H&R BLOCK Q3 FY25 Financial Results Conference Call Q3 FY25 Financial Results Conference Call May 7, 2025 H&R BLOCK Q3 FY25 Financial Results Conference Call Jordyn Eskijian Program Manager, Investor Relations & ESG H&R BLOCK Q3 FY25 Financial Results Conference Call Safe Harbor Statement Forward-Looking Statement This presentation contains forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to histor ...

PART I - FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Financial statements show revenue growth from tax services, a decline in nine-month net income due to higher expenses and tax rates, and a shift to stockholders' deficiency [Consolidated Statements of Operations and Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Third-quarter results show increased revenues and net income, while nine-month revenues grew but net income and diluted EPS declined Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2124 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $2,277,104 | $2,184,834 | $2,649,984 | $2,547,717 | | **Net Income** | $722,330 | $690,737 | $306,334 | $337,500 | | **Diluted EPS** | $5.31 | $4.86 | $2.21 | $2.32 | | **Dividends Declared Per Share** | $0.375 | $0.32 | $1.125 | $0.96 | [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet indicates a slight asset increase, rising liabilities, and a significant shift to a total stockholders' deficiency driven by share repurchases and net losses Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $1,246,538 | $1,239,476 | | **Total Assets** | $3,245,011 | $3,218,810 | | **Total Current Liabilities** | $1,589,803 | $977,328 | | **Total Liabilities** | $3,437,849 | $3,128,216 | | **Total Stockholders' Equity (Deficiency)** | ($192,838) | $90,594 | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow slightly increased for the nine-month period, while increased investing and financing activities led to a net decrease in cash Consolidated Cash Flow Summary (in thousands) | Activity | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $429,322 | $420,264 | | **Net Cash Used in Investing Activities** | ($110,890) | ($99,643) | | **Net Cash Used in Financing Activities** | ($595,506) | ($520,503) | | **Net Decrease in Cash** | ($285,503) | ($202,621) | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail revenue recognition, debt, and contingencies, highlighting growth in tax services, an increased effective tax rate, and ongoing legal matters - U.S. assisted tax preparation revenue for the nine months ended March 31, 2025, increased to **$1.73 billion** from **$1.62 billion** in the prior year. U.S. DIY tax preparation revenue also grew to **$231.6 million** from **$215.5 million**[25](index=25&type=chunk) - The effective tax rate for continuing operations for the nine months ended March 31, 2025, was **25.3%**, compared to **17.6%** for the same period in 2024. The increase is primarily due to lower discrete tax benefits in the current period compared to the prior period[47](index=47&type=chunk) - The company has a remaining commitment to purchase approximately **$75.1 million** in federal investment tax credits (ITCs) by June 30, 2025[51](index=51&type=chunk) - The company is responding to governmental inquiries, class actions, and mass arbitrations related to the IRS Free File Program and the use of pixels in its DIY tax services. An accrual for these matters is included in the loss contingency accrual of **$5.5 million** as of March 31, 2025[59](index=59&type=chunk)[65](index=65&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes revenue growth to tax services, offset by lower royalty and financial services income, while increased operating expenses led to a net income decline, with liquidity maintained through cash and CLOC [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Nine-month revenues increased due to U.S. assisted and DIY tax preparation, but rising operating expenses, including legal fees, led to a decline in net income from continuing operations Revenue Changes (Nine Months Ended March 31, 2025 vs 2024) | Revenue Stream | 2025 (in 000s) | 2024 (in 000s) | % Change | | :--- | :--- | :--- | :--- | | U.S. Assisted Tax Prep | $1,727,220 | $1,622,430 | +6.5% | | U.S. DIY Tax Prep | $231,646 | $215,529 | +7.5% | | Royalties | $143,312 | $153,070 | -6.4% | | Financial Services | $85,763 | $98,195 | -12.7% | | **Total Revenues** | **$2,649,984** | **$2,547,717** | **+4.0%** | - The increase in U.S. assisted tax preparation revenue was driven by a **5.0% increase** in net average charge and a **1.4% increase** in company-owned tax return volumes[77](index=77&type=chunk) - Operating expenses increased by **4.8%**, primarily due to higher field wages (**+$32.0 million**), benefits (**+$17.8 million**), marketing (**+$10.4 million**), and legal fees (**+$9.9 million**)[80](index=80&type=chunk)[81](index=81&type=chunk) [Financial Condition and Liquidity](index=22&type=section&id=Financial%20Condition%20and%20Liquidity) Liquidity is maintained through seasonal operations and a committed line of credit, with capital allocation prioritizing shareholder returns via dividends and share repurchases, alongside active debt management - The company had no outstanding balance under its **$1.5 billion CLOC** as of March 31, 2025, and was in compliance with all debt covenants[43](index=43&type=chunk)[99](index=99&type=chunk) - During the nine months ended March 31, 2025, the company returned significant capital to shareholders, paying **$147.1 million** in dividends and repurchasing **$400.1 million** of its common stock[94](index=94&type=chunk)[96](index=96&type=chunk) - Capital expenditures for the nine-month period totaled **$71.8 million**, and payments for business acquisitions (primarily franchisees) were **$35.3 million**[98](index=98&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risks have occurred since the last annual report - There have been no material changes in market risks since the last annual report[118](index=118&type=chunk) [Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period[119](index=119&type=chunk) - No material changes were identified in the company's internal control over financial reporting during the third quarter[120](index=120&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) Material pending legal proceedings, including governmental inquiries and class actions, are detailed in the consolidated financial statements - For details on material legal proceedings, the report directs readers to Note 9 in Part I, Item 1[121](index=121&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes in risk factors have occurred since the last annual report - There have been no material changes in risk factors since the last annual report[122](index=122&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company made no public share repurchases in Q3 but bought shares for employee tax obligations, with significant board-authorized funds remaining for future repurchases Share Purchases (Q3 FY2025) | Month (2025) | Total Shares Purchased | Average Price Paid per Share | Purchased as Part of Publicly Announced Program | | :--- | :--- | :--- | :--- | | January | 4,000 | $55.23 | $0 | | February | 2,000 | $54.43 | $0 | | March | 0 | N/A | $0 | - On August 15, 2024, the Board of Directors approved a **$1.5 billion** share repurchase program. As of March 31, 2025, **$1.1 billion** remained authorized for future repurchases[96](index=96&type=chunk)[124](index=124&type=chunk) [Other Information](index=27&type=section&id=Item%205.%20Other%20Information) No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[127](index=127&type=chunk) [Exhibits](index=28&type=section&id=Item%206.%20Exhibits) The exhibits include CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and Inline XBRL data files - The exhibits include certifications by the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act[129](index=129&type=chunk)

