Avantax Inc (AVTA) 2015 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 Chief Executive Officer, Bill Ruckelshaus; Chief Financial Officer, Eric Emans; Vice President, Investor Relations, Stacy Ybarra. At this time, I'd like to turn the conference over to Stacy Ybarra. Please go ahead, ma'am.

Good afternoon and welcome to Blucora's investor conference call to discuss first quarter 2015 earnings. 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 its products and services, outlook for the future of our business and growth initiatives, and anticipated financial performance for the second quarter and future periods. 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 quarterly report on Form 10-Q on file with the Securities and Exchange Commission. Blucora assumes no obligation to update any forward-looking statements, 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 Relations section of our corporate website at www.blucora.com and filed with the SEC on Form 8-K.

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

Thank you, Stacey. Good afternoon, everyone. Thank you for joining. Blucora results in the first quarter are highlighted by a strong season in TaxACT and continued challenges inside our Search and Content segment. My remarks today address Q1 consolidated results and forward outlook and performance trends at our three operating segments. First quarter performance for Blucora was consistent with our in-going expectations and included some positive upside. Revenue of roughly $175 million was down $41 million or 19% versus Q1 2014. Search and Content revenue was down $48 million, E-Commerce was down $2 million, and TaxACT increased $9 million. Consolidated adjusted EBITDA of $51 million was down $6 million or 11% versus prior year. Search and Content declined $11 million year-on-year, E-Commerce was down $1 million, corporate expenses expanded by $1 million.

Offsetting these increases, TaxACT grew by $7 million or plus 18% versus Q1 2014. We repurchased approximately 300,000 shares of our stock for $4.4 million in Q1 at an average price of $14.21. The capital we devote to buybacks is important and governed by our Board authorization and our ongoing objective to preserve capital for a new business acquisition as we continue our transformation. Our formula for creating value at Blucora is straightforward, operate and strengthen our portfolio while pursuing disciplined M&A. Through operating execution and sound capital decision making, we will leverage our outsized net operating loss to maximize free cash flow. Turning to our business unit performance starting with Tax Preparation. For the full season representing expected results for Q2, we forecast TaxACT to generate approximately 13% revenue growth and 16% to 17% segment income growth over the same period last year.

This marks the second consecutive year of double-digit topline growth combined with operating leverage. Over the four year period from 2011 through our forecasted full year 2015 roughly approximating the time since our acquisition, TaxACT is expected to record double-digit compound annual growth in revenue and segment income and 5% growth in e-file. 2014 consumer tax season was slow to develop and we again experienced record volumes in revenue in the final days leading up to April 15. TaxACT's performance this season in a hotly competitive market is a testament to the team's execution and the strength of their market position. TaxACT's formula relies upon growing filings in the DDIY market, expanding revenue per filer through pricing and ancillary products, and accelerating growth in assisted prep in SMB.

On the consumer filings front, DDIY e-files were flat year-on-year against a market that grew roughly 6%. In January, TurboTax and H&R Block introduced discounted versions of their applications for selected filer groups. TurboTax's Absolute Zero offering targeting new 1040A and 1040EZ filers with free federal and state ran through early February. H&R Block offered free federal and reduced state to $9.99 in a promotion that ran intermittently throughout the season. Our responsive TaxACT was guided by two related considerations. First, our experience indicates that aggressive price based promotions particularly those that vary year-to-year confuse customers and mostly attract less loyal, lower monetizing filers prone to switching providers one season to the next. Second, TaxACT's commitment to fair, transparent, and simple pricing tiers has been a driving force for acquisition and retention of loyal high value customers over the years.

By choosing not to match aggressive competitive offers, we anticipated TaxACT would fare less favorably with 1040A and 1040EZ filers in the early season and that is where we saw the significant majority of our unit shortfalls versus expectation. The largest impacted segment for us this season was free filers, particularly those new to TaxACT, a group less likely to monetize in the long run. Notwithstanding these dynamics, TaxACT was again successful in attracting new free filers in 1040A and 1040EZ resulting in an improved mix as lower monetizing switchers were lured away by aggressive offers. In short, competitor offers impacted our performance in the low end of the market concentrated in the early season. In response, we found opportunity to drive value on higher-end SKUs through targeted pricing actions.

