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~~December 31, 2023
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 28, 2023: 152,284,238~~January 31, 2024: 139,520,675 shares.

Table of Contents

Form 10-Q for the Period ended ~~March~~December 31, 2023

Table of Contents


	PART I
Item 1.	Consolidated Statements of Operations and Comprehensive ~~Income~~Loss Three and ~~nine~~six months ended ~~March~~December 31, 2023 and 2022	1
	Consolidated Balance Sheets As of M a ~~rch~~December 31, ~~202~~3 2023 and June 30, ~~2022~~2023	2
	Consolidated Statements of Cash Flows ~~Nine~~Six months ended ~~March~~December 31, 2023 and 2022	3
	Consolidated Statements of Stockholders' Equity Three and ~~nine~~six months ended ~~March~~December 31, 2023 and 2022	4
	Notes to Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2625
Item 4.	Controls and Procedures	2625
	PART II
Item 1.	Legal Proceedings	2726
Item 1A.	Risk Factors	2726
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2726
Item 3.	Defaults Upon Senior Securities	2726
Item 4.	Mine Safety Disclosures	2726
Item 5.	Other Information	2726
Item 6.	Exhibits	2827
	Signatures	2928

Table of Contents

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME:							(unaudited, in 000s, except per share amounts)
			Three months ended March 31,				Nine months ended March 31,
			2023		2022		2023		2022
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS:											CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS:		(unaudited, in 000s, except per share amounts)
		Three months ended December 31,												Three months ended December 31,			Six months ended December 31,
		2023										2023			2022	2023		2022
REVENUES:	REVENUES:
Service revenues	Service revenues		$	1,885,035	$	1,841,122	$	2,191,794	$	2,151,824
Service revenues
Service revenues
Royalty, product and other revenues	Royalty, product and other revenues		208,614		220,635		248,245		261,373
			2,093,649		2,061,757		2,440,039		2,413,197
		179,083
OPERATING EXPENSES:	OPERATING EXPENSES:
Costs of revenues
Costs of revenues
Costs of revenues	Costs of revenues		883,686		831,455		1,442,693		1,362,310
Selling, general and administrative	Selling, general and administrative		345,461		344,937		625,158		617,594
Total operating expenses	Total operating expenses		1,229,147		1,176,392		2,067,851		1,979,904

Other income (expense), net	Other income (expense), net		13,224		238		21,020		1,989
Other income (expense), net
Other income (expense), net
Interest expense on borrowings	Interest expense on borrowings		(22,298)		(23,746)		(57,107)		(69,661)
Income from continuing operations before income taxes			855,428		861,857		336,101		365,621
Income taxes			209,351		186,884		78,254		29,666
Net income from continuing operations			646,077		674,973		257,847		335,955
Net loss from discontinued operations, net of tax benefits of $792, $539, $1,920 and $1,495			(2,648)		(1,796)		(6,418)		(4,984)
NET INCOME			$	643,429	$	673,177	$	251,429	$	330,971
BASIC EARNINGS PER SHARE:
Loss from continuing operations before income tax benefit
Income tax benefit
Net loss from continuing operations
Net loss from discontinued operations, net of tax benefits of $191, $812, $373 and $1,128
NET LOSS
BASIC AND DILUTED LOSS PER SHARE:
Continuing operations	Continuing operations		$	4.22	$	4.13	$	1.65	$	1.95
Discontinued operations			(0.01)		(0.01)		(0.04)		(0.03)
Consolidated			$	4.21	$	4.12	$	1.61	$	1.92
DILUTED EARNINGS PER SHARE:
Continuing operations
Continuing operations	Continuing operations		$	4.14	$	4.06	$	1.62	$	1.92
Discontinued operations	Discontinued operations		(0.02)		(0.01)		(0.04)		(0.03)
Consolidated	Consolidated		$	4.12	$	4.05	$	1.58	$	1.89

DIVIDENDS DECLARED PER SHARE	DIVIDENDS DECLARED PER SHARE		$	0.29	$	0.27	$	0.87	$	0.81
COMPREHENSIVE INCOME:
Net income			$	643,429	$	673,177	$	251,429	$	330,971

DIVIDENDS DECLARED PER SHARE

DIVIDENDS DECLARED PER SHARE
COMPREHENSIVE LOSS:
Net loss
Net loss
Net loss

Change in foreign currency translation adjustments	Change in foreign currency translation adjustments		402		5,595		(22,636)		(3,926)

Change in foreign currency translation adjustments

Change in foreign currency translation adjustments
Other comprehensive income (loss)	Other comprehensive income (loss)		402		5,595		(22,636)		(3,926)
Comprehensive income			$	643,831	$	678,772	$	228,793	$	327,045
Comprehensive loss

See accompanying notes to consolidated financial statements.


H&R Block, Inc. ~~\|Q3 FY2023~~\|Q2 FY2024 Form 10-Q			1

Table of Contents


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, 2023			June 30, 2022		As of		December 31, 2023	June 30, 2023
ASSETS	ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	909,075		$	885,015
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents - restricted	Cash and cash equivalents - restricted	25,270			165,698
Receivables, less allowance for credit losses of $56,003 and $65,351		249,150			58,447
Receivables, less allowance for credit losses of $18,579 and $55,502
Income taxes receivable	Income taxes receivable	32,584			202,838
Prepaid expenses and other current assets	Prepaid expenses and other current assets	86,736			72,460
Total current assets	Total current assets	1,302,815			1,384,458
Property and equipment, at cost, less accumulated depreciation and amortization of $892,820 and $857,468		136,132			123,912
Property and equipment, at cost, less accumulated depreciation and amortization of $872,950 and $846,177
Operating lease right of use assets	Operating lease right of use assets	372,175			427,783
Intangible assets, net	Intangible assets, net	293,447			309,644
Goodwill	Goodwill	769,557			760,401
Deferred tax assets and income taxes receivable	Deferred tax assets and income taxes receivable	226,527			208,948
Other noncurrent assets	Other noncurrent assets	57,254			54,012
Total assets	Total assets	$	3,157,907		$	3,269,158
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:	LIABILITIES:
LIABILITIES:
LIABILITIES:
Accounts payable and accrued expenses
Accounts payable and accrued expenses
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	236,388		$	160,929
Accrued salaries, wages and payroll taxes	Accrued salaries, wages and payroll taxes	208,560			154,764
Accrued income taxes and reserves for uncertain tax positions	Accrued income taxes and reserves for uncertain tax positions	284,124			280,115

Operating lease liabilities	Operating lease liabilities	179,415			206,898
Operating lease liabilities
Operating lease liabilities
Deferred revenue and other current liabilities	Deferred revenue and other current liabilities	207,095			196,107
Total current liabilities	Total current liabilities	1,115,582			998,813
Long-term debt		1,488,457			1,486,876
Long-term debt and line of credit borrowings
Deferred tax liabilities and reserves for uncertain tax positions	Deferred tax liabilities and reserves for uncertain tax positions	256,119			226,362
Operating lease liabilities	Operating lease liabilities	199,086			228,820
Deferred revenue and other noncurrent liabilities	Deferred revenue and other noncurrent liabilities	135,055			116,656
Total liabilities	Total liabilities	3,194,299			3,057,527
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES						COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:	STOCKHOLDERS' EQUITY:
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 185,403,081 and 193,571,309		1,854			1,936
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 170,915,771 and 178,935,578
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 170,915,771 and 178,935,578
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 170,915,771 and 178,935,578
Additional paid-in capital	Additional paid-in capital	775,269			772,182
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(44,281)			(21,645)
Retained earnings (deficit)		(109,384)			120,405
Less treasury shares, at cost, of 33,119,705 and 33,640,988		(659,850)			(661,247)
Retained deficit
Less treasury shares, at cost, of 31,396,591 and 32,785,658
Total stockholders' equity (deficiency)	Total stockholders' equity (deficiency)	(36,392)			211,631
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,157,907		$	3,269,158

See accompanying notes to consolidated financial statements.


2			~~Q3 FY2023~~Q2 FY2024 Form 10-Q\| H&R Block, Inc.

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in 000s)

Nine months ended March 31,

2023

2022

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

251,429

330,971

Adjustments to reconcile net income to net cash provided by operating activities:

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

98,660

107,462

Provision

49,174

59,778

Depreciation and amortization

Provision for credit losses

Deferred taxes

6,685

(85,122)

Deferred taxes

Stock-based compensation

26,785

19,988

Changes in assets and liabilities, net of acquisitions:

Receivables

(237,395)

(233,362)

Prepaid expenses, other current and noncurrent assets

(17,438)

(16,525)

Prepaid expenses, other current and noncurrent assets

Accounts payable, accrued expenses, salaries, wages and payroll taxes

122,025

122,112

Deferred revenue, other current and noncurrent liabilities

22,054

36,960

Deferred revenue, other current and noncurrent liabilities

Income tax receivables, accrued income taxes and income tax reserves

179,692

36,244

Other, net

(3,285)

(5,378)

Net cash provided by operating activities

498,386

373,128

Other, net

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(56,661)

(52,718)

Capital expenditures

Payments made for business acquisitions, net of cash acquired

(47,740)

(25,465)

Franchise loans funded

(21,566)

(18,468)

Franchise loans funded

Payments from franchisees

14,963

17,714

Other, net

9,717

7,831

Other, net

Net cash used in investing activities

(101,287)

(71,106)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments of line of credit borrowings

(970,000)

(705,000)

Repayments of line of credit borrowings

Proceeds from line of credit borrowings

970,000

705,000

Dividends paid

(133,762)

(143,435)

Dividends paid

Repurchase of common stock, including shares surrendered

(365,852)

(555,247)

Proceeds from exercise of stock options

1,427

4,605

Repurchase of common stock, including shares surrendered

Other, net

(7,400)

(13,389)

Net cash used in financing activities

(505,587)

(707,466)

Other, net

Net cash provided by financing activities

Effects of exchange rate changes on cash

(7,880)

(1,666)

Net decrease in cash and cash equivalents, including restricted balances

(116,368)

(407,110)

Net decrease in cash and cash equivalents, including restricted balances

Cash, cash equivalents and restricted cash, beginning of period

1,050,713

1,584,164

Cash, cash equivalents and restricted cash, end of period

934,345

1,177,054

Cash, cash equivalents and restricted cash, end of period

SUPPLEMENTARY CASH FLOW DATA:

Income taxes paid (received), net

(110,028)

76,894

Income taxes paid (received), net

Interest paid on borrowings

59,429

58,009

Accrued additions to property and equipment

4,378

1,336

Accrued additions to property and equipment

New operating right of use assets and related lease liabilities

131,949

126,726

New operating right of use assets and related lease liabilities

Accrued dividends payable to common shareholders

44,163

43,041

See accompanying notes to consolidated financial statements.


