H&R Block(HRB) - 2025 Q4 - Annual Report

Part I Item 1. Business H&R Block provides global tax preparation, financial products, and small business solutions, blending digital innovation with human expertise Fiscal Year 2025 Key Performance Metrics | Metric | Value | | :--- | :--- | | U.S. Assisted Tax Returns Prepared | 11.3 million | | DIY Online Paid Tax Returns Filed | 3.8 million | | Consolidated Revenues | $3.8 billion | | Net Income from Continuing Operations | $609.5 million | | EBITDA from Continuing Operations | $976.3 million | | Diluted EPS from Continuing Operations | $4.42 per share | | Shares Repurchased | 6.5 million | | Dividends Declared | $1.50 per share (17.2% YoY increase) | - The company's business model combines assisted tax preparation by professionals with do-it-yourself (DIY) solutions offered through online, mobile, and desktop software, also providing financial products and small business solutions via Block Advisors and Wave brands[14][20][22] - Recent corporate developments include the amendment and restatement of the company's $1.5 billion unsecured committed line of credit (CLOC), extending its maturity to July 2030[18] - Jeffrey J. Jones II announced his intention to retire as President and CEO, effective December 31, 2025, with Curtis A. Campbell appointed as his successor[19] - The company's business is highly seasonal, with a substantial majority of revenues earned from February through April, leading to operational losses during the first two quarters of the fiscal year[31] - As of June 30, 2025, the company had approximately 4,300 regular full-time associates, with the seasonal workforce peaking at approximately 70,100 employees during the fiscal year[36] Item 1A. Risk Factors The company faces a variety of risks categorized as strategic, operational, information security, legal, and financial - Changes in tax laws or government processes, such as simplification or the expansion of free government filing options (e.g., the IRS direct file system), could reduce demand for the company's services[62][65][74] - The company faces substantial competition in both assisted and DIY tax preparation from other firms, software providers, and free offerings, which could impact market share and profitability[67] - Operational integrity is threatened by the increasing sophistication of third-party fraud, potential interruptions in information systems (including reliance on Microsoft Azure), and the challenges of a highly seasonal business model[78][83][94] - A security breach resulting in unauthorized access to client or employee personal information could adversely affect demand, reputation, and financial performance, with complex and evolving data privacy laws potentially increasing costs[104][109] - The company is subject to legal actions and governmental inquiries related to the IRS Free File program and other aspects of its DIY tax preparation services, including the use of pixels[127] - Financial risks include potential negative impacts on liquidity from credit market disruptions, the dependency of dividends and share repurchases on earnings and Board authorization, and potential changes in corporate tax laws[133][136][139] Item 1B. Unresolved Staff Comments The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments as of the filing date[144] Item 1C. Cybersecurity H&R Block has implemented a cybersecurity program based on the NIST Cybersecurity Framework to manage and mitigate risks - The company's cybersecurity strategy utilizes the National Institute of Standards and Technology (NIST) Cybersecurity Framework and a multi-layered, zero-trust approach to secure systems[145][150] - Oversight is provided by the Audit Committee of the Board of Directors, with the Chief Information Security Officer (CISO) heading the Information Security team and reporting to the Chief Legal and Administrative Officer (CLAO)[147][148][149] - As of the date of this report, the company has not identified any risks from cybersecurity threats or prior incidents that have materially affected its business strategy, results of operations, or financial condition[151] Item 2. Properties The company owns its corporate headquarters in Kansas City, Missouri, while most tax offices and international executive offices are leased - The corporate headquarters in Kansas City, Missouri is owned by the company[152] - The majority of tax offices and international executive offices are leased[152] Item 3. Legal Proceedings For a description of material pending legal proceedings, the company refers to the discussion in Item 8, Note 12 of the consolidated financial statements - Details on material pending legal proceedings are provided in Note 12 to the consolidated financial statements[154] Item 4. Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[155] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities H&R Block's common stock trades on the NYSE under the symbol HRB, with a new $1.5 billion share repurchase program approved in August 2024 - The company's common stock is traded on the New York Stock Exchange (NYSE) under the symbol HRB, with 11,433 shareholders of record as of July 31, 2025[156] Issuer Purchases of Equity Securities (Q4 FY2025) | Period | Total Shares Purchased (in 000s) | Average Price Paid per Share | Maximum Dollar Value Remaining Under Program (in 000s) | | :--- | :--- | :--- | :--- | | April 1 – April 30 | — | $56.73 | $1,100,000 | | May 1 - May 31 | 9 | $62.46 | $1,100,000 | | June 1 - June 30 | 1 | $58.91 | $1,100,000 | | Total | 10 | $61.90 | | - On August 15, 2024, the Board of Directors approved a new $1.5 billion share repurchase program, which does not have an expiration date[157] Item 6. Selected Financial Data This item is not applicable - Not applicable[160] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal year 2025, revenue increased 4.2% to $3.8 billion, driven by higher net average charges, while operating expenses rose 4.6% due to increased costs Fiscal Year 2025 vs. 2024 Financial Highlights (Continuing Operations) | Metric | FY 2025 | FY 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $3,761.0M | $3,610.3M | 4.2% | | Total Operating Expenses | $2,933.0M | $2,805.1M | 4.6% | | Net Income | $609.5M | $598.0M | 1.9% | | Diluted EPS | $4.42 | $4.14 | 6.8% | | Adjusted Diluted EPS | $4.66 | $4.41 | 5.7% | | EBITDA | $976.3M | $963.2M | 1.4% | - The 4.2% revenue increase was primarily driven by a 5.1% rise in net average charge for U.S. assisted