TaxACT operates within a large pricing umbrella relative to competing solutions and value-based pricing in higher end segments this season did not diminished this advantage. TaxACT's value to filers across all segments remains the strongest in the industry. The continued focus of TaxACT is to win profitable share while bringing more value to our returning filers. Recognized with PC Magazine Editor's Choice Award for the second consecutive year, TaxACT improved core offerings with the launch of mobile products including TaxACT Express, our tablet app, and Donation Assistant. Engagement with our customer base improved through investments in decision support content and further leveraging social media channel. We generated more than 800,000 unique page views on our blog in 2015 and since 2013, more than 150,000 users have signed up for our products through social media.

TaxACT gains in assisted prep and DIY small business product lines this year expand our footprint and have contributed meaningfully to our overall momentum. In assisted prep, customer accounts and monetization per customer continue to expand. SMB while still relatively small for TaxACT generated solid growth in customers and ARPU this season. We see significant upside and untapped opportunities in both of these markets going forward. TaxACT is a fantastic franchise led by a strong management team with decades of experience in tax preparation. This offseason the team will innovate again in consumer tax evolving offers, enhancing features, and optimizing marketing spend to regain filer growth with continued financial momentum. Turning to Search and Content. The Search and Content segment performed to guidance this quarter driven by our owned and operated properties, primarily WebCrawler and HowStuffWorks.

As previewed during our last call, Infospace is transforming under new leadership. While prudently managing core search, the team is building audience discovery and monetization solutions for content publishers starting with HowStuffWorks and extending throughout this year to a new set of quality partners. With the acquisition of HowStuffWorks in May 2014, we saw the opportunity to promote HSW content across the Infospace search network thereby introducing HowStuffWorks, the high quality intent-based audiences unique to the search channel. Actions over the last year; integrating HSW, investing in their team and content, boosting monetization through direct and indirect sales, and driving incremental traffic to their pages; is bearing fruit. HowStuffWorks today represents 21% of our owned and operated revenue.

The benefits accruing to HowStuffWorks since our acquisition are clear, growing intent-based audience that monetizes well and expands awareness, consumption, and sharing of the site's educational and entertainment content. The next phase for Infospace will be to take these offerings to a broader set of content publishers. To date we have launched 23 new publisher sites implementing our solution. Our partners are experiencing gains in site traffic with strong engagement. We will introduce expanded features to partners this year that will further grow traffic and enhance site monetization. As expected, our legacy distribution network continues to be pressured. We are transitioning the core search network with the support and cooperation of our search engine partners while we continue to build out the new Infospace model. Expect further progress updates as the year moves forward.

Now, turning to our E-Commerce business. Monoprice results for the quarter were in line with our expectation and a continued turnaround at Monoprice is on schedule. In his short time aboard, President Bernard Luthi has assembled a strong team to execute and take Monoprice to the next level. Monoprice is a trusted brand and e-commerce provider with a distinctive value proposition and a loyal customer base. As shared during our last call, Monoprice will build momentum in 2015 to revitalize product innovation, operational enhancements, and channel development. Some updates in each area. Product innovation, Monoprice developed its following by innovating in core CE categories such as cables, networking, and accessories. Returning to growth means being first to market in these core categories again with new high quality products at disruptive prices. The recent USB-C launch at Monoprice offers a glimpse of this approach.

In early April Monoprice was first to unveil USB-C, a new specification in connector type that will eventually replace all existing USB cable. Nearly 3 billion devices with USB ports are shipped every year making it by far the most utilized peripheral connection. USB-C addresses consumer frustrations by connecting devices to a universal connector with 2x speed and 3x power improvement. Monoprice USB-C solutions brings step function improvements in charge, sync, and transfer speeds at unbeatable price points. Our launch beat the market, garnered media buzz, and positions Monoprice as the early leader in this growth category. Operational enhancement, the recently redesigned homepage at monoprice.com improves navigation, makes finding easier for our users, and highlights products with lifestyle photography. Early results from the stage rollout are positive with time on site and new visitor conversions up meaningfully.

