Prompt:
Human: Andy Simanek, head of investor relations for Hewlett Packard Enterprise.
Also, for financial information that has been expressed on a non-GAAP basis, we have provided reconciliations to the comparable GAAP information on our website.
Throughout this conference call, all revenue growth rates, unless noted otherwise, are presented on a year-over-year basis and adjusted to exclude the impact of currency.
I am amazed by the resilience of our customers, partners, and team members.
And I'm incredibly proud of the way Hewlett Packard Enterprise continues to serve the needs of our global communities during such an unusual and evolving circumstances.
We delivered a very impressive third quarter at HPE with strong orders growth, expanded margins, and record free cash flow.
Overall, I am pleased to see how our differentiated portfolio is resonating with the market and our edge-to-cloud strategy is driving improved momentum across our businesses.
Based on the strength of our Q3 performance and our confidence about our momentum in the market, we are again raising our fiscal year 2021 earnings per share and free cash flow outlook, and we are also resuming stock repurchases.
Revenue in Q3 was $6.9 billion, in line with our outlook and normal sequential seasonality.
Our Q3 orders were up strong double digits year over year, and our year-to-date order volume has increased 11%, showing the strength of our edge-to-cloud offerings.
We significantly expanded our non-GAAP gross and operating margins, driving our year-to-date non-GAAP operating profit and earnings per share, up 28% and 27% year over year, respectively.
We generated record year-to-date free cash flow of $1.5 billion, up $1.1 billion year over year, putting us well ahead of the original outlook we announced last October.
I am particularly pleased that we were able to deliver these results while mitigating against industrywide supply constraints by taking proactive inventory measures working closely with our suppliers and deploy our best-in-class engineering capabilities to establish specific response plans.
The impact of the pandemic continue to accelerate the shift we predicted years ago to an edge-centric, cloud-enabled, and data-driven world.
Now more than ever, there is a greater need for secure connectivity, faster insights from data, and a cloud experience everywhere.
We expect these trends to continue.
Digital transformation is no longer a priority but a strategic imperative.
To help our customers transform their businesses and be future-ready today, we have been focused on doubling down in key areas that are resonating strongly in the market.
We had a record number of orders in both our intelligent edge business and high-performance compute and mission-critical solutions business.
Due to strong demand and execution, these growth businesses now make up nearly 25% of our total company revenue.
Our intelligent edge business accelerated its momentum again in Q3, with 23% year-over-year revenue growth, driven by a record number of new orders.
Strong customer demand for secure connectivity has generated a backlog five times greater than at the close of Q3 last year, as customers increasingly look for solutions to collect, connect, analyze, and act on data at the edge.
We are leaning into this demand and continue to invest and innovate at the edge.
In June, we announced new AI ops, IoT, and security features for our Aruba Edge Services Platform, or ESP, designed to streamline network operations, maximize IT efficiency, and more easily extend the network from the edge to the cloud.
Our Aruba ESP continues to gain traction with customers in different verticals.
In the third quarter, customers including Save A Lot, Monument Health, and Circa Resort and Casino, all standardized their networks on Aruba ESP.
In our high-performance compute and mission-critical solutions business, revenue was up 9% year over year, driven by a record number of new orders.
We also generated a record order book, which now exceeds $2.5 billion.
The exponential growth in data, along with AI and big data analytics, are all driving an increased need for high-performance computing and mission-critical capabilities in enterprises of all sizes.
To meet this demand, we bolstered our artificial intelligence capabilities with the acquisition of Determined AI, a start-up that delivers a puzzle software stack that to train AI models faster at any scale using its open-source machine learning platform.
We also continued to see an increasing number of customers accessing our high-performance computer solutions as-a-Service through HPE GreenLake.
With our HPE GreenLake Cloud Services for HPC, customers gained powerful specialized computing and AI capabilities with a sustainable cloud experience.
For example, in Q3, HPE was awarded a $2 billion contract to be realized over a 10-year period with the National Security Agency to deliver high-performance computing solutions through the HP GreenLake platform.
The service will help the National Security Agency efficiently process data and unlock new insights in sustainable new ways.
Our core businesses generated robust year-over-year orders growth, as well as strong profitability and free cash flow in the quarter.
Year to date, compute and storage orders are up mid-single digits, with Q3 operating margins of 11.2% and 15.1%, respectively.
We continue to offer more of our core capabilities as-a-Service.
In Q3, we introduced unified compute operations as-a-Service through our HP GreenLake edge-to-cloud platform.
This new cloud-based management service simplifies provisioning and automates the management of compute infrastructure wherever it resides.
Our storage business is transforming into a cloud-native software-defined data services business through organic innovation and targeted acquisitions.
In May, we introduced our new cloud data services available through HPE GreenLake, as well as a new HPE Alletra cloud-native data infrastructure.
And just this week, we closed the acquisition of Zerto, an industry leader in cloud data management and protection, and run some way of data recovery services, which will be soon available as-a-Service through HPE GreenLake.
This acquisition immediately positions HPE GreenLake in the high-growth data protection market with a proven scale solution.
HPE was the first to market four years ago in delivering and as-a-Service cloud experience on-premises in a colocation or at the edge with HPE GreenLake.
Today, our HPE GreenLake edge-to-cloud platform has more than 1,100 customers.
Our annualized revenue run rate this quarter was $705 million, up 33% year over year, driven by strong as-a-Service orders growth, up 46% year over year.
Organizations across sectors, including retail, healthcare, financial services, and public sector, are turning to HPE GreenLake.
For instance, we helped Liberty Mutual shift from a traditional capex IT spend to a new pay-as-you-go model, creating a cloud experience on-premises to provide transparency into consumption while improving their speed in adapting to capacity demands.
They standardized critical workloads on HPE Synergy delivered through HPE GreenLake, resulting in a reduced data center footprint and significant cost savings, including a monthly unit rate well below public cloud alternatives.
We also see in the power of the full HPE edge-to-cloud portfolio as customers are turning to HPE for integrated solutions that combine secure connectivity, data insight capabilities, and cloud experiences.
Woolworths Group Australia and New Zealand's largest retailer selected HPE GreenLake to power its new Wpay payment platform.
They needed a solution that combines a powerful mission-critical architecture with the ability to scale and also provide a better cost efficiency back to Wpay and its merchant partners.
Delivered through HPE GreenLake, their solution leverages our full edge-to-cloud portfolio, including HPE Aruba, HPE NonStop, HPE Primera, and HPE Synergy.
HPE Pointnext Services also provided expertise to us over the company's digital transformation.
I believe this is a great example of the power of our HPE edge-to-cloud portfolio.
To extend our leadership position in cloud services and further accelerate our pivot as-a-Service, we are relentlessly innovating.
We made several compelling announcements at HPE Discover in June.
I am particularly excited about our new HPE GreenLake Lighthouse offering, a secure cloud-native stack built with HPE Ezmeral software to autonomously optimize different workloads across hybrid estate, reducing time to deployment and operating costs.
We also introduced Project Aurora to secure the enterprise, embedded in our HPE GreenLake edge-to-cloud platform.
