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	~~March 31,~~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 ~~April 29,~~October 31, 2022: ~~159,594,159~~155,468,155 shares.

Table of Contents

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

Table of Contents


	PART I
Item 1.	Consolidated Statements of Operations and Comprehensive ~~Income~~Loss Three ~~and nine~~ months ended ~~March 31,~~September 3 0 , 2022 and 2021	1
	Consolidated Balance Sheets As of ~~March~~September ~~31, 202~~3 20 , 2022 and June 30, ~~2021~~20 22	2
	Consolidated Statements of Cash Flows ~~Nine~~Three months ended ~~March 31,~~September 3 0 , 2022 and 2021	3
	Consolidated Statements of Stockholders' Equity Three ~~and nine~~ months ended ~~March 31,~~September 3 0 , 2022 and 2021	4
	Notes to Consolidated Financial Statements	65
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1814
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2821
Item 4.	Controls and Procedures	2821
	PART II
Item 1.	Legal Proceedings	2821
Item 1A.	Risk Factors	2821
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2922
Item 3.	Defaults Upon Senior Securities	2922
Item 4.	Mine Safety Disclosures	2922
Item 5.	Other Information	2922
Item 6.	Exhibits	3022
	Signatures	3123

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PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME						(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 March 31,				Nine months ended March 31,						Three months ended September 30,
		2022		2021		2022		2021					2022		2021
REVENUES:	REVENUES:									REVENUES:
Service revenues	Service revenues	$	1,841,122	$	1,763,693	$	2,151,824	$	2,262,663	Service revenues			$	167,194	$	176,977
Royalty, product and other revenues	Royalty, product and other revenues	220,635		219,871		261,373		280,212		Royalty, product and other revenues			12,791		15,647
		2,061,757		1,983,564		2,413,197		2,542,875					179,985		192,624
OPERATING EXPENSES:	OPERATING EXPENSES:									OPERATING EXPENSES:
Costs of revenues	Costs of revenues	831,455		795,494		1,362,310		1,350,730		Costs of revenues			260,662		241,532
Selling, general and administrative	Selling, general and administrative	344,937		336,833		617,594		621,209		Selling, general and administrative			128,434		125,864
Total operating expenses	Total operating expenses	1,176,392		1,132,327		1,979,904		1,971,939		Total operating expenses			389,096		367,396

Other income (expense), net	Other income (expense), net	238		449		1,989		3,491		Other income (expense), net			3,611		284
Interest expense on borrowings	Interest expense on borrowings	(23,746)		(22,471)		(69,661)		(78,657)		Interest expense on borrowings			(15,824)		(22,830)
Income from continuing operations before income taxes		861,857		829,215		365,621		495,770
Income taxes		186,884		69,543		29,666		50,997
Net income from continuing operations		674,973		759,672		335,955		444,773
Net loss from discontinued operations, net of tax benefits of $539, $793, $1,495 and $3,317		(1,796)		(1,425)		(4,984)		(4,533)
NET INCOME		$	673,177	$	758,247	$	330,971	$	440,240
BASIC EARNINGS PER SHARE:
Continuing operations		$	4.13	$	4.15	$	1.95	$	2.38
Discontinued operations		(0.01)		(0.01)		(0.03)		(0.03)
Consolidated		$	4.12	$	4.14	$	1.92	$	2.35
DILUTED EARNINGS PER SHARE:
Loss from continuing operations before income tax benefit										Loss from continuing operations before income tax benefit			(221,324)		(197,318)
Income tax benefit										Income tax benefit			(53,957)		(47,373)
Net loss from continuing operations										Net loss from continuing operations			(167,367)		(149,945)
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			$	(168,421)	$	(151,601)
BASIC AND DILUTED LOSS PER SHARE:										BASIC AND DILUTED LOSS PER SHARE:
Continuing operations	Continuing operations	$	4.06	$	4.09	$	1.92	$	2.35	Continuing operations			$	(1.05)	$	(0.84)
Discontinued operations	Discontinued operations	(0.01)		(0.01)		(0.03)		(0.02)		Discontinued operations			(0.01)		(0.01)
Consolidated	Consolidated	$	4.05	$	4.08	$	1.89	$	2.33	Consolidated			$	(1.06)	$	(0.85)

DIVIDENDS DECLARED PER SHARE	DIVIDENDS DECLARED PER SHARE	$	0.27	$	0.26	$	0.81	$	0.78	DIVIDENDS DECLARED PER SHARE			$	0.29	$	0.27
COMPREHENSIVE INCOME:
Net income		$	673,177	$	758,247	$	330,971	$	440,240
COMPREHENSIVE LOSS:										COMPREHENSIVE LOSS:
Net loss										Net loss			$	(168,421)	$	(151,601)

Change in foreign currency translation adjustments	Change in foreign currency translation adjustments	5,595		3,955		(3,926)		34,753		Change in foreign currency translation adjustments			(32,345)		(11,177)
Other comprehensive income (loss)		5,595		3,955		(3,926)		34,753
Comprehensive income		$	678,772	$	762,202	$	327,045	$	474,993
Other comprehensive loss										Other comprehensive loss			(32,345)		(11,177)
Comprehensive loss										Comprehensive loss			$	(200,766)	$	(162,778)

See accompanying notes to consolidated financial statements.


H&R Block, Inc. ~~\|Q3 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	March 31, 2022			June 30, 2021			As of	September 30, 2022		June 30, 2022
ASSETS	ASSETS							ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	1,041,740		$	1,434,381		Cash and cash equivalents	$	322,824	$	885,015
Cash and cash equivalents - restricted	Cash and cash equivalents - restricted	135,314			149,783			Cash and cash equivalents - restricted	108,550		165,698
Receivables, less allowance for credit losses of $61,512 and $77,518		261,602			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	340,355			330,872			Income taxes receivable	154,123		202,838
Prepaid expenses and other current assets	Prepaid expenses and other current assets	89,025			76,414			Prepaid expenses and other current assets	77,906		72,460
Total current assets	Total current assets	1,868,036			2,080,382			Total current assets	724,438		1,384,458
Property and equipment, at cost, less accumulated depreciation and amortization of $881,841 and $842,861		133,036			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	390,758			445,847			Operating lease right of use assets	412,823		427,783
Intangible assets, net	Intangible assets, net	322,836			351,093			Intangible assets, net	303,483		309,644
Goodwill	Goodwill	764,428			754,521			Goodwill	746,711		760,401
Deferred tax assets and income taxes receivable	Deferred tax assets and income taxes receivable	236,792			181,996			Deferred tax assets and income taxes receivable	193,761		208,948
Other noncurrent assets	Other noncurrent assets	65,241			61,273			Other noncurrent assets	50,082		54,012
Total assets	Total assets	$	3,781,127		$	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	$	225,708		$	164,269		Accounts payable and accrued expenses	$	168,496	$	160,929
Accrued salaries, wages and payroll taxes	Accrued salaries, wages and payroll taxes	227,075			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	337,363			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	187,263			214,190			Operating lease liabilities	197,491		206,898
Deferred revenue and other current liabilities	Deferred revenue and other current liabilities	216,073			196,175			Deferred revenue and other current liabilities	179,956		196,107
Total current liabilities	Total current liabilities	1,692,877			982,486			Total current liabilities	790,223		998,813
Long-term debt	Long-term debt	1,486,530			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	218,461			301,658			Deferred tax liabilities and reserves for uncertain tax positions	229,340		226,362
Operating lease liabilities	Operating lease liabilities	210,866			244,932			Operating lease liabilities	222,914		228,820
Deferred revenue and other noncurrent liabilities	Deferred revenue and other noncurrent liabilities	127,537			113,535			Deferred revenue and other noncurrent liabilities	94,333		116,656
Total liabilities	Total liabilities	3,736,271			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 193,571,309 and 216,655,616		1,936			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	767,869			779,465			Additional paid-in capital	759,629		772,182
Accumulated other comprehensive income (loss)		(3,838)			88
Accumulated other comprehensive loss								Accumulated other comprehensive loss	(53,990)		(21,645)
Retained earnings (deficit)	Retained earnings (deficit)	(56,790)			286,694			Retained earnings (deficit)	(311,671)		120,405
Less treasury shares, at cost, of 33,978,937 and 34,842,125		(664,321)			(680,356)
Total stockholders' equity		44,856			388,058
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)	(264,985)		211,631
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,781,127		$	4,014,388		Total liabilities and stockholders' equity	$	2,559,232	$	3,269,158

See accompanying notes to consolidated financial statements.


