Avantax Inc (AVTA) 2018 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Blucora 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call may be recorded.

I would now like to introduce your host for today's conference, Mr. Bill Michalek, Vice President, Investor Relations. Please go ahead.

Thank you, and welcome, everyone, to Blucora's First Quarter 2018 Earnings Conference Call. By now, you should have had the opportunity to review a copy of our earnings release, supplemental information and prepared remarks. If you have not reviewed these documents, all 3 are available on the Investor Relations section of our website at blucora.com.

I'm joined today by John Clendening, Chief Executive Officer; and Davinder Athwal, Chief Financial Officer.

Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it and speak only as of the current date. As such, they include risks and uncertainties, and actual results and events could differ materially from our current expectations. Please refer to our press release and our other SEC filings, including Forms 10-K, 10-Q and other reports, for more information on the specific risk factors. We assume no obligation to update our forward-looking statements.

We will discuss both GAAP and non-GAAP financial measures today, and the earnings release available on blucora.com includes the full GAAP and non-GAAP reconciliations.

With that, let me hand it over to John.

Thanks, Bill, and good morning, everyone. In addition to releasing our earnings results this morning, we also announced that our head of TaxACT, Sanjay Baskaran, has made the decision to step down as president of TaxACT and leave the company for personal reasons, effective last Friday, May 4. I know this was a difficult decision for him. We're all grateful for all of Sanjay's contributions, and we are pleased that he's agreed to remain with us on a transition basis through August 1.

During his time with us, Sanjay has made many valuable contributions, including playing a key role in the very strong tax season results we announced today. So we thank him for all that, and for all that he has contributed.

On an interim basis, I will assume Sanjay's responsibilities for TaxACT, supported by the strong team we have at both TaxACT and Blucora. We have initiated a search for a replacement and will make an announcement as soon as we have something finalized.

So net earnings. I am pleased to report that Blucora had a very strong start to the year, posting double-digit growth rates and exceeding the high end of our guidance range on all metrics. Compared to last year's first quarter, Blucora revenue grew by 13%, adjusted EBITDA by 14% and non-GAAP EPS by 15%. Strong cash flow generation allowed us to further strengthen our balance sheet. During the quarter, we reduced debt by another $40 million and improved our net leverage ratio to 2.1x. This compares to 3.3x in the year earlier period and 6.3x at the end of 2015.

Big picture, we are on track with our plans to drive growth in our businesses.

Moving to the business unit level, starting first with Wealth Management. HD Vest continued strong business momentum with double-digit growth across its key metrics. Revenue grew by 11% year-over-year to $92 million, with continued investment in business this year, including costs associated with the clearing firm conversion, segment income grew 10% year-over-year to $13.1 million. Total assets under administration, or AUA, increased 10% year-over-year to $44.4 billion, and fee-based advisory assets under management, or AUM, were up 15% year-over-year to $12.7 billion. These levels for both AUA and AUM are new records for the company.

Net inflows into AUA in Q1 were about $625 million, which I believe is the highest single quarter inflow level on record. This was driven in part by a number of recent adviser recruits coming on board, including first funds from the large adviser we announced last quarter. Net inflows in AUM were about $320 million, and AUM as a percentage of AUA increased to 28.7%, up about 130 basis points from the year-ago quarter, also hitting a high water mark.

A few updates I'll call out here for HD Vest. The clearing conversion remains on track for late September. We continue to expect breakeven on the conversion for 2018 and perhaps see a slight net benefit, followed by a $6 million to $8 million benefit in 2019, and an $8 million to $10 million benefit in 2020. Our adviser success and productivity efforts continue to show progress. Advisers recruited under the new assessment process are showing exam pass rates 20 points higher than our historical average, which is a strong leading indicator. In addition, these advisers are hitting initial benchmarks in growing gross commissions in about 120 days versus our prior 800 days, which is a remarkable early statistic.

While it's still a relatively new process and the dollar volumes are still small, it's a good indication that we're bringing the right new recruits onboard and better enabling them to engage their clients on Wealth Management.

