H&R Block, Inc.
Q4 2018 Earnings Call Transcript

Published: 13 Jun 2018

[Operator:]

Good day. My name is Ian, and I will be your conference operator today. At this time, I’d like to welcome everyone to the H&R Block Fiscal 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. I’d now like to turn the call over to Mr. Colby Brown, Vice President of Finance and Investor Relations. Sir, you may begin.

[Colby Brown:]

Thank you, Ian. Good afternoon, everyone, and thank you for joining us to discuss our fiscal 2018 results. On the call today are Jeff Jones, our President and CEO; and Tony Bowen, our CFO. We’ve posted today’s press release on the Investor Relations website at hrblock.com. Additionally, a presentation for viewing is available via the webcast and will also be posted to the Investor Relations website after this call. Some of the figures that we’ll discuss today are presented on a non-GAAP basis. We’ve reconciled the comparable GAAP and non-GAAP figures in the schedules attached to our press release and presentation. Before we begin our prepared remarks, I will remind everyone that this call will include forward-looking statements as defined under the Securities Laws. Such statements are based on current information and management’s expectations as of this date and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties and assumptions that are difficult to predict. As a result, our actual outcomes and results could differ materially. You can learn more about these risks in our Form 10-K for fiscal 2017 and our other SEC filings. H&R Block undertakes no obligation to publicly update these risk factors or forward-looking statements. At the conclusion of our prepared remarks, we will have a Q&A session. During Q&A, we ask that participants limit themselves to one question with a follow-up after which they may choose to jump back into the queue. With that, I’ll now turn the call over to Jeff.

[Jeffrey Jones:]

Thank you, Colby. Good afternoon, everyone, and thanks for joining us. Fiscal 2018 was a good year for H&R Block. We have a lot to cover, so let me outline the three areas we’ll talk about today. First, I’ll share my perspective on the tax season and our results. I’ll then give an update on the enterprise strategy work, including key opportunities for improvement and the five pillars that will guide us over the next several years. I’ll then highlight some of the strategic initiatives for 2019. Finally, Tony will review our 2018 financial results and we’ll provide thoughts on our outlook for fiscal 2019. Let me begin by looking back at tax season 2018, starting with overall industry. Total U.S. return growth was approximately 1.5%, as expected, with assisted returns growing 0.5% and DIY returns increasing 2.5%. Consistent with prior years, industry results show a slight shift from assisted to DIY. However, like last year, it was moderate. We estimate the shift was only 40 to 50 basis points, which is less than the average over the last several years. This moderation is likely due to the IRS’s great work to crack down on fraud in the system and confirms what we hear from a large percentage of the tax paying population that they turned to Tax Pros at H&R Block for help, because they want to ensure they’re getting all they deserve and they want someone they can count on should questions arise. We continue to see the primary driver in choosing a method is the individual’s confidence with taxes, not the complexity of their tax situation. Turning to H&R Block. Our goal for this season was to build on our momentum from 2017 by continuing to improve the client trajectory and we achieved that goal. We outperformed the market and took share overall and in the DIY category and we delivered improved results in assisted. As I shared in December, we focused on three areas

[Tony Bowen:]

