrollees does not equate to the total number of tax returns because multiple family members could be included in a single application. Back in April, the congressional budget office projected 2015 enrollments would climb to 13 million and eventually to 24 million. But more recently, Secretary Burwell's staff provided their forecast of 9 million to 10 million paid enrollees for 2015. HHS now believes, it will take 4 to 5 years for the 24 million enrollment target to be achieved. The real take-home message to you, however, is that as marketplace enrollment numbers climb, so too will the specific tax impacts faced by tax filing households, which is one of the reasons, we believe, it will take time for the full effects of the Affordable Care Act to become evident. Beyond marketplace enrollment, there are other important ACA provisions that are influencing household coverage levels, namely the impact of expanded Medicaid in about 27 states. In fact, a recent study indicated that, in addition to the approximately 7 million who gain coverage via the marketplace enrollment process, another 3 million to 4 million gained coverage via Medicaid, for a total of approximately 10 million. Recent Gallup poll results reflected this impact with the reported drop in the overall uninsured rate from 18% to 13.4%. At the same time, the CBO and the joint committee on taxation issued a report that indicated, even with the growing marketplace and Medicaid enrollment, about 30 million people in America will likely continue to be uninsured. Thankfully for them, the majority should be eligible for exemptions, which would leave about 4 million people potentially paying penalties. While these studies provide a useful context around the magnitude of the ACA impacts, we wanted to gain a deeper insight into how our current H&R Block tax clients were affected. So we fielded a research study in August among a large sample of both our retail and digital tax clients. We also weighted our results by age, income tax forms, and filing method to ensure a representative sample. The results from our study indicated that approximately 25% of our current clients, including both assisted and DIY, will directly confront ACA tax impacts either due to the need to reconcile premium tax credits, calculate penalties, or qualify for exemptions. Most were impacted by potential penalties or are likely to be eligible for exemptions. But this survey provided another important insight. Most experts who study ACA tend to see households in black-and-white terms that is either fully covered or uninsured. But our survey revealed a much messier reality, that almost half of affected households have much more complicated and frankly uneven coverage situations. In fact, we found that only half of households, were covered under the same health plan with many experiencing coverage changes throughout the year. I'll discuss this implication later, but in simple terms, it means many households will face multiple simultaneous tax impacts associated with the Affordable Care Act. Finally, our survey again exposed massive consumer confusion despite the law being in effect now for almost a year. You might ask, what's all the confusion about? Well, many are simply overwhelmed and mystified by all the information and frankly misinformation in the media. And those who are enrolled through the marketplace and received tax credits didn't even understand they received government assistance. As a general rule, virtually, everyone is confused about the reconciliation process. For those without minimum essential coverage, many still don't understand how penalties are calculated, let alone the exemptions process or tax forms filing requirements. Probably the most important takeaway, we heard, was that now more than ever, our tax clients are counting on us to help them understand, first, if they are impacted by ACA; and second, if so, what that means to their personal tax situation, both now and in the future. With that background, let's move on to providing a more detailed understanding of the major ACA tax impacts for the coming filing season. My intent here is to give you a deeper appreciation for what a typical impacted household might face come tax time. There are some in our industry, who would simply claim the Affordable Care Act is no big deal. While that may be the case for 75% of our client-base who have employer or government health coverage. For the remaining 25%, well, you can judge for yourself. Strap on your seatbelts, because as Han Solo famously said in Star Wars, "we are going in; we are going in deep." Last year, we told you what we thought the tax impact would be; based upon our reading of the law, but we now have an even deeper understanding based on the first wave of formal IRS tax forms and instructions released in September. I say, first wave because we continue to work with the IRS around a number of areas where we still have important questions. Based on these instructions, we can now confidently take a deep review into this specific tax implications of ACA. We have provided each of you with a handout containing these forms and instructions just in case you have trouble sleeping at night. In basic terms, there are 6 tax impacts related to the Affordable Care Act for filing households. First, there will be new tax documents that provide critical information regarding health plan coverage, and in some cases, premium tax credit payments. Next, all taxpayers will experience new questions regarding the status of each household member's insurance coverage for each month of 2014. As we discussed last year, there will be a defined process for reconciling the premium tax credits, households received when they enrolled via the marketplace portal based upon their actual household income. Those who are uninsured, for all the part of 2014, will face a new set of worksheets designed to calculate their shared responsibility payment or what we call the ACA tax penalty. Along with the penalty comes a complicated maze of exemptions that many will likely qualify for, provided they filed the proper forms. And finally, ACA impacted consumers will have to deal with new tax form filing requirements, among the most notable being, restrictions around the use of the 1040EZ based tax form. Let's start with the new tax docs. First, we have the 1095-A, which for those that enrolled in either the Federal or state marketplaces is a critical document that indicates each household members coverage status and premium tax credit payments. The 1095-A is actually a part of a new series of notices commonly referred to as the 1095 series. These notices come in the form of either an A, B, or C. A notices will be issued by the federal and state health insurance marketplaces, and you will see in a few minutes, that they are a must have filing documents. The 1095-Bs and Cs will be issued by health insurance carriers, the military, the government, and employers. These notices are voluntary in 2015, but will become mandatory next year in 2016. As with other similar notices, such as the 1098 or 1099, this information is not just provided to the household, it's also provided to the IRS for cross referencing. For this year, consumers should receive their 1095-A notices from the marketplaces by late January, and we have been told electronic versions will also be available. The 1095-A contains key information needed for the premium tax credit reconciliation process, such as covered family members, monthly tax credit amounts, and especially the premiums for the benchmark second lowest cost Silver Plan in the filers rating area. Let's now talk about how tax filers will verify their insurance coverage. As I mentioned, for the first time this coming tax season, each and every filer will be asked about their insurance coverage status. The good news is that household's fully covered through an employer, qualified private insurance or government plans will simply need to attest to this coverage. What this means is they will not have to provide evidence of insurance coverage, such as an insurance policy, and most will be able to simply check the box. Additionally, tax professionals will not be accountable for any special IRS due diligence requirements associated with verifying coverage for family members. However, understanding the type of coverage, and who in the household was covered will be critical. Because if even 1 household member was not covered for any period of time, this check-box cannot be used. Next tax season, this all changes as all filers will need to provide coverage documentation. At this point, some of you may be thinking, okay, but what's going to prevent someone from lying about their coverage status? Well, the short answer is, probably nothing at the time of filing. However, the IRS has indicated to us that they have every intention of enforcing ACA tax provisions and they certainly have legal recourse to go back and take a deeper look in the case of suspected fraud for up to 10 years. The more practical answer you will see in a few minutes, is why bother with lying when the vast majority of uninsured filers will be able to qualify for legitimate penalty exemptions. Before talking about these exemptions, we will first turn to the reconciliation process. When 8 million-plus consumers enrolled via federal or state marketplaces, most qualified for advance payments of their premium tax credit. Come tax season, it's true-up time. In order to fully understand reconciliation, however, we have to take a step back and talk about the premium tax credit, which is essentially government financial assistance intended to reduce the cost of insurance premiums for qualified households. To qualify for a premium tax credit, the household must not currently have or have access to affordable qualified health insurance. By the way, qualified means the governments 10 -- it meets the governments 10 minimum essential coverage requirements. The good news is, most employer, government and private plans currently meet these requirements. Secondly, the household's income must be between a 100% to 400% of the federal property level. The actual credit they receive, ladders up or down based on income, family size, and zip code, because it's indexed to the second lowest cost silver plan premium in the applicant's rating area. Now historically, tax credits are typically claimed retroactively at the time of filing. However, in the case of ACA's premium tax credit, it's prospective, because the credit is estimated upfront and then actually advanced directly to the insurance company for each month the applicant is enrolled. Finally, anyone who receives premium tax credits must, by law, file a tax return. If they don't, they may lose the option going forward to qualify according to HHS. Now here are the typical Federal property level income bands that households must fall into to qualify for premium tax credits. It surprises many when they see how high these income bands go. For instance, up to 94,000 for a family of 4. Also, household income for purposes of the premium tax credit is actually modified adjusted gross income, which is essentially your AGI plus tax exempt Social Security, tax exempt interest, and unearned foreign income. It also includes a taxable income from all family members, not just the primary tax filer. In case you're interested, here's the actual formula used to determine a household's advance premium tax credit amount. Essentially, it multiplies the forecast of the enrollee's household income, times an applicable percentage ranging from 2% to 9.5%, and then subtracts that total from the premium of the second lowest cost silver plan in the households trading area, matched to the applicant's age, family, and composition. Got that? Don't worry, we do. We are now ready to go a little deeper into the actual reconciliation process. Starting this year, tax filers must adjust the premium tax credit based upon their actual 2014 household income using a new form called the 8962. This process essentially follows 4 steps. Step 1 involves the determination of the premium tax credit the household was entitled to, based on their actual modified adjusted gross income on their tax return. Step 2, compares this determination to the advance payments actually received by the household, which if you recall, comes from their 1095-A. That's why it's a must-have document. Step 3, then adjusts the tax refund or taxes due based on the difference either with the repayment of the premium tax credit or an additional credit amount. Finally, for those facing a repayment, the law also created a tax liability limitation table. The table works like this. For those between a 100% to 400% of the FPL, there is a cap for any premium tax credit liability owed based on the household's filing status and income. However, household's whose income exceeds 400% of FPL will need to pay back the entire premium tax credit they received, which in some cases can amount to thousands of dollars. My guess is that you will hear lots of stories about these situations once tax season begins. This reconciliation process has even deeper levels of complexity. For instance, there is a specific interview and allocation method for spreading the premium tax credit across separate tax filing households, such as for divorced couples. And there is an alternative process for handling, those who got married during the year. And for filers, whose household members changed or got employer coverage, but didn't notify the marketplace, well the 1095-A issued to them is actually not correct and a special approach will be required. But the law is ambiguous on this point. Any household that received advance premium tax credits must file a tax return with the 8962, and if they are married, they must file a joint return, and if they don't, their tax return will be held by the IRS delaying access to their tax refund. Remember, as I said earlier, when I talked about the 1095-A, the IRS knows who received tax credits, and is therefore expecting the 8962 with their return. If they don't file a tax return they may be disallowed eligibility for future premium tax credits. And then finally, as I said, households near to 400% FPL level need to pay close attention to avoid paying back their entire premium tax credit. Let's turn now to tax penalties. As you know, the Affordable Care Act created a new mandate, which will institutionalize a new system of tax penalties for households without qualified health insurance coverage, which is applied on a per month basis. Our consumer research validated that while most households are aware of the penalty, unfortunately, their awareness was focused on the individual flat fee amount of $95 versus the percentage of income method. The percentage method most often ends up with a higher penalty amount, and for that reason is probably the one, people should be paying attention to. "Why?" You may ask. Well, let's take a look at an example. Under the flat fee calculation, a 3 person household uninsured for all of 2014 with a taxable income of $50,000 would have a flat fee penalty of $285. However, under the percentage method, their calculated penalties are actually closer to $500. The IRS then takes the higher outcome of the 2 methods, and the $500 value gets carried from the worksheets into the tax return, assuming that household does not qualify for an exemption. In sum, there are few key things to remember, we got in tax penalties. You'll sometimes hear the term, as I said, shared responsibility payment, when referring to the ACA tax penalties. That's its official name. Next year, those penalties will double to 2% of household taxable income or a flat fee of $325 per adult. By the way, the maximum penalty is capped to the cost of a national average premium for an applicable bronze level plan, which is currently around $2,500 for an individual. There's been a quite a bit of urban mythology around whether the IRS will even collect the tax penalty. But from what we know, the IRS has indicated it has every intention to fulfill its collection duties, even with some legal limitations. And if a household happens to incorrectly calculate their penalty, they will receive an IRS collection notice. Now let's pivot and talk about exemptions. There are varying estimates that 20 million to 25 million people will be theoretically subject to tax penalties in 2015 due to non-coverage. The not-so-secret reality is that most should qualify for an exemption to lower the cost of their ACA tax penalty or even eliminate it all together provided they complete and file using a new form 8965. However, from a tax filer perspective, the devil is in the details, as the challenge here is to find, calculate, and document which exemption they qualify for. Why? Well, because there is over 20 exemptions, and if you include the 14 hardship exemptions the number is well over 30, and each exemption type has different qualification requirements. There is 2 broad buckets of exemptions. Those that can be claimed on the tax return, and those that require a separate marketplace waiver application before the exemption can be claimed. The first bucket relates to the exemptions that can be claimed directly on the tax return and covers a wide range of circumstances, including unaffordability, short-term coverage gaps, government programs, residency status, and special group membership. By the way, those below the filing threshold are actually not required to file to claim an exemption. We don't have time this morning to go into depth on each, but you can quickly see how many circumstances are actually addressed. The affordability exemption is an example of one that while potentially applicable to many households, is actually pretty tricky, because it requires the filer to document that the monthly premiums of either the marketplace plan or employer health plan available to them in 2014 exceeded 8% of their taxable household income. The second bucket of exemptions includes those granted by the marketplace, and these actually have to be applied for separately before they can be claimed. Generally, households