2			~~Q3 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)
Nine months ended March 31,		2022		2021
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 income		$	330,971	$	440,240
Adjustments to reconcile net income to net cash provided by operating activities:
Net loss						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:
Depreciation and amortization	Depreciation and amortization	107,462		117,037							Depreciation and amortization	33,624		35,715
Provision	Provision	59,778		60,428							Provision	1,077		1,850
Deferred taxes	Deferred taxes	(85,122)		5,763							Deferred taxes	16,918		(13,547)
Stock-based compensation	Stock-based compensation	19,988		21,232							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	(233,362)		(336,868)							Receivables	3,702		35,913
Prepaid expenses, other current and noncurrent assets	Prepaid expenses, other current and noncurrent assets	(16,525)		(37,054)							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	122,112		257,034							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	36,960		30,783							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	36,244		(52,516)							Income tax receivables, accrued income taxes and income tax reserves	(41,659)		(72,768)
Other, net	Other, net	(5,378)		(4,723)							Other, net	(435)		(1,438)
Net cash provided by operating activities		373,128		501,356
Net cash used in operating activities						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	(52,718)		(44,220)							Capital expenditures	(16,161)		(15,620)
Payments made for business acquisitions, net of cash acquired	Payments made for business acquisitions, net of cash acquired	(25,465)		(15,495)							Payments made for business acquisitions, net of cash acquired	(16,507)		(4,265)

Franchise loans funded	Franchise loans funded	(18,468)		(26,745)							Franchise loans funded	(6,686)		(4,474)
Payments from franchisees	Payments from franchisees	17,714		28,477							Payments from franchisees	2,270		2,839

Other, net	Other, net	7,831		7,969							Other, net	(274)		2,067
Net cash used in investing activities	Net cash used in investing activities	(71,106)		(50,014)							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		(705,000)		(3,275,000)
Proceeds from line of credit borrowings		705,000		1,275,000
Repayments of long-term debt		—		(650,000)
Proceeds from issuance of long-term debt		—		647,965

Dividends paid	Dividends paid	(143,435)		(147,887)							Dividends paid	(43,093)		(48,996)
Repurchase of common stock, including shares surrendered	Repurchase of common stock, including shares surrendered	(555,247)		(188,892)							Repurchase of common stock, including shares surrendered	(202,845)		(165,800)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	4,605		2,228							Proceeds from exercise of stock options	—		3,385
Other, net	Other, net	(13,389)		(19,680)							Other, net	(955)		(5,911)
Net cash used in financing activities	Net cash used in financing activities	(707,466)		(2,356,266)							Net cash used in financing activities	(246,893)		(217,322)
Effects of exchange rate changes on cash	Effects of exchange rate changes on cash	(1,666)		10,370							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	(407,110)		(1,894,554)							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	$	1,177,054	$	875,393						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		$	76,894	$	100,118
Income taxes paid (received), net						Income taxes paid (received), net	$	(29,811)	$	38,419
Interest paid on borrowings	Interest paid on borrowings	58,009		77,398							Interest paid on borrowings	19,792		12,594

Accrued purchase of common stock						Accrued purchase of common stock	32,356		4,785
Accrued additions to property and equipment	Accrued additions to property and equipment	1,336		977							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	126,726		94,260							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	43,041		47,181							Accrued dividends payable to common shareholders	46,100		47,940

See accompanying notes to consolidated financial statements.


H&R Block, Inc. \| ~~Q3 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)

Net income		—	—			—		—				673,177				—		—				673,177

Other comprehensive income		—	—			—		5,595				—				—		—				5,595
Stock-based compensation		—	—			5,619		—				—				—		—				5,619
Stock-based awards exercised or vested		—	—			(2,595)		—				(201)				244		4,771				1,975
Acquisition of treasury shares(2)		—	—			—		—				—				(1)		(32)				(32)
Repurchase and retirement of common shares		(9,694)	(97)			(5,816)		—				(219,868)				—		—				(225,781)

Cash dividends declared - $0.27 per share		—	—			—		—				(43,042)				—		—				(43,042)
Balances as of March 31, 2022		193,571	$	1,936		$	767,869	$	(3,838)			$	(56,790)			(33,979)		$	(664,321)			$	44,856

~~(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			~~Q3 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						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, 2020		228,207	$	2,282		$	772,943			$	(39,781)			$	(18,455)		(35,478)			$	(692,187)				$	24,802
Balances as of July 1, 2021																									Balances as of July 1, 2021		216,656	$	2,167							$	779,465				$	88		$	286,694			(34,842)			$	(680,356)	$	388,058
Net loss	Net loss	—	—			—		—				(62,256)				—		—				(62,256)			Net loss		—	—							—			—			(151,601)			—				—			(151,601)
Other comprehensive income		—	—			—		8,816				—				—		—				8,816
Other comprehensive loss																									Other comprehensive loss		—	—					—			(11,177)			—				—			—			(11,177)
Stock-based compensation	Stock-based compensation	—	—			7,259		—				—				—		—				7,259			Stock-based compensation		—	—					5,627			—			—				—			—			5,627
Stock-based awards exercised or vested	Stock-based awards exercised or vested	—	—			(2,613)		—				(636)				215		4,176				927			Stock-based awards exercised or vested		—	—					(10,328)			—			(291)				705			13,765			3,146
Acquisition of treasury shares(2)	Acquisition of treasury shares(2)	—	—			—		—				—				(42)		(596)				(596)			Acquisition of treasury shares(2)		—	—					—			—			—				(205)			(4,817)			(4,817)
Repurchase and retirement of common shares	Repurchase and retirement of common shares	(5,957)	(60)			(3,514)		—				(84,884)				—		—				(88,458)			Repurchase and retirement of common shares		(6,802)	(68)					(4,081)			—			(161,619)				—			—			(165,768)

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)
Net income		—	—			—		—				758,247				—		—				758,247
Other comprehensive income		—	—			—		3,955				—				—		—				3,955
Stock-based compensation		—	—			6,943		—				—				—		—				6,943
Stock-based awards exercised or vested		—	—			(1,071)		—				(214)				111		2,174				889
Acquisition of treasury shares(2)		—	—			—		—				—				(2)		(39)				(39)
Repurchase and retirement of common shares		(2,063)	(20)			(1,219)		—				(36,832)				—		—				(38,071)