Another update in terms of recruits. We've received about 700 advisory leads to date from a relationship we announced late last year with Drake, a maker of tax software for the professional market. A few have already become HD Vest advisers, and with tax season now in the rearview mirror, we expect to increase activity in this regard.

Lastly, we continue to make changes to drive improved adviser support. One example we saw during the quarter was in driving our average speed to answer adviser calls to its lowest point on record for February and March. These months represent a 50% improvement versus the comparable period last year. It's just another example of the types of opportunity in front of us to further improve an already strong business.

So in summary, the first quarter was another strong quarter for HD Vest, in terms of results as well as position for future success. And speaking of the future, there's a great deal of potential ahead of us with each of the 3 key drivers of value creation: organic growth, conversion of fee-based AUM and increased income from suite.

Turning to tax preparation, and for this discussion, I'll be talking about the full tax season, which is through Tax Day plus 1, or through April 19, as well as our full first half 2018 expectation for TaxACT. TaxACT delivered good progress on our multiyear strategy to reposition the business with a focus on growing monetized units. Monetized units generally include online and desktop software units for which we are paid, for either or both of the software or ancillary service as well as partnership units. As you may recall, for the 3 prior tax seasons, we've seen in a decline in monetized units. I've described it in prior calls as being on the left side of the letter U, with our hope we need to get to the flat part of the U over time as a precursor to growth in monetized units. In our last call, I noted that we saw a path to get to flat this season. We are pleased that we could get there, and a little beyond, by growing monetized filers modestly. The net effect, along with pricing and product actions, is that we expect to grow first half TaxACT revenue by approximately 15% versus the comparable period last year, which will put us well above the high end of both our original and revised outlook ranges for revenue. We continue to make strategic and technology infrastructure investments in the business and even with some incremental investment expect first half segment income will come in at the 56% range, putting us slightly above our revised outlook on segment margin.

So let's get into a little bit of detail. While the season got off to a slow start, with the IRS opening a week later than last year, along with some confusion around the impact of tax reform, and as of early February, total IRS [funds] were down 10%. The DDIY market saw a nice recovery from there and ultimately ended the season up about 3% in unit volume. This season, we continued our focus on higher value customers and driving monetized units for superior lifetime value.

As we would expect, with aiming for high-value customers and deemphasizing free, our total DDIY e-files declined year-over-year, while our average revenue per user increased. Through April 19, our total U.S. consumer e-files were $3.772 million, representing total market share of about 7.1%, a reduction of 130 basis points from last season, again due to drop off in unpaid filers while increasing monetized filers. Our efforts in driving high value centered on 4 areas of opportunities I've discussed in the past: targeting high potential DDIY segments, transparent pricing, leveraging enhanced capabilities, diversifying revenue by gaining additional distribution and extending our relationship with filers.

We worked hard to improve our competitive position for this tax season focused on enhancing the value proposition, particularly around our core focus segments within the gig economy and disaffected TurboTax and H&R Block filers. We launched a $100,000 accuracy guarantee, personalized deduction maximizer. We significantly increased our mobile capability and streamlined our import capabilities. We additionally launched a new freelancer SKU for this season, which should promise some growth in future years.

While we continue to increase our federal pricing, we've maintained a strong advantage versus the volumetric leader of about 50%. In addition, we continue to present our pricing very clearly. From the very start of the experience, filers know what our prices are.

During the season, we introduced a new basic SKU, which targets the segment of the population that files 1040A that are willing to pay for a low-cost product and great experience. And all that comes with their products will be clear about what they'll pay.

This product was very popular and exceeded our expectations. It's important to point out that market prices increased faster than last year and with second peak pricing in place weeks earlier than traditionally. These factors enabled us to move more aggressively on price than we had anticipated. So mix and additional pricing helped drive the incremental revenue relative to guidance. This year, we enhanced our capabilities through investments in our people as well as introducing machine learning and augmented intelligence at key parts of the filer experience. In addition, we significantly enhanced our customer support capabilities and efficiency and migrated successfully to a new cloud platform, which makes us more secure, efficient and scalable. These enhancements will serve us well for years in the future.