Project Aurora automatically and continuously verifies and attests the integrity of the hardware, freeware operating systems, platforms and workloads, while also detecting advanced threats.
And finally, demonstrating our continued commitment to acquiring assets that complement our own capabilities, we acquired data platform developer Ampool.
Ampool will accelerate HPE Ezmeral analytics run time to deliver high-performance analytics for engineers and business analysts.
I am proud of HPE's performance in Q3 and year to date and the significant progress we have made in becoming the edge-to-cloud company.
The momentum we have in the market compels us to move even further and faster, and our ability to transform with increasing speed is imperative.
This transformation is my No.
At this pivotal moment, our purpose to advance the way people in the work has never been more important.
Our vision to become the edge-to-cloud company is proving its tremendous relevance and our portfolio is winning in the marketplace.
Fueled by our purpose, vision, and portfolio, we have the opportunity to build a more digitally enabled inclusive world.
We have a mandate to imagine new digital transformation strategies that support our own ESG goals and those of our customers, leading to better business outcomes and societal impact.
We will never waver from our commitment to being a force for good and a strategic partner for our customers.
We will continue to bring bold new innovation to our customers, and we will continue to create value for our shareholders.
And I'm grateful for the incredible team, and I'm confident in and excited about the future.
I hope you will join us for our virtual Security Analyst Meeting on October 28 to hear more about our position in the market, our priorities, and our outlook for the year ahead.
I'll start with a summary of our financial results for the third quarter of fiscal year 2021.
Antonio discussed the key highlights on Slides 1 and 2.
So, now let me discuss our Q3 performance, starting with Slide 3.
I'm pleased to report that we are experiencing very strong demand across all of our businesses.
Q3 was marked by accelerating order growth, strong gross and operating margin expansion, and robust cash flow generation.
Building on the strength from the last quarter, we delivered Q3 revenues of $6.9 billion, up 3% from the prior quarter and in line with normal sequential seasonality, also in line with our outlook that factored in some of the expected supply chain constraints we flagged.
We're working to ensure disruption is minimal by taking proactive measures and coordinating with our world-class suppliers to establish tailored recovery plans.
I am particularly proud of our non-GAAP gross margin that hit another record level of 34.7%, up 40 basis points sequentially and up 420 basis points from the prior-year period.
This is driven by our deliberate actions to shift toward higher-margin software-rich offerings, strong pricing discipline, and cost takeout.
As previously indicated, we continue to invest in high-growth, margin-rich areas of our portfolio, both in R&D and go-to-market, particularly in Aruba Software and as-a-Service, which increased our non-GAAP operating expenses in the quarter.
We also booked two one-time charging totally $28 million for a legal settlement and bad debt associated with likely fraud involving a channel partner in APJ.
Even with these investments and one-time charges, our non-GAAP operating margin was 9.8%, up 190 basis points from the prior year, which translates to a 25% year-over-year increase in operating profit.
We continue to be focused on driving further efficiencies in the business.
Within other income and expense, we benefited from stronger operational performance in H3C and strong gains related to increased valuations in our Pathfinder venture portfolio.
As a result, we now expect other income and expense for fiscal year '21 to be an income of approximately $50 million.
With strong execution across the business and despite two unanticipated one-time charges, we ended the quarter with non-GAAP earnings per share of $0.47, up 31% from the prior year and above the higher end of our outlook range for Q3.
Q3 cash flow from operations was $1.1 billion, and free cash flow was $526 million.
This puts us at a record $1.5 billion of year-to-date free cash flow, up $1.1 billion from the prior year, driven primarily by an increase in operating profit.
Finally, the strength of our business has positioned us to contribute substantial capital to our shareholders.
We paid $157 million of dividends in the quarter and are declaring a Q4 dividend today of $0.12 per share payable in October.
We are also announcing today the resumption of share buybacks as a result of greater free cash flow generation and visibility.
I'll come back to capital allocation more broadly when we discuss the outlook.
Now, let's turn to our segment highlights on Slide 4.
Our growth businesses, which now represent nearly 25% of our total company revenue, are executing strongly and experiencing record order levels.
In the Intelligent Edge, we accelerated our top-line momentum with record levels of orders and 23% year-over-year revenue growth.
Switching was up over 20% year over year, whereas wireless LAN experienced more acute supply constraints and was up mid-single digits.
Additionally, the Edge-as-a-Service offerings were up triple digits year over year, which reflects enabling software platforms, as well as Network-as-a-Service.
We also continue to see strong operating margins at 15.8% in Q3, up 540 basis points year over year, which included a $17 million one-time legal settlement that impacted margins by 2 points.
Silver Peak continues to perform strongly and contributed 7 points to the Intelligent Edge growth.
In addition, we started generating meaningful revenue synergies by cross-selling the Aruba portfolio, which reinforces the merits of the Silver Peak deal.
In HPC and MCS, demand strengthened even further with a record order level.
Revenue grew 9% year over year as we continue to achieve more customer acceptance milestones and deliver on more than $2.5 billion of awarded contracts, including the contract that Antonio mentioned with the NSA worth $2 billion over 10 years.
We remain on track to deliver on our full-year and three-year revenue growth CAGR target of 8% to 12%.
In compute, revenue grew 4% quarter over quarter, reflecting normal sequential seasonality despite previously anticipated supply chain tightness.
Operating margins of 11.2%, were up 190 basis points from the prior year, due to disciplined pricing and the rightsizing of the cost structure in this segment.
Within Storage, revenue grew 1% year over year and 3% quarter over quarter, ahead of normal sequential seasonality, driven by strong growth in software-defined offerings.
Nimble grew 10% year over year, with ongoing strong dHCI momentum, growing double digits year over year.
All-Flash Arrays grew by over 30% year over year, led by Primera.
The mix shift toward more software-rich platforms helped drive Storage operating margins to 15.1%, up 10 basis points year over year, offset by continued investments in our cloud data services.
With respect to Pointnext operational services, including Nimble services, revenue grew for the third consecutive quarter year over year as reported with both order and revenue growth expected for fiscal year '21.
Within HPE Financial services, revenue was flat year over year and sequentially.
While our bad debt loss ratio did increase slightly to 94 basis points this quarter, it was entirely due to a one-time $11 million reserve charge related to the already mentioned likely fraud in APJ by a channel partner.
Absent this one-off event, our bad debt loss ratio would have improved to just 61 basis points aligned to pre-pandemic levels.
More importantly, we continue to see improved cash collections above pre-pandemic levels.
Our operating margin was 11.1%, up 300 basis points from the prior year.
And our return on equity at 18.3%, is well above the 15% plus target set at SAM.
Slide 5 highlights the key metrics of our growing as-a-Service business.
We have made significant progress since our Analyst Day last October by adding over 200 new enterprise GreenLake customers to over 1,100 today and increasing our TCV by over $1 billion to a current lifetime TCV of well over $5 billion.
For Q3 specifically, our ARR was $705 million, which was up 33% year over year as reported, and total as-a-Service orders were up 46% year over year.
It is also important to note that the mix of our ARR is becoming more and more software-rich as we build out our GreenLake Cloud Platform, which is improving our margin profile.
