Avantax Inc (AVTA) 2013 Q1 法說會逐字稿

Good day, everyone, and welcome to the Blucora first quarter earnings results conference call. This call is being recorded. With us today from the Company is the President and Chief Executive Officer, Bill Ruckelshaus; Chief Financial Officer, Eric Emans; and the Senior Director of Investor Relations, Stacy Ybarra. At this time I would like to turn the call over to Stacy Ybarra. Please go ahead, ma'am.

Good afternoon and welcome to Blucora's first quarter 2013 earnings conference call. Before we begin, I'd like to remind you that during the course of this call Blucora representatives will make forward-looking statements including, but not limited to, statements regarding Blucora's expectations about products and services, outlook for the future of our business and growth initiatives, and anticipated financial performance for second quarter 2013 and tax season. Other statements that refer to our beliefs, plans, expectations or intentions which may be made in response to questions are also forward-looking statements for purposes of the Safe Harbor provided by the Private Securities Litigation Reform Act.

Because these statements pertain to future events, they are subject to various risks and uncertainties and actual results could differ materially from our current expectations and beliefs. Factors that could cause or contribute to such differences include, but are not limited to, the risks and other factors discussed in Blucora's most recent annual report on Form 10-K on file with the Securities and Exchange Commission. Blucora assumes no obligation to update any forward-looking statement which speak only as of the date the statement is made.

In addition, during this call our Management will discuss GAAP and non-GAAP financial measures. In the press release, which has been posted on our website and filed with the SEC on form 8-K, we present GAAP and non-GAAP results along with reconciliation tables and the reasons for our presentation of non-GAAP information. We have also provided supplemental financial information to our results in the Investor section of our corporate website at www.blucora.com and filed with the SEC on 8-K.

Now, I'll turn the call over to Bill Ruckelshaus. Following his comments, Eric Emans will review the first quarter results and second quarter outlook, then we'll open it up to your questions.

Thanks, Stacy, and good afternoon, everyone.

I'm pleased to report that Blucora had a great start to the year with strong performance in both of our operating businesses. Revenue was $165.3 million, up 43% over Q1 2012, driven by solid growth in search and reflecting a full quarter of the TaxACT business that we acquired in January last year. Adjusted EBITDA was $45.9 million, up 45% year on year. Results this period underscore our practical approach to building value at Blucora; growing profitable operating businesses, cost and capital discipline and efficient cash conversion.

I'll begin with some comments on the performance at TaxACT. It was a hectic tax season beginning with the late passage of the American Taxpayer Relief Act. Despite the noise, TaxACT performed well, gained share and executed. For the 6 months through June this year, we expect pro forma segment revenue to grow approximately 9% and segment income to grow 7% to 8% over the same period last year. These results are supported by 8% growth in consumer DDIY e-files.

Through tax day plus one, TaxACT generated 5.3 million consumer e-files, outpacing DDIY category growth of approximately 4% according to IRS statistics through April 19th. On the paid preparer side, we grew equivalent e-file units 10.3% over the prior season and gained share in the assisted channel. Overall, TaxACT processed 6.5 million e-files in the season, up 8% over last year.

TaxACT's performance reflects our participation in the growing DDIY market, the strength of our product and our competitive price position relative to other solutions.

As I mentioned on our call in February, we entered this tax season having made off-season investments in four key areas; instrumentation and business intelligence to improve filer retention and acquisition, core product enhancements to simplify the tax preparation experience, tablet and mobile product introductions, and additional offerings around basic tax prep to bring more value to our filers.

In our core product we enhanced TaxACT's site content with tailored new information for taxpayers and more subject-specific guides. We improved the search capabilities in our answer center to more quickly provide customers with relevant support. We added chat functionality to our support platform to address frequent customer needs and improve response times in our call center.

In mobile, we focused initiatives around an access anywhere strategy. We updated our TaxACT central mobile app with enhanced features and functionality and introduced two new products, DocVault, a mobile app for organizing and saving tax documents, and our award-winning tablet app that allows users to start their returns on their tablet or on the web at TaxACT.com and access their information in either location anytime, anywhere, using the same user name and password.

