UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	~~December 31, 2021~~September 30, 2022
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission file number 1-06089

H&R Block, Inc.

(Exact name of registrant as specified in its charter)


Missouri						44-0607856
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)

One H&R Block Way, Kansas City, Missouri 64105

(Address of principal executive offices, including zip code)

(816) 854-3000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, without par value	HRB	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

The number of shares outstanding of the registrant's Common Stock, without par value, at the close of business on ~~January~~October 31, 2022: ~~164,538,187~~155,468,155 shares.

Table of Contents

Form 10-Q for the Period ended ~~December 31, 2021~~September 30, 2022

Table of Contents


	PART I
Item 1.	Consolidated Statements of Operations and Comprehensive Loss Three ~~and six~~ months ended ~~December 31,~~September 3 0 , 2022 and 2021 ~~and 2020~~	1
	Consolidated Balance Sheets As of ~~December 31, 2021~~September 3 0 , 2022 and June 30, ~~2021~~20 22	2
	Consolidated Statements of Cash Flows ~~Six~~Three months ended ~~December 31,~~September 3 0 , 2022 and 2021 ~~and 2020~~	3
	Consolidated Statements of Stockholders' Equity Three ~~and six~~ months ended ~~December 31,~~September 3 0 , 2022 and 2021 ~~and 2020~~	4
	Notes to Consolidated Financial Statements	65
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1914
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2921
Item 4.	Controls and Procedures	2921
	PART II
Item 1.	Legal Proceedings	2921
Item 1A.	Risk Factors	2921
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3022
Item 3.	Defaults Upon Senior Securities	3022
Item 4.	Mine Safety Disclosures	3022
Item 5.	Other Information	3022
Item 6.	Exhibits	3122
	Signatures	3223

Table of Contents

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS						(unaudited, in 000s, except per share amounts)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS:										CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS:	(unaudited, in 000s, except per share amounts)
		Three months ended December 31,				Six months ended December 31,						Three months ended September 30,
		2021		2020		2021		2020					2022		2021
REVENUES:	REVENUES:									REVENUES:
Service revenues	Service revenues	$	133,725	$	116,613	$	310,702	$	498,970	Service revenues			$	167,194	$	176,977
Royalty, product and other revenues	Royalty, product and other revenues	25,091		25,352		40,738		60,341		Royalty, product and other revenues			12,791		15,647
		158,816		141,965		351,440		559,311					179,985		192,624
OPERATING EXPENSES:	OPERATING EXPENSES:									OPERATING EXPENSES:
Costs of revenues	Costs of revenues	289,323		277,129		530,855		555,236		Costs of revenues			260,662		241,532
Selling, general and administrative	Selling, general and administrative	146,793		144,384		272,657		284,376		Selling, general and administrative			128,434		125,864
Total operating expenses	Total operating expenses	436,116		421,513		803,512		839,612		Total operating expenses			389,096		367,396

Other income (expense), net	Other income (expense), net	1,467		538		1,751		3,042		Other income (expense), net			3,611		284
Interest expense on borrowings	Interest expense on borrowings	(23,085)		(21,489)		(45,915)		(56,186)		Interest expense on borrowings			(15,824)		(22,830)
Loss from continuing operations before income tax benefit	Loss from continuing operations before income tax benefit	(298,918)		(300,499)		(496,236)		(333,445)		Loss from continuing operations before income tax benefit			(221,324)		(197,318)
Income tax benefit	Income tax benefit	(109,845)		(46,510)		(157,218)		(18,546)		Income tax benefit			(53,957)		(47,373)
Net loss from continuing operations	Net loss from continuing operations	(189,073)		(253,989)		(339,018)		(314,899)		Net loss from continuing operations			(167,367)		(149,945)
Net loss from discontinued operations, net of tax benefits of $461, $1,132, $956 and $2,524		(1,532)		(1,762)		(3,188)		(3,108)
Net loss from discontinued operations, net of tax benefits of $316 and $495										Net loss from discontinued operations, net of tax benefits of $316 and $495			(1,054)		(1,656)
NET LOSS	NET LOSS	$	(190,605)	$	(255,751)	$	(342,206)	$	(318,007)	NET LOSS			$	(168,421)	$	(151,601)
BASIC AND DILUTED LOSS PER SHARE:	BASIC AND DILUTED LOSS PER SHARE:									BASIC AND DILUTED LOSS PER SHARE:
Continuing operations	Continuing operations	$	(1.09)	$	(1.38)	$	(1.93)	$	(1.68)	Continuing operations			$	(1.05)	$	(0.84)
Discontinued operations	Discontinued operations	(0.01)		(0.01)		(0.02)		(0.01)		Discontinued operations			(0.01)		(0.01)
Consolidated	Consolidated	$	(1.10)	$	(1.39)	$	(1.95)	$	(1.69)	Consolidated			$	(1.06)	$	(0.85)

DIVIDENDS DECLARED PER SHARE	DIVIDENDS DECLARED PER SHARE	$	0.27	$	0.26	$	0.54	$	0.52	DIVIDENDS DECLARED PER SHARE			$	0.29	$	0.27
COMPREHENSIVE LOSS:	COMPREHENSIVE LOSS:									COMPREHENSIVE LOSS:
Net loss	Net loss	$	(190,605)	$	(255,751)	$	(342,206)	$	(318,007)	Net loss			$	(168,421)	$	(151,601)

Change in foreign currency translation adjustments	Change in foreign currency translation adjustments	1,656		21,982		(9,521)		30,798		Change in foreign currency translation adjustments			(32,345)		(11,177)
Other comprehensive income (loss)		1,656		21,982		(9,521)		30,798
Other comprehensive loss										Other comprehensive loss			(32,345)		(11,177)
Comprehensive loss	Comprehensive loss	$	(188,949)	$	(233,769)	$	(351,727)	$	(287,209)	Comprehensive loss			$	(200,766)	$	(162,778)

See accompanying notes to consolidated financial statements.


H&R Block, Inc. ~~\|Q2 FY2022~~\|Q1 FY2023 Form 10-Q			1

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CONSOLIDATED BALANCE SHEETS	CONSOLIDATED BALANCE SHEETS	(unaudited, in 000s, except share and per share amounts)		CONSOLIDATED BALANCE SHEETS			(unaudited, in 000s, except share and per share amounts)
As of	As of	December 31, 2021			June 30, 2021			As of	September 30, 2022		June 30, 2022
ASSETS	ASSETS							ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	336,250		$	1,434,381		Cash and cash equivalents	$	322,824	$	885,015
Cash and cash equivalents - restricted	Cash and cash equivalents - restricted	123,686			149,783			Cash and cash equivalents - restricted	108,550		165,698
Receivables, less allowance for credit losses of $25,377 and $77,518		301,055			88,932
Receivables, less allowance for credit losses of $65,217 and $65,351								Receivables, less allowance for credit losses of $65,217 and $65,351	61,035		58,447
Income taxes receivable	Income taxes receivable	351,829			330,872			Income taxes receivable	154,123		202,838
Prepaid expenses and other current assets	Prepaid expenses and other current assets	126,784			76,414			Prepaid expenses and other current assets	77,906		72,460
Total current assets	Total current assets	1,239,604			2,080,382			Total current assets	724,438		1,384,458
Property and equipment, at cost, less accumulated depreciation and amortization of $865,593 and $842,861		140,459			139,276
Property and equipment, at cost, less accumulated depreciation and amortization of $867,402 and $857,468								Property and equipment, at cost, less accumulated depreciation and amortization of $867,402 and $857,468	127,934		123,912
Operating lease right of use assets	Operating lease right of use assets	396,522			445,847			Operating lease right of use assets	412,823		427,783
Intangible assets, net	Intangible assets, net	334,557			351,093			Intangible assets, net	303,483		309,644
Goodwill	Goodwill	759,183			754,521			Goodwill	746,711		760,401
Deferred tax assets and income taxes receivable	Deferred tax assets and income taxes receivable	179,626			181,996			Deferred tax assets and income taxes receivable	193,761		208,948
Other noncurrent assets	Other noncurrent assets	50,104			61,273			Other noncurrent assets	50,082		54,012
Total assets	Total assets	$	3,100,055		$	4,014,388		Total assets	$	2,559,232	$	3,269,158
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:	LIABILITIES:							LIABILITIES:
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	155,841		$	164,269		Accounts payable and accrued expenses	$	168,496	$	160,929
Accrued salaries, wages and payroll taxes	Accrued salaries, wages and payroll taxes	62,524			168,989			Accrued salaries, wages and payroll taxes	56,162		154,764
Accrued income taxes and reserves for uncertain tax positions	Accrued income taxes and reserves for uncertain tax positions	78,921			238,863			Accrued income taxes and reserves for uncertain tax positions	188,118		280,115
Current portion of long-term debt		499,395			—

Operating lease liabilities	Operating lease liabilities	189,984			214,190			Operating lease liabilities	197,491		206,898
Deferred revenue and other current liabilities	Deferred revenue and other current liabilities	184,775			196,175			Deferred revenue and other current liabilities	179,956		196,107
Total current liabilities	Total current liabilities	1,171,440			982,486			Total current liabilities	790,223		998,813
Long-term debt	Long-term debt	1,760,830			1,983,719			Long-term debt	1,487,407		1,486,876
Deferred tax liabilities and reserves for uncertain tax positions	Deferred tax liabilities and reserves for uncertain tax positions	249,751			301,658			Deferred tax liabilities and reserves for uncertain tax positions	229,340		226,362
Operating lease liabilities	Operating lease liabilities	215,826			244,932			Operating lease liabilities	222,914		228,820
Deferred revenue and other noncurrent liabilities	Deferred revenue and other noncurrent liabilities	74,863			113,535			Deferred revenue and other noncurrent liabilities	94,333		116,656
Total liabilities	Total liabilities	3,472,710			3,626,330			Total liabilities	2,824,217		3,057,527
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES	0			0			COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:	STOCKHOLDERS' EQUITY:							STOCKHOLDERS' EQUITY:
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 203,265,054 and 216,655,616		2,033			2,167
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 188,644,066 and 193,571,309								Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 188,644,066 and 193,571,309	1,887		1,936
Additional paid-in capital	Additional paid-in capital	770,661			779,465			Additional paid-in capital	759,629		772,182
Accumulated other comprehensive income (loss)		(9,433)			88
Accumulated other comprehensive loss								Accumulated other comprehensive loss	(53,990)		(21,645)
Retained earnings (deficit)	Retained earnings (deficit)	(466,856)			286,694			Retained earnings (deficit)	(311,671)		120,405
Less treasury shares, at cost, of 34,221,633 and 34,842,125		(669,060)			(680,356)
Less treasury shares, at cost, of 33,176,727 and 33,640,988								Less treasury shares, at cost, of 33,176,727 and 33,640,988	(660,840)		(661,247)
Total stockholders' equity (deficiency)	Total stockholders' equity (deficiency)	(372,655)			388,058			Total stockholders' equity (deficiency)	(264,985)		211,631
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,100,055		$	4,014,388		Total liabilities and stockholders' equity	$	2,559,232	$	3,269,158

See accompanying notes to consolidated financial statements.


2			~~Q2 FY2022~~Q1 FY2023 Form 10-Q\| H&R Block, Inc.

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CONSOLIDATED STATEMENTS OF CASH FLOWS	CONSOLIDATED STATEMENTS OF CASH FLOWS	(unaudited, in 000s)									CONSOLIDATED STATEMENTS OF CASH FLOWS	(unaudited, in 000s)
Six months ended December 31,		2021		2020
Three months ended September 30,						Three months ended September 30,	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:										CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	Net loss	$	(342,206)	$	(318,007)						Net loss	$	(168,421)	$	(151,601)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:										Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	71,346		77,937							Depreciation and amortization	33,624		35,715
Provision	Provision	14,639		15,977							Provision	1,077		1,850
Deferred taxes	Deferred taxes	16,685		29,015							Deferred taxes	16,918		(13,547)
Stock-based compensation	Stock-based compensation	13,233		13,359							Stock-based compensation	7,654		6,847

Changes in assets and liabilities, net of acquisitions:	Changes in assets and liabilities, net of acquisitions:										Changes in assets and liabilities, net of acquisitions:

Receivables	Receivables	(216,071)		(248,184)							Receivables	3,702		35,913
Prepaid expenses, other current and noncurrent assets	Prepaid expenses, other current and noncurrent assets	(46,928)		(61,070)							Prepaid expenses, other current and noncurrent assets	(2,669)		8,610

Accounts payable, accrued expenses, salaries, wages and payroll taxes	Accounts payable, accrued expenses, salaries, wages and payroll taxes	(121,926)		(14,798)							Accounts payable, accrued expenses, salaries, wages and payroll taxes	(129,908)		(134,215)

Deferred revenue, other current and noncurrent liabilities	Deferred revenue, other current and noncurrent liabilities	(50,882)		(48,117)							Deferred revenue, other current and noncurrent liabilities	(41,549)		(27,990)

Income tax receivables, accrued income taxes and income tax reserves	Income tax receivables, accrued income taxes and income tax reserves	(247,088)		(146,215)							Income tax receivables, accrued income taxes and income tax reserves	(41,659)		(72,768)
Other, net	Other, net	(4,373)		(2,737)							Other, net	(435)		(1,438)
Net cash used in operating activities	Net cash used in operating activities	(913,571)		(702,840)							Net cash used in operating activities	(321,666)		(312,624)
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:										CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures	Capital expenditures	(39,371)		(34,751)							Capital expenditures	(16,161)		(15,620)
Payments made for business acquisitions, net of cash acquired	Payments made for business acquisitions, net of cash acquired	(19,333)		(12,155)							Payments made for business acquisitions, net of cash acquired	(16,507)		(4,265)

Franchise loans funded	Franchise loans funded	(14,480)		(20,064)							Franchise loans funded	(6,686)		(4,474)
Payments from franchisees	Payments from franchisees	6,213		13,633							Payments from franchisees	2,270		2,839

Other, net	Other, net	9,527		(5,383)							Other, net	(274)		2,067
Net cash used in investing activities	Net cash used in investing activities	(57,444)		(58,720)							Net cash used in investing activities	(37,358)		(19,453)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:										CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of line of credit borrowings		(210,000)		(2,050,000)
Proceeds from line of credit borrowings		485,000		1,040,000
Repayments of long-term debt		—		(650,000)
Proceeds from issuance of long-term debt		—		647,965

Dividends paid	Dividends paid	(96,938)		(100,198)							Dividends paid	(43,093)		(48,996)
Repurchase of common stock, including shares surrendered	Repurchase of common stock, including shares surrendered	(324,589)		(150,782)							Repurchase of common stock, including shares surrendered	(202,845)		(165,800)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	4,067		1,133							Proceeds from exercise of stock options	—		3,385
Other, net	Other, net	(7,423)		(19,705)							Other, net	(955)		(5,911)
Net cash used in financing activities	Net cash used in financing activities	(149,883)		(1,281,587)							Net cash used in financing activities	(246,893)		(217,322)
Effects of exchange rate changes on cash	Effects of exchange rate changes on cash	(3,330)		11,030							Effects of exchange rate changes on cash	(13,422)		(3,959)
Net decrease in cash and cash equivalents, including restricted balances	Net decrease in cash and cash equivalents, including restricted balances	(1,124,228)		(2,032,117)							Net decrease in cash and cash equivalents, including restricted balances	(619,339)		(553,358)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	1,584,164		2,769,947							Cash, cash equivalents and restricted cash, beginning of period	1,050,713		1,584,164
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	459,936	$	737,830						Cash, cash equivalents and restricted cash, end of period	$	431,374	$	1,030,806
SUPPLEMENTARY CASH FLOW DATA:	SUPPLEMENTARY CASH FLOW DATA:										SUPPLEMENTARY CASH FLOW DATA:
Income taxes paid, net of refunds received		$	72,169	$	95,789
Income taxes paid (received), net						Income taxes paid (received), net	$	(29,811)	$	38,419
Interest paid on borrowings	Interest paid on borrowings	36,539		50,472							Interest paid on borrowings	19,792		12,594

Accrued purchase of common stock	Accrued purchase of common stock	4,845		—							Accrued purchase of common stock	32,356		4,785
Accrued additions to property and equipment	Accrued additions to property and equipment	1,393		1,285							Accrued additions to property and equipment	4,704		6,273
New operating right of use assets and related lease liabilities	New operating right of use assets and related lease liabilities	73,710		46,954							New operating right of use assets and related lease liabilities	52,265		29,371
Accrued dividends payable to common shareholders	Accrued dividends payable to common shareholders	46,497		47,689							Accrued dividends payable to common shareholders	46,100		47,940

See accompanying notes to consolidated financial statements.