We look forward to providing more disclosure around our software and services mix at our analyst day later this fall, which I believe reinforces the significant value add of GreenLake.
Overall, based on strong customer demand and recent wins, I am very happy with how this business is executing and progressing toward achieving our ARR growth target of 30% to 40% CAGR from FY '20 to FY '23.
Slide 6 highlights our revenue and earnings per share performance to date where you can clearly see the strong rebound from last year and sustained momentum for the last three quarters.
The demand environment continues to strengthen.
And with the operational execution of our cost optimization and resource allocation program, we have increased non-GAAP earnings per share in Q3 by 31% year over year.
Turning to Slide 7.
We delivered another record non-GAAP gross margin rate in Q3 of 34.7% of revenues, which was up 40 basis points sequentially and up 420 basis points from the prior year.
This was driven by strong pricing discipline and a positive mix shift toward high-margin software-rich businesses like the intelligent edge and next-generation storage offerings.
We have also benefited from our new segmentation we implemented beginning of fiscal year 2020, that gives us much better visibility into each business unit and enables the better resource allocation and discipline to drive operating leverage.
Moving to Slide 8.
You can also see we have expanded non-GAAP operating profit margin substantially from pandemic lows to 9.8%, which is up 190 basis points from the prior-year period.
We are driving further productivity benefits and delivering the expected savings from our cost optimization plan, while simultaneously increasing our investment levels in R and D and field selling costs, which are critical to fuel our long-term innovation engine and revenue growth targets.
As mentioned previously, Q3 operating expenses also included one-time charges not included in our guidance, totaling $28 million for a legal settlement and the likely forgery involving a partner.
Excluding these one-off charges, our operating margin would have been 10.2%.
Turning to Slide 9.
We generated a record year-to-date levels of cash flow with $2.9 billion of cash flow from operations and $1.5 billion of free cash flow, which is up $1.1 billion year over year.
This was primarily driven by increased operating profit.
I would like also to underscore that this year, our free cash flow seasonality will be different than in prior years.
We expect increased financial services volume that includes more than $150 million in Q4 financing for a very large deal that is predominantly GreenLake and will benefit our ARR margins for years to come.
We also have further restructuring payments and growing working capital needs as we continue to buffer our inventory levels in the light of the disruption in the global IT supply chain.
Now moving on to Slide 10, let me remind everyone about the strength of our diversified balance sheet.
As of July 31, the operating company net cash balance turned positive due to our strong free cash flow.
Furthermore, we made additional progress during the quarter, securitizing over $750 million of financial services-related debt through the ABS market.
The refinancing of higher cost unsecured debt with ABS financing allows us to boost access to financing market at a cheaper cost of debt capital, as well as diversify and segregate our balance sheet between our operating company and our financial services business.
Bottom line, our improved free cash flow outlook and cash position ensure we have ample liquidity to run our operations, continuing to invest in our business to drive growth and return capital to shareholders.
Now turning to our outlook on Slide 11.
I'm very pleased to announce that we are once again raising our full-year guidance to reflect the continued momentum in the demand environment and our strong execution.
This will be the fourth guidance increase since SAM in October 2020.
We now expect to deliver fiscal year '21 non-GAAP diluted net earnings per share between $1.88 and $1.96.
With respect to supply chain, as indicated last quarter, industrywide tightening somewhat constrained our supply as expected.
We continue to take proactive inventory measures where possible.
And you can see our efforts in inventory balances that increased $1.3 billion year to date that also reflects the strengthening demand environment and a substantial order book we have across the business.
We expect the challenged supply chain conditions to persist until at least the middle of calendar year 2022 and have factored these into our revenues, costs, and cash flow outlook.
From a top-line perspective, although we remain prudent given the challenged supply chain environment, we are very pleased with the accelerating Q3 order momentum across all segments of the business.
More specifically for Q4 '21, we expect revenue to be above our normal sequential seasonality from Q3 and are comfortable with current consensus levels.
For Q4 '21, we expect GAAP diluted net earnings per share of $0.14 to $0.22 and non-GAAP diluted net earnings per share of $0.44 to $0.52.
Additionally, given our record levels of free cash flow year to date and confidence in our raised outlook, I'm very pleased to announce that we are also raising fiscal year '21 free cash flow guidance to $1.5 billion to $1.7 billion, that is a $600 million increase at the midpoint from our original SAM guidance with the top end of this free cash flow guidance range at the peak levels attained in fiscal year '19.
As you recall, at the end of the first half of fiscal year 2020, we suspended our share buybacks to preserve liquidity in the context of the global pandemic disruption.
Although we continue to operate in a challenged supply environment, our order momentum and improved cash flow generation visibility give us confidence to reinstate our share repurchase program.
We are targeting up to $250 million of share repurchases in Q4 of fiscal year '21, and we'll update investors on our capital management policy for fiscal year '22 at SAM in October.
As a reminder, we always follow a disciplined, return-based capital allocation framework to maximize long-term shareholder value.
1 priority remains delivering sustainable profitable growth through both organic and inorganic M and A investments while remaining committed to paying dividends to our shareholders.
In addition, we will consider opportunistic share buybacks when we see a favorable return for doing so.
So, overall, and to conclude, I am very proud of the progress we have made year to date in fiscal year '21.
It's clear that our edge-to-cloud strategy is resonating with customers and driving improved momentum across all of our businesses.
Our growth businesses in the Intelligent Edge and HPC/MCS have accelerated top-line performance with record levels of orders.
Our core business of Compute and Storage is demonstrating momentum with robust orders and improved margins and our as-a-Service ARR is accelerating.
All of this translates to improving revenue momentum, strong profitability growth, and record levels of free cash flow.
We look forward to closing out our fiscal year much leaner, better resourced, and positioned to capitalize on the strong demand environment.
Lastly, as Antonio mentioned, we look forward to having you join us for our virtual Securities Analyst Meeting in late October, where we will provide an update on our strategy, business insights, and financial outlook.
 Assistant:

Chosen response:
hewlett packard enterprise q3 adj earnings per share $0.47.
q3 revenue $6.9 billion versus refinitiv ibes estimate of $6.93 billion.
q3 non-gaap earnings per share $0.47.
sees q4 gaap earnings per share $0.14 to $0.22.
sees q4 non-gaap earnings per share $0.44 to $0.52.
reinstating share repurchase program and targeting share repurchases of up to $250 million in q4 fy21.
raises fy gaap diluted net earnings per share outlook to $0.80 to $0.88 and non-gaap diluted net earnings per share outlook to $1.88 to $1.96.


Prompt:
Human: Moreover, this quarter was once again included in certain disclosure prompted by COVID 19 business changes, which we will maintain as business operations further normalize.
They will be joined by other senior management during the Q&A portion of the call.
As we sit today, more than 18 months into the pandemic, the advantages of our focus on top tier tech and media markets on building and reinvesting in a state-of-the-art portfolio and are maintaining a strong balance sheet, have never been more evident.
In the 3rd quarter, we had a robust same property NOI growth as our office and studio tenants continue to pay rent and repay deferred rent.