that are members in particularly religious sects or those who have experienced to one of the long list of financial family or personal hardships may potentially qualify for marketplace exemptions. Within the hardship umbrella, itself, there are 14 distinct definitions ranging from eviction, foreclosure or utility shutoff to family hardships, to government program eligibility issues, all the way to the infamous "Other" category. This is all well and good for deserving households, but the marketplace exemption process has 2 major issues from a consumer standpoint. The first is, simply lack of awareness since many of the uninsured household who experienced hardships would not have even gone to healthcare.gov to learn about them and apply. The second issue is the antiquated paper application process. Yes, I said paper. A few key points to remember for marketplace exemptions, is that each impacted household member needs to complete a 4-page paper application, which we've included in your handouts. There are specific documentation requirements for each hardship category, for instance copies of eviction notices or medical expenses would need to be attached to that application. The time period of the family member's the exemption applies to also depends on the type of hardship. Lastly, hardship exceptions are not permanent, and need to be applied for -- reapplied for each year. Here's a simplified flow diagram, outlining the steps involved in applying for a marketplace exemption. After completing the 4-part application, it needs to be mailed to an HHS service center in Kentucky. At the present time, the marketplace is claiming a 2-week processing time, but we expect once tax season begins, that the processing time will take much longer, even up to 60 days, depending upon whether that application was properly completed. Provided the application is approved, the applying household will then receive a letter containing a specific exemption certificate number or ECN. This number then has to be properly inserted on to a form 8965 and filed with the IRS in order for the tax filer to claim the marketplace exemption. Let me just state the obvious. This whole process is going to be confusing and frustrating for many tax filers. Ordinarily, clients who come in to our offices without an ECN in hand, would be looking at what we call the file now and amend later approach. However, there is some good late-breaking news, that the IRS will permit filers without an ECN in hand to claim their full refund using a pending code on Form 8965. This would avoid the inconvenience and expense of needing to come back and amend the tax return in order to claim the penalty exemption. However, the paper application would still need to be mailed to HHS. Given the complexity of the entire process -- exemption process, and the fact that few tax filers are even where they may qualify, we believe that helping our clients find and properly claim penalty exemptions is one of our biggest value-added opportunities for this coming tax season. In many cases, the value created by finding an exemption can exceed the entire cost of the tax return. The sixth and final impact concerns new ACA-driven form filing requirements. The most prevalent change is that the 1040 easy-based form cannot be used for those filers who need to reconcile their premium tax credits. These filers will instead need to bump-up to a more complicated 1040 or 1040A. The good news is that while the easy cannot be used in conjunction with the premium tax credit, it can be used in situations where the filer is just verifying coverage, paying a penalty or claiming an exemption. Finally, I want to leave you with one last thought around ACA tax impacts. While discussing these impacts, you might have gotten the impression that each impacted household would face one of these tax consequences. Ah! If it was only that simple. On the contrary, we expect many tax filers will experience multiple simultaneous ACA tax impacts. How can that be? Well, you might, for instance have a household then enrolled in a plan via marketplace in January and then dropped coverage in July, or you might have some uninsured family members that qualify for exemptions and some that do not. As a result there can be many combinations of ACA forms and worksheets that may be needed. Understandably, your heads may be spinning at this point. So let's take a deep breath and summarize these key headlines. First, virtually all of the 8 million-or-so who enrolled in the health plan via federal or state-based marketplace will receive a new 1095-A tax doc this year. Next, every tax filer will be asked about their household coverage status with those that are covered with either an employer or government plan needing only to attest using a check-box. Anyone who received premium tax credits, when they enrolled on the marketplace, must file and when they file, they need to reconcile the credit using form 8962. Uninsured households will face either a tax penalty or if they qualify, they will need to file for an exemption using form 8965, and ultimately, we believe, many families will confront multiple ACA tax impacts. What we have talked a lot about forms, check-boxes calculations, and formulas, there is another important dimension around these ACA tax impacts. I'm speaking to the confusion, frustration, and a range of emotions that consumers will experience this coming tax season as they confront this new law. We felt the best way to convey this would be to walk you through a few real-life scenarios through the eyes of our clients that will illustrate the typical range of ACA situations that are likely to occur either at the tax desk or in front of the computer. Let's start with Dan and Lucy Green. Dan works as a retail store Manager for a small employer that doesn't provide health insurance. Dan and Lucy filed using a 1040EZ in 2013. When they heard about the new marketplaces, they were excited to be able to get affordable insurance, especially because Lucy is pregnant with their first child. When they enrolled on the federal marketplace, Dan was the sole earner in the household, and he estimated their household income for 2014 to be $38,000, because that's his annual salary. On that basis, the Green's qualified for advance premium tax credits that reduced the cost of their monthly insurance premiums. Now, let's fast-forward to January 2015, when the Green's receive in the mail a 1095-A document from the marketplace that indicates they received advanced tax credit payments of about $2,700. When the Green's get their taxes prepared, they learn that because they received advance premium tax credits, they will now need to reconcile the credit based on their actual household income for 2014. And because they received a tax credit, they also learned that they can no longer use the 1040EZ form and must now use a more complex 1040. Because the Green's year end household income, however, ends up being higher due to Lucy getting a part-time job, their reconciliation results in actually a $1,200 repayment to the government, which will be now be taken out of their tax refund. This was a refund that they were planning to use to buy a much-needed used car for Lucy. Both Dan and Lucy are surprised and frustrated because they now have to put that purchase on hold. Now, let's talk about Clyde and Vicki Mason. Clyde's an independent contractor and is currently uninsured. However, his spouse Vicki is covered under her employer's plan. Together the Mason's household income is about $65,000. Even though Clyde heard about the individual mandate, he does not believe the government will enforce it; and if they do, it's only going to cost him $95. When the Mason's come in to get their taxes prepared, they learn that because Clyde was uninsured for 2014, and he does not qualify for any exemptions, he will have to pay a shared responsibility payment to the government. Clyde's surprised, he will have to pay, but even more surprised when he learns that the tax penalty will be almost $450. Clyde had never heard about the percentage of income method of calculating the penalty. The Mason's also learned that next year, if Clyde continues to be uninsured, their tax penalty will double to $900. As a result, Clyde is rethinking his plans for future insurance coverage. Here's our last case study. Michael and Tina Alvarez have a household income of about $23,000. Michael and Tina have 2 children and live in Texas, which is a non-expansion Medicaid state. Tina's mother lives with them as well, but does not have valid immigration documentation. Both parents and Tina's mom are uninsured, but their 2 children received coverage assistance from the government's Children Health Insurance Program or CHIP. When the Alvarez's family comes in for their taxes, their tax pro indicates that because both of them and Tina's mother were uninsured for 2014. They could face a $285 tax penalty, which scares them because they frankly need every penny of their refund to pay needed household expenses. However, after some digging, their tax professional indicates that they will qualify to receive a penalty exemption right at the tax desk due to their low income level, and because Tina's mom is not subject to ACA tax penalties. As we walk through these scenarios, hopefully you saw some common themes play out: Confusion and strong emotions, especially frustration, born of lack of awareness or misperceptions. Increased tax complexity with new tax form filing requirements, surprise refund impacts for those filers who count on the refund each year for critical household expenses and the reality that while calculating the tax penalty is painful, finding an exemption represents a true value-added hero opportunity for the tax professional. Hopefully, it's now evident that for millions of filers this coming tax season, it's going to be whole new ballgame. And it's a new ballgame for H&R Block too. And addressing these new ACA tax impacts has required us to make some key investments in our core operating and client support model. Let's cover these in a little bit more detail. These ACA-related investments fall into 5 categories: Training and support, Blockworks and DIY tax software, our GoHealth partnership, operations and support, and finally marketing programs. With ACA, we are looking at the biggest change to the federal tax code in decades. Fully preparing our tax professionals to effectively navigate the new ACA tax provisions is of paramount importance. Plain and simple, we are committed to making sure our tax pros have access to the most comprehensive ACA training in the industry. In fact, all told, our tax professionals will received over 600,000 hours of ACA-specific training prior to tax season, including tax theory, client experience, and extensive case study work designed to prepare our tax pros to confidently handle the full range of situations they are likely to face and then some. Additionally, we created a multilayered network of support tools and resources to ensure our tax professionals are kept up-to-date on new developments and get quick answers to their questions, especially around deeply complex areas of this law. Earlier, Bill introduced you to Blockworks, our new private cloud-based tax office software. Blockworks will also play a critical role guiding our tax professionals through all possible the ACA client situations. With Blockworks, our tax professionals will have access to a state-of-the-art tool with built-in guardrails and navigation designed to identify the optimal path for each and every client. In addition to our office tax software, we also have enhanced our do-it-yourself text products to address the full range of ACA forms including reconciliation, penalties and exemptions as well as including the best help in the industry for user questions that may emerge during the tax interview. While H&R Block has enormous expertise around taxes, we don't have a lot of experience or expertise around health insurance. That's why we partnered with GoHealth. GoHealth is a privately held health insurance services software and outsourcing company with extensive experience with developing and managing consumer-based insurance exchange platforms. They have deep relationships with 200-plus insurance carriers and have full -- fully integrated call center capabilities, including agents licensed to sell throughout the United States. From a business standpoint, we split commissions with GoHealth for any enrolled client. ACA will also impact our day-to-day retail operations. Clients who are directly impacted by ACA will likely take more tax preparation time, as well as frequent reminders to bring in the proper documentation. For clients setting appointments this year, we're going to be asking them a few new questions upfront to determine if they are impacted and if so, we will be automatically adjusting their appointment times. We also plan to closely monitor key performance metrics and operational issues tied to ACA such as average wait times and tax returns that are on hold, waiting for the client to bring in the needed documentation. Finally, given the overall consumer confusion and angst around the tax impacts of the Affordable Care Act, we intend to aggressively promote our brand and our powerful ACA value proposition to America. Our plans include employing a wide array of marketing elements and media at national scale, including advertising, direct mail, search, office signage, digital assets, local marketing and PR events. In other words, we are not holding anything back when it comes to ACA as we believe now, more than ever, consumers will be looking for tax expertise that they can trust. Now let's talk about enrollment support. Compared to last year, thankfully, healthcare.gov and the state base marketplaces have operated much more smoothly. Nevertheless, the enrollment process continues to be daunting for many eligible households, especially with respect to finding, comparing and enrolling in the right health plan, with the right doctors and hospitals, with the right deductible level and the right prescription drug formulary. That is why we are continuing to offer enrollment assistance via our partnership with GoHealth. Open enrollment began November 15. But compared to last year, the sign-up window is about half as long, lasting only until February 15. Besides the shorter time period, there's another issue with the February 15 end date. As practically, there will be many later filers who won't find out they are facing large penalties until later in the tax season. And as it now stands, they won't be able to enroll in a health plan unless they meet special enrollment qualifications. That is why we have formally requested that HHS consider extending the open-enrollment period for those facing penalties through the end of the tax season. And just as we did last year, during open enrollment, we will continue to provide free remote assistance by phone or online from licensed insurance agents who will walk clients step-by-step through the government application, help them with health plan selection and comparisons, officially enroll them in a plan and in some cases, even collect the first month's premium payment. I'm going to conclude by talking about the opportunity thesis for H&R Block. I stated at the outset that we believe this new intersection between ACA and taxes will create growth opportunities for H&R Block across multiple areas and over time. One of the immediate and direct opportunities ties to added tax form complexity for ACA-impacted filers and even more explicitly [Audio Gap] focused on creating added tangible value via our are retail experience and our tax expertise. Practically, this means addressing client questions and concerns, finding tax penalty exemptions, helping them enroll in health plans and providing each client with information around ACA -- how ACA could impact them now and in the future. By virtue of increased tax complexity and the overall confusion for a large swath of tax filers, we think the opportunities presented by the Affordable Care Act are significant. Including the opportunity to drive new client growth, whether that be from other tax preparers or DIY consumers who may be facing a more complicated tax interview that impacts their tax refund. We also see the potential to drive loyalty and retention and referrals by helping each of our clients understand if and how the Affordable Care Act impacts them in plain English. Combined with the immediate benefits of identifying valuable exemptions. And finally, we believe our enrollment assistance services extends our brand into new relevant consumer pinpoints that can provide block with additional revenue growth opportunities. In closing, while many of you are focused on the impact of ACA and the upcoming tax season, the truth is that large-scale impacts of this law will unfold over time, and key interim changes could substantially alter the outcome. Likely coming in June will be the Supreme Court ruling, but there are other impacts that we need to keep an eye on as well, including increases in marketplace enrollments both this fall and next year, which will drive reconciliation activity. New coverage documentation requirements for all tax filers, the doubling of the tax penalties due to noncoverage and impact of the employer mandate both on businesses and employees. We believe that H&R Block is set up to win with ACA. Because of our unrivaled brand strength, we will be the go-to-trusted source for all things ACA, because of our deep tax expertise and our industry-leading knowledge, training and support, because of our large pool of tax professionals operating out of an expansive national network of over 10,000 offices, because of our unique ability to serve a wide range of consumers across multiple channels and methods. And finally, because of our commitment to invest where and when we need to in training, technology, client service and marketing to serve clients better than any in the industry. Thanks for hanging in there with me today and for your time. [Video Presentation]