The access anywhere approach is working as our mobile initiatives drove new customers to TaxACT this season. Mobile is not material to our results today, but the trend is clear and we are excited by the opportunity as the digital lives of our filers continue to migrate to smartphones and tablets.

On the new offerings front we introduced Tax Audit Defense with year-round protection for filer tax returns and LegalACT Will for the last -- for last will and testaments in four easy steps. We also partnered with PayPower to evolve our stored value card product with the PayPal or Visa prepaid card. Together, these efforts - core product enhancements, mobile innovation and new offerings surrounding and complementing the tax filing experience - brought more value to filers this season, built loyalty and improved our following.

Importantly, we also redoubled our commitment this season to price leadership in DDIY, where TaxACT is significantly more price competitive than other large players in the space. We view our price position as the critical second plank in bringing value to filers, along with delivering a great accessible tax product.

With TaxACT, everybody can prepare, e-file and print their federal returns for free, regardless of AGI or filing type. Our price lock guarantee allows filers who start early in the season with TaxACT to finish on their own schedule and not be subjected to a late season fee increase. Our offerings, in addition to basic tax, including support, state filing, data archive services, bank products and now legal and audit, are all competitively priced so filers take home more of their refunds and don't overpay.

Product investment and innovation and price leadership define the TaxACT value proposition and the results this season speak to both our market position and the execution strengths of our team.

We continue to like the DDIY trends in our outlook. Demographics are shifting to young, tech-savvy filers. Software and mobile advancements are strengthening DDIY solutions. Large, growing ad budgets continue to evangelize the DDIY category. As the price leader in the space, TaxACT benefits disproportionately from these continued trends.

Turning now to our search business, InfoSpace performed well in the quarter, driven by growth in both distribution and our owned and operated properties. As discussed on our last call, we implemented changes in Q1 with Google that impact our distribution partners that acquire end users through downloadable applications, a group that historically and currently represents less than 50% of total InfoSpace revenue.

We continue to believe these changes, while introducing transitions and tough comparisons for us this year, are long-term positive for the market and for InfoSpace. The InfoSpace metasearch model allows us to leverage content and features of the big engines to offer enhanced search services across owned and operated properties and our network of partners.

The search market continues to grow. We have strong relationships with Google and the other major engines and we are confident InfoSpace has ample room to innovate in both desktop and mobile search for years to come.

Before I turn the call over to Eric, I want to make a few comments on our capital strategy at Blucora.

We continue to focus on acquisitions as a way to build value. We recently issued $201 million of convertible notes to provide additional financial flexibility as we evaluate opportunities. The additional cash better positions us in pursuing larger deals with sourcing, with speed and with credibility. Looking ahead, we will continue to pursue investment and growth United States at InfoSpace and TaxACT, while simultaneously looking for opportunities to add to the Blucora group of businesses.

Transaction opportunities may come for us in the form of companies or assets that complement our existing businesses, or they may represent new lines of business unrelated to InfoSpace or TaxACT where we feel we can be successful and the return opportunities are compelling.

With that, I'll turn the call over to Eric for more details on the financials.

Thanks, Bill.

Let's jump right into the results for the first quarter of 2013. First quarter consolidated revenue was $165.3 million and adjusted EBITDA was $45.9 million. Non-GAAP net income was $42 million, or $0.95 per diluted share, and GAAP net income was $23.6 million, or $0.53 per diluted share.

Bill touched on our strong consolidated performance in his comments; therefore, I will focus on the year-over-year growth drivers in my discussion of the segment results, including pro forma results for the tax preparation segment.

Before we turn to the segment results, let's touch on the strength of our balance sheet. As Bill mentioned, we successfully completed a convertible note offering which added approximately $195 million in cash net of fees. As such, we finished the quarter with cash and cash equivalents and short-term investments of $401.7 million and debt of $275.7 million, or net cash of $126 million.

