H&R Block (NYSE:HRB) Q2 2026 Earnings call February 03, 2026 04:30 PM ET Company ParticipantsAlex Paris - President and Senior Managing DirectorCurtis Campbell - President and CEOJessica Hazel - Head of Investor RelationsKartik Mehta - Executive Managing Director and Director of ResearchScott Schneeberger - Managing DirectorTiffany Mason - CFOConference Call ParticipantsSammy Yon - AnalystOperatorday and thank you for standing by. Welcome to the H&R Block second quarter fiscal 2026 earnings conference call. ...

Jessica Hazel Vice President, Investor Relations H&R BLOCK Q2 FY26 FINANCIAL RESULTS CONFERENCE CALL February 3, 2026 Second Quarter FY26 Financial Results Conference Call H&R BLOCK Q2 FY26 FINANCIAL RESULTS CONFERENCE CALL Safe Harbor Statement Forward -Looking Statements 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 historical or current facts . They often incl ...

Core Insights - H&R Block (HRB) has a Growth Score of B, indicating a fair assessment of its growth quality and sustainability [2] - Earnings are projected to increase by 6% in fiscal 2026 and 7.9% in fiscal 2027, while revenues are expected to grow by 3.3% in fiscal 2026 and 2.4% in fiscal 2027 [2][9] Revenue Growth Drivers - Revenue growth is primarily driven by increased volume in U.S. assisted tax preparation, attributed to a rise in net average charge (NAC) and higher company-owned tax return volumes [3] - The DIY software offers comprehensive tax preparation services, empowering clients to manage their taxes independently through various platforms [3] Customer Relationship Enhancement - The Second Look offering reviews clients' past three years' tax returns to identify missed refund opportunities, thereby strengthening customer relationships [4] Technology Integration - H&R Block's commitment to technology advancement fosters customer trust and loyalty, with AI-powered tools enhancing the DIY tax preparation experience [5] Diversification and Client Base Expansion - Additional offerings such as Refund Transfers, credit products, and the Spruc mobile banking platform demonstrate the company's strategy to diversify and expand its client base [6] - The Spruc platform has achieved approximately 476,000 sign-ups and $1.75 billion in customer deposits by the end of fiscal 2025 [6][9]

Core Insights - H&R Block (HRB) has a Growth Score of A, indicating strong growth quality and sustainability [1][8] - Earnings are projected to increase by 6% in 2025 and 7.9% in 2026, while revenues are expected to grow by 3.3% in 2025 and 2.4% in 2026 [1][8] Revenue Growth Drivers - Revenue growth is driven by higher volumes in U.S. assisted tax preparation, an increase in net average charge (NAC), and higher company-owned tax return volumes [2][8] - The company generated $204 million in total revenues in Q1 of fiscal 2026, reflecting a 5% year-over-year growth [2] Client Engagement Initiatives - The Second Look offering enhances customer relationships by reviewing clients' past three years' tax returns for missed refund opportunities [2] - The mobile banking platform, Spruc, supports year-round financial wellness, with approximately 476,000 sign-ups and $1.75 billion in customer deposits by the end of fiscal 2025 [3] - Integration of AI-powered technology into DIY tax preparation tools like MyBlock, AI TaxAssist, and TaxProReview improves customer experience without additional charges [4] Risk Factor - H&R Block reported a current ratio of 0.76, which is below the industry average of 0.82, indicating potential challenges in meeting short-term obligations [5]

Financial Data and Key Metrics Changes - The company achieved a revenue growth of 5% in the first quarter, generating $204 million in total revenue, an increase of $10 million over the prior year [6][10] - EBITDA improved by 9.4% compared to the prior year, with a first quarter EBITDA loss of $170 million, an improvement of $18 million [6][8] - The effective tax rate decreased to 23.6% from 26.2% in the prior year, contributing to a net loss from continuing operations of $165 million, representing a 3.5% improvement [8][10] - Approximately $455 million was returned to shareholders through dividends and share repurchases, bringing the cumulative total of capital return since 2016 to nearly $5 billion [9][10] Business Line Data and Key Metrics Changes - The U.S. assisted business saw higher volumes and net average charges, contributing to the overall revenue growth [6][7] - WAVE continued to experience double-digit growth, particularly in its high-margin subscription product, Pro Tier [6][7] Market Data and Key Metrics Changes - The U.S. consumer tax preparation total addressable market (TAM) is estimated between $20 billion and $25 billion, while the small business TAM is over $100 billion [12][13] - The market is split roughly 55% assisted and 45% DIY, with assisted services projected to gain further market share in 2026 [16] Company Strategy and Development Direction - The company plans to focus on more complex paid filers who demonstrate stronger loyalty and value additional services [13][14] - Investments will continue in improving customer experience and innovating products, such as the Second Look offering and Spruce for financial wellness [14][15] - The company aims to leverage technology and AI to enhance customer experience and operational efficiency [15][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the upcoming tax season, with no indications of a late start despite potential complexities from new tax legislation [30][31] - The company remains cautiously optimistic about the impact of the new tax bill, expecting it to serve as a tailwind for the assisted business [31][32] - The leadership transition is seen as smooth, with a strong belief in the company's potential for long-term value creation [18] Other Important Information - The company reported a disciplined approach to capital allocation, including a 12% increase in dividends announced in August [9][10] - The leadership team is aligned on key themes for future growth, emphasizing the importance of meeting customer needs through various channels [15][17] Q&A Session Summary Question: Changes in marketing and operations in Assisted to stem share losses - Management highlighted investments in the Second Look service and AI to improve productivity and client outcomes [22][23] Question: Pricing strategy in DIY and its impact on margins and market share - The pricing strategy remains consistent with prior years, expecting low single-digit price increases across both channels [24] Question: Anticipated complexity from the new tax bill and government shutdown impact - Management indicated no expected delays for the tax season and expressed optimism about the new tax bill serving as a tailwind [30][31] Question: AI differentiation and addressing threats - AI is viewed as an opportunity to enhance client experiences and optimize operations, with ongoing developments in AI Tax Assist [34] Question: Marketing to free customers versus those likely to pay - The focus is on understanding consumer cohorts to effectively reach those likely to convert to paying clients [35][36]

Financial Performance - H&R Block announced a 12% increase to its quarterly dividend in August[28] - The company repurchased 7.9 million shares for $400 million, retiring approximately 6% of outstanding shares[29] - H&R Block reaffirms its FY26 outlook with revenue projected between $3.875 billion and $3.895 billion, and adjusted EPS between $4.85 and $5.00[33] - The company anticipates an effective tax rate of approximately 25% for FY26[33] Strategic Initiatives - H&R Block is finalizing tax season plans, incorporating learnings from the previous year[12] - The company focuses on strengthening marketing messaging, personalizing experiences, and optimizing the sales funnel[15] - H&R Block aims to enhance the client experience in retail and DIY channels, reducing friction and increasing conversion from marketing demand[15] - Key products like Second Look, AI Tax Assist, Tax Pro Review, and Spruce are being leveraged to deliver value and differentiation[15] Market Focus - H&R Block is prioritizing growth among more complex, higher lifetime value filers[53] - The company aims to meet customers where they are, both digitally and in person, combining trusted human expertise with innovation[72]