Thank you for standing by, and welcome to H&R Block's first quarter 2022 earnings conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference may be recorded. Should you require any further assistance, please press star zero. I would now like to hand the conference over to your host, Michaela Gallina, Vice President, Investor Relations. Please go ahead.
Thank you, operator. Good afternoon, everyone, and welcome to H&R Block's first quarter fiscal 2022 financial results conference call. Joining me are Jeff Jones, our President and Chief Executive Officer, and Tony Bowen, our Chief Financial Officer. Earlier today, we issued a press release and presentation which can be downloaded or viewed live on our website at investors.hrblock.com. Our call is being broadcast and webcast live, and a replay will be available on our website for 14 days. Before we begin, I'd like to remind listeners that comments made by management may include forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties, and actual results could differ from those projected in any forward-looking statement due to numerous factors.
For a description of these risks and uncertainties, please see H&R Block's annual report on Form 10-K and quarterly reports on Form 10-Q, as updated periodically with the company's other SEC filings. Please note, some metrics we'll discuss today are presented on a non-GAAP basis. We reconcile the comparable GAAP and non-GAAP figures in the schedules attached to our press release and in the presentation. Furthermore, the content of this call contains time-sensitive information accurate only as of today, November 2nd, 2021. H&R Block undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. With that, I will now turn it over to Jeff.
Thank you, Michaela. Good afternoon, everyone, and thanks for joining us. We're really happy to be with you today and excited to talk about our first quarter, and we have a lot to share. Over the past several months, we've met with many investors and analysts, and today, beyond our thoughts on the quarter, we'll address many of the themes that have emerged. I'll begin by summarizing our results and providing thoughts on tax season 2022. Then I'll share perspective on the value we have created over the last several years and the levers we have to achieve our long-term revenue growth target of 3%-6%. Finally, Tony will review our financials, fiscal 2022 outlook, and provide his thoughts on the value of Block today.
Turning to our first quarter results, we continue to see momentum in the business. As a reminder, given that the tax season extended through July 15th last year versus only May 17th this year, our quarter ending September 30th is not comparable and does not clearly depict our performance and progress as we're off to a great start. We saw strong revenue growth from the Emerald Card and Wave and effectively managed costs while appropriately investing in our growth initiatives. On the capital allocation front, which we'll dig into in a minute, we reduced shares outstanding by another 4% this quarter. As we look to tax season 2022, we're well positioned for a number of reasons.
Over the past several years, we've invested meaningfully in technology and digital capabilities and have made significant product and experience improvements via our Block Experience imperative. We pivoted quickly and learned to operate more efficiently during the pandemic, and our customers have taken note as we've gained market share and just completed our best tax season in over a decade. Our value proposition is strong and we are continuing to add product enhancements, including help for retail and crypto investors. Overall, we feel really good about the platforms we're building and our efforts to retain the clients we serve. With that backdrop, and before we dig into our growth plans, I want to highlight the progress we have made and where we are today. Our business is strong. We have a proven track record of generating cash flow, driving EPS growth, and returning capital to shareholders.
Since 2016, we have averaged annual free cash flow of $465 million, an increase of 29%. Including the most recent quarter, we've grown the dividend by 35% and repurchased nearly a quarter of shares outstanding. In total, these actions have led to an adjusted earnings per share growth of 78%. We've done all this while investing in the business and have strategically positioned ourselves for sustainable long-term growth. Regardless of year-to-year dynamics, our robust cash flow and capital allocation strategy are evidence of our ability to deliver shareholder value. With that foundation, let's now discuss what we are doing to drive growth. We have had our foot on the gas since announcing Block Horizons at our Investor Day last December, where we shared our long-term revenue growth target of 3%-6%.
While we are in the early innings of this next phase of our transformation, we're focused on demonstrating meaningful progress to build investor confidence. We have multiple levers in place to achieve our goal. Let's start with the industry. The tax industry has grown consistently for a long period of time, averaging a historical CAGR of 1%. As the industry grows, so will we. We've proven we can hold and grow market share, which we've done in four of the last five years. We've simultaneously increased customer satisfaction scores, and we will continue to make improvements to the Block Experience. We anticipate that holding share at a minimum will add about a point of growth annually to our top line. Now let's discuss the revenue contribution from pricing.