Cash dividends declared - $0.26 per share		—	—			—		—				(47,181)				—		—				(47,181)
Balances as of March 31, 2021		216,656	$	2,167		$	781,692	$	(5,028)			$	94,409			(35,191)		$	(686,372)			$	186,868
Cash dividends declared - $0.27 per share																									Cash dividends declared - $0.27 per share		—	—					—			—			(47,940)				—			—			(47,940)
Balances as of September 30, 2021																									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			Q1 FY2023 Form 10-Q\| H&R Block, Inc. ~~\|Q3 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 ~~March 31,~~September 30, 2022 and June 30, ~~2021,~~2022, the consolidated statements of operations and comprehensive ~~income~~loss for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2022 and 2021, the consolidated statements of cash flows for the ~~nine~~three months ended ~~March 31,~~September 30, 2022 and 2021, and the consolidated statements of stockholders' equity for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2022 and 2021 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 ~~March 31,~~September 30, 2022 and 2021 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 nine months ended March 31, 2021. 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			~~Q3 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 March 31,				Nine months ended March 31,					Three months ended September 30,
		2022		2021		2022		2021				2022		2021
Revenues:	Revenues:									Revenues:
U.S. assisted tax preparation	U.S. assisted tax preparation	$	1,392,142	$	1,290,892	$	1,456,594	$	1,532,079	U.S. assisted tax preparation		$	36,312	$	33,607
U.S. royalties	U.S. royalties	158,786		150,117		169,548		178,126		U.S. royalties		6,228		7,358
U.S. DIY tax preparation	U.S. DIY tax preparation	175,184		181,294		188,455		234,871		U.S. DIY tax preparation		3,158		4,061
International		65,232		62,869		151,464		148,282
Refund Transfers	Refund Transfers	132,223		134,799		134,665		141,309		Refund Transfers		1,284		1,665
Emerald Card®		50,660		73,647		103,748		96,045
Peace of Mind® Extended Service Plan	Peace of Mind® Extended Service Plan	17,222		17,668		59,373		63,430		Peace of Mind® Extended Service Plan		24,770		24,836
Tax Identity Shield®	Tax Identity Shield®	9,078		8,643		19,431		22,446		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	30,535		38,247		43,438		52,812		Interest and fee income on Emerald AdvanceSM		614		479
International										International		58,834		58,325
Wave	Wave	20,111		16,082		58,745		44,656		Wave		22,646		19,137
Other	Other	10,584		9,306		27,736		28,819		Other		9,360		9,745
Total revenues	Total revenues	$	2,061,757	$	1,983,564	$	2,413,197	$	2,542,875	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
Nine months ended March 31,		2022		2021		2022		2021
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	80,801		87,175		9,006		8,712		Amounts deferred	1,360		1,492		5		7
Amounts recognized on previous deferrals	Amounts recognized on previous deferrals	(69,075)		(73,683)		(6,786)		(8,068)		Amounts recognized on previous deferrals	(28,703)		(28,948)		(2,988)		(2,847)
Balances as of March 31,		$	184,485	$	181,319	$	20,087	$	19,351
Balance, end of the period										Balance, end of the period	$	146,143	$	145,303	$	16,512	$	15,027

As of ~~March 31,~~September 30, 2022, deferred revenue related to POM was ~~$184.5~~$146.1 million. We expect that ~~$101.2~~$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 ~~March 31,~~September 30, 2022 and 2021, Tax Identity Shield® (TIS) deferred revenue was ~~$37.4~~$21.2 million and ~~$38.2~~$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 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 ~~0.3~~4.4 million shares and ~~0.6~~5.3 million shares for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2022 ~~respectively,~~ and ~~0.6 million and 0.9 million shares for the three and nine months ended March 31,~~ 2021, respectively,~~, respectively,~~ as the effect would be ~~antidilutive.~~antidilutive due to the net loss from continuing operations during the periods.


6			Q1 FY2023 Form 10-Q\| H&R Block, Inc. ~~\|Q3 FY2022 Form 10-Q~~			7

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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 March 31,				Nine months ended March 31,					Three months ended September 30,
		2022		2021		2022		2021				2022		2021
Net income from continuing operations attributable to shareholders		$	674,973	$	759,672	$	335,955	$	444,773
Net loss from continuing operations attributable to shareholders										Net loss from continuing operations attributable to shareholders		$	(167,367)	$	(149,945)
Amounts allocated to participating securities	Amounts allocated to participating securities	(3,061)		(3,374)		(1,543)		(1,908)		Amounts allocated to participating securities		(179)		(239)
Net income from continuing operations attributable to common shareholders		$	671,912	$	756,298	$	334,412	$	442,865
Net loss from continuing operations attributable to common shareholders										Net loss from continuing operations attributable to common shareholders		$	(167,546)	$	(150,184)
Basic weighted average common shares	Basic weighted average common shares	162,777		182,204		171,481		186,162		Basic weighted average common shares		159,284		178,099
Potential dilutive shares	Potential dilutive shares	2,835		2,701		2,661		1,971		Potential dilutive shares		—		—
Dilutive weighted average common shares	Dilutive weighted average common shares	165,612		184,905		174,142		188,133		Dilutive weighted average common shares		159,284		178,099
Earnings 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	$	4.13	$	4.15	$	1.95	$	2.38	Basic		$	(1.05)	$	(0.84)
Diluted	Diluted	4.06		4.09		1.92		2.35		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 ~~nine~~three months ended ~~March 31,~~September 30, 2022, we granted ~~1.6~~0.9 million shares under our stock-based compensation plan. We granted awards of ~~0.7~~1.4 million shares under our stock-based compensation plans during the ~~nine~~three months ended ~~March 31,~~September 30, 2021. ~~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.~~ Stock-based compensation expense of our continuing operations totaled ~~$6.8 million and $20.0~~$7.7 million for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2022 ~~respectively,~~ and ~~$7.8 million and $21.2~~$6.8 million for the three ~~and nine~~ months ended ~~March 31, 2021, respectively.~~September 30, 2021. As of ~~March 31,~~September 30, 2022, unrecognized compensation cost for stock options totaled ~~$0.5~~$0.4 million, and for nonvested shares and units totaled ~~$44.9~~$76.9 million.

NOTE 4: RECEIVABLES

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

(in 000s)
As of March 31, 2022 June 30, 2021
Short-term Long-term Short-term Long-term
Loans to franchisees $ 14,499 $ 26,411 $ 9,497 $ 28,026
Receivables for U.S. assisted and DIY tax preparation and related fees 120,483 3,215 41,900 3,793
H&R Block Instant RefundTM receivables
38,213 1,547 2,357 159
H&R Block Emerald Advance® lines of credit
8,510 12,775 8,248 8,089
Software receivables from retailers 9,126 — 2,910 —
Royalties and other receivables from franchisees 48,562 98 6,167 178
Wave payment processing receivables 1,879 — 2,187 —
Other 20,330 1,212 15,666 1,350
Total $ 261,602 $ 45,258 $ 88,932 $ 41,595


8			~~Q3 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 ~~March 31,~~September 30, 2022 and June 30, ~~2021,~~2022, loans with a principal balance more than 90 days past due, or on non-accrual 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 ~~March 31,~~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	$	40,565	$	—	2021	$	2,781	$	2,261
2020 and prior	2020 and prior	266		266		2020 and prior	111		111

		40,831		$	266		2,892		$	2,372
Allowance	Allowance	(1,071)				Allowance	(1,368)
Net balance	Net balance	$	39,760			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 ~~March 31,~~September 30, 2022 are as follows:

(in 000s)
Fiscal year of origination: Balance Non-Accrual
2022 $ 32,795 $ 32,795
2021 and prior 777 777
Revolving loans 12,837 12,246
46,409 $ 45,818
Allowance (25,124)
Net balance $ 21,285


~~H&R Block, Inc.~~ ~~\|Q3 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 ~~nine~~three months ended ~~March 31,~~September 30, 2022 and 2021 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	13,797			45,981		59,778		Provision	—		1,077		1,077

Charge-offs, recoveries and other	Charge-offs, recoveries and other	(16,377)			(60,343)		(76,720)		Charge-offs, recoveries and other	—		(1,281)		(1,281)

Balances as of March 31, 2022		$	25,124		$	45,910	$	71,034
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	13,411			47,017		60,428		Provision	—		1,850		1,850
Charge-offs, recoveries and other	Charge-offs, recoveries and other	(18,650)			(54,092)		(72,742)		Charge-offs, recoveries and other	—		(3,583)		(3,583)
Balances as of March 31, 2021		$	26,795		$	45,091	$	71,886
Balances as of September 30, 2021									Balances as of September 30, 2021	$	27,704	$	58,539	$	86,243


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NOTE 5: GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the ~~nine~~three months ended ~~March 31,~~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	12,667		—		12,667		Acquisitions	7,879		—		7,879
Disposals and foreign currency changes, net	Disposals and foreign currency changes, net	(2,760)		—		(2,760)		Disposals and foreign currency changes, net	(21,569)		—		(21,569)
Impairments	Impairments	—		—		—		Impairments	—		—		—
Balances as of March 31, 2022		$	902,725	$	(138,297)	$	764,428
Balances as of September 30, 2022								Balances as of September 30, 2022	$	885,008	$	(138,297)	$	746,711

~~In conjunction with our annual impairment~~We test ~~we tested~~ goodwill for impairment ~~during~~annually as of February 1, or more frequently if events occur or circumstances change which would, more likely than not, reduce the ~~quarter and did not identify any impairment.~~


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~~Table~~fair value of ~~Contents~~

a reporting unit below its carrying value.

