H&R Block Inc. will spend $405 million to acquire Canadian financial software firm Wave Financial, the company announced Tuesday morning.
The Kansas City-based company will use existing cash to fund the deal, which is expected to close in the next few months. The news came the same day that H&R Block reported its latest quarterly and annual financial performance results.
In a news release, H&R Block President and CEO Jeff Jones said Wave Financial would complement the offerings of the tax preparation company.
The Canadian firm provides bookkeeping, accounting, invoicing, payroll and payments processing services to more than 400,000 small businesses.
“Wave provides us the opportunity to accelerate our small business strategy and is a great strategic fit,” Jones said in the news release. “Both companies can leverage each other’s capabilities to bring tax and financial solutions to small business owners, serving more clients in more ways.”
Following the acquisition, Wave will maintain its independent leadership team and headquarters in Toronto.
In an interview, Jones said H&R Block approached Wave several months ago as part of its long-term focus on acquiring new talent and capabilities. H&R Block already offers tax and bookkeeping services for small businesses but Jones believes Wave will help broaden the company’s reach.
“We spend a lot of time with our clients and listening to our clients and when you do that you learn a lot about their unmet needs,” Jones said. “And that leads us to think about product development, innovation and ways we can serve more clients.”
H&R Block finished its fiscal year with total revenues of about $3.1 billion — a decrease of about $65 million, or 2.1%, over the previous fiscal year. In fiscal year 2019, 20.3 million U.S. tax returns were prepared by or through H&R Block, an increase of 1.5% over the previous year.
Executives anticipated decreased revenues for the year.
In October, Jones announced plans to slash the price of tax preparation services as federal tax cuts threatened to accelerate the decline of filers visiting H&R Block retail stores.
In an interview, Jones characterized 2019 as a banner year for the company. H&R Block grew tax return volumes faster than the industry, took market share in the do-it-yourself tax preparation space and improved customer satisfaction scores.
“2019 was a great year for H&R Block,” he said. “Really across the board, we delivered at the top end of our financial outlook.”
Aside from cutting some prices, Jones noted that H&R Block introduced pricing transparency ahead of the 2019 season so filers knew how much they would pay before starting to file — a move the CEO described as “a breakthrough” for an industry long defined by opaque pricing.
“The combination of those things absolutely increased interest in H&R Block,” he said.
While investors worried that lower tax obligations might hamper business, Jones said federal tax reform did not change the way most customers filed their taxes. He said H&R Block has weathered more than 30 major changes to the tax code throughout its 64-year history.
The company was co-founded by brothers Henry and Richard Bloch. Richard died in 2004; Henry died in April at age 96 in Kansas City.