H&R Block, Inc. \| ~~Q3 FY2023~~Q2 FY2024 Form 10-Q			3

Table of Contents


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY	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
			Shares	Amount									Shares				Amount
Balances as of July 1, 2022			193,571	$	1,936		$	772,182			$	(21,645)			$	120,405		(33,641)			$	(661,247)			$	211,631
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY																												(amounts in 000s, except per share amounts)
		Common Stock																									Common Stock		Additional Paid-in Capital	Accumulated Other Comprehensive Loss(1)	Retained Deficit	Treasury Stock	Total Stockholders’ Equity
		Shares
Balances as of July 1, 2023
Balances as of July 1, 2023
Balances as of July 1, 2023
Net loss	Net loss		—	—			—		—				(168,421)				—		—				(168,421)
Other comprehensive loss	Other comprehensive loss		—	—			—		(32,345)				—				—		—				(32,345)
Stock-based compensation	Stock-based compensation		—	—			5,630		—				—				—		—				5,630
Stock-based awards exercised or vested	Stock-based awards exercised or vested		—	—			(15,276)		—				(742)				805		15,839				(179)
Acquisition of treasury shares(2)	Acquisition of treasury shares(2)		—	—			—		—				—				(341)		(15,432)				(15,432)
Repurchase and retirement of common shares	Repurchase and retirement of common shares		(4,927)	(49)			(2,907)		—				(216,813)				—		—				(219,769)

Cash dividends declared - $0.29 per share			—	—			—		—				(46,100)				—		—				(46,100)
Balances as of September 30, 2022			188,644	$	1,887		$	759,629	$	(53,990)			$	(311,671)			(33,177)		$	(660,840)			$	(264,985)
Cash dividends declared - $0.32 per share

Cash dividends declared - $0.32 per share

Cash dividends declared - $0.32 per share
Balances as of September 30, 2023
Net loss	Net loss		—	—			—		—				(223,579)				—		—				(223,579)
Other comprehensive income	Other comprehensive income		—	—			—		9,307				—				—		—				9,307
Stock-based compensation	Stock-based compensation		—	—			9,544		—				—				—		—				9,544
Stock-based awards exercised or vested	Stock-based awards exercised or vested		—	—			421		—				(209)				52		1,023				1,235
Acquisition of treasury shares(2)	Acquisition of treasury shares(2)		—	—			—		—				—				(2)		(79)				(79)
Repurchase and retirement of common shares	Repurchase and retirement of common shares		(3,241)	(33)			(1,911)		—				(128,409)				—		—				(130,353)

Cash dividends declared - $0.29 per share			—	—			—		—				(44,569)				—		—				(44,569)
Balances as of December 31, 2022			185,403	$	1,854		$	767,683	$	(44,683)			$	(708,437)			(33,127)		$	(659,896)			$	(643,479)
Cash dividends declared - $0.32 per share

Net income			—	—			—		—				643,429				—		—				643,429
Cash dividends declared - $0.32 per share

Other comprehensive income			—	—			—		402				—				—		—				402
Stock-based compensation			—	—			7,830		—				—				—		—				7,830
Stock-based awards exercised or vested			—	—			(244)		—				(213)				13		265				(192)
Acquisition of treasury shares(2)			—	—			—		—				—				(6)		(219)				(219)

Cash dividends declared - $0.29 per share			—	—			—		—				(44,163)				—		—				(44,163)
Balances as of March 31, 2023			185,403	$	1,854		$	775,269	$	(44,281)			$	(109,384)			(33,120)		$	(659,850)			$	(36,392)
Cash dividends declared - $0.32 per share
Balances as of December 31, 2023

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

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

See accompanying notes to consolidated financial statements.


4			Q2 FY2024 Form 10-Q\| H&R Block, Inc.

Table of Contents




	Common Stock			Additional Paid-in Capital	Accumulated Other Comprehensive Loss(1)		Retained Earnings (Deficit)		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount									Shares			Amount
Balances as of July 1, 2022	193,571	$	1,936		$	772,182	$	(21,645)	$	120,405	(33,641)	$	(661,247)		$	211,631
Net loss	—	—			—		—		(168,421)		—	—			(168,421)
Other comprehensive loss	—	—			—		(32,345)		—		—	—			(32,345)
Stock-based compensation	—	—			5,630		—		—		—	—			5,630
Stock-based awards exercised or vested	—	—			(15,276)		—		(742)		805	15,839			(179)
Acquisition of treasury shares(2)	—	—			—		—		—		(341)	(15,432)			(15,432)
Repurchase and retirement of common shares	(4,927)	(49)			(2,907)		—		(216,813)		—	—			(219,769)


Cash dividends declared - $0.29 per share	—	—			—		—		(46,100)		—	—			(46,100)
Balances as of September 30, 2022	188,644	$	1,887		$	759,629	$	(53,990)	$	(311,671)	(33,177)	$	(660,840)		$	(264,985)
Net loss	—	—			—		—		(223,579)		—	—			(223,579)
Other comprehensive income	—	—			—		9,307		—		—	—			9,307
Stock-based compensation	—	—			9,544		—		—		—	—			9,544
Stock-based awards exercised or vested	—	—			421		—		(209)		52	1,023			1,235
Acquisition of treasury shares(2)	—	—			—		—		—		(2)	(79)			(79)
Repurchase and retirement of common shares	(3,241)	(33)			(1,911)		—		(128,409)		—	—			(130,353)


Cash dividends declared - $0.29 per share	—	—			—		—		(44,569)		—	—			(44,569)
Balances as of December 31, 2022	185,403	$	1,854		$	767,683	$	(44,683)	$	(708,437)	(33,127)	$	(659,896)		$	(643,479)

(1) The balance of our accumulated other comprehensive 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 FY2023 Form 10-Q\|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

(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
Shares Amount Shares Amount
Balances as of July 1, 2021 216,656 $ 2,167 $ 779,465 $ 88 $ 286,694 (34,842) $ (680,356) $ 388,058
Net loss — — — — (151,601) — — (151,601)
Other comprehensive loss — — — (11,177) — — — (11,177)
Stock-based compensation — — 5,627 — — — — 5,627
Stock-based awards exercised or vested — — (10,328) — (291) 705 13,765 3,146
Acquisition of treasury shares(2)
— — — — — (205) (4,817) (4,817)
Repurchase and retirement of common shares (6,802) (68) (4,081) — (161,619) — — (165,768)
Cash dividends declared - $0.27 per share — — — — (47,940) — — (47,940)
Balances as of September 30, 2021 209,854 $ 2,099 $ 770,683 $ (11,089) $ (74,757) (34,342) $ (671,408) $ 15,528
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)
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.~~


H&R Block, Inc. ~~\|Q3 FY2023~~\|Q2 FY2024 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~~December 31, 2023 and June 30, ~~2022,~~2023, the consolidated statements of operations and comprehensive ~~income~~loss for the three and ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, the consolidated statements of cash flows for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, and the consolidated statements of stockholders' equity for the three and ~~nine~~six months ended ~~March~~December 31, 2023 and 2022 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~~December 31, 2023 and 2022 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.

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 June 30, ~~2022~~2023 Annual Report ~~to Shareholders~~ on Form 10-K. All amounts presented herein as of June 30, ~~2022~~2023 or for the year then ended are derived from our Annual Report on Form 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.

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 loss contingencies related to our discontinued operations.


6			~~Q3 FY2023~~Q2 FY2024 Form 10-Q\| H&R Block, Inc.

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NOTE 2: REVENUE RECOGNITION

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


										(in 000s)
			Three months ended March 31,				Nine months ended March 31,
			2023		2022		2023			2022
									(in 000s)									(in 000s)
		Three months ended December 31,											Three months ended December 31,			Six months ended December 31,
		2023										2023		2022	2023		2022
Revenues:	Revenues:
U.S. assisted tax preparation
U.S. assisted tax preparation
U.S. assisted tax preparation	U.S. assisted tax preparation		$	1,453,049	$	1,392,142	$	1,530,577		$	1,456,594
U.S. royalties	U.S. royalties		150,163		158,786		161,337			169,548
U.S. DIY tax preparation	U.S. DIY tax preparation		167,022		175,184		182,330			188,455
Refund Transfers	Refund Transfers		117,384		132,223		120,210			134,665
Peace of Mind® Extended Service Plan	Peace of Mind® Extended Service Plan		16,750		17,222		58,840			59,373
Tax Identity Shield®	Tax Identity Shield®		8,720		9,078		19,237			19,431
Emerald Card® and SpruceSM	Emerald Card® and SpruceSM		44,358		50,660		68,448			103,748
Interest and fee income on Emerald AdvanceSM	Interest and fee income on Emerald AdvanceSM		33,750		30,535		47,267			43,438
International	International		69,417		65,232		156,297			151,464
Wave	Wave		22,064		20,111		66,651			58,745
Other	Other		10,972		10,584		28,845			27,736
Total revenues	Total revenues		$	2,093,649	$	2,061,757	$	2,440,039		$	2,413,197

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)									(in 000s)
POM	POM	Deferred Revenue				Deferred Wages					POM	Deferred Revenue		Deferred Wages
Nine months ended March 31,		2023		2022		2023			2022
Six months ended December 31,											Six months ended December 31,	2023	2022		2023	2022
Balance, beginning of the period	Balance, beginning of the period	$	173,486	$	172,759	$	19,495		$	17,867
Amounts deferred	Amounts deferred	76,231		80,801		8,451			9,006
Amounts recognized on previous deferrals	Amounts recognized on previous deferrals	(67,276)		(69,075)		(7,084)			(6,786)
Balance, end of the period	Balance, end of the period	$	182,441	$	184,485	$	20,862		$	20,087

As of ~~March~~December 31, 2023, deferred revenue related to POM was ~~$182.4~~$121.9 million. We expect that ~~$103.3~~$89.9 million will be recognized over the next twelve months, while the remaining balance will be recognized over the following five years.

As of ~~March~~December 31, 2023 and 2022, Tax Identity Shield® (TIS) deferred revenue was ~~$33.3~~$16.5 million and ~~$37.4~~$16.8 million, respectively. Deferred revenue related to TIS was ~~$25.8~~$25.2 million and ~~$28.3~~$25.8 million as of June 30, ~~2022~~2023 and ~~June 30, 2021,~~2022, respectively. All deferred revenue related to TIS will be recognized by April 2024.