H&R Block, Inc. \| ~~Q2 FY2022~~Q1 FY2023 Form 10-Q			3

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY	CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY					(amounts in 000s, except per share amounts)											CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY													(amounts in 000s, except per share amounts)
		Common Stock			Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)(1)		Retained Earnings (Deficit)				Treasury Stock						Total Stockholders’ Equity						Common Stock						Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)(1)	Retained Earnings (Deficit)			Treasury Stock							Total Stockholders’ Equity
		Shares	Amount									Shares				Amount								Shares			Amount				Retained Earnings (Deficit)							Total Stockholders’ Equity	Amount
Balances as of July 1, 2021		216,656	$	2,167		$	779,465			$	88			$	286,694		(34,842)			$	(680,356)				$	388,058
Balances as of July 1, 2022																									Balances as of July 1, 2022		193,571	$	1,936							$	772,182				$	(21,645)		$	120,405			(33,641)			$	(661,247)	$	211,631
Net loss	Net loss	—	—			—		—				(151,601)				—		—				(151,601)			Net loss		—	—							—			—			(168,421)			—				—			(168,421)
Other comprehensive loss	Other comprehensive loss	—	—			—		(11,177)				—				—		—				(11,177)			Other comprehensive loss		—	—					—			(32,345)			—				—			—			(32,345)
Stock-based compensation	Stock-based compensation	—	—			5,627		—				—				—		—				5,627			Stock-based compensation		—	—					5,630			—			—				—			—			5,630
Stock-based awards exercised or vested	Stock-based awards exercised or vested	—	—			(10,328)		—				(291)				705		13,765				3,146			Stock-based awards exercised or vested		—	—					(15,276)			—			(742)				805			15,839			(179)
Acquisition of treasury shares(2)	Acquisition of treasury shares(2)	—	—			—		—				—				(205)		(4,817)				(4,817)			Acquisition of treasury shares(2)		—	—					—			—			—				(341)			(15,432)			(15,432)
Repurchase and retirement of common shares	Repurchase and retirement of common shares	(6,802)	(68)			(4,081)		—				(161,619)				—		—				(165,768)			Repurchase and retirement of common shares		(4,927)	(49)					(2,907)			—			(216,813)				—			—			(219,769)

Cash dividends declared - $0.27 per share		—	—			—		—				(47,940)				—		—				(47,940)
Balances as of September 30, 2021		209,854	$	2,099		$	770,683	$	(11,089)			$	(74,757)			(34,342)		$	(671,408)			$	15,528
Net loss		—	—			—		—				(190,605)				—		—				(190,605)
Other comprehensive income		—	—			—		1,656				—				—		—				1,656
Stock-based compensation		—	—			5,640		—				—				—		—				5,640
Stock-based awards exercised or vested		—	—			(1,709)		—				(219)				122		2,400				472
Acquisition of treasury shares(2)		—	—			—		—				—				(2)		(52)				(52)
Repurchase and retirement of common shares		(6,589)	(66)			(3,953)		—				(154,778)				—		—				(158,797)

Cash dividends declared - $0.27 per share		—	—			—		—				(46,497)				—		—				(46,497)
Balances as of December 31, 2021		203,265	$	2,033		$	770,661	$	(9,433)			$	(466,856)			(34,222)		$	(669,060)			$	(372,655)
Cash dividends declared - $0.29 per share																									Cash dividends declared - $0.29 per share		—	—					—			—			(46,100)				—			—			(46,100)
Balances as of September 30, 2022																									Balances as of September 30, 2022		188,644	$	1,887				$	759,629		$	(53,990)		$	(311,671)			(33,177)			$	(660,840)		$	(264,985)



	Common Stock			Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)(1)		Retained Earnings (Deficit)		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount									Shares			Amount
Balances as of July 1, 2021	216,656	$	2,167		$	779,465	$	88	$	286,694	(34,842)	$	(680,356)		$	388,058
Net loss	—	—			—		—		(151,601)		—	—			(151,601)
Other comprehensive loss	—	—			—		(11,177)		—		—	—			(11,177)
Stock-based compensation	—	—			5,627		—		—		—	—			5,627
Stock-based awards exercised or vested	—	—			(10,328)		—		(291)		705	13,765			3,146
Acquisition of treasury shares(2)	—	—			—		—		—		(205)	(4,817)			(4,817)
Repurchase and retirement of common shares	(6,802)	(68)			(4,081)		—		(161,619)		—	—			(165,768)


Cash dividends declared - $0.27 per share	—	—			—		—		(47,940)		—	—			(47,940)
Balances as of September 30, 2021	209,854	$	2,099		$	770,683	$	(11,089)	$	(74,757)	(34,342)	$	(671,408)		$	15,528

(1) ~~The balance of our accumulated other comprehensive income (loss) consists of foreign currency translation adjustments.~~

~~(2)~~ ~~Represents shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards.~~

~~See accompanying notes to consolidated financial statements.~~


4			~~Q2 FY2022 Form 10-Q\|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

Common Stock Additional
Paid-in
Capital
Accumulated Other
Comprehensive
Income (Loss)(1)
Retained
Earnings
(Deficit) Treasury Stock Total
Stockholders’
Equity
Shares Amount Shares Amount
Balances as of July 1, 2020 228,207 $ 2,282 $ 772,943 $ (39,781) $ (18,455) (35,478) $ (692,187) $ 24,802
Net loss — — — — (62,256) — — (62,256)
Other comprehensive income — — — 8,816 — — — 8,816
Stock-based compensation — — 7,259 — — — — 7,259
Stock-based awards exercised or vested — — (2,613) — (636) 215 4,176 927
Acquisition of treasury shares(2)
— — — — — (42) (596) (596)
Repurchase and retirement of common shares (5,957) (60) (3,514) — (84,884) — — (88,458)
Cash dividends declared - $0.26 per share — — — — (50,154) — — (50,154)
Balances as of September 30, 2020 222,250 $ 2,222 $ 774,075 $ (30,965) $ (216,385) (35,305) $ (688,607) $ (159,660)
Net loss — — — — (255,751) — — (255,751)
Other comprehensive income — — — 21,982 — — — 21,982
Stock-based compensation — — 5,181 — — — — 5,181
Stock-based awards exercised or vested — — (134) — (220) 8 144 (210)
Acquisition of treasury shares(2)
— — — — — (3) (44) (44)
Repurchase and retirement of common shares (3,531) (35) (2,083) — (59,566) — — (61,684)
Cash dividends declared - $0.26 per share — — — — (47,689) — — (47,689)
Balances as of December 31, 2020 218,719 $ 2,187 $ 777,039 $ (8,983) $ (579,611) (35,300) $ (688,507) $ (497,875)

~~(1)~~The balance of our accumulated other comprehensive income (loss) consists of foreign currency translation adjustments.

(2) Represents shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards.

See accompanying notes to consolidated financial statements.


4			Q1 FY2023 Form 10-Q\| H&R Block, Inc. ~~\|Q2 FY2022 Form 10-Q~~			5

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION – The consolidated balance sheets as of ~~December 31, 2021~~September 30, 2022 and June 30, ~~2021,~~2022, the consolidated statements of operations and comprehensive loss for the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ the consolidated statements of cash flows for the ~~six~~three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ and the consolidated statements of stockholders' equity for the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and 2021 ~~and 2020~~ have been prepared by the Company, without audit. In the opinion of management, all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position, results of operations, and cash flows as of ~~December 31,~~September 30, 2022 and 2021 ~~and 2020~~ and for all periods presented, have been made.

"H&R Block," "the Company," "we," "our," and "us" are used interchangeably to refer to H&R Block, Inc., to H&R Block, Inc. and its subsidiaries, or to H&R Block, Inc.'s operating subsidiaries, as appropriate to the context.

On June 9, 2021, the Board of Directors approved a change of the Company's fiscal year end from April 30 to June 30. The Company's 2022 fiscal year began on July 1, 2021 and will end on June 30, 2022. As a result of this change, the Company filed a Transition Report on Form 10-Q that included the financial information for the transition period from May 1, 2021 to June 30, 2021 (Transition Period). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our ~~April~~June 30, ~~2021~~2022 Annual Report to Shareholders on Form ~~10-K and our~~10-K. All amounts presented herein as of June 30, ~~2021 Transition~~2022 or for the year then ended are derived from our Annual Report ~~filed~~ on Form ~~10-Q.~~10-K.

MANAGEMENT ESTIMATES – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates, assumptions and judgments are applied in the evaluation of contingent losses arising from our discontinued mortgage business, contingent losses associated with pending claims and litigation, reserves for uncertain tax positions, fair value of reporting units, and related matters. Estimates have been prepared based on the best information available as of each balance sheet date. As such, actual results could differ materially from those estimates.

SEASONALITY OF BUSINESS – Our operating revenues are seasonal in nature with peak revenues typically occurring in the months of February through April. Therefore, results for interim periods are not indicative of results to be expected for the full year.

On March 21, 2020, the federal tax filing deadline in the U.S. for individual 2019 tax returns was extended from April 15, 2020 to July 15, 2020, shifting a portion of revenues and expenses from that tax season into the six months ended December 31, 2020. This extension impacted the typical seasonality of our business and the comparability of our financial results.

DISCONTINUED OPERATIONS – Our discontinued operations include the results of operations of Sand Canyon Corporation, previously known as Option One Mortgage Corporation (including its subsidiaries, collectively, SCC), which exited its mortgage business in fiscal year 2008. See note 9 for additional information on ~~litigation, claims, and other~~ loss contingencies related to our discontinued operations.


6			~~Q2 FY2022 Form 10-Q\|~~ H&R Block, Inc. \|Q1 FY2023 Form 10-Q			5

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NOTE 2: REVENUE RECOGNITION

The majority of our revenues are from our U.S. tax services business. The following table disaggregates our U.S. tax services revenues by major service line, with revenues from our international tax services businesses and from Wave included as separate lines:


								(in 000s)						(in 000s)
		Three months ended December 31,				Six months ended December 31,					Three months ended September 30,
		2021		2020		2021		2020				2022		2021
Revenues:	Revenues:									Revenues:
U.S. assisted tax preparation	U.S. assisted tax preparation	$	30,845	$	34,020	$	64,452	$	241,187	U.S. assisted tax preparation		$	36,312	$	33,607
U.S. royalties	U.S. royalties	3,404		5,357		10,762		28,009		U.S. royalties		6,228		7,358
U.S. DIY tax preparation	U.S. DIY tax preparation	9,210		6,114		13,271		53,577		U.S. DIY tax preparation		3,158		4,061
International		27,907		26,637		86,232		85,413
Refund Transfers	Refund Transfers	777		397		2,442		6,510		Refund Transfers		1,284		1,665
Emerald Card®		24,830		9,962		53,088		22,398
Peace of Mind® Extended Service Plan	Peace of Mind® Extended Service Plan	17,315		18,570		42,151		45,762		Peace of Mind® Extended Service Plan		24,770		24,836
Tax Identity Shield®	Tax Identity Shield®	5,200		4,809		10,353		13,803		Tax Identity Shield®		5,167		5,153
Emerald Card® and SpruceSM										Emerald Card® and SpruceSM		11,612		28,258
Interest and fee income on Emerald AdvanceSM	Interest and fee income on Emerald AdvanceSM	12,424		14,039		12,903		14,565		Interest and fee income on Emerald AdvanceSM		614		479
International										International		58,834		58,325
Wave	Wave	19,497		14,837		38,634		28,574		Wave		22,646		19,137
Other	Other	7,407		7,223		17,152		19,513		Other		9,360		9,745
Total revenues	Total revenues	$	158,816	$	141,965	$	351,440	$	559,311	Total revenues		$	179,985	$	192,624

Changes in the balances of deferred revenue and wages for our Peace of Mind® Extended Service Plan (POM) are as follows:


								(in 000s)									(in 000s)
POM	POM	Deferred Revenue				Deferred Wages				POM	Deferred Revenue				Deferred Wages
Six months ended December 31,		2021		2020		2021		2020
Balances as of July 1,		$	172,759	$	167,827	$	17,867	$	18,707
Three months ended September 30,										Three months ended September 30,	2022		2021		2022		2021
Balance, beginning of the period										Balance, beginning of the period	$	173,486	$	172,759	$	19,495	$	17,867
Amounts deferred	Amounts deferred	2,961		12,421		10		46		Amounts deferred	1,360		1,492		5		7
Amounts recognized on previous deferrals	Amounts recognized on previous deferrals	(49,034)		(52,974)		(4,805)		(5,834)		Amounts recognized on previous deferrals	(28,703)		(28,948)		(2,988)		(2,847)
Balances as of December 31,		$	126,686	$	127,274	$	13,072	$	12,919
Balance, end of the period										Balance, end of the period	$	146,143	$	145,303	$	16,512	$	15,027

As of ~~December 31, 2021,~~September 30, 2022, deferred revenue related to POM was ~~$126.7~~$146.1 million. We expect that ~~$93.1~~$97.0 million will be recognized over the next twelve months, while the remaining balance will be recognized over the following five years.

As of ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ Tax Identity Shield® (TIS) deferred revenue was ~~$18.5~~$21.2 million and ~~$17.1~~$23.5 million, respectively. Deferred revenue related to TIS was ~~$28.3~~$25.8 million and ~~$28.8~~$28.3 million as of June 30, ~~2021~~2022 and June 30, ~~2020,~~2021, respectively. All deferred revenue related to TIS will be recognized by April ~~30, 2022.~~2023.

NOTE 3: EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY

EARNINGS PER SHARE – Basic and diluted earnings (loss) per share is computed using the two-class method. The two-class method is an earnings allocation formula that determines net income per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Per share amounts are computed by dividing net income (loss) from continuing operations attributable to common shareholders by the weighted average shares outstanding during each period. Diluted earnings per share excludes the impact of shares of common stock issuable upon the lapse of certain restrictions or the exercise of options to purchase ~~5.1~~4.4 million shares ~~for the three and six months ended December 31, 2021~~ and 5.3 million shares for the three ~~and six~~ months ended ~~December 31, 2020,~~September 30, 2022 and 2021, respectively, as the effect would be antidilutive due to the net loss from continuing operations during the periods.