We had another solid quarter of leasing activity on positive rent spreads.
Our stabilized lease percentage remains over 92% for making good progress on our remaining 2021 and our 2022 expirations.
We also successfully executed on multiple city related acquisitions all in spite of the pandemic headwinds.
There is definitely growing momentum around our tenants return to the office.
Some have already reiterated at least a portion of their employees over the last few months, while others are working toward either a year-end or early 2022 return.
The combination of record funding and fundraising by VCs, media can be spending of over $100 billion on content and significant national health and research spending has led to continued growth in hiring within the industries that drive demand for our assets, primarily tech media gaming and life science.
Across our markets, office leasing activity was notably elevated or showed healthy indicators such as a shift away from short-term renewals to new and expansion deals.
Sublease space contracted almost without exception as a result of tenants, both pulling listings or backfilling space.
We also saw a positive absorption around many of our metro areas in submarkets, and in most cases, for the first time since the pandemics onset.
We're obviously very focused on maintaining our leasing momentum as the office market recovers, which Mark is going to discuss further in a moment.
We also made several major announcements around the successful growth of our studio platform in the 3rd quarter.
We unveiled plans for Sunset Glenoaks, which will be the first purpose-built studio in Los Angeles area in more than 20 years growing our studio footprint in that market to a 1.5 million square feet in two stages.
We purchase a major site north of London to build Sunset Waltham Cross which will be a large scale purpose-built facility with 15 to 25 new stages and we expanded our services platform with the purchase of the transportation and logistics companies, Star Waggons and Zio Studio Services, enhancing our existing clients experience, while capturing significant additional production-related revenue.
Our combined expertise with Blackstone, across transactions operations and development, is second to none and we're poised to deliver and operate purpose-built next-generation studios that will attract premium productions for years to come and create exceptional value for our shareholders.
Finally earlier this month we received our GRESB 2021 real estate assessment results.
In addition to earning GRESB Green Star, the highest 5-star ratings for the 3rd year in a row, Hudson Pacific was named an office sector leader for the America's ranking first among the 22 companies in that category in terms of our development program.
In addition, we earned an A and ranked first among our US office peers in terms of public disclosure.
I'm incredibly proud of these results as it showcases both the dedication and the ingenuity of our team as well as the commitment to being a leader on ESG issues.
Our rent collections remained strong at 99% for our portfolio overall and 100% for office and studio tenants.
We've collected 100% of contractually deferred rents due to date and 57% of all contractual deferrals physical occupancy at our properties has stayed consistent over the last several months at around 25 to percent, while as Victor noted activity around a return to the office is accelerating across our markets.
Our current office leasing pipeline that is deals and leases, LOI's and proposals stands at 1.8 million square feet, up over 20% quarter-over-quarter and also 20% above our long-term average.
We signed 318,000 square feet of new and renewal office leases in the third quarter at 8.3% and 5.1% GAAP and cash rent spreads, with the bulk of that activity, about 65% in the Peninsula and Valley.
That brings us to 1.4 million square feet of new and renewal deals year-to-date.
Our weighted average trailing 12 months, net effective rents are up about 4% year-over-year, while our weighted average trailing 12 month lease term for new and renewal deals held steady at 5 years.
Despite facing about 360,000 square feet of expirations heading in the last quarter our stabilized and in-service office lease percentages remained essentially stable at 92.1% and 91.2% respectively.
Recall that the addition of Harlow to the in-service portfolio as of the second quarter, accounts for more than 30 of the 50 basis point drop in lease percentage since first quarter Harlow is 50% leased and we are in leases with the tenant for the balance of the building.
We only have 1.9% of our ABR in terms of our 2021 expirations remaining and those leases are over 20% below market.
With strong activity on our fourth quarter expirations and existing vacancy, we remain confident our year-end in service leased percentage will remain essentially in line with third quarter levels.
We also already have 30% percent coverage on our 2022 expirations.
We continue to work on our pipeline of world-class office and studio development projects.
In terms of office, we're on track to deliver our 584,000 square foot, One Westside office, adaptive reuse project in West Los Angeles to Google for their tenant improvements in the first quarter of next year.
We plan to close on the podium for our 530,000 square foot Washington 1,000 office development in Seattle, later in the fourth quarter.
We are in dialog with potential tenants and have 12 months post closing to finalize our construction timeline.
We also recently announced plans for Burrard exchange, a 450,000 square foot, hybrid mass timber building on the Bentall Centre campus in Vancouver.
We've submitted a development permit application and construction could start in early 2023.
On the studio side, we plan to begin construction for our 241,000 square foot, Sunset Glenoaks Studios Development in Sun Valley before year-end, with delivery anticipated in the third quarter of 2023.
In the third quarter, we generated FFO excluding specified items $0.50 per diluted share compared to $0.43 per diluted share a year ago.
Third quarter specified items consisting of transaction-related expenses of $6.3 million or $0.04 per diluted share.
One-time debt extinguishment costs of $3.2 million or $0.02 per diluted share and one-time prior period supplemental property tax reimbursement related to Sunset Las Palmas of $1.3 million or $0.01 per diluted share, compared to transaction related expenses of $0.2 million or $0.00 per diluted share and one-time debt extinguishment costs of $2.7 million or $0.02 per diluted share a year ago.
Third quarter NOI at our 45 consolidated same-store office properties increased 5.1% on a GAAP basis and increased 10.8% on a cash basis.
For our three same-store studio properties, NOI increased 49.8% on a GAAP basis and 45.5% on a cash basis.
Adjusting for the one-time prior period property tax reimbursement, the NOI would have increased by 27.9% on a GAAP basis and 22.8% on a cash basis.
Turning to the balance sheet.
At the end of the third quarter, we had approximately $0.6 billion in liquidity with no material maturities until 2023 and average loan term of 4.6 years.
In August we refinanced the mortgage loan secured by our Hollywood media portfolio, accessing additional principal, while lowering the interest rate and extending the term, we replaced the prior $900 million loan bearing LIBOR plus 2.15% per annum, with a $1.1 billion loan bearing LIBOR plus 1.17% per annum.
The new loan has a 2-year term with 3 one-year extension options and is non-recourse except as to customary carve outs.
We also purchased $209.8 million of the new loan which bears interest at a weighted average rate of LIBOR plus 1.55% per annum.
Our Pro Rata net debt after this refinancing remained unchanged at $351 million.
In terms of our three studio related acquisitions completed during the quarter the Sunset Waltham Cross site in the U.K and Star Waggons and Zio Studio Services operating businesses.
we funded each with a combination of cash on hand and draws from our revolving credit facility.
On account of these three transactions and other corporate activity at the end of the third quarter, we have drawn $300 million under our revolving credit facility, leaving 300 million of undrawn capacity.
Third quarter AFFO grew significantly compared to the prior year, increasing by $10.1 million or over 21%.
By comparison, FFO increased by 9% or $6 million during the same period.
Again, this positive AFFO trend reflects the significant impact of normalizing lease costs and cash rent commencements on major leases, following the burn off of free rent.
Now I'll turn to guidance.