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 ~~0.7 million and 0.6~~3.2 million shares for the three and ~~nine~~six months ended ~~March~~December 31, 2023 and 4.5 million


H&R Block, Inc. ~~\|Q3 FY2023~~\|Q2 FY2024 Form 10-Q			7

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~~respectively, and 0.3 million and 0.6 million~~ shares for the three and ~~nine~~six months ended ~~March~~December 31, 2022 ~~respectively,~~ , as the effect would be ~~antidilutive.~~antidilutive due to the net loss from continuing operations during the periods.

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


(in 000s, except per share amounts)	(in 000s, except per share amounts)										(in 000s, except per share amounts)
		Three months ended December 31,											Three months ended December 31,			Six months ended December 31,
		2023										2023		2022	2023		2022
Net loss from continuing operations attributable to shareholders
Amounts allocated to participating securities
Net loss from continuing operations attributable to common shareholders
			Three months ended March 31,				Nine months ended March 31,
			2023		2022		2023		2022
Net income from continuing operations attributable to shareholders			$	646,077	$	674,973	$	257,847	$	335,955
Amounts allocated to participating securities			(2,822)		(3,061)		(1,064)		(1,543)
Net income from continuing operations attributable to common shareholders			$	643,255	$	671,912	$	256,783	$	334,412

Basic weighted average common shares
Basic weighted average common shares
Basic weighted average common shares	Basic weighted average common shares		152,281		162,777		155,249		171,481
Potential dilutive shares	Potential dilutive shares		3,280		2,835		3,239		2,661
Dilutive weighted average common shares	Dilutive weighted average common shares		155,561		165,612		158,488		174,142

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:
Loss per share from continuing operations attributable to common shareholders:
Basic
Basic
Basic	Basic		$	4.22	$	4.13	$	1.65	$	1.95
Diluted	Diluted		4.14		4.06		1.62		1.92

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

STOCK-BASED COMPENSATION – We granted ~~1.1~~1.7 million and ~~1.6~~1.0 million shares, including adjustments for performance achievement and dividend equivalents, under our stock-based compensation plans during the ~~nine~~six months ended ~~March~~December 31, 2023 and ~~March 31,~~ 2022, respectively. Stock-based compensation expense of our continuing operations totaled ~~$8.9~~$9.9 million and ~~$26.8~~$17.5 million for the three and ~~nine~~six months ended ~~March~~December 31, 2023, respectively, and ~~$6.8~~$10.2 million and ~~$20.0~~$17.9 million for the three and ~~nine~~six months ended ~~months ended March~~December 31, 2022, respectively. As of ~~March~~December 31, 2023, unrecognized compensation cost for ~~stock options totaled $0.2 million, and for~~ nonvested shares and units totaled ~~$56.6~~$59.2 million.

NOTE 4: RECEIVABLES

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


(in 000s)	(in 000s)							(in 000s)
As of	As of		March 31, 2023				June 30, 2022				As of			December 31, 2023		June 30, 2023
			Short-term		Long-term				Short-term			Long-term
		Short-term													Short-term		Long-term	Short-term	Long-term
Loans to franchisees	Loans to franchisees		$	13,841	$	23,570			$	6,194		$	22,036
Receivables for U.S. assisted and DIY tax preparation and related fees	Receivables for U.S. assisted and DIY tax preparation and related fees		104,954		6,477				18,893			2,560
H&R Block's Instant RefundSM receivables			41,537		1,687				3,491			198
H&R Block Emerald Advance® lines of credit			15,976		6,166				6,691			8,825
H&R Block's Instant Refund® receivables
Emerald AdvanceSM
Software receivables from retailers	Software receivables from retailers		8,882		—				3,992			—
Royalties and other receivables from franchisees	Royalties and other receivables from franchisees		42,443		—				3,682			73

Wave payment processing receivables	Wave payment processing receivables		935		—				1,393			—
Other	Other		20,582		1,365				14,111			1,172

Total	Total		$	249,150	$	39,265			$	58,447		$	34,864


8			~~Q3 FY2023~~Q2 FY2024 Form 10-Q\| H&R Block, Inc.

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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~~December 31, 2023 and June 30, ~~2022,~~2023, loans with a principal balance more than 90 days past due, or on non-accrual status, are not material.

H&R BLOCK'S INSTANT REFUNDSM® – H&R Block's Instant ~~Refund~~SMRefund® 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 credit losses at an amount that we believe reflects the receivable at net realizable value. In December of each year, we charge-off the receivables and the related allowance 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~~December 31, 2023 are as follows:


				(in 000s)					(in 000s)
					(in 000s)

Tax return year of origination
Tax return year of origination
Tax return year of origination	Tax return year of origination	Current Balance			More Than 60 Days Past Due		Balance	More Than 60 Days Past Due
2022	2022	$	44,063		$	—
2021 and prior	2021 and prior	451			451

		44,514			$	451
		3,765
		3,765
		3,765
Allowance	Allowance	(1,290)
Net balance	Net balance	$	43,224
Net balance
Net balance

~~H&R BLOCK~~ EMERALD ADVANCE®SM ~~LINES OF CREDIT~~ – Historically, Emerald AdvanceSM lines of credit (EA LOCs) have been offered to clients in our offices from mid-November through mid-January. If the borrower met certain criteria as agreed in the loan terms, the line of credit could be utilized year-round (Revolving Loan). In fiscal year 2024, EAs are being offered as term loans (EA TLs), and we discontinued EA LOCs, including the Revolving Loans. See note 8 for discussion of the new EA TL.

We review the credit quality of our purchased participation interests in ~~Emerald Advance~~SM ~~(EA)~~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 credit losses at an amount that we believe reflects the receivable at net realizable value. InTypically, in December of each year, we charge-off the receivables and the related allowance for EA LOCs, excluding Revolving Loans, to an amount we believe represents the net realizable value. However, due to the discontinuation of EA LOCs, we charged-off the receivables and the related allowance of EA LOCs and Revolving Loans during the quarter ended September 30, 2023 to an amount that we believe represents 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~~December 31, 2023 are as follows:


(in 000s)	(in 000s)					(in 000s)
Fiscal year of origination	Fiscal year of origination	Current Balance		Non-Accrual		Fiscal year of origination	Balance	Non-Accrual
2023		$	33,096	$	33,096
2022 and prior		3,757		3,757
Revolving loans		13,318		12,743
2024 – Term loans
2023 and prior – Lines of credit and Revolving Loans
		50,171		$	49,596
		373,992
		373,992
		373,992
Allowance	Allowance	(28,029)
Net balance	Net balance	$	22,142
Net balance
Net balance


H&R Block, Inc. ~~\|Q3 FY2023~~\|Q2 FY2024 Form 10-Q			9

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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~~six months ended ~~March~~December 31, 2023 and 2022 is as follows:

(in 000s)
EAs All Other Total
Balances as of July 1, 2022 $ 26,141 $ 51,126 $ 77,267
Provision 16,702 32,472 49,174
Charge-offs, recoveries and other (14,814) (51,081) (65,895)
Balances as of March 31, 2023 $ 28,029 $ 32,517 $ 60,546
Balances as of July 1, 2021 $ 27,704 $ 60,272 $ 87,976
Provision 13,797 45,981 59,778
Charge-offs, recoveries and other (16,377) (60,343) (76,720)
Balances as of March 31, 2022 $ 25,124 $ 45,910 $ 71,034


(in 000s)
	EAs		All Other		Total
Balances as of July 1, 2023	$	27,386	$	35,108	$	62,494
Provision for credit losses	17,885		3,651		21,536
Charge-offs, recoveries and other	(27,714)		(37,613)		(65,327)
Balances as of December 31, 2023	$	17,557	$	1,146	$	18,703
Balances as of July 1, 2022	$	26,141	$	51,126	$	77,267
Provision for credit losses	15,081		1,500		16,581
Charge-offs, recoveries and other	(14,814)		(51,429)		(66,243)
Balances as of December 31, 2022	$	26,408	$	1,197	$	27,605

Gross charge-offs of EAs were $27.7 million for the six months ended December 31, 2023, of which $15.4 million related to EA LOCs originated in fiscal year 2023 and $12.3 million related to Revolving Loans.

NOTE 5: GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the ~~nine~~six months ended ~~March~~December 31, 2023 are as follows:


(in 000s)	(in 000s)
(in 000s)
(in 000s)
		Goodwill
		Goodwill
		Goodwill
Balances as of July 1, 2023
Balances as of July 1, 2023
Balances as of July 1, 2023
		Goodwill		Accumulated Impairment Losses		Net
Balances as of July 1, 2022		$	898,698	$	(138,297)	$	760,401
Acquisitions(1)

Acquisitions		23,829		—		23,829
Acquisitions(1)

Acquisitions(1)
Disposals and foreign currency changes, net
Disposals and foreign currency changes, net
Disposals and foreign currency changes, net	Disposals and foreign currency changes, net	(14,673)		—		(14,673)
Impairments	Impairments	—		—		—
Balances as of March 31, 2023		$	907,854	$	(138,297)	$	769,557
Impairments
Impairments
Balances as of December 31, 2023
Balances as of December 31, 2023
Balances as of December 31, 2023

~~In conjunction with our annual impairment~~(1) All goodwill added during the period is expected to be tax-deductible for federal income tax reporting.

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.~~fair value of a reporting unit below its carrying value.


10			~~Q3 FY2023~~Q2 FY2024 Form 10-Q\| H&R Block, Inc.