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The computations of basic and diluted earnings (loss) per share from continuing operations are as follows:


(in 000s, except per share amounts)	(in 000s, except per share amounts)									(in 000s, except per share amounts)
		Three months ended December 31,				Six months ended December 31,					Three months ended September 30,
		2021		2020		2021		2020				2022		2021
Net loss from continuing operations attributable to shareholders	Net loss from continuing operations attributable to shareholders	$	(189,073)	$	(253,989)	$	(339,018)	$	(314,899)	Net loss from continuing operations attributable to shareholders		$	(167,367)	$	(149,945)
Amounts allocated to participating securities	Amounts allocated to participating securities	(210)		(210)		(449)		(417)		Amounts allocated to participating securities		(179)		(239)
Net loss from continuing operations attributable to common shareholders	Net loss from continuing operations attributable to common shareholders	$	(189,283)	$	(254,199)	$	(339,467)	$	(315,316)	Net loss from continuing operations attributable to common shareholders		$	(167,546)	$	(150,184)
Basic weighted average common shares	Basic weighted average common shares	173,378		183,883		175,739		188,099		Basic weighted average common shares		159,284		178,099
Potential dilutive shares	Potential dilutive shares	—		—		—		—		Potential dilutive shares		—		—
Dilutive weighted average common shares	Dilutive weighted average common shares	173,378		183,883		175,739		188,099		Dilutive weighted average common shares		159,284		178,099
Loss per share from continuing operations attributable to common shareholders:	Loss per share from continuing operations attributable to common shareholders:									Loss per share from continuing operations attributable to common shareholders:
Basic	Basic	$	(1.09)	$	(1.38)	$	(1.93)	$	(1.68)	Basic		$	(1.05)	$	(0.84)
Diluted	Diluted	(1.09)		(1.38)		(1.93)		(1.68)		Diluted		(1.05)		(0.84)

The decrease in the weighted average shares outstanding is due to share repurchases completed in the current and prior fiscal years.

STOCK-BASED COMPENSATION – During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, we granted ~~1.5~~0.9 million shares under our stock-based compensation plan. We granted awards of ~~0.6~~1.4 million shares under our stock-based compensation plans during the ~~six~~three months ended ~~December 31, 2020. The increase in shares granted compared to the prior year is a result of the change in timing of grants due to the change in our fiscal year.~~September 30, 2021. Stock-based compensation expense of our continuing operations totaled ~~$6.4 million and $13.2~~$7.7 million for the three ~~and six~~ months ended ~~December 31, 2021, respectively,~~September 30, 2022 and ~~$5.6 million and $13.4~~$6.8 million for the three ~~and six~~ months ended ~~December 31, 2020, respectively.~~September 30, 2021. As of ~~December 31, 2021,~~September 30, 2022, unrecognized compensation cost for stock options totaled ~~$0.6~~$0.4 million, and for nonvested shares and units totaled ~~$51.8~~$76.9 million.

NOTE 4: RECEIVABLES

Receivables, net of their related allowance, consist of the following:

(in 000s)
As of December 31, 2021 June 30, 2021
Short-term Long-term Short-term Long-term
Loans to franchisees $ 19,030 $ 28,654 $ 9,497 $ 28,026
Receivables for U.S. assisted and DIY tax preparation and related fees 6,326 3,681 41,900 3,793
H&R Block Instant RefundTM receivables
324 16 2,357 159
H&R Block Emerald Advance® lines of credit
246,970 1,791 8,248 8,089
Software receivables from retailers 1,886 — 2,910 —
Royalties and other receivables from franchisees 3,377 133 6,167 178
Wave payment processing receivables 3,062 — 2,187 —
Other 20,080 1,279 15,666 1,350
Total $ 301,055 $ 35,554 $ 88,932 $ 41,595


8			~~Q2 FY2022 Form 10-Q\|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~


(in 000s)
As of	September 30, 2022				June 30, 2022
	Short-term		Long-term			Short-term		Long-term
Loans to franchisees	$	9,628	$	23,054		$	6,194	$	22,036
Receivables for U.S. assisted and DIY tax preparation and related fees	14,104		2,337			18,893		2,560
H&R Block's Instant RefundSM receivables	1,412		112			3,491		198
H&R Block Emerald Advance® lines of credit	6,800		7,098			6,691		8,825
Software receivables from retailers	607		—			3,992		—
Royalties and other receivables from franchisees	6,208		55			3,682		73

Wave payment processing receivables	1,306		—			1,393		—
Other	20,970		1,679			14,111		1,172


Total	$	61,035	$	34,335		$	58,447	$	34,864

Balances presented above as short-term are included in receivables, while the long-term portions are included in other noncurrent assets in the consolidated balance sheets.

LOANS TO FRANCHISEES – Franchisee loan balances consist of term loans made primarily to finance the purchase of franchises and revolving lines of credit primarily for the purpose of funding working capital needs. As of ~~December 31, 2021~~ September 30, 2022 and June 30, ~~2021~~2022, loans with a principal balance o~~f $0.1 million and $0.2 million, respectively, were~~ more than 90 days past ~~due. We had no loans to franchisees~~due, or on non-accrual ~~status.~~status, are not material.


H&R Block, Inc. \|Q1 FY2023 Form 10-Q			7

Table of Contents

H&R ~~BLOCK~~BLOCK'S INSTANT REFUNDTMSM ~~PROGRAM~~ – H&R ~~Block~~Block's Instant RefundTMSM amounts are generally received from the Canada Revenue Agency within 60 days of filing the client's return, with the remaining balance collectible from the client.

We review the credit quality of our Instant Refund receivables based on pools, which are segregated by the tax return year of origination, with older years being deemed more unlikely to be repaid. We establish an allowance for ~~doubtful accounts~~credit losses at an amount that we believe ~~represents~~reflects the receivable at net realizable value. In December of each year we charge-off the receivables to an amount we believe represents the net realizable value.

Balances and amounts on non-accrual status and classified as impaired, or more than 60 days past due, by tax return year of origination, as of ~~December 31, 2021~~September 30, 2022 are as follows:


				(in 000s)					(in 000s)

Tax return year of origination:		Balance		Non-Accrual

Tax return year of origination						Tax return year of origination	Current Balance		More Than 60 Days Past Due
2021						2021	$	2,781	$	2,261
2020 and prior	2020 and prior	$	340	$	340	2020 and prior	111		111

		340		$	340		2,892		$	2,372
Allowance	Allowance	—				Allowance	(1,368)
Net balance	Net balance	$	340			Net balance	$	1,524

H&R BLOCK EMERALD ADVANCE® LINES OF CREDIT – We review the credit quality of our purchased participation interests in Emerald AdvanceSM (EA) receivables based on pools, which are segregated by the fiscal year of origination, with older years being deemed more unlikely to be repaid. We establish an allowance for ~~doubtful accounts~~credit losses at an amount that we believe ~~represents~~reflects the receivable at net realizable value. In December of each year we charge-off the receivables to an amount we believe represents the net realizable value.

Balances and amounts on non-accrual status and classified as impaired, or more than 60 days past due, by fiscal year of origination, as of ~~December 31, 2021~~September 30, 2022 are as follows:

(in 000s)
Fiscal year of origination: Balance Non-Accrual
2022 $ 244,645 $ —
2021 and prior 7,499 7,499
Revolving loans 20,373 12,891
272,517 $ 20,390
Allowance (23,756)
Net balance $ 248,761


~~H&R Block, Inc.~~ ~~\|Q2 FY2022 Form 10-Q~~			9

~~Table of Contents~~


(in 000s)
Fiscal year of origination	Current Balance		Non-Accrual
2022	$	23,865	$	23,865
2021 and prior	429		429
Revolving loans	15,745		14,369
	40,039		$	38,663
Allowance	(26,141)
Net balance	$	13,898

ALLOWANCE FOR CREDIT LOSSES – Activity in the allowance for credit losses for our EA and all other short-term and long-term receivables for the ~~six~~three months ended ~~December 31,~~September 30, 2022 and 2021 ~~and 2020~~ is as follows:


(in 000s)	(in 000s)			(in 000s)
		EAs			All Other		Total			EAs		All Other		Total
Balances as of July 1, 2021		$	27,704		$	60,272	$	87,976
Balances as of July 1, 2022									Balances as of July 1, 2022	$	26,141	$	51,126	$	77,267
Provision	Provision	12,429			2,210		14,639		Provision	—		1,077		1,077

Charge-offs, recoveries and other	Charge-offs, recoveries and other	(16,377)			(60,437)		(76,814)		Charge-offs, recoveries and other	—		(1,281)		(1,281)

Balances as of December 31, 2021		$	23,756		$	2,045	$	25,801
Balances as of July 1, 2020		$	32,034		$	52,166	$	84,200
Balances as of September 30, 2022									Balances as of September 30, 2022	$	26,141	$	50,922	$	77,063
Balances as of July 1, 2021									Balances as of July 1, 2021	$	27,704	$	60,272	$	87,976
Provision	Provision	11,913			4,064		15,977		Provision	—		1,850		1,850
Charge-offs, recoveries and other	Charge-offs, recoveries and other	(18,650)			(54,322)		(72,972)		Charge-offs, recoveries and other	—		(3,583)		(3,583)
Balances as of December 31, 2020		$	25,297		$	1,908	$	27,205
Balances as of September 30, 2021									Balances as of September 30, 2021	$	27,704	$	58,539	$	86,243


8			Q1 FY2023 Form 10-Q\| H&R Block, Inc.

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NOTE 5: GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 are as follows:


(in 000s)	(in 000s)							(in 000s)
		Goodwill		Accumulated Impairment Losses		Net			Goodwill		Accumulated Impairment Losses		Net
Balances as of July 1, 2021		$	892,818	$	(138,297)	$	754,521
Balances as of July 1, 2022								Balances as of July 1, 2022	$	898,698	$	(138,297)	$	760,401

Acquisitions	Acquisitions	11,159		—		11,159		Acquisitions	7,879		—		7,879
Disposals and foreign currency changes, net	Disposals and foreign currency changes, net	(6,497)		—		(6,497)		Disposals and foreign currency changes, net	(21,569)		—		(21,569)
Impairments	Impairments	—		—		—		Impairments	—		—		—
Balances as of December 31, 2021		$	897,480	$	(138,297)	$	759,183
Balances as of September 30, 2022								Balances as of September 30, 2022	$	885,008	$	(138,297)	$	746,711

We test goodwill for impairment annually as of February 1, or more frequently if events occur or circumstances change which would, more likely than not, reduce the fair value of a reporting unit below its carrying value.


10			~~Q2 FY2022 Form 10-Q\|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

Components of intangible assets are as follows:


(in 000s)	(in 000s)							(in 000s)
		Gross Carrying Amount		Accumulated Amortization		Net			Gross Carrying Amount		Accumulated Amortization		Net
As of December 31, 2021:
As of September 30, 2022:								As of September 30, 2022:
Reacquired franchise rights	Reacquired franchise rights	$	377,512	$	(189,936)	$	187,576	Reacquired franchise rights	$	383,809	$	(200,442)	$	183,367
Customer relationships	Customer relationships	324,255		(267,158)		57,097		Customer relationships	335,766		(283,515)		52,251
Internally-developed software	Internally-developed software	166,866		(129,406)		37,460		Internally-developed software	138,600		(112,561)		26,039
Noncompete agreements	Noncompete agreements	41,494		(36,748)		4,746		Noncompete agreements	41,949		(38,106)		3,843
Franchise agreements	Franchise agreements	19,201		(16,748)		2,453		Franchise agreements	19,201		(17,708)		1,493
Purchased technology	Purchased technology	122,700		(81,825)		40,875		Purchased technology	122,700		(90,125)		32,575
Trade name	Trade name	5,800		(1,450)		4,350		Trade name	5,800		(1,885)		3,915
		$	1,057,828	$	(723,271)	$	334,557		$	1,047,825	$	(744,342)	$	303,483

As of June 30, 2021:
As of June 30, 2022:								As of June 30, 2022:
Reacquired franchise rights	Reacquired franchise rights	$	370,405	$	(182,366)	$	188,039	Reacquired franchise rights	$	379,114	$	(197,068)	$	182,046
Customer relationships	Customer relationships	316,547		(255,294)		61,253		Customer relationships	331,020		(278,717)		52,303
Internally-developed software	Internally-developed software	160,315		(119,460)		40,855		Internally-developed software	137,638		(107,111)		30,527
Noncompete agreements	Noncompete agreements	41,228		(35,802)		5,426		Noncompete agreements	41,789		(37,684)		4,105
Franchise agreements	Franchise agreements	19,201		(16,108)		3,093		Franchise agreements	19,201		(17,388)		1,813
Purchased technology	Purchased technology	122,700		(74,913)		47,787		Purchased technology	122,700		(87,910)		34,790
Trade name	Trade name	5,800		(1,160)		4,640		Trade name	5,800		(1,740)		4,060

		$	1,036,196	$	(685,103)	$	351,093		$	1,037,262	$	(727,618)	$	309,644

We made payments to acquire businesses totaling ~~$19.3~~$16.5 million and ~~$12.2~~$4.3 million during the ~~six~~three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively. The amounts and weighted-average lives of intangible assets acquired ~~during the six months ended December 31, 2021, including amounts capitalized related to internally-developed software, are as follows:~~

(dollars in 000s)
Amount Weighted-Average Life (in years)
Internally-developed software $ 6,640 3
Customer relationships 8,967 5
Reacquired franchise rights 7,420 5
Noncompete agreements 290 5
Total $ 23,317 4

~~Amortization of intangible assets for the three and six~~ ~~months ended December 31, 2021 was $19.4 million and $39.2 million, respectively, compared to $21.5 million and $41.4 million for the~~ ~~three and six~~ months ended December 31, 2020, respectively. Estimated amortization of intangible assets for fiscal years ending June 30, 2022, 2023, 2024, 2025 and 2026 is $76.7 million, $62.6 million, $43.1 million, $23.0 million and $15.8 million, respectively.


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during the three months ended September 30, 2022, including amounts capitalized related to internally-developed software, are as follows:


(dollars in 000s)
	Amount		Weighted-Average Life (in years)
Internally-developed software	$	1,254	2
Customer relationships	6,331		5
Reacquired franchise rights	4,897		4
Noncompete agreements	220		5
Total	$	12,702	4

Amortization of intangible assets for the three months ended September 30, 2022 was $18.4 million compared to $19.8 million for the three months ended September 30, 2021. Estimated amortization of intangible assets for fiscal years ending June 30, 2023, 2024, 2025, 2026, and 2027 is $68.8 million, $49.1 million, $27.5 million, $19.3 million and $13.8 million, respectively.

NOTE 6: LONG-TERM DEBT

The components of long-term debt are as follows:


				(in 000s)					(in 000s)
As of	As of	December 31, 2021		June 30, 2021		As of	September 30, 2022		June 30, 2022

Senior Notes, 5.500%, due November 2022		$	500,000	$	500,000

Senior Notes, 5.250%, due October 2025	Senior Notes, 5.250%, due October 2025	350,000		350,000		Senior Notes, 5.250%, due October 2025	$	350,000	$	350,000
Senior Notes, 2.500%, due July 2028	Senior Notes, 2.500%, due July 2028	500,000		500,000		Senior Notes, 2.500%, due July 2028	500,000		500,000
Senior Notes, 3.875%, due August 2030	Senior Notes, 3.875%, due August 2030	650,000		650,000		Senior Notes, 3.875%, due August 2030	650,000		650,000
Committed line of credit borrowings		275,000		—

Debt issuance costs and discounts	Debt issuance costs and discounts	(14,775)		(16,281)		Debt issuance costs and discounts	(12,593)		(13,124)
Total long-term debt	Total long-term debt	2,260,225		1,983,719		Total long-term debt	1,487,407		1,486,876
Less: Current portion	Less: Current portion	(499,395)		—		Less: Current portion	—		—
Long-term portion	Long-term portion	$	1,760,830	$	1,983,719	Long-term portion	$	1,487,407	$	1,486,876
Estimated fair value of long-term debt	Estimated fair value of long-term debt	$	2,366,000	$	2,123,000	Estimated fair value of long-term debt	$	1,312,000	$	1,377,000

~~UNSECURED COMMITTED LINE OF CREDIT~~ – Our unsecured committed line of credit (CLOC) provides for an unsecured senior revolving credit facility in the aggregate principal amount of $1.5 billion, which includes a $175.0 million sublimit for swingline loans and a $50.0 million sublimit for standby letters of credit. We may request increases in the aggregate principal amount of the revolving credit facility of up to $500.0 million, subject to obtaining commitments from lenders and meeting certain other conditions. The CLOC will mature on June 11, 2026, unless extended pursuant to the terms of the CLOC, at which time all outstanding amounts thereunder will be due and payable. Our CLOC includes an annual facility fee, which will vary depending on our then current credit ratings.

