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David Weselcouch - Vice President Treasury and Investor Relations

Mike Yerington - President and Chief Executive Officer

Dan O’Brien - Executive Vice President and Chief Financial Officer


Scott Schneeberger – Oppenheimer

John Healy - FTN Midwest

Vance Edelson – Morgan Stanley

Michael Millman – Soleil Securities

Jackson Hewitt Tax Service Inc. (JTX) F1Q09 Earnings Call September 4, 2008 8:30 AM ET


Welcome to the first quarter 2009 Jackson Hewitt Tax Service Inc. earnings conference call. (Operator Instructions) I would now like to turn the presentation over to our host for today’s call, David Weselcouch.

David Weselcouch

I’m David Weselcouch, Vice President Treasury and Investor Relations for Jackson Hewitt and I’d like to welcome you to our fiscal 2009 first quarter results conference call. Joining me this morning are Mike Yerington, our President and Chief Executive Officer, and Dan O’Brien, Executive Vice President and Chief Financial Officer.

Our earnings release went out on a wire earlier this morning and hopefully you’ve had an opportunity to review it. The earnings release can be accessed at the investor relations section of our website located at

The format for today’s call will be as follows. First, Mike Yerington will provide an update on the initiatives outlined on our June 5 call. Following Mike, Dan O’Brien will review our first quarter financial results. Finally, we’ll open the call up to your questions. This morning’s call is scheduled to conclude at or around 9:00 am.

Before I turn the call over to Mike, let me briefly state our Safe Harbor disclaimer. Please note that this morning’s conference call contains statements that are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied.

In addition, this conference call contains time sensitive information that reflects management’s analysis, expectations and assumptions as of the date of this live call. For further information concerning issues and risk factors that could materially affect the company’s business and financial performance, please refer to the press release we issued earlier this morning, our annual report on form 10-K for the fiscal year ended April 30, 2008 or our other SEC filings.

Jackson Hewitt does not assume or undertake any obligation to update or alter any forward looking statements made or information presented during this call. This call is open to the public and is being webcast simultaneously on our website at Additionally, the webcast will be available for replay on our website.

At this time, I’d like to turn the call over to Jackson Hewitt’s President and CEO, Mike Yerington.

Mike Yerington

The three key messages that I want you to take away from this mornings call are as follows:

Jackson Hewitt is focused on achieving a successful 2009 tax season.

We are making solid progress on the initiatives we have undertaken to achieve this goal.

We are confident that we are on track with our plans for operational and financial success in 2009.

In regard to our being focused on achieving a successful 2009 tax season. Following two consecutive challenging tax seasons we intend to put Jackson Hewitt back on the solid track to longer term growth. We know that the first and all important step in that process is a successful 2009 tax season. We also recognize that a successful 2009 will carry with it a host of benefits for Jackson Hewitt.

It will substantiate the viability of our business model, it will regain investor confidence in our model, our management team and our future prospects and it will further energize our franchise community and it will provide the foundation for future expansion and growth.

To accomplish this we are looking to maximize the operating performance of our existing franchised and company owned office locations, with a strong emphasis on improved same store sales performance and a strong emphasis on winning in the early season. Our present footprint is geared to the early season and that is where we plan to make up the significant ground that we lost last year. We expect to attack the early season on two fronts.

First, we intend to be in the market early with a compelling product to attract lost customers back to our stores, bring current and new customers into our stores and retain customers for their tax preparation work. Second, we have talked with both regulators and banks to diminish pay stub filings. Our bank partners have indicated an intention to ratchet up their enforcement in this area in the coming season.

This morning I will provide you with a brief update on the initiatives we have undertaken to prepare ourselves for a successful 2009 tax season. The competitive nature of our business will prevent me from getting too detailed at this point; a fact that I know you can appreciate. However, I think it’s important to give you a general sense of where we stand in our preparations and to convey to you my confidence that we are very much on track with our plans.

