Thus, expenses for seasonal staff (% of revenue) may decrease from 23.4% in 2022 to 20% by 2027. Therefore, I conservatively assume that the company will be able to start reducing the number of seasonal staff by 5% between 20. Forecastingįirstly, I don't think we will see a reduction in personnel costs in the next 2 years because the technology is still evolving and it will take a certain amount of time to implement it. Predicting the impact of the technological revolution on a real business is not an easy task, so I will rely on the experience of existing companies, as well as on expert forecasts and my own judgments. Next, I'd like to make my own assumptions about how much seasonal work cuts we might see in the future and what impact this will have on the company's financials and stock valuation in the coming years. I believe that the introduction and active use of AI can significantly increase productivity, thus, the company can reduce the number of seasonal associates that need to be hired during the business season, which can lead to a significant reduction in operating costs and increase business profitability. However, the answer to the question of whether AI can replace tax personnel is still ambiguous, so I would like to give an example of a survey on this topic from one of the AI professionals on his LinkedIn page, where we can see that most people agree that AI is technically capable of replacing humans in the coming years. Staff costs by type (Company's information) You can see the details in the chart below. At the end of 2022 (fiscal), the company hired 69,900 seasonal associates, while the number of regular full time associates was 3,800. At the heart of field wages is the need to hire seasonal associates to help manage the increased volume of work as the company's business is seasonal. If we look at personnel costs in more detail, we will see that the largest share of expenses falls on field wages (23.4% of revenue), while expenses on other wages and benefits (% of revenue) are 8.2% and 6.0 %, respectively. expenses by category (Company's information) So, according to the results of 2021 (fiscal) and 2022 (fiscal), labor costs (% of revenue) amounted to 36.3% and 37.6%, respectively. If we look at the structure of a company's operating expenses, we can see that salaries and bonuses are the largest part of operating expenses. How AI implementation can increase profitability The company was founded in 1955 and operates in the US, Canada and Australia markets. The company operates in both online and offline segments. H&R Block prepares tax returns for its clients. Secondly, I think that increasing the convenience and efficiency of online interaction with companies through automatic data collection and time savings will help users to more quickly abandon the company's offices, which will help reduce rental costs. First, I believe that the ability to automate routine tasks through the introduction of AI will allow the company to significantly reduce the number of seasonal associates, which can help increase the operating profitability of the business. In my personal opinion, the introduction of AI can not only significantly increase the productivity of company employees, but also lead to a faster change in consumer behavior. In my article, I would like to focus on how the development of AI can help increase business profitability by reducing operating costs in the coming years. Despite the fact that the company's shares are currently under pressure, I believe that we now have an attractive entry point for opening long positions. In my personal opinion, the active development of AI can have a significant impact on a huge number of companies, one of which is H&R Block ( NYSE: HRB).
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