The CLOC is subject to various conditions, triggers, events or occurrences that could result in earlier termination and contains customary representations, warranties, covenants and events of default, including, without limitation: (1) a covenant requiring the Company to maintain a debt-to-EBITDA ratio, as defined by the CLOC agreement, calculated on a consolidated basis of no greater than (a) 3.50 to 1.00 as of the last day of each fiscal quarter ending on March 31, June 30, and September 30 of each year and (b) 4.50 to 1.00 as of the last day of each fiscal quarter ending on December 31 of each year; (2) a covenant requiring us to maintain an interest coverage ratio (EBITDA-to-interest expense) calculated on a consolidated basis of not less than 2.50 to 1.00 as of the last date of any fiscal quarter; and (3) covenants restricting our ability to incur certain additional debt, incur liens, merge or consolidate with other companies, sell or dispose of assets (including equity interests), liquidate or dissolve, engage in certain transactions with affiliates or enter into certain restrictive agreements. The CLOC includes provisions for an equity cure which could potentially allow us to independently cure certain defaults. Proceeds under the CLOC may be used for working capital needs or for other general corporate purposes. We were in compliance with these requirements as of ~~December 31, 2021.~~September 30, 2022.


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We had anno outstanding balance ~~of $275.0 million~~ under our CLOC and amounts available to borrow were ~~not~~ limited by the debt-to-EBITDA covenant to approximately $1.47 billion as of ~~December 31, 2021~~.September 30, 2022.

NOTE 7: INCOME TAXES

We file a consolidated federal income tax return in the U.S. with the Internal Revenue Service (IRS) and file tax returns in various state, local, and foreign jurisdictions. Tax returns are typically examined and either settled upon completion of the examination or through the appeals process. On July 14, 2021 we filed a U.S. federal income tax form 1139 carryback claim to utilize net operating losses against income earned in tax years 2015 and 2016. Filing this carryback claim has opened our 2015 and 2016 tax years to examination. Consequently, ourOur U.S. federal income tax returns for 2015, 2016, ~~2018~~2019 and later years remain open for examination. Our U.S. federal income tax returns for 2018, 2017, 2014 and all years prior to 2014 are closed. On October 4, 2022, the IRS notified us that it plans to audit our 2020 tax return and related carryback claims. With respect to federal, state and local jurisdictions and countries outside of the U.S., we are typically subject to examination for three to six years after the income tax returns have been filed. Although the outcome of tax audits is always uncertain, we believe that adequate


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amounts of tax, interest, and penalties have been provided for in the accompanying consolidated financial statements for any adjustments that might be incurred due to federal, state, local or foreign audits.

We had gross unrecognized tax benefits of ~~$212.8~~$231.7 million and $232.0 million as of ~~December 31, 2021~~September 30, 2022 and ~~$264.3 million as of~~ June 30, ~~2021.~~2022, respectively. The gross unrecognized tax benefits decreased ~~$51.5~~by $0.3 million during the ~~six~~three months ended ~~December 31, 2021.The decrease in unrecognized~~September 30, 2022 due to settlements with state tax ~~benefits during the six months ending December 31, 2021 is related to federal and state statute of limitation periods expiring in the current quarter.~~authorities. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately ~~$43.8~~$33.1 million within the next twelve months. The anticipated decrease is due to the expiration of statutes of limitations and anticipated closure of various state matters currently under ~~examination.~~examination or in appeals. For such matters where a change in the balance of unrecognized tax benefits is not yet deemed reasonably possible, no estimate has been included.

A discrete income tax benefit of $50.0 million was recorded in the six months ended December 31, 2021 compared to a discrete income tax expense of $18.2 million in the six months ended December 31, 2020. The discrete tax benefit recorded in the current period primarily resulted from federal and state statute of limitations expiring in the current quarter. The discrete tax expense recorded in the prior period primarily resulted from uncertain tax benefits related to a net operating loss carryback generated on our calendar year 2020 federal income tax return.

Our effective tax rate for continuing operations, including the effects of discrete tax items, was ~~31.7%~~24.4% and 24.0% for the ~~six~~three months ended ~~December 31,~~September 30, 2022 and 2021, and 5.6% for the six months ended December 31, 2020. Discrete items increased the effective tax rate by 10.1% for the six months ended December 31, 2021, and decreased the effective tax rate by 5.5% for the six months ended December 31, 2020. Due to the loss through the second quarter, a discrete tax expense decreases the tax rate while an item of discrete benefit increases the tax rate. The impact of discrete tax items combined with the seasonal nature of our business can cause the effective tax rate in our second quarter to be significantly different than the rate for our full fiscal year.respectively.

Consistent with prior years, our pretax loss for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 is expected to be offset by income in our third and fourth quarters due to the established pattern of seasonality in our primary business operations. As such, management has determined that it is more-likely-than-not that realization of tax benefits recorded in our financial statements will occur within our fiscal year. The amount of tax benefit recorded for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 reflects management’s estimate of the annual effective tax rate applied to year-to-date loss from continuing operations adjusted for the tax impact of discrete items for the periods presented.

NOTE 8: COMMITMENTS AND CONTINGENCIES

~~All assisted~~Assisted tax returns are covered by our 100% accuracy guarantee, whereby we will reimburse a client for penalties and interest attributable to an H&R Block error on a return. DIY tax returns are covered by our 100% accuracy guarantee, whereby we will reimburse a client up to a maximum of $10,000 if our software makes an arithmetic error that results in payment of penalties and/or interest to the IRS that a client would otherwise not have been required to pay. Our liability related to estimated losses under the 100% accuracy guarantee was ~~$11.5~~$12.7 million and ~~$12.6~~$14.0 million as of ~~December 31, 2021~~September 30, 2022 and June 30, ~~2021,~~2022, respectively. The short-term and long-term portions of this liability are included in deferred revenue and other liabilities in the consolidated balance sheets.

Liabilities related to acquisitions for (1) estimated contingent consideration based on expected financial performance of the acquired business and economic conditions at the time of acquisition and (2) estimated accrued compensation related to continued employment of key employees were ~~$18.4~~$16.0 million and ~~$17.3~~$12.9 million as of ~~December 31, 2021~~September 30, 2022 and June 30, ~~2021,~~2022, respectively, with amounts recorded in deferred revenue and other liabilities. Should actual results differ from our estimates, future payments made will differ from the above estimate and any differences will be recorded in results from continuing operations.

We have contractual commitments to fund certain franchises with approved revolving lines of credit. Our total obligation under these lines of credit was ~~$24.9~~$15.3 million at ~~December 31, 2021,~~September 30, 2022, and net of amounts drawn and outstanding, our remaining commitment to fund totaled ~~$12.3~~$8.7 million.

In March 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to provide economic and other relief as a result of the COVID-19 pandemic. The CARES Act includes, among other items, provisions relating to refundable employee retention payroll tax credits. During the first quarter, we applied


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for employee retention credits related to calendar year 2020. Due to the complex nature of the employee retention credit computations, any benefits we may receive are uncertain and may significantly differ from our current estimates. We plan to record any benefit related to these credits upon both the receipt of the benefit and the resolution of the uncertainties, which could include the completion of any potential audit or examination, or the expiration of the related statute of limitations.

~~Emerald Advance~~SM lines of credit (EAs) are originated by MetaBank®, N.A. (Meta). We purchase a 90% participation interest, at par, in all EAs originated by Meta in accordance with our participation agreement. At December 31, 2021, the principal balance of purchased participation interests for the current year totaled $247.7 million.

NOTE 9: LITIGATION AND OTHER RELATED CONTINGENCIES

We are a defendant in numerous litigation and arbitration matters, arising both in the ordinary course of business and otherwise, including as described below. The matters described below are not all of the lawsuits or arbitrations to which we are subject. In some of the matters, very large or indeterminate amounts, including punitive damages, ~~are~~may be sought. U.S. jurisdictions permit considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the ~~jurisdiction of the court.~~jurisdiction. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. We believe that the monetary relief which may be specified in a lawsuit or a claim bears little relevance to its merits or disposition value due to this variability in pleadings and our experience in ~~litigating or~~handling and resolving ~~through settlement of~~ numerous claims over an extended period of time.

The outcome of a ~~litigation~~ matter and the amount or range of potential loss at particular points in time may be difficult to ascertain. Among other things, uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how ~~trial~~courts and ~~appellate courts~~arbitrators will apply the law. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will ~~themselves~~ view the relevant evidence and applicable law.

In addition to litigation and arbitration matters, we are also subject to ~~claims and~~ other loss contingencies arising out of our business activities, including as described below.

We accrue liabilities for litigation, ~~claims, including indemnification and contribution claims,~~arbitration, and other related loss contingencies and any related settlements ~~(each referred to, individually, as a "matter" and, collectively, as "matters")~~ when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued. If no amount within the range can be identified as a better estimate than any other amount, we accrue the minimum amount in the range.

For such matters where a loss is believed to be reasonably possible, but not probable, or the loss cannot be reasonably estimated, no accrual has been made. It is possible that such matters could require us to pay damages or make other expenditures or accrue liabilities in amounts that could not be reasonably estimated as of ~~December 31, 2021.~~September 30, 2022. While the potential future liabilities could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known, we do not believe any such liabilities are likely to have a material adverse effect on our business and our consolidated financial position, results of operations, and cash flows. ~~As of December 31, 2021 and June 30, 2021 our~~Our total accrued liabilities were $1.7 million as of September 30, 2022 and ~~$1.6 million, respectively.~~June 30, 2022.

Our estimate of the aggregate range of reasonably possible losses includes (1) matters where a liability has been accrued and there is a reasonably possible loss in excess of the amount accrued for that liability, and (2) matters where a liability has not been accrued but we believe a loss is reasonably possible. This aggregate range only represents those losses as to which we are currently able to estimate a reasonably possible loss or range of loss. It does not represent our maximum loss exposure.

Matters for which we are not currently able to estimate the reasonably possible loss or range of loss are not included in this range. We are often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the reasonably possible loss or


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range of loss, such as precise information about the amount of damages or other remedies being asserted, the defenses to the claims being asserted, discovery from other parties and investigation of factual allegations, rulings by courts or arbitrators on motions or appeals, ~~analysis~~analyses by experts, or the status or terms of any settlement negotiations.

The estimated range of reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions, as well as known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. As of ~~December 31, 2021,~~September 30, 2022, we believe the estimate of the aggregate range of reasonably possible losses in excess of amounts accrued, where the range of loss can be estimated, is not material.


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At the end of each reporting period, we review relevant information with respect to litigation, arbitration and other related loss contingencies and update our accruals, disclosures, and estimates of reasonably possible loss or range of loss based on such reviews. Costs incurred with defending matters are expensed as incurred. Any receivable for insurance recoveries is recorded separately from the corresponding liability, and only if recovery is determined to be probable and reasonably estimable.

We believe we have meritorious defenses to the claims asserted in the various matters described in this note, and we intend to defend them vigorously. The amounts claimed in the matters are substantial, however, and there can be no assurances as to their outcomes. In the event of unfavorable outcomes, it could require modifications to our operations; in addition, the amounts that may be required to be paid to discharge or settle the matters could be substantial and could have a material adverse impact on our business and our consolidated financial position, results of operations, and cash flows.

LITIGATION, CLAIMS OR OTHER LOSS CONTINGENCIES PERTAINING TO CONTINUING OPERATIONS –

Free File Litigation. On May 6, 2019, the Los Angeles City Attorney filed a lawsuit on behalf of the People of the State of California in the Superior Court of California, County of Los Angeles (Case No. 19STCV15742). The case is styled The People of the State of California v. HRB Digital LLC, et al. The complaint alleges that H&R Block, Inc. and HRB Digital LLC engaged in unfair, fraudulent and deceptive business practices and acts in connection with the IRS Free File Program in violation of the California Unfair Competition Law, California Business and Professions Code §§17200 et seq. The complaint seeks injunctive relief, restitution of monies paid to H&R Block by persons in the State of California who were eligible to file under the IRS Free File Program for the time period starting 4 years prior to the date of the filing of the complaint, pre-judgment interest, civil penalties and costs. The City Attorney subsequently dismissed H&R Block, Inc. from the case and amended its complaint to add HRB Tax Group, Inc. We filed a motion to stay the case based on the primary jurisdiction doctrine, which was denied. We filed a motion for summary judgment, which remains pending. A trial date is set for ~~November 8, 2022. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter.~~

On May 17, 2019, a putative class action complaint was filed against H&R Block, Inc., HRB Tax Group, Inc. and HRB Digital LLC in the Superior Court of the State of California, County of San Francisco (Case No. CGC-19576093). The case was removed to the United States District Court for the Northern District of California on June 21, 2019 (Case No. 3:19-cv-03610-SK) and is styled ~~Snarr v. HRB Tax Group, Inc., et al. The plaintiff filed a first amended complaint on~~ August 9, 2019, dropping H&R Block, Inc. from the case. In the amended complaint, the plaintiff seeks to represent classes of all persons, between May 17, 2015 and the present, who (1) paid to file one or more federal tax returns through H&R Block’s internet-based filing system, (2) were eligible to file those tax returns for free through the H&R Block Free File offer of the IRS Free File Program, and (3) resided in and were citizens of California at the time of the payments. The plaintiff generally alleges unlawful, unfair, fraudulent and deceptive business practices and acts in connection with the IRS Free File Program in violation of the California Consumers Legal Remedies Act, California Civil Code §§1750, et seq., California False Advertising Law, California Business and Professions Code §§17500, et seq., and California Unfair Competition Law, California Business and Professions Code §§17200 et seq. The plaintiff seeks declaratory and injunctive relief, restitution, compensatory damages, punitive damages, interest, attorneys’ fees and costs. We filed a motion to stay the proceedings based on the primary jurisdiction doctrine and a motion to compel arbitration, both of which were denied. Our appeal of the court's arbitration order was denied; we filed a petition for review with the United States Supreme Court. After filing an answer to the amended complaint, we filed a renewed motion to compel arbitration, which the court denied on May 13, 2021; we filed an appeal. We filed a motion to dismiss the plaintiff's claim for public injunctive relief. The court granted our motion and dismissed the case in its entirety on August 24, 2021. The plaintiff filed an


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~~appeal, which was later dismissed by the parties, along with the other appeals. We have no accrual related to this matter as of December 31, 2021.~~

On September 26, 2019, a putative class action complaint was filed against H&R Block, Inc., HRB Tax Group, Inc., HRB Digital LLC and Free File, Inc. in the United States District Court for the Western District of Missouri (Case No. 4:19-cv-00788-GAF) styled ~~Swanson v. H&R Block, Inc., et al.~~ The plaintiff seeks to represent both a nationwide class and a California subclass of all persons eligible for the IRS Free File Program who paid to use an H&R Block product to file an online tax return for the 2002 through 2018 tax filing years. The plaintiff generally alleges unlawful, unfair, fraudulent and deceptive business practices and acts in connection with the IRS Free File Program in violation of the California Consumers Legal Remedies Act, California Civil Code §§1750, ~~et seq., California False Advertising Law, California Business and Professions Code §§17500,~~ ~~et seq., California Unfair Competition Law, California Business and Professions Code §§17200,~~ ~~et seq~~., in addition to breach of contract and fraud. The plaintiff seeks injunctive relief, disgorgement, compensatory damages, statutory damages, punitive damages, interest, attorneys’ fees and costs. The court granted a motion to dismiss filed by defendant Free File, Inc. for lack of personal jurisdiction. The court granted our motion to compel arbitration and stayed the case pending the outcome of individual arbitration.14, 2023. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter.

