Blucora's (BCOR) CEO John Clendening on Q1 2016 Results - Earnings Call Transcript

| About: Blucora, Inc. (BCOR)

Blucora, Inc. (NASDAQ:BCOR)

Q1 2016 Earnings Conference Call

April 28, 2016 8:30 AM ET

Executives

Stacy Ybarra – Vice President, Investor Relations

John Clendening – President and Chief Executive Officer

Eric Emans – Chief Financial Officer

Analysts

Dan Kurnos – The Benchmark Company

Mason Anderson – Craig-Hallum

Operator

Good day, everyone, and welcome to the Blucora First Quarter Earnings Results Conference Call. This call is being recorded. With us today from the Company is the President and CEO, John Clendening; Chief Financial Officer, Eric Emans; and Vice President, Investor Relations, Stacy Ybarra.

At this time, I'd like to turn the call over to Stacy Ybarra. Please go ahead, Ma'am.

Stacy Ybarra

Good morning and welcome to Blucora's investor conference call to discuss first quarter 2016 results. 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 full-year 2016.

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

Now, I'll turn the call over to John Clendening. Following his comments, Eric Emans will review first quarter results and 2016 outlook. Then, we'll open up the call to your questions.

John Clendening

Thank you, Stacy. Good morning, everyone. And thanks to everyone joining on our call today and a special call out to those of you dialing in from the West Coast where the day is only now breaking. I am thrilled to share Blucora's results for the first quarter of 2016 and the progress we were making to execute on our transformation to a technology-enabled financial solutions company. I'm happy to share that Blucora began the year with positive momentum highlighted by our strong tax season financial performance, and today you'll see a company that is performing well and that has great opportunities ahead of it.

Before jumping into results, I would like to start off by saying how excited I am to have been appointed CEO of Blucora and to share my early perspective on the enormous potential that exists within this Company. Over the course of my career, I have been fortunate to work with a number of talented teams to achieve growth and the energy at Blucora is what originally attracted me to the Company. Since I began in my role as CEO, I've had the opportunity to meet the vast majority of the team and it's clear that we all know what we need to do to succeed.

Blucora has two very strong businesses that participate in attractive markets. The secular trends are favorable and on top of that, we are well positioned to leverage the shared opportunities across TaxAct and HD Vest. We have a clear plan in place and we are driving a strategically focused company that is already capturing the significant opportunities that exist in the markets we serve.

Today marks the 25th day of a 100-day process while I'm taking the time to listen and learn from the team while evaluating every aspect of the Company, with a focus on identifying the best opportunities to enhance shareholder value. Over the past few weeks, I've talked to the Company's shareholders, analysts, employees and customers. These conversations have only reinforced my confidence in Blucora and what we can achieve. In the near term, we are 100% focused on what I like to call the 4Ds, divest, delever, deliver and drive.

First, we are committed to successfully divesting InfoSpace and Monoprice. Both processes are moving according to schedule. As previously announced, we hope to complete the divestitures sometime in the middle of the year. We're seeing strong interest and are optimistic that the transactions will produce substantial cash proceeds and also provide significant opportunities for the InfoSpace and Monoprice teams. It's too early to get into additional details, but given the process dynamics, we remain confident in our ability to successfully divest these businesses. Once the divestitures are completed, Blucora will consist of strategically aligned businesses whose results are likely to be less volatile.

Second, we are committed to delevering by aggressively paying down debt, working to achieve a 3x net leverage ratio over the next year. We are well on our way to achieving this goal. During the quarter, we retired more than $65 million of debt, reducing our net leverage ratio significantly. We will remain vigilant in paying down our debt until we meet our goal. Third, we are committed to delivering on our financial commitments, I'm pleased to report that our results in the first quarter were strong with consolidated revenue of $155.8 million and adjusted EBITDA of $53.8 million, up 5% and 11% respectively. Fourth, we are committed to driving sustainable long-term growth. Our teams are already focused on developing the plans, they will achieve such growth in 2017 and beyond.