On our June 5 conference call we told you that we were already hard at work putting the company back on a path to a successful 2009 tax season with a keen focus on new product development with emphasis on being in the market with a compelling early season product, significantly enhancing our marketing and branding programs, improving same store sales and profitability, selectively broadening our distribution and partnership arrangements, and creating a more efficient and flexible cost structure throughout our organization.

We identified these initiatives because we believe accomplishing each of these initiatives will position us well for successful 2009 tax season. I’m pleased to report to you today that we have made and continue to make solid progress on each of these important initiatives as we prepare for the upcoming tax season.

Now let me provide a brief update beginning with new product development. I can share with you today that we are making very good progress on our product lines and we are on track at this point in time with a compelling early season product for our core customers. Getting the product finalized is no simple undertaking. There’s still a lot to accomplish in order for us to deliver and early season product but we are on track.

Our expectation is to make available an attractive credit product to drive customers into our stores in the early season and we’re also planning to test several tax related new services in our company owned offices. I can’t share specific product or launch details but it remains our intention to make a powerful product impact in the early season.

Why is this so important? It’s important because we know from past experience the positive retention impact that an early season product can have. We believe that a sizeable portion of the 300,000 returns we were down in the first month of last tax season can be recaptured by attracting customers to our stores early.

We are working closely with a new bank partner to put a product in place that will not only be attractive to our early season customers but will also be economically attractive to our bank partner and beneficial to our efforts to win back lost customers as well as retaining existing customers and attract new customers into our stores early and then keep them there for their tax preparation business.

We also believe that getting out in front of the official electronic filing start to the tax season with a viable product will allow us to legally compete against pay stub filings that have historically occurred with the opening of the IRS electronic filing window. The bottom line is we are on track with our early season product plans and we look forward to sharing more with you later in the year.

In the marketing front we also told you in June that we were focused on improving our marketing program in 2009 and that we were undertaking an initiative to significantly improve our overall marketing focus, messaging and effectiveness. I’m pleased to inform you that we have made and continue to make great strides in this area. We’ve engaged a new advertising agency with significant retail experience.

We are building a marketing program with marketing messages based on a clear understanding of who our core customer is. The marketing programs are squarely aimed at improving same store sales and fully supporting our new product development efforts while applying consistent, targeted messaging at every touch point. Messages that we are already well progressed at building out.

We also will employ improved local marketing tools to attract new customers. Our approach to advertising will effectively and efficiently combine the use of national, regional and local media to reach our core customers. I’m excited about the progress on the marketing front and I look forward to sharing more about our marketing plans with you in the future.

Turning now to distribution and beginning with our approach to new territory sales. Relative to prior periods our sales of new territories were soft in the first quarter 2009. A variety of factors contributed to the soft new territory sales in this quarter. First, our emphasis is not necessarily on selling more territories in or current footprint as we already have good distribution there.

Second, we are undertaking a new multi-territory approach which was outlined for you in June. We have restructured our sales management organization and it will take us time to get the benefit from those changes. Do I believe our approach to territory sales is right for the long term? I certainly do. However, our ability to deliver a successful 2009 tax season which is our primary focus right now will not be hindered by soft new territory sales in the near term.

New territories typically are not significant contributors to our results in their first year of operation but they are important to our longer term ability to grow and prosper. In fact, a successful 2009 tax season will likely create greater demand and result in improved territory sales going forward. We do have territory sales in the pipeline and we expect to pick up new territory sales in the second quarter.

In general we are working through a brief transition period in terms of both our sales management and our sales strategy for new territory sales. Our sales approach which we continue to enhance encompasses multiple territories sold to well capitalized entrepreneurs, geographically strategic groups of one to two territories sold to small business operators with emphasis on locations that will enhance our second season footprint over time, vertical markets consisting of various employee groups or classes of trade which are things like see no employees and sales to existing franchisees, historically that’s accounted for about 75% of our overall sales.

As you can see, outside of sales aimed at existing franchisees that are coming off a challenging year we are employing several new approaches that we expect to yield success over time. We continue to make progress on enhancing our position in the Hispanic market and improving our alliance and partnership activities.