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Components of intangible assets are as follows:


(in 000s)	(in 000s)								(in 000s)
			Gross Carrying Amount		Accumulated Amortization		Net
As of March 31, 2023:
		Gross Carrying Amount								Gross Carrying Amount	Accumulated Amortization	Net
As of December 31, 2023:
Reacquired franchise rights
Reacquired franchise rights
Reacquired franchise rights	Reacquired franchise rights		$	392,274	$	(208,401)	$	183,873
Customer relationships	Customer relationships		351,427		(295,094)		56,333
Internally-developed software	Internally-developed software		140,268		(123,125)		17,143
Noncompete agreements	Noncompete agreements		42,575		(39,099)		3,476
Franchise agreements	Franchise agreements		19,201		(18,348)		853
Purchased technology	Purchased technology		122,700		(94,556)		28,144
Trade name	Trade name		5,800		(2,175)		3,625
			$	1,074,245	$	(780,798)	$	293,447

As of June 30, 2022:
		$
As of June 30, 2023:
Reacquired franchise rights
Reacquired franchise rights
Reacquired franchise rights	Reacquired franchise rights		$	379,114	$	(197,068)	$	182,046
Customer relationships	Customer relationships		331,020		(278,717)		52,303
Internally-developed software	Internally-developed software		137,638		(107,111)		30,527
Noncompete agreements	Noncompete agreements		41,789		(37,684)		4,105
Franchise agreements	Franchise agreements		19,201		(17,388)		1,813
Purchased technology	Purchased technology		122,700		(87,910)		34,790
Trade name	Trade name		5,800		(1,740)		4,060
		$

			$	1,037,262	$	(727,618)	$	309,644

We made payments to acquire businesses totaling ~~$47.7~~$27.2 million and ~~$25.5~~$39.8 million during the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, respectively. The amounts and weighted-average lives of intangible assets acquired during the ~~nine~~six months ended ~~March~~December 31, 2023 ~~including amounts capitalized related to internally-developed software,~~ are as follows:


(dollars in 000s)	(dollars in 000s)					(dollars in 000s)
		Amount											Amount			Weighted-Average Life (in years)
			Amount		Weighted-Average Life (in years)
Internally-developed software			$	2,822	2
Customer relationships
Customer relationships
Customer relationships	Customer relationships		22,015		5		$	20,933			5			5
Reacquired franchise rights	Reacquired franchise rights		13,460		4	Reacquired franchise rights			7,604			5			5
Noncompete agreements	Noncompete agreements		833		5	Noncompete agreements			942			5			5
Total	Total		$	39,130	5	Total			$	29,479		5			5

Amortization of intangible assets for the three and ~~nine~~six months ended ~~March~~December 31, 2023 was ~~$17.8~~$15.4 million and ~~$54.7~~$31.2 million, respectively, compared to ~~$19.5~~$18.5 million and ~~$58.7~~$36.9 million for the three and ~~nine~~six months ended ~~March~~December 31, 2022, respectively. Estimated amortization of intangible assets for fiscal years ending June 30, ~~2023,~~ 2024, 2025, 2026, 2027, and ~~2027~~2028 is ~~$71.9~~$59.9 million, ~~$55.2~~$39.9 million, ~~$32.6~~$30.2 million, ~~$23.6~~$23.9 million and ~~$17.8~~$16.3 million, respectively.


H&R Block, Inc. ~~\|Q3 FY2023~~\|Q2 FY2024 Form 10-Q			11

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NOTE 6: LONG-TERM DEBT

The components of long-term debt are as follows:


					(in 000s)
				(in 000s)						(in 000s)
As of	As of	March 31, 2023			June 30, 2022		As of	December 31, 2023	June 30, 2023

Senior Notes, 5.250%, due October 2025	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, 3.875%, due August 2030	Senior Notes, 3.875%, due August 2030	650,000			650,000

Committed line of credit borrowings
Debt issuance costs and discounts	Debt issuance costs and discounts	(11,543)			(13,124)
Total long-term debt	Total long-term debt	1,488,457			1,486,876
Less: Current portion	Less: Current portion	—			—
Long-term portion	Long-term portion	$	1,488,457		$	1,486,876
Estimated fair value of long-term debt	Estimated fair value of long-term debt	$	1,337,000		$	1,377,000

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~~December 31, 2023.

We had noan outstanding balance of $800.0 million under our CLOC and amounts available to borrow were not limited by the debt-to-EBITDA covenant ~~to approximately $1.4 billion~~as of ~~March~~December 31, 2023.

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. 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. On November 7, 2022, the IRS commenced their examination of our 2020 tax return and related carryback claims to tax years 2015 through 2018. 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 ~~$256.3~~$208.4 million and ~~$232.0~~$240.1 million as of ~~March~~December 31, 2023 and June 30, ~~2022,~~2023, respectively. The gross unrecognized tax benefits ~~increased~~decreased by ~~$24.3~~$31.7 million during the ~~nine~~six months ended


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

~~Table~~ December 31, 2023 due to expiration of ~~Contents~~

~~March 31, 2023.~~statutes of limitations and settlements with state tax authorities. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately ~~$53.5~~$117.4 million within the next twelve months. The anticipated decrease is due to the expiration of statutes of limitations and anticipated closure of various matters currently under 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.


12			Q2 FY2024 Form 10-Q\| H&R Block, Inc.

Table of Contents

Our effective tax rate for continuing operations, including the effects of discrete tax items, was ~~23.3%~~28.9% and ~~8.1%~~25.2% for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, respectively. Discrete items ~~decreased~~increased the effective tax rate by ~~1.3%~~5.4% and ~~14.4%~~1.4% for the ~~nine~~six months ended ~~March~~December 31, 2023, and 2022, respectively. A discrete income tax benefit of ~~$4.2~~$26.6 million and ~~$52.6~~$7.2 million were recorded in the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, respectively. The discrete tax benefit recorded in the current period primarily resulted from settlements with tax authorities and state statute of limitations expirations. The discrete tax benefit recorded in the prior period primarily resulted from ~~federal and~~ state statute of limitations ~~expirations.~~expirations and refund interest. The impact of discrete tax items ~~have on~~combined with the seasonal nature of our business can cause the effective tax rate ~~through~~in our second quarter to be significantly different than the ~~third quarter are slightly exaggerated versus the impact discrete tax items have on the~~rate for our full fiscal ~~year~~year.

Consistent with prior years, our pretax loss for the six months ended December 31, 2023 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 ~~rate.~~benefits recorded in our financial statements will occur within our fiscal year. The amount of tax benefit recorded for the six months ended December 31, 2023 reflects management’s estimate of the annual effective tax rate applied to year-to-date loss from continuing operations adjusted for the tax impact of discrete items for the periods presented.

NOTE 8: COMMITMENTS AND CONTINGENCIES

Our U.S. and Canadian businesses offer our 100% accuracy guarantee. 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~~respective taxing authority that a client would otherwise not have been required to pay. Our liability related to estimated losses under the 100% accuracy guarantee was ~~$14.6~~$11.9 million and ~~$14.0~~$15.8 million as of ~~March~~December 31, 2023 and June 30, ~~2022,~~2023, 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 ~~$19.9~~$31.7 million and ~~$12.9~~$18.3 million as of ~~March~~December 31, 2023 and June 30, ~~2022,~~2023 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~~short-term lines of ~~credit.~~credit for the purpose of meeting their seasonal working capital needs. Our total obligation under these lines of credit was ~~$20.4~~$20.8 million at ~~March~~December 31, 2023, and net of amounts drawn and outstanding, our remaining commitment to fund totaled ~~$9.6~~$6.2 million.

~~In March 2020,~~Effective October 20, 2023, we amended the ~~U.S. government enacted the Coronavirus Aid, Relief,~~Program Management Agreement and ~~Economic Security Act (CARES Act) to provide economic and other relief as~~entered into a ~~result of the COVID-19 pandemic. The CARES Act includes, among other items, provisions relating to refundable employee retention payroll tax credits.~~ 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 benefitnew participation agreement related to these credits upon both the receipt of the benefit and the resolution of the uncertainties, including, but not limited to, the completion of any potential audit or examination, or the expiration of the related statute of limitations. During the nine months ended March 31, 2023, we received $13.2 million related to these credits and recognized $3.7 million as an offset to related operating expenses. As of March 31, 2023 and June 30, 2022, we had deferre~~d balances of $14.6 million and $5.1 million, respectively, which is recorded in deferred revenue and other current liabilities.~~

~~Emerald Advance~~SM ~~lines of credit (EAs) are~~EA TLs originated by ~~Pathward~~TM Pathward®, N.A. (Pathward). In fiscal year 2024, EAs are being offered as term loans and we discontinued EA LOCs. EA TLs are interest bearing with principal and interest due in full on March 31, and there are no annual fees or required monthly payments. EA TLs are offered to clients in our offices, in November and December, in amounts of $350 to $1,300. We continue to purchase a 90% participation interest ~~at par,~~ in ~~all EAs originated~~each loan made by Pathward in accordance with ~~our~~the participation agreement. ~~At March 31, 2023, the principal balance of~~We purchased participation interests ~~for~~of $341.8 million during the ~~current year totaled $277.9 million.~~

Refund Advance loans are originated by Pathward and offered to certain assisted U.S. tax preparation clients, based on client eligibility as determined by Pathward. 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 Marchsix months ended December 31, ~~2023, we accrued an estimated liability of $0.8 million related to this guarantee, compared to $0.6 million at March 31, 2022.~~


~~H&R Block, Inc.~~ ~~\|Q3 FY2023 Form 10-Q~~			13

2023.

~~Table of Contents~~

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, 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. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible


H&R Block, Inc. \|Q2 FY2024 Form 10-Q			13

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verdicts in the jurisdiction for similar matters. We believe that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value due to this variability in pleadings and our experience in handling and resolving numerous claims over an extended period of time.

The outcome of a 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 courts and arbitrators will apply the law. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will view the relevant evidence and applicable law.

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

We accrue liabilities for litigation, arbitration and other related loss contingencies and any related settlements 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~~December 31, 2023. 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. Our ~~total~~ accrued liabilities were ~~$4.0~~$1.8 million and ~~$1.7~~$0.2 million as of ~~March~~December 31, 2023 and June 30, ~~2022,~~2023, respectively.

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 defenses to the claims being asserted, discovery from other parties and investigation of factual allegations, rulings by courts or arbitrators on motions or appeals, 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~~December 31, 2023, 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.


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

~~Table of Contents~~

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


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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 –

On May 6, 2019, the Los Angeles City Attorney filed a lawsuit on behalf of the People of the State of California in the Superior Court of California, County of Los Angeles (Case No. 19STCV15742). The case is styled The People of the State of California v. HRB Digital LLC, et al. The complaint alleges that H&R Block, Inc. and HRB Digital LLC engaged in unfair, fraudulent and deceptive business practices and acts in connection with the IRS Free File Program in violation of the California Unfair Competition Law, California Business and Professions Code §§17200 et seq. The complaint seeks injunctive relief, restitution of monies paid to H&R Block by persons in the State of California who were eligible to file under the IRS Free File Program for the time period starting 4 years prior to the date of the filing of the complaint, pre-judgment interest, civil penalties and costs. The City Attorney subsequently dismissed H&R Block, Inc. from the case and amended its complaint to add HRB Tax Group, Inc. We filed a motion for summary judgment, which was denied. ~~A trial date is set for August 14, 2023. We~~The parties have ~~not concluded that a loss~~reached an agreement to settle this matter. An accrual related to this matter is ~~probable, nor have we accrued a liability related to this matter.~~included in our loss contingency accrual.