Strategic partnerships enable us to diversify our revenue in 2 ways: one, by creating new sources of customer acquisition; and two, extending customer relationships to new products and offers while we serve them more holistically across their financial lives.

We announced over 10 new partner agreements for this season. In terms of the first point, new sources of customers, new agreements include Fidelity Investments, Netspend and KeyBank. I'll use KeyBank as an example of new customer-centric propositions we are building, where KeyBank customers receive our premium filing solutions, free of charge to them, and at their election, can receive more accurate and relative financial wellness recommendations from KeyBank. This type of partnership is new for us, and each partnership came online at a different point in the season. But in total, they generated good learnings and insights.

We look to add even deeper product integration in the future to provide incremental volume opportunity, even greater partner value and enhanced customer experience. As it pertains to the second item, extending customer relationships through new products and offers, this year we launched the BluPrint financial assessment, which turns insights from a tax return into actual recommendations designed to improve the filer's financial situation. With a tax filer's consent, we use dozens of data points within the 1040 for our financial -- to offer financial insights and suggestions, which will help them save on their taxes, less their debt burdens and improve their future financial health. We believe we can help the average U.S. filer save thousands of dollars with the insights and solutions we provide. In fact, the average savings identified for customers this season was approximately $2,700. Think about that: For the cost of filing their taxes, finding savings of that magnitude. For the average filer, there would be a doubling of their tax return. That is differentiated from others in the marketplace that either offer no additional benefit or perhaps not much more than a credit score.

How do we enable these savings? By making it easy for customers to go from analysis to action. This year, we offered access to product partners to help consumers generate more interest on their hard-earned money through a high-yield deposit account, get a better deal on consumer debt or manage risk through adding life insurance at a competitive rate. When we started the new season, we engaged with these partnerships, and it generated good learnings. One other point I would add here on BluPrint is that our customer request rate to perform the customized analysis was well above expectations. We hope this represents the beginning of a significant shift in how our TaxACT customers work with us. Historically, they come to have their taxes done and that's it. This year, that's changed as a large majority of customers had agreed and shown that they were -- they want more solutions provided by TaxACT to help them with their financial lives throughout the year.

Looking ahead, through partners and customer engagement, we hope to shift to a more year-round engagement. We now have more than 2 million customers that have indicated an interest and that we can seek to serve outside of tax season.

To finish up on TaxACT, a few other positive developments I call out for the season include, one, our retention rates, both for overall and for paid filers, improved versus last season; two, from an efficiency standpoint, our customer call duration declined almost 10% versus last year, saving us several thousand employee hours; and three, professional e-files increased 3% year-over-year. Stepping back on tax preparation, given the season's only a few weeks behind us, we continue to build on our assessment of last year, and we'll quickly turn our attention to access to generate continued progress next season, the first year under tax reform.

In closing, I am very pleased with our strong first quarter, with double-digit revenue earnings growth and with significant cash flow allowing us to continue to strengthen our balance sheet, and with HD Vest showing double-digit growth in revenue, segment income, AUA and AUM. TaxACT showed significant progress with improved retention, improved products and a return to growth in monetized units.

Simply put, we continue to do what we said we would do, and I'm pleased with our progress.

Finally, I wanted to add a big thank you to our employees for all their work on behalf of our customers, clients and advisers. The team has been doing incredible work, and I'm very proud to represent them.

With that, I'm pleased to turn the call over for the first time to our relatively new CFO, Davinder Athwal, who joined us in February. We are very excited to have him as part of the team, and he is already making a strong positive impact. So welcome, again, Davinder. The call is yours.

Thanks, John. And before I begin my remarks, I'd like to say I'm excited to be here and look forward to driving continued financial performance as we execute our strategy.

As a follow-on to John's comments, I'd like to provide some additional detail on first quarter performance, a balance sheet update as well as an outlook for each of the second quarter and full fiscal year.