Thanks, Jeff. Good afternoon, everyone. I’m excited about the work we’ve done on our enterprise strategy and what it means for the future of H&R Block. Due to this work, we are taking steps to ensure we can achieve sustainable growth for the long-term. Before I provide some additional detail on our outlook for fiscal 2019, I’ll walk through our fiscal 2018 results and how we performed against our expectations. Let me start with the objectives that we outlined prior to the tax season and how our performance measured us. With respect to volume and pricing in our Assisted business, we expect an improvement in the client trajectory and moderate inflationary price increases. We achieved these objectives with the decline in returns of just 0.6%, compared to a decline of 2.5% in fiscal 2017. Net average charge increased 2%, which was in line with our expectations. In DIY, we anticipate an increase in client volumes, along with a net average charge consistent with fiscal 2017. We outperformed expectations with overall DIY client growth of 8%, including 10% growth in online. Additionally, we delivered a 3% increase in net average charge due to better than expected product mix. Overall, we came into the year expecting modest revenue growth, and I’m pleased to report that we exceeded our expectations with revenue increasing 4.1%. From an earnings perspective, considering our revenue growth projection and the impact of inflationary cost and investments, we expected EBITDA margin to be at the high-end of the 27% to 30% range. Similar to fiscal 2017 and as expected, we delivered a margin of 29.8%. In summary, we achieved or exceeded all of our objectives. With that context, I’d now like to provide additional details on our key financial metrics, starting with the income statement. As I just mentioned, revenue grew 4.1%, or $124 million. U.S. assisted tax preparation fees and royalties together increased $40 million, due to increased net average charge and favorable mix, partially offset by the decline in return volumes. DIY’s tax prep fees increased $24 million, due to increased return volumes and net average charge, which was due to favorable product mix. Regarding our Tax Plus products, we saw an increase in net tax rates overall, driven by Emerald Card, Peace of Mind and [Tax Advantage Shield] [ph]. Additionally, we increased the price of refund transfer this year, which led to a $24 million increase in revenue, balanced against a slight decline in the tax rate. This was our second year for Refund Advance. Applications of Refund Advance increased 14% over last year and the average loan amount increased 45%, due to the addition of the $3,000 loan tier. Despite these increases, we were able to keep the total cost of the program flat at approximate $30 million. International revenues increased $17 million due to favorable results and exchange rates in Australia and Canada. Turning to expenses. Total operating expenses grew at a lower rate than revenue, increasing $88 million, or 3.8%. This was primarily due to expected increases in compensation cost related to the increase in revenue, occupancy cost and bad debt expense, as well as the impact of foreign exchange. These increases were partially offset by a decrease in marketing and advertising expenses. Moving through the remainder of the income statement, we saw interest expense decreased $3.6 million due to lower draws on our line of credit compared to the prior year. Regarding corporate taxes, fiscal 2018 represented a unique year for the 35% statutory rate for the first eight months of the year when we generate a loss and a 21% rate for the final four months of the year when we generate a profit. This resulted in a full-year effective tax rate of 6.3%. Going forward, we expect an effective tax rate of 23% to 25% for fiscal 2019 and beyond. Our solid financial performance coupled with the unique corporate tax situation, resulted in a 52% increase in EPS from $1.96 in fiscal 2017 to $2.98 in fiscal 2018, up $1.02 increase, $0.85 was due to their lower corporate tax rate, resulting from the recent tax legislation. Turning to discontinued operations. Sand Canyon Corporation made several payments of $4.5 million this fiscal year, which were previously accrued and related to a settlement agreement from fiscal 2016. For additional information on Sand Canyon, please refer to disclosures and the company’s reports on forms 10-K, 10-Q and other SEC filings. I’d now like to provide some initial thoughts on our financial outlook for fiscal 2019. As Jeff shared, we have developed a multi-year strategic framework to guide us over the next several years and outline the areas we’ll be focusing on for fiscal 2019. Historically, we have provided our financial – our fiscal year outlook on the December earnings call just prior to the beginning of the tax season. This generally included our thoughts on volume and net average charge along with an EBITDA margin range. Considering the changes planned for next year, including investments in the business, as well as the impact of tax legislation on both the corporate and individual side, we’re taking the unique step of providing more detail than we have historically at this time of the year. As Jeff mentioned, we are making changes to our pricing structure, which will improve our ability to deliver value in our Assisted business and address the impact of the recent tax legislation. As a result, we currently expect total revenues to be $3.05 billion to $3.1 billion in fiscal 2019. We will also be making strategic investments in technology, as well as operations, including charges related to our office footprint optimization. Given our revenue expectation and the planned investments, EBITDA margin is expected to be 24% to 26% for fiscal 2019. As we previously shared, fiscal 2018 represented our high watermark for depreciation and amortization, as we see the impact of office upgrades and franchise buybacks from several years ago rollout. Thus, we expect D&A to decline in fiscal 2019 and be between $170 million and $180 million. As a reminder, approximately two-thirds of our D&A is CapEx-related, while the remaining one-third is related to acquisitions. We expect CapEx in fiscal 2019 to be $95 million to $105 million. Interest expense will be $80 million to $85 million. And as mentioned earlier, we expect our effective tax rate to be in the 23% to 25% range. Regarding capital structure, our solid financial performance this fiscal year, along with the help from the changing corporate tax rates drove strong free cash flow of $751 million, a 62% increase over last year’s free cash flow of $463 million. The reference we define free cash flow as cash flow from operations, less capital expenditures. Our capital allocation priorities remain unchanged. At the top of the list, it’s maintaining adequate liquidity for our operational needs to account for our seasonality. We didn’t make investments back into the business that we believe deliver value to our clients and drive sustainable growth. Next, we will deploy excess capital through quarterly dividends and share repurchases. These priorities are grounded in our commitment to maintain investment-grade credit rating metrics, an integral part of our financial strategy. I’m pleased that our Board of Directors has approved a 4% increase in our dividend to an annual rate of $1, or $0.25 per quarter. This represents a third consecutive year of dividend increases. We remain committed to paying quarterly dividends and will continue to perform an annual review of the dividend after each fiscal year. With respect to share repurchases, as we discussed on prior calls, there were no repurchases made in fiscal 2018. For fiscal 2019, we’re adjusting our prior practice and plan to repurchase shares to offset dilution from equity grants in order to at a minimum prevent an increase in our shares outstanding. We believe this is an important part of our capital allocation and in addition to offsetting equity grants, we will continue to be opportunistic in share repurchases going forward. In summary, I’m excited about the changes we’re making in the business as we position ourselves for sustainable growth. With that, I will now turn the call back over to Jeff.