Now, let's turn to more details on the business updates for the quarter starting with tax preparation. TaxAct turned in a strong performance this tax season. This was a critical year for Tax Act given the significant changes in our go-to-market approach. These changes were positive and better positioned the business for the long term. Big picture, you should take away three points.

One, we have successfully rotated our strategy toward driving profitable share versus unit tonnage. Two, while consumer units are down 9%, we are confident that we have moved in the right direction in terms of attracting the types of consumers that drive long-term value. Three, the new packaging and pricing strategy drove top and bottom line results. For the full season, representing expected results through Q2, we forecast TaxAct to generate approximately 18% revenue growth and 20% income growth over the same period last year.

In a year when we completely transformed our pricing and packaging, we knew it would make forecasting results less predictable. Given Blucora's priority to aggressively pay down debt in 2016, this season, we focus a bit more toward the type of acquisition and monetization tactics that drive cash flow generation rather than those that would optimize for total share.

So, stepping back, this is our first tax season of a multi-year pivot from total units in absolute share growth to monetizable units and lifetime value. In the first installment of this pivot, TaxAct implemented a new forms-based pricing and packaging strategy, including a Free Federal and Free State return for simple filers. This was an enormous undertaking in terms of development, implementation and messaging to customers and I am very proud of what the team accomplished.

As we expected, the shift in our strategy reduced free units. That said, we are seeing the sort of performance we expected around attracting higher quality and higher value customers. Some key metrics that illustrate this are; one, ARPU is up in total and up low double-digits for new filers. Two, although we moved away from Free Federal for everyone, our returning complex filers are up high-teens versus tax year 2014. Three, new paid filers not only beat plan but were up versus last season by mid-single digits, a clear indication that we are increasing share among paid filers.

Four, returning complex filers are anchored by mid-to-high earners and we saw a good mix shift to millennials this season, both exactly what you want to see, especially when you think about the potential for cross-serving customers leveraging HD Vest. Five, we outperformed our expectations on ancillary revenue.

Each demonstrate that we are now positioned to grow with the right kind of filers who will drive strong lifetime value in the consumer business. Additionally, we've only scratched the surface around growth outside of consumer. TaxAct offers a Preparer's Edition of its software. This year, we increased the number of tax professionals using our software from 19,500 to 20,100.

We also increased the number of e-files per professional with overall e-files growth of 10% this season. Our small and medium business offering also continues to gain traction with double-digit revenue growth.

Lastly, our acquisition of SimpleTax last year is beginning to yield strong results. While small compared to our overall business, SimpleTax's KPIs are trending positively versus our buy case expectations. Net, we believe there is significant upside and untapped potential in all three of these markets and look forward to capitalizing on that opportunity.

In closing on tax prep, looking ahead, we are better positioned than ever to thrive in this space. The team is already focused on tax year 2016, and we will be making investments later this year, that will allow us to win across Consumer, Professional, and Small and Medium Business next season. Tax prep is a dynamic and competitive business, but the proof is always in the pudding. TaxAct posted its 17th straight year of revenue growth. It's a remarkable achievement, one that very few companies can claim and this gives us strong confidence in the future of the business.

Now, turning to wealth management, we are thrilled that HD Vest is now fully integrated into Blucora, and I'd like to warmly welcome the team, their advisors and clients to the Blucora family. The business faced some obvious headwinds in the first quarter with the S&P hitting a 52-week low in February and with significant volatility. It's the sort of quarter that pressure tests wealth management businesses, and we are pleased with HD Vest's performance. Net revenues were $25 million, up 5% and segment income of $10.9 million was up 26% compared to the prior year, validating the strong operating leverage and efficiency in our model. Given investors were skittish, our advisors did the right thing in the first quarter and focused on guiding their clients rather than driving new business.