~~We have received and are responding to certain governmental inquiries relating to the IRS Free File Program and our DIY tax preparation services.~~ In ~~February 2023,~~January 2024, we received a revised demand and draft complaint from the Federal Trade Commission (FTC) relating to certain aspects of our DIY tax preparation services. ~~The Company has been discussing potential resolution of~~If the ~~matter with the FTC. If we~~parties are not able to reach aamicable resolution, the FTC may seek resolution through litigation. We have also received and are responding to certain governmental inquiries and other matters relating to the IRS Free File Program and other aspects of our DIY tax preparation services, including the use of pixels. We have not concluded that a loss related to these matters is probable, nor have we accrued a liability related to these matters.

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 and may in the future be, subject to litigation and other loss contingencies, including indemnification and contribution claims, pertaining to SCC's mortgage business activities that occurred prior to such termination and sale.

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 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 obligations relating to such matters. Additional lawsuits against the parties to the securitization transactions may be filed in the future, and SCC may receive additional notices of potential indemnification, contribution or similar obligations with respect to existing or new lawsuits or settlements of such lawsuits or other claims. ~~An accrual~~We have not concluded that a loss related to any of these ~~matters~~potential indemnification or contribution claims is ~~included in our loss contingency accrual.~~probable, nor have we accrued a liability related to any of 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 and the indeterminate damages sought. If the amount that SCC is ultimately required to pay with respect to 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 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~~December 31, 2023, total


~~H&R Block, Inc.~~ ~~\|Q3 FY2023 Form 10-Q~~			15

~~Table of Contents~~

approximately ~~$266~~$268 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 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, 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.


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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

RESULTS OF OPERATIONS

Our subsidiaries provide assisted and ~~DIY~~do-it-yourself (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 partners, to the general public primarily in the ~~U.S.~~United States (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 solutions through our company-owned and franchise offices and online through Wave. We report a single segment that includes all of our continuing operations.


16			~~Q3 FY2023~~Q2 FY2024 Form 10-Q\| H&R Block, Inc.

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Consolidated – Financial Results (in 000s, except per share amounts)
Three months ended March 31, 2023 2022 $ Change % Change
Revenues:
U.S. tax preparation and related services:
Assisted tax preparation $ 1,453,049 $ 1,392,142 $ 60,907 4.4 %
Royalties 150,163 158,786 (8,623) (5.4) %
DIY tax preparation 167,022 175,184 (8,162) (4.7) %
Refund Transfers 117,384 132,223 (14,839) (11.2) %
Peace of Mind® Extended Service Plan 16,750 17,222 (472) (2.7) %
Tax Identity Shield® 8,720 9,078 (358) (3.9) %
Other 10,972 10,584 388 3.7 %
Total U.S. tax preparation and related services 1,924,060 1,895,219 28,841 1.5 %
Financial services:
Emerald Card® and SpruceSM
44,358 50,660 (6,302) (12.4) %
Interest and fee income on Emerald AdvanceSM
33,750 30,535 3,215 10.5 %
Total financial services 78,108 81,195 (3,087) (3.8) %
International 69,417 65,232 4,185 6.4 %
Wave 22,064 20,111 1,953 9.7 %
Total revenues $ 2,093,649 $ 2,061,757 $ 31,892 1.5 %
Compensation and benefits:
Field wages 480,779 435,345 (45,434) (10.4) %
Other wages 73,503 78,584 5,081 6.5 %
Benefits and other compensation 100,368 91,051 (9,317) (10.2) %
654,650 604,980 (49,670) (8.2) %
Occupancy 118,111 111,405 (6,706) (6.0) %
Marketing and advertising 210,508 196,582 (13,926) (7.1) %
Depreciation and amortization 32,313 36,116 3,803 10.5 %
Bad debt 34,273 45,051 10,778 23.9 %
Other 179,292 182,258 2,966 1.6 %
Total operating expenses 1,229,147 1,176,392 (52,755) (4.5) %
Other income (expense), net 13,224 238 12,986 **
Interest expense on borrowings (22,298) (23,746) 1,448 6.1 %
Pretax income 855,428 861,857 (6,429) (0.7) %
Income taxes 209,351 186,884 (22,467) (12.0) %
Net income from continuing operations 646,077 674,973 (28,896) (4.3) %
Net loss from discontinued operations (2,648) (1,796) (852) (47.4) %
Net income $ 643,429 $ 673,177 $ (29,748) (4.4) %
DILUTED EARNINGS PER SHARE
Continuing operations $ 4.14 $ 4.06 $ 0.08 2.0 %
Discontinued operations (0.02) (0.01) (0.01) (100.0) %
Consolidated $ 4.12 $ 4.05 $ 0.07 1.7 %
Adjusted diluted EPS(1)
$ 4.20 $ 4.11 $ 0.09 2.2 %
EBITDA (1)
$ 910,039 $ 921,719 $ (11,680) (1.3) %


Consolidated – Financial Results			(in 000s, except per share amounts)
Three months ended December 31,	2023		2022		$ Change		% Change
Revenues:
U.S. tax preparation and related services:
Assisted tax preparation	$	48,342	$	41,216	$	7,126	17.3	%
Royalties	5,454		4,946		508		10.3	%
DIY tax preparation	13,111		12,150		961		7.9	%
Refund Transfers	813		1,542		(729)		(47.3)	%
Peace of Mind® Extended Service Plan	17,440		17,320		120		0.7	%
Tax Identity Shield®	4,694		5,350		(656)		(12.3)	%
Other	9,592		8,513		1,079		12.7	%
Total U.S. tax preparation and related services	99,446		91,037		8,409		9.2	%
Financial services:
Emerald Card® and SpruceSM	11,700		12,478		(778)		(6.2)	%
Interest and fee income on Emerald AdvanceSM	15,235		12,903		2,332		18.1	%
Total financial services	26,935		25,381		1,554		6.1	%
International	29,569		28,046		1,523		5.4	%
Wave	23,133		21,941		1,192		5.4	%
Total revenues	$	179,083	$	166,405	$	12,678	7.6	%
Compensation and benefits:
Field wages	77,795		76,204		(1,591)		(2.1)	%
Other wages	74,671		70,530		(4,141)		(5.9)	%
Benefits and other compensation	36,063		34,277		(1,786)		(5.2)	%
	188,529		181,011		(7,518)		(4.2)	%
Occupancy	101,194		101,173		(21)		—	%
Marketing and advertising	11,305		15,142		3,837		25.3	%
Depreciation and amortization	30,107		32,723		2,616		8.0	%
Bad debt	21,754		22,416		662		3.0	%
Other	93,626		97,143		3,517		3.6	%
Total operating expenses	446,515		449,608		3,093		0.7	%
Other income (expense), net	5,922		4,185		1,737		41.5	%
Interest expense on borrowings	(21,364)		(18,985)		(2,379)		(12.5)	%
Pretax loss	(282,874)		(298,003)		15,129		5.1	%
Income tax benefit	(93,758)		(77,140)		16,618		21.5	%
Net loss from continuing operations	(189,116)		(220,863)		31,747		14.4	%
Net loss from discontinued operations	(639)		(2,716)		2,077		76.5	%
Net loss	$	(189,755)	$	(223,579)	$	33,824	15.1	%
BASIC AND DILUTED LOSS PER SHARE:
Continuing operations	$	(1.33)	$	(1.43)	$	0.10	7.0	%
Discontinued operations	—		(0.02)		0.02		**
Consolidated	$	(1.33)	$	(1.45)	$	0.12	8.3	%




Adjusted diluted EPS(1)	$	(1.27)	$	(1.37)	$	0.10	7.3	%
EBITDA (1)	$	(231,403)	$	(246,295)	$	14,892	6.0	%

(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~~.measures.


H&R Block, Inc. ~~\|Q3 FY2023~~\|Q2 FY2024 Form 10-Q			17

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Three months ended ~~March~~December 31, 2023 compared to ~~March~~December 31, 2022

Revenues increased ~~$31.9~~$12.7 million, or ~~1.5%~~7.6%, from the prior year. U.S. assisted tax preparation revenues increased ~~$60.9~~$7.1 million, or ~~4.4%~~17.3%, due to ~~a 3.7% increase in net average charge combined with~~ higher ~~tax return~~ volumes ~~in the current year. U.S. royalty revenue decreased $8.6 million, or 5.4%, due to lower volumes, partially offset by~~and a higher net average charge in the current year. ~~During~~Other revenues increased $1.1 million, or 12.7%, primarily due to higher extension filing and bookkeeping fees.

Interest and fee income on Emerald AdvanceSM (EA) increased $2.3 million, or 18.1%, due to an increase in EA Loans and an earlier start to the ~~year we purchased franchise offices which results~~offering period in ~~increasing tax preparation~~the current year.

International revenues ~~and decreasing royalties as the revenues and returns become company-owned after the acquisition. For the three months ended March 31, our total assisted~~increased $1.5 million, or 5.4%, primarily due to higher tax return ~~volume, which includes both company-owned and franchise offices,~~volumes in Australia. Wave revenues increased $1.2 million, or 5.4%, due to higher small business payments processing volumes.

Total operating expenses decreased ~~2.0%~~$3.1 million, or 0.7%, from the prior year.

~~U.S. DIY tax preparation revenues decreased $8.2~~ Other wages increased $4.1 million, or ~~4.7%~~5.9%, primarily due to higher corporate wages from higher headcount in the current year. Marketing and advertising expense decreased $3.8 million, or 25.3%, primarily due to vendor refunds for expired customer incentives. Depreciation and amortization expense decreased $2.6 million, or 8.0%, primarily due to lower software sales and a decline in online paid returns during the quarter compared to the prior year. Refund Transfer revenues decreased $14.8 million, or 11.2%, primarily due to fewer Refund Transfers in the current year.

~~Emerald Card® and Spruce~~SM ~~revenues decreased $6.3 million, or 12.4%, primarily due to lower card activity in the current year as a result~~amortization of ~~less funds being loaded to Emerald Cards® in the current year.~~

Total operating expenses increased $52.8 million, or 4.5%, from the prior year. Field wages increased $45.4 million, or 10.4%, primarily due to higher wages in the current year. Benefits and other compensation increased $9.3 million, or 10.2%, due to higher payroll taxes, employee insurance and stock-based compensation. Occupancy expense increased $6.7 million, or 6.0%, primarily due to higher office repairs and rent. Marketing and advertising expense increased $13.9 million, or 7.1%, due to higher television advertising. Bad debt expense decreased $10.8 million, or 23.9%, due to fewer Refund Transfers compared to the prior year.capitalized software.