We have also received and are responding to certain governmental inquiries relating to the IRS Free File Program.

~~LITIGATION, CLAIMS, INCLUDING INDEMNIFICATION AND CONTRIBUTION CLAIMS, OR OTHER LOSS CONTINGENCIES PERTAINING TO~~ DISCONTINUED MORTGAGE OPERATIONS – Although SCC ceased its mortgage loan origination activities in December 2007 and sold its loan servicing business in April 2008, SCC or the Company has been ~~remains,~~ and may in the future be, subject to litigation ~~claims,~~and other loss contingencies, including indemnification and contribution claims, ~~and other loss contingencies~~ pertaining to SCC's mortgage business activities that occurred prior to such termination and sale. ~~These~~

Parties, including underwriters, depositors, and securitization trustees, have been, remain, or may in the future be, involved in lawsuits, threatened lawsuits, or settlements related to securitization transactions in which SCC participated. A variety of claims are alleged in these matters, including violations of federal and ~~other loss contingencies include actions by regulators, third parties seeking~~state securities laws and common law fraud, breaches of representations and warranties, or violations of statutory requirements. SCC has received notices of potential indemnification or contribution ~~including depositors, underwriters,~~obligations relating to such matters. Additional lawsuits against the parties to the securitization transactions may be filed in the future, and ~~securitization trustees, individual plaintiffs, and cases in which plaintiffs seek~~SCC may receive additional notices of potential indemnification, contribution or similar obligations with respect to ~~represent~~existing or new lawsuits or settlements of such lawsuits or other claims. We have not concluded that a ~~class~~loss related to any of ~~others alleged to be similarly situated. Among other things,~~ these lawsuits, claims, and contingencies allege or may allege discriminatory or unfair and deceptive loan origination and servicing (including debt collection, foreclosure, and eviction) practices, other common law torts, rights topotential indemnification or contribution ~~breach~~claims is probable, nor have we accrued a liability related to any of contract, violations of securities laws, and violations of a variety of federal statutes, including the Truth in Lending Act (TILA), Equal Credit Opportunity Act, Fair Housing Act, Real Estate Settlement Procedures Act (RESPA), Home Ownership & Equity Protection Act (HOEPA), as well as similar state statutes. these claims.

It is difficult to predict either the likelihood of new matters being initiated or the outcome of existing matters. In many of these matters it is not possible to estimate a reasonably possible loss or range of loss due to, among other things, the inherent uncertainties involved in these matters ~~some of which are beyond the Company's control,~~ and the indeterminate damages ~~sought in some of these matters.~~

Mortgage loans originated by SCC were sold either as whole loans to single third-party buyers, who generally securitized such loans, or in the form of residential mortgage-backed securities (RMBSs). In connection with the sale of loans and/or RMBSs, SCC made certain representations and warranties. Claims under these representations and warranties together with any settlement arrangements related to these losses are collectively referred to as "representation and warranty claims." The statute of limitations for a contractual claim to enforce a representation and warranty obligation is generally six years or such shorter limitations period that may apply under the law of a state where the economic injury occurred. On June 11, 2015, the New York Court of Appeals, New York’s highest court, held in ~~ACE Securities Corp. v. DB Structured Products, Inc.~~, that the six-year statute of limitations under New York law starts to run at the time the representations and warranties are made, not the date when the repurchase demand was denied. This decision applies to claims and lawsuits brought against SCC where New York law governs. New York law governs many, though not all, of the RMBS transactions into which SCC entered. However, this decision would not affect representation and warranty claims and lawsuits SCC has received or may receive, for example, where the statute of limitations has been tolled by agreement or a suit was timely filed.

~~In response to the statute of limitations rulings in the~~ ~~ACE~~ ~~case and similar rulings in other state and federal courts, parties seeking to pursue representation and warranty claims or lawsuits have sought, and may in the~~


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~~future seek, to distinguish certain aspects of the~~ ~~ACE~~ decision, pursue alternate legal theories of recovery, or assert claims against other contractual parties such as securitization trustees. For example, a 2016 ruling by a New York intermediate appellate court, followed by the federal district court in the second Homeward case described below, allowed a counterparty to pursue litigation on additional loans in the same trust even though only some of the loans complied with the condition precedent of timely pre-suit notice and opportunity to cure or repurchase. Additionally, plaintiffs in litigation to which SCC is not party have alleged breaches of an independent contractual duty to provide notice of material breaches of representations and warranties and pursued separate claims to which, they argue, the statute of limitations ruling in the ~~ACE~~ ~~case does not apply. The impact on SCC from alternative legal theories seeking to avoid or distinguish the~~ ~~ACE~~ ~~decision, or judicial limitations on the~~ ~~ACE~~ ~~decision, is unclear. SCC has not accrued liabilities for claims not subject to a tolling arrangement or not relating back to timely filed litigation.~~

~~On May 31, 2012, a lawsuit was filed by Homeward Residential, Inc. (Homeward) in the Supreme Court of the State of New York, County of New York, against SCC styled~~ ~~Homeward Residential, Inc. v. Sand Canyon Corporation~~ (Index No. 651885/2012). SCC removed the case to the United States District Court for the Southern District of New York on June 28, 2012 (Case No. 12-cv-5067). The plaintiff, in its capacity as the master servicer for Option One Mortgage Loan Trust 2006-2 and for the benefit of the trustee and the certificate holders of such trust, asserts claims for breach of contract, anticipatory breach, indemnity, and declaratory judgment in connection with alleged losses incurred as a result of the breach of representations and warranties relating to SCC and to loans sold to the trust. The trust was originally collateralized with approximately 7,500 loans. The plaintiff seeks specific performance of alleged repurchase obligations or damages to compensate the trust and its certificate holders for alleged actual and anticipated losses, as well as a repurchase of all loans due to alleged misrepresentations by SCC as to itself and as to the loans' compliance with its underwriting standards and the value of underlying real estate. In response to a motion filed by SCC, the court dismissed the plaintiff's claims for breach of the duty to cure or repurchase, anticipatory breach, indemnity, and declaratory judgment. The case proceeded on the remaining claims. Representatives of a holder of certificates in the trust filed a motion to intervene to add H&R Block, Inc. to the lawsuit and assert claims against H&R Block, Inc. based on alter ego, corporate veil-piercing, and agency law. On February 12, 2018, the court denied the motion to intervene. Discovery in the case closed on September 30, 2019, with motions for summary judgment filed on December 6, 2019. On November 9, 2020, the court granted SCC's motion for summary judgment and dismissed Homeward's claims in their entirety as untimely under the applicable statute of limitations. Homeward appealed that ruling on December 4, 2020, and the appeal remains pending. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter.

~~On September 28, 2012, a second lawsuit was filed by Homeward in the United States District Court for the Southern District of New York against SCC styled~~ ~~Homeward Residential, Inc. v. Sand Canyon Corporation~~ (Case No. 12-cv-7319). The plaintiff, in its capacity as the master servicer for Option One Mortgage Loan Trust 2006-3 and for the benefit of the trustee and the certificate holders of such trust, asserts claims for breach of contract and indemnity in connection with losses allegedly incurred as a result of the breach of representations and warranties relating to 96 loans sold to the trust. The trust was originally collateralized with approximately 7,500 loans. The plaintiff seeks specific performance of alleged repurchase obligations or damages to compensate the trust and its certificate holders for alleged actual and anticipated losses. In response to a motion filed by SCC, the court dismissed the plaintiff's claims for breach of the duty to cure or repurchase and for indemnification of its costs associated with the litigation. On September 30, 2016, the court granted a motion allowing the plaintiff to file a second amended complaint to include breach of contract claims with respect to 649 additional loans in the trust and to allow such claims with respect to other loans in the trust proven to be in material breach of SCC’s representations and warranties. SCC filed a motion for reconsideration, followed by a motion for leave to appeal the ruling, both of which were denied. On October 6, 2016, the plaintiff filed its second amended complaint. In response to a motion filed by SCC, the court dismissed the plaintiff's claim for breach of one of the representations. The case proceeded on the remaining claims. Representatives of a holder of certificates in the trust filed a motion to intervene to add H&R Block, Inc. to the lawsuit and assert claims against H&R Block, Inc. based on alter ego, corporate veil-piercing, and agency law. On February 12, 2018, the court denied the motion to intervene. The settlement payments that were made in fiscal year 2018 for representation and warranty claims related to some of the loans in this case. Discovery in the case closed on September 30, 2019, with motions for summary judgment filed on December 6, 2019. On November 9, 2020, the court granted SCC's motion for


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summary judgment and dismissed Homeward's claims in their entirety as untimely under the applicable statute of limitations. Homeward appealed that ruling on December 4, 2020, and the appeal remains pending. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter.

Parties, including underwriters, depositors, and securitization trustees, are, or have been, involved in multiple lawsuits, threatened lawsuits, and settlements related to securitization transactions in which SCC participated. A variety of claims are alleged in these matters, including violations of federal and state securities laws and common law fraud, based on alleged materially inaccurate or misleading disclosures, that originators, depositors, securitization trustees, or servicers breached their representations and warranties or otherwise failed to fulfill their obligations, or that securitization trustees violated statutory requirements by failing to properly protect the certificate holders’ interests. SCC has received notices of claims for indemnification or potential indemnification obligations relating to such matters, including lawsuits or settlements to which underwriters, depositors, or securitization trustees are party. Additional lawsuits against the parties to the securitization transactions may be filed in the future, and SCC may receive additional notices of claims for indemnification, contribution or similar obligations with respect to existing or new lawsuits or settlements of such lawsuits or other claims. Certain of the notices received included, and future notices may include, a reservation of rights to assert claims for contribution, which are referred to herein as "contribution claims." Contribution claims may become operative if indemnification is unavailable or insufficient to cover all of the losses and expenses involved. We have not concluded that a loss related to any of these indemnification or contribution claims is probable, nor have we accrued a liability related to any of these claims.

sought. If the amount that SCC is ultimately required to pay with respect to ~~claims and litigation related to its past sales and securitizations of mortgage loans,~~loss contingencies, together with payment of SCC's related administration and legal expense, exceeds SCC's net assets, the creditors of SCC, other potential claimants, or a bankruptcy trustee if SCC were to file or be forced into bankruptcy, may attempt to assert claims against us for payment of SCC's obligations. Claimants also may ~~also~~ attempt to assert claims against or seek payment directly from the Company even if SCC's assets exceed its liabilities. SCC's principal assets, as of ~~December 31, 2021,~~September 30, 2022, total approximately ~~$267~~$264 million and consist of an intercompany note receivable. We believe our legal position is strong on any potential corporate veil-piercing arguments; however, if this position is challenged and not upheld, it could


H&R Block, Inc. \|Q1 FY2023 Form 10-Q			13

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have a material adverse effect on our business and our consolidated financial position, results of operations, and cash flows.

OTHER – We are from time to time a party to litigation, ~~claims~~arbitration and other loss contingencies not discussed herein arising out of our business operations. These matters may include actions by state attorneys general, other state regulators, federal regulators, individual plaintiffs, and cases in which plaintiffs seek to represent others who may be similarly situated.

While we cannot provide assurance that we will ultimately prevail in each instance, we believe the amount, if any, we are required to pay to discharge or settle these other matters will not have a material adverse impact on our business and our consolidated financial position, results of operations, and cash flows.


18			~~Q2 FY2022 Form 10-Q\|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~RECENT DEVELOPMENTS~~

On December 20, 2021, we entered into a First Amendment to our August 2020 Program Management Agreement (PMA) with MetaBank®, N.A. (Meta), which among other things, extends the PMA through June 30, 2025, and adds Spruce℠ accounts to the program.

In January 2022, we launched the Spruce℠ mobile banking platform as a part of the Financial Products imperative of our previously-announced Block Horizons 2025 strategic plan. The Spruce℠ solution, built by H&R Block with banking products ~~powered~~ ~~by Meta, includes a spending account with a debit card, along with a connected savings account that allows for budgeting for specific goals.~~

~~FINANCIAL OVERVIEW~~

Our revenues for the three months ended December 31, 2021 increased $16.9 million, or 11.9%, when compared to the prior year period, primarily due to higher Emerald Card® activity, and we recorded a pretax loss of $298.9 million compared to $300.5 million in the prior year.

Our revenues for the six months ended December 31, 2021 decreased $207.9 million, or 37.2%, when compared to the prior year, primarily due to the extension of the 2019 tax season to July 15, 2020 in the prior year period. We recorded a pretax loss of $496.2 million compared to $333.4 million in the prior year.


~~H&R Block, Inc.~~ ~~\|Q2 FY2022 Form 10-Q~~			19

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RESULTS OF OPERATIONS

Our subsidiaries provide assisted and DIY tax preparation solutions through multiple channels (including in-person, online and mobile applications, virtual, and desktop software) and distribute H&R Block-branded products and services, including those of our bank ~~partner,~~partners, to the general public primarily in the U.S., Canada and Australia. Tax returns are either prepared by H&R Block tax professionals (in company-owned or franchise offices, virtually or via an internet review) or prepared and filed by our clients through our DIY tax solutions. We also offer small business ~~financial~~ solutions through our company-owned and franchise offices and online through Wave. We report a single segment that includes all of our continuing operations.

U.S. Operating Statistics
Six months ended December 31, 2021
2020(1)
Change % Change
Tax returns prepared: (in 000s) (2)
Company-owned operations 258 985 (727) (73.8) %
Franchise operations 134 399 (265) (66.4) %
Total assisted 392 1,384 (992) (71.7) %
Desktop 34 350 (316) (90.3) %
Online 117 752 (635) (84.4) %
Total DIY 151 1,102 (951) (86.3) %
Total U.S. Returns 543 2,486 (1,943) (78.2) %
Net Average Charge: (3)
Company-owned operations $ 250.10 $ 244.82 $ 5.28 2.2 %
Franchise operations (4)
$ 256.48 $ 233.95 $ 22.53 9.6 %
Online $ 48.82 $ 56.02 $ (7.20) (12.9) %

~~(1)~~ ~~Represents a partial 2019 individual tax filing season, which was extended until July 15, 2020.~~

~~(2)~~ An assisted tax return is defined as a current or prior year individual or business tax return that has been accepted by the client. A DIY online return is defined as a current year individual or business tax return that has been accepted by the client. A DIY desktop return is defined as a current year individual or business tax return that has been electronically submitted to the IRS.

~~(3)~~ ~~Net average charge is calculated as total tax preparation fees divided by tax returns prepared.~~

~~(4)~~ Net average charge related to H&R Block Franchise operations represents tax preparation fees collected by H&R Block franchisees divided by returns prepared in franchise offices. H&R Block will recognize a portion of franchise revenues as franchise royalties based on the terms of franchise agreements.