Additional UX improvements on tap this year will further broaden our appeal to tech enthusiasts and drive gains in site level metrics. Channel development, this involves making sure our branded products are available to customers wherever they shop for tech gear. Monoprice continues to expand availability in US and international online marketplaces and in reseller and B2B sales channel. Growth in these channels is ramping, driving awareness of our products to an expanded demographic, and growing our community of future loyals. At Monoprice, I'm encouraged by the team's execution and look forward to updating on the continued progress next quarter. In conclusion, Blucora starts the year on a positive note. Leadership and operational changes made last year are beginning to pay off. With a strong balance sheet and capable team, Blucora is positioned to build value by operating effectively and allocating capital with discipline.

With that, I'll turn the call over to Eric for more details on our performance in the quarter.

Thanks, Bill. Jumping right into consolidated results. As Bill mentioned, consolidated revenue for the first quarter was $174.8 million and adjusted EBITDA was $50.8 million. Non-GAAP net income was $43 million or $1.03 per diluted share and GAAP net income was $23.1 million, $0.55 per diluted share. Both of which exceeded the top end of our guidance. We exited the first quarter with cash, cash equivalents, and short-term investments of $311.4 million and net cash of $55.2 million. Turning to our first quarter segment performance starting with Tax Preparation. Revenue for the first quarter was $81.1 million, up 12% over prior year. Segment income was $44.1 million, up 18% year-on-year and representing a segment margin of 54%. Shifting to our first half 2015 expectations, which include the full tax season, we are raising our revenue guidance to $111 million to $112 million and raising segment margin to approximately 57%.

This translates to first half 2015 revenue growth of approximately 13% and segment income growth of 16% to 17% versus prior year. Tax Prep's first half 2015 segment revenue growth is primarily driven by consumer ARPU gains of approximately 13% as a result of pricing actions, gains in ancillary products, and an increase in paid software mix. First half 2015 assisted prep software revenue representing approximately 11% of total tax segment revenue is expected to grow 15% with balanced gains across ARPU, software units sold, e-files, and e-files per unit. Assisted prep e-files through tax day plus 1 grew approximately 8% while e-files per unit grew approximately 4%. Closing on the first half of 2015, we expect DIY small business product revenue to grow approximately 60% versus prior year.

Although this is a small component of our segment revenue, it provides a glimpse into how the team is continuing to innovate, diversify, and grow revenue streams. Overall, first half 2015 segment income growth of 16% to 17% reflects topline revenue gains and modest operating leverage. Before we close on the Tax Preparation segment, I want to touch briefly on our full-year 2015 expectations. We expect revenue of $116 million to $117.5 million and a segment margin of approximately 48%. Now, turning to Search and Content. Revenue for the quarter was $58.7 million and segment income was $8.4 million, consistent with guidance. Owned and operated revenue was up 16% sequentially and now represents 34% of Search and Content revenue. HowStuffWorks revenue was up 39% sequentially. This momentum reflects improved site-wide monetization and the positive impact of promoting HowStuffWorks across our search network.

Overall owned and operated revenue increases were partially offset by a greater than expected revenue decline on Dogpile, which contributed to margin compression and is reflected in our forward guidance. As expected, distribution revenue was down 19% sequentially primarily driven by the removal of a large distribution partner as discussed during our last call. We expect continued but moderated attrition in the distribution network in the second quarter. With Peter Mansour's arrival at the end of last year, the Infospace team is focused on product and diversification initiatives that better align with our search engine customer preferences and in the long term should stabilize quarterly sequential results and provide growth within the segment. Although we are targeting a stabilization in the second half of 2015, uncertainty continues to persist given recent trends in our core search revenue streams and the early stage of our diversification initiatives.

Our outlook for the second quarter is as follows, revenue of $48 million to $54.5 million and segment margins of 10% to 13%. With that, let's move on to E-Commerce. Revenue for the first quarter was $35 million while segment income was $2.6 million for a segment margin of approximately 7%, which exceeded the high end of our guidance. As expected, our revenue results reflect inventory challenges created by the port slowdowns. Revenue was down 6% versus prior year on a decrease of 12% in orders offset by an increase of 7.5% in average order value. As we mentioned during our last call, order counts and average order value are skewed year-on-year in part due to mix shifts in reseller and B2B enterprise sales, which compresses order counts and increases average order value. First quarter revenue from Amazon, our primary reseller, are up about 63% versus prior year. Monoprice enters the second quarter with momentum. Inventory shortfalls are largely addressed with the port resolution.