For example, in coordination with outside experts we have developed a robust 20 part training program to enhance our marketing effort to ensure success with Hispanic customers in 2009. With regard to alliances and partnerships we expect to attain improved returns in this area in 2009 by attracting the customers and employees of large corporations as well as members of various associations to Jackson Hewitt.

Both of these initiatives are important components of our overall distribution strategy and are areas where we have put resources in place to take advantage of these opportunities. We anticipate sharing additional details with you on these initiatives later in the year.

Let me comment briefly on our existing distribution network. We’ve had extensive communication with our franchise community since the start of our 2009 fiscal year, beginning with our franchise convention in early June. When I spoke to you on our last call prior to our convention I indicated that our franchisees were hopeful and optimistic about 2009.

Following our successful convention in June and reflecting on a recent meeting with our 50 largest franchisees and other communications that I’ve had with our franchisees I believe our franchise community is energized for a successful 2009 season. I’ve said from the beginning this is a partnership. Jackson Hewitt’s success will translate into franchisee success and visa versa.

Our franchisees know what is at stake and they strongly desire to achieve an improved growth and profitability in their business in 2009. They fully embrace the focus on improving their respective same store performance in 2009 and that where operational focus is in terms of building specific plans to assist our franchisees with effectively running their businesses and attracting new customers and re-attracting existing customers.

We are very attentive in our planning this year on successfully blocking and tackling at the local level. Winning the battle on the ground, assisting our franchisees with their overall planning and execution including working on several improvements to the customer experience in our stores.

On our June call we also talked about our need to improve our overall cost management. We undertook an initiative to do just that. Since that time we have reduced our consolidated work force approximately 10% during the 2009 first quarter. These are of course difficult decisions but necessary ones if we are to achieve our goals. The lower return levels in our 2008 tax season resulted in our costs being out of line particularly in our company owned operations where our margins decreased significantly.

We expect to achieve significant margin improvement in our company owned operations in 2009. We have taken the cost reduction actions that we have told you we would take and that we needed to take. We will enter the 2009 tax season in a leaner and more flexible cost position. We will as always look for additional cost efficiencies that may avail themselves as we prepare for the upcoming tax season.

I’d like to make a brief comment about our management team. This is not easy work and we are in the midst of gearing up to roll out our plans for 2009 and I’m very pleased with the level of focus and determination exhibited by my fellow senior management team members, Jackson Hewitt executives across the company, our employees and our franchisee system.

There is a sense of urgency in our organization coupled with a sense of excitement and anticipation that goes along with building and executing on a winning game plan to deliver the results we seek in 2009. The senior management team is a highly motivated group whose goals have been more tightly aligned with shareholder interest through a new performance based component of our equity incentive plan as outlined in our recent proxy statement.

Lastly, before I turn the call over to Dan I want to comment on the recent corporate governance enhancements that our Board unanimously approved in late July. Good corporate governance is important to Jackson Hewitt and these announced enhancements build on our existing solid foundation of corporate governance practices.

The specific governance enhancements include the adoption of a majority voting for uncontested elections of directors effective at our upcoming 2008 annual meeting of stockholders and the presentation of proposals at the annual meeting of stockholders providing stockholders with the opportunity to determine whether we should declassify our Board the opportunity to express their views regarding Jackson Hewitt’s executive officer pay programs and policies.

These corporate governance enhancements follow the action we undertook late last year to separate the roles of Chair of the Board and Chief Executive Officer under our bylaws. The Chair of the Board must be an independent director. We remain committed to pursuing corporate governance practices that are in the best interest of Jackson Hewitt and our stockholders.

Instituting majority voting, taking steps to declassify our Board and providing for stockholders say on pay are all actions that increase Board accountability, gives stockholders a greater voice in corporate matters and ensures tighter alignment of corporate and stockholder interest.

At this point I’ll turn the call over to Dan for a brief review of our 2009 first quarter financial highlights.