At a strategic level, the HD Vest model is different in important ways from traditional independent brokerage firms. HD Vest advisors have earned trusted relationships with their clients, enabling them to turn tax clients into tax and investment advisor clients. As the market leader among tax professionals, HD Vest is nearly twice as large as the next two competitors combined.

This distinct approach paired with a dominant market position creates real economic advantage: The HD Vest model leads to lower cost to acquire advisors, higher recurring revenue and lower attrition in their advisor base. These turn into superior EBITDA margins. It's better for investors too since outcomes should be better if tax considerations are explicitly factored in as part of overall financial planning. As tax season has now wound down, we are already gearing up recruiting efforts, leveraging deeper segmentation, digital delivery and data-driven lead generation. Leads for 2016 have thus far exceeded our expectations and indicate a strong pipeline.

HD Vest also continues to focus on advisor engagement. The HD Vest national conference, CONNECT2016, to be held in early June, has record registration this year. The conference will focus on The Power of Your Practice theme, educating our advisors to leverage HD Vest technology, programs and platforms for higher growth, engagement and efficiency.

The conference is also leveraged to bring in potential recruits to demonstrate the firm's value proposition and strong network of advisors. Enhanced technology will be demonstrated, including a new user interface for Vest Vision, the firm's investment and retirement goal planning tool and new applications to help advisors seamlessly transact business such as a new annuity account opening tool called AnnuityRight. The easier we make it for advisors to work with clients, the more business we win, plain and simple.

On a final note, I want to touch upon the Department of Labor's recent release of its final regulation, redefining the fiduciary's standards under which retirement client advisors must operate. While we and the industry are still digesting the details of the final regulation, which will take some time, it's clear that the final rule has been favorably revised in a number of respects, including a longer implementation deadline, streamlined disclosure requirements, grandfathering of existing accounts, and fewer limitations on products availability.

Based on our initial assessment, we continue to believe that the impact of the DOL rule will not be material to our financial performance in 2016 and longer-term, we are positioned well to adapt to this new regulation to deliver growth. Before I turn it over to Eric for more details on the financials, I want to briefly address the opportunity for cross-serving across these two businesses. Using IRS average refunds as a proxy, our analysis suggests that TaxAct customers received more than $15 billion in tax refunds this year.

And, based on estimates from the Pew Charitable Foundation, we believe these customers have north of $100 billion in financial assets. These speak to a terrific opportunity that is unique to Blucora and one that we will figure out how to capture. Eric?

Eric Emans

Thanks, John, let me start by welcoming you to the team, great to have you here. For my part today, going to cover first quarter results and expected tax season results. I will then close with the consolidated second quarter outlook and an update to our full-year outlook. As a reminder, I will be speaking to year-on-year variances in the 2015 pro forma results that include the wealth management segment and I will focus my comments on the results from continuing operations. The 2015 quarterly pro forma results can be found on our IR website in our first quarter supplemental information release.

Okay, let's get started. Consolidated revenue for the quarter was $165.8 million, up 5% versus prior year. Adjusted EBITDA was $53.8 million, up 11% and non-GAAP income from continuing operations was $39.3 million, up 5% and $0.94 per diluted share. The year-on-year non-GAAP income growth was reduced by accelerated debt discount cost associated with our first quarter de-levering activity which I'll speak to in a moment. Driving up consolidated results, GAAP net income was $22.7 million, up 23% or $0.54 per diluted share and includes $2.5 million or $0.06 per diluted share from discontinued operations and a gain before tax of $7.7 million or $0.19 per diluted share associated with the repurchase of $28.4 million in convertible senior notes for cash of $20.7 million. Those are results from discontinued operations and the gain on the convertible notes repurchased were excluded from our non-GAAP income from continuing operations.

Turning to the balance sheet, as of March 31, 2016, we had cash, cash equivalents and short-term investments of $79.6 million. Debt principal outstanding $539.3 million will reflect debt paydowns in the quarter of $68.4 million which consisted of a $40 million or 10% paydown of term loan fees and previously mentioned the repurchase of $28.4 million convertible senior notes. The de-levering coupled with the first quarter year-on-year adjusted EBITDA growth lowered our net leverage ratio by more than a turn. The exited the quarter with net debt of approximately $460 million.