As always, our guidance excludes the impact of unannounced or speculative acquisitions, dispositions financings and capital market activity.
In addition, I'll remind everyone of potential COVID related impacts to our guidance including variance and evolving governmental mandates.
Clearly, uncertainty surrounding the pandemic makes projecting the remainder of the year difficult and we assume our guidance will be treated with a high degree of caution.
As noted many companies are still determining return to work requirements and the impact on space needs, because of this, for example, our guidance does not assume a material increase in parking and other related variable income.
Overall, we assume full occupancy and related revenues will not return to pre-COVID condition levels in 2021.
That said, we are narrowing full year and providing fourth quarter 2021 guidance in the range of $1.95 to $1.99 per diluted share, excluding specified items.
And $0.48 to $0.50 per diluted share excluding specified items respectively.
There are no specified items in connection with the fourth quarter guidance.
I'll point out that we incurred $1.4 million of prior period supplemental property tax expenses, as noted in the first and second quarter SEC filings.
Nearly all of which was offset by the prior period supplemental property tax reimbursement of $1.3 million received during the third quarter.
So we're not identifying as specified item related to prior period taxes for the purposes of 2021 full-year guidance.
We appreciate your continued support.
Stay healthy and safe and look forward to updating you next quarter.
And operator, with that, let's open the line for any questions.
 Assistant:

Chosen response:
compname says q3 ffo per share $0.50 excluding items.
sees ffo $1.95 to $1.99 per diluted share (excluding specified items) for full-year .
q3 ffo per share $0.50 excluding items.
compname reports q3 ffo per share $0.50 excluding items.
sees $1.95 to $1.99 per diluted share (excluding specified items) for full-year.


Prompt:
Human: Joining me are Jeff Jones, our president and chief executive officer; and Tony Bowen, our chief financial officer.
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'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 '22.
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% to 6%.
Finally, Tony will review our financials, fiscal '22 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 15 last year versus only May 17 this year, our quarter ending September 30 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 '22, we are 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 have 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 earnings per share growth and returning capital to shareholders.
Since 2016, we've 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 1/4 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% to 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 have proven we can hold and grow market share, which we've done in four of the last five years.
We have 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 1 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% to 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 of 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 have 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 1 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 1 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 health.
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.
We know there are 35 million underbanked consumers in the United States alone, a group we view as financially vulnerable and financially coping.
Of this population, 8 million are current Block customers.
They trust us with their most intimate financial details, use our existing products and have an unmet need for additional banking.
Thus, we're uniquely positioned as compared to other competitors who are starting from scratch to build brand awareness and trust.
We've launched the beta product internally and plan to launch nationally in the early part of next tax season with our marketing efforts focused on existing DIY clients.
As you would expect, we will leverage our interactions to incentivize clients to set up direct deposits.
We'll continue to roll out features throughout the year and look forward to sharing more once it has officially launched.
In summary, with respect to revenue growth, we have many levers working in tandem to reach our annual 3% to 6% growth target.
Additionally, we're able to leverage our fixed cost structure, so that EBITDA will grow faster than revenue.
It's also important to note that we're funding our investments by reducing expenses across the company as part of our Fund the Future initiative.
I want to emphasize 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 enabled us to achieve our long-term financial goals and benefit all our stakeholders.
Today, I will 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.
And today, we are reporting our first fiscal quarter of 2022, which ends September 30.
As Jeff shared, given that the tax season extended through July 15 last year versus only May 17 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 pre-tax 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% to 18% range for the full fiscal year as we realize the benefits of certain discrete items later in fiscal '22.
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 1/4 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 '22 outlook.
Regarding discontinued operations, there were no changes to accrued contingent liabilities related to Sand Canyon during the quarter.
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.
But 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 cost by refinancing our debt and line of credit.
These achievements have translated into adjusted earnings per share growth of 78%, and that's even after normalizing fiscal year '21 for the tax season extension.
We've derisked the business and created growth levers that didn't exist in the past.
Yet our trading multiple is compressed over this time period despite the broader market rally.
H&R Block is on solid footing and will continue to drive earnings per share growth through disciplined capital allocation and core business performance.
And as Jeff discussed earlier, we are creating additional upside opportunity with Block Horizons.
I look forward to all that lies ahead.
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.
 Assistant:

Chosen response:
h&r block reiterates fiscal year financial outlook.
qtrly adjusted loss per share$0.78.


Prompt:
Human: On the call today are Jeff Jones, our President and CEO; and Tony Bowen, our CFO.
Some of the figures that we'll discuss today are presented on a non-GAAP basis.
Such statements are based on current information and management's expectations as of this date and are not guarantees of future performance.
As such, our actual outcomes and results could differ materially.
You can learn more about these risks in our Form 10-K for fiscal 2019 and our other SEC filings.
During Q&A, we ask that participants limit themselves to one question with a follow-up after which they may choose to jump back into the queue.
When we talked with you last quarter, we outlined our strategic objectives to digitally enable every aspect of our business to deliver our expertise to consumers in new and exciting ways, and we're seeing some positive results.
We're focused on serving Assisted clients with higher quality and better value and are on track to achieve our goal of holding share in the category.
We are seeing stronger demand for our Virtual product Tax Pro Go.
We continue to grow clients in DIY.
Client satisfaction scores are up across all products following a year in which we saw unprecedented growth.
And we continue to make strides in small business including another strong quarter from Wave.
While I'm pleased with these early results we identified a couple of areas to improve DIY performance in the second half, that I will comment on later.
First, I'll provide our perspective on what we've seen in the tax industry.
Then I'll review our tax season to date results, discuss our expectations for the second half of the season and provide an update on small business.
Finally, Tony will review our third quarter results and offer additional thoughts on our financial outlook for the fiscal year.
Starting with the industry.
Overall trends in filings are consistent with our expectations.
At this point the increase in DIY mix is at levels lower than last year.
So while there was speculation by some that the second year of the new tax law would cause more Assisted filers to switch to DIY, we aren't seeing any evidence of this in either our data or the industries and the change has actually moderated.
Turning to our performance, I'd like to spend some time providing an update on our progress in each of the key areas we outlined last quarter.
We're focused on leading the industry with upfront transparent pricing, enhancing our standard operating procedures and digitizing how tax pros serve clients through Work Center.
In pricing, we're bringing upfront and transparent to life in an even stronger way this year through a new price estimator tool to help our tax pros provide clients a better estimate at the outset.
Upfront transparent pricing is the key element of our recently launched No Surprise Guarantee, which also provides three audit assistance and a midyear tax check-in for clients across all of our products.
We've also improved Work Center which digitizes how our tax pros serve and communicate with clients, providing them with a superior experience.
We're seeing results from these efforts with higher retention for both new and prior clients as well as better conversions.
Client survey scores increased 3 points for price for value and 2 points for overall quality, considering the 9 point improvement in these scores last season, these results are tremendous.
This has led to a significant improvement in client trajectory compared to this time last year.
With a lot of season left, we're confident that we will achieve our goal of holding share in the Assisted category.
Tax Sseason '20 marks the second year of Tax Pro Go.