[Fiscal 2025 Third Quarter Financial Highlights](index=1&type=section&id=Fiscal%202025%20Third%20Quarter%20Financial%20Highlights) H&R Block reported strong third-quarter results with revenue and EPS growth, reaffirmed its full-year outlook, and continued its capital allocation strategy through dividends and share repurchases [Performance Summary](index=1&type=section&id=Performance%20Summary) H&R Block reported strong Q3 FY2025 results with revenue up 4.2% to $2.3 billion and diluted EPS up 9.2% to $5.32, driven by higher charges and U.S. return volumes Q3 FY2025 Key Financial Metrics (vs. Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $2.3 billion | $2.2 billion | +4.2% | | Net Income (cont. ops) | $722.9 million | $691.6 million | +4.5% | | Diluted EPS (cont. ops) | $5.32 | $4.87 | +9.2% | | Adjusted Diluted EPS (cont. ops) | $5.38 | $4.94 | +8.9% | - Revenue growth was primarily driven by an increase in the overall net average charge (NAC) and higher company-owned return volumes in the U.S[3](index=3&type=chunk) - Growth was partially offset by lower international revenue and decreased interest and fee income from the Emerald Advance® financial product[3](index=3&type=chunk) - The company successfully improved volume and market share trends in the Assisted channel by enhancing the new client experience, leading to higher client satisfaction[2](index=2&type=chunk) - Total operating expenses increased by **3.4% to $1.3 billion**, mainly due to higher wages and benefits for tax professionals corresponding with the increase in return volume[4](index=4&type=chunk) [Capital Allocation](index=1&type=section&id=Capital%20Allocation) H&R Block continued its capital allocation strategy, declaring a $0.375 per share dividend and repurchasing $400 million in shares - A quarterly cash dividend of **$0.375 per share** will be paid on July 3, 2025[5](index=5&type=chunk) - In the first and second quarters of fiscal 2025, the company repurchased **6.5 million shares** at an aggregate price of **$400 million**[11](index=11&type=chunk) - Approximately **$1.1 billion** remains on the company's **$1.5 billion** share repurchase program[11](index=11&type=chunk) - Since 2016, H&R Block has returned over **$4.5 billion** to shareholders through dividends and share buybacks, repurchasing over **43%** of its shares outstanding[6](index=6&type=chunk) [Fiscal Year 2025 Outlook](index=2&type=section&id=Fiscal%20Year%202025%20Outlook) H&R Block reaffirmed its FY2025 outlook, projecting revenues between $3.69 billion and $3.75 billion and Adjusted Diluted EPS of $5.15 to $5.35 Reaffirmed Fiscal Year 2025 Outlook | Metric | Outlook Range | | :--- | :--- | | Revenue | $3.69 billion to $3.75 billion | | EBITDA | $975 million to $1.02 billion | | Adjusted Diluted EPS | $5.15 to $5.35 | | Effective Tax Rate | Approx. 13% | [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements detail H&R Block's income, balance sheet, and cash flow performance for the period, showing revenue growth and changes in equity [Financial Results (Income Statement)](index=4&type=section&id=Financial%20Results%20%28Income%20Statement%29) Total revenues for Q3 FY2025 increased to $2.28 billion, with net income from continuing operations growing to $722.9 million Income Statement Highlights - Three Months Ended March 31 (in thousands) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues | $2,277,104 | $2,184,834 | | Total Operating Expenses | $1,298,791 | $1,256,630 | | Net Income from Continuing Ops | $722,928 | $691,586 | | Diluted EPS from Continuing Ops | $5.32 | $4.87 | Income Statement Highlights - Nine Months Ended March 31 (in thousands) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues | $2,649,984 | $2,547,717 | | Net Income from Continuing Ops | $309,041 | $339,597 | | Diluted EPS from Continuing Ops | $2.23 | $2.34 | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $3.25 billion, with total liabilities at $3.44 billion, resulting in a stockholders' deficiency of $192.8 million Balance Sheet Summary (in thousands) | Account | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $772,946 | $1,053,326 | | Total Assets | $3,245,011 | $3,218,810 | | Total Liabilities | $3,437,849 | $3,128,216 | | Total Stockholders' Equity (Deficiency) | ($192,838) | $90,594 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities for the nine months ended March 31, 2025, was $429.3 million, with a net decrease in cash of $285.5 million Cash Flow Summary - Nine Months Ended March 31 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $429,322 | $420,264 | | Net Cash used in Investing Activities | ($110,890) | ($99,643) | | Net Cash used in Financing Activities | ($595,506) | ($520,503) | | Net Decrease in Cash | ($285,503) | ($202,621) | - The primary uses of cash in financing activities were repurchases of common stock (**$436.5 million**) and dividends paid (**$147.1 million**)[16](index=16&type=chunk) [Non-GAAP Financial Measures](index=7&type=section&id=Non-GAAP%20Financial%20Measures) The company provides reconciliations for non-GAAP measures like EBITDA and Adjusted EPS, explaining their utility for performance evaluation [Reconciliation of Non-GAAP Measures](index=7&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) Reconciliations are provided for non-GAAP measures, showing how Net Income of $722.9 million reconciles to EBITDA of $1.01 billion and GAAP Diluted EPS to Adjusted Diluted EPS EBITDA Reconciliation - Q3 (in thousands) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Net income from continuing ops | $722,928 | $691,586 | | Add: Taxes, Interest, D&A | $289,160 | $272,514 | | **EBITDA from continuing ops** | **$1,012,088** | **$964,100** | Adjusted Diluted EPS Reconciliation - Q3 | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Diluted EPS from continuing ops | $5.32 | $4.87 | | Adjustments, net of tax | $0.06 | $0.07 | | **Adjusted diluted EPS** | **$5.38** | **$4.94** | [Explanation of Non-GAAP Measures](index=2&type=section&id=Explanation%20of%20Non-GAAP%20Measures) H&R Block uses non-GAAP measures like EBITDA and Adjusted EPS for performance evaluation, adjusting for non-core items, while cautioning they are not GAAP substitutes - The company considers non-GAAP financial measures like EBITDA and adjusted diluted EPS to be useful metrics for management and investors to evaluate ongoing operating performance[19](index=19&type=chunk)[20](index=20&type=chunk) - Adjustments are made for certain items, such as the amortization of intangibles from acquisitions, to better reflect core business performance[19](index=19&type=chunk) - These non-GAAP measures should not be considered a substitute for, or superior to, financial performance measures prepared in accordance with GAAP[18](index=18&type=chunk)