As John mentioned, debt paydown remains the top priority in our capital allocation strategies and we expect our next significant paydown once we've completed the divestiture of InfoSpace and Monoprice. This transition to segment performance in the first quarter, starting with tax prep. First quarter tax prep revenue was $88.5 million, up 9% versus prior year. Segment income was $47.6 million, up 8%. Segment margin was approximately 54%.

Both revenue and segment income exceeded the high end of our guidance expectations. Let me provide a little more color on our tax results in the context of our tax season expectations, which include the second quarter. We had an impressive tax season and expect revenue growth of approximately 18%, segment income growth of approximately 20% for the first half of 2016. These results were driven by robust increases in average revenue per user of paid consumer software and to a lesser extent consumer ancillary revenue. As John discussed, we are exclusively focused on driving long-term value, less interested in attracting customers with little to no monetization potential. So we privilege of a form base offer this year, this approach has two clear benefits.

First, it better diversifies our consumer software revenue which rely heavily on state attack. Second, it better aligns our pricing and packaging with the market. This is important because we are the value player that allows consumers to see TaxAct's clear advantage versus the competition. We also expected to ship with challenge consumer e-file growth and we ended the tax season down 9% versus last season. While consumer e-files are down, I think it is important to keep in mind two points.

First, we are sharpening our focus toward consumers with strong promise for monetization and away from those that bounce around annually to the cheapest offer in market. This increases lifetime value. Second, we believe there is a path to rebounded unit growth in the coming years. We expect a driver of this growth to be improved unit retention, which was just under 70% for this tax season, modestly lower than last year and expected given the pivot. In summary, it was a transition year for the consumer side of the business and we are pleased with the financial results attained and how we are positioned against the market in the future.

Transitioning to our professional prep and do it yourself SMB software offerings, both are contributing year-on-year revenue growth in the first half of 2016. We expect professional prep to be up approximately 7% and do it yourself SMB to be up approximately 18%. We expect first-half 2016 segment income growth of approximately 20% attributable to revenue growth and operating expense leverage.

This translates to an expected segment margin of approximately 58% for the first half of 2016 which is up from approximately 57% in first half of 2015. Let's wrap up the tax prep segment with a couple comments on full-year expectations. Revenue in the second half of the year will be in line with last year's results and we expect full-year segment income in the 47% to 48% range as we will look to continue making investments to drive growth. Looking beyond 2016, we believe our revenue growth will come down in line with our long-term growth expectations of mid-to-high single digits.

Shifting to wealth management, first quarter revenue was $77.3 million and segment income was $10.9 million, up 1% and 26% respectively over the first quarter of 2015 and within our guidance range expectations. More than 100% of our revenue growth came from asset-based transaction and fee revenue and drove year-on-year net revenue growth of 5%. Advisory revenue was down 1% versus prior year and we exited the quarter with advisory AUM of $9.6 billion.

Advisory AUM declined approximately $100 million from the fourth quarter 2015, driven by net outflows during the first quarter. Flow performance was impacted by churn of a few high-producing advisors who are expected to retire and market volatility which put our advisors on the defensive during the busiest months of the tax season as they focused more on maintaining assets rather than growing assets. Commission revenue was down 2% versus prior year as trailer revenue was down 7% tied to S&P 500 market performance which was partially offset by transaction revenue growth of 6% versus first quarter 2015.

Wealth management segment income was up 26% year-on-year, driven by increased net revenue and operating expense leverage. Operating expenses were down 10% year-on-year. Looking forward into the second quarter for wealth management, we expect revenue will perform in line or better than first quarter 2016 but segment margin will come down 100 basis points to 200 basis points, driven in large part by our CONNECT conference which takes place in the second quarter. Corporate operating expenses for the first quarter came in at $4.7 million. We expect second quarter to be in line with first quarter and no change to our full year expectation of approximately $18.5 million.