Dan O’Brien

This morning’s earnings release provides the detailed financial statements and summarizes results for the 2009 first quarter so I’d like to just cover a few items in advance of your questions. First of all as those of you who follow us are aware operating results in the first and second quarter of our fiscal year are not indicative of our full year performance.

Historically we have generated roughly 2% of our total annual revenues in each of the first two fiscal quarters due to the seasonal nature of the tax return preparation business. As such, we incur a net loss during the first two quarters. These losses have typically risen annually due to increased company owned store locations, the addition of resources to support our franchise business and the higher interest expense resulting from common share repurchase activities.

In the first quarter of our fiscal year revenues consist primarily of financial product fees earned in large part from the sales of our Gold Guarantee product in prior tax seasons which are amortized into revenue over the customer contract period, and from the sales of new territories. For the 2009 first quarter we reported revenues of $4.3 million versus $5.9 million in the 2008 first quarter.

The revenue decline in this quarter versus the year ago quarter was primarily due to the softer territory sales that Mike alluded to earlier. As Mike also indicated we have territory sales activity in our pipeline from these sales to increase in the second quarter and beyond.

Another area I want to highlight is the $4.9 million total expense increase in our company owned store segment. Approximately $2.3 million is related to restructuring charges in this segment that I’ll touch on momentarily. The remaining increase which I mentioned on our last call is directly attributable to the fact that we began the 2009 fiscal year with approximately 1,000 office locations versus the approximately 720 locations in place at the beginning of the 2008 fiscal year, primarily due to acquisitions that occurred over the past year.

On the bottom line net loss as adjusted increased to $19.7 million versus $17.1 million in the 2008 first quarter. On a per share basis net loss as adjusted was $0.69 versus a net loss as adjusted of $0.57 in the year ago quarter. Approximately $0.07 of the increased loss per share versus last year’s first quarter is attributable to a reduced share count and increased interest expense resulting from share repurchases that occurred since the end of the 2008 first quarter.

The weighted average share count for the first quarter was 28.5 million shares outstanding as compared to 30.3 million shares outstanding in the prior year period. Keep in mind that in periods of losses basic not diluted share count is used in the loss per share calculation.

A schedule is included in our earnings release entitled “Condensed Adjusted Results of Operations” which reconciles the reported and adjusted results for the quarter. I’d like to take just a minute to discuss these adjusting items. First, as Mike mentioned earlier we took steps to reduce our overall consolidated workforce in the first quarter.

This workforce reduction resulted from our initiative to improve our overall cost structure in advance of the 2009 tax season and represented approximately 10% of Jackson Hewitt’s full time employee population with over half of these positions coming from our company owned segment. In connection with this action and certain employee terminations a $1.4 million pre-tax severance charge was recorded in the quarter.

As we continue our off season preparations to significantly improve our company owned operation, specifically same store sales performance and margins, we also closed approximately 191 underperforming store locations in the first quarter. In connection with this action we took a pre-tax charge of $1.6 million related to lease terminations and other expenses involving 51 of these locations.

We are at a similar number of company owned stores in advance of the 2009 tax season. With a net effect being a roughly similar company owned store count as compared to 2008 but an improved location footprint in this business as we enter the upcoming tax season and an anticipated better overall profitability.

Lastly, on the positive side we recorded an insurance settlement of $1.5 million in the quarter in connection with certain prior period litigation. Net net these adjustments resulted in an increase to our net loss of $900,000 in the quarter.

Turning now to our capital structure we ended our 2009 first quarter with a debt balance of $281 million which left the unused portion of our $450 million credit facility at $169 million at quarter end. We are generally consuming cash in a manner consistent with our planning as we prepare for the new tax season.

Our leverage ratio at quarter end was approximately 3.1 times. With regard to our dividend our Board of Directors declared a second quarter dividend of $0.18 per share back on August 1 which will be payable on October 15, 2008, to stockholders of record on September 29, 2008. This dividend marked the 17th consecutive quarterly dividend since our IPO back in mid 2004.

With that let me turn the call back to Mike.

Mike Yerington

To summarize our three key messages from this morning’s call:

Jackson Hewitt is focused on achieving a successful 2009 tax season.