The team is focused this year on product, user experience, and marketing initiatives that should return Monoprice to year-on-year double-digit revenue growth by the fourth quarter with margin expansion. For the second quarter, Monoprice expects revenue of $36 million to $38 million representing a return to year-on-year growth and a segment margin in the mid 5% to 7% range. Finishing up on the first quarter results, unallocated corporate expenses came in at $4.3 million. We expect a modest sequential increase in the second quarter primarily driven by increased professional services. With that, let's finish with our consolidated second quarter expectations. We expect consolidated revenue between $114 million and $123.5 million, adjusted EBITDA between $20.8 million and $24.8 million, non-GAAP net income of $16.1 million to $20 million or $0.38 to $0.48 per diluted share, and net income of $2.5 million to $5.4 million or $0.06 to $0.13 per diluted share.

With that, let's turn the call over to the operator and we will be glad to take your questions.

(Operator Instructions) Gil Luria, Wedbush Securities.

Tax season, there were almost two different tax seasons. There's the first half where Intuit was especially aggressive on prices and then the second half when their promotion ended and they did a couple of things to crack down on fraud. Would you mind breaking out the unit growth, the filing growth for TaxACT between the first and the second half? Could you actually have positive unit growth in the second half and what's the kind of least order of magnitude of what that growth was?

Gil, it's Bill. I'll start out by sort of framing the season that we saw and then pass it to Eric for a little bit more of the specifics in direct response to your question. But I do think that it was in many respects a tale of two seasons, we certainly saw that. The early season for us was where we encountered the majority of our issues as it relates to unit growth. We think that had a lot to do with the aggressive offers that were out there that I referred to and the second half of season looked a lot different. And as I had mentioned, for now I think the third consecutive year we saw more of a backend weighting to our season. That sort of also kind of gives you a sense for the seasonality inside of TaxACT that's evolved somewhat over the last few years. But Eric, why don't you to share a little bit more specifics in terms of as it relates to prior experience with respect to early season and late season and also the currencies and how that might have changed?

So, just to give you a little bit of color. We definitely saw the growth in the back half of the season and saw the declines in the first half of the season. As Bill indicated, we saw a little bit of a shift to the back half and I think that partly can be explained by just the softness in the first half.

But nothing more specific than that in terms of unit growth after the first four weeks?

Well, we don't break it out exactly that way. I would say through call it past mid-February, I'd say we had about 2% unit growth and then prior to that, we were down about 5% year-on-year.

And then you went through the drivers of ARPU growth, pricing, ancillary products and mix; what's the breakdown in terms of what drove that increase in ARPU this year? Was that in order that you listed them? Was pricing the biggest piece?

Gil, this is Bill. So without getting into specifics, which we don't disclose publicly, the way I can answer that question that I think will give you a little bit more sense as to how this season was different is in the following way. So, one of the opportunities that we had identified with the TaxACT team back when Blucora acquired TaxACT was the comparative unit economics between TaxACT and the competitors we thought was not necessarily reflective of the comparative value that TaxACT was bringing and the value that this product represented. So, there was opportunities for us to carefully close the gap over time that had more to do with bringing more value to filers in the form of additional offerings that they would essentially opt into call that attach rate versus rate card changes.

And for the first several seasons together, that was precisely the strategy we pursued. This past season we complemented that with some targeted pricing actions on the rate card side so this year the ARPU gains were a little bit more balanced between attach and rate card and we thought prudently so because a vacuum had opened up in the higher end of the market segment in response to the pricing actions on behalf of the competitors. But I would say that's probably the best way we can characterize how it was different this year, it was a little bit more balanced across rate card and attach.

So then finally, the aggressive pricing basically going to zero for those first few weeks ended up being extremely successful for TurboTax. They were able to make up for it in the second half so not unlikely that next year they'll expand that and maybe have truly free for those simple filings for the entire season. If they do that, wouldn't you have to match them?

