Tax prep service H&R Block (HRB) beat top and bottom-line earnings estimates on Tuesday, reaffirming its full-year outlook for 2024. H&R Block CEO Jeff Jones highlights the biggest fiscal second-quarter drivers, the impact of free tax filing services, and the outlook on the 2024 tax season.

"Keep in mind... when you're in the first couple weeks of tax season, everybody is always eager to know how it's doing, and there's a lot of volatility as consumers are paying — in this case, to child tax credit or e-file opened one week later this year — so we see reasons why it could be off to a bit of a slow start," Jones says "Again, at the industry level, but it raises no concerns for us about the outlook of the full year."

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Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

- H&R Block reporting a beat on second quarter revenue while reaffirming its full year outlook shares falling in today's trade this comes after the recent launch of its generative AI tax products using Microsoft's Azure service. Here to discuss this and more is H&R Block CEO Jeff Jones. Jeff, it is good to see you. Maybe we could just start with the report, Jeff, just interested to hear, well, what drove the quarter? And what you see ahead, Jeff?

JEFF JONES: Hey, Josh. Good to see you, guys. So, we did have a strong quarter, we're off to a really good start in the first half of the year. And we're really well positioned for tax season. Really based on three drivers. Our core tax business, both consumer and small business perform well.

We saw really nice performance with our emerald advance product which is a term loan. And we're seeing really good traction with Spruce, which is our challenger banking platform. So, all in all despite the market reaction today, we feel really good about the start of the year and our performance over the last several years.

- Hey, Jeff, I'm glad you acknowledged what's going on with the stock today, although, it is up considerably off the lows of the session, still down about 4% right now. You guys did beat as you pointed out, you did not raise your forecast for the full year. You reaffirmed it. Can you talk us through a little bit about why?

JEFF JONES: Absolutely. So, so much of our business is linked to the tax season, as you know, and that is just getting started. And so while we feel very good about our prospect and where we're headed, it's just too soon to call that we're going to beat for the year when we're really just getting started in taxes-- excuse me. So that's really why but reaffirming having confidence in what we're doing.

We also announced the retirement of my partner and CFO who will leave in September. There could be a little reaction to that news as well. But we're focused on over time, not obviously one day or so after earnings.

- And Jeff, I know it's early in the tax season. But on the call, were you all suggesting that maybe it was off to a somewhat slower start than you would imagined?

JEFF JONES: Well, we see the industry data. And we see the industry data just being a little slower start, but that raises no concerns for us about the year overall. And keep in mind, when you're in the first couple weeks of tax season, everybody is always eager to know how it's doing.

And there's a lot of volatility as consumers are paying attention, in this case, to child tax credit or e-file opened one week later this year. So we see reasons why it could be off to a bit of a slow start. Again, at the industry level, but it raises no concerns for us about the outlook for the full year, both industry growth and outperformance.

- And Jeff, I'm curious, there has been a free government or free IRS tax filing option for a while, but there's a new push to have more people use it a new site, et cetera. How much of a bite out of your business is that going to take? Or do you guys not do much business on that sort of end, anyway?

JEFF JONES: I think the important thing to remember Julie is today there are over 30 companies and organizations nonprofits that already offer free tax prep, including H&R Block. And so there isn't a problem in the market, per se where consumers are looking for a place to go for free.

And so they're going to pilot this year. We have been very vocal in our opposition to that pilot. We are very supportive of the IRS in general getting more funding. We need them to be able to service the customer, process returns faster, answer calls better. So we absolutely want to see them get more funding, but we just don't see a problem in the market that requires them to offer free tax prep.

- And Jeff, I want to ask you too about this line in the 10-Q that I know got some attention, which seemed to suggest I guess, Jeff, that maybe you all received a complaint of some kind from the FTC. Any kind of color or insight you can offer on that?

JEFF JONES: You know, we always like to put in our disclosures obviously anytime we get an inquiry of any kind, and this inquiry goes back to the Free File Alliance and so we just like, we think it's prudent to provide that disclosure that's why we added it in the document. But at this point, there's nothing more to share about what's happening or what they're looking at.

- Copy that. Jeff Jones, thanks so much for joining us. Good to see you.

JEFF JONES: Good to see you all. Thank you.