Net cash is up $38.1 million from the prior quarter, highlighting the strong cash flow generation of the business. It is worth calling out that the debt balance of $275.7 million represents total principal owed and differs from debt balance -- differs from the debt balance on the face of the balance sheet, which are presented net of discounts.

Lastly, during the quarter we repurchased approximately 68,000 shares of our stock at an average of $15.48 per share.

Now for our segment performance. Search had another strong quarter, generating $100.6 million in revenue and $18.3 million of segment income, up 34% and 37%, respectively, from prior years. Search performance was driven by revenue generated by our distribution partners, which was up $22.7 million, or 35% versus the first quarter of 2012.

Revenue from new distribution partners launched in 2013 represented $1.2 million, down from $1.7 million last year, but still off to a promising start. Segment income margin came in at 18.2% for the quarter comparable to the prior year.

Turning to the tax preparation segment. First quarter revenue was $64.7 million and segment income was $30.8 million, for segment income margin of approximately 48%. As a reminder, we acquired the TaxACT business on January 31, 2012, so year-over-year trends are most meaningful on a pro forma basis. Pro forma information is included in our supplemental information release available on our Investor Relations website.

On a pro forma basis, first quarter revenue was $65.4 million, up 6% versus prior year, and segment income was $31.4 million, up 3%. The revenue increase was primarily driven by increased accepted consumer e-file volumes, which were up 6% through March 31st. Segment income growth lagged revenue growth due to the front-end nature of our tax season marketing spend. Segment margin decrease approximately 130 basis points, reflecting increased headcount investment.

Since we are through the tax year 2012 filing deadline, let me provide some additional color on our consumer unit performance and how we expect it to translate to financial performance on a pro forma basis.

Through tax day-plus one, TaxACT consumer accepted e-files were out -- were 5.3 million, up 8% versus prior year and well ahead of the IRS self-prepared e-file growth of approximately 4%. On a pro forma basis, we expect we will grow revenue year over year by approximately 9% for the first half of 2013 versus the first half of 2012. We are pleased with this growth, which was fueled by our gain in market share and revenue-per-filer gains. For the same period we expect segment income will grow 7% to 8%.

Moving to corporate expenses. Unallocated operating expense for the first quarter was $3.2 million, down 16% from the prior year, which included acquisition costs related to TaxACT.

Let's spend a few minutes talking through our second quarter expectations for each segment. Starting with the search segment, we expect second quarter year-over-year revenue growth in the low to mid-teens, or $90 million to $94 million, and segment income margin of 17% to 18%. This is consistent with our comments from our last call where we expected the second quarter to be down sequentially given full quarter's impact of new implementations with our downloadable applications partners.

For the full year we expect to achieve revenue growth in our search segment of approximately 10% and segment income growth in the low single digits, consistent with our comments from our last call.

Closing on search, I would like to reiterate Bill's comments that the changes this year, while presenting some headwinds to our results, are good for users and good for our business long term. As such, we expect to continue to invest in our search business where we see opportunities for growth.

For the tax preparation segment we expect second quarter revenue to be between $23 million and $23.5 million and segment income margin of 63% to 64%. This represents a tightening of the previously provided first half of the year guidance expectations due to the visibility we have through tax season. We expect unallocated operating expenses to be flat to slightly down on a sequential basis.

On a consolidated basis, for the second quarter 2013 we expect revenue between $113 million and $117.5 million; adjusted EBITDA between $27 million and $28.5 million; non-GAAP net income of $22 million to $23.5 million, or $0.51 to $0.55 per diluted share; net income of -- GAAP net income of $9 million to $10 million, or $0.21 to $0.23 per diluted share. Please note that our GAAP net income and EPS guidance does not include an expectation for non-cash gains or losses related to mark-to-market derivative instruments. Also note that the impact of such gains or losses are excluded from our non-GAAP financial measures.

Lastly, our diluted EPS guidance reflects our expectation that shareholder approval will be obtained in the second quarter, allowing flexible settlement on our convertible notes. Currently, these notes are only permitted to be settled in shares. As a result, the first quarter weighted average diluted share count included an additional 1.7 million shares.