Other operating expenses decreased ~~$3.0~~$3.5 million, or ~~1.6%~~3.6%. The components of other expenses are as follows:


										(in 000s)
Three months ended March 31,			2023		2022		$ Change			% Change
									(in 000s)																										(in 000s)
Three months ended December 31,												Three months ended December 31,	2023					2022					$ Change						% Change
Consulting and outsourced services	Consulting and outsourced services		$	42,130	$	46,402	$	4,272		9.2	%	Consulting and outsourced services	$	16,267	$			$	22,452	$			$	6,185		27.5				27.5	%
Bank partner fees	Bank partner fees		24,778		23,686		(1,092)			(4.6)	%	Bank partner fees	(1,113)		(778)				(778)		335				335			43.1			43.1		%
Client claims and refunds	Client claims and refunds		8,787		10,730		1,943			18.1	%	Client claims and refunds	3,107		5,445				5,445		2,338				2,338			42.9			42.9		%
Employee and travel expenses	Employee and travel expenses		9,906		9,515		(391)			(4.1)	%	Employee and travel expenses	12,375		14,701				14,701		2,326				2,326			15.8			15.8		%
Technology-related expenses	Technology-related expenses		26,385		26,373		(12)			—	%	Technology-related expenses	27,261		24,489				24,489		(2,772)				(2,772)			(11.3)			(11.3)		%
Credit card/bank charges	Credit card/bank charges		34,159		30,770		(3,389)			(11.0)	%	Credit card/bank charges	17,768		17,322				17,322		(446)				(446)			(2.6)			(2.6)		%
Insurance	Insurance		2,891		4,099		1,208			29.5	%	Insurance	2,076		(349)				(349)		(2,425)				(2,425)			**				**
Legal fees and settlements	Legal fees and settlements		2,685		7,125		4,440			62.3	%	Legal fees and settlements	5,421		2,184				2,184		(3,237)				(3,237)			(148.2)			(148.2)		%
Supplies	Supplies		15,956		14,243		(1,713)			(12.0)	%	Supplies	4,355		3,940				3,940		(415)				(415)			(10.5)			(10.5)		%
Other	Other		11,615		9,315		(2,300)			(24.7)	%	Other	6,109		7,737				7,737		1,628				1,628			21.0			21.0		%
		$														$	93,626				$	97,143					$	3,517					3.6	%
			$	179,292	$	182,258	$	2,966		1.6	%

~~Other income (expense)~~Consulting and outsourced services expense decreased $6.2 million, or 27.5%, ~~net increased $13.0 million~~ primarily due to ~~income from a~~lower contract labor in the current year. Technology-related expenses increased $2.8 million, or 11.3%, due to higher costs of technology in the current year. Legal fees and settlements expense increased $3.2 million, or 148.2%, primarily due to higher legal ~~settlement and interest~~settlements in the current year.

We recorded an income tax ~~expense~~benefit of ~~$209.4~~$93.8 million in the current year compared to ~~$186.9~~$77.1 million in the prior year. The effective tax rate for the three months ended ~~March~~December 31, 2023, and 2022 was ~~24.5%~~33.1% and ~~21.7%~~25.9%, respectively.

Diluted earnings per share from continuing operations increased 2.0% from the prior year due to fewer shares outstanding from share repurchases, partially offset by lower net income compared to the prior year.


18			~~Q3 FY2023~~Q2 FY2024 Form 10-Q\| H&R Block, Inc.

Table of Contents


Consolidated - Financial Results	Consolidated - Financial Results				(in 000s, except per share amounts)						Consolidated - Financial Results													(in 000s, except per share amounts)
Nine months ended March 31,			2023		2022		$ Change		% Change
Six months ended December 31,											Six months ended December 31,			2023							2022									$ Change						% Change
Revenues:	Revenues:
U.S. tax preparation and related services:	U.S. tax preparation and related services:
U.S. tax preparation and related services:
U.S. tax preparation and related services:
Assisted tax preparation
Assisted tax preparation
Assisted tax preparation	Assisted tax preparation		$	1,530,577	$	1,456,594	$	73,983	5.1	%		$	87,605			$			$	77,528			$					$	10,077			13.0			13.0		%
Royalties	Royalties		161,337		169,548		(8,211)		(4.8)	%	Royalties			11,155			11,174					11,174				(19)						(19)		(0.2)					(0.2)	%
DIY tax preparation	DIY tax preparation		182,330		188,455		(6,125)		(3.3)	%	DIY tax preparation			16,959			15,308					15,308				1,651						1,651		10.8					10.8	%
Refund Transfers	Refund Transfers		120,210		134,665		(14,455)		(10.7)	%	Refund Transfers			1,955			2,826					2,826				(871)						(871)		(30.8)					(30.8)	%
Peace of Mind® Extended Service Plan	Peace of Mind® Extended Service Plan		58,840		59,373		(533)		(0.9)	%	Peace of Mind® Extended Service Plan			42,287			42,090					42,090				197						197		0.5					0.5	%
Tax Identity Shield®	Tax Identity Shield®		19,237		19,431		(194)		(1.0)	%	Tax Identity Shield®			9,274			10,517					10,517				(1,243)						(1,243)		(11.8)					(11.8)	%
Other	Other		28,845		27,736		1,109		4.0	%	Other			20,572			17,873					17,873				2,699						2,699		15.1					15.1	%
Total U.S. tax preparation and related services	Total U.S. tax preparation and related services		2,101,376		2,055,802		45,574		2.2	%	Total U.S. tax preparation and related services			189,807			177,316					177,316				12,491						12,491		7.0					7.0	%
Financial services:	Financial services:
Emerald Card® and SpruceSM	Emerald Card® and SpruceSM		68,448		103,748		(35,300)		(34.0)	%
Emerald Card® and SpruceSM
Emerald Card® and SpruceSM														20,333							24,090									(3,757)						(15.6)		%
Interest and fee income on Emerald AdvanceSM	Interest and fee income on Emerald AdvanceSM		47,267		43,438		3,829		8.8	%	Interest and fee income on Emerald AdvanceSM			15,533			13,517					13,517				2,016						2,016		14.9					14.9	%
Total financial services	Total financial services		115,715		147,186		(31,471)		(21.4)	%	Total financial services			35,866			37,607					37,607				(1,741)						(1,741)		(4.6)					(4.6)	%
International	International		156,297		151,464		4,833		3.2	%	International			90,134			86,880					86,880				3,254						3,254		3.7					3.7	%
Wave	Wave		66,651		58,745		7,906		13.5	%	Wave			47,076			44,587					44,587				2,489						2,489		5.6					5.6	%
Total revenues	Total revenues		$	2,440,039	$	2,413,197	$	26,842	1.1	%	Total revenues			$	362,883		$				$	346,390			$					$	16,493		4.8				4.8		%
Compensation and benefits:	Compensation and benefits:
Field wages	Field wages		618,656		561,482		(57,174)		(10.2)	%
Field wages
Field wages														140,230							137,877									(2,353)						(1.7)		%
Other wages	Other wages		207,786		200,715		(7,071)		(3.5)	%	Other wages			146,769			134,283					134,283				(12,486)						(12,486)		(9.3)					(9.3)	%
Benefits and other compensation	Benefits and other compensation		169,477		146,708		(22,769)		(15.5)	%	Benefits and other compensation			71,311			69,109					69,109				(2,202)						(2,202)		(3.2)					(3.2)	%
			995,919		908,905		(87,014)		(9.6)	%
		358,310																358,310									341,269							(17,041)							(5.0)	%
Occupancy	Occupancy		316,874		306,523		(10,351)		(3.4)	%	Occupancy			200,479			198,763					198,763				(1,716)						(1,716)		(0.9)					(0.9)	%
Marketing and advertising	Marketing and advertising		236,299		223,796		(12,503)		(5.6)	%	Marketing and advertising			16,786			25,791					25,791				9,005						9,005		34.9					34.9	%
Depreciation and amortization	Depreciation and amortization		98,660		107,462		8,802		8.2	%	Depreciation and amortization			60,332			66,347					66,347				6,015						6,015		9.1					9.1	%
Bad debt	Bad debt		57,018		59,760		2,742		4.6	%	Bad debt			26,552			22,745					22,745				(3,807)						(3,807)		(16.7)					(16.7)	%
Other	Other		363,081		373,458		10,377		2.8	%	Other			174,182			183,789					183,789				9,607						9,607		5.2					5.2	%
Total operating expenses	Total operating expenses		2,067,851		1,979,904		(87,947)		(4.4)	%	Total operating expenses			836,641			838,704					838,704				2,063						2,063		0.2					0.2	%
Other income (expense), net	Other income (expense), net		21,020		1,989		19,031		956.8	%	Other income (expense), net			15,758			7,796					7,796				7,962						7,962		102.1					102.1	%
Interest expense on borrowings	Interest expense on borrowings		(57,107)		(69,661)		12,554		18.0	%	Interest expense on borrowings			(37,234)			(34,809)					(34,809)				(2,425)						(2,425)		(7.0)					(7.0)	%
Pretax income			336,101		365,621		(29,520)		(8.1)	%
Income taxes			78,254		29,666		(48,588)		(163.8)	%
Net income from continuing operations			257,847		335,955		(78,108)		(23.2)	%
Pretax loss											Pretax loss			(495,234)							(519,327)									24,093						4.6		%
Income tax benefit											Income tax benefit			(143,245)							(131,097)									12,148						9.3		%
Net loss from continuing operations											Net loss from continuing operations			(351,989)							(388,230)									36,241						9.3		%
Net loss from discontinued operations	Net loss from discontinued operations		(6,418)		(4,984)		(1,434)		(28.8)	%	Net loss from discontinued operations			(1,248)			(3,770)					(3,770)				2,522						2,522		66.9					66.9	%
Net income			$	251,429	$	330,971	$	(79,542)	(24.0)	%
DILUTED EARNINGS PER SHARE
Net loss											Net loss			$	(353,237)						$	(392,000)								$	38,763					9.9		%
BASIC AND DILUTED LOSS PER SHARE:
Continuing operations
Continuing operations
Continuing operations	Continuing operations		$	1.62	$	1.92	$	(0.30)	(15.6)	%		$	(2.44)			$			$	(2.48)			$					$	0.04			1.6			1.6		%
Discontinued operations	Discontinued operations		(0.04)		(0.03)		(0.01)		(33.3)	%	Discontinued operations			(0.01)			(0.02)					(0.02)				0.01						0.01		50.0					50.0	%
Consolidated	Consolidated		$	1.58	$	1.89	$	(0.31)	(16.4)	%	Consolidated			$	(2.45)		$				$	(2.50)			$					$	0.05		2.0				2.0		%
Adjusted diluted EPS(1)	Adjusted diluted EPS(1)		$	1.80	$	2.11	$	(0.31)	(14.7)	%	Adjusted diluted EPS(1)			$	(2.31)		$				$	(2.36)			$					$	0.05		2.1				2.1		%
EBITDA (1)	EBITDA (1)		$	491,868	$	542,744	$	(50,876)	(9.4)	%	EBITDA (1)			$	(397,668)		$				$	(418,171)			$					$	20,503		4.9				4.9		%

(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.