Beginning with consolidated results for the first quarter and year-on-year growth, revenue was $206 million, or up 13%; adjusted EBITDA was $66.3 million, up 14%; non-GAAP net income was $58.2 million, or $1.20 per diluted share, representing improvement of 23% and 15%, respectively; GAAP net income was $45.3 million, or $0.93 per diluted share, representing improvement of 48% and [39%] respectively; and lastly, operating free cash flow for the quarter was $56.7 million, up 10%.

Turning now to segment performance and beginning with Wealth Management. HD Vest first quarter revenue was $92.1 million, and segment income was $13.1 million, both above the high end of our guidance range driven by better-than-expected transactional revenue due in large part to higher annuity and mutual fund sales.

We're pleased while the AUA net flow of $625 million and fee-based AUM net flow of [$319 million], each of which speaks to the excellent work our advisers are doing with clients as well as the long-term potential of the business. I will note that as we approach the clearing firm conversion transition date, we expect to see a slowing in net flow followed by a stronger fourth quarter.

The clearing transition is on schedule, and nonrecurring expenses incurred in the first quarter were approximately $200,000, and we expect to incur another $1.2 million of nonrecurring expenses in the second and third quarter of this year.

Our outlook for Wealth Management in the second quarter is for revenue of $88.6 million to $91.6 million, and segment income of $10.4 million to $11.9 million.

Moving on to tax preparation. TaxACT first quarter revenue was $113.9 million and segment income $58.8 million, both of which are above the high end of our guidance range, driven largely by pricing and packaging actions that we were able to accelerate given the competitive landscape.

As John mentioned, we expect first half revenue growth to be approximately 15% versus last year. These results are driven by an approximate [38%] increase in digital do-it-yourself consumer average revenue per user. John has shared our growth and margin expectation for the first half of 2018, which translates into a second quarter outlook for TaxACT of revenue between $63.2 million to $64 million and segment income of $40.3 million to $41.5 million.

Finishing up on first quarter performance. Unallocated corporate expenses came in at $5.5 million, a bit better-than-expected, and included approximately $600,000 of nonrecurring transition-related cost. We expect second quarter unallocated corporate expenses to come in around $5.6 million. Approximately $200,000 to $300,000 of expenses that we had expected in the first quarter have shifted to the second quarter.

Moving on to the balance sheet. We ended the quarter with cash and cash equivalents of $77.1 million and our net debt is $227.9 million, which reflected $40 million paydown during the quarter, enabled by the continued strong cash flow generation that characterizes our business. This reduction is consistent with our stated expectation of paying down $80 million to $100 million of debt in the first half of 2018.

Our focus on leverage reduction is reflected in our recent debt grading upgrade by S&P to BB with a stable outlook from a BB minus.

With that, let's start the consolidated outlook for the second quarter and full year.

For the second quarter, we expect consolidated revenue of $151.8 million to $155.6 million, adjusted EBITDA of $45 million to $48 million, non-GAAP net income of $39.8 million to $42.9 million, or $0.82 to $0.88 per diluted share, and GAAP net income attributable to Blucora of $27 million to $28.9 million, or $0.55 to $0.59 per diluted share.

For the full year, we expect consolidated revenue of $545.8 million to $559.8 million, adjusted EBITDA of $110.5 million to $118.3 million, non-GAAP net income of $86.3 million to $94.2 million, or $1.76 to $1.93 per diluted share, and GAAP net income attributable to Blucora of $38.7 million to $45 million, or $0.79 to $0.92 per diluted share.

As a reminder, our outlook includes the following assumptions: a broad range for transactional revenue, due to its variability; impact of clearing firm transitional-related expenses; market volatility, including impact to net flows and cash free balances; an effective tax rate of 4% to 8% for GAAP net income attributable to Blucora; and finally, our guidance for GAAP net income or loss attributable to Blucora excludes any impact to tax expense for discrete items and variable stock-based compensation granted to nonemployee advisers.

Consistent with our previous messaging, we will continue to run the business to optimize for adjusted EBITDA. As such, we will refine our investment into each segment along with corporate operating expense for the second half of the year.

This concludes our prepared remarks. We will now turn the call over to the operator for Q&A. Kristen?