An innovative product that provides clients with access to be unparalleled expertise of our tax pros from the convenience of their mobile device.
This year we redesigned the client experience to improve the product flow, simplified pricing, and made it easier to connect with our expert tax pros.
We're also highlighting the advantages of this product in our marketing, which is driving an increase in Tax Pro Go demand and mobile usage.
We're seeing the results of these efforts with improvements in key client service metrics and strong client growth.
And while we're still in the early stages of this product, this continued growth gives us confidence that we can satisfy unmet needs and attract new clients to our brand.
In DIY, we've maintained our challenger strategy of investing to improve the product and user experience, pricing at a level that is competitive and provides value to clients, and communicating this value to grow awareness in compelled DIY consumers to switch to H&R Block.
We continue to utilize AI and machine learning to improve ease, speed and personalization in our product.
We've also increased the prominence of Online Assist, which provides DIY clients with on-demand access to a tax pro through chat, phone and screen sharing.
This product is priced competitively and is supported by the unmatched expertise of our extensive tax pro network.
And our service levels have been tremendous this season, with most clients able to access the Tax Pro within one minute.
Collectively, these efforts have led to strong results in our net promoter scores increasing over 3 points.
This is a significant -- this is significant considering the 9 point increase we saw last year.
And our product has received a number of third-party accolades, including number one in thestreet.com's ranking of the best online tax software and NerdWallet's best software for simple returns.
While we're excited about the progress we're making in our product and in the value we're delivering for our clients, we believe we can improve both our volume and net average charge result in the second half and have already taken the appropriate steps.
First, we made changes to optimize our marketing investment to drive greater new client demand.
And second, we have corrected an issue with a key online page that didn't allow clients to choose a different product, resulting in a loss of monetization.
Since we have remedied the issue we have seen a 4% improvement in net average charge in DIY.
We're confident that we've made the appropriate changes and believe that our second half will be stronger.
We expect to end the year growing DIY clients in line with the category.
Finally, in small business, starting with tax.
We've highlighted our expertise through new tools and a redesigned experience.
We're beginning to see traction from these new initiatives but believe it will take some time to increase awareness of our small business expertise.
With Wave, we continue to innovate to simplify the financial lives of small business owners.
During the quarter, Wave continued to make progress on its strategic roadmap in a number of areas.
We're seeing demand grow for Wave advisors, where clients can get personalized help from our in-house bookkeepers.
In payroll, we're adding full service capabilities in more states to automatically file clients state and federal payroll taxes.
And in payments, we've made key changes to streamline the client onboarding process to assist clients and getting the right product and to gather key information earlier in the process.
All of these improvements are fueling Wave's impressive performance which continued this quarter with year-over-year revenue growth of over 40%.
To summarize, we're on track to deliver our financial outlook for the year by digitally enabling our business, driving improved client trajectory in Assisted, innovating in Virtual, enhancing our award winning DIY product and expanding in small business.
We have clear visibility in the areas for improvement and are focused on executing in the second half to deliver stronger results by seasons end.
With that, I'll now hand the call over to Tony.
Before I get into the details of our results, as a reminder, we typically report a loss during the fiscal third quarter due to the seasonality of our tax business.
Therefore, third quarter results are not representative of our full year performance.
Starting with revenues, we saw a year-over-year growth of $51 million or 11% to $519 million.
This increase was primarily due to higher tax preparation fees due to volume growth in Assisted and DIY and the acquisition of just over 200 franchise offices this year which continues to be a good use of capital.
The volume growth also resulted in higher royalties as well as increased revenues related to our Tax Plus products.
In addition to increases in our tax business, Wave contributed $11 million, which represents a year-over-year increase of more than 40%.
Total operating expenses increased $65 million or 11% to $672 million.
The majority of this increase was anticipated as it was driven by Wave, increased compensation due to higher Assisted volumes, and planned investments related to our technology roadmap.
We also recorded $19 million of incremental marketing expense during the quarter that was entirely due to a pull forward of recognition from Q4 to Q3, and was not due to an increase in spend.
Because of this timing shift, we expect marketing expense to be lower in Q4.
I'll discuss our full year outlook including expectations for operating expenses later in the call.
Interest expense was $26 million, which reflects an increase from the prior year due to higher draws on our line of credit.
The changes in revenue and expenses resulted in an increase in pre-tax loss from continuing operations of $18 million.
GAAP loss per share increased $0.08 to $0.66.
As we shared last quarter, we are now reporting GAAP and non-GAAP EPS.
Adjusted loss per share increased $0.07 to $0.59 driven by the increase in pre-tax loss and lower shares outstanding, partially offset by an increased tax benefit.
As a reminder, while beneficial on a full year basis, the lower share count negatively impacts earnings per share in quarters in which we report a loss.
In discontinued operations there were no changes to accrued contingent liabilities related to Sand Canyon during the quarter.
Regarding capital, our priorities remain unchanged.
At the top of list is maintaining adequate liquidity for our operational needs to account for our seasonality.
We came into this year with a strong financial position after generating over $500 million of free cash flow in fiscal '19.
We then make strategic investments back in to the business that we believe deliver value to our clients, ultimately benefiting our shareholders.
Making prudent investments to drive sustainable growth remains a key element of our capital allocation.
Last, we will deploy excess capital through quarterly dividends and share repurchases.
We've increased our quarterly dividend each of the last four years, resulting in a 30% increase over that time.
Regarding share repurchases in the third quarter, we repurchased 2.8 million shares for $66 million at an average price of $23.35.
Year-to-date, we have repurchased a total of 10.1 million shares for $247 million at an average price of $24.36.
Going forward, we will continue to be opportunistic in our share repurchase approach.
I'd now like to provide thoughts on our financial outlook for the remainder of the year.
Starting with the tax industry, we continue to expect overall return growth of around 1%, with Assisted volume flat to slightly up and DIY growing around 3%.
This is consistent with the trends we've seen over the last several years.
For H&R Block, as Jeff shared, we expect growth in DIY clients in line with the category, and an improvement in client trajectory in Assisted as we hold market share in that category.
Combined this would be the third consecutive year of overall client growth.
Regarding pricing, in Assisted we expect net average charge to remain consistent with last year, following a year in which we reset price.
In DIY, during the first half of the season, we saw a decrease in net average charge, due to the product issue that Jeff discussed.
We've remedied this and combined with anticipated growth in Online Assist, we expect mix to improve in the second half, resulting in net average charge similar to last year.
Consistent with the outlook we provided last quarter, we expect these client growth and net average charge expectations along with Wave to result in revenue growth of 1.5% to 3.5%.
For the full year, we expect to grow revenue faster than EBITDA resulting in a decline in EBITDA margin compared to fiscal '19.
This year, we realized approximately $15 million of unplanned one-time expenses -- one-time expense increases, due to legal cost and Refund Advance fees, which will also impact our margin.
Despite these expense increases, we continue to expect EBITDA margin to be within our previously provided range of 24% to 26%.
Given our year-to-date results, this full year outlook infers a significant increase in EBITDA in the fourth quarter.