So I've watched Mark do that presentation several times and I have to tell you, I learn something new every time and it continues to amaze me. The complexity that this country's going to be going through in the near term. The other thing I should point out before I begin my presentation is, I think this is the first time that all of you come to our Investor Meeting, we're actually giving you tax forms to take with you. So you can thank us later for that. Anyway, I'm Greg Macfarlane. I'm really here to take my time with you to wrap up everything together from what you've heard today. We've gone through a lot of material with you, but we do have an organization and a theme to it that I'll share with you. Before I do that, though, I do want to talk about our second quarter results that we released last evening. A lot of you had the chance to read that. So with that, I'll start here with revenue. So revenues for the first quarter were $135 million. They were up slightly from the prior year. We had higher tax prep fees during the off-season in United States and Australia. Where in Australia, we actually just completed our 44th tax season and delivered another strong year, so congratulations to our Australia team. We also continue to improve our off-season usage of the Emerald Card, building on a Tax Plus momentum that you heard Bill talk about extensively earlier today. Next, adjusted pretax loss from continuing operations was $202 million, which was an increase of $19 million compared to the prior year. This increase in revenue was offset by an increase in operating expenses. This was primarily due to higher depreciation, amortization from acquisitions and planned office and technology upgrades. Additionally, compensation and benefits were higher driven by the investments in people, Bill spoke to earlier today. A common theme you've heard throughout today's presentation is that we're investing back into our business. To capitalize on the opportunities that we've discussed earlier, we're investing in our technology, our people, our offices and our -- into Tax Plus. For the same reasons you're all attracted to the stock, we think these are good investments, which will drive significant return on investment. I'll speak to more about that later. On an EPS basis, our seasonal adjusted net loss from continuing operations was $0.45 per share or $0.03 higher than the prior year. While our losses are trending modestly higher year-to-date, in a business as seasonal as ours, it's difficult to read too much into the off-season results. As many of you know, tax season performance during the fourth quarter represents a substantial majority of revenues and earnings for the year. So with that, let me turn to discontinued operations. This includes the results of Sand Canyon. Here, our second quarter net income of $1 million compared to a loss of $2 million in the prior year. Sand Canyon remains engaged in bulk discussions with the counter parties from which it had received a significant majority of asserted claims. Just last week, Sand Canyon entered into a settlement agreement to resolve certain of those claims. Due to the timing and accounting rules around this, you will see a disclosure in our second quarter 10-Q later this week, but the actual accounting itself will not be included until the third quarter 10-Q. Importantly, the payment amount under the settlement agreement was fully included in the liability recorded at October 31, 2014, of $194 million. This represents progress for Sand Canyon and though there is still work ahead and it may take some time, Sand Canyon continues to make important stride to wind down its efforts. With that, I now want to turn and talk more broadly about H&R Block. When I talk about H&R Block, for me, there are really 3 things that come to mind: First was we represent great growth opportunity for investors; second, we do that in a value environment; and third, we are consider to be a low-risk environment. Throughout today's presentation, you've heard a number of examples of those, but in summary, this is how we think about the growth opportunities. It's nice to work in an industry where you show up and every year, there's 1% to 2% more returns. This gets combined with the fact that in our industry, we have real pricing power and we know how to use it. In terms of the favorable macro conditions, the economy continues to get stronger, homeownership percentages continue to get better and this is a nice tailwind for this company. Health care reform, after that presentation by Mark, you are now more understanding of health care reform in the United States than 99% of the people. If you don't understand the opportunities that present itself, then we need to do the presentation over for you. Fourth is our Tax Plus. This has been a major part of our focus in the last several years, and we've seen good progress here. Importantly, building our successes upon last year, we move up from 20% to 24% attach rate. The continued progress in Emerald Card, we're introducing a new product to the market this year, the Taxes Identity Shield, which we're very excited about. Jason Houseworth, early today, talked about our digital strategy in great amount of detail. Block is well positioned here. We invest real capital into this business. In fact, we overinvest in this area because we believe as this continued -- this industry continues to evolve that Block will naturally benefit. And lastly, as international growth. It represents a little bit less than 10% of our overall revenues but actually, it's growing at a greater rate from the rest of the company, and we expect that trend to continue. On the value side, this company is a very profitable one. We generate a lot of cash here. So the #1 metric that we worry about is our ability to generate cash from this system. Importantly and increasingly, we're going to be talking about that as an efficient user of capital. Return on invested capital, ROE, is an important metric for us, and we generate a high level of return on the cash that we have. Next is our dividend track record and repurchased track record. We pay a healthy dividend. We've been paying a healthy dividend for more than 50 years. We also have a good track record of buying back shares smartly. As you all know, we've been in a period here for a couple of years where we've not been able to increase our dividend and/or buy back shares. In terms of the low risk, we do have this mortgage issue that we're dealing with. I just shared an update with you on Sand Canyon's progress there. My perspective -- our perspective is this is a time-bounded issue. It will take time to resolve itself. But with this latest announcement, it's a good example of that forward progress that we are expecting. And lastly, but probably most importantly, is really stable management. For many of you investors and people that know this company, as friends of ours, that have been coming to these things for many years, I think it's a good sign when you see many -- the same members of management here in the stage with a consistent view year-to-year on our strategy and our execution. In a business model that executes only one time a year for most of our clients, it is important to have a view of the medium and long term. So with that, I wanted to go into a bit more detail with you. This is a tax industry view back to 1952, and what I'm showing you here is the number of returns get filed here in the United States. The same graph, by the way, is the same in Canada and Australia. Obviously, the x-axis would be different. There is a 97% R-squared correlation to nonfarm employment. This is an employment-driven industry. And it's nice to be in a business that despite recession and wars and economic cycles is pretty resilient at 1% to 2% growth. I mentioned just in the last page, this concept around pricing power. We measure pricing power in the assistive side at 0.1. What that means is for a 1% change in price, we would expect only a 10 basis point impact on volume. This is one of the realities of our business model and something that Block has invested a lot of effort into. It is a strategic opportunity for us to take that 1% to 2% base level volume growth and be able to grow on top of that. This is a graph that shows you how people like to get their taxes done. We've shown this to you before, there's nothing new here. 60% of Americans like to get someone to help with their taxes, and 40% like to do it themselves. The emotions that drive that are listed on the right-hand side. These are very pervasive. This is a very big deal for people. It is a very clear categorization how people think about taxes. The only thing that has really changed, by the way, is in the DIY space. And I think Jason did an exceptionally good job of actually walking back through the history of this industry to show that when it started, all pen and paper to what it is today, is almost the exact same number. What has changed is those individuals that used to go to the post office, pick up the tax forms, kitchen table, shoebox, pencil and did their taxes. Those people have chosen to outsource their calculations to software, okay, initially, done through the DIY desktop, which was software in a box, but increasingly as Internet is more pervasive and people more comfortable with the cloud through SaaS based offerings, which is the online. The ability for that industry to grow is slowing down quickly as the remaining amount of pen and paper people are almost nonexistent. The only changes that we've seen in the last few years is the number of people doing DIY are driven by fraud. If it wasn't for the issue around fraud, specifically, the EIC migration, based on the unlevel playing field between assisted and DIY, the DIY industry would have actually shrunk. The overall industry we operate in is a very big one at $19 billion. The vast majority of revenues here actually go through the assistance side. You've seen that from us several times, only 10% go through the DIY space. If you look at it by competitor, though, the map changes a lot. Although Block is the largest competitor in the space, we only have 15% of the share. All the other branded competitors, which include both assisted and software are a little bit less than we are in total. Our biggest opportunity, as time goes on, is to continue to address the issue that we see in the appended side. They represent 44% of the market. And Sean did a really nice job talking to you at a very practical level about how we see that industry unfolding, the issues within that and the opportunities that we see in the short-term and, of course, in the long term, as we believe, standards will go up. Block knows taxes better than anybody. Not only did we invent this industry, but we have been the source of every major innovation this industry has seen from day one. This is an industry, as you think about it playing over the next 10 years, you have to think about how each competitor's going to shake out of this conversation, and we believe that Block is the best position. One of the reasons we say that is that we have a brand that's unmatched in the space. We have a brand awareness of 98%, which is on par with major well-known consumer brands across the country. This is a direct result of billions of dollars of investment in marketing over decades. It is the direct result of us doing hundreds of millions of people's taxes successfully over decades. If you want to compete in the tax-preparation space, you have to automatically understand how you're going to differentiate versus Block because we are the name in taxes. Next is our reach. As all of you know here in the U.S., we have about 10,400 locations, roughly 40% franchise run and 60% are company run. That number is not going to change a lot. What we have been through in the most recent years is a specific downsizing effort with our investment into Sears and Walmart. We're finished with that now. And if you went back before that, there was a period, which Block expanded very quickly our footprint, which was a mistake. We're past that now. As we look forward, we expect to grow our footprint modestly year in and year out, which will be a source of growth for us. This is based off of our understanding of our customers, our data models and our ability to execute an operational model that understands that with $40,000 or $60,000 to open up a new store, we know how to make that run successfully. The population shifting in the United States, the competitive environment continues to shift, and we have identified pockets of opportunity that will lead to some consistent growth over the next few years. Our tax professionals. This is, by the way, from my perspective, being with Block for 2.5 years as the most amazing part of this model. For our client that comes into our offices and sits down to do their work with us, H&R Block is the tax professional across the desk from them. The vast majority of those individuals are seasonal employees. This is Richard Gartland, he's the face of H&R Block. He's not just another pretty face. He's actually a tax professional. Works for us in Glendale, California. I don't know if you know this, but he actually does a couple of hundred returns per year. In fact, all the requirements we've been putting on him the last couple of years in terms of our shooting and ads and TV appearances and stuff is actually getting in his way of serving his clients, which he is, by the way, pretty upset about. We hire, train, develop, supervise, place, compensate and execute tens of thousands of seasonal people in a very fast time period. It's this time of the year that we're actually in the middle of it, and me who gets to sit on the side lines to see an organization that goes from coast-to-coast to find these people and ramp them, it was really