H&R Block, Inc. ~~\|Q3 FY2023~~\|Q2 FY2024 Form 10-Q			19

Table of Contents

~~Nine~~Six months ended ~~March~~December 31, 2023 compared to ~~March~~December 31, 2022

Revenues increased ~~$26.8~~$16.5 million, or ~~1.1%~~4.8%, from the prior year. U.S. assisted tax preparation revenues increased ~~$74.0~~$10.1 million, or ~~5.1%~~13.0%, due to a ~~3.4% increase in~~higher net average charge ~~combined with~~and higher ~~tax return~~ volumes in the current year. ~~U.S. royalties revenue decreased $8.2~~Other revenues increased $2.7 million, or 4.8%, due to lower volumes, partially offset by a higher net average charge in the current year. During the year we purchased franchise offices which results in increasing tax preparation revenues and decreasing royalties as the revenues and returns become company-owned after the acquisition. Through the nine months ended March 31, our total assisted tax return volume, which includes both company-owned and franchise offices, decreased 1.6% from the prior year.

~~U.S. DIY tax preparation revenues decreased $6.1 million, or 3.3%~~15.1%, primarily due to ~~lower software sales~~higher extension filing and ~~a decline in online paid returns during the quarter compared to the prior year. Refund Transfer revenues decreased $14.5 million, or 10.7%, due to fewer Refund Transfers in the current year.~~bookkeeping fees.

Emerald Card® and SpruceSM revenues decreased ~~$35.3~~$3.8 million, or ~~34.0%~~15.6%, due to lower Emerald Card® activity in the current year as a result of less funds being loaded on the cards. Interest and fee income on Emerald AdvanceSM increased $2.0 million, or 14.9%, due to an increase in EA Loans and an earlier start to the offering period in the current year.

International revenues increased $3.3 million, or 3.7%, primarily due to higher ~~card activity~~tax return volumes in ~~the prior year, which is the result of the IRS loading Child Tax Credits monthly to Emerald Cards®.~~

Australia. Wave revenues increased ~~$7.9~~$2.5 million, or ~~13.5%~~5.6%, due to higher small business payments processing volumes.

Total operating expenses ~~increased $87.9~~decreased $2.1 million, or ~~4.4%~~0.2%, from the prior year period. ~~Field~~Other wages increased ~~$57.2~~$12.5 million, or ~~10.2%~~9.3%, primarily due to higher corporate wages from higher headcount in the current year. ~~Other wages increased $7.1~~Marketing and advertising expense decreased $9.0 million, or 3.5%, due to higher corporate wages in the current year. Benefits and other compensation increased $22.8 million, or 15.5%, due to higher payroll taxes, employee insurance and stock-based compensation. Occupancy expense increased $10.4 million, or 3.4%34.9%, primarily due to ~~higher rent and office repairs. Marketing and advertising expense increased $12.5 million, or 5.6%, due to higher television advertising.~~vendor refunds for expired customer incentives. Depreciation and amortization expense decreased ~~$8.8~~$6.0 million, or ~~8.2%~~9.1%, primarily due ~~primarily~~ to lower amortization of ~~acquired intangibles.~~capitalized software. Bad debt expense increased $3.8 million, or 16.7%, due to an increase in EA loans compared to the prior year.

Other operating expenses decreased ~~$10.4~~$9.6 million, or ~~2.8%~~5.2%. The components of other expenses are as follows:


										(in 000s)
Nine months ended March 31,			2023		2022		$ Change			% Change
									(in 000s)																									(in 000s)
Six months ended December 31,												Six months ended December 31,	2023					2022					$ Change						% Change
Consulting and outsourced services	Consulting and outsourced services		$	82,635	$	99,870	$	17,235		17.3	%	Consulting and outsourced services	$	29,401	$			$	40,505	$			$	11,104		27.4				27.4	%
Bank partner fees	Bank partner fees		23,981		26,344		2,363			9.0	%	Bank partner fees	(1,065)		(797)				(797)		268				268			33.6			33.6	%
Client claims and refunds	Client claims and refunds		21,002		22,945		1,943			8.5	%	Client claims and refunds	9,346		12,215				12,215		2,869				2,869			23.5			23.5	%
Employee and travel expenses	Employee and travel expenses		30,675		23,222		(7,453)			(32.1)	%	Employee and travel expenses	18,061		20,769				20,769		2,708				2,708			13.0			13.0	%
Technology-related expenses	Technology-related expenses		76,789		69,998		(6,791)			(9.7)	%	Technology-related expenses	50,339		50,404				50,404		65				65			0.1			0.1	%
Credit card/bank charges	Credit card/bank charges		67,682		63,441		(4,241)			(6.7)	%	Credit card/bank charges	34,937		33,523				33,523		(1,414)				(1,414)			(4.2)			(4.2)	%
Insurance	Insurance		6,260		11,780		5,520			46.9	%	Insurance	5,426		3,369				3,369		(2,057)				(2,057)			(61.1)			(61.1)	%
Legal fees and settlements	Legal fees and settlements		7,155		14,227		7,072			49.7	%	Legal fees and settlements	8,429		4,470				4,470		(3,959)				(3,959)			(88.6)			(88.6)	%
Supplies	Supplies		23,291		22,161		(1,130)			(5.1)	%	Supplies	7,118		7,335				7,335		217				217			3.0			3.0	%
Other	Other		23,611		19,470		(4,141)			(21.3)	%	Other	12,190		11,996				11,996		(194)				(194)			(1.6)			(1.6)	%
		$														$	174,182				$	183,789					$	9,607				5.2	%
			$	363,081	$	373,458	$	10,377		2.8	%

Consulting and outsourced services expense decreased ~~$17.2~~$11.1 million, or ~~17.3%~~27.4%, due to ~~higher spend in the prior year related to our strategic imperatives,~~lower contract labor and ~~lower~~ call center ~~volumes and Emerald Card® data processing~~expenses in the current year. Employee and travel expenses increased $7.5 million, or 32.1%, due to more travel in the current year. Technology-related expenses increased $6.8 million, or 9.7%, due to increased investments in information technology. Legal fees and settlements expense ~~decreased $7.1~~increased $4.0 million, or ~~49.7%~~88.6%, primarily due to ~~lower fees~~higher legal settlements in the current year.

Other income (expense), net increased ~~$19.0~~$8.0 million, or 102.1%, due to higher interest ~~and~~ income from a legal settlement in the current year. Interest expense on borrowings decreased $12.6 million, or 18.0%, due to the repayment of our $500 million 5.500% Senior Notes in May 2022, partially offset by higher interest expense on our CLOC borrowings in the current year.


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

~~Table of Contents~~

We recorded an income tax ~~expense~~benefit of ~~$78.3~~$143.2 million in the current year compared to ~~$29.7~~$131.1 million in the prior year. The effective tax rate for the ~~nine~~six months ended ~~March~~December 31, 2023, and 2022 was ~~23.3%~~28.9% and ~~8.1%~~25.2%, respectively. See Item 1, note 7 to the consolidated financial statements for additional discussion.

Total U.S. return volume, which includes our assisted and DIY operations, from July 1, 2022 through April 30, 2023 decreased 1.3% compared to the prior year period. Our business is highly seasonal and results for the nine months ended March 31, as well as results for the period ended April 30, may not be indicative of results for the fiscal year ended June 30, 2023.

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.


20			Q2 FY2024 Form 10-Q\| H&R Block, Inc.

Table of Contents

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,~~unsecured committed line of credit (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.

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

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~~December 31, 2023 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~~six months ended ~~March~~December 31, 2023 and 2022. See Item 1 for the complete consolidated statements of cash flows for these periods.

(in 000s)

Nine months ended March 31,

2023

2022

(in 000s)

Six months ended December 31,

Net cash provided by (used in):

Operating activities

498,386

373,128

Operating activities

Investing activities

(101,287)

(71,106)

Financing activities

(505,587)

(707,466)

Financing activities

Effects of exchange rates on cash

(7,880)

(1,666)

Net decrease in cash and cash equivalents, including restricted balances

(116,368)

(407,110)

Net decrease in cash and cash equivalents, including restricted balances

Operating Activities. Cash ~~provided by~~used in operations totaled ~~$498.4~~$942.2 million for the ~~nine~~six months ended ~~March~~December 31, 2023 compared to ~~$373.1~~$780.5 million in the prior year period. The change is primarily due to the receipt of income tax receivables in the prior year and higher EA receivables in the current year, partially offset by ~~a decrease in our net income~~lower bonus and payroll tax payments in the current year.

Investing Activities. Cash used in investing activities totaled ~~$101.3~~$71.0 million for the ~~nine~~six months ended ~~March~~December 31, 2023 compared to ~~$71.1~~$99.1 million in the prior year period. The change is primarily due to ~~higher~~lower payments to acquire businesses and capital expenditures in the current year.

Financing Activities. Cash ~~used in~~provided by financing activities totaled ~~$505.6~~$335.4 million for the ~~nine~~six months ended ~~March~~December 31, 2023 compared to ~~$707.5~~$128.8 million in the prior year period. The change is primarily due to ~~higher repurchases of common stock~~borrowings on our CLOC in the ~~prior~~current year.


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

~~Table of Contents~~

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 $~~133.8~~89.9 million and $~~143.4~~89.2 million for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, 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~~six months ended ~~March~~December 31, 2023, we repurchased $350.1 million of our common stock at an average price of $43.66 per share, excluding excise taxes in connection with such repurchases. In the prior year period, we repurchased $350.1 million of our common stock at an average price of $42.86 per share. ~~In the prior year period, we repurchased $550.3 million of our common stock at an average price of $23.84 per share.~~ Our current share repurchase program has remaining authorization of ~~$900.0~~$350.0 million, which is effective through June 2025.


H&R Block, Inc. \|Q2 FY2024 Form 10-Q			21

Table of Contents

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.