We are making solid measurable progress on the initiatives we have undertaken to achieve this goal.

We are confident that we are on track with our plans for operational and financial success in 2009.

Before turning to Q&A let me use this opportunity to make a brief hold the date announcement. On Thursday, December 4 we will be conducting our first ever Jackson Hewitt Analyst Day in New York City. Concurrently on this same morning we are planning to release our 2009 second quarter results.

As we will be in the early season at that time we will expect to be able to be forthcoming with details regarding our 2009 tax season initiatives particularly in the area of new products and marketing and we look forward to having those discussions with you at that time. Additional information about our Analyst Day will be forthcoming.

At this time we will open the call to your questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Scott Schneeberger – Oppenheimer.

Scott Schneeberger – Oppenheimer

Could you provide what the new territory sales number was, the gross positive and then we know the net calling of underperformers and you also mentioned an equal amount of company stores opened in relation to those that were called. Could you guys quantify at this point of the year where each of those metrics stand?

Dan O’Brien

Territory sales were at four in this first quarter again separate from locations. Again, we’re not giving any location views at this point. As we get a little further on in the year as is our typical practice we’ll do that. I did mention that we have shut down and have completed all those shut down activities of 191 company owned stores and are in the process of looking at opening approximately that same level of other company owned stores.

Again roughly we would expect company owned stores to be on balance with where we ended last year. Again that’s still to be finalized; we’re still early in the process.

Scott Schneeberger – Oppenheimer

On franchises, four new territories sold what are you looking for net; I got a sense for what you’re looking for company owned on a net basis. On a net basis for franchise stores will that probably be a negative this year?

Mike Yerington

It’s too early to say. I think we would expect to see some limited net growth this year overall but again we’ll have more to say on that as we get to the Analyst Day that we talked about in December. It’s just a bit early within our planning and whereas I’ve given some of our own company owned planning which clearly we have a closer ownership to, our franchisees are still in the process of finalizing their plans so it’s a bit early for us to give that prognostication.

Scott Schneeberger – Oppenheimer

Obviously your focus this year is less on the expansion growth and more on profitability in the same store sales and you’ve been delivering that message. Could you follow up perhaps on some quantification of what benchmarks you’re looking to achieve there. I realize that’s early too but anything you can share; I figured I’d fish for.

Mike Yerington

Let me talk a little bit about same store sales, certainly that is clearly our focus and a couple things I can talk about that we’re doing at the local level, we’re working with our franchise partners to develop business plans for them in their businesses in their local market. We’re working on a coordinated effort between marketing and operational to have almost a daily tactical plan for the franchisees.

We’re working on marketing and programs that effectively direct the efforts at the local level to achieve both acquisitions of new customers as well as retaining current customers. There are a lot of specifics that I can’t get into more detail on but I will tell you that there’s a very clear focus on same store sales across the organization.

Dan O’Brien

As to quantification it’s not something we’re prepared to do at this point. Clearly we have a plan that we’re marching to but we’ll have to saving quantification about it until we get into the tax season.

Scott Schneeberger – Oppenheimer

You mentioned earlier you’re on track with an early season product, an attractive credit product, that will be rolled out company owned and franchise I assume because you followed up and you say you’re testing new services in company owned offices. Those are betas for this year but really the big initiative is the early season product.

Mike Yerington

Yes, that will be across both franchisee and company owned stores. We have certain tax related products that we’re going to be testing in our own company owned stores. Part of good product development is for us to test, make sure the pricing is right, the model works right, etc. Doing some of that with certain products in our company owned stores but those are not planned to be rolled across to franchisees expect maybe in limited numbers that agree to help us test this year.

Scott Schneeberger – Oppenheimer

Could you update us on your bank partner status, obviously you mentioned that you’re trying to make the credit product attractive for your bank partner. Is that one of your existing bank partners for your other financial products, just any further color you can share with those relationships?