With that, I will turn the call over to the operator and we will be happy to take your questions.

(Operator Instructions.) The first question is from Dan Kurnos of The Benchmark Company. Your line is open.

Yes, good afternoon. Search -- first on search, it was a pleasant surprise in O&O, nice sequential rise there. I'm just curious if you could give us a little bit more color around what's going on in O&O and how we should look about -- look at that segment going forward for the balance of the year.

Sure. This is Bill. I'll take that. Eric, you jump in.

I think what's going on in O&O is we have kind of pursued a dual-prong approach of making sure that the search results that we present in response to queries in any geography are relevant. And that's going to be a function of what search providers we work with and how we integrate their results against a certain type of keyword, the locality of the query itself and our ability to deliver rich results against that particular category of content.

And we have investments in those areas over the last 8 quarters; most importantly, really consolidating our platform really down into one code base and then getting new sources of content onto that code base. And once we were confident that those efforts resulted in a better product, we really stepped up in our efforts to market our properties to users. And so, it's the intersection of both feeling better about the product and also developing capabilities as it relates to our ability to acquire users. So, we feel good about that and think that there's still room ahead to grow.

Yes. This is Eric. I'll jump in real quick. I would say that we've seen the momentum carry into the second quarter and it's reflected in our guidance, and we're optimistic that it'll carry on throughout the year and beyond.

So then, to follow up on that, you had a very strong quarter on the distributed side in Q1. That implies, as you guys have mentioned, some moderation in Q2, but your outlook for the full year of 10% looks sort of like we'll sort of trail off over the bulk of the year. I know you're going to lap some difficult new business wins that you had last year. So, I guess maybe I'd just ask what are you guys seeing in terms of effective cost per acquisition? How many of your partners are looking to take alternative monetization paths? And sort of how do we think that the split between O&O and distributed might play out over the balance of the year?

Yes. So, this is Bill. I think the balance of the year where we're most specific, obviously, is with respect to the coming quarter. We have the most visibility there. And one of the things we've talked about in prior calls is some of the difficulties around having a partner network and speaking to the results of that network at an aggregate level. We certainly know the dynamics going on with respect to partners in the downloadable segment, as well as partners in other segments.

And really, what -- to put a finer point on some of Eric's comments as it relates to forward visibility, it is our expectation, and it has been our experience in the past, that as we move through rules changes, we move through implementation changes, there's a transition period. Some partners are able to make that transition, other partners struggle, others stop becoming really present and ultimately stop becoming partners of ours.

And so, at this point it continues to be our view that a number of our stronger partners will make this transition, not without some degree of interim impact, but ultimately will figure it out. And that really -- our confidence as it relates to those partners has a lot to do with the quality of their products that they're bringing and, ultimately, the user demand for the applications that they're developing; not just what exists, but also what's in their pipeline. And so, it's with those group of partners that we think where this business will ultimately not only stabilize, but ultimately grow.

As it relates to the rest, that's really where a lot of imprecision comes in. So, that's really speaking to the transition underway this year with -- in the downloadable space.

And on the marketing side and cost per acquisition, it's a little bit -- I think now, with our feet underneath us, the changes I described on the product side and our feeling more comfortable, we are out marketing and acquiring users on a direct basis in multiple geographies. And for the most part, we're seeing the cost of acquisition be favorable in the areas where we are acquiring traffic. We're going to constantly monetize our ability to -- constantly evaluate our ability to monetize those users once we do acquire them. And where that equation doesn't look to be paying off, we'll pull back. But generally, we are seeing some runway on the O&O front as well.

Great. Thanks. And maybe just one on the tax side. Just curious because you did mention increased revenue per filer. It sounds like you had some decent uptake of your value-added services. I know that you guys are planning on rolling out some more products. Maybe if you could just quantify a little bit more, maybe a little more color on just the differential that you saw in terms of the revenue per filer increase. And maybe give us a sense of a product roadmap that you have planned going forward. Thanks.