Well, I think certainly we're going to be regrouping in the offseason. There was a lot of lessons and a lot of experiments that we ran in the season that I think are going to be instructive in regrouping and coming back next season with a focus on not just financial performance, but also regain filer momentum. The TaxACT philosophy and one that I think is going to be guiding going forward is around transparency. So, we have every expectation to be very competitive in all segments of the filing population next year and are certainly going to be anticipating how it is the competition might behave in ways you described and in other ways. But our commitment, something we think is actually somewhat centered inside of the TaxACT brand, is transparency so we're not going to be out there claiming things in our promotions of our products that ultimately aren't true once you get to the site. We'll use that as a guideline. But certainly as we come back out next season, it would be our expectation that it will be equally if not more competitive and we'll have to revisit our value proposition in all segments.

Great. Thank you.

Dan Kurnos, Benchmark.

I was going to surprise you guys by asking a tax question first although Gil just asked most of mine so I'll ask a quick just follow-up on that. Eric, you've said historically that TaxACT margins can be kind of in this maybe sustainable mid-40%s range and obviously you guys have been exceeding that given the shift into deluxe that you've been taking and obviously the pricing actions as well. So maybe to Gil's question, just how do we think about it? If it is really competitive next year and you have that kind of play maybe to get a little bit aggressive on the promo side that you can continue to accomplish sort of similar results that we've seen, how should we think about sort of that balance?

Dan, this is Eric. I think the easiest way I can kind of lay this out for you is because of how our fiscal breaks down, you really have the back half of our year where we are spending a lot of dollars to get ready for the next tax season. So, It's good to look at it on an LTM basis off of our expected results for 6/30. So if you do that and compare expected LTM given the guidance we just provided through 6/30 this year and look back, we would have been at a 50% segment income margin. If you compare it with the comparable period of the year before, we'd be actually up almost 1.5 points, 1.7 points over the previous year. And so, margin continues to be paramount as we think about this as a business within our portfolio and certainly we want to think long term and grow units, but we also put profitability at the front.

And I think the other thing, which Bill touched upon in his script, is as we think about gaining units and we think about how relative [ARPU] to the competition; we have to be very efficient and make sure that we're targeting the right kind of share that comes into our products and stick with us over time. And I think a testament to the team is if you look at our marketing efficiency and say marketing is generally a percentage of revenue over the last two seasons, we've brought it down and in fact this year they brought it down 2 points. And so yes, we would expect to maintain a similar margin profile. It doesn't mean that we're not going to take the opportunity to look at all strategic opportunities including things outside of consumer, which have been growing very nicely for us. But this business is a cash flow driver for us and we put that in the front of our conversations and why we talk about profitable growth.

To that point, Eric, and thanks for the color. Not to sort of beleaguer this, but is there a thought to maybe offering retention and repeat metrics relative to your competitors if that's sort of the strategy?

We'll think about it as it relates to the strategy. We're still 14 days or so out of tax season and a lot of work to do by the team than to go offline. But certainly you can imagine with us being flat on share with the market growing, we did see some challenges with our retention. We came down, but we are still for the tax season in the mid 70%s and it's a favorable metric for us. But to the extent that that can give color around a long-term strategy, we'll certainly consider giving that information.

So let's switch over to Search. Just briefly on the B2B business, there's a little bit of an accelerated decline and we know you called out the partner churn from last quarter. It was still a little bit lighter than we were expecting and I'm just wondering if it really had to do more with the timing of that partner churn, maybe it wasn't entirely baked into all of last quarter, if there was some additional intentional churn this quarter, if there was another factor there?

No, there isn't any specific partner churn I would call out. As we've talked about, we certainly think that the declines will be more moderated, but certain segments of the business such as DLA continue to be under pressure and the team's focused on maintaining those dollars and maneuvering any policy actions or policy changes that may occur. But no, I think that there were no surprises I would say in distribution in the first quarter for us.

Okay. So then on O&O, there are some pretty healthy upside about $3 million versus our estimate and obviously that's sort of a testament to the new team I think. I just love to get sort of your thoughts on the breakout of the impact of increase in CPCs, we've seen that from a couple competitors and whether or not you guys are actually seeing any impact either way from Google's focus on higher SEO rankings for mobile optimized websites.