Dan O’Brien

I think we’ve said on prior calls that the bank partner that we’re working with in terms of the early season product is not one of our current RAL providers. Again, we are in finalizing our discussions with our RAL providers on taking up the volume associated with HSBCs contract ending. We anticipate doing that smoothly but we’ll leave it that there is another party that we are dealing with respect to the early season products. We’ll have more to say on that in the future.


Your next question comes from John Healy - FTN Midwest.

John Healy - FTN Midwest

You mentioned that you lost 300,000 customers in the first month of last tax season and you’re optimistic you’re going to be able to win some of those back. What should we think is a realistic level of those customers you think will have the potential for coming back to Jackson Hewitt in this tax season?

Mike Yerington

I don’t want to talk specifically about the numbers except to say that we have a very targeted list of people that have been in our system as you can imagine over the last several years. We know those that have dropped out, we know those that have used these products in the past and we have a very robust program to go after those folks and make sure that they’re aware of these products. I can’t talk about it specifically but there’s a large pool of customers that we think would be attracted to these kinds of products.

John Healy - FTN Midwest

Last year one of the things that was talked about much is the magnitude, it was debated back and forth but with the military RAL product do you think it’s possible that Jackson Hewitt could offer military RAL products for this upcoming tax season?

Mike Yerington

Yes, what we said, just to put things into context, we said that we only have about 1% of our total population of users that use military products. Last year we had a partnership with a company called Pioneer, it wasn’t as robust an offering as maybe others had in the marketplace but our intent this year is to have a robust military product if others have a robust military products. We’re planning on doing that.

John Healy - FTN Midwest

I know you continue to talk about improving share in Hispanic market and some of your competitors also talk about that. Can you talk to where this market is coming from for you guys, maybe the providers that this community is using, maybe the tax filing method they are using and maybe how will you think now that you’re going to be able to win share relative to the past.

Mike Yerington

I don’t want to leave you with the impression we don’t already have a large number of Hispanics in our customer base today. I think part of what we’ve been trying to do, the reason we hired this outside expert who happens to be Hispanic, who happens to know the tax business is that we have decided that in order for us to attract more of those customers into our office we need to understand the cultural attributes that Hispanic customers want from our offices.

It’s not just putting “Si habla Espanol” on the window it’s what are those things that attract the Hispanic customer, what are those things culturally that make it comfortable for them to come into or offices and do business. Part of this 20 part series I referred to a minute ago is that it is a step by step process for our franchisees to understand from soup to nuts exactly how they need to prepare their offices, how they need to establish the Spanish speaking preparers in their office, all those things.

As well as some support from the consultant ongoing during the tax season to make sure that they’re doing all those things and if they have questions they can get the support they need during the season. I think all those things, if you look at our footprint generally our footprint is urban and in our urban markets there are significant number of Hispanic customers and you asked a question where they go today. I think they probably go to independents for the most part. Some come to us but I think what we’re trying to do is increase our share by understanding the needs of those customers.

John Healy - FTN Midwest

On the cost side of the business you talked about the 10% reduction in the workforce primarily in the company owned offices. Is there any way for us to try to start thinking about how we should quantify that in terms of margin benefit or potential EPS benefit for you guys and I don’t know if it will flow through this year but maybe even next year.

Dan O’Brien

To give you a framing of it as you think about it just from a salary, fringe standpoint it’s kind of in the area of $4 to $5 million. These are actions largely taken at the end of the quarter so again not much of that benefit flowed through this year but on an annualized basis you should think in that $4 to $5 million range that excludes obviously the reduced workforce you have other reduced costs, travel and other things that have not been put into that figure. From a salary and fringe standpoint that’s an estimate you can use.

John Healy - FTN Midwest

You should be able to maybe get 75% of as the remainder of the year goes on?

Dan O’Brien

Yes, that’s correct.


Your next question comes from Vance Edelson – Morgan Stanley.

Vance Edelson – Morgan Stanley

You mentioned you are talking to banks and to the IRS to reduce pay stub filers. How confident would you say you are that the enforcement will be there to make sure that there really is some improvement, can you provide your thoughts on that?

