H&R Block will acquire Wave Financial for $405 million in cash, the tax services tcompany said this week.  Wave, based in Toronto, Ont., markets cloud-based small business software and has targeted the growing market of free-lance employees.

Block said  the deal will close “in a few months.” Block said Wave is expected to add $40 million to $45 million in revenue for its year ending April 30, 2020. That is based on Block's owning the cloud-software company for nine months in fiscal 2020.  Block said it will absorb Wave’s loss and related transaction costs of $25 million to $35 million. “We do not expect Wave to be profitable in the near to medium term,” CFO Tony Bowen said during this week's earnings webcast for financial results for fiscal 2019.

Wave generates revenue by providing payment processing, payroll services, and bookkeeping services. It offers a free suite of products featuring accounting software, invoicing and receipt scanning. There is also per-use pricing for credit-carding processing of 2.9 percent, plus 30 cents per transaction and 1 percent for ACH transactions.

There is a $35 monthly base fee for payroll, plus $4 per employee and $4 per independent contract paid in the tax service states of California, Florida, New York, Texas, Illinois, and Washington. For the 44 self-service states, there is a $20-per-month fee, along with the $4 charge per employee and independent contractor.

Last modified on Thursday, 13 June 2019
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