As you recall, in 2018, we moved to an upfront transparent pricing model in our assisted channel, and we have essentially held pricing flat since then. In DIY, we have a 10%-20% price advantage relative to our largest competitor. As a result of our significant product and experience improvements, we plan to take modest price increases in assisted this year, something we'll evaluate annually. In DIY, our product is competitive and because of our price advantage, we see additional opportunity over time. In summary, we believe we can add a couple points of revenue growth to our top line from price adjustments. We have a long track record of acquiring franchise partners, which will remain part of our ongoing strategy.
Over the past five years, we've purchased on average 125 locations annually, typically from franchisees who are ready to exit for family or retirement reasons. We believe we can acquire a similar number each year through 2025, which will contribute nearly a point of growth to our top line. We view this to be a good use of capital, given we're able to repurchase locations at attractive EBITDA multiples, optimize our footprint, and integrate the business into our company operations. Now let's walk through contributions from our three strategic imperatives. As you have heard throughout our call, Block Experience is about modernizing and growing the consumer tax business. It underpins much of the progress and ongoing strategy that we have discussed in our industry share and pricing assumptions. Our other two strategic initiatives, small business and financial products, layer on additional new growth levers.
Starting with Wave, we're focused on increasing the value of the existing customer base and acquiring new clients. The value of the customer, as measured in average revenue per business, has grown significantly as we continue to innovate with new products and position Wave Money at the center of the experience. Wave's total revenue continues to grow more than 30% year-over-year. This is contributing about a point of growth annually to our consolidated top line. Beyond Wave, upside in the small business imperative exists as we lean into tax services and bookkeeping with an emphasis on human help. We learned a lot last year and have evolved our marketing messaging in order to drive efficiency and better target customers who can benefit from these products. We also see additional upside in our financial products imperative.
The mobile banking solution we announced as part of our strategy last year supports our goal of serving and engaging with clients year round. We've performed extensive market research to understand the consumer needs and as a result, understand what it takes to succeed. How great I feel about the progress we've made and the path that we're on. We're continuing to execute against our strategic imperatives and are gaining momentum. I am more confident now than ever in our plans for Block Horizons 2025. Lastly, I'd like to mention that we published our second annual corporate responsibility report in September. We recognize the importance of environmental stewardship, social responsibility, and sound corporate governance. Some of our initiatives include championing diversity and inclusion, understanding and reducing our climate impact, supporting the communities we live and serve in, and transparent governance practices.
Together, these enable us to achieve our long term financial goals and benefit all our stakeholders. I'll now turn it over to Tony to cover our financial results.
Thanks, Jeff. Good afternoon, everyone. Today, I'll review our results from the first fiscal quarter, recap our outlook, and then provide thoughts on the value we have created in the business. As you recall, this summer we adjusted our fiscal year-end from April to June. In August, we released a QT for the stub period of May and June 2021 to bridge the fiscal year. Today we are reporting our first fiscal quarter of 2022, which ends September thirtieth. As Jeff shared, given that the tax season extended through July fifteenth last year versus only May seventeenth this year, Q1 is not comparable to the prior year and does not clearly depict our performance and the progress we are making. We delivered $193 million of revenue, down 54% or $225 million.
This decline was entirely due to the estimated $246 million related to the tax season extension in the first quarter of last year. We saw incremental Emerald Card revenue due to child tax payments and continued strong growth from Wave. Regarding expenses, we were disciplined in achieving our cost savings while appropriately investing in our Block Horizons imperatives. The ongoing rigor to drive our Fund the Future initiative allows us to invest with the savings we generate versus spending incremental capital. Total operating expenses in the quarter were $367 million, a decrease of 12%, primarily driven by lower tax pro compensation as a result of the prior year extension I just discussed. Interest expense was $23 million, a decrease of 34% due to lower draws on our line of credit.