Dan O’Brien

Let me give it to you in perspective. One is that I think that the IRS is acutely aware of the issue and we’ve talked to them many times on this topic. We intend to go with our fellow tax preparers and talk to them on the same topic so we’re going to try to heighten the awareness at the IRS level, we’ve already done that.

We’ve certainly heightened the awareness at the highest levels within the bank partners that we operate with. In discussions we’ve had at those high levels they intend to increase the enforcement that they have on the pay stub filing in the early season. I think they want to do the right thing here. They obviously are regulated like we are and they want to make sure that they’re not taking a filing that was originated off a pay stub versus a W-2 because that’s against IRS regulations. I think specifically you’ll see stepped up enforcement at both of our bank partners in that area.

I can’t talk to the IRS except to say that we’re making them aware that it’s important to us, they understand that, more to follow on that as we get closer to the season.

Vance Edelson – Morgan Stanley

Could you just comment on recent pricing trends or the revenue per return and what the outlook is on that front for the upcoming season?

Mike Yerington

I don’t think there’s much to add at this point. Obviously we’re not into the season yet to really have any trended data that’s meaningful. I think we’ve historically seen in this business somewhere in the 5% to 7% increase levels. I don’t want to make prognostications for this year in that respect that’s been historically what we’ve seen.

We’re looking carefully at our own pricing and local markets and being very careful in that and making sure our recommendations to our franchisees and operating our company owned stores is appropriate. I can only comment on what has occurred to date historically. This upcoming season we’re still in our planning.


Your last question comes from Michael Millman – Soleil Securities.

Michael Millman – Soleil Securities

Could you give us some historic perspective on the effect of pre-season loans on retentions, on returnees, ex-customers on new customers?

Mike Yerington

We really can’t specifically about numbers there except to say that we know that customers in our core customer segment there is a need to get money quickly and we know that the response rates we had when we were offering those products was very good. We also know there was a high correlation between those folks that came in for early season products that came back for tax prep and even those that were not approved for those early season products there was what I call a stickiness associated with them coming in early. I think that’s probably directionally where we can go.

Michael Millman – Soleil Securities

Would you expect to get the same kind of results you got in the past or you think your going to have more robust product and actually do better than historically you did with early season products.

Dan O’Brien

We’ll have more to say as we get into the season. I’d look forward maybe to talking a bit more on that subject in December at our Analyst Day. We’re still finalizing the framing of the program and all of those aspects Mike had expressed some confidence in the direction that we’re taking. It’s a bit early to frame out what the impact of that might be.

Michael Millman – Soleil Securities

Regarding the pre-file loan and maybe the military RAL would you expect that you would contribute or subsidize part of that cost and to what extent would you expect your franchisees to contribute to the cost of those products?

Dan O’Brien

Again, it’s a bit early to talk about anything. Clearly we go into these relationships not with a bankers hat on, that’s not where we are and not a normal position. Suffice to say we’re still in the process of finalizing all of this and we’ll have more to say around the actual arrangements that we have to offer these credit products as we move forward.

Michael Millman – Soleil Securities

Could you at least give us some directional, typically you’ve been paid to give bank access to loan products would you expect this to be true with these early season product and military RAL.

Dan O’Brien

Historically when we’ve offered these products we have not received compensation on the early season products. Again, more to come in terms of any outcome with respect to the program we’re putting in place for this year. Historically we have not earned any money on these early season products.

Mike Yerington

They’re really geared toward retaining the tax customer. We know our customers need funding as quick as they can get it and we’ve used these products really more as a way to get them in to do their tax return.


At this time this concludes our question and answer session.

Mike Yerington

First of all, thank you all for participating on our call this morning and for your continuing interest in Jackson Hewitt. I look forward to reporting to you on our progress in early December at our first ever Jackson Hewitt Analyst Day. Thanks for your time this morning and have a great day.

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Source: Jackson Hewitt Tax Service Inc. F1Q09 (Qtr End 07/31/08) Earnings Call Transcript
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