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 March 31, 2022:
As of September 30, 2022:								As of September 30, 2022:
Reacquired franchise rights	Reacquired franchise rights	$	378,257	$	(193,589)	$	184,668	Reacquired franchise rights	$	383,809	$	(200,442)	$	183,367
Customer relationships	Customer relationships	328,161		(272,947)		55,214		Customer relationships	335,766		(283,515)		52,251
Internally-developed software	Internally-developed software	169,708		(134,990)		34,718		Internally-developed software	138,600		(112,561)		26,039
Noncompete agreements	Noncompete agreements	41,710		(37,231)		4,479		Noncompete agreements	41,949		(38,106)		3,843
Franchise agreements	Franchise agreements	19,201		(17,068)		2,133		Franchise agreements	19,201		(17,708)		1,493
Purchased technology	Purchased technology	122,700		(85,281)		37,419		Purchased technology	122,700		(90,125)		32,575
Trade name	Trade name	5,800		(1,595)		4,205		Trade name	5,800		(1,885)		3,915
		$	1,065,537	$	(742,701)	$	322,836		$	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 ~~$25.5~~$16.5 million and ~~$15.5~~$4.3 million during the ~~nine~~three months ended ~~March 31,~~September 30, 2022 and 2021, respectively. The amounts and weighted-average lives of intangible assets acquired ~~during the nine months ended March 31, 2022, including amounts capitalized related to internally-developed software, are as follows:~~

(dollars in 000s)
Amount Weighted-Average Life (in years)
Internally-developed software $ 9,427 3
Customer relationships 13,029 5
Reacquired franchise rights 8,130 5
Noncompete agreements 496 5
Total $ 31,082 4

~~Amortization of intangible assets for the three and nine~~ ~~months ended March 31, 2022 was $19.5 million and $58.7 million, respectively, compared to $20.7 million and $62.1 million for the~~ ~~three and nine~~ months ended March 31, 2021, respectively. Estimated amortization of intangible assets for fiscal years ending June 30, 2022, 2023, 2024, 2025 and 2026 is $77.3 million, $64.2 million, $44.6 million, $23.9 million and $16.3 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	March 31, 2022		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

Debt issuance costs and discounts	Debt issuance costs and discounts	(14,075)		(16,281)		Debt issuance costs and discounts	(12,593)		(13,124)
Total long-term debt	Total long-term debt	1,985,925		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	$	1,486,530	$	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	$	1,964,000	$	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 ~~March 31,~~September 30, 2022.


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We had no outstanding balance under our CLOC and amounts available to borrow were limited by the debt-to-EBITDA covenant to approximately ~~$427.5 million~~$1.47 billion as of ~~March 31, 2022.~~

~~SUBSEQUENT EVENT~~ –On April 1, 2022, we sent a notice of redemption to the trustee to fully redeem our outstanding $500 million 5.500% Senior Notes originally due in November 2022 (2022 Senior Notes). The redemption price is equal to 100% of the outstanding principal amount of the 2022 Senior Notes, plus accrued and unpaid interest up to, but not including, the redemption date. The 2022 Senior Notes were redeemed on May 2,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~~Our 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, our U.S. federal


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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 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 ~~$225.9~~$231.7 million and $232.0 million as of ~~March 31,~~September 30, 2022 and ~~$264.3 million as of~~ June 30, ~~2021.~~2022, respectively. The gross unrecognized tax benefits decreased ~~$38.4~~by $0.3 million during the ~~nine~~three months ended ~~March 31, 2022. The decrease is related~~September 30, 2022 due to ~~federal and~~settlements with state ~~statute of limitation periods expiring in the current year.~~tax authorities. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately ~~$33.3~~$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.

Our effective tax rate for continuing operations, including the effects of discrete tax items, was ~~8.1%~~24.4% and ~~10.3%~~24.0% for the ~~nine~~three months ended ~~March 31,~~September 30, 2022 and 2021, respectively. ~~Discrete items decreased~~

Consistent with prior years, our pretax loss for the three months ended 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 three months ended September 30, 2022 reflects management’s estimate of the annual effective tax rate ~~by 14.4% and 2.3%~~applied to year-to-date loss from continuing operations adjusted for the ~~nine months ended March 31, 2022 and 2021, respectively. A~~tax impact of discrete ~~income tax benefit of $52.6 million and $11.4 million were recorded in~~items for the nine months ended March 31, 2022 and 2021, respectively. The discrete tax benefit recorded in the current period primarily resulted from federal and state statute of limitations expirations. The discrete tax benefit recorded in the prior period primarily resulted from settlements with taxing authorities and statute of limitations expirations. The impact discrete tax items have on our tax rate through the third quarter are slightly exaggerated versus the impact discrete tax items have on the full fiscal year tax rate.periods presented.

NOTE 8: COMMITMENTS AND CONTINGENCIES

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 ~~$13.8~~$12.7 million and ~~$12.6~~$14.0 million as of ~~March 31,~~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 ~~$13.9~~$16.0 million and ~~$17.3~~$12.9 million as of ~~March 31,~~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 ~~$25.5~~$15.3 million at ~~March 31,~~September 30, 2022, and net of amounts drawn and outstanding, our remaining commitment to fund totaled ~~$16.1~~$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 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~~


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~~March 31, 2022, the principal balance of purchased participation interests for the current year totaled $256.5 million.~~

Refund Advance loans are originated by Meta and offered to certain assisted U.S. tax preparation clients, based on client eligibility as determined by Meta. We pay fees primarily based on loan size and customer type. We have provided a guarantee up to $18.0 million related to certain loans to clients prior to the IRS accepting electronic filing. At March 31, 2022, we accrued an estimated liability of $0.6 million related to this guarantee, compared to $2.4 million at March 31, 2021.

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 ~~March 31,~~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 March 31, 2022 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 range of loss, such as precise information about the amount of damages or other remedies being asserted, the


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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 ~~March 31,~~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 ~~four~~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 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 sought 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 alleged 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 sought 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 subsequently granted our motion to compel arbitration and stayed the case pending the outcome of individual arbitration. The plaintiff filed a claim in arbitration, which was dismissed on February 7, 2022. The plaintiff’s lawsuit was dismissed on March 2, 2022.August 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.


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~~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 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, asserted 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 sought specific


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~~Table of Contents~~

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 filed an appeal to the Second Circuit Court of Appeals, which was denied on February 10, 2022. Homeward subsequently filed a petition for panel rehearing with the Second Circuit, which was denied on March 15, 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 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, asserted 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 sought 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 summary judgment and dismissed Homeward's claims in their entirety as untimely under the applicable statute of limitations. Homeward filed an appeal to the Second Circuit Court of Appeals, which was denied on February 10, 2022. Homeward subsequently filed a petition for panel rehearing with the Second Circuit, which was denied on March 15, 2022. 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


~~H&R Block, Inc.~~ ~~\|Q3 FY2022 Form 10-Q~~			17

~~Table of Contents~~

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 ~~March 31,~~September 30, 2022, total approximately ~~$265~~$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

Table of Contents

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.

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.~~

On April 1, 2022, we sent a notice of redemption to the trustee to fully redeem our outstanding $500 million 5.500% Senior Notes originally due in November 2022 (2022 Senior Notes). The redemption price is equal to 100% of the outstanding principal amount of the 2022 Senior Notes, plus accrued and unpaid interest up to, but not including, the redemption date. The 2022 Senior Notes were redeemed on May 2, 2022.