With that, let's turn to consolidated outlook for the second quarter and an update to our full year outlook. For the second quarter we expect revenue between $120.5 million and $124.5 million, adjusted EBITDA between $33.7 million and $35.9 million, non-GAAP net income from continuing operations of $20.0 million to $22.7 million or $0.48 to $0.54 per diluted share and GAAP income from continuing operations of $4.5 million to $6.3 million or $0.11 to $0.15 per diluted share.

For the full year, we are raising and narrowing our outlook as follows. We expect revenue between $452 million to $465.5 million, adjusted EBITDA between $90 million and $94 million, non-GAAP net income from continuing operations of $39.9 million to $44.4 million or $0.95 to $1.06 per diluted share and GAAP loss from continuing operations of $5.0 million to $1.3 million or a $0.12 to $0.03 per share loss.

It is worth noting that our outlook includes market assumptions for the S&P 500 and federal funds rate. While our outlook assumes a range of outcomes, to the extent of market performance differs materially from these assumptions of results will be impacted.

Finally, in closing, it is my hope that you share our view that our results year to date are indicative of a financially strong company that is delivering on its stated objectives and commitments.

With that, let me turn the call back over to John for his closing remarks.

John Clendening

Thank you, Eric. I am honored to be serving Blucora's customers, clients, advisors and shareholders at this important time in the company's history. It is clear that we have made significant progress in our strategic transformation. As we shape our path forward, I believe it is imperative to have a clearly defined set of core values to inform every aspect of how we will run the business. These core values, what I call our pillars for growth, are what you can expect to define Blucora moving forward.

The first pillar is our customer-first culture. We engage customers, clients and advisors with confidence, integrity, pride and passion, and we will drive growth through earning their loyalty. We do exactly as we say we are going to do. Second, we are One Company. We have one culture, and actively leverage strengths across departments, which allows us to better serve our customers. A client-centered culture matched with a highly effective, talented organization is hard to beat.

Third, we have strategic clarity. We play in attractive markets, we target the best growth prospects, and we represent the better choice. Fourth, we execute with excellence, everywhere and all the time. Executional excellence is the expectation of every employee in every role. Fifth, we are always innovating. We continue to challenge the status quo, because we owe it to our customers, advisors and clients to constantly improve every part of our company, finding a way to do things better, faster and at lower cost. And our sixth value is financial discipline. We are owners and responsible stewards of our financial resources, and pride ourselves in the careful planning and use of these resources to create value for shareholders. By staying true to these principles, we put ourselves in the best position to deliver reliable financial performance, which generates attractive shareholder returns.

I look forward to meeting with and speaking to all of you in the near future. I would now like to turn the call over to the operator to take any questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Dan Kurnos with The Benchmark Company.

Dan Kurnos

Great, thanks. Good, very early morning to you guys. First off, congrats on the quarter. Let's start just here with tax. Obviously results were really strong, so let's just talk about the credit pivot strategy here. Good to get some metrics from you guys around paid unit growth. So maybe with the understanding that this is really the first year that we've had full season free at the low end, can you give us some color on vision and confidence level that you can continue to essentially steal that free share back once they converted to pay from basically Turbos, Funnels, and also H&R had advanced. And while the gap is still currently large how you intend to do so while likely continuing to take price increases?

John Clendening

Hey, Dan. Good morning. Thanks for the question. John here, really appreciate it. So, couple of things, first, to reemphasize definitely confident about the future and are really grow this business and the value of this business over time. As you know from what we've just shared, we are totally focused on lifetime value. It's our unprofitable share growth and we're just not that interested anymore in paying money every single year to rent the same free-free customer that doesn't have a promise of turning into a monetizable plant. And so I'm not going to repeat some of the metrics with this year, but we're encouraged by what we are seeing in that regard.