We provide Net Average Charge as a key operating metric because we consider it an important supplemental measure useful to analysts, investors, and other interested parties as it provides insights into pricing and tax return mix relative to our customer base, which are significant drivers of revenue. Our definition of Net Average Charge may not be comparable to similarly titled measures of other companies.


2014			~~Q2 FY2022~~Q1 FY2023 Form 10-Q\| H&R Block, Inc.

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~~RESULTS OF OPERATIONS~~


Consolidated – Financial Results	Consolidated – Financial Results			(in 000s, except per share amounts)						Consolidated – Financial Results			(in 000s, except per share amounts)
Three months ended December 31,		2021		2020		$ Change		% Change
Three months ended September 30,										Three months ended September 30,	2022		2021		$ Change		% Change
Revenues:	Revenues:									Revenues:
U.S. assisted tax preparation		$	30,845	$	34,020	$	(3,175)	(9.3)	%
U.S. royalties		3,404		5,357		(1,953)		(36.5)	%
U.S. DIY tax preparation		9,210		6,114		3,096		50.6	%
International		27,907		26,637		1,270		4.8	%
U.S. tax preparation and related services:										U.S. tax preparation and related services:
Assisted tax preparation										Assisted tax preparation	$	36,312	$	33,607	$	2,705	8.0	%
Royalties										Royalties	6,228		7,358		(1,130)		(15.4)	%
DIY tax preparation										DIY tax preparation	3,158		4,061		(903)		(22.2)	%
Refund Transfers	Refund Transfers	777		397		380		95.7	%	Refund Transfers	1,284		1,665		(381)		(22.9)	%
Emerald Card®		24,830		9,962		14,868		149.2	%
Peace of Mind® Extended Service Plan	Peace of Mind® Extended Service Plan	17,315		18,570		(1,255)		(6.8)	%	Peace of Mind® Extended Service Plan	24,770		24,836		(66)		(0.3)	%
Tax Identity Shield®	Tax Identity Shield®	5,200		4,809		391		8.1	%	Tax Identity Shield®	5,167		5,153		14		0.3	%
Other										Other	9,360		9,745		(385)		(4.0)	%
Total U.S. tax preparation and related services:										Total U.S. tax preparation and related services:	86,279		86,425		(146)		(0.2)	%
Financial services:										Financial services:
Emerald Card® and SpruceSM										Emerald Card® and SpruceSM	11,612		28,258		(16,646)		(58.9)	%
Interest and fee income on Emerald AdvanceSM	Interest and fee income on Emerald AdvanceSM	12,424		14,039		(1,615)		(11.5)	%	Interest and fee income on Emerald AdvanceSM	614		479		135		28.2	%
Total financial services										Total financial services	12,226		28,737		(16,511)		(57.5)	%
International										International	58,834		58,325		509		0.9	%
Wave	Wave	19,497		14,837		4,660		31.4	%	Wave	22,646		19,137		3,509		18.3	%
Other		7,407		7,223		184		2.5	%
Total revenues	Total revenues	158,816		141,965		16,851		11.9	%	Total revenues	$	179,985	$	192,624	$	(12,639)	(6.6)	%
Compensation and benefits:	Compensation and benefits:									Compensation and benefits:
Field wages	Field wages	70,058		66,307		(3,751)		(5.7)	%	Field wages	61,673		56,079		(5,594)		(10.0)	%
Other wages	Other wages	64,067		63,568		(499)		(0.8)	%	Other wages	63,753		58,064		(5,689)		(9.8)	%
Benefits and other compensation	Benefits and other compensation	30,207		27,650		(2,557)		(9.2)	%	Benefits and other compensation	34,832		25,450		(9,382)		(36.9)	%
		164,332		157,525		(6,807)		(4.3)	%		160,258		139,593		(20,665)		(14.8)	%
Occupancy	Occupancy	99,296		99,029		(267)		(0.3)	%	Occupancy	97,590		95,822		(1,768)		(1.8)	%
Marketing and advertising	Marketing and advertising	17,141		15,490		(1,651)		(10.7)	%	Marketing and advertising	10,649		10,073		(576)		(5.7)	%
Depreciation and amortization	Depreciation and amortization	35,631		39,699		4,068		10.2	%	Depreciation and amortization	33,624		35,715		2,091		5.9	%
Bad debt	Bad debt	13,666		16,570		2,904		17.5	%	Bad debt	329		1,043		714		68.5	%
Other	Other	106,050		93,200		(12,850)		(13.8)	%	Other	86,646		85,150		(1,496)		(1.8)	%
Total operating expenses	Total operating expenses	436,116		421,513		(14,603)		(3.5)	%	Total operating expenses	389,096		367,396		(21,700)		(5.9)	%
Other income (expense), net	Other income (expense), net	1,467		538		929		172.7	%	Other income (expense), net	3,611		284		3,327		1,171.5	%
Interest expense on borrowings	Interest expense on borrowings	(23,085)		(21,489)		(1,596)		(7.4)	%	Interest expense on borrowings	(15,824)		(22,830)		7,006		30.7	%
Pretax loss	Pretax loss	(298,918)		(300,499)		1,581		0.5	%	Pretax loss	(221,324)		(197,318)		(24,006)		(12.2)	%
Income tax benefit	Income tax benefit	(109,845)		(46,510)		63,335		136.2	%	Income tax benefit	(53,957)		(47,373)		6,584		13.9	%
Net loss from continuing operations	Net loss from continuing operations	(189,073)		(253,989)		64,916		25.6	%	Net loss from continuing operations	(167,367)		(149,945)		(17,422)		(11.6)	%
Net loss from discontinued operations	Net loss from discontinued operations	(1,532)		(1,762)		230		13.1	%	Net loss from discontinued operations	(1,054)		(1,656)		602		36.4	%
Net loss	Net loss	$	(190,605)	$	(255,751)	$	65,146	25.5	%	Net loss	$	(168,421)	$	(151,601)	$	(16,820)	(11.1)	%
BASIC AND DILUTED LOSS PER SHARE:	BASIC AND DILUTED LOSS PER SHARE:									BASIC AND DILUTED LOSS PER SHARE:
Continuing operations	Continuing operations	$	(1.09)	$	(1.38)	$	0.29	21.0	%	Continuing operations	$	(1.05)	$	(0.84)	$	(0.21)	(25.0)	%
Discontinued operations	Discontinued operations	(0.01)		(0.01)		—		—	%	Discontinued operations	(0.01)		(0.01)		—		—	%
Consolidated	Consolidated	$	(1.10)	$	(1.39)	$	0.29	20.9	%	Consolidated	$	(1.06)	$	(0.85)	$	(0.21)	(24.7)	%

Adjusted diluted EPS(1)	Adjusted diluted EPS(1)	$	(1.02)	$	(1.28)	$	0.26	20.3	%	Adjusted diluted EPS(1)	$	(0.99)	$	(0.78)	$	(0.21)	(26.9)	%
EBITDA (1)	EBITDA (1)	$	(240,202)	$	(239,311)	$	(891)	(0.4)	%	EBITDA (1)	$	(171,876)	$	(138,773)	$	(33,103)	(23.9)	%

(1) All non-GAAP measures are results from continuing operations. See "Non-GAAP Financial Information" at the end of this item for a reconciliation of non-GAAP measures.

Three months ended ~~December 31, 2021~~September 30, 2022 compared to ~~December 31, 2020~~September 30, 2021

Revenues ~~increased $16.9~~decreased $12.6 million, or ~~11.9%~~6.6%, from the prior year. Emerald Card® revenues increased $14.9 million, or 149.2% due to higher card activity which is a result of the IRS loading Child Tax Credits monthly to Emerald Cards®. Wave revenues increased $4.7 million, or 31.4%, due to higher small business payments processing volumes. U.S. ~~DIY~~assisted tax preparation revenues increased ~~$3.1~~$2.7 million, or ~~50.6%~~8.0%, primarily due to a higher net average charge and slightly higher return volume in the current year. U.S. royalty revenue decreased $1.1 million, or 15.4%, due to ~~higher desktop software~~the timing of royalty incentives.


H&R Block, Inc. ~~\|Q2 FY2022~~\|Q1 FY2023 Form 10-Q			2115

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Emerald Card and Spruce revenues decreased $16.6 million, or 58.9%, due to the IRS loading Child Tax Credits monthly to Emerald Cards® in the prior year.

International tax preparation volumes increased in Australia, which was largely offset by the impacts of foreign currency exchange rates compared to the prior year. ~~U.S. assisted tax preparation~~Wave revenues ~~decreased $3.2~~increased $3.5 million, or ~~9.3%~~18.3%, due to ~~lower off-season tax return volumes and lower net average charge.~~higher small business payments processing volumes.

Total operating expenses increased ~~$14.6~~$21.7 million, or ~~3.5%~~5.9%, from the prior year. Field wages increased ~~$3.8~~$5.6 million, or ~~5.7%~~10%, due to ~~Canadian wage subsidies received~~higher field management wages and a bonus accrual adjustment in the prior ~~year and~~year. Other wages increased $5.7 million, or 9.8%, due to higher ~~bonus accruals~~corporate wages in ~~our Australian tax operations.~~the current year. Benefits and other compensation increased ~~$2.6~~$9.4 million, or ~~9.2%~~36.9%, ~~primarily~~ due to higher employee insurance ~~expenses.~~costs and higher payroll taxes as a result of the increase in wages. Occupancy expense increased $1.8 million, or 1.8%, due to higher office rent rates in the current year. Depreciation and amortization expense decreased ~~$4.1~~$2.1 million, or ~~10.2%, due to~~ ~~lower amortization on acquired intangibles and depreciation on equipment. Bad debt decreased~~ ~~$2.9 million, or~~ ~~17.5%~~5.9%, due to lower ~~Emerald Advance~~SM ~~volumes compared to the prior year.~~amortization of acquired intangibles.

Other operating expenses increased ~~$12.9~~$1.5 million, or ~~13.8%~~1.8%. The components of other expenses are as follows:


								(in 000s)									(in 000s)
Three months ended December 31,		2021		2020		$ Change		% Change
Three months ended September 30,										Three months ended September 30,	2022		2021		$ Change		% Change
Consulting and outsourced services	Consulting and outsourced services	$	27,611	$	24,279	$	(3,332)	(13.7)	%	Consulting and outsourced services	$	18,053	$	25,857	$	7,804	30.2	%
Bank partner fees	Bank partner fees	2,550		1,369		(1,181)		(86.3)	%	Bank partner fees	(19)		108		127		**
Client claims and refunds	Client claims and refunds	6,200		6,347		147		2.3	%	Client claims and refunds	6,770		6,015		(755)		(12.6)	%
Employee and travel expenses	Employee and travel expenses	9,417		8,510		(907)		(10.7)	%	Employee and travel expenses	6,068		4,290		(1,778)		(41.4)	%
Technology-related expenses	Technology-related expenses	23,300		19,446		(3,854)		(19.8)	%	Technology-related expenses	25,915		20,325		(5,590)		(27.5)	%
Credit card/bank charges	Credit card/bank charges	17,710		12,404		(5,306)		(42.8)	%	Credit card/bank charges	16,201		14,961		(1,240)		(8.3)	%
Insurance	Insurance	4,350		2,182		(2,168)		(99.4)	%	Insurance	3,718		3,331		(387)		(11.6)	%
Legal fees and settlements	Legal fees and settlements	4,060		5,070		1,010		19.9	%	Legal fees and settlements	2,286		3,042		756		24.9	%
Supplies	Supplies	5,095		8,331		3,236		38.8	%	Supplies	3,395		2,823		(572)		(20.3)	%
Other	Other	5,757		5,262		(495)		(9.4)	%	Other	4,259		4,398		139		3.2	%
		$	106,050	$	93,200	$	(12,850)	(13.8)	%		$	86,646	$	85,150	$	(1,496)	(1.8)	%

Consulting and outsourced services expense ~~increased $3.3~~decreased $7.8 million, or ~~13.7%~~30.2%, due to ~~our strategic imperatives~~lower call center expenses and data processing fees related to ~~higher~~lower activity on Emerald ~~Cards®.~~Cards. Employee and travel expenses increased $1.8 million, or 41.4%, due to more travel in the current year. Technology-related expenses increased ~~$3.9~~$5.6 million, or ~~19.8%~~27.5%, due to increased investments in information technology. Credit card and bank charges increased ~~$5.3~~$1.2 million, or ~~42.8%~~8.3%, due to higher Wave small business payment processing ~~fees and fees related~~fees.

Other income (expense), net increased $3.3 million primarily due to ~~Emerald Cards~~®~~. Supplies~~higher interest income as a result of higher interest rates. Interest expense on borrowings decreased ~~$3.2~~$7.0 million,, or ~~38.8%~~30.7%, due to ~~office supplies purchased~~the repayment of our $500 million 5.500% Senior Notes in ~~the prior year in response to the COVID-19 pandemic.~~May 2022.

We recorded an income tax benefit of ~~$109.8~~$54.0 million in the current year compared to ~~a benefit of $46.5~~$47.4 million in the prior ~~year, the increase is due to discrete tax items in the current~~ year. The effective tax rate for the three months ended ~~December 31,~~September 30, 2022, and 2021 was 24.4% and ~~2020 was 36.7% and 15.5%~~24.0%, respectively. ~~See~~ ~~Item 1, note 7~~ ~~to the consolidated financial statements for additional discussion.~~


22			~~Q2 FY2022 Form 10-Q\|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

Consolidated - Financial Results (in 000s, except per share amounts)
Six months ended December 31, 2021 2020 $ Change % Change
Revenues:
U.S. assisted tax preparation $ 64,452 $ 241,187 $ (176,735) (73.3) %
U.S. royalties 10,762 28,009 (17,247) (61.6) %
U.S. DIY tax preparation 13,271 53,577 (40,306) (75.2) %
International 86,232 85,413 819 1.0 %
Refund Transfers 2,442 6,510 (4,068) (62.5) %
Emerald Card® 53,088 22,398 30,690 137.0 %
Peace of Mind® Extended Service Plan 42,151 45,762 (3,611) (7.9) %
Tax Identity Shield® 10,353 13,803 (3,450) (25.0) %
Interest and fee income on Emerald AdvanceSM
12,903 14,565 (1,662) (11.4) %
Wave 38,634 28,574 10,060 35.2 %
Other 17,152 19,513 (2,361) (12.1) %
Total revenues 351,440 559,311 (207,871) (37.2) %
Compensation and benefits:
Field wages 126,137 158,852 32,715 20.6 %
Other wages 122,131 126,636 4,505 3.6 %
Benefits and other compensation 55,657 61,455 5,798 9.4 %
303,925 346,943 43,018 12.4 %
Occupancy 195,118 195,879 761 0.4 %
Marketing and advertising 27,214 30,982 3,768 12.2 %
Depreciation and amortization 71,346 77,936 6,590 8.5 %
Bad debt 14,709 17,090 2,381 13.9 %
Other 191,200 170,782 (20,418) (12.0) %
Total operating expenses 803,512 839,612 36,100 4.3 %
Other income (expense), net 1,751 3,042 (1,291) (42.4) %
Interest expense on borrowings (45,915) (56,186) 10,271 18.3 %
Pretax loss (496,236) (333,445) (162,791) (48.8) %
Income tax benefit (157,218) (18,546) 138,672 747.7 %
Net loss from continuing operations (339,018) (314,899) (24,119) (7.7) %
Net loss from discontinued operations (3,188) (3,108) (80) (2.6) %
Net loss $ (342,206) $ (318,007) $ (24,199) (7.6) %
BASIC AND DILUTED LOSS PER SHARE:
Continuing operations $ (1.93) $ (1.68) $ (0.25) (14.9) %
Discontinued operations (0.02) (0.01) (0.01) (100.0) %
Consolidated $ (1.95) $ (1.69) $ (0.26) (15.4) %
Adjusted diluted EPS(1)
$ (1.80) $ (1.49) $ 0.31 20.8 %
EBITDA (1)
$ (378,975) $ (199,323) $ (179,652) (90.1) %

~~(1)~~ ~~All non-GAAP measures are results from continuing operations. See "Non-GAAP Financial Information" at the end of this item for a reconciliation of non-GAAP measures.~~

~~Six months ended December 31, 2021 compared to December 31, 2020~~

Revenues decreased $207.9 million, or 37.2%, from the prior year. The decrease in revenue is due to lower tax return volumes in the current year as the 2019 tax season was extended to July 15, 2020 in the prior year period, whereas the 2020 tax season deadline of May 17, 2021 did not extend into the six month period ended December 31, 2021. This resulted in a decrease in U.S. tax preparation, royalty and Refund Transfer revenues.