~~FINANCIAL OVERVIEW~~


18			~~Q3 FY2022 Form 10-Q\|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

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
Nine months ended March 31, 2022
2021(1)
Change % Change
Tax returns prepared: (in 000s) (2)
Company-owned operations 6,209 6,925 (716) (10.3) %
Franchise operations 2,300 2,674 (374) (14.0) %
Total assisted 8,509 9,599 (1,090) (11.4) %
Desktop 1,043 1,405 (362) (25.8) %
Online 4,457 5,459 (1,002) (18.4) %
Total DIY 5,500 6,864 (1,364) (19.9) %
Total U.S. Returns 14,009 16,463 (2,454) (14.9) %
Net Average Charge: (3)
Company-owned operations $ 234.59 $ 221.25 $ 13.34 6.0 %
Franchise operations (4)
$ 229.64 $ 210.56 $ 19.08 9.1 %
Online $ 32.53 $ 34.36 $ (1.83) (5.3) %

~~(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.


14			Q1 FY2023 Form 10-Q\| H&R Block, Inc. ~~\|Q3 FY2022 Form 10-Q~~			19

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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 March 31,		2022		2021		$ Change		% Change
Three months ended September 30,										Three months ended September 30,	2022		2021		$ Change		% Change
Revenues:	Revenues:									Revenues:
U.S. assisted tax preparation		$	1,392,142	$	1,290,892	$	101,250	7.8	%
U.S. royalties		158,786		150,117		8,669		5.8	%
U.S. DIY tax preparation		175,184		181,294		(6,110)		(3.4)	%
International		65,232		62,869		2,363		3.8	%
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	132,223		134,799		(2,576)		(1.9)	%	Refund Transfers	1,284		1,665		(381)		(22.9)	%
Emerald Card®		50,660		73,647		(22,987)		(31.2)	%
Peace of Mind® Extended Service Plan	Peace of Mind® Extended Service Plan	17,222		17,668		(446)		(2.5)	%	Peace of Mind® Extended Service Plan	24,770		24,836		(66)		(0.3)	%
Tax Identity Shield®	Tax Identity Shield®	9,078		8,643		435		5.0	%	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	30,535		38,247		(7,712)		(20.2)	%	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	20,111		16,082		4,029		25.1	%	Wave	22,646		19,137		3,509		18.3	%
Other		10,584		9,306		1,278		13.7	%
Total revenues	Total revenues	2,061,757		1,983,564		78,193		3.9	%	Total revenues	$	179,985	$	192,624	$	(12,639)	(6.6)	%
Compensation and benefits:	Compensation and benefits:									Compensation and benefits:
Field wages	Field wages	435,345		409,741		(25,604)		(6.2)	%	Field wages	61,673		56,079		(5,594)		(10.0)	%
Other wages	Other wages	78,584		78,181		(403)		(0.5)	%	Other wages	63,753		58,064		(5,689)		(9.8)	%
Benefits and other compensation	Benefits and other compensation	91,051		92,825		1,774		1.9	%	Benefits and other compensation	34,832		25,450		(9,382)		(36.9)	%
		604,980		580,747		(24,233)		(4.2)	%		160,258		139,593		(20,665)		(14.8)	%
Occupancy	Occupancy	111,405		113,759		2,354		2.1	%	Occupancy	97,590		95,822		(1,768)		(1.8)	%
Marketing and advertising	Marketing and advertising	196,582		183,109		(13,473)		(7.4)	%	Marketing and advertising	10,649		10,073		(576)		(5.7)	%
Depreciation and amortization	Depreciation and amortization	36,116		39,100		2,984		7.6	%	Depreciation and amortization	33,624		35,715		2,091		5.9	%
Bad debt	Bad debt	45,051		46,066		1,015		2.2	%	Bad debt	329		1,043		714		68.5	%
Other	Other	182,258		169,546		(12,712)		(7.5)	%	Other	86,646		85,150		(1,496)		(1.8)	%
Total operating expenses	Total operating expenses	1,176,392		1,132,327		(44,065)		(3.9)	%	Total operating expenses	389,096		367,396		(21,700)		(5.9)	%
Other income (expense), net	Other income (expense), net	238		449		(211)		(47.0)	%	Other income (expense), net	3,611		284		3,327		1,171.5	%
Interest expense on borrowings	Interest expense on borrowings	(23,746)		(22,471)		(1,275)		(5.7)	%	Interest expense on borrowings	(15,824)		(22,830)		7,006		30.7	%
Pretax income		861,857		829,215		32,642		3.9	%
Income taxes		186,884		69,543		(117,341)		(168.7)	%
Net income from continuing operations		674,973		759,672		(84,699)		(11.1)	%
Pretax loss										Pretax loss	(221,324)		(197,318)		(24,006)		(12.2)	%
Income tax benefit										Income tax benefit	(53,957)		(47,373)		6,584		13.9	%
Net loss from continuing operations										Net loss from continuing operations	(167,367)		(149,945)		(17,422)		(11.6)	%
Net loss from discontinued operations	Net loss from discontinued operations	(1,796)		(1,425)		(371)		(26.0)	%	Net loss from discontinued operations	(1,054)		(1,656)		602		36.4	%
Net income		$	673,177	$	758,247	$	(85,070)	(11.2)	%
DILUTED EARNINGS PER SHARE:
Net loss										Net loss	$	(168,421)	$	(151,601)	$	(16,820)	(11.1)	%
BASIC AND DILUTED LOSS PER SHARE:										BASIC AND DILUTED LOSS PER SHARE:
Continuing operations	Continuing operations	$	4.06	$	4.09	$	(0.03)	(0.7)	%	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	$	4.05	$	4.08	$	(0.03)	(0.7)	%	Consolidated	$	(1.06)	$	(0.85)	$	(0.21)	(24.7)	%

Adjusted diluted EPS(1)	Adjusted diluted EPS(1)	$	4.11	$	4.11	$	—	—	%	Adjusted diluted EPS(1)	$	(0.99)	$	(0.78)	$	(0.21)	(26.9)	%
EBITDA (1)	EBITDA (1)	$	921,719	$	890,786	$	30,933	3.5	%	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 ~~March 31,~~September 30, 2022 compared to ~~March 31,~~September 30, 2021

Revenues ~~increased $78.2~~decreased $12.6 million, or ~~3.9%~~6.6%, from the prior year. ~~Revenues for~~ U.S. assisted tax preparation revenues increased ~~$101.3~~$2.7 million, or ~~7.8%~~8.0%, ~~largely~~primarily due to a higher net average charge ~~in the current year combined with~~and slightly higher ~~tax~~ return volumes. U.S. royalties revenues increased $8.7 million, or 5.8%, due to an increase in tax preparation fees. U.S. DIY tax preparation revenues decreased $6.1 million, or 3.4%, due to lower tax return volumes. Emerald Card® revenues decreased $23.0 million, or 31.2%, due to lower card activity in the current


20			~~Q3 FY2022 Form 10-Q\|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

~~quarter as some stimulus payments were loaded on to Emerald Cards in the prior year. Interest and fees on Emerald Advances decreased $7.7 million, or 20.2%, due to a decline in Emerald Advances~~SMvolume in the current year. ~~Wave revenues increased $4.0~~U.S. royalty revenue decreased $1.1 million, or ~~25.1%~~15.4%, due to ~~higher small business payments processing volumes.~~

~~Total operating expenses increased $44.1 million, or 3.9%, from~~ the ~~prior year. Field wages increased $25.6 million, or 6.2%, due to higher hourly wage rates. Marketing expense increased $13.5 million, or 7.4%, due to higher online advertising and~~ ~~agency fees. Depreciation and amortization expense decreased $3.0 million, or 7.6%, due to~~ ~~lower amortization on acquired intangibles and depreciation on equipment.~~

~~Other expenses increased $12.7 million, or 7.5%. The components~~timing of ~~other expenses are as follows:~~

(in 000s)
Three months ended March 31, 2022 2021 $ Change % Change
Consulting and outsourced services $ 46,402 $ 48,845 $ 2,443 5.0 %
Bank partner fees 23,686 22,981 (705) (3.1) %
Client claims and refunds 10,730 10,057 (673) (6.7) %
Employee and travel expenses 9,515 5,523 (3,992) (72.3) %
Technology-related expenses 26,373 23,425 (2,948) (12.6) %
Credit card/bank charges 30,770 27,906 (2,864) (10.3) %
Insurance 4,099 3,135 (964) (30.7) %
Legal fees and settlements 7,125 3,311 (3,814) (115.2) %
Supplies 14,243 14,551 308 2.1 %
Other 9,315 9,812 497 5.1 %
$ 182,258 $ 169,546 $ (12,712) (7.5) %

Employee and travel expenses increased $4.0 million, or 72.3%, due to less travel in the prior year as a result of COVID-19 restrictions. Technology-related expenses increased $2.9 million, or 12.6%, due to increased investments in information technology. Credit card and bank charges increased $2.9 million, or 10.3%, due to higher Wave small business payment processing fees. Legal fees and settlements increased $3.8 million, or 115.2%, due to higher fees attributable to certain pending litigation matters.