amazing. This is the biggest barrier for any competitor in the space, to find and be able to place seasonal tax professionals that execute with quality, and Block does it better than anybody. Retentions another nice benefit about being in this industry, simply because most Americans, including yourselves, will likely only change the way they do their taxes 3 or 4 times in their lifetime. The main reason that someone changes the way they do their taxes is because of a change in a life event. You moved, you bought a home, you retired, you had a child, you got divorced. These are triggers in which you may want to reassess how you get your taxes done. But putting that aside, the average tax preparer knows, with some degree of certainty, 60% of their clients are going to come back next year, which is not a bad business to be in. As you can see here, Block actually does 70%, which is a full 10 points higher than our other branded competitors. This is a direct result of all the investment we make in our people, and our brand and how we execute with service. It's something that we are very proud of. In the DIY space, we are investing a lot of money here. You saw a lot of the specific examples of that today as our journey continues here. We are going to continue to overinvest in this area because we believe that Block is a very good alternative for many Americans to do their taxes. As a reminder, we are the only company that actually says we just want to be here when you do your taxes. We're agnostic to how you want to do your taxes. Now me, as a CFO, of course, there's an economic difference between the two. But we're in this for a lifetime, and we think it's important to have a solution that starts in the DIY and goes all the way over to assisted and all the spaces within -- between them. We believe that in the next few years, that competitive environment you see in the circle of chart on the right-hand side is going to change, and you're going to have to think yourselves who will be the winners and who will be the losers. We obviously think that Block will be one of the winners. One of the main things happening in this industry is this introduction of pricing. So for the first time last season, we saw the main competitor in the industry turned to pricing as a competitive differentiator, and we believe that has short-term and long-term implications for this industry. Historically, within the segment, there has been of value subsegment and a premium subsegment. That is now going to collide, and we think turn into 1 segment. Okay, Block is well positioned for that. On the higher end, these are the people that have the more sophisticated returns that typically pay more for their software. What we see from the industry leaders, they are putting the price up fairly materially in certain areas to be able to afford dropping the price in the low end. We also think that Block will benefit, not just to our DIY potentially, but even some of our assisted clients -- assisted maybe more of an alternative percent of DIY clients. Next is international. So I reported earlier on Australia, so I'm not going to touch on that too much. In Canada, we're about to start the same tax season. Roughly in Canada, as we do in the United States, and we've been seeing good growth from that team. The main focus for Canada in the medium and long term is really to become a presence in the DIY space within Canada. You probably don't know this, but Canada has been, for Block, about 1% market share in the DIY side, with the main competitor in the U.S. being the largest provider in Canada, too. That's over -- so Block is now entering the software DIY space in Canada and it's a medium- and long-term investment for us. There's other opportunities that we presented here, both in Brazil, India and expat. And for us, these are smart, long-term investments. As I said before, the best time to plant an oak tree was 100 years ago or today. We've been in Brazil and India now for several years. We continue to invest money there because we think there's long-term investment or long-term return. The amounts of money that we're talking about, however, fairly modest and measured in a few million dollars per year. But those Economies are changing quickly, and we think that Block has a long term solution that will help its citizens and the government navigate an increasingly complicated tax system. Tax Plus is a very important part of our overall strategy and really starts with the foundational nature of our relationship with our client. Most of our clients will come in to our office and spend up to an hour with a tax professional sharing with them intimate financial information about their life. It is a trusted relationship. 85% of our clients walk out with a big smile on their face because they're getting a refund. And we have learned over the years that if you have the right financial products, you can add value to the client's life and make some money at the same time. We've had good success in the last few years as we focused on Emerald Card and Peace of Mind, in particular, but never forget that Emerald advance and refund transfer are very important ways that we add value to our clients' lives. We're happier for this year, we have a new thing we can add value to their lives on, which is the Tax Identity Shield. This is an important product that's dealing within a very specific issue. Last year, as you saw from our chart in Bill's section, there were over 3 million individuals whose identities were stolen and someone else filed their tax return on their behalf. This is a problem, and we have a solution. Next, specifically, is the Emerald Card. And I've always believed and I think, as you heard from Bill, that this is really the crown jewel within the Tax Plus suite of products. The #1 reason I believe that is because there's been the fundamental shift really since the 2008 crisis and how Americans need to get financial services. Many banks are looking at their client base and saying that we can no longer make money on these individuals, we're restricted on the fees we can charge them and they're pushing them out of the mainstream system. Block's clients, about half of them in total, are considered either under-banked or not banked at all. And yet, these are individuals that still need to have access to buy airplane tickets and paying utilities and living their lives. And that's why this debit card product has been such an explosion in the last several years and Block has the third largest program out there: NetSpend and Green Dot are 1 and 2 here. We've worked really hard to improve the features and functions of this product to make it appeal to clients so that they can use that as their year-round card, and we have had some good success here. As you can see in the bottom right here, we've moved our revenue per card 2 years ago from $36 a card per year to last year at $44. That's almost a $10 increase in 2 years, and we expect that trend to continue. We don't know if we'll ever get up to entitlement. So if you look in the table above that, the revenue per account that a Green Dot or NetSpend gets, which is in the low 100s. It's unlikely we'll get into low 100s, but I think it's very realistic to expect $50 or $60 or plus dollars as we continue to develop this product. So next, I want to talk about the bank. I know that Bill talked about this right upfront, but I want to make a few things clear to you. One, we are going to exit the banking system. We're focused on getting it done. We believe, second of all, that the transaction we presented to the OCC, with our partners at BofI, is a good transaction and its merits will be approved. We have to be patient. The point at which we have more information, as we have done to date, we'll get on the phone and have a conversation with you. We cannot predict what the regulatory time line is because that's not the way it works. The ACA and the tax care -- and the taxes in the United States are intersection point this year, and so I actually think the graphic here is perfect because we're standing right now in the middle of that. Up until this past year, ACA has been a notion. It's been an idea. It's been a concept for most people. But for the first time when someone sits down to do their taxes this year, will be when they have to sit down and face into the realities of their situation that relates to health care, and this situation will only get more complicated as the next few years unravel. People will have new documents, they're going to have more questions, they're going to have more forms to fill in and this is a great opportunity for H&R Block to demonstrate the value that we bring. We are investing real money in this area. You've heard a number of examples from Mark, but as a CFO, I'll tell you that this costs real money. And the reason we're saying investment is very specifically, this is not an expense for us. This is something that we believe will have short term, medium term and long term return for us. As you've known, for those of you who followed us last few years, we've also invested money last year and the year before, and we thought that was a good investment then and we think it's a good investment now. When this investment pays off, what we think about will translate are these following factors: New client growth. Based on the description you heard from Mark, do you think it's likely that people who go to other assisted-tax preparers, especially a lot of the ones that you saw from Sean in those pictures, are not going to be satisfied with the level of understanding that tax professional may have? The fact that their return changed a lot? We think some of those people are going to come talk to us. We think a number of people who are going to sit in front of their computers, because that's what they are normally used to doing and are normally used to handling their taxes and change in the tax law that way. For the first time, they say, "My return were changed in a more amount -- larger amount than I ever expected to do, and I don't understand why. Because for me, I was counting on that money. So maybe, for the first time, I'm going to talk to somebody about that." And we want Block to be well positioned for that. Of course, there's a third pool of people, which are those who have not been regular filers who are now, because of the rules of the healthcare reform, required to file. For what it's worth, we don't think there's a lot of those individuals, but there are some individuals that will fall under that category. All the investments that we're making in all the different areas I just talked about in the previous page will have benefits. We think our current clients will see that and will become more loyal. We think as we attract new clients who maybe sampling us just for 1 or 2 years may see the value of H&R Block. And so we think that over time, they will also be loyalty retention benefits. We are a value-based pricing system, which you can also think of as a form-based pricing system. We showed you a number of new forms, we will be charging for them this season. We will not be telling you how much that is because the reality is, a lot of the competitors are listening to this call right now, want to know what we're charging in and they'll take their position off of that, okay? There is pricing opportunity here for us for sure. And lastly is enrollment services. A number of people are very confused by the complexity of selecting health care. If you've ever had a chance to go on and look at the health care sites, you'll only knew about 5 minutes to realize. This is a very daunting thing for many people. Should I go with the silver level? Should I go with the bronze level? What did they spend last year? What am I may going to spend this year? What's my co-pay amount going to be? I don't understand why there's so many options here. We think that Block is a trusted source and we've validated that through our research. Our ability introduced clients to -- as additional value add as a way for us to help them and, of course, make money and this is the partnership with GoHealth that we're very positive about. GoHealth has been a good partner, and we expect to have a lot of opportunities as we look forward. So with that, let me switch more to the financial overview of the company and really start with some of the basics. This is just a graph that goes back to 1996. What you're seeing here is our pretax earnings. Generally, a good story, I mean, especially in the last few years, as we continue to work on this. Last year, we increased our pretax segment earnings from 2012 to '14 by $162 million. It's a good story. Our EBITDA margin, which is something I get a lot of questions on, I thought I'd addressed that, but everyone kind of knows we did last year, we reported 31% EBITDA margins, which was up from the year before and dramatically up from the year before. So as you can see from 2012 to 2014, we've increased EBITDA margin by 5 full points to 31%. If you actually take that number and compare it to the S&P 500, or we've also shown here the consumers index, we say we have envious margins for a reason. So these are the average S&P EBITDA margins, which are reported at, typically, in the high teens, 19% or so. Not a bad business to be in. The other thing that I talked about is an expected range of margin with you. And up until this past year, I've talked about a range of 27% to 32% as a range. We've done a lot of work on that and unfortunately or fortunately out of that, there's been a minor change to that model. We're now going to say 28% to 32%, for what it's worth. This page shows free cash flow and so the -- I'm sorry, the total graph actually shows operating cash in total and from that, you have CapEx. As you all know, we've been spending a little bit more in