(Operator Instructions) And our first question comes from Chris Shutler from William Blair.

Maybe just a little more color on the distribution partnerships, John, what kind of results it's generated for you this tax season, what the response from the partners has been to date. And what should we expect from -- to see from you guys next tax season from a distribution standpoint?

So in terms of partnerships, as we laid out, we've got 2 ways of thinking about these. So I'll touch on both types of partnerships. The first type was around creating new sources of customer acquisition, and we're happy with where we're at on that this year. As we noted in the prepared remarks, we raced really quickly, with a lot of these arrangements coming online, in fact, even during the course of the season itself. And we also pointed out, just as a reminder back in November, that this is a sort of year 1 of this sort of approach. And so it would be good year to test and learn. So we have some important takeaways around the partnership types and the merchandising that's required to enable these sorts of arrangements to drive material traffic flow. It still is a multiyear approach to -- in my mind, on this one in terms of the deals we've done so far, to have that sort of move the needle impact on the numbers, but encouraged by what we've seen so far there. And we'll be turning our attention within the next couple of weeks to continue to move down this path of adding more partnerships in this vein so that we'll be even more ready for next tax season. The second flavor around extending relationships through products and offers, really happy with the consumer response that we saw here, in terms of consumers opting for a situation where we can make an offer to them, really encouraged in that regard. As I mentioned, we're encouraged by the numbers that we demonstrated we can save consumers. They get interested. But again, in this case, also, it's early days. But I think, in this case as well as the first case, around driving traffic, you'll see us to be more aggressive as we head into next year and take the lessons that we've learned and turn them into even more positive business impact. We've also been happy with the partner reaction. We're engaged in debriefs on those with partners around how we sort of come together to make these more impactful for everybody, most notably the consumer. So net-net, we're where I'd expect we would be on year 1. More to come as we share plans later in the year for next year.

All right, and then why did you make the decision to reintroduce the basic SKU kind of mid-season?

Yes, thanks for the question there on that as well, Chris. Yes, a couple of things there. First is, every season is different. We did walk away from that SKU a couple of seasons ago. Every season is different. The marketplace is really dynamic. And what it means for us is we've got to be nimble and make the calls that we need to make in advance of season as well as in the season. Having said that as sort of backdrop, the most important reason we made that decision was, we saw significant consumer demand for a SKU that was more than something that was free, for a SKU that consisted of prior year import, alongside that, access to customer care on a continuous and unlimited basis. And so we began observing that. And as you know, we've got multiple tests in the marketplace at any particular time. When we saw that, we moved towards introducing that SKU, and we feel like we priced it in the right spot. In fact, it's one of the areas that we're a little bit pessimistic around response we would get. In fact, it was a far stronger response than often we'd anticipated. And so for those reasons, we introduced it and merchandised it a bit, and we're happy with what we saw.

Okay. And then just one more, John, on HD Vest this time. So HD Vest has been around for a while, it's well known by tax pros. So what's the pitch to get those who've been on the sidelines with respect to wealth management on board? And how is now any different than 3 or 5 years ago?

Chris, thanks for the question there as well. It's an important one because since we are focused on growing our own and as we've talked on this call for several quarters that the focus is to upgrade our efforts in targeting and then getting advisers on board. And so while the enduring attraction to doing something like this is the same, right, where we get a tax professional who has a customer base that trust them, a tax pro who understands what's going on in people's financial lives, and so they have a basis with which to establish the relationship. They see the carnage in people's portfolios and on top of that they've got an opportunity to stay engaged in the off-season for them so they can, without adding any cost, add to their practice and add to the (inaudible) value. But having said that, why now? Two things there that I think are most important. Number one, we are retooling our outreach and our marketing efforts. For many years, it had been simply a mailroom shop, if you will, of spewing tons and tons of direct mail out to the adviser base, and I think people get a little bit numb at that. Think everybody in the call, think about the mail you don't open when you get it. It's the vast majority of what you get in your mailbox. And so we've created new ways of reaching out, through partnerships, through consortiums and these sorts of things to approach the advisory a different way. We've also got the Drake partnership, which is a new way of engaging a client -- a potential adviser where the adviser feels like, hey, wait a second, this firm Drake that I trust for my professional software, they're saying I ought to go take a look at this. You heard the response we've got from that. So the way you talk to someone and where you catch them different than spewing on direct mail. Although we still do some direct mail, it's one reason why we get a new look now. And then second, people are taking notice around the work we've been doing to upgrade our interaction with prospects where we're focusing really on more attractive prospects, but also, where we can now say around the length of time it can take, how easy it can be with the right training and with the right licensing, to get up to speed and have an impact in this business. So you heard some of the numbers in prepared remarks. Pretty stunning for someone who has not been a wealth professional or a brokerage individual to be able to get up to speed that quickly. So that message around, "Hey, you can do this, we can help," is a really strong message that we're getting some good response to.