We recorded an income tax expense of $186.9 million in the current year compared to $69.5 million in the prior year. The effective tax rate for the three months ended March 31, 2022, and 2021 was 21.7% and 8.4%, respectively. The lower rate in prior year is a result of tax benefits recorded related to our net operating loss carrybacks to 35% tax years.

The U.S. federal tax filing deadline for 2021 individual income tax returns was April 18, 2022, the deadline for 2020 tax returns was May 17, 2021 and the deadline for 2019 tax returns was July 15, 2020. Therefore, the year-over-year periods are not directly comparable. Our business is highly seasonal and results for the three months ended March 31 may not be indicative of results for the entire tax season.royalty incentives.


H&R Block, Inc. ~~\|Q3 FY2022~~\|Q1 FY2023 Form 10-Q			21

~~Table of Contents~~

Consolidated - Financial Results (in 000s, except per share amounts)
Nine months ended March 31, 2022 2021 $ Change % Change
Revenues:
U.S. assisted tax preparation $ 1,456,594 $ 1,532,079 $ (75,485) (4.9) %
U.S. royalties 169,548 178,126 (8,578) (4.8) %
U.S. DIY tax preparation 188,455 234,871 (46,416) (19.8) %
International 151,464 148,282 3,182 2.1 %
Refund Transfers 134,665 141,309 (6,644) (4.7) %
Emerald Card® 103,748 96,045 7,703 8.0 %
Peace of Mind® Extended Service Plan 59,373 63,430 (4,057) (6.4) %
Tax Identity Shield® 19,431 22,446 (3,015) (13.4) %
Interest and fee income on Emerald AdvanceSM
43,438 52,812 (9,374) (17.7) %
Wave 58,745 44,656 14,089 31.6 %
Other 27,736 28,819 (1,083) (3.8) %
Total revenues 2,413,197 2,542,875 (129,678) (5.1) %
Compensation and benefits:
Field wages 561,482 568,593 7,111 1.3 %
Other wages 200,715 204,817 4,102 2.0 %
Benefits and other compensation 146,708 154,280 7,572 4.9 %
908,905 927,690 18,785 2.0 %
Occupancy 306,523 309,638 3,115 1.0 %
Marketing and advertising 223,796 214,091 (9,705) (4.5) %
Depreciation and amortization 107,462 117,036 9,574 8.2 %
Bad debt 59,760 63,156 3,396 5.4 %
Other 373,458 340,328 (33,130) (9.7) %
Total operating expenses 1,979,904 1,971,939 (7,965) (0.4) %
Other income (expense), net 1,989 3,491 (1,502) (43.0) %
Interest expense on borrowings (69,661) (78,657) 8,996 11.4 %
Pretax income 365,621 495,770 (130,149) (26.3) %
Income taxes 29,666 50,997 21,331 41.8 %
Net income from continuing operations 335,955 444,773 (108,818) (24.5) %
Net loss from discontinued operations (4,984) (4,533) (451) (9.9) %
Net income $ 330,971 $ 440,240 $ (109,269) (24.8) %
DILUTED EARNINGS PER SHARE:
Continuing operations $ 1.92 $ 2.35 $ (0.43) (18.3) %
Discontinued operations (0.03) (0.02) (0.01) (50.0) %
Consolidated $ 1.89 $ 2.33 $ (0.44) (18.9) %
Adjusted diluted EPS(1)
$ 2.11 $ 2.56 $ (0.45) (17.6) %
EBITDA (1)
$ 542,744 $ 691,463 $ (148,719) (21.5) %

~~(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.~~

~~Nine months ended March 31, 2022 compared to March 31, 2021~~

~~Revenues decreased $129.7 million, or 5.1%, 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 nine month period ended March 31, 2022. This resulted in a decrease in U.S. tax preparation, royalty and Refund Transfer revenues.


22			~~Q3 FY2022 Form 10-Q\|~~ ~~H&R Block, Inc.~~

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Emerald ~~Card®~~Card and Spruce revenues ~~increased $7.7~~decreased $16.6 million, or ~~8.0%~~58.9%, due to ~~higher card activity which is a result of~~ the IRS loading Child Tax Credits monthly to Emerald Cards® in ~~July through December 2021. Interest and fees on Emerald Advances decreased $9.4 million, or 17.7%, due~~the prior year.

International tax preparation volumes increased in Australia, which was largely offset by the impacts of foreign currency exchange rates compared to ~~a decline in Emerald Advances.~~the prior year. Wave revenues increased ~~$14.1~~$3.5 million, or ~~31.6%~~18.3%, due to higher small business payments processing volumes.

Total operating expenses increased ~~$8.0~~$21.7 million, or ~~0.4%~~5.9%, from the prior ~~year period.~~year. Field wages ~~decreased $7.1~~increased $5.6 million, or ~~1.3%~~10%, due to ~~lower tax preparation volumes~~higher field management wages and a bonus accrual adjustment in the ~~current year as a result of the tax season extension~~prior year. Other wages increased $5.7 million, or 9.8%, due to higher corporate wages in the ~~prior~~current year. Benefits and other compensation ~~decreased $7.6~~increased $9.4 million, or ~~4.9%~~36.9%, due to ~~lower~~higher employee insurance costs and higher payroll taxes as a result of ~~lower~~the increase in wages. ~~Marketing and advertising~~Occupancy expense increased ~~$9.7~~$1.8 million, or ~~4.5%~~1.8%, due to higher ~~online advertising and agency fees~~office rent rates in the current year. Depreciation and amortization expense decreased ~~$9.6~~$2.1 million, or ~~8.2%~~5.9%, due ~~primarily~~ to lower amortization of acquired intangibles.

Other operating expenses increased ~~$33.1~~$1.5 million, or ~~9.7%~~1.8%. The components of other expenses are as follows:


								(in 000s)									(in 000s)
Nine months ended March 31,		2022		2021		$ Change		% Change
Three months ended September 30,										Three months ended September 30,	2022		2021		$ Change		% Change
Consulting and outsourced services	Consulting and outsourced services	$	99,870	$	91,888	$	(7,982)	(8.7)	%	Consulting and outsourced services	$	18,053	$	25,857	$	7,804	30.2	%
Bank partner fees	Bank partner fees	26,344		21,916		(4,428)		(20.2)	%	Bank partner fees	(19)		108		127		**
Client claims and refunds	Client claims and refunds	22,945		20,930		(2,015)		(9.6)	%	Client claims and refunds	6,770		6,015		(755)		(12.6)	%
Employee and travel expenses	Employee and travel expenses	23,222		17,504		(5,718)		(32.7)	%	Employee and travel expenses	6,068		4,290		(1,778)		(41.4)	%
Technology-related expenses	Technology-related expenses	69,998		61,596		(8,402)		(13.6)	%	Technology-related expenses	25,915		20,325		(5,590)		(27.5)	%
Credit card/bank charges	Credit card/bank charges	63,441		53,788		(9,653)		(17.9)	%	Credit card/bank charges	16,201		14,961		(1,240)		(8.3)	%
Insurance	Insurance	11,780		9,359		(2,421)		(25.9)	%	Insurance	3,718		3,331		(387)		(11.6)	%
Legal fees and settlements	Legal fees and settlements	14,227		15,653		1,426		9.1	%	Legal fees and settlements	2,286		3,042		756		24.9	%
Supplies	Supplies	22,161		26,463		4,302		16.3	%	Supplies	3,395		2,823		(572)		(20.3)	%
Other	Other	19,470		21,231		1,761		8.3	%	Other	4,259		4,398		139		3.2	%
		$	373,458	$	340,328	$	(33,130)	(9.7)	%		$	86,646	$	85,150	$	(1,496)	(1.8)	%