CapEx. Our normal expected range in CapEx is 2% to 3% of revenues. That's ticked up specifically, and I'll address that here in a page. Once we get past CapEx, of course, we have a dividend that we're very proud of paying. We take that out. But even then, we still have a lot of free cash flow. Free cash flow is a very important metric for Block and one that Bill and the management team are very focused on. Next, I want to talk, actually, specifically, about our CapEx investment. We do, as I said, expect CapEx historically to be about 2% to 3% of revenues, which reflects a mature business model that also is a service-based model, whose main investments typically are furniture and computers and software, but nothing in a material sense like many other industries. We do expect CapEx, again, this year to be about 5% of revenues. But having said that, and I'll talk about this at the end to confirm it, we expect that the tick back down to a normal range. Now at some point, as you all know, there's a difference between the way the cash gets spent and the way it gets accounted for. And so the other line shows you depreciation and amortization. And I want to be clear that we expect a big step up in depreciation and amortization this year. Last year was $160 [ph] million. This year, we're expecting at $165 million. In addition to the elevated levels of CapEx in the last few years, there are 2 other reasons why that's going up. Secondly, is the fact the nature of the assets that we're buying have a shorter lifespan. And so as you can expect, the amortization, depreciation tables are a little bit more accelerated. The third, and actually probably larger driver than the second one, is the fact we've been actually buying back a number of our franchisees is here in the last year. In fact, this year, by the time it's finished, we'll expect to have invested over $100 million in buying back former company territories that we refranchised and are now buying back. We believe that's a good solid investment, but it has a depreciation and amortization impact on the short term. I mentioned this earlier and it's a topic that you'll be hearing from us increasingly as time goes on, which is return on invested capital. We think it's a better metric, but it's very similar to, obviously, ROE here. And we've shown you back to 2009, per year, what our ROIC is, so last year, reported 25% return on invested capital. By the way, this is with the well-capitalized bank and, the fact, we've been building up capital, okay? It's a number that we're focused on. When you make that -- and you continue the story and really talk about what's the inherent cost of capital and, of course, we do this math on a regular basis, it's one of the things I get paid to do is worry about how to optimize our cost of capital, you can see us, we're typically right around 9%. This is a very good investment return for people, and something that we're very focused on. And another thing I wanted to do on ROIC is provide some context for you here. So this slide actually shows you Block, we're in a green bubble. So 2013, and we have to do this on calendar year not fiscal years, 25%. The red circle represents the average ROIC for the S&P 500 and the bar -- the top of the bar is the 75th percentile and the bottom bar is the 25th percentile. So we actually will now talk about our speed [ph] having enviable ROIC margins and this is the basis for that conclusion. This is a good investment. It's a good, efficient generator of -- use of capital to generate the returns that we do. Next is dividends. As you all know in the last 2 years, we have actually been prohibited increasing our dividend. Right now, we pay $0.80 per share per year, which represents based on today's shift share price, roughly 2.3% yield. Historically, we've always been higher than the S&P 500, which I don't think is a bad thing for a mature company that generates this level of cash flow. At the point at which we exit the bank will be a chance for us to reexamine our dividend policy. Next, which is a little bit of the building on the concept of dividends is also the concept to share repurchases. For the same reasons, we've been prohibited from increasing the dividend. We've also been prohibited from buying back shares really for the last 2 years. If you put that aside though and really look since 2012, between dividends and share repurchases, we've actually returned to you $1.2 billion, which for a company that has a market capitalization of $9 billion is not a bad number. The other thing I like about this chart is we've indicated in the bottom line the average price we bought those shares back. So if you look back in those 2 last windows in '12 and '13 when we were buying back shares, we typically bought them back about $14 or so. Given the share price right now sits in the low 30s, mid-30 range, that wasn't a bad investment. Importantly at the point in the future where we may have the ability to buy back shares, we will always look to intrinsic values as a guideline about efficient capital and ways of optimizing value for you. The broader concept of capital allocation is a simple model. I've shared this with you before, but just to reiterate, Job 1 for us is to make sure we pay the bills. This is a very profitable business, and we need to make sure that we continue to invest back into it. So step 1 is to making sure that we fund the operational liquidity needs of the tax business. Once we get past that, we do think it's a smart investment to invest in the future. Today was a great example a number of those investments in real life. I want to be very clear with you though from a financial perspective. Many of these investments, in combination with the fact that we get to do business once per year with many of our clients, have multi years to pay back. They're smart investments, they have multiyear paybacks, but they do cost money in the short term. Once we get past the strategic initiatives, we, of course, then support our dividend. Our dividend payout ratio is approximately 45%. After that, we've always had cash left over. We have historically -- traditionally bought back shares, but obviously -- but the other thing is at this point with the bank, it really is a moot point from what we would do at this point. Job one for us, really from a capital perspective, is to effectively close this bank transaction and then we can talk about what level 4 will be. Another idea that I get a lot of questions on so I thought we put a slide in today is really just talk about how we align value with you, our shareholders, with the management team you see here on the stage. We are a medium and long term based business model because of the nature of what we do, and we've tried to do -- work hard with the board to really understand what the right way to compensate is. On the left-hand side, you see the way that the CEO gets compensated and the right is myself and my colleagues. There's a bias here towards the long term and I think that's a good thing. Now in closing, I have 2 last slides for you, specifically, first is a market outlook and then the second one will be an H&R Block outlook. On the market outlook, we do not know when the tax season will start this year. The IRS has not yet communicated that, but we do expect it to be late January, which is in line with the last 2 seasons. For many of you who follow tax season for a long time, the tax season has traditionally opened in the middle of January and it's really just been in the last 2 years that it shifted to be the end of January. We think that's likely to stay more permanent in nature. Why that matters for us is because our fiscal third quarter ends the end of January. So the implication of this is the majority of our transactions -- our economics and accounting will now be in the fourth quarter. The next thing we want to talk about is what our expectations over the tax filing increase. It will be 1% to 2% in the industry this year, really based off of employment growth. However, within the 2 sub-segments, we think the assisted side will grow somewhere between zero to 1% and the digital side will be 4% to 5%. For the next few years, past this year, we continue to expect 1% to 2% overall. We think assisted will continue to be around 0% to 1%, but the digital will continue to moderate as the pen and paper filers continue to disappear. Last thing on this page is really about complexity, the complexity in tax law changes. This year is the heart of complexity when we deal with ACA that will, of course, unfold to the next few years. We also talk a lot about immigration reform and some other pieces of legislation. We also, by the way, have to worry about state levels, who increasingly or using the tax code as a way to generate additional income without actually increasing taxes. We think complexity is likely to continue, not simplify. How much, it's hard to tell. So with that, let me turn more specifically to H&R Block here, and I'll kind of do this line by line with you because I know a number of you like this from a model perspective. So first, our compensation and benefits. A lot of the investments that we're making that you heard about today is really about people. We are increasing the number of people that are working for us and we're paying them more. You saw that a little bit here in the second quarter and that trend will continue. We expect this year for a dilution of roughly $0.04 a share. Once we get past this year, which is really the height of some of these investments, it will then moderate back to typical wage inflation, which would be 2% to 3% and we wouldn't really spec it out at that point in time. Secondly is training costs. As you heard from the ACA, but also this new system we're putting in, Blockworks, we're expecting and are seeing a big increase in our training budget, which, again, is an investment in our future. That specifically will be a dilution this year of about $0.05 per share that will moderate over the next few years to $0.02 to $0.03 of dilution. Those 2 things, in combination with a number of other things, which includes of course costs from productivity work that we're doing, will result in a drop of our EBITDA margin from last year of about 31%, we expect it to be about 30% this year. Just to be clear, the compensation and benefits and training costs I've outlined are included in that number. Once we get past this year, we continue to believe that EBITDA margin percentage will be somewhere between 28% to 32%. I want to be very clear on a major point here. Our objective is not to have EBITDA margin continue to grow by itself. Our goal is to get revenue to grow at a greater than 4% rate. And we're prepared to invest productivity back into getting that number to be more sustainable over time. That will then have natural margin expansion at that point in time. A lot of what we're doing is the cost we're taking out of the company, we are reinvesting back in the top line growth we think will pay back over the next few years. Next is CapEx. I talked about this earlier, but just to confirm, we expect this year to spend about 5% of revenues on CapEx, but that will go down here very shortly to 2% to -- 3% to 4% of revenues. And depreciation, to confirm the number for this year, we think somewhere between $160 million to $170 million. That number will stay elevated because of the 3 reasons I mentioned earlier all the way through fiscal year '19. This is one number that we see have several models a little bit out of sync on, so we want to be very explicit with you today on. Next is interest expense. Many of you know that we had a medium term note that was due here this October at a principal amount of $400 million. We chose to pay that down and that will result in interest savings for us this year. This ultimately, of course, gets wrapped up into what does our capital structure look like in a world where we don't have a bank. We don't have the answers to that right now. We felt, given the fact that we have an abundance of capital available to us, refinancing some debt just to say we're refinanced, it wasn't a smart thing for you, our shareholders, and that's why in the short term, we chose to pay down. It's not -- by any means, you shouldn't read that as a permanent change in our capital structure. Next is our tax rate. This year, we're expecting our tax rate to be somewhere between 35.5% to 36.5%. That is now going to be 3 years in a row where we've been in and around that range. Importantly, though, this year and the previous 2 years, that was really driven by a number of onetime events that we were able to structure and realized, which had good economic impact, it also allowed us to repatriate cash into the U.S. in a very smart way. Having said that, our long term objective is to focus on our base tax rate of 39% and bring that down. And we do have a number of things we're doing to bring that down. And at some point in the future, I'll talk to you more specifically about that. And then lastly, just to confirm, I think the obvious here, because of our inability to buy back shares, we expect the number of diluted shares outstanding to be about 278 million which is no real big change, and as we look out past this year, it's certainly to be contingent on the bank sale on the capital allocation. So hopefully, that helps from a more model perspective. But really just in closing, I think it's important to summarize what we talked about with you today. We think that Block represents a great growth opportunity, provides real value to you along the way, and generally, we think this is all done in a low-risk environment. Thank you, again, for braving the weather, spending your time with us this morning. We're going to take a very quick break, put some chairs up here and then open up for Q&A. So again, thank you.