Now, a couple things specific to your question. First is, we like the fact that the overall DIY market is growing. It's on the move again and we think that we're well positioned to benefit from the shrinking of the legacy storefront business that we're certainly seeing this year. What gives us confidence that we're going to be able to grow share in that arena and given that environment.

Couple of things, first we still offer terrific value, I'll give you an example you brought up value and pricing. At the end of season we offer $10.40 with - and $10.99 at $24.99, which is just one-third of the cost that the largest competitor charge that's terrific value for the consumer, not only that we offered price-lock guarantee. So once you began to the tax line process, you didn't have to fear that prices would be increased on you over time. And so we offer huge value versus the competitor and a more transparent way of getting your taxes done from a pricing point of view. Number 2, we also are intent to win back a bunch of customers that, they had gotten used to coming to our business, coming to TaxAct and paying nothing on the federal side, a little sticker shock when they came in this year and so they went to a competitor and yet, unwittingly to them or unknown to them, they actually finished that process paying a ton more at that competitor than they would have paid with us.

So we'll go back and win back a bunch of customers that left us this year, only to find they had a degradation in their total value. And on top of that, as was alluded in the comments that Eric just made, we had an opportunity around improving retention next year. Year one of a pivot, it is a little jarring to some customers, not to most, but to some and so we think that our retention is going to rebound next year as well. Now, we're only a couple days after the season, right, so we're spending a ton of time dissecting our results from every single angle and we will be loaded for bear by the time season hits again upcoming to get back in a mode of driving unit growth as well.

Dan Kurnos

Got it. Great. That's really helpful. And just Eric, could you just sort of expound a bit on your commentary for long-term growth here and just how we should think about the timing of that transition from the current elevated level as you continue this pivot?

Eric Emans

Thanks for the question Dan. Obviously this year, drove a lot of the growth through the economics on a unit filers and I think that's going to come in sort of benefit of the pivot this year drove that ARPU increased and that should be the ARPU. Although as John touched on, we have plenty of room for pricing umbrella standpoint to take pricing action that we choose. We also want to keep the best interest for the customer in mind. And you don't want to become completely reliant on price increases.

And so as you think about the business going forward and that the mix of unit growth and pricing, I think that that suggest more of a business that should grow in the mid to high single digits, similar with the competition. So one thing I would say just lastly is we digest the market early and obviously the IRS data is not out yet. We think the pivot was absolutely necessary that we based upon our estimates and how the share shift this year between various parties and are very excited about how our position going forward. And think the growth can not only come from units in over a multi-year period, but also through additional pricing action given some of the success we had, more clearly aligned with how the competition goes to market. So people can really see how our value pops versus the competition.

Dan Kurnos

Great, thanks. And then, shifting just to HD Vest, I know you guys touched on this a lot in your prepared commentary, clearly that the growth kind of came from asset-based revenue. Maybe if you could just give us a little bit more of the granularity for some of the puts and takes on that spike, assuming with some of market condition related and not to rigor to take too much of what you guys announced when you purchased HD Vest which is some of the levers that you're looking for this year aside from improving market which has improved or that gets HD towards that 7% to 9% long-term growth rate and how much does that advisor churn in Q1 kind of impair your near-term outlook?

Eric Emans

Dan, this is Eric again. So, I'll take your first question, which is really revenue growth this year coming from asset-based fee and transaction or fee revenue, is basically what we really liked about the business and I'd say the biggest driver in that is probably revenue earned on customers that moved to cash on a volatile market. So one of the things we observed as we got to know this business is a natural kind of, if you will, hedge at the net revenue line, which is really where I focus when I think about this business and that's where we had the 5% year-on-year growth is in a volatile market, some people take the opportunity to move to cash and so that provides us to the extent that some of the advisory or transaction or trailer revenue that can be impacted by the market more readily allows us to kind of have that good performance tilt to net revenue.