We feel great about the changes we have made in our debt position to reduce interest expense by refinancing our line of credit and issuing long-term debt at very attractive rates, which will positively impact our P&L and cash flow. For the quarter, our pretax loss was $197 million compared to $33 million in the prior year. Our effective tax rate was 24%. We continue to expect the tax rate to be in the 16%-18% range for the full fiscal year as we realize the benefits of certain discrete items later in fiscal 2022. Turning to share repurchases, we bought a total of $166 million in the quarter, allowing us to retire 6.8 million shares at an average price of $24.37.
As Jeff highlighted earlier, share repurchase is a core element of our commitment to returning capital to shareholders. Since taking over this post in 2016, we have now retired nearly a quarter of our shares outstanding and have approximately $400 million remaining on our share repurchase authorization. Loss per share from continuing operations increased from $0.32 to $0.84, while adjusted loss per share from continuing operations increased from $0.24 to $0.78. In summary, we feel good about the start to the year, and we are reiterating our fiscal year 2022 outlook. Regarding discontinued operations, there were no changes to accrued contingent liabilities related to Sand Canyon during the quarter. For additional information on Sand Canyon, please refer to disclosures on the company's reports on Forms 10-K and 10-Q and other SEC filings.
Before closing, I'd like to provide some overarching thoughts on how we view H&R Block's value. A few years ago, we deliberately made significant changes that put short-term pressure on our financials, yet were foundational to a better future. These choices included major investments in technology, a pricing reset, and operational improvements. Our actions have yielded robust results. We've dramatically changed our assisted business trajectory, and as Jeff reminded us, we just completed our best tax season in over a decade. While we have provided normalizations to make it easier to assess our results, the changing tax deadlines and fiscal year-end adjustment have created noise. The bottom line is we generate strong free cash flow, have grown our dividend, and dramatically reduced shares outstanding. Over the past five years, we've returned nearly $2 billion to shareholders, or approximately 84% of our total free cash flow.
These capital allocation principles will remain intact despite year-to-year nuances in the industry. Further, we significantly reduced our effective tax rate and lowered our borrowing costs by refinancing our debt and line of credit. These achievements have translated into adjusted EPS growth of 78%, and that's even after normalizing fiscal year 2021 for the tax season extension. We've de-risked the business and created growth levers that didn't exist in the past. Yet, our trading multiple has compressed over this time period despite the broader market rally. H&R Block is on solid footing and will continue to drive EPS growth through disciplined capital allocation and core business performance. As Jeff discussed earlier, we are creating additional upside opportunity with Block Horizons. I look forward to all that lies ahead. With that, I will now turn the call back over to Jeff.
Thanks, Tony. In summary, we are proud of the progress that we have made, the momentum in the business, and the opportunities to come. We're confident in our ability to drive shareholder value with both our capital allocation approach and our future with Block Horizons. As we end our prepared remarks, I want to thank our hardworking associates, franchisees and tax pros who have driven our progress and inspire confidence in our clients and communities worldwide. Now we'll open the line for questions. Operator?
As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. We ask that you limit yourself to one question and then one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Kartik Mehta of Northcoast Research. Your question, please.
Hey, Jeff and Tony. Hey, Jeff, I wanted to get your perspective on the upcoming tax season and if your thoughts have changed at all with the recent IRS release of numbers?
Hey, Kartik, thanks for the question. The newest data through October fifteenth, you know, changes the numbers a bit, but I think the direction is still accurate in terms of our share growth in Assisted and overall and the slight share loss in DIY. I think if I look forward to the coming year, you know, we know that based on the industry growth that occurred, some number of those filers were new last year. They were first-time filers. We also know that some number of them are gonna return this year because they saw the benefit of filing, you know, given unemployment, stimulus, child tax credits, et cetera. We also believe that there could be programs again like RRC that would make it beneficial to file.
I think, you know, what's really important to say is that we don't have the perfect crystal ball on consumer behavior and how many will return or not. We're doing two really important things. The first thing we're doing, and we've talked about this a bit over the last several months, is developing those marketing programs to reach those clients that were new last year to help educate them again on the benefits of filing. Then I think finally, you know, just building into our operations the flexibility that we learned during COVID and that we executed so well so that no matter what happens with demand, we're prepared to flex and serve our clients.