So we are set up here and we'll get started here in just 1 second. Just wanted to quickly remind everyone that the slides for today's presentations will be posted to our Investor Relations website later this afternoon and the transcript will be posted Monday. As we come around, so we will have microphones for all those of you who are asking questions. We just like for you to state your name, your company and then ask your question. We'll call on you at that time. Okay. So if you have a question, just raise your hand, we'll come around and get you. Scott?

Scott Schneeberger with Oppenheimer. I guess we'll start off with the news of last evening with regard to Sand Canyon. Greg, could you just elaborate a little bit more on that? I don't think it's fully understood what the development is that you reported last night. So any further color will be helpful.

Yes, so it's an awkward time-line because it kind of happened after the end of the quarter, but before we released the quarterly report. But that doesn't really matter. What matters is obviously Sand Canyon's making forward progress on this issue. We are restricted in actually the specifics in which we can talk about, so unfortunately, I have to be a little bit vague. But specifically, there was a material development from a settlement with a counter party, that was involved from a [indiscernible] warrant claim, in our view in a positive way. I can't quantify that other than say it was a material amount of the reserve and the actual reserve in itself was fully contemplated in the reserves. There's no broader implication of the reserve amount.

And just to follow up. I'm not sure if you can answer this, but it represents past claimants and those who may still be pursuing. Should we infer that this would cover all as of this date who are putting forth claims, and therefore, could be a permanent solution? Or would there still be incremental opportunity for others once this agreement is concluded?