Consulting and outsourced services expense ~~increased $8.0~~decreased $7.8 million, or ~~8.7%~~30.2%, due to ~~higher~~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 ~~$8.4~~$5.6 million, or ~~13.6%~~27.5%, due to increased investments in information technology. Credit card and bank charges increased ~~$9.7~~$1.2 million, or ~~17.9%~~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~~®.

higher interest income as a result of higher interest rates. Interest expense on borrowings decreased ~~$9.0~~$7.0 million, or ~~11.4%~~30.7%, ~~primarily~~ due to ~~higher CLOC borrowings~~the repayment of our $500 million 5.500% Senior Notes in ~~the prior year.~~May 2022.

We recorded an income tax ~~expense~~benefit of ~~$29.7~~$54.0 million in the current year compared to ~~$51.0~~$47.4 million in the prior ~~year, the decrease is primarily related to lower pretax income in the current~~ year. The effective tax rate for the ~~nine~~three months ended ~~March 31,~~September 30, 2022, and 2021 was ~~8.1%~~24.4% and ~~10.3%~~24.0%, 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.


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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


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January. We typically have relied on available cash balances from the prior tax season and borrowings to meet liquidity needs.

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 ~~March 31,~~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 ~~nine~~three months ended ~~March 31,~~September 30, 2022 and 2021. See Item 1 for the complete consolidated statements of cash flows for these periods.


		(in 000s)					(in 000s)
Nine months ended March 31,		2022		2021
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	$	373,128	$	501,356	Operating activities	$	(321,666)	$	(312,624)
Investing activities	Investing activities	(71,106)		(50,014)		Investing activities	(37,358)		(19,453)
Financing activities	Financing activities	(707,466)		(2,356,266)		Financing activities	(246,893)		(217,322)
Effects of exchange rates on cash	Effects of exchange rates on cash	(1,666)		10,370		Effects of exchange rates on cash	(13,422)		(3,959)
Net decrease in cash, cash equivalents and restricted cash		$	(407,110)	$	(1,894,554)
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 ~~provided by~~used in operations totaled ~~$373.1~~$321.7 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2022 compared to ~~$501.4~~$312.6 million in the prior year period. The change is primarily due to ~~higher bonus~~the timing of receivables collections and ~~payroll tax payments and a decrease~~an increase in our net ~~income in the current year,~~loss, partially offset by the ~~timing~~receipt of ~~receivables collections~~an income tax receivable in the current year.

Investing Activities. Cash used in investing activities totaled ~~$71.1~~$37.4 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2022 compared to ~~$50.0~~$19.5 million in the prior year period. The change is primarily due to ~~an increase in capital expenditures and~~ payments to acquire businesses in the current year.

Financing Activities. Cash used in financing activities totaled ~~$707.5~~$246.9 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2022 compared to ~~$2.4 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~~ 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 $~~143.4~~43.1 million and $~~147.9~~49.0 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2022 and 2021, 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.

In August 2022, the Board of Directors approved a $1.25 billion share repurchase program, effective through fiscal year 2025. During the ~~nine~~three months ended ~~March 31,~~September 30, 2022, we repurchased ~~$550.3~~$219.8 million of our common stock at an average price of ~~$23.84~~$44.60 per share. In the prior year period, we repurchased ~~$188.2~~$165.8 million of our common stock at an average price of ~~$16.29~~$24.37 per share. Our current share repurchase program has remaining authorization of ~~$13.8 million~~$1.03 billion which is effective through June ~~2022.~~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.


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Capital Investment. Capital expenditures totaled ~~$52.7~~$16.2 million and ~~$44.2~~$15.6 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2022 and 2021, 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


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totaling ~~$25.5~~$16.5 million and ~~$15.5~~$4.3 million during the ~~nine~~three months ended ~~March 31,~~September 30, 2022 and 2021, respectively. See Item 1, note 5 for additional information on our acquisitions.

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 hadhad no outstanding balance under our CLOC and amounts available to borrow were limited by the debt-to-EBITDA covenant to approximately ~~$427.5 million~~$1.47 billion as of ~~March 31,~~September 30, 2022.

On April 1, 2022, we sent a notice of redemption to the trustee to fully redeem our outstanding 2022 Senior Notes originally due in November 2022. The redemption price is equal to 100% of the outstanding principal amount of the 2022 Senior Notes, plus accrued and unpaid interest up to, but not including, the redemption date. The 2022 Senior Notes were redeemed on May 2, 2022.

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

As of

~~March 31,~~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 ~~March 31,~~September 30, 2022, we held cash and cash equivalents, excluding restricted amounts, of ~~$1.0 billion,~~$322.8 million, including ~~$131.8~~$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 ~~March 31,~~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 ~~$1.7~~$13.4 million during the ~~nine~~three months ended ~~March 31,~~September 30, 2022 and in ~~an increase~~a decrease of ~~$10.4~~$4.0 million during the ~~nine~~three months ended ~~March 31,~~September 30, 2021.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS~~– Except as described in~~ ~~Recent Developments~~ ~~related to our amended PMA agreement with Meta, 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	March 31, 2022		June 30, 2021		As of	September 30, 2022		June 30, 2022
Current assets	Current assets	$	60,543	$	50,737	Current assets	$	50,399	$	38,922
Noncurrent assets	Noncurrent assets	2,182,280		2,155,650		Noncurrent assets	1,682,102		1,698,242
Current liabilities	Current liabilities	583,051		81,388		Current liabilities	106,679		75,855
Noncurrent liabilities	Noncurrent liabilities	1,496,156		1,994,582		Noncurrent liabilities	1,497,818		1,495,732


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SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER	SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER			(in 000s)		SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER			(in 000s)
		Nine months ended March 31, 2022		Two months ended June 30, 2021			Three months ended September 30, 2022		Twelve months ended June 30, 2022
Total revenues	Total revenues	$	169,944	$	22,978	Total revenues	$	13,420	$	199,683
Income from continuing operations before income taxes	Income from continuing operations before income taxes	39,127		2,504		Income from continuing operations before income taxes	771		44,404
Net income from continuing operations	Net income from continuing operations	34,745		2,953		Net income from continuing operations	3,490		41,979
Net income	Net income	29,760		1,444		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 ~~March 31,~~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.