~~H&R Block, Inc.~~ ~~\|Q2 FY2022 Form 10-Q~~			23

~~Table of Contents~~

Emerald Card® revenues increased $30.7 million, or 137.0%, due to higher card activity which is a result of the IRS loading Child Tax Credits monthly to Emerald Cards®. Wave revenues increased $10.1 million, or 35.2% due to higher small business payments processing volumes.

Total operating expenses decreased $36.1 million, or 4.3%, from the prior year period. Field wages decreased $32.7 million, or 20.6%, due to lower tax preparation volumes in the current year as a result of the tax season extension in the prior year. Other wages decreased $4.5 million, or 3.6%, due to an adjustment to prior year bonus accruals in the current year. Benefits and other compensation decreased $5.8 million, or 9.4%, due to lower payroll taxes as a result of lower wages. Depreciation and amortization expense decreased $6.6 million, or 8.5%, due primarily to lower amortization of acquired intangibles.

~~Other expenses increased $20.4 million, or 12.0%. The components of other expenses are as follows:~~

Six months ended December 31, 2021 2020 $ Change % Change
Consulting and outsourced services $ 53,468 $ 43,043 $ (10,425) (24.2) %
Bank partner fees 2,658 (1,065) (3,723) **
Client claims and refunds 12,215 10,873 (1,342) (12.3) %
Employee and travel expenses 13,707 11,981 (1,726) (14.4) %
Technology-related expenses 43,625 38,171 (5,454) (14.3) %
Credit card/bank charges 32,671 25,882 (6,789) (26.2) %
Insurance 7,681 6,224 (1,457) (23.4) %
Legal fees and settlements 7,102 12,342 5,240 42.5 %
Supplies 7,918 11,912 3,994 33.5 %
Other 10,155 11,419 1,264 11.1 %
$ 191,200 $ 170,782 $ (20,418) (12.0) %

Consulting and outsourced services expense increased $10.4 million, or 24.2%, due to our strategic imperatives and data processing fees related to higher activity on Emerald Cards®. Technology-related expenses increased $5.5 million, or 14.3%, due to increased investments in information technology. Credit card and bank charges increased $6.8 million, or 26.2%, due to ~~higher Wave small business payment processing fees and fees related to Emerald Cards~~®. ~~Legal fees and settlements decreased $5.2 million, or 42.5%, due to a legal accrual in the prior year.~~

~~Interest expense on borrowings decreased $10.3 million, or 18.3%, primarily due to higher CLOC borrowings in the prior year.~~

We recorded an income tax benefit of $157.2 million in the current year compared to a benefit of $18.5 million in the prior year, the increase is due to discrete tax items in the current year. The effective tax rate for the six months ended December 31, 2021, and 2020 was 31.7% and 5.6%, respectively. See ~~Item 1, note 7~~ ~~to the consolidated financial statements for additional discussion.~~

FINANCIAL CONDITION

These comments should be read in conjunction with the consolidated balance sheets and consolidated statements of cash flows included in Part 1, Item 1.

CAPITAL RESOURCES AND LIQUIDITY –

OVERVIEW – Our primary sources of capital and liquidity include cash from operations (including changes in working capital), draws on our CLOC, and issuances of debt. We use our sources of liquidity primarily to fund working capital, service and repay debt, pay dividends, repurchase shares of our common stock, and acquire businesses.


16			Q1 FY2023 Form 10-Q\| H&R Block, Inc.

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Our operations are highly seasonal and substantially all of our revenues and cash flow are generated during the period from February through April in a typical year. Therefore, we normally require the use of cash to fund losses and working capital needs, periodically resulting in a working capital deficit, during the months of May through January. We typically have relied on available cash balances from the prior tax season and borrowings to meet liquidity needs.


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~~Table of Contents~~

Given the likely availability of a number of liquidity options discussed herein, we believe that, in the absence of any unexpected developments, our existing sources of capital as of ~~December 31, 2021~~September 30, 2022 are sufficient to meet our operating, investing and financing needs.

DISCUSSION OF CONSOLIDATED STATEMENTS OF CASH FLOWS – The following table summarizes our statements of cash flows for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 and ~~2020.~~2021. See Item 1 for the complete consolidated statements of cash flows for these periods.


		(in 000s)					(in 000s)
Six months ended December 31,		2021		2020
Net cash provided by (used in):
Three months ended September 30,						Three months ended September 30,	2022		2021
Net cash used in:						Net cash used in:
Operating activities	Operating activities	$	(913,571)	$	(702,840)	Operating activities	$	(321,666)	$	(312,624)
Investing activities	Investing activities	(57,444)		(58,720)		Investing activities	(37,358)		(19,453)
Financing activities	Financing activities	(149,883)		(1,281,587)		Financing activities	(246,893)		(217,322)
Effects of exchange rates on cash	Effects of exchange rates on cash	(3,330)		11,030		Effects of exchange rates on cash	(13,422)		(3,959)
Net decrease in cash, cash equivalents and restricted cash		$	(1,124,228)	$	(2,032,117)
Net decrease in cash and cash equivalents, including restricted balances						Net decrease in cash and cash equivalents, including restricted balances	$	(619,339)	$	(553,358)

Operating Activities.Cash used in operations totaled ~~$913.6~~$321.7 million for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 compared to ~~$702.8~~$312.6 million in the prior year period. The change is primarily due to ~~higher bonus payments, changes due to~~ the ~~expiration~~timing of ~~tax statutes of limitations~~receivables collections and an increase in our net loss, partially offset by the receipt of an income tax receivable in the current ~~year as a result of the timing of the extended tax season in the prior~~ year.

Investing Activities. Cash used in investing activities totaled ~~$57.4~~$37.4 million for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 compared to ~~$58.7~~$19.5 million in the prior year period. The change is primarily due to ~~a decrease~~payments to acquire businesses in ~~EA revolving loans funded and franchise loans funded.~~the current year.

Financing Activities. Cash used in financing activities totaled ~~$149.9~~$246.9 million for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 compared to ~~$1.3 billion~~$217.3 million in the prior year period. The change is ~~primarily~~ due to ~~the repayment of the $2.0 billion draw on our CLOC in the prior year, partially offset by new draws on our CLOC and the repurchase of shares~~higher share repurchases in the current year.

CASH REQUIREMENTS –

Dividends and Share Repurchases. Returning capital to shareholders in the form of dividends and the repurchase of outstanding shares is, and has historically been, a significant component of our capital allocation plan.

We have consistently paid quarterly dividends. Dividends paid totaled $~~96.9~~43.1 million and $~~100.2~~49.0 million for the ~~six~~three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively. Although we have historically paid dividends and plan to continue to do so, there can be no assurances that circumstances will not change in the future that could affect our ability or decisions to pay dividends.

~~Our current~~In August 2022, the Board of Directors approved a $1.25 billion share repurchase program, ~~has remaining authorization of $239.4 million which is~~ effective through ~~June 2022.~~fiscal year 2025. During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, we repurchased ~~$324.6~~$219.8 million of our common stock at an average price of ~~$24.24~~$44.60 per share. In the prior year period, we repurchased ~~$150.1~~$165.8 million of our common stock at an average price of ~~$15.83~~$24.37 per share. Our current share repurchase program has remaining authorization of $1.03 billion which is effective through June 2025.

Share repurchases may be effectuated through open market transactions, some of which may be effectuated under SEC Rule 10b5-1. The Company may cancel, suspend, or extend the period for the purchase of shares at any time. Any repurchases will be funded primarily through available cash and cash from operations. Although we may continue to repurchase shares, there is no assurance that we will purchase up to the full Board authorization.


H&R Block, Inc. \|Q1 FY2023 Form 10-Q			17

Table of Contents

Capital Investment. Capital expenditures totaled ~~$39.4~~$16.2 million and ~~$34.8~~$15.6 million for the ~~six~~three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively. Our capital expenditures relate primarily to recurring improvements to retail offices, as well as investments in computers, software and related assets. In addition to our capital expenditures, we also made payments to acquire businesses. We acquired franchisee and competitor businesses totaling ~~$19.3~~$16.5 million and ~~$12.2~~$4.3 million during the ~~six~~three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively. See Item 1, note 5 for additional information on our acquisitions.


~~H&R Block, Inc.~~ ~~\|Q2 FY2022 Form 10-Q~~			25

~~Table of Contents~~

FINANCING RESOURCES – The CLOC has ~~capacity~~capacity up to $1.5 billion and is scheduled to expire in June 2026. Proceeds under the CLOC may be used for working capital needs or for other general corporate purposes. We ha~~d an~~had no outstanding balance ~~of $275.0 million~~ under ~~the~~our CLOC ~~as of December 31, 2021~~ and amounts available to borrow were ~~not~~ limited by the debt-to-EBITDA covenant to approximately $1.47 billion as of ~~December 31, 2021.~~September 30, 2022.

~~We intend to redeem the $500.0 million in principal outstanding of our 5.500% notes due November 2022 by the end of the fiscal year.~~

The following table provides ratings for debt issued by Block Financial LLC (Block Financial) as of ~~December 31, 2021~~September 30, 2022 and June 30, ~~2021:~~2022:

As of

~~December 31, 2021~~September 30, 2022

June 30, ~~2021~~2022

Short-term

Long-term

Outlook

Short-term

Long-term

Outlook

Moody's

P-3

Baa3

~~Stable~~Positive

P-3

Baa3

Stable

S&P

A-2

BBB

Stable

A-2

BBB

Stable

Other than described above, there have been no material changes in our borrowings from those reported as of June 30, 2022 in our ~~April 30, 2021~~ Annual Report to Shareholders on Form ~~10-K or our June 30, 2021 Transition Report filed on Form 10-Q.~~10-K.

CASH AND OTHER ASSETS – As of ~~December 31, 2021,~~September 30, 2022, we held cash and cash equivalents, excluding restricted amounts, of ~~$336.3~~$322.8 million, including ~~$164.3~~$127.4 million held by our foreign subsidiaries. We received $100.6 million of our federal income tax receivable subsequent to September 30, 2022.

Foreign Operations. Seasonal borrowing needs of our Canadian operations are typically funded by our U.S. operations. To mitigate foreign currency risk, we sometimes enter into foreign exchange forward contracts. There were no forward contracts outstanding as of ~~December 31, 2021.~~September 30, 2022.

We do not currently intend to repatriate non-borrowed funds held by our foreign subsidiaries in a manner that would trigger a material tax liability.

The impact of changes in foreign exchange rates during the period on our international cash balances resulted in ana decrease of ~~$3.3~~$13.4 million during the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 and in ~~an increase~~a decrease of ~~$11.0~~$4.0 million during the ~~six~~three months ended ~~December 31, 2020.~~September 30, 2021.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS~~– Except as described in~~ ~~Recent Developments~~ ~~related to our amended PMA agreement with Meta and in~~ ~~Item 1, note 8~~ ~~related to the Emerald Advance℠ purchase participation interest, there~~– There have been no material changes in our contractual obligations and commercial commitments from those reported in our ~~April~~June 30, ~~2021~~2022 Annual Report to Shareholders on Form ~~10-K or our June 30, 2021 Transition Report filed on Form 10-Q.~~10-K.

SUMMARIZED GUARANTOR FINANCIAL STATEMENTS– – Block Financial is a 100% owned subsidiary of H&R Block, Inc. Block Financial is the Issuer and H&R Block, Inc. is the full and unconditional Guarantor of our Senior Notes, CLOC and other indebtedness issued from time to time.

The following table presents summarized financial information for H&R Block, Inc. (Guarantor) and Block Financial (Issuer) on a combined basis after intercompany eliminations and excludes investments in and equity earnings in non-guarantor subsidiaries.


SUMMARIZED BALANCE SHEET - GUARANTOR AND ISSUER	SUMMARIZED BALANCE SHEET - GUARANTOR AND ISSUER			(in 000s)		SUMMARIZED BALANCE SHEET - GUARANTOR AND ISSUER			(in 000s)
As of	As of	December 31, 2021		June 30, 2021		As of	September 30, 2022		June 30, 2022
Current assets	Current assets	$	295,276	$	50,737	Current assets	$	50,399	$	38,922
Noncurrent assets	Noncurrent assets	2,177,911		2,155,650		Noncurrent assets	1,682,102		1,698,242
Current liabilities	Current liabilities	592,322		81,388		Current liabilities	106,679		75,855
Noncurrent liabilities	Noncurrent liabilities	1,771,014		1,994,582		Noncurrent liabilities	1,497,818		1,495,732


2618			~~Q2 FY2022~~Q1 FY2023 Form 10-Q\| H&R Block, Inc.

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SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER (in 000s)
Six months ended December 31, 2021 Two months ended June 30, 2021
Total revenues $ 68,095 $ 22,978
Income (loss) from continuing operations before income taxes (22,214) 2,504
Net income (loss) from continuing operations (12,811) 2,953
Net income (loss) (16,000) 1,444


SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER			(in 000s)
	Three months ended September 30, 2022		Twelve months ended June 30, 2022
Total revenues	$	13,420	$	199,683
Income from continuing operations before income taxes	771		44,404
Net income from continuing operations	3,490		41,979
Net income	2,437		35,007

The table above reflects ~~$2.1~~$1.6 billion of non-current intercompany receivables due to the Issuer from non-guarantor subsidiaries as of ~~December 31, 2021~~September 30, 2022 and June 30, ~~2021.~~2022.

REGULATORY ENVIRONMENT

As previously disclosed, in 2017 the Consumer Financial Protection Bureau (CFPB) published its final rule regulating certain consumer credit products (Payday Rule), which the CFPB later limited by removing the mandatory underwriting provisions. Certain limited provisions of the Payday Rule became effective in 2018, but most provisions were scheduled to go into effect in 2019. Litigation in a federal district court in Texas had stayed that effective date, but on August 31, 2021 the judge in that litigation ruled in favor of the CFPB. The plaintiffs appealed, and, on October 14, 2021, the United States Court of Appeals for the Fifth Circuit extended the compliance deadline until after the appeal is resolved. On October 19, 2022, the appellate court found that the funding mechanism for the CFPB was unconstitutional and vacated the Payday Rule; however, the CFPB may take further action to challenge this ruling.

We are unsure whether, when, or in what form the Payday Rule will go into effect. Though we do not currently expect the Payday Rule to have a material adverse impact on Emerald AdvanceSM, our business, or our consolidated financial position, results of operations, and cash flows, we will continue to monitor and analyze the potential impact of any further developments on the Company.