So let me backtrack a little bit if that's okay. When we had shared this with you, which is probably 1.5 years ago the 6-year statute of limitations, which is what we believe is a matter of law has well expired at this point in time. So any new claimant that may show up at this point will have a very difficult time and the reality has been really no new claims to talk about. So really what this issue with Sand Canyon is focused on a limited number of counter parties that have a asserted claims that Sand Canyon felt was productive to enter into these towing [ph] arrangements, which was a way to stop the clock, and what we've announced yesterday was really one of those situations resolving.

Thomas?

So there's been a lot of chatter in the investment bank community about immigration reform and the potential benefits to you. You didn't touch much on it. Can we just get a little more -- couple of more thoughts on it?

So couple of things on that. First of all, the President came out with that speech a couple of weeks ago. There's a lot of conversation about that whole area. So -- excuse me, we're still watching that to see what that is. What I wouldn't say is I think we're really well positioned here because we are the #1. [Audio Gap] We are the leader in terms of the number of Latino returns that we do today. We have made a big step up over the last 2 years in terms of the number of bilingual tax pros we have. And I think similar to ACA, we had anticipated that something like this would come. I do think this will happen. I think it's to the benefit of, frankly, both parties, that something happen before 2016. But specific to the proposal that came out a couple of weeks ago, we're going to wait and see where that settles out. But we think, in general, this is going to be a net benefit to us.

If you look at the details of their announcement, it's hard to understand how there'd be a direct benefit this tax season, specifically.

And then follow-up. So on the bank sale, I mean there's been some chatter that the increased scrutiny of prepaid debit cards by the CFPB, and maybe some other regulatory changes is what's slowing down the process. Can you answer that comment or those thoughts?

Greg, help me out if I don't phrase this right. I don't think it has any impact on the -- that's the CFPB and we're dealing with the OCC.

The CFPB guidance just came out. Obviously, we looked at it in detail and the good thing about product is we are pretty much in full compliance right now. There's always been broader concerns, in general, about debit cards, but specific to our application, we think they're independent.

All right.

And there's no increased scrutiny by -- on any of your other financial products, or you think any changes in regulatory frameworks that could have an impact?

I couldn't hear the questions.

Just in terms of changes in the regulatory process, on your other products and on Emerald Advance and Emerald One, and I guess, refund transfer. No changes in the environment that should be slowing down?

I mean these has been regulated for a number of years. We're operating the bank. Obviously, we're operating all those products. So no, I don't see any change to structure of our products or that this has any impact on the pending bank transaction.

And just to be clear, I mean, I completely agree with Bill. I mean, we don't think there's an issue. But we've said very clear, to the regulator -- if there is an issue, you need to tell us because and we'd be happy to change the product very quickly to accommodate that.

And the regulators have said anything to you?

There's been no request to do anything.

As a reminder, if you don't mind, state your name and your company before asking the question. That'd be helpful.

[indiscernible]. Could you discuss the decision-making factors and the relative economics between buying an independent, taking in a franchise and adding a new store, first? And then secondly, can we assume that following the '15 tax season, you will have commensurately more excess capital relative to the $850 million to $1 billion that you discussed previously?

So Greg, why don't you -- I realize it's in Shawn's area, but I think this is more a financial question. So why don't you take that and Shawn, if there's anything you want to add at the end. Why don't you let Greg lead?

Yes, I mean specifically the first part you've got, do we open a new store? Do we buy back -- or do we buy an independent buy back a franchise? All 3 represent compelling financial returns from our perspective and one thing about us right now is we have an abundance of capital. So realistically, on the second of the -- on items 2 and 3, it's really -- well I should say really on the independents it's really a quality issue, so we work hard to find a limited number of deals because the quality is such a big issue for us, the franchise really is a onetime opportunity. This was a refranchise strategy the company pursued several years back. That was mistaken. We're fixing that and we're pretty much fixed at this point. So that's kind of close as an issue. In terms of opening up new stores, what we have learned from our history of opening up stores is slow and methodical is better than fast and hasty, because the operational structure, the quality tax professionals, the supervision of the district managers are very important. So we're going to be methodical and slow in that area, and as we continue to develop this as a muscle, we'll talk about maybe going a little bit faster.

But if the company is within 5 miles of 85% of the population, is it fair to say that acquiring independents is a higher priority than opening new stores?

It's going to be a combination of the two. And this is actually when Kathy did a really nice job of talking about how we're taking our data and understanding at a much level of greater detail with better analysis, and we're able to identify sides of the street corners, what part of town -- we're able to extrapolate projections of population shifting and have a much more finite view of opportunity. And when we identify opportunity, you have to be growing new store, do we buy a local entrepreneur or some combination of the two.

And the thing is, in the retail business, trade area has changed and the like, and with the large footprint we have, you are correct, we are -- we're in a lot of locations, but we also want to be where populations expand. We certainly, with the changing demographics of the country, want to be in certain locations. So there's still opportunity for us to grow the footprint. But I think Greg's point is the right one, which is we don't see and we don't have a dramatic, "I'm going to come out with a number" and make sure you get that number. I think it's better. I think we've really evolved, similar to what we talked about in Shawn's area with the -- what we call the acquisition and development process, our real estate process is much more sophisticated now as we go forward. So I think we have a good sense that there are incremental opportunities. Obviously, from a net perspective, we pulled out of Sears and Walmart and we think that was the right decision on every level.

Gil Luria, Wedbush Securities. In terms of your vision for how the digital market is going to evolve. You talked a little bit about the fact that Intuit is bifurcating, it's lowering the price on the low-end, raising the price for a new chunk of -- new type of filings. But I think your commentary was that you expect in the future for the categories to converge. Could you explain why you think that would happen, and if it does, and if the category gets even more bifurcated, how does that impact your vision?

It's definitely based on the idea that price is no longer a differentiator, because if you look at the value competitors, there's very little to them except price and that was why I think I said it 3 or 4 times and I said these are really web for -- tax forms as a webpage. There's very little more than that. And so you might say that that is of value to me if it's the lowest price, but if price is no longer something that differentiates, then my view is that those consumers have the same expectations at that point as the premium consumer. And then to your point about the bifurcation of the market leaders pricing strategy, that pricing strategy last year was used in online to both have a lower entry-level price for simple filers and then to the charge more for the more complex. And we're seeing it again in desktop. This year, the desktop SKUs have already launched. There in some stores, but they're already online, and if you look, there are multiple changes in the basic and deluxe product SKUs for the market leader, but the basic is probably the most pronounced and it's the example that I'll give you, but that product was $29.99 last year. This year, it's opening at $14.99. But it's only 1040EZ and 1040A. The schedule A and the 1040 was taken out of the basic product. So if I go in and buy that, I may see it as a good value, but there's a lot less there. At $14.99 now, if I'm a schedule A user, which 30% DIY-ers are, then I'm forced to upgrade to the $59.99 deluxe product. So that's really why I believe that in both the value and the premium that there are changes going on that leave us very well positioned, Gil.

Last year, the result of Intuit taking this strategy, was that they had a double-digit volume increase, but revenue per filing for them and by definition, for the industry came down. Aren't you concerned that, that's the trend going forward if they continue on this strategy?

Well, I think Bill said that we look at our own metric around growing. Tax Plus revenue is our primary objective. We've gained share in revenue 4 years in a row. Where I view the categories going is you've got to do both. I think that in order to lead in this area, you're going to have to do both and price as a lever is only really a onetime shot.

Anj Singh from Credit Suisse. This is for Greg and Shawn. I think I heard you guys say you're looking to acquire 650 franchised urban centers. I was wondering if you can discuss what sort of pace you anticipate that rolling out and if you can quantify a revenue opportunity there. More importantly, I was wondering, were these stores originally company-owned, then franchised, now company-owned again? Sort of what are the decisions that have driven that back and forth?

So why don't you guys -- why don't you start, Greg?