Yeah. Just as a follow-up, Tony, you know, obviously there's been inflationary pressures almost in every business. I'm wondering for H&R Block, you know, what is labor going to be the largest inflationary pressure? What do you anticipate on that front in FY 2022?
Yeah. Thanks, Kartik. I mean, obviously it's contemplated in our outlook that we provided and reiterated today. You know, we are monitoring, you know, a couple different buckets. Obviously, labor as well as rent are two of our largest line items. As you recall, you know, our largest line item, which is tax pro compensation, is tied to the revenue they generate, and it's essentially a percentage of that revenue that ends up being their compensation, so it kind of flexes with the revenue base already. There are some positions that are, you know, paid on more of an hourly rate, and we've done things like adjust those over time to stay competitive.
You know, we'll continue to monitor where it's going long term, but we feel good that we've been able to, in some cases, renegotiate with certain landlords, take advantage of some of the real estate softness in certain parts of the country. All that's contemplated in our guidance, you know, continue to monitor it over the long term.
Thank you very much. Appreciate it.
Thanks, Kartik.
Thanks.
Thank you. Our next question comes from Scott Schneeberger of Oppenheimer. Your line is open.
Thank you very much. Good afternoon. I guess I'll start with, Jeff, you've mentioned now I think a couple quarters in a row, that you anticipate doing some moderate price increasing after not having done it in the assisted category for the upcoming season. Just curious, will it be early season, late season? Just thoughts on how it will be applied. I'm assuming not broad-based, and that's why I'm asking. The follow-up to that question is what type of volume implications are you expecting as a result of the pricing increases, you know, mixed in with your overall volume results for the upcoming year? Thanks.
Yeah. Let me make sure I get all those. You're absolutely right. After not moving on price since the reset in 2018, we have earned the confidence we believe to take modest increase this year. For us, modest means, you know, kinda couple points. Given what we've seen in volume, given what we've seen in client satisfaction, given what we've seen in retention gains, we feel good about taking that kind of price increase and something we wanna look at each year in the assisted business, as we move forward. Keep in mind, that's just price and there's still opportunity with mix as well in the assisted business.
Then in the DIY business real quickly, you know, we maintain still a price advantage to our largest competitor. We do everything we can to exploit that price advantage. You know, we grew NAC about 20% last year in DIY related to mix. Between pricing, mix and additional features like Online Assist, for example, we continue to see more opportunity to grow revenue through pricing. That's how we're thinking about it in both of our businesses and, you know, we're ready to take that step this upcoming season.
Specific, Scott, to the volume implications, obviously that's all contemplated in our outlook as well, but I think to Jeff's point earlier, the feedback we've heard has been really positive. Clients feel really good about the price they're paying for the value they're receiving. We're not expecting, you know, a volume impact necessarily. Obviously on the margin there's always a few clients plus or minus, but we're not expecting a volume decline as a result of the pricing changes.
Thanks. Appreciate the color. Jeff, I guess it would be a good time to ask on your technology investment that's been multi-year. Just kinda would love to get an update on what inning that is in now and an overall progress report. I know you've broken it out into a few buckets in the past. If you could just kind of address it in that format or if you have a new way of thinking about it, just an overall update there. Thanks.
Absolutely, Scott. You're exactly right. I mean, this has been multiple years and really touching every single facet of our technology stack, data and architecture, moving to a single tax engine, data security, cloud migration. It is really holistic. As you may recall, it has been a while. You know, we did that for two big reasons. One is to start enabling an entirely different kind of customer experience, and the second is cost, and on the first part, you know, we are seeing the benefits of that today. Had we not been making these investments, you know, it would have been far more difficult to deliver the digital capabilities. We are enabling tax pros to work from anywhere, et cetera. We are seeing those benefits now. You know, most of our data is largely in the cloud.