This will be achieved through continued revenue growth as well as a reduction of certain expenses in the fourth quarter related to the timing of marketing expense recognition that I mentioned earlier and lower compensation related to accrued bonuses.
As we indicated last quarter, we expect the tax rate of 19% to 21% due to favorable settlements with tax authorities during the second quarter.
The rest of our financial outlook also remains unchanged with total depreciation and amortization of $165 million to $175 million, of which $70 million to $80 million will be amortization of intangibles related to acquisitions.
This amortization expense reflects both Wave and tax office acquisitions and is excluded from earnings per share for non-GAAP reporting.
We continue to expect interest expense of $90 million to $100 million and capital expenditures of $70 million to $80 million.
To conclude, I'm confident in our plans for the second half of the tax season, and we are on track to deliver our financial objectives for the fiscal year.
Their dedication to providing help and inspiring confidence in our clients and communities is what makes H&R Block the great company it is today.
Overall, I'm excited about the progress we're making toward our long-term goals and I'm confident we're taking the steps necessary to deliver on our objectives for the fiscal year.
I look forward to sharing more with you when we report our full-year result in June.
 Assistant:

Chosen response:
compname reports q3 adjusted loss per share $0.59.
q3 adjusted loss per share $0.59 from continuing operations.
q3 loss per share $0.66 from continuing operations.
q3 revenue $519 million versus refinitiv ibes estimate of $485.5 million.


Prompt:
Human: On the call today are Jeff Jones, our president and CEO; and Tony Bowen, our CFO.
Some of these figures we'll discuss today are presented on a non-GAAP basis.
Such statements are based on current information and management's expectations as of this date and are not guarantees of future performance.
As a result, our actual outcomes and results could differ materially.
You can learn more about these risks in our Form 10-K and our other SEC.
During Q&A, we ask that participants limit themselves to one question with a follow-up, after which they may choose to jump back into the queue.
Today I'm excited to share our outstanding results.
I'm proud of what our team has accomplished, including progress on our Block Horizons strategy and a very strong tax season.
Our results show that our multi-year efforts to improve client trajectory are gaining traction.
We grew clients and achieved our largest overall and the largest assisted market share gains in over a decade.
We drove significant growth in DIY revenue and continued strong growth at Wave.
We increased the digitization of the business, advanced how we serve small businesses at Block Advisors and made meaningful progress in building our new mobile banking product.
Today, we also announced another increase in our quarterly dividend.
Our fifth in the past six years, further demonstrating the confidence we have in both our financial strength and outlook for continued long-term growth.
With that backdrop, let me provide more detail on what we've achieved with Block Horizons since our Investor Day in December, followed by additional color on the 2021 tax season Tony will then review our full-year financials and capital structure, discuss our fiscal year change, and provide thoughts on our fiscal year '22 outlook.
Since our Investor Day in December where we laid out our Block Horizons strategy, we've had our foot on the gas to execute across our three strategic imperatives: small business; financial products; and Block Experience.
Small business and financial products are categories where we have a right to compete and advantages to help us win.
Block Experience represents our modernized approach to tax.
I'll start with an update on each of these key areas.
In small business, we've gained traction on all elements of our strategy.
First, we expanded our reach to more small business owners by improving our client experience in tax and amplifying our messaging.
In a few short months, we certified over 25,000 tax professionals to serve small businesses, relaunched the Block Advisors brand, and built a new Block Advisors product in DIY, which includes unlimited expert help.
Our Block Advisors marketing campaign, which launched in mid-February, resonated with customers as it drove awareness of our ability to serve small business owners' unique needs and reinforced our expertise as a trusted year-round partner for this critical customer segment.
Second, we made progress in bookkeeping and payroll services, laying the foundation for future growth.
And third, Wave continued exceptional growth of over 35% for the year, while also expanding Wave Money as the center of the experience.
Turning to financial products, we've begun our journey to provide additional value to underbanked customers by offering a mobile banking alternative to meet their unique needs.
We've completed the design phase and are now building the beta version of our product, which we expect to launch by calendar year-end.
Regarding Block Experience, we're continuing to infuse human help into our DIY offering and transform the assisted experience through digital tools as we meet our customers however and wherever they wish to be served.
We're already seeing positive signs in virtual adoption by our assisted customers and we also saw a great uptake of DIY clients requesting human help.
I'll share more on this in a moment as I go through tax season details.
The theme of this year's tax season for H&R Block can be summed up in one word: growth.
To provide context on the strength of our results this year, I'd like to first frame the industry dynamics, particularly given this year's unique considerations.
This season included a delayed start from the IRS, a two additional rounds of related stimulus payments, mid-season changes to tax laws, added new policies regarding unemployment and recovery rebate credits, and finally, a one-month delay in the filing deadline to May 17, all in year two of the pandemic.
The industry in total saw an increase in filings when compared to last year's completed season, that is to the filing deadlines in each year.
There was also a mix shift from DIY to assisted, representing a reversal of prior-year trends.
As a reminder, the category also showed strength in 2020 as assisted returns were essentially flat in a year when the operating environment was far from normal.
The resilience and sustainability of the assisted category, even amid the pandemic reflects our conviction and its stability over time.
The bottom line continues to be that most Americans want personal help with their taxes and nobody is better-positioned than we are in delivering that expert help.
With the industry backdrop as an important context, I'd like to provide more detail on our results.
To clarify, when making comparisons, I will discuss the full tax season in 2021 versus the full tax season in 2020, despite the different filing deadlines.
Later, Tony will share more about our fiscal-year results and how these were impacted by the extension.
We saw growth in overall clients, total share, assisted share, and strong revenue performance in DIY.
We estimate that we gained approximately 30 basis points of total market share when compared to last year's completed tax season.
This is our best result in over a decade.
In our assisted business, we grew clients by over 700,000 or approximately 7%, in estimate, we gained 70 basis points of market share.
Again, the best in over 10 years.
Based on these results and the continued positive feedback we hear from customers, we know that our work to improve value, quality, and digital capabilities are helping consumers rediscover a new H&R Block.
We were the go-to source of help for many individuals who haven't normally been filing, but who this year had questions about unemployment or receiving the recovery rebate credit.
Though some of these filings may be one-time in nature, we're committed to doing all we can to retain these additional clients.
Importantly, our client satisfaction scores remained strong and our new client scores improved with high marks for being cared for, price for service, and intent to return.
With these dynamics, we held pricing flat in assisted.
Our net average charge was down about 2% due entirely to mix as the majority of growth in new clients came from filers at lower price points.
While these new clients caused a decrease in our average charge, they were additive to revenue.
Our share gains show that our value is being recognized in the marketplace, giving us confidence to consider modest price increases.
Moving to our DIY business, revenue grew nearly 20% due to an increase in the net average charge related to improved mix and pricing actions.
Also, significantly more clients chose to add human help, resulting in the second year in a row of tax pro review growing more than 50%.
We saw a slight share loss as we focused on more valuable returns, evidenced by our improved mix and an increase in NAC of over 20%.
The increasing use of human help by our DIY customers, along with the use of digital tools by our assisted customers demonstrates the importance of our Block Experience efforts to blend digital capabilities with human expertise and care.