So, I would say the biggest driver this period was the cash sweep revenue and was benefited by the Fed rate increase in the fourth quarter of last year. You are correct around how we look at the advisory AUM on your second question is that, yes, that kind of movement can have some in-quarter impact to our fee-based revenue. But really as we look out over the next quarter is where you can kind of see some of that impact. And so we feel that the churn in Q1 is not indicative of typical churn.

In fact as if you look at our advisor numbers, the majority of folks that did churn work decisions that we made in what I would call advisors that are not actively engaged with clients, but we did have a couple of folks that chose to retire and that happens from time to time in a business like this, but we're encouraged that we're back on track in second quarter and moving forward, but it can have, if you will, a quarter lag effect and we've certainly built that into our consideration going forward.

Dan Kurnos

Great. And then, just last one for me, I think I probably know the answer to this already, but obviously we're hoping to see sale of InfoSpace. Is this a nonsense going on with Yahoo!, is that impacting the process at all?

Eric Emans

Dan, I'll take that as well, it's Eric. No, I wouldn't say that at all, it's just the dynamics of the deal process where you're inching towards the finish line and - but I would say that there is an outside factors or even the businesses are performing not only in full space, but model priced - the business performance hasn't changed our view on our ability to gain value and you get the value that we need for these transactions. So I would say no outside impact on the process, just M&A is a two-party dance and we're trying to get to the finish line.

Dan Kurnos

And we would assume all proceeds go to pay down debt?

Eric Emans

Yes, I mean, as John called out in his prepared remarks, our capital allocation strategy top priority right now is delevering.

Dan Kurnos

All right, great, thanks and congrats again on the quarter.

Eric Emans

Thanks Dan.

Operator

[Operator Instructions] Our next question comes from Mitch Bartlett with Craig-Hallum.

Mason Anderson

Hey, guys, this is Mason on for Mitch, talked about this a little bit, so maybe I'll just ask it another way. When exactly do you plan to have the TaxAct business fully shifted towards the kind of higher ARPU models? Do we expect to see by next tax season or is there still some more - will there be some more work to do to do there?

John Clendening

Well I think the way to think about that, Mason - and by the way, thanks for the question and good morning. Way to think about that is that to a large extent, the repackaging is completed, right. So we've redefined how we go to market from a pricing point of view how you present forms and those sorts of things. So it's in a way that first sort of step in the process is done and we've learned a whole bunch around price elasticity, how to better presenter offers, kind to draw contrast. You heard the comment earlier, I know you're aware of this, but the sharp value that we present some others.

So there is more work to be done in terms of optimizing revenue models over time as well as the marketing angles too. So the benefits that we'll get from the pivot that we've just completed on the packaging and pricing side will extend for years to come. Now we're not prepared to discuss anything around future pricing strategies. But I think what I've shared, what Eric have shared and just anyone looking at the price structure in this business would say wow this is a huge high advantage to consumers to work with TaxAct and could there be some more room around prices in the future.

Yes, absolutely that could be. I want to be smart about and continue to hold that value as high position we have in the marketplace. The other thing is of course around other monetization tactics, right, and we've got an opportunity grow revenue per client by continuing to fine-tune how we present ancillary offers and then to push down the road around taking advantage of the HD Vest capabilities too. So while the repackaging is essentially done, we're also going to stay nimble in the marketplace. There's still a lot of strategies we can deploy down the line to continue to grow revenue per client.

Mason Anderson

Great, thanks for that color. And then, I'm just curious if you could talk a little bit about how Monoprice is performing?

John Clendening

Yes, Mason, this is Eric. Thanks for the question. As we report discontinued ops in our middle of sales processes, we're not going to get into too much detail. I think I would leave my comments as what I stated to Dan, which is the businesses are performing as expected and which should lead to a get result on the sales process.

Mason Anderson

All right, great, that's it from me. Thanks guys.

John Clendening

Thank you.

Operator

And I'm not showing any further questions at this time and this also does conclude today's conference call. You may now disconnect and have a wonderful day.

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