(Operator Instructions) And I'm showing no further -- I'm sorry, we do have a question from Alex Paris from Barrington Research.

Couple of questions. I came on a couple minutes late. I don't know if you addressed this already. But you paid down $40 million in debt in the first quarter. You're targeting $80 million to $100 million for the full year. Deleveraging has been an important part of the P&L here and balance sheet, I guess, over the last few years. I know your debt was -- your net leverage ratio was over 6x after the HD Vest acquisition. What is it now? Or what was it at year-end? And what do you expect it to be, with planned paydowns, at the end of this year?

So hey, thanks for the question. Since you missed it, one thing at the intro, I want to let you know that Davinder Athwal is on the call here as our new CFO, and he has been on the job for a couple of months, and one of the areas that he focused on initially, of course, is understanding the balance sheet and the capital structure, and he's -- I'll turn the question over to him.

Thanks, John, and good morning, Alex. Thanks for the question. So basically, as we announced, we paid down $40 million in the quarter and just kind of walking through where we are or where we'd be. We were, as you know, we had about 6.3x after the HD Vest acquisition. At the end of last year, we ended up at about 3.3x, and right now we're sitting at about 2.1x. We do expect to pay another $40 million to $60 million for the balance of the year, so at the end of this year, we expect to be kind of right around 1.8x, which has been our stated target.

Okay, great, thank you for that. And then another question, shifting gears, just a follow-up on the partnership question. How many partnerships do you have? You might've said this; I apologize. And what sort of things are you referring to? I heard you say life insurance and other things. Just get a more thorough response, please?

You bet, you bet. Again, Alex, thanks for the question. So we've got over 10 partnerships. And again, big picture, there is some partnerships that are around essentially traffic flow generation and widening our distribution outside of being dependent on consumer marketing, which is something that we've covered over the past several quarters, as we'd like to have another sort of intake valve of consumers that come in and file their taxes. The other one is, hey, wait a second, if you have people already coming right now and you're looking to increase that, why not do a better job of better serving those customers by extending our relationship with them. I know that's the heart of your question, so the offerings that we have available and had available last season were around consumer debt. It was around consumer loans, around student lending, high-yield deposit accounts and life insurance. And so we worked late last year and finalized those 4 arrangements. And the essence of it is that, based on the information that taxpayers make available to us with their permission, we can then make a offer to them. And we do so in the context of having access to 40 or 50 data points in that tax file, and we turn that into a customized, tailored experience for the consumer where they feel like they're even in session, having the opportunity to improve their financial situation. The numbers are big, right, $2,700, $3,000, doubling your refund, that sort of thing. And critically, I'll point out as well, with that consumer's permission, we can now also market these services to them during the course of the year, which then opens up to us engaging them across the year. One of the big conundrums in the entire industry is moving away from a "one and done" sort of experience. And so these give us an ability to do that. So again, early days, but that's the type of offer that we're making, and it comes from the consumer -- to the consumer, again, in a customized, easy to act on way.

And I -- we do have a follow-up from Chris Shutler from William Blair.

I'll take advantage of the lack of questions here. Regarding M&A, maybe just talk about your appetite at this point given where the leverage ratio is. And I guess just as important, do you get the sense that there may be some properties in your wheelhouse that could become available or may be available at some point over the next year?