The single biggest lift that remains is finalizing the move from three tax engines to one tax engine. This is something the company has tried multiple times in history and hasn't been successful, and we are absolutely on track to do that now. We're in the transition periods now from operating three to now 3+ with the new one, and then transitioning over the next year and a half to two years to the final single engine. That's when we see the cost benefits really starting to materialize is a couple of years out. I don't know what inning that makes us in, but it makes us in the home stretch.
Thank you. Our next question comes from George Tong of Goldman Sachs. Your question, please.
Hi, this is Zachary Lopez on for George Tong. I was just kind of wondering if you can give a little bit more color on the progress with, you know, Block Horizons and the initiatives.
Absolutely. Thanks for the question. Three initiatives, what we call strategic imperatives, Small Business, Financial Products, and Block Experience. Starting with the last one, our progress has been very, very good. That's essentially digitizing all facets of the business. We are now fully deployed to work with our assisted clients virtually in whatever way they choose and offering human help to DIY clients. That work will always, you know, be about improving the experience, learning from customers, but that imperative is well underway. Going back to the top in Small Business, there's two things I would highlight. Number one, last year, which was our first year, we grew assisted Small Business clients by about 4%. We trained and certified 25,000 of our tax professionals, and we launched our first customer acquisition campaign for Block Advisors in Small Business.
On the Wave side of small business, that business continues to grow 30%+, serving a unique segment of small business owners that are comfortable doing this bookkeeping, payroll, payments themselves. The real focus there is on continuing to grow and scale Wave Money. Moving into this tax season, we've learned from last year, we've improved our plans, our customer acquisition efforts, certification of pros, et cetera. With small business, that's a quick little update. Finally, with our financial products, the real progress since we made the announcements has been the build of what we refer to currently as Block Money. We've now done two beta releases internally. We're shipping code regularly, and we're on track to launch Block Money in the upcoming tax season. We feel very good that that will be a differentiated product when we launch, and we're on track to do what we said we would do.
No, thank you. Very helpful. I know earlier on in the discussion you mentioned about, you know, assisted volume. I was just wondering if you can perhaps elaborate on the outlook of assisted volume growth at the industry level, and at HRB.
Well, absolutely. I think at the industry level, you know, as I mentioned early on, you know, we know that this year's growth was really driven by a lot of first-time filers. We know that there will be dynamics in the macro environment that will cause many of them to file again. We don't have a crystal ball to know exactly how many of them will go back to the sidelines versus not, which is why we're doing what we can do at Block, which is about marketing to our clients to educate them on the value of returning, and then building that operational flexibility into our business so we can execute no matter what demand may be. When you put all that together, we have anticipated that the industry will be flat to slightly down for next year.
Thank you. Our next question comes from Hamzah Mazari of Jefferies. Your line is open.
Hey, good afternoon. This is actually Ryan Gunning filling in for Hamzah Mazari. My first question is, could you just give us a flavor of how client retention is tracking across the portfolio and whether this is an opportunity there and how you measure that, either by customer count or on a revenue dollar basis?
Absolutely. We measured it on customer count. We've seen great improvement in retention. Our blended retention last year jumped from 72% to 75%. Our new client retention jumped from 50% to 54%. We definitely see that the work we're doing is driving an improvement in retention. Yes, there's opportunity. We continue to think about what we can do for new and prior clients to get more coming back every single year.
Great. Thanks. That's super helpful. My follow-up is, could you just talk about any M&A you could do similar to Wave or how you're thinking about the pipeline there, specifically in terms of scaling either financial products and/or small business growth initiatives?
Yeah, Ryan, absolutely. When we announced our Block Horizons strategy, we talked about M&A and the fact that, we don't believe that M&A is required to achieve our strategy. Obviously, we feel very good about the Wave acquisition and their continued performance. You know, we'll continue to look in the market if we see a capability that might make sense. Our strategy is not M&A dependent, and there is not an imminent deal on the horizon, you know, that you should expect us to announce.
Thank you. As there are no further questions in queue at this time, I'd like to turn the call back over to Michaela Gallina for closing remarks.
Thank you, Latif, and thank you everyone for joining us today. This concludes our first quarter 2022 financial results conference call.
This concludes today's call. Thank you for participating. You may now disconnect.