There have been no other material changes in our regulatory environment from what was reported in our ~~April~~June 30, ~~2021~~2022 Annual Report to Shareholders on Form ~~10-K or our June 30, 2021 Transition Report filed on Form 10-Q.~~10-K.

NON-GAAP FINANCIAL INFORMATION

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Because these measures are not measures of financial performance under GAAP and are susceptible to varying calculations, they may not be comparable to similarly titled measures for other companies.

We consider our non-GAAP financial measures to be performance measures and a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business. We make adjustments for certain non-GAAP financial measures related to amortization of intangibles from acquisitions and goodwill impairments. We may consider whether other significant items that arise in the future should be excluded from our non-GAAP financial measures.

We measure the performance of our business using a variety of metrics, including earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations, adjusted EBITDA from continuing operations, ~~EBITDA margin from continuing operations, adjusted EBITDA margin from continuing operations,~~ adjusted diluted earnings per share from continuing operations, free cash flow and free cash ~~flow.~~flow yield. We also use EBITDA from continuing operations and pretax income of continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees.


H&R Block, Inc. ~~\|Q2 FY2022~~\|Q1 FY2023 Form 10-Q			2719

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The following is a reconciliation of net ~~income (loss)~~loss to EBITDA from continuing operations, which is a non-GAAP financial measure:


								(in 000s)						(in 000s)
		Three months ended December 31,				Six months ended December 31,					Three months ended September 30,
		2021		2020		2021		2020				2022		2021
Net loss - as reported	Net loss - as reported	$	(190,605)	$	(255,751)	$	(342,206)	$	(318,007)	Net loss - as reported		$	(168,421)	$	(151,601)
Discontinued operations, net	Discontinued operations, net	1,532		1,762		3,188		3,108		Discontinued operations, net		1,054		1,656
Net loss from continuing operations - as reported	Net loss from continuing operations - as reported	(189,073)		(253,989)		(339,018)		(314,899)		Net loss from continuing operations - as reported		(167,367)		(149,945)
Add back:	Add back:									Add back:
Income tax benefit	Income tax benefit	(109,845)		(46,510)		(157,218)		(18,546)		Income tax benefit		(53,957)		(47,373)
Interest expense	Interest expense	23,085		21,489		45,915		56,186		Interest expense		15,824		22,830
Depreciation and amortization	Depreciation and amortization	35,631		39,699		71,346		77,936		Depreciation and amortization		33,624		35,715
		(51,129)		14,678		(39,957)		115,576				(4,509)		11,172
EBITDA from continuing operations	EBITDA from continuing operations	$	(240,202)	$	(239,311)	$	(378,975)	$	(199,323)	EBITDA from continuing operations		$	(171,876)	$	(138,773)

The following is a reconciliation of our results from continuing operations to our adjusted results from continuing operations, which is a non-GAAP financial measure:


(in 000s, except per share amounts)	(in 000s, except per share amounts)									(in 000s, except per share amounts)
		Three months ended December 31,				Six months ended December 31,					Three months ended September 30,
		2021		2020		2021		2020				2022		2021
Net loss from continuing operations - as reported	Net loss from continuing operations - as reported	$	(189,073)	$	(253,989)	$	(339,018)	$	(314,899)	Net loss from continuing operations - as reported		$	(167,367)	$	(149,945)
Adjustments:	Adjustments:									Adjustments:
Amortization of intangibles related to acquisitions (pretax)	Amortization of intangibles related to acquisitions (pretax)	14,292		16,531		29,162		34,169		Amortization of intangibles related to acquisitions (pretax)		12,696		14,870
Tax effect of adjustments (1)	Tax effect of adjustments (1)	(1,922)		2,086		(5,557)		232		Tax effect of adjustments (1)		(3,221)		(3,635)
Adjusted net loss from continuing operations	Adjusted net loss from continuing operations	$	(176,703)	$	(235,372)	$	(315,413)	$	(280,498)	Adjusted net loss from continuing operations		$	(157,892)	$	(138,710)
Diluted loss per share from continuing operations - as reported	Diluted loss per share from continuing operations - as reported	$	(1.09)	$	(1.38)	$	(1.93)	$	(1.68)	Diluted loss per share from continuing operations - as reported		$	(1.05)	$	(0.84)
Adjustments, net of tax	Adjustments, net of tax	0.07		0.10		0.13		0.19		Adjustments, net of tax		0.06		0.06
Adjusted diluted loss per share from continuing operations	Adjusted diluted loss per share from continuing operations	$	(1.02)	$	(1.28)	$	(1.80)	$	(1.49)	Adjusted diluted loss per share from continuing operations		$	(0.99)	$	(0.78)

(1)Tax effect of adjustments is the difference between the tax provision calculated on a GAAP basis and on an adjusted non-GAAP basis.

FORWARD-LOOKING INFORMATION

This report and other documents filed with the SEC may contain forward-looking statements. In addition, our senior management may make forward-looking statements orally to analysts, investors, the media and others. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as "expects," "anticipates," "intends," "plans," "believes," "commits," "seeks," "estimates," "projects," "forecasts," "targets," "would," "will," "should," "goal," "could," "may" or other similar expressions. Forward-looking statements provide management's current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, client trajectory, income, effective tax rate, earnings per share, cost savings, capital expenditures, dividends, share repurchases, liquidity, capital structure, market share, industry volumes or other financial items, descriptions of management's plans or objectives for future operations, services or products, or descriptions of assumptions underlying any of the above. They may also include the expected impact of the coronavirus (COVID–19) pandemic, including, without limitation, the impact on economic and financial markets, the Company's capital resources and financial condition, future expenditures, potential


28			~~Q2 FY2022 Form 10-Q\|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

regulatory actions, such as extensions of tax filing deadlines or other related relief, changes in consumer behaviors and modifications to the Company's operations relating thereto.


20			Q1 FY2023 Form 10-Q\| H&R Block, Inc.

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All forward-looking statements speak only as of the date they are made and reflect the Company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law.

By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive, operational and regulatory factors, many of which are beyond the Company's control. In addition, factors that may cause the Company’s actual effective tax rate to differ from estimates include the Company’s actual results from operations compared to current estimates, future discrete items, changes in interpretations and assumptions the Company has made, future actions of the Company, and increases in applicable tax rates in jurisdictions where the Company operates. Investors should understand that it is not possible to predict or identify all such factors and, consequently, should not consider any such list to be a complete set of all potential risks or uncertainties.

Details about risks, uncertainties and assumptions that could affect various aspects of our business are included throughout our Annual Report on Form 10-K for the fiscal year ended ~~April~~June 30, ~~2021~~2022 and are also described from time to time in other filings with the SEC. Investors should carefully consider all of these risks, and should pay particular attention to Item 1A, "Risk Factors," and Item 7 under "Critical Accounting Policies" of our Annual Report on Form 10-K for the fiscal year ended ~~April~~June 30, ~~2021.~~2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risks from those reported in our ~~April~~June 30, ~~2021~~2022 Annual Report to Shareholders on Form ~~10-K or our June 30, 2021 Transition Report filed on Form 10-Q.~~10-K.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES – As of the end of the period covered by this Form 10-Q, management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING – There were no changes during the three months ended ~~December 31, 2021~~September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of our material pending legal proceedings, see discussion in Part I, Item 1, note 9 to the consolidated financial statements.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those reported in our ~~April~~June 30, ~~2021~~2022 Annual Report to Shareholders on Form ~~10-K or our June 30, 2021 Transition Report filed on Form 10-Q.~~10-K.


H&R Block, Inc. ~~\|Q2 FY2022~~\|Q1 FY2023 Form 10-Q			2921

Table of Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

A summary of our purchases of H&R Block common stock during the three months ended ~~December 31, 2021~~September 30, 2022 is as follows:

(in 000s, except per share amounts)
Total Number of
Shares Purchased (1)
Average
Price Paid
per Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs (2)
Maximum Dollar Value of
Shares that May Yet Be
Purchased Under the Plans
or Programs (2)
October 1 - October 31 — $ — — $ 398,131
November 1 - November 30 3,422 $ 24.66 3,420 $ 313,797
December 1 - December 31 3,169 $ 23.47 3,169 $ 239,433
6,591 $ 24.09 6,589


(in 000s, except per share amounts)
	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
July 1 - July 31	2	$	36.77	—	$	—
August 1 - August 31	1,021	$	45.88	684	$	1,218,409
September 1 - September 30	4,245	$	44.33	4,243	$	1,030,304
	5,268	$	44.63	4,927

(1)We purchased approximately 2341 thousand shares in connection with funding employee income tax withholding obligations arising upon the lapse of restrictions on restricted share units.

(2)In ~~September 2015,~~August 2022, we announced that our Board of Directors approved a ~~$3.5~~$1.25 billion share repurchase program, effective through June ~~2019. In June 2019, our Board of Directors extended the share repurchase program through June 2022.~~2025.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.


30			~~Q2 FY2022 Form 10-Q\|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

ITEM 6. EXHIBITS

The following exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K:


10.1			~~H&R Block Deferred Compensation~~Form of 2018 Long Term Incentive Plan Award Agreement for ~~Executives,~~Restricted Share Units, as ~~amended and restated effective January 1, 2022.~~
~~10.2~~			~~First Amendment to Program Management Agreement, dated December 20, 2021, by and between Emerald Financial Services, LLC and MetaBank, N.A.,~~approved on August 11, 2022, filed as Exhibit 10.1 to the ~~Company’s~~Company's current report on Form 8-K filed ~~December 23, 2021,~~August 17, 2022, file number 1-06089, is incorporated herein by reference.
~~10.3~~10.2			~~Executive Severance~~Form of 2018 Long Term Incentive Plan Award Agreement for Performance Share Units, as approved on ~~November 4, 2021,~~August 11, 2022, filed as Exhibit ~~10.1~~10.2 to the ~~Company’s~~Company's current report on Form 8-K filed ~~November 8, 2021, file number 1-06089, is incorporated herein by reference.~~
~~10.4~~			Employment Agreement dated November 4, 2021, among H&R Block, Inc., HRB Professional Resources LLC, and Jeffrey J. Jones II, filed as Exhibit 10.1 to the Company’s current report on Form 8-K filed November 4, 2021,August 17, 2022, file number 1-06089, is incorporated herein by reference.
22			List of Guarantor and Issuer Subsidiaries, filed as Exhibit 22 to the Company’s ~~transition report~~Annual Report on Form ~~10-Q~~10-K for the ~~two months ending~~year ended June 30, ~~2021,~~2022, file number 1-06089, is incorporated herein by reference.
31.1			Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification by Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Certification by Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema
101.CAL			Inline XBRL Extension Calculation Linkbase
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


22			Q1 FY2023 Form 10-Q\| H&R Block, Inc. ~~\|Q2 FY2022 Form 10-Q~~			31

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


H&R BLOCK, INC.

/s/ Jeffrey J. Jones II
Jeffrey J. Jones II
President and Chief Executive Officer
~~February 4,~~November 3, 2022

/s/ Tony G. Bowen
Tony G. Bowen
Chief Financial Officer
~~February 4,~~November 3, 2022

/s/ Kellie J. Logerwell
Kellie J. Logerwell
Chief Accounting Officer
~~February 4,~~November 3, 2022


32			~~Q2 FY2022 Form 10-Q\|~~ H&R Block, Inc. \|Q1 FY2023 Form 10-Q			23


(in 000s)
Fiscal year of origination:	Balance		Non-Accrual
2022	$	244,645	$	—
2021 and prior	7,499		7,499
Revolving loans	20,373		12,891
	272,517		$	20,390
Allowance	(23,756)
Net balance	$	248,761


U.S. Operating Statistics
Six months ended December 31,	2021		2020(1)		Change		% Change
Tax returns prepared: (in 000s) (2)
Company-owned operations	258		985		(727)		(73.8)	%
Franchise operations	134		399		(265)		(66.4)	%
Total assisted	392		1,384		(992)		(71.7)	%
Desktop	34		350		(316)		(90.3)	%
Online	117		752		(635)		(84.4)	%
Total DIY	151		1,102		(951)		(86.3)	%
Total U.S. Returns	543		2,486		(1,943)		(78.2)	%
Net Average Charge: (3)
Company-owned operations	$	250.10	$	244.82	$	5.28	2.2	%
Franchise operations (4)	$	256.48	$	233.95	$	22.53	9.6	%
Online	$	48.82	$	56.02	$	(7.20)	(12.9)	%


Consolidated - Financial Results			(in 000s, except per share amounts)
Six months ended December 31,	2021		2020		$ Change		% Change
Revenues:
U.S. assisted tax preparation	$	64,452	$	241,187	$	(176,735)	(73.3)	%
U.S. royalties	10,762		28,009		(17,247)		(61.6)	%
U.S. DIY tax preparation	13,271		53,577		(40,306)		(75.2)	%
International	86,232		85,413		819		1.0	%
Refund Transfers	2,442		6,510		(4,068)		(62.5)	%
Emerald Card®	53,088		22,398		30,690		137.0	%
Peace of Mind® Extended Service Plan	42,151		45,762		(3,611)		(7.9)	%
Tax Identity Shield®	10,353		13,803		(3,450)		(25.0)	%
Interest and fee income on Emerald AdvanceSM	12,903		14,565		(1,662)		(11.4)	%
Wave	38,634		28,574		10,060		35.2	%
Other	17,152		19,513		(2,361)		(12.1)	%
Total revenues	351,440		559,311		(207,871)		(37.2)	%
Compensation and benefits:
Field wages	126,137		158,852		32,715		20.6	%
Other wages	122,131		126,636		4,505		3.6	%
Benefits and other compensation	55,657		61,455		5,798		9.4	%
	303,925		346,943		43,018		12.4	%
Occupancy	195,118		195,879		761		0.4	%
Marketing and advertising	27,214		30,982		3,768		12.2	%
Depreciation and amortization	71,346		77,936		6,590		8.5	%
Bad debt	14,709		17,090		2,381		13.9	%
Other	191,200		170,782		(20,418)		(12.0)	%
Total operating expenses	803,512		839,612		36,100		4.3	%
Other income (expense), net	1,751		3,042		(1,291)		(42.4)	%
Interest expense on borrowings	(45,915)		(56,186)		10,271		18.3	%
Pretax loss	(496,236)		(333,445)		(162,791)		(48.8)	%
Income tax benefit	(157,218)		(18,546)		138,672		747.7	%
Net loss from continuing operations	(339,018)		(314,899)		(24,119)		(7.7)	%
Net loss from discontinued operations	(3,188)		(3,108)		(80)		(2.6)	%
Net loss	$	(342,206)	$	(318,007)	$	(24,199)	(7.6)	%
BASIC AND DILUTED LOSS PER SHARE:
Continuing operations	$	(1.93)	$	(1.68)	$	(0.25)	(14.9)	%
Discontinued operations	(0.02)		(0.01)		(0.01)		(100.0)	%
Consolidated	$	(1.95)	$	(1.69)	$	(0.26)	(15.4)	%
Adjusted diluted EPS(1)	$	(1.80)	$	(1.49)	$	0.31	20.8	%
EBITDA (1)	$	(378,975)	$	(199,323)	$	(179,652)	(90.1)	%


SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER			(in 000s)
	Six months ended December 31, 2021		Two months ended June 30, 2021
Total revenues	$	68,095	$	22,978
Income (loss) from continuing operations before income taxes	(22,214)		2,504
Net income (loss) from continuing operations	(12,811)		2,953
Net income (loss)	(16,000)		1,444