[Jeffrey Jones:]

Thanks, Tony. We met our objectives for fiscal 2018 and deliver what we promised. We are increasing our dividend and reiterating our commitment to maintain investment-grade credit rating metrics. We’ve outlined the strategic framework that will guide our efforts over the next several years and highlighted initiatives for fiscal 2019. Now it’s the right time to building our strong foundation to invest for the long-term and generate sustainable growth over time. We along with our Board are excited about the years ahead for H&R Block. With that, we’ll now open the line for questions. Ian?

[Operator:]

[Operator Instructions] Our first question comes from line of Scott Schneeberger from Oppenheimer.

[Scott Schneeberger:]

Thanks. Good afternoon, everyone. I guess, we – the obligatory question here Jeff is, with these investments, and Tony, being made in 2019 has a significant margin hit? What longer-term is they are a run rate or something that we’re looking to achieve longer-term? Could you just hit nearly 30, we’re chopping by, let’s call it, 500 basis points. I know there’s no formal guidance, but how are you thinking about that? And kind of the part B to this question is, could you give a little bit more on what the investments are? Thanks.

[Jeffrey Jones:]

Hey, Scott, it’s Jeff. I’ll tee it up and let Tony chime in as well. And I think first of all, what was really important in both of those was that we start sharing information about where we’re headed much more soon than we normally do, which is what we want to get the conversation started on this June call. Ultimately, the work that we’ve been up to over the last six months really gave us the sense of strength and opportunities to improve. And the big opportunities for us, as I mentioned in my prepared remarks, are really about relevance and a new client growth, in particular. And so while your question is specific about earnings guidance, the macro point for us is this really is about long-term sustainable growth to the business. As we get closer to 2019 and the tax season we’ll have more to share as we get closer to the season. But for now, we just believe it’s the right time coming from a position of strength to start positioning the business for real long-term growth.

[Tony Bowen:]

Yes. And as far as the investments that we talked about the new pricing structure in the Assisted business, obviously, that – that’s having an impact on revenue taking into account the recent tax legislation. We talked about improving our technology. We now have a multi-year roadmap. We’re going to begin to execute against to really put us in a really good place from a technology perspective. And we’ve also got some one-time charges related to the office footprint optimization that Jeff talked about, all of that is taken into account in our outlook for FY 2019.

[Scott Schneeberger:]

Thanks. And just a follow-on to that, Tony, specifically, will there be more updates from H&R Block prior to the start of the of next tax season with what’s going to happen with pricing, or is that just going to kick in and we’ll watch and see what we had? I’m just curious on how much of your hand you’re going to show prior to the season? Thanks.

[Tony Bowen:]

Yes. I mean, obviously, at this point, for competitive reasons, keeping that fairly close to the vest. But as we approach tax season, we expect to provide additional details on not only how we’re thinking about pricing, but other promotions and details around the tax season.

[Scott Schneeberger:]

Thanks. And I’d like to consider all that. My one – my first question to sneak in a follow-on. You mentioned 200 company-owned locations probably at the smaller locations you’re probably going to be looked at production. Just curious, it sounds like you’ve done some work on that space. Jeff, what’s the right amount of footprint you anticipate longer-term for the company? Thanks. That’s all.

[Jeffrey Jones:]

Yes. Scott, thanks. So it’s actually 400 locations. And I think as in retail [indiscernible] at the footprint, every year is important. It’s something we learn every single year. I think, one of the factors that led to kind of that number of this year was really focused on quality and consistency of execution in the offices and what’s the right kind of span of control to think about our field organization to lead the different offices, that obviously led us to then go deep in terms of what’s the right number, or what’s the right size threshold. And we have, because we have closed offices over the course of time, we have a really good plan in place for how we think about migrating clients to adjacent offices. And so what we have always done in the past, we’ll implement that plan and move Tax Pros and Clients to a nearby location.