O&O is a real positive trend for us at Infospace. I wouldn't describe the upside is deriving from CPC gains per se. There's mixed changes going on inside of O&O as O&O becomes more defined by new not necessarily search dominated initiatives like HowStuffWorks, which of course was introduced by way of an acquisition in the first half of 2014. But HowStuffWorks we like because it is a mobile site with great content that has both now search and non-search advertising schemes that we can exploit and it gives us more diversity in that regard. So the WebCrawler performance, as Eric touched on, benefited from quality score gains certainly versus the prior year at this time that we were experiencing that were contributing to lots of the softness around WebCrawler. So where we have better quality scores, we're certainly in a better position to promote metasearch and we saw some evidence of that in Q1. To your last point, we're not expecting any significant impact to the mobile SEO changes to the search business or across any of our businesses at this point.

I figured probably not. And I just wanted to get a sense from you guys maybe, Bill or Eric, just on the broader sort of mobile strategy going forward for both segments would be helpful.

I would say two things on that. One is maintaining responsive sites that are optimized in mobile is critical and whether it's by way of the SEO rankings that you referred to in Google or it's simply in terms of optimizing a user experience when someone comes to your property through an email or other means, it's absolutely critical and at the forefront of everything that Infospace and Monoprice and TaxACT are thinking about as it relates to user experience. So, it is a dominating metaphor as it relates to everything that they develop and the content that they render. And then the question is which properties do we think and what strategies do we have inside of Infospace that we think can best position us.

I had mentioned HowStuffWorks is a mobile property that I think its content renders very well on mobile and we're seeing lots of engagement inside of smartphone and tablet and are hoping to pursue more of that. Certainly as the team starts to syndicate more of its content out to social channels, I think that by definition will bring it a higher mobile mix and we'll exploit those opportunities. And then as it relates to the content publisher initiatives that I have referred to now on two consecutive calls, the content publishers and the promotions that we're doing and this audience discovery inside of search will be mobile intensive effort just by virtue of where it is we're acquiring the traffic and rendering the content partners' experiences in mobile is critical to making sure we have a relevant solution for our partners. So, mobile is going to be a big opportunity for us going forward.

Great. Thanks for all the color. I have some more questions, but I'll let other people ask and get back in the queue. Thank you.

Brian Fitzgerald, Jefferies.

Would you characterize Monoprice's quote-on-quote fully stabilized from the West Coast stock issues? Was the timing around the alleviation of pressure there kind of as expected? And then a second one looking back, did the Affordable Care Act have any meaningful impact on the amount of filers that may have begun, but ultimately abandoned the process? Any color around that would be great.

So, I will start off with the Monoprice answer. The timing I think is about as we expected as it relates to the port resolution. Certainly the last time we were speaking to this, there was not forward visibility as to the timing of the resolution and it came about fairly quickly. That didn't result in an overnight inventory surplus for us. The ships still had to make their way into port and that took some time, but we're pleased that most of that is behind us and we now reached more stabilization, but it was disruptive. On the ACA front, I think the answer to that is not dissimilar from what other DIY players may have said already, which is heading into the season it wasn't our expectation that this was going to represent the headwind that might have been thought as it relates to DIY. And our experience with the vast majority, I'll call it a significant majority of our filers, it simply meant one more box to check in the tax application. It was no more disruptive than that and [our having] analysis in terms of drop-offs in and around that step sort of reconfirmed in our mind that this did not introduce a bunch of complexity that represented a headwind.

Great. Thanks, guys.

(Operator Instructions) Scott Schneeberger, Oppenheimer.

Just curious with regard to you'd mentioned earlier pricing of core consumer tax. In the past few years since buying the Company, you've been doing more of the pricing opportunity or the ARPU on attach and then this year you shifted a little bit more over to the base. I would imagine you still have a lot of runway considering some of your larger peers, particularly your largest peer, increased price in the deluxe and the premium here. Would you comment on that extended runway and your cadence of capitalizing on it over coming seasons?. Thanks.