Core Insights - H&R Block reported a revenue growth of 4% for the third quarter of fiscal 2025, with total revenue reaching $2.3 billion, an increase of $92.3 million compared to the previous year [3][4] - Net income from continuing operations rose by 4.5% to $722.9 million, while earnings per share (EPS) increased by 9.2% to $5.32 [4][5] - The company reaffirmed its full-year fiscal 2025 outlook, expecting revenue between $3.69 billion and $3.75 billion and adjusted diluted EPS in the range of $5.15 to $5.35 [9][7] Financial Performance - Total operating expenses increased by 3.4% to $1.3 billion, primarily due to higher wages and benefits for tax professionals [4][20] - The company achieved a net income growth of $31.3 million, reflecting strong financial fundamentals and consistent cash flow generation [4][3] - Adjusted earnings per share from continuing operations increased by 8.9% to $5.38, driven by higher net income and a reduction in shares outstanding due to share repurchases [5][27] Capital Allocation - Since 2016, H&R Block has returned over $4.5 billion to shareholders through dividends and share repurchases, buying back more than 43% of its outstanding shares [6][8] - A quarterly cash dividend of $0.375 per share is scheduled for payment on July 3, 2025, to shareholders of record as of June 4, 2025 [8][19] Market Trends - The company noted improved volume and market share trends in the Assisted channel, attributed to enhancements in the client experience [3][4] - The increase in revenue was partly due to higher company-owned return volumes in the U.S., despite lower international revenue and interest income [3][4]