Capital Investment. Capital expenditures totaled ~~$56.7~~$32.7 million and ~~$52.7~~$41.5 million for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, respectively. Our capital expenditures relate primarily to recurring improvements to retail offices, as well as investments in computers, software and related assets. In addition to our capital expenditures, we also made payments to acquire businesses. We acquired franchisee and competitor businesses totaling ~~$47.7~~$27.2 million and ~~$25.5~~$39.8 million during the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, respectively. See Item 1, note 5 for additional information on our acquisitions.

FINANCING RESOURCES – The CLOC has 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 had ~~no outstanding~~an outstanding balance of $800.0 million under our CLOC and amounts available to borrow were not limited by the debt-to-EBITDA covenant ~~to approximately $1.4 billion~~ as of ~~March~~December 31, 2023.

The following table provides ratings for debt issued by Block Financial LLC (Block Financial) as of ~~March~~December 31, 2023 and June 30, ~~2022:~~2023:

As of

~~March~~December 31, 2023

June 30, ~~2022~~2023

Short-term

Long-term

Outlook

Short-term

Long-term

Outlook

Moody's

P-3

Baa3

~~Positive~~Stable

P-3

Baa3

~~Stable~~Positive

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~~2023 in our Annual Report ~~to Shareholders~~ on Form 10-K.

CASH AND OTHER ASSETS – As of ~~March~~December 31, 2023, we held cash and cash equivalents, excluding restricted amounts, of ~~$909.1~~$321.0 million, including ~~$82.8~~$140.0 million held by our foreign subsidiaries.

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~~December 31, 2023.

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 an increase of $0.7 million during the six months ended December 31, 2023 and a decrease of ~~$7.9 million and $1.7~~$7.8 million during the ~~nine~~six months ended ~~March~~December 31, ~~2023 and 2022, respectively.~~


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

~~Table of Contents~~

2022.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS – ~~Emerald Advance~~SM ~~lines of credit (EAs)~~EAs are originated by ~~Pathward~~TM ~~N.A. (Pathward).~~Pathward. We purchase a 90% participation interest, at par, in all EAs originated by Pathward in accordance with our participation agreement. ~~See~~ ~~Item 1, note 4~~Effective October 20, 2023, we amended the Program Management Agreement and entered into a new participation agreement related to EAs originated by Pathward. We purchased participation interests of $341.8 million during the ~~consolidated financial statements for additional information about these balances.~~six months ended December 31, 2023.

There have been no other material changes in our contractual obligations and commercial commitments from those reported in our June 30, ~~2022~~2023 Annual Report ~~to Shareholders~~ on Form 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.


22			Q2 FY2024 Form 10-Q\| H&R Block, Inc.

Table of Contents

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

(in 000s)

SUMMARIZED BALANCE SHEET - GUARANTOR AND ISSUER

(in 000s)

As of

March 31, 2023

June 30, 2022

As of

December 31, 2023

June 30, 2023

Current assets

43,069

38,922

Noncurrent assets

1,718,492

1,698,242

Current liabilities

81,271

75,855

Noncurrent liabilities

1,493,576

1,495,732

SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER

(in 000s)

SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER

(in 000s)

Nine months ended March 31, 2023

Twelve months ended June 30, 2022

Six months ended December 31, 2023

Twelve months ended June 30, 2023

Total revenues

137,676

199,683

Income from continuing operations before income taxes

23,904

44,404

Net income from continuing operations

21,027

41,979

Net income

14,609

35,007

The table above reflects ~~$1.7~~$2.1 billion and ~~$1.6~~$1.7 billion of non-current intercompany receivables due to the Issuer from non-guarantor subsidiaries as of ~~March~~December 31, 2023 and June 30, ~~2022,~~2023, respectively.

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. On November 14, 2022, the CFPB filed a petition for review with the United States Supreme Court, which the Supreme Court granted on February 27, 2023.

~~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 Advance~~SM~~, 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 June 30, ~~2022~~2023 Annual Report ~~to Shareholders~~ on Form 10-K.


~~H&R Block, Inc.~~ ~~\|Q3 FY2023 Form 10-Q~~			23

~~Table of Contents~~

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.~~U.S. generally accepted accounting principles (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, adjusted diluted earnings per share from continuing operations, free cash flow and free cash flow yield. We also use EBITDA from continuing operations and pretax income of continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees.


H&R Block, Inc. \|Q2 FY2024 Form 10-Q			23

Table of Contents

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

(in 000s)
Three months ended March 31, Nine months ended March 31,
2023 2022 2023 2022
Net income - as reported $ 643,429 $ 673,177 $ 251,429 $ 330,971
Discontinued operations, net 2,648 1,796 6,418 4,984
Net income from continuing operations - as reported 646,077 674,973 257,847 335,955
Add back:
Income taxes 209,351 186,884 78,254 29,666
Interest expense 22,298 23,746 57,107 69,661
Depreciation and amortization 32,313 36,116 98,660 107,462
263,962 246,746 234,021 206,789
EBITDA from continuing operations $ 910,039 $ 921,719 $ 491,868 $ 542,744


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

~~Table of Contents~~


							(in 000s)
	Three months ended December 31,				Six months ended December 31,
	2023		2022		2023		2022
Net loss - as reported	$	(189,755)	$	(223,579)	$	(353,237)	$	(392,000)
Discontinued operations, net	639		2,716		1,248		3,770
Net loss from continuing operations - as reported	(189,116)		(220,863)		(351,989)		(388,230)
Add back:
Income tax benefit	(93,758)		(77,140)		(143,245)		(131,097)
Interest expense	21,364		18,985		37,234		34,809
Depreciation and amortization	30,107		32,723		60,332		66,347
	(42,287)		(25,432)		(45,679)		(29,941)
EBITDA from continuing operations	$	(231,403)	$	(246,295)	$	(397,668)	$	(418,171)

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,
			2023		2022		2023		2022
Net income from continuing operations - as reported			$	646,077	$	674,973	$	257,847	$	335,955
		Three months ended December 31,											Three months ended December 31,			Six months ended December 31,
		2023										2023		2022	2023		2022
Net loss from continuing operations - as reported
Adjustments:	Adjustments:
Amortization of intangibles related to acquisitions (pretax)	Amortization of intangibles related to acquisitions (pretax)		13,011		13,979		38,546		43,141
Amortization of intangibles related to acquisitions (pretax)
Amortization of intangibles related to acquisitions (pretax)
Tax effect of adjustments (1)	Tax effect of adjustments (1)		(3,190)		(4,545)		(9,198)		(10,102)
Adjusted net income from continuing operations			$	655,898	$	684,407	$	287,195	$	368,994
Diluted earnings per share from continuing operations - as reported			$	4.14	$	4.06	$	1.62	$	1.92
Adjusted net loss from continuing operations
Diluted loss per share from continuing operations - as reported
Adjustments, net of tax	Adjustments, net of tax		0.06		0.05		0.18		0.19
Adjusted diluted earnings per share from continuing operations			$	4.20	$	4.11	$	1.80	$	2.11
Adjusted diluted loss per share from continuing operations

(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~~Securities and Exchange Commission (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 external events beyond the Company's control, such as outbreaks of infectious disease (including the coronavirus (COVID–19) pandemic, including, without limitation, the impact on economic and financial markets, the Company's capital resources and financial condition, future expenditures, potential regulatory actions, such as extensions of tax filing deadlines(COVID-19) pandemic), severe weather events, natural or ~~other related relief,~~manmade disasters, or changes in ~~consumer behaviors and modifications to~~ the ~~Company's operations relating thereto.~~regulatory environment in which we operate.


24			Q2 FY2024 Form 10-Q\| H&R Block, Inc.

Table of Contents

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.


~~H&R Block, Inc.~~ ~~\|Q3 FY2023 Form 10-Q~~			25

~~Table of Contents~~

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 June 30, ~~2022~~2023 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 June 30, ~~2022.~~2023.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risks from those reported in our June 30, ~~2022~~2023 Annual Report ~~to Shareholders~~ on Form 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~~December 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


26			~~Q3 FY2023 Form 10-Q\|~~ H&R Block, Inc. \|Q2 FY2024 Form 10-Q			25

Table of Contents

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 June 30, ~~2022~~2023 Annual Report ~~to Shareholders~~ on Form 10-K.

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~~December 31, 2023 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 2 $ 35.35 — $ 900,000
February 1 - February 28 4 $ 39.44 — $ 900,000
March 1 - March 31 — $ — — $ 900,000
6 $ 38.27 —


(in 000s, except per share amounts)
	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
October 1 - October 31	2	$	41.42	—	$	568,068
November 1 - November 30	2,588	$	45.55	2,588	$	450,190
December 1 - December 31	2,168	$	46.23	2,167	$	350,000
	4,758	$	45.86	4,755

(1)We purchased approximately 63 thousand shares in connection with funding employee income tax withholding obligations arising upon the lapse of restrictions on restricted share units.

(2)In August 2022, we announced that our Board of Directors approved a $1.25 billion share repurchase program, effective through June 2025.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~None.~~Director and Section 16 Officer Trading Arrangements

On November 14, 2023, Jeffrey J. Jones II, President, Chief Executive Officer and Director, adopted a Rule 10b5-1 plan (“Rule 10b5-1 Plan”) intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. Mr. Jones’s Rule 10b5-1 Plan provides for the sale of up to 155,556 shares of the Company’s common stock, pursuant to the terms of the Rule 10b5-1 Plan. The Rule 10b5-1 Plan expires on November 12, 2024, or upon the earlier completion of all authorized transactions under such Rule 10b5-1 Plan.

No other director or Section 16 officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K, during the three months ended December 31, 2023.


26			Q2 FY2024 Form 10-Q\| H&R Block, Inc. ~~\|Q3 FY2023 Form 10-Q~~			27

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ITEM 6. EXHIBITS

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


22			List of Guarantor and Issuer Subsidiaries, filed as Exhibit 22 to the Company’s Annual Report on Form 10-K for the year ended June 30, ~~2022,~~2023, 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)


28			~~Q3 FY2023 Form 10-Q\|~~ H&R Block, Inc. \|Q2 FY2024 Form 10-Q			27

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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 9, 2023~~February 6, 2024

/s/ Tony G. Bowen
Tony G. Bowen
Chief Financial Officer
~~May 9, 2023~~February 6, 2024

/s/ Kellie J. Logerwell
Kellie J. Logerwell
Chief Accounting Officer
~~May 9, 2023~~February 6, 2024


28			Q2 FY2024 Form 10-Q\| H&R Block, Inc. ~~\|Q3 FY2023 Form 10-Q~~			29