[Scott Schneeberger:]

Great. Thanks for sharing that. I’ll turn it over, guys.

[Jeffrey Jones:]

Thanks, Scott.

[Operator:]

And our next question is from the line of George Tong from Goldman Sachs.

[George Tong:]

Hi, thanks. Good afternoon. Assisted volumes narrowed and declined this year, driven mainly by improved retention rates. Can you elaborate on the strategies you have to drive improved gross customer additions? And when you might expect to see eventual growth, positive growth in assisted volumes?

[Jeffrey Jones:]

Hi, George, it’s Jeff. Again, [indiscernible]. First, you’re absolutely right. We’ve seen kind of year-over-year consistent improvement in assisted volume. Retention did play into that. You think about two years in a row, we’ve had success with refund advance. Two years in a row, we’ve really been focused on improving execution in the offices. The second monitor the way the Tax Pros interact. So some of the investments we have made have resulted in improved retention. As we mentioned, the big opportunity for us is in new clients. And it’s a big part when we talk about brand differentiation and value proposition. It’s really what we’ve seen over time is, the Block brand is extremely well-known, we’re synonymous with taxes. We start from a positive place. But as the competitive landscape shifts, as consumer preference have shifted, we just realized that our promise to the marketplace is less differentiated. And so we think the key to starting to see client growth over time in assisted is actually making a really clear promise about the value that H&R Block can provide and that’s what our strategy work is really intended to do.

[George Tong:]

Gotcha, that’s helpful. And Jeff, you’ve outlined as a result of your strategic review over the past several months some of your key pillars and initiatives. Can you discuss what your priorities are out of all of those pillars and initiatives? And where you think there’s most opportunity to unlock value?

[Jeffrey Jones:]

Well, absolutely. I mean, the initiatives that we share really are the top priorities. And so, as you see, those range in terms of investing in technology in order to enable us to deliver a modern client experience. This, as Tony alluded to, this is a multi-year technology roadmap and it does require investment, but we also see run rate savings over time. This is essential work. We see initiatives focused on the client experience, both improving the experience in a given channel. In assisted, it’s really about just what we talked about in terms of retention continue to improve the quality and consistency of service delivery. In the DIY channel, we’ve done a really nice job of improving the product, delivering a great value and actually marketing the product in a way that people understand that we’re a very good alternative and option in the category. Those two priorities are very important. You hear us talk about cross-channel experiences and just continue to evolve Tax Pro Review, Tax Pro Go and how we serve clients really in whatever terms they desire. And then the value proposition work in brand positioning this is essential to everything we do, and this includes a look at price. But it’s really the fundamental reason and the promise about what H&R Block does is differentiated. And we think over time, we have stopped telling our own story and have – really told the story more about what you would say are the category benefits around promotions and things like that. So the initiatives that are on the page really represents the most important priorities for the company and what the entire leadership is focused on delivering.

[George Tong:]

Got it. Very helpful. Thank you.

[Jeffrey Jones:]

Thanks, George.

[Operator:]

And our next question is from the line of Thomas Allen from Morgan Stanley.

[Thomas Allen:]

Hey, good afternoon. So going back historically, I mean, two years ago, I think that H&R Block and Jeff as before you were there significantly disappointed investors. And I feel like over the past two years, you guys have done a very good job of kind of executing and doing well. And now you guys are guiding margin down 500 basis points and you’re in the difficult situation that you’re not going to prove that you can only prove out your results every year once a year basically. So like, I mean, why make such a drastic investment today when you’re not going to be able to kind of show results for a couple of years when you could have done a more gradual shift?

[Jeffrey Jones:]

Tom, it’s Jeff. It’s a great question, obviously, one we’ve been thinking a lot about, because over the last six months, there are few things that have really jumped off the page at us. Number one is, we are coming off two years of improved performance. And what that signals to me is our ability to execute against our commitments, and so that’s the strength about the business right now. We also know from a consumer perspective, whether it’s any given channel or in a cross-channel world, we – our proposition, our promise is as relevant as it needs to be, so we need to tackle that. Ultimately, we have been a business that only thought about one season at a time. And so you see us now taking a multi-year view at how we really position the business for long-term growth. Tax legislation has been another input in terms of what – what’s happened in the last year and the impact on pricing our value proposition. So they’re really just a number of different things that over the last six months, we recognized that this set the company up and position us for long-term growth. These are all things we need to start tackling now and to do it from a position of strength financially and to do it from a position of strength in terms of our ability to execute is why we’re making the decisions we’re making.