tax preparation and a 9.8% increase in paid net average charge for U.S. DIY services[166][167] - The 4.6% increase in operating expenses was mainly due to higher field wages (+$58.4 million), benefits and other compensation (+$22.0 million), consulting services (+$11.3 million), and technology-related expenses (+$10.5 million)[168][169] - Cash provided by operating activities decreased to $680.9 million from $720.9 million in the prior year, primarily due to changes in income tax reserves and accounts payable[176] - The company repurchased $400.1 million of its common stock in FY2025 at an average price of $61.10 per share, with $1.1 billion remaining authorization under the current share repurchase program[182] - On July 11, 2025, the company amended and restated its $1.5 billion committed line of credit (CLOC), extending the maturity to July 11, 2030[186] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposures are related to interest rates on its variable-rate credit facility and foreign currency exchange rates from international operations - Interest rate risk is primarily linked to seasonal borrowings on the variable-rate CLOC, while long-term debt is fixed-rate, minimizing the impact of rate changes on earnings[222][223] - Foreign exchange risk is driven by operations in Canada and Australia, with a hypothetical 10% change in foreign exchange rates estimated to impact FY2025 consolidated pretax income by $4.5 million[224] Item 8. Financial Statements and Supplementary Data This section includes the company's consolidated financial statements, an unqualified auditor's report, and details on critical audit matters like uncertain tax positions and goodwill impairment - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting[233][234] - Critical Audit Matters identified were: (1) Income Taxes - Uncertain Tax Positions, specifically related to transfer pricing policies, and (2) Goodwill - Wave Reporting Unit, focusing on the significant judgments in estimating fair value[238][241] Consolidated Statement of Operations Highlights (in millions) | Line Item | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | Total Revenues | $3,761.0 | $3,610.3 | $3,472.2 | | Total Operating Expenses | $2,933.0 | $2,805.1 | $2,723.5 | | Income from Continuing Operations Before Taxes | $781.4 | $762.3 | $711.2 | | Net Income from Continuing Operations | $609.5 | $598.0 | $561.8 | | Net Income | $605.8 | $595.3 | $553.7 | Consolidated Balance Sheet Highlights (in millions) | Line Item | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,162.5 | $1,239.5 | | Total Assets | $3,263.9 | $3,218.8 | | Total Current Liabilities | $1,298.6 | $977.3 | | Long-Term Debt | $1,143.3 | $1,491.1 | | Total Liabilities | $3,175.0 | $3,128.2 | | Total Stockholders' Equity | $88.9 | $90.6 | - The company reports as a single operating segment, with the Chief Operating Decision Maker (CEO) reviewing financial information at a consolidated level to evaluate performance and allocate resources[361][362] - As of June 30, 2025, the company had accrued liabilities of $6.2 million for litigation and other contingencies, and is responding to governmental inquiries and legal actions related to the IRS Free File Program and its DIY tax services[352][358] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no disagreements with its accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure - There were no disagreements or reportable events with the company's accountants[365] Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of June 30, 2025, with no material changes during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[368] - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2025, based on the COSO 2013 framework[370] - No changes occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[372] Item 9B. Other Information During the fourth quarter of fiscal year 2025, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[373] Part III Item 10. Directors, Executive Officers and Corporate Governance Information regarding executive officers is in Item 1, while other corporate governance details are incorporated by reference from the 2025 proxy statement - Information about executive officers is located in Item 1 of the Form 10-K[374] - Information regarding directors, corporate governance, and the audit committee is incorporated by reference from the forthcoming definitive proxy statement[374] Item 11. Executive Compensation All information related to executive compensation is incorporated by reference from the company's definitive proxy statement for its 2025 Annual Meeting of Shareholders - All information related to executive and director compensation is incorporated by reference from the company's definitive proxy statement[376] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information concerning security ownership and equity compensation plans is incorporated by reference from the company's definitive proxy statement for its 2025 Annual Meeting of Shareholders - Information regarding security ownership and equity compensation plans is incorporated by reference from the company's definitive proxy statement[377] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on related person transactions and director independence is incorporated by reference from the company's definitive proxy statement for its 2025 Annual Meeting of Shareholders - Information on related party transactions and director independence is incorporated by reference from the company's definitive proxy statement[378] Item 14. Principal Accountant Fees and Services Information detailing fees paid to the principal accountant is incorporated by reference from the company's definitive proxy statement for its 2025 Annual Meeting of Shareholders - Information regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement[379] Part IV Item 15. Exhibit Index This section provides a list of all exhibits filed as part of the Form 10-K, including corporate governance documents, debt agreements, and Sarbanes-Oxley Act certifications - The exhibit index lists key documents such as the Amended and Restated Articles of Incorporation, Bylaws, Indentures for Senior Notes, and the Fifth Amended and Restated Credit and Guarantee Agreement[382][384] - Management contracts and compensatory plans, such as the Long-Term Incentive Plans and severance plans, are identified and filed as exhibits[383] - Certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as exhibits[384]