The topic of M&A is one that was completely off the table for us when you're up there at 6x and you're going down that glide path and you're looking to strengthen your balance sheet. And most importantly, for folks that have been following the stock for some time period, we were very clear that we are going to pace our efforts to grow this business in the right fashion and we're not going to get distracted at the wrong time on things that just wouldn't be practical for us to go do. Having said that, from a philosophical point of view, the most I can share today is, we believe that well-handled, well-executed M&A can be very, very accretive to the shareholder. And so it's part of what we need to be doing is being open-minded to and paying attention to the possibility that having now a strategy, as of last August, which we shared in November. Having a strategy that's understood and articulated guides us then toward to what extent can M&A be done in fulfillment of that strategy. Very different than what Blucora had been focused on previously, which is more around do we feel like we can add value to the shareholder through smart M&A. And so that strategy in mind, debt having been paid down in mind, we are -- we're going to be a firm that to the extent that deals can be done at the right price and with the right asset in mind, with a path toward accretion, then of course we're going to be interested. That's all I can say at this point.

All right. And then lastly, in TaxACT, I think you noted some -- you'd be making some incremental investments in that business, so just wanted to get more clarity there. And the Q2 revenue outlook for TaxACT looked good, EBITDA may be a little lighter. But just wondering how much of that is aggressive distribution deals that you entered into, which I know Eric alluded to on the last call a bit, versus investments.

Good to say that it's still 8 months until we're into the next tax season. We've done a lot of digesting in the last tax year now behind us. And so there's work to be done, clearly, though relatively quickly to focus our efforts for next tax season. And so when we speak about investments, they're going to come in to a couple of forms. One's going to be around capability. It was a year where we did some experimentation around augmented and machine learning, and so we're sorting out how to best deploy that. And that's just an example. Remember, sort of related to that, we've talked about having moved to the cloud. We also need to think about how do we modernize other elements of our technology so that we can get better metrics, frankly, just to make the experience better. It's one thing to move to the cloud. There's elements of the software that can be upgraded. The second type of investment is around taking the learnings from the last year and improving the client experience and the marketing of that client experience. There's not a whole bunch of investment that goes with that, but there is some. We can't stay still. Competitors are moving. We're learning a lot as we go. As everybody on the call knows, we've got a team that's maturing into this business, and every single season, and these are hyper-seasonal businesses, create significant learning that cause us to see new opportunities that we hadn't seen previously. And so improving the client experience is a part of that. So capability, technology, client experience, those are the type of investments. Now underneath partnerships, with the learning we have from this season in hand, I think it's very fair to say that we are clear on what sort of partnerships should command most of our focus and those that really demand less focus based on the potential that comes from them. And on top of that, we are looking to make it easier for partners to essentially integrate into our systems. And so that's another example of an investment that will be an enabler around this business going forward. But all this is contemplated in the guidance remarks that we've made, and we feel like we're pacing the investment properly in this business, sort of weighing the capacity to invest, with the marketplace opportunities, with the profit growth potential that we see in the future. So we're not at a point where we're saying, hey, there's a big bang that's coming, or oh my gosh, we gotta go put in a multiple of normal investment in this business. That said, we look back at 2 years ago, 3 years ago, 4 years ago, and I guess we should have been spending more into this business. It's a good business. We should be putting more into growth, and we're looking to leg into that.

And I am showing no further questions from our phone lines. I would now like to turn the conference call back over to management for any closing remarks.

Thank you, and thanks, everybody, really appreciate the focus and attention on the call today. And in closing, I'd like to reinforce some of the things I said in the earlier remarks around gratitude. Really appreciate everybody joining, very grateful, as is the team here, around our employees, advisers and customers, folks that make the business as strong as it is, enjoyable as it is for me to be employed here at Blucora. It's certainly true that those constituents are at the heart of our success. So in closing, pleased to report another strong quarter and look forward to continue to update you on our progress. Thanks, everybody.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone, have a wonderful day.