[Thomas Allen:]

Okay. And then just on the 400 company offices you’re going to consolidate, is there like a easy like one-time charge for that? It seems like a number that can be put together?

[Tony Bowen:]

Yes, Thomas, it’s included in the overall outlook we provided. The specific number, we think most of it will happen in Q2 as we exit those locations and buyout of the remaining lease liability we will take the charge. Right now, we expect that to be $15 million to $20 million for FY 2019.

[Thomas Allen:]

All right. Well, thank you very much.

[Tony Bowen:]

Thank you.

[Operator:]

And our next question is from the line of Jeff Silber from BMO Capital Markets.

[Jeff Silber:]

Thank you so much. Wanted to go back to your revenue guidance for fiscal 2019. You mentioned, I guess, the new pricing structure in assisted. Is that where the bulk of the year-over-year decline is coming, or should we expect decline from some of your other line items as well?

[Jeffrey Jones:]

Yes, that’s definitely a key component of it. Obviously, Jeff, there’s a lot of moving parts. Pricing and the value we’re trying to deliver in the assisted side being a big part of it. But you’re right and that is a big part of it.

[Jeff Silber:]

And then just jumping a little bit further on the pricing side, again, I’m expecting you to divulge your pricing strategy. But kind of stepping back, because of tax reform, in theory, tax returns are going to be less complex next year. And I know you typically charge by complexity even excluding your changes in prices would we have expected your revenue per assisted return to go down just because of tax reform?

[Jeffrey Jones:]

There definitely is some impact. As you’re right, we do price on complexity and there are certain clients that because of the standard deduction change mainly would have been paying a lower price. And we took that into account thinking about our overall pricing approach to the upcoming season.

[Jeff Silber:]

Okay. And then finally, just one more, I’m sorry. Would we expect, and again, I’m looking at office. Are you expecting assisted volumes to continue to decline next year getting worse, getting better, any color on that would be great? Thanks.

[Jeffrey Jones:]

This is Jeff. I mean, I think the reason why we’re embarking on this is the opportunity we see in the business and the goal of long-term sustainable growth and that’s really what we’re tackling this as holistic as we’re.

[Tony Bowen:]

Yes, I mean, just to add on to that. I mean, I think the growth is not only revenue over time, but obviously clients as well. So we’re not providing specific client outlook for 2019 definitely at this point. But as Jeff mentioned over the long-term, we would expect client and revenue growth.

[Jeff Silber:]

Okay, appreciate the color. Thanks so much.

[Tony Bowen:]

Thanks, Jeff.

[Operator:]

And our next question is from the line of Hamzah Mazari from Macquarie Capital.

[Hamzah Mazari:]

Good evening. Thank you. The first question is just on the strategic investment spend as well. Maybe if you could highlight, is this a one-time spend, or is spend going to be elevated next year as well and the following year? And how much of this is a catch-up? Block has had many restructuring and over the years store improvement was part of that, too. And so just curious how much of this is a catch-up versus sort of Block moving to a completely new direction?

[Jeffrey Jones:]

I mean, I think it’s a little bit of both, Hamzah. I mean, I wouldn’t call it a catch-up, but there’s definitely investments that we’re making that we’re expecting to continue to make for the next several years. The IT would be the one example on the technology side, where it’s a multi-year roadmap, it’s not just a 2019 impact. That being said, we’re expecting those investments to essentially level off and not like we’re expecting EBITDA margin to have another decline the following year. But at this point, we’re not providing a long-term guidance for either revenue or EBITDA.

[Hamzah Mazari:]

Okay. And then just on the investments, again, is there a return that we should think about on these investments, how you think about that these in terms of payback or any other metrics that you could share? And then along side that a big part of this investment is – appears to be new client acquisition. Maybe if you could frame for us historically what has new client acquisition run at either our dollar number of your total revenue base, or however, you quantify that and what should it look like, just any color there? Thank you.