So I'll give you a bit of history. Block, as it began to expand 50 years ago, really said we're going to control the cities and the suburbs and franchising is the right solution for rural development. And there's real good reasons for that: Our average franchise only has 1 or 2 stores because the distance between them is 40, 50 miles. Husband runs one, the wife runs the other one. We find real synergies of management and control by being in the suburbs and cities. As times gone on, obviously, suburbs continue to expand. 4, 5 years ago, there was a decision that in some of the smaller markets like Raleigh, North Carolina, Scottsdale, Arizona, Springfield, Missouri, to take that city and its suburbs and sell them to franchise. As a gain on sale opportunity that obviously we didn't think created real value. That was a mistake from our perspective. Our franchisees do not run the stores better than we do. We believe that we can actually run a little bit better than they can. We don't have to put a lot of capital into it. So we're going back and looking at all those sales and saying, we think there's opportunity for us to create value here. This past 12 months, we've actually gone back and taken care most of those refranchising that happened, and so as we go into this tax season, not all them but the majority of them that were refranchised 4, 5 years ago are now back part of the H&R Block company system. So that means there are few sort of this transaction to go next year. We're not going to quantify much more than $100 million for now. I think at the end of the tax season, we'll give you some more information on that.

Got it. And as a follow-up, I'm not sure if I missed it, but at this juncture, do you have any better thinking around the incremental leverage opportunity that you've talked about, or is that something that's still too early to discuss?

You're talking about the leverage for the whole company?

Yes.

Yes, I mean the answer is, unfortunately, similar to what we've talked about before, we're a low investment-grade rating rated company. We spend a lot of time thinking about that. We've announced publicly that we think there's value in maintaining that investment grade rating. We haven't given very specific guidance what exactly that means other than we want to maintain that investment grade rating post the bank transaction.

But we have said that upon completion of that, the board and I have agreed that we're going to -- we will -- we were taking on incremental net debt. So we've talked about the excess capital and the incremental net debt and that's really the position we've taken at this point.

Michael?

I'm Michael Millman from Millman Research Associates. Kind of following up on some of the questions, particularly, the franchisee. Can you give us an idea of what the free cash flow is for a franchised system as opposed to an owned system?

Are you talking about from the company perspective, Mike?

From a company perspective.

Well, the economics are different. I mean right now, Block, on a franchise agreement, typically has a 30% royalty off revenues. We do incur costs around that, so it's not just doesn't go right to the bottom line. In fact, we've spent a fair amount of money on supporting our franchise. When it comes into the system, there's an initial outlay to buy that, but the ongoing fixed assets are relatively modest. You've seen 2% to 3% of revenues is the right model to think about. So we're trying to balance revenue growth at appropriate levels of margin, which translates still to superior ROIC, and so when we are well above our cost to capital, we think that's a compelling return for investors of excess capital.

And I think the other thing I would add in term of this decision, I mean, in the simplest terms, we do think that there is operating efficiency that having franchisees focus primarily in rural areas, while the company focuses urban and suburban does create a lot of efficiencies of management in the system. And on top of that, with the margin structure we're fortunate to have in this company, the ability to get 100% of the revenue from a company perspective, yet still return a very -- have a very healthy return at the bottom makes it pretty attractive for us equally to lean to the company side versus the franchise side. Having said that, 30% royalty rate with the efficiencies of them operating in small towns and communities really is a great combination for us. So a lot of times, people ask about the mix, we think the mix will stay, generally, how it is today.

And to change the subject a little bit, price -- can you talk about what you see over the next few years as your revenue per return, excluding some of these extras that we discussed today?

You want to take that, Greg?

Yes, I mean we've talked about this. We have pricing leverage and synergies are one of the benefits. We talked about the price last [indiscernible] number. What we have realized in the last 10 years at Block is greater than the rate of inflation. We're not going to give specific guidance for competitive reasons, but you should expect greater than the rate of inflation from pricing going forward on -- just all things being equal.

Can we go back to Scott.

Scott Schneeberger again from Oppenheimer. Two if I could sneak it in. One on Identity Shield. Its new, it's differentiated versus your peers. I'm curious, what type of revenue opportunity, I know you may not want to speak to this year, but over the longer term, sounds like it might be a kin to your warranty product, which is about a $35 price point, $90 million of revenue a year. Is that the way to think about it? Trying to sell into the population and grow it as such?

Yes, let me kick it off and then let Jason or Greg want to add anything. The context for this is the growing problem in the country that tax identity theft has suddenly emerged, as bad guys have figured out, "Wow! There's $4,800 and $35 according to the 60-minute segment that I can get in what seems to be in pretty simple terms." So part of this is tied to what steps are taken to combat this particular issue. If it continues the way it is trending right now, we think it will be a very good addition to our Tax Plus strategy. But in terms of revenue projections or exactly what the pricing is, we're not prepared, we're not ready to go into that right yet. I don't know if anybody's got anything to add.

Well I think we're really excited about this product. What it gives the consumer is it gives them prevention, protection and remediation in case this happens. It's a growing problem. We're excited because we've got a great partner who knows a lot about the identity space and the identity theft space, but not specifically tax identity, which is really where we, specifically, see this hitting and it's similar to [indiscernible] and that it will really go out and be something that consumers like at all segments. This is the ones that Kathy mentioned earlier.

And then just a separate topic altogether. Bill, I'm curious, usually Latin market gets a lot of lip service every year at Investor Day and from all companies across the business. We saw at tobacco, across the presentations. Could you tie it together perhaps with regard to this buying back or this expansion of office strategy and the hiring numbers you provided and if you could just kind of put a bow on what the approach is this year and how you think you'll be differentiated there?

Yes, and then I'll let Kathy add some information from the segmentation perspective. But I think that you've got the thesis. We have invested in our offices and a lot of those are in -- we have something called Latino designated offices where we have a number of a bilingual tax pros, we have a lot of materials that are bilingual. We're hiring more tax pros, we're training them, they're becoming more experienced, and then there's certainly a marketing investment.

So interestingly enough, when we looked at the segmentation results, what we saw is that Latinos were spread equally across all the segments. Again, because the segmentation is based on needs and it's not a demographic segmentation. We saw that there were Latinos, very equally distributed across all of the segments, which really helps us, again, in our marketing efforts to those people; knowing who they are, what is relevant to them and how to best reach them.

And in our marketing efforts, you saw the one -- we have José who's kind of the emblem in the Latino community, we buy national media and UniVision and extensive radio efforts.

So we have our Latino air coverage just like we have our general market air cover.

I think there is time for another question, down at the back there?

This is Steve Rogers with Citi. Can you talk more about the simple filer tax market that people that would file a 1040EZ or 1040A and just talk about how do you win there and how do you see the market dynamics currently?

So do you want to start with that, Kathy? And then maybe Jason or Mark, if you want to add something, because, obviously, Mark brought up the point that the 1040EZ market, probably by definition, almost will shrink this year because of -- you won't be able to file if you're in the Marketplace. Why don't you start for the segmentation?

So again, if you look back at the segmentation and I mentioned this, but behavior or I guess, I should say form type or demographics do not really -- are not indicative of consumer behavior. So what we've seen, again, is that regardless of age, regardless of income and regardless of form type, consumers behave different ways. And so we're able to really reach them more on how we think that they're going to behave. You'll see that we have, effectively, with our one-to-one marketing, we've been able to identify who those early-season or those 1040EZ filers may be and reach them with the right message and the right offer at the right time, just to make sure that we're hitting them when it's most relevant, most timely.

And really, when we think about designing our products, we do think first in terms of the needs based and what jobs the consumers want. And so for instance, we don't just think about an EZ, we think about all the taxpayers who are DIY and their interest primarily in getting a refund. And so for instance this year, we have a new feature, it's called Refund Reveal. And this will be unique a product innovation that's unique to Block in the marketplace and it not only shows the consumer what their refund is, but it shows them how it was calculated. This is really -- that box in the upper left-hand corner that the user watches, they see it go up and down, but what we found during our research was there's a mystery about how it goes. What makes it go up and down so that was one of the insects as we think about the needs-based approach as opposed to a forms-based approach that led us to that innovation.

I would just also say don't confuse simple forms with what consumer's perception is about their taxes and just because you're using an EZ doesn't necessarily mean you would see your taxes as simple, and with the Affordable Care Act, Bill already mentioned, obviously, some of those EZ clients are no longer qualify for those forms and that number's going to go up as more people enroll in the Marketplace. Eventually, if it hits the HHS number of 25 million, you're going to see a substantial shrinking of the EZ market. But importantly, even EZ clients are going to be faced with potential refund effects from either penalty calculations, verification of their insurance coverage or exemptions. And so that's going to confront them as well even though they may be using what we call a simple-based tax form, and so we expect some of those do-it-yourself people that are confronting with that are going to have questions and they're going to need answers because their refund's going to be affected.

Okay, maybe one more in the back there?

This is Jesse Rosenthal from CreditSights. Just a very quick question for Greg. Follow up on the leverage issue, I appreciate that you're just kind of getting through the bank deal first, but I was wondering if you had any preliminary discussions with the rating agencies or any plans to discuss with them once you kind of get to the point where you're trying to dimension exactly where you want to be.

Yes and just to be clear, the ratings agency's joined us today, although I think I saw Ed [ph] sneak out, but anyway, we have regular conversations with the ratings agencies. It's part of just our relationship with them. We've had good open dialogue with them. We're proactive in sharing our ideas and thoughts with them, but we're not going to talk about specifics at this point.

Okay, there are no other questions. Just want to say, once again, thank you so much for coming out. We do appreciate your involvement today, and you all have a great day. Thank you.

Thank you.