Scott, it's Eric. We have taken actually pricing actions since ownership. I think a couple years ago was in the form of maybe more aggressive pricing throughout the season. We still have the Price Lock Guarantee so you pay the price that you start, but as we would raise the price throughout the season and those that would maybe procrastinate then would have a higher price. Last year we chose to raise the price on deluxe and we thought that that didn't impact us on the unit front, but drove an increase to ARPU and was a net win. And then this year as we looked at the competitiveness of the season and how others were pricing in the market, we did take opportunities especially in the areas of filers where we thought we had the most pricing umbrella and were still driving the best value to try some things there.

And so as it relates to the runway vis-a-vis what we see thus far from the competition, yes, I think there's a lot of runway there. But again, it comes back to what Bill touched on is transparent pricing and our value proposition are driving value to end users is very important to the team and is constantly used a barometer as we think about that pricing umbrella. But there is plenty of room as we recognize the competition when they go after the low end, oftentimes they're either increasing prices on the high end so again helping us on our pricing umbrella in the high-end market.

Another thing that we hear from your larger two peers is the discussion of their power of their marketing spend just given their size and what they do spend and how that can be a barrier in the industry. You're comparable on their level versus I would say the next peer down. But what would be your comment with regard to your visibility to consumers relative to your larger peers and anything you may do with marketing with regard to spend or approach in the coming season? Thanks.

Scott, this is Eric again. Look, obviously our share of voice in the marketing space is challenging given the two large competitors that are out there as well as also the difference is the ARPU of our product offering. So, it is always a challenge to go after share of voice and we think the team does a nice job of understanding who our filers are, understands the cost to acquire those filers, and what those lifetime values are. And so I think every year we can be competitive, but certainly there is a share of voice. But the one thing I would say in particular with one of the competitors is we love to see the spend out there in evangelizing DDIY which we think is good for the value player in the space. So to a certain extent, there is an opportunity there for us if we're reaching out to the right filers. As far as forward-looking plans, I'm not to get into too much detail there as we go through strategy, but I would say in the past year I think we've seen a lot of success or increased opportunity in social and I think you should plan for us to continue to capitalize on that in the future.

Certainly I think your strategy is very successful with regard to looking at your margin. One more from me if I could, just following up on the ACA question before. You said basically your expectations that DDIY would not be too impacted adversely by ACA this year or realized and I think that's pretty clear now observing. What do you anticipate some of the non-DDIYs are saying well, there's still an opportunity for next year and we think that we'll see that then. Having looked at your software, I realize yes, it was just the one box to which you were speaking. I guess curious on the incremental two years what you think, do you maintain the same view or would that view soften slightly going in the next few years? Thanks.

Scott, this is Eric again. I think as Bill touched on, we share the view of the DDIY competitors that have been out there speaking is that for us and as we look at our filers, the significant majority of it was no harder than I think clicking a box and so really a non-event. And so I think as it relates to our existing filers and bringing them back, we like to think we have some of the smartest, most savvy filers and we'll get them back every year. As it relates to the overall general market, I think that ACA will continue to be an opportunity for us as well as the competition. But thus far, it's playing out like we expected and we believe that it's not going to be a headwind, but rather an opportunity for us in the future.

Thanks, guys. Best of luck.

Alex Paris, Barrington Research.

It's actually Joe. Just one question, most of my stuff's already been answered. But maybe just around capital allocation, maybe more specifically around acquisitions, kind of what you're seeing out there in terms of pipeline and maybe just kind of update us maybe on your appetite given the relative valuation that you're seeing out there? Thanks.

As we said before, we think that M&A can continue to be a catalyst, but it's not going to be something that we're going to pursue if we don't find the right opportunity. The right opportunity being defined as the quality business that is established and profitable and where we can structure a transaction that brings good returns for our shareholders. And so, it isn't until we find that opportunity that we'll pursue it. And it's also safe to say that given how hot the market is even when you do find an opportunity like that, you sometimes don't get to the finish line because of the bidding environment. And so we continue to believe that there are going to be opportunities for us down the road that are going to be a catalyst. So, we're committed to that strategy, optimistic about it, and seeing some interesting things out there that only further our confidence. But we are going to be disciplined and we're not considering ourselves to be sort of hasty as it relates to finding that opportunity, but we do move quickly when we do.

Great. Thank you, guys.

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

Thanks, everyone, for joining the call.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.