I'll take the first part on it, Bill. This is Eric. On a revenue-per-filer basis, I would say we're up about 150 basis points. And it really came from the back-end weighted late season where we do make some pricing adjustments, which we did that this year and we've historically done that. As well as we were happy with the product mix and our ability to up-sell.

One thing that kind of weighted down some of our add-on products was really the change of our store value card provider which resulted in a -- moving from gross accounting, which -- gross revenue accounting to net revenue accounting. If you normalize for that last year, I think we would have been able to grow by -- or normalizing for that last year, we would have grown by another 300 basis points. So really, normalizing for that, ARPU was up essentially 5%.

And then, as far as product roadmap, Bill, I don't know if you want to touch on that?

Well, I think the ability for us to either, through internally developed products or partnering with third parties to bring more value to filers in a more comprehensive way, that was really a step in that direction, as you saw around both audit and legal. Audit's a little closer to home. Legal is we think related, but not precisely in the line of what our filers are doing at that time of year.

But, we like the learnings we took from these introductions. We're going to go back, in many cases, to the drawing board and refresh the offer and figure out if we're presenting in the right way, at the right time to our filers. But, the ability to bring more value and thus increase our monetization as a result of that is absolutely part of the strategy.

Alright, great. Thanks a lot.

Thank you.

Thank you. Our next question is from Scott Schneeberger of Oppenheimer. Your line is open.

Hi, guys. This is Joshua (inaudible) filling in for Scott. How's everything going?

Good.

Good. You touched on this briefly in your prepared remarks. We saw the IRS data come out for the season. 4.4% growth in the DDIY e-file, relatively flat for professionally prepared. In years past this spread was a little wider. I'm just curious what does that tell you about DDIY versus professional channel and where do you think that spread goes in future years?

So, I'll take a crack at that. Again, Eric, jump in if I don't capture all of our thoughts here.

So, it was, as I think has been noted, a somewhat noisy season. There was late legislation, late forms availability, late acceptances, delayed acceptances with respect to certain filings and credits on into February and even March. And so that is a caveat around what signal to take as it relates to the results through the end of April. But nevertheless, we -- and from our perspective there are some pretty clear takeaways.

First is the fact that it's down overall. The last -- the numbers through, I think the third week of April, were down about 70 basis points in terms of total filings year on year. I still think, notwithstanding the fact that you're through April, it's early to tell, because if you look at last year, there were 18 million receipts from April through December. And as you think about how that might repeat itself this year, whether there are more extensions as a result of some of the lateness in the season overall, it's tough to say, but potentially, and so it may be conclusions about a flat to down filing season may change as a result of that.

I think fraud and identify theft were very much a focus this year, both with respect to the bank processors in compliance with their rules, as well as the IRS. The IRS recently said that they suspended or rejected over 2 million suspicious returns. So, taken together, lateness, extensions and fraud and identity theft protections, how much of a suppressant that was on the season, tough to say, but certainly you can imagine that it was.

Our takeaways from the season, kind of from a headline perspective, are that we continued to see erosion in the 60/40 paid preparer to DIY trend. We were pleased by that; not surprised by it. It's a multi-year trend.

We continue to see outperformance within that trend of DDIY e-files, which is why we report on that metric. And against it all we like where TaxACT is positioned in DDIY as a price leaders. So, that's -- I guess that's maybe more of an answer than you asked for, but that's our view on it.

Thank you. And just a follow up on that. Do you think that the ObamaCare dynamic will influence that split in the future?

So, I really don't. I mean, I think it's difficult to crystal ball in this. There's a degree of fluidity around the ACA and its implementation.

One of the things that's true about DIY, and certainly true about the TaxACT filers, is they're very smart, self-empowered, self-educated. And certainly that's who it is we've been in business with our filers is helping them through technology and content, solve problems on their own. And we don't really view this as being any different than changes that have happened in prior years.

So, the way we are going to proceed is really to -- first of all, to enable DDIY filers to get through the requirements associated with ACA as they become known, and then educate them about the opportunities they might pursue through their tax process and hopefully in the process there build trust.