Core Insights - H&R Block (HRB) is expected to report quarterly earnings of $5.12 per share, reflecting a year-over-year increase of 3.6% [1] - Anticipated revenues for the quarter are projected at $2.25 billion, which represents a 2.8% increase compared to the same quarter last year [1] - The consensus EPS estimate has remained unchanged over the past 30 days, indicating analysts' reassessment of their projections [1] Revenue Estimates - Analysts predict 'Revenues- U.S. assisted tax preparation' to be $1.60 billion, showing a year-over-year change of +4.5% [4] - 'Revenues- U.S. royalties' are expected to be $133.04 million, indicating a decline of -6.3% from the previous year [4] - 'Revenues- U.S. DIY tax preparation' is estimated to reach $202.19 million, reflecting a +1.8% change year-over-year [4] International and Other Revenue Projections - 'Revenues- International' are forecasted at $70.58 million, suggesting a +3.4% change year-over-year [5] - 'Revenues- Refund Transfers' are expected to be $116.00 million, indicating a -2.5% change from the prior year [5] - 'Revenues- Tax Identity Shield' is projected at $7.21 million, reflecting a -4.3% change year-over-year [5] Additional Revenue Insights - 'Revenues- Peace of Mind Extended Service Plan' is expected to be $16.71 million, indicating a -0.6% change [6] - 'Revenues- Interest and fee income on Emerald Advance' is projected at $19.12 million, suggesting a -9.7% change year-over-year [6] - 'Revenues- Other' is estimated to reach $12.98 million, reflecting a +7.6% change from the previous year [6] Performance and Market Position - The consensus estimate for 'Revenues- Wave' stands at $26.30 million, indicating a +11.5% change year-over-year [7] - 'Revenues- Emerald Card and Spruce' are expected to be $37.56 million, reflecting a -8.8% change from the prior year [7] - H&R Block shares have returned +12.5% over the past month, outperforming the Zacks S&P 500 composite's +11.5% change [7]