[Jeffrey Jones:]

Yes, I mean, it’s hard to say on a specific payback perspective. I mean, I think what these investments are allowing us to do and the changes we’re making along with from a strategic perspective is really setting us up for long-term sustainable growth. And if we talk about new client continuing decline in the most recent year, overall clients in the assisted business, while much better still declining last year, and we’re trying to think about what are the changes that we need to make. So that over the long-term, not the next two or three years, but 10 or 20 years, H&R Block is still a viable company with its healthy growing revenue, growing client. So I don’t think about it in terms of specific ROI in the short-term, because a none of the things are foundational capabilities that we need to position us over that longer term period. As far as client acquisition cost, again, it’s not something that we want to get into today. It’s a combination obviously of not only new clients, but also continue to drive retention. We made improvements over the last few years. But we still – we want to try to increase retention, especially across the various bands. I mean, when we think about our 10-year of new clients all the way up to a 10-year plus client, we still have opportunities to retain more new clients in the second year they come back and see H&R Block. So it’s obviously largely a new client story, but it’s also providing a great service and consistent experience at the desk, which should drive additional retention over the long-term.

[Hamzah Mazari:]

Okay, great. Thank you.

[Jeffrey Jones:]

Thank you.

[Operator:]

And our next question is from the line of Michael Millman from Millman Research Associates.

[Michael Millman:]

Thank you. Over the many years, many taxpayers have used H&R Block and then going on. What makes you think that, because you make some changes that people who’ve been there done that will come back? And sort of it’s related, it seems that, as you suggest, assisted may be down because of the Tax Pro change simplification, for example. And it would seem investments are going into do-it-yourself. So I guess, the bottom line question is, do you see the growth in do-it-yourself, or something similar do-it-yourself and and looking away from offices, or do you see it continue people to come into the office as they have over the many years?

[Jeffrey Jones:]

Michael, it’s Jeff. I’ll teed up and let Tony chime in as well. I mean, I think, in addition to our improved performance in client trajectory and assisted over the couple of years, it’s important to note that the assisted category grew about 50 basis points this year, the second year out of the last three with the assisted categories grown, I think, it’s grown four out of the last eight years, if my memory serves properly. So we definitely still see viability and growth in the assisted tax preparation business. Now we’ve improved retention. We extend our client loss, but we believe that a better value proposition and more clear differentiation leveraging all the assets that make H&R Block the leading tax preparation company give us the opportunity to win back clients who may have defected for some reason or to attract net new clients who haven’t yet tried us. As I mentioned in my prepared remarks and more on this as we get closer to the season, but little fact that I love seeing that give me optimism for the help of the business or things like the number of millennials who choose H&R Block assisted every year. So one of the things that’s become very clear to me is that it’s not just about if someone complex or simple, I mean think about today 70% of tax filers already take a standard deduction. The majority of tax filers take a standard deduction. While the majority of tax filers also using assisted method today, we know that that shift from assisted to DIY has moderated in the last couple of years and we talked about what a couple of those reasons maybe. So, there’s a lot of evidence for us that make us optimistic about better quality and consistency, stronger value proposition, more clear differentiation are all reasons we can get back to growth. And as Tony said, that’s revenue growth and new client growth and we think both of those are important to our future.

[Michael Millman:]

Just kind of follow-up. You’re not or at least this past year you didn’t buyback shares. Your cash flow has been very good, as you pointed out. The tax cut helps that. Does this suggest that we’re going to see some very big investments and/or acquisitions?

[Jeffrey Jones:]

Well, I think the first thing to suggest is, through the strategic work we’ve done, we have realized that we see opportunity to improve the core business, that’s priority number one. Priority number two and this is the near-term for us is that, we have many things in our portfolio today that we aren’t leveraging to their full potential. I gave you a couple of examples in the prepared remarks of what those may be. So those are priorities number one and two. Tony can talk more about share repurchase and how we think about capital allocation as part of our strategy. But as we signaled on the call, we are – we will be opportunistic again in terms of buying back our stock. Tony, anything else you want to add?

[Tony Bowen:]

No, I mean, I think you’ve hit some really good points. Obviously, we bought back a lot of shares over the last few years. We didn’t buy any this year, but the year before, we bought several $100 million, obviously, a couple of billion dollars over the last three years in total. So, we’re still very shareholder-friendly from a share repurchase perspective. We raised a dividend again this year third consecutive year. So it’s still a key part of how we think about our future strategy, but as Jeff said, we’re really going to be opportunistic going forward.

[Michael Millman:]

Great. Thank you.

[Tony Bowen:]

Thanks, Michael.

[Jeffrey Jones:]

Thanks, Michael.

[Operator:]

And at this time, I’m showing we have no further questions. I’d now like to turn the call back over to Mr. Colby Brown. Sir?

[Colby Brown:]

Thanks again, everyone, for joining us today. This concludes today’s call.

[Operator:]

Ladies and gentlemen, this does conclude today’s conference call. We thank you greatly for your participation. You may now disconnect.