But, I don't think that this is going to be certainly a deciding factor as it relates to 60/40 and that going trend. And ultimately, I think it'll be an opportunity for players like TaxACT.

Thank you. And if you don't mind, if I could just slip one more in. Going off of that education process, you guys have inherent pricing power with your product. Do you think you'll apply that next year, particularly if there's increased complexity with ObamaCare?

Well, we are not a -- we don't charge per form. And so, to the extent that this introduces a new form, it isn't natural that would therefore result in an incremental revenue opportunity or necessarily even be the way TaxACT would think about it. But, the monetization opportunities for TaxACT as it relates to bringing more value to filers, retaining more filers, retaining more of your paid filers, boosting attach rates because of the things you're offering them and how it is you're presenting it, all of those things I think speak to long-term monetization and ARPU gains. And it also comes in a form other than sort of the blunt instrument of a rate card boost, which we think is constructive to our long-term market share position.

Okay. Thank you very much, guys.

Thanks.

Thank you. Our next question is from Mitch Bartlett of Craig-Hallum Capital. Your line is open.

Hi. This is Jack McCarthy filling in for Mitch today. Could you tell me a little bit about -- more about Google's new policies since they were implemented and touch on a little more about Blucora's ability to find new distribution partners to add?

Yes. This is Bill. I'm happy to speak to that. So, as we described on our last call, there is a group of partners that we work with in the downloadable application space where search is introduced as a monetization scheme in connection with their content distribution strategies. And Google is a very close partner of ours and has been going through some upgrades and evolutions to the policies that they promote as it relates to their participation in that market segment.

As a very close partner of Google's, we have been at the table with them for some time, dating back to last year, in anticipation of these changes and have given our partners plenty of heads-up. In some cases it was not a big change and, in other cases, it was a significant change. But nevertheless, all of our partners are well underway in not only having changed their implementations, but also figuring out how to move forward.

So, the specifics as to how it is we work with Google are confidential, so I can't get into much more detail than that other than to say that it does apply to that segment of our partners, which is not by any means the only segment of partners that we work with. And it also applies specifically in terms of our working relationship with Google. And we have, of course, a relationship with Yahoo! and other search engines.

Okay. Thank you.

Thank you.

Thank you. Our next question is from Michael Millman of Millman Research. Your line is open.

Looking specifically at the online tax, last (inaudible) shared to block despite the big differential in price. I was wondering if you could give us some ideas to why you think that occurred.

Yes, Michael, that's not actually the way we look at it. I think we view having -- both in the case of total filings, as well as DDIY, which is really accepted e-files having gained share. So, we absolutely view that. And I would also add to that, in the paid professional channel where we feel like we have a very competitive offer as well.

So, I think that the perspective as to why did we gain share is really back to the comments we made at the front end of the call, which is we feel like we have a very competitive product that is feature rich, that is increasingly mobile, and that is priced in a very fair way, much more fair than we think competing solutions are. And so, that's been the strategy at TaxACT before Blucora came into the picture. It certainly continues to be the strategy and we're pleased with the season's results.

Yes. Bill, if I could add onto that. This is Eric, Michael. One thing I would also say is our business is largely concentrated in online and has a rather small desktop presence, although we were able to grow our desktop accepted e-files this year which we were excited about. We -- it does not provide us a tailwind to our online accepted numbers. So, I think that's -- speaking to our methodologies, that's why we tend to look at DDIY in total when we talk about share changes and what we're focused on.

Okay. Can you also talk -- again on tax, your retention rate and what the source of new clients typically is for you? In other words, do the new filers, are they coming from assisted, are they coming from competitors, both higher-cost competitors like Block or lower cost -- or low-cost competitors like TaxSlayer and a bunch of others?

So, this is Eric again. I would say that retention was a very good story for us again this year. We're up about 200 basis points. We don't specifically break that out, but we continue on a cumulative basis, remain in the mid-70s for -- 70% for retention.

As far as where our filers come from, I mean, we're very excited with the retention of our existing filers this year, as well as bringing new filers on where we also saw increases over last year. AS far as the details of where those filers are coming from, we're still assessing the season and may or may not provide more detail on that next call.