Core Insights - Block Advisors by H&R Block has relaunched its Fund Her Future grant program, accepting applications from April 28 to May 30, 2025, to support women-owned small businesses with high growth potential [1][5] - The program will award a total of $100,000 in grants, with one recipient receiving $50,000 and up to five others receiving $10,000 each, along with a year of small business services valued at nearly $30,000 [1][4] Group 1: Program Details - The 2025 Fund Her Future program aims to recognize six women-owned small businesses that demonstrate community impact [1][5] - Eligibility requires applicants to be over 18 and owners of a U.S.-based business, with a focus on those showing community impact [5] - The program received over 6,000 applications in 2024, highlighting the significant interest and need for support among female entrepreneurs [6] Group 2: Challenges for Female Entrepreneurs - Female entrepreneurs face significant barriers in accessing capital, with 42% of women business owners denied bank loans and nearly 90% relying on personal finances and credit cards for funding [2] - The 2024 State of Women's Small Business Report indicates that women entrepreneurs encounter more hurdles compared to their male counterparts [2] Group 3: Impact of Previous Grant Recipients - Grant recipient Heather Jiang reported a 50% increase in online traffic to her business after receiving the grant, which allowed her to expand product lines and hire staff [7] - Erica Cole leveraged the funding to launch a sensory-friendly collection in Walmart and acquire another brand, demonstrating the scaling potential enabled by the grant [7] - Ameka Coleman anticipates a 400% revenue increase from onboarding additional hospital networks due to the support received from the grant [7] Group 4: Company Overview - H&R Block, through its Block Advisors division, provides year-round services for small businesses, including bookkeeping, payroll, and advisory services [10] - The company combines digital innovation with human expertise to assist clients in achieving better financial outcomes [10]

The Block Advisors program will grant $100,000 total and a year of small business services to six women-owned businesses dedicated to improving their communitiesKANSAS CITY, Mo., April 28, 2025 (GLOBE NEWSWIRE) -- Block Advisors by H&R Block today announced the return of its Fund Her Future grant program. Starting today, applications are being accepted through May 30, 2025. In its second year, the 2025 program is recognizing six women-owned small businesses with high growth and community impact potential. G ...

Group 1 - H&R Block, Inc. will report its fiscal 2025 third quarter results on May 7, 2025, after the market close [1] - A conference call for analysts, institutional investors, and shareholders is scheduled for 4:30 p.m. Eastern time on the same day to discuss the results and provide a business update [2] - The conference call will be available in a listen-only format for the media and public via a webcast, which will also be accessible for replay for 90 days [3] Group 2 - H&R Block provides global tax preparation services, financial products, and small-business solutions, combining digital innovation with human expertise [4] - The company offers a mobile banking app, Spruce, to help clients manage their finances better [4] - H&R Block supports small-business owners through services like bookkeeping, payroll, advisory, and payment processing via Block Advisors and Wave [4]

Company Announcement - H&R Block, Inc. will report its fiscal 2025 third quarter results on May 7, 2025, after the market close [1] - A conference call for analysts, institutional investors, and shareholders is scheduled for 4:30 p.m. Eastern time on the same day to discuss the results and provide a business update [2] - The conference call will be available in a listen-only format for the media and public via a webcast, which will also be accessible for replay for 90 days after the call [3] Company Overview - H&R Block provides global tax preparation services, financial products, and small-business solutions, combining digital innovation with human expertise [4] - The company offers a mobile banking app, Spruce, to help clients manage their finances better and supports small-business owners with services like bookkeeping and payroll through Block Advisors and Wave [4] Contact Information - For investor relations, Jordyn Eskijian can be contacted at (816) 854-5674 or via email [5] - Media inquiries can be directed to the Media Desk via email [5]

Joint initiative merges world-class tax expertise with advanced AI capabilities to enhance real-time assistance for 60,000 tax pros to support millions of taxpayersKANSAS CITY, Mo., April 15, 2025 (GLOBE NEWSWIRE) -- H&R Block (NYSE: HRB) and OpenAI today announced a joint effort to develop a generative artificial intelligence (GenAI) solution enabling H&R Block’s vast network of more than 60,000 tax professionals to deliver tailored insights, faster, to the millions of clients served each year virtually or ...