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


								(in 000s)						(in 000s)
		Three months ended March 31,				Nine months ended March 31,					Three months ended September 30,
		2022		2021		2022		2021				2022		2021
Net income - as reported		$	673,177	$	758,247	$	330,971	$	440,240
Net loss - as reported										Net loss - as reported		$	(168,421)	$	(151,601)
Discontinued operations, net	Discontinued operations, net	1,796		1,425		4,984		4,533		Discontinued operations, net		1,054		1,656
Net income from continuing operations - as reported		674,973		759,672		335,955		444,773
Net loss from continuing operations - as reported										Net loss from continuing operations - as reported		(167,367)		(149,945)
Add back:	Add back:									Add back:
Income taxes		186,884		69,543		29,666		50,997
Income tax benefit										Income tax benefit		(53,957)		(47,373)
Interest expense	Interest expense	23,746		22,471		69,661		78,657		Interest expense		15,824		22,830
Depreciation and amortization	Depreciation and amortization	36,116		39,100		107,462		117,036		Depreciation and amortization		33,624		35,715
		246,746		131,114		206,789		246,690				(4,509)		11,172
EBITDA from continuing operations	EBITDA from continuing operations	$	921,719	$	890,786	$	542,744	$	691,463	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 March 31,				Nine months ended March 31,					Three months ended September 30,
		2022		2021		2022		2021				2022		2021
Net income from continuing operations - as reported		$	674,973	$	759,672	$	335,955	$	444,773
Net loss from continuing operations - as reported										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)	13,979		16,229		43,141		50,398		Amortization of intangibles related to acquisitions (pretax)		12,696		14,870
Tax effect of adjustments (1)	Tax effect of adjustments (1)	(4,545)		(11,699)		(10,102)		(11,467)		Tax effect of adjustments (1)		(3,221)		(3,635)
Adjusted net income from continuing operations		$	684,407	$	764,202	$	368,994	$	483,704
Diluted earnings per share from continuing operations - as reported		$	4.06	$	4.09	$	1.92	$	2.35
Adjusted net loss from continuing operations										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		$	(1.05)	$	(0.84)
Adjustments, net of tax	Adjustments, net of tax	0.05		0.02		0.19		0.21		Adjustments, net of tax		0.06		0.06
Adjusted diluted earnings per share from continuing operations		$	4.11	$	4.11	$	2.11	$	2.56
Adjusted diluted loss per share from continuing operations										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


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and financial markets, the Company's capital resources and financial condition, future expenditures, potential 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.


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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 ~~March 31,~~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.


28			~~Q3 FY2022 Form 10-Q\|~~ H&R Block, Inc. \|Q1 FY2023 Form 10-Q			21

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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 ~~March 31,~~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)
January 1 - January 31 4,566 $ 22.14 4,566 $ 138,342
February 1 - February 28 5,129 $ 24.29 5,128 $ 13,797
March 1 - March 31 — $ — — $ 13,797
9,695 $ 23.28 9,694


(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 1341 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

On May 9, 2022, the Compensation Committee of the Company’s Board of Directors approved certain amendments to the Company’s Executive Severance Plan (as amended and restated, the Plan) to provide for the same severance benefits that an eligible participant would currently receive under the Plan in the case of a “Qualifying Termination,” but under circumstances constituting a “Good Reason Termination” outside of a change in control. The “Good Reason Termination” definition has also been updated to clarify that changes in the Company’s policy regarding remote or hybrid work are not grounds for a “Good Reason Termination.” All benefits and payments under the Plan remain subject to a participant's execution (and non-revocation) of a release of claims against the Company and other released parties.

The Company’s named executive officers, other than Jeffrey J. Jones II, the Company’s President and Chief Executive Officer, participate in the Executive Severance Plan. Mr. Jones would only participate in the Executive Severance Plan if and to the extent that the benefits related to equity awards thereunder exceeded those contained in his employment agreement.

The foregoing summary of the changes to the Plan is qualified in its entirety by reference to the full text of the Plan, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference.


~~H&R Block, Inc.~~ ~~\|Q3 FY2022 Form 10-Q~~			29

None.

~~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			~~Executive Severance~~Form of 2018 Long Term Incentive Plan Award Agreement for Restricted Share Units, as approved on ~~May 9,~~August 11, 2022, filed as Exhibit 10.1 to the Company's current report on Form 8-K filed August 17, 2022, file number 1-06089, is incorporated herein by reference.
10.2			Form of 2018 Long Term Incentive Plan Award Agreement for Performance Share Units, as approved on August 11, 2022, filed as Exhibit 10.2 to the Company's current report on Form 8-K filed 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)


3022			~~Q3 FY2022~~Q1 FY2023 Form 10-Q\| H&R Block, Inc.

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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
~~May 10,~~November 3, 2022

/s/ Tony G. Bowen
Tony G. Bowen
Chief Financial Officer
~~May 10,~~November 3, 2022

/s/ Kellie J. Logerwell
Kellie J. Logerwell
Chief Accounting Officer
~~May 10,~~November 3, 2022


H&R Block, Inc. ~~\|Q3 FY2022~~\|Q1 FY2023 Form 10-Q			3123


(in 000s)
Fiscal year of origination:	Balance		Non-Accrual
2022	$	32,795	$	32,795
2021 and prior	777		777
Revolving loans	12,837		12,246
	46,409		$	45,818
Allowance	(25,124)
Net balance	$	21,285


U.S. Operating Statistics
Nine months ended March 31,	2022		2021(1)		Change		% Change
Tax returns prepared: (in 000s) (2)
Company-owned operations	6,209		6,925		(716)		(10.3)	%
Franchise operations	2,300		2,674		(374)		(14.0)	%
Total assisted	8,509		9,599		(1,090)		(11.4)	%
Desktop	1,043		1,405		(362)		(25.8)	%
Online	4,457		5,459		(1,002)		(18.4)	%
Total DIY	5,500		6,864		(1,364)		(19.9)	%
Total U.S. Returns	14,009		16,463		(2,454)		(14.9)	%
Net Average Charge: (3)
Company-owned operations	$	234.59	$	221.25	$	13.34	6.0	%
Franchise operations (4)	$	229.64	$	210.56	$	19.08	9.1	%
Online	$	32.53	$	34.36	$	(1.83)	(5.3)	%


Consolidated - Financial Results			(in 000s, except per share amounts)
Nine months ended March 31,	2022		2021		$ Change		% Change
Revenues:
U.S. assisted tax preparation	$	1,456,594	$	1,532,079	$	(75,485)	(4.9)	%
U.S. royalties	169,548		178,126		(8,578)		(4.8)	%
U.S. DIY tax preparation	188,455		234,871		(46,416)		(19.8)	%
International	151,464		148,282		3,182		2.1	%
Refund Transfers	134,665		141,309		(6,644)		(4.7)	%
Emerald Card®	103,748		96,045		7,703		8.0	%
Peace of Mind® Extended Service Plan	59,373		63,430		(4,057)		(6.4)	%
Tax Identity Shield®	19,431		22,446		(3,015)		(13.4)	%
Interest and fee income on Emerald AdvanceSM	43,438		52,812		(9,374)		(17.7)	%
Wave	58,745		44,656		14,089		31.6	%
Other	27,736		28,819		(1,083)		(3.8)	%
Total revenues	2,413,197		2,542,875		(129,678)		(5.1)	%
Compensation and benefits:
Field wages	561,482		568,593		7,111		1.3	%
Other wages	200,715		204,817		4,102		2.0	%
Benefits and other compensation	146,708		154,280		7,572		4.9	%
	908,905		927,690		18,785		2.0	%
Occupancy	306,523		309,638		3,115		1.0	%
Marketing and advertising	223,796		214,091		(9,705)		(4.5)	%
Depreciation and amortization	107,462		117,036		9,574		8.2	%
Bad debt	59,760		63,156		3,396		5.4	%
Other	373,458		340,328		(33,130)		(9.7)	%
Total operating expenses	1,979,904		1,971,939		(7,965)		(0.4)	%
Other income (expense), net	1,989		3,491		(1,502)		(43.0)	%
Interest expense on borrowings	(69,661)		(78,657)		8,996		11.4	%
Pretax income	365,621		495,770		(130,149)		(26.3)	%
Income taxes	29,666		50,997		21,331		41.8	%
Net income from continuing operations	335,955		444,773		(108,818)		(24.5)	%
Net loss from discontinued operations	(4,984)		(4,533)		(451)		(9.9)	%
Net income	$	330,971	$	440,240	$	(109,269)	(24.8)	%
DILUTED EARNINGS PER SHARE:
Continuing operations	$	1.92	$	2.35	$	(0.43)	(18.3)	%
Discontinued operations	(0.03)		(0.02)		(0.01)		(50.0)	%
Consolidated	$	1.89	$	2.33	$	(0.44)	(18.9)	%
Adjusted diluted EPS(1)	$	2.11	$	2.56	$	(0.45)	(17.6)	%
EBITDA (1)	$	542,744	$	691,463	$	(148,719)	(21.5)	%