Okay. Thank you.

Thank you.

Thank you. Our next question is from Gil Luria of Wedbush Securities. Your line is open.

Yes. Thank you for taking my question. You mentioned the Affordable Care Act a little bit. Can you talk a little bit about what product enhancements you consider making when you reach out to your customers ahead of time, before tax season, to let them know that you can handle those types of challenges as they go forward? A little bit more detail about how you plan to proceed and prevent this from being a way of customers shifting to paid preparers?

Yes. So, I would be -- I think on the second part of your question is absolutely what we're gearing up to do. And having very recently spent time with the team on this topic, it is in many respects like a challenge that would have presented itself in prior seasons. And it's really just something's changed in the rules that requires an updating of the filing process, the interview, some upfront education, some site content.

So, as big a change as this is with respect to that segment of the population that is currently uninsured, as big a headline grabber as ACA has been for the last months and years, as it relates specifically to enabling our filers to get their taxes done in an accurate way and in a simple way, this is not unlike any other challenge that we've tackled in the past.

And so the -- which is not the same thing as saying there's probably not going to be a reasonable amount of marketing dollars on behalf of some players in the space trying to get people concerned that it's a monumental thing that is going to cause them to rethink how it is they do their taxes. But really, the population that we serve by and large is pretty smart and I think they'll see through that. But -- so, that's really with respect to the education and meeting their requirements.

But, we also want to allow our filers to make the most of t his opportunity. To the extent that they can access a credit through the filing process, then we're going to make sure that they know how to do that, and also do it in a way that keeps pace with the enrollments that begin later this year.

Got it. And then, you listed the list of reasons that you think caused there to be a lower number of filers through tax day this year. Would you mind prioritizing which ones you think are the real big culprits and what that means for the growth in filings when we're done for the year in October? And what do you think that means for the growth of filings -- overall filings, overall IRS filings for next year?

Well, of course that is difficult to crystal ball. I think in the past we've said, Eric, 1.5 points to 2 points a filer growth?

1 to 2, yes.

1 to 2. That was our expectation heading into the season. I think, like a lot of people, we were a little surprised that the filings been down through the third week in April. It may be that that reverses itself between now and October. Certainly the history would suggest that it revert back to 1%, 1.5%. I think you have an employment tailwind as well that should contribute to that. So, going forward, the question would be how much of this year was extenuating with respect of -- with respect to lateness and some of the fraud issues and other issues playing into that versus will we have kind of a mean reversion in the future and see 1% to 1.5%. That would be our expectation. I think we are viewing this season as somewhat exceptional, but that's tough to crystal ball.

Thank you very much.

Thank you.

Thank you. Our next question is from Jim Macdonald of First Analysis. Your line is open.

(Inaudible) question. Just one quick thing on tax. How important do you think live tax, the live tax offerings are to market share gains or losses? And maybe you could talk about what your plans are and how you plan to compete against those offerings.

Yes. Well, we have live support. It's been an integral part of TaxACT's offering. And you can imagine; as the season progresses, customer support becomes more and more important. The nature of that can vary from technical questions, mundane questions like username and password, which are much more easily addressed, to a particular point in the interview or how do I fill out this box on this part of the form. And I think that is important.

The complexity of the filing process would add to that. Certainly as you're trying to evangelize DIY to the 60% that have been using some form of assisted, you can imagine how hand-holding is important. It isn't always the case that that needs to take the form of a phone call, however, which is -- a lot of the effort of TaxACT historically has been to provide that level of comfort and education and peace of mind through software.

And so, we continue to believe that that is absolutely possible and ultimately will become possible through a smartphone and a tablet. But, I think a lot has been made of live support over the last several seasons. A lot of that is really kind of on the sort of pitched battlefield between the 60/40. But, I think support will continue to be helpful. It really does matter, though, in what form it comes.

Great. Thanks very much.

Thanks.

Thank you. This ends the Q&A portion of today's call. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.