We're confident we're on the right path to serving consumers in a modern way.
As a reminder, digital does not mean DIY and the increasing use of digital capabilities in the assisted business does not reduce our NAC.
I'll now move on to small business, which includes our Block Advisors and Wave brands.
We grew assisted small business filers by 4%.
And as I previously shared, Wave continues to produce strong results as we see increases in customers new to the brand, overall payments volume, and the use of payroll services.
This all led to revenue growth of over 35%.
In addition, our strategy of putting Wave Money at the core of our offering is picking up steam as Wave Money deposits have grown at a pace of 40% per month for the past six months.
In summary, our team provided help and inspired confidence for millions of consumers and small business owners this season.
We made tremendous progress in our first year of Block Horizons, running technology and digital tools with human expertise in tax to help achieve our largest market share gains in over a decade.
We improved our offerings in small business, drove significant growth of Wave, and are making progress on our new mobile banking platform.
We are confident about the journey we're on and I'm very excited about our future.
Today, I'll provide color on our full fiscal-year results, discuss the impact of the filing extension beyond our fiscal year, recap our dividend and capital allocation strategy, provide details on our new line of credit, and share more about our fiscal year-end change.
I'll also provide some more context about our baseline earnings and our outlook for fiscal '22.
The extension of the U.S. federal tax filing deadline to May 17 led to the tax season concluding beyond fiscal '21, causing a timing difference in our financial results.
If we were able to include these amounts in our fiscal 2021 results, we would have significantly surpassed the high end of our previous outlook for both revenue and earnings.
tax return volumes due to the extension of last tax season into fiscal '21.
We also achieved improved monetization within DIY and increase in Emerald Card revenues related to federal stimulus payments, and strong growth from Wave.
Regarding expenses, due to strong fiscal management, we outperformed our savings target while still investing appropriately in our Block Horizons strategic imperatives.
Total operating expenses were $2.6 billion, which increased by $82 million or 3% due to an increase in variable labor, which is partially offset by prior-year impairment charges, lower bank partner fees, and travel-related costs.
Interest expense increased $11 million, which reflects the precautionary draw on our line of credit at the end of last fiscal year, partially offset by a lower interest rate on our debt issuance earlier in the fiscal year.
As a result, pre-tax income was $669 million, compared to a pre-tax loss of $3 million in the prior year.
Our effective tax rate was just 12%, driven by favorable tax planning we implemented during the year.
Diluted earnings per share from continuing operations increased from $0.03 to $3.11, while adjusted earnings per share from continuing operations increased from $0.84 to $3.39.
Regarding discontinued operations, there were no changes to accrued contingent liabilities related to Sand Canyon during the quarter.
Moving to capital allocation, our strategy demonstrates current strength and confidence in our future, supported by strong free cash flow.
Our priorities remain unchanged: first, maintain adequate liquidity; next, invest in our business; and then support the dividend and opportunistically repurchase shares.
Due to the health of our business and our outlook, we announced today an increase in our quarterly dividend of 4% to $0.27 per share.
This marks the fifth time we've raised the dividend in six years, resulting in a 35% total increase over that time.
Regarding share repurchases, we bought a total of $38 million in the fourth quarter.
For the full year, we repurchased $108 million at an average price of $16.29, allowing us to retire 11.6 million shares or 6% of our float.
Approximately $564 million remains under our share repurchase authorization, which expires in June of 2022.
I'm also pleased to announce that we just amended our line of credit to a new five-year facility.
We lowered the capacity to $1.5 billion, which is more appropriate for our business needs and result in lower costs.
We were able to renew at favorable rates and reduce our expected run-rate costs by approximately $3 million per year.
Finally, we aligned our covenants to our new fiscal calendar, which I'll share more about in a moment.
This is yet another sign of our financial strength, which provides a solid foundation for growth.
Switching gears, I'd like to talk about our decision to change the fiscal year.
Given the lack of comparability in our results over the past couple of years due to tax season extensions, we felt it was appropriate to examine our fiscal year-end.
After this review, we have made the decision to move from an April year-end to a junior -- June year-end effective immediately.
The change allows for better alignment of complete tax seasons in comparable fiscal periods and other related benefits.
We plan to file a report on Form 10-QT for the transition month of May and June later this summer.
Fiscal 2022 will begin on July 1 and end on June 30, 2022, with our first-quarter results through September 30 reported in early November.
Finally, I'd like to discuss our outlook for fiscal '22 based on our new June year-end.
Before doing so, we know investors are seeking to better understand baseline results and thought it would be helpful to provide additional context for fiscal '21, including the change to the fiscal year.
To reset to the new fiscal year, we take our current fiscal year '21 results and remove May and June from 2020 at the beginning of the year, and then add May and June from 2021.
We then normalize the fiscal '21 for two things.
First, given tax season 2020 concluded on July 15, we are backing out the activity related to tax season that carried into the new fiscal '21.
Second, we remove one-time impacts related to the pandemic.
These primarily consisted of incremental Emerald Card revenue related to stimulus payment loads and one-time expenses for associated benefits and supplies, both related to the pandemic.
This normalized view of fiscal '21 ending June 30 would result in an estimated revenue of $3.25 billion and EBITDA of $760 million.
Turning now to fiscal '22, we considered a number of variables both for the tax industry and for us.
These include the potential industry loss of one-time filers who were motivated to file this tax -- past tax season for the recovery rebate credit, changes in unemployment-related benefits, and the expansion of the child tax credit.
After considering these impacts, we expect industry volumes to be flat to slightly down in '22 and anticipate a similar trend for our volume.
As such, we now expect fiscal '22 revenue to be in the range of $3.25 billion to $3.35 billion.
EBITDA is expected to be in the range of $765 million to $815 million.
Both of these are an improvement to the normalized fiscal year '21 results I shared with EBITDA growing faster than revenue.
Regarding our outlook, the effective tax rate is anticipated to be between 16% and 18%, depreciation and amortization is anticipated to be between $150 million and 160 million, and interest expense is anticipated to be between $90 million and $100 million.
Our projected results demonstrate solid growth despite comparing against very strong performance last year and are a sign that we have the right strategy under way.
In summary, I am very pleased with both our tremendous performance this season and the trends we are seeing in the business.
We are committed to our financial principles and are on a path to long-term sustainable growth.
Before we begin Q&A.
I also want to reiterate how pleased I am about this year's results and the progress we've made, as well as our confidence in the Block Horizons strategy going forward.
The last two years have been incredibly complex and disruptive, and this success is made possible by our hardworking associates, franchisees, and tax pros, who once again demonstrated how H&R Block inspires confidence in our clients and communities.
As we open the line for Q&A, I want to make a note of transition in our Investor Relations role.
Colby Brown has been leading these efforts for more than eight years and has done a tremendous job.
We recognize the importance of supporting our investment community.
And as Colby transitions out of the IR role, we have brought on Michaella Gallina, whose sole focus will be serving analysts and investors.
Michaella has led IR at a number of companies and was also an analyst on the buy side.
 Assistant:

Chosen response: increases quarterly dividend by 4 percent to $0.27per share.