H&R BLOCK INC 10-Q

ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS: (unaudited, in 000s, except per share amounts) Three months ended September 30, 2025 2024 REVENUES: Service revenues $ 192,111 $ 181,771 Royalty, product and other revenues 11,440 12,039 203,551 193,810 OPERATING EXPENSES: Costs of revenues 274,017 269,581 Selling, general and administrative 136,565 152,560 Total operating expenses 410,582 422,141 Other income (expense), net 8,102 11,917 Interest expense on borrowings ( 17,402 ) ( 15,847 ) Loss from continuing operations before income tax benefit ( 216,331 ) ( 232,261 ) Income tax benefit ( 50,963 ) ( 60,840 ) Net loss from continuing operations ( 165,368 ) ( 171,421 ) Net loss from discontinued operations, net of tax benefits of $ 135 and $ 345 ( 451 ) ( 1,155 ) NET LOSS $ ( 165,819 ) $ ( 172,576 ) BASIC AND DILUTED LOSS PER SHARE: Continuing operations $ ( 1.26 ) $ ( 1.23 ) Discontinued operations — ( 0.01 ) Consolidated $ ( 1.26 ) $ ( 1.24 ) DIVIDENDS DECLARED PER SHARE $ 0.42 $ 0.375 COMPREHENSIVE LOSS: Net loss $ ( 165,819 ) $ ( 172,576 ) Change in foreign currency translation adjustments ( 9,308 ) 6,117 Other comprehensive income (loss) ( 9,308 ) 6,117 Comprehensive loss $ ( 175,127 ) $ ( 166,459 ) See accompanying notes to consolidated financial statements. H&R Block, Inc. |Q1 FY2026 Form 10-Q 1 Table of Contents CONSOLIDATED BALANCE SHEETS (unaudited, in 000s, except share and per share amounts) As of September 30, 2025 June 30, 2025 ASSETS Cash and cash equivalents $ 376,410 $ 983,277 Cash and cash equivalents - restricted 20,991 19,862 Receivables, less allowance for credit losses of $ 54,249 and $ 55,775 64,145 63,621 Prepaid expenses and other current assets 102,692 95,788 Total current assets 564,238 1,162,548 Property and equipment, at cost, less accumulated depreciation and amortization of $ 844,866 and $ 828,744 137,623 135,068 Operating lease right of use assets 499,910 521,215 Intangible assets, net 254,136 259,412 Goodwill 797,739 802,053 Deferred tax assets and income taxes receivable 300,251 317,691 Other noncurrent assets 67,425 65,911 Total assets $ 2,621,322 $ 3,263,898 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Accounts payable and accrued expenses $ 145,574 $ 144,046 Accrued salaries, wages and payroll taxes 62,231 107,375 Accrued income taxes and reserves for uncertain tax positions 156,449 296,244 Current portion of long-term debt — 349,893 Operating lease liabilities 205,152 209,203 Deferred revenue and other current liabilities 170,145 191,849 Total current liabilities 739,551 1,298,610 Long-term debt and line of credit borrowings 1,734,962 1,143,305 Deferred tax liabilities and reserves for uncertain tax positions 310,722 306,134 Operating lease liabilities 306,000 322,847 Deferred revenue and other noncurrent liabilities 80,997 104,106 Total liabilities 3,172,232 3,175,002 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, no par, stated value $ 0.01 per share, 800,000,000 shares authorized, shares issued of 156,506,438 and 164,367,434 1,565 1,644 Additional paid-in capital 757,981 766,998 Accumulated other comprehensive loss ( 57,063 ) ( 47,755 ) Retained earnings (deficit) ( 609,299 ) 12,061 Less treasury shares, at cost, of 30,085,317 and 30,420,033 ( 644,094 ) ( 644,052 ) Total stockholders' equity (deficiency) ( 550,910 ) 88,896 Total liabilities and stockholders' equity $ 2,621,322 $ 3,263,898 See accompanying notes to consolidated financial statements. 2 Q1 FY2026 Form 10-Q| H&R Block, Inc. Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in 000s) Three months ended September 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 165,819 ) $ ( 172,576 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 28,922 28,831 Provision for credit losses 975 1,024 Deferred taxes 17,800 19,006 Stock-based compensation 6,173 8,727 Changes in assets and liabilities, net of acquisitions: Receivables 262 1,029 Prepaid expenses, other current and noncurrent assets 7,530 8,836 Accounts payable, accrued expenses, salaries, wages and payroll taxes ( 59,094 ) ( 66,017 ) Deferred revenue, other current and noncurrent liabilities ( 46,118 ) ( 27,025 ) Income tax receivables, accrued income taxes and income tax reserves ( 147,233 ) ( 129,397 ) Other, net ( 236 ) ( 1,019 ) Net cash used in operating activities ( 356,838 ) ( 328,581 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 13,188 ) ( 18,735 ) Payments made for business acquisitions, net of cash acquired ( 5,069 ) ( 5,901 ) Franchise loans funded ( 3,667 ) ( 7,109 ) Payments from franchisees 731 211 Other, net 267 5,140 Net cash used in investing activities ( 20,926 ) ( 26,394 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit borrowings 245,000 — Repayments of long-term debt ( 350,000 ) — Proceeds from issuance of long-term debt 346,980 — Dividends paid ( 50,208 ) ( 44,653 ) Repurchase of common stock, including shares surrendered ( 412,415 ) ( 238,376 ) Other, net ( 4,382 ) ( 1,421 ) Net cash used in financing activities ( 225,025 ) ( 284,450 ) Effects of exchange rate changes on cash ( 2,949 ) 3,249 Net decrease in cash and cash equivalents, including restricted balances ( 605,738 ) ( 636,176 ) Cash, cash equivalents and restricted cash, beginning of period 1,003,139 1,075,193 Cash, cash equivalents and restricted cash, end of period $ 397,401 $ 439,017 SUPPLEMENTARY CASH FLOW DATA: Income taxes paid, net (includes payments for purchased investment tax credits) $ 78,339 $ 48,343 Interest paid on borrowings 28,471 19,792 Accrued additions to property and equipment 7,734 6,341 New operating right of use assets and related lease liabilities 37,885 21,861 Accrued dividends payable to common shareholders 54,343 52,307 Accrued purchase of common stock — 7,131 See accompanying notes to consolidated financial statements. H&R Block, Inc. | Q1 FY2026 Form 10-Q 3 Table of Contents CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (amounts in 000s, except per share amounts) 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, 2025 164,367 $ 1,644 $ 766,998 $ ( 47,755 ) $ 12,061 ( 30,420 ) $ ( 644,052 ) $ 88,896 Net loss — — — — ( 165,819 ) — — ( 165,819 ) Other comprehensive loss — — — ( 9,308 ) — — — ( 9,308 ) Stock-based compensation — — 6,172 — — — — 6,172 Stock-based awards exercised or vested — — ( 10,551 ) — ( 1,797 ) 579 12,255 ( 93 ) Acquisition of treasury shares (2) — — — — — ( 244 ) ( 12,297 ) ( 12,297 ) Repurchase and retirement of common shares ( 7,861 ) ( 79 ) ( 4,638 ) — ( 399,401 ) — — ( 404,118 ) Cash dividends declared - $ 0.42 per share — — — — ( 54,343 ) — — ( 54,343 ) Balances as of September 30, 2025 156,506 $ 1,565 $ 757,981 $ ( 57,063 ) $ ( 609,299 ) ( 30,085 ) $ ( 644,094 ) $ ( 550,910 ) (amounts in 000s, except per share amounts) 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, 2024 170,916 $ 1,709 $ 762,583 $ ( 48,845 ) $ 12,654 ( 31,325 ) $ ( 637,507 ) $ 90,594 Net loss — — — — ( 172,576 ) — — ( 172,576 ) Other comprehensive income — — — 6,117 — — — 6,117 Stock-based compensation — — 7,463 — — — — 7,463 Stock-based awards exercised or vested — — ( 23,990 ) — ( 2,611 ) 1,319 26,848 247 Acquisition of treasury shares (2) — — — — — ( 567 ) ( 35,882 ) ( 35,882 ) Repurchase and retirement of common shares ( 3,301 ) ( 33 ) ( 1,980 ) — ( 209,708 ) — — ( 211,721 ) Cash dividends declared - $ 0.375 per share — — — — ( 52,307 ) — — ( 52,307 ) Balances as of September 30, 2024 167,615 $ 1,676 $ 744,076 $ ( 42,728 ) $ ( 424,548 ) ( 30,573 ) $ ( 646,541 ) $ ( 368,065 ) (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 Q1 FY2026 Form 10-Q| H&R Block, Inc. Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION – The consolidated balance sheets as of September 30, 2025 and June 30, 2025, the consolidated statements of operations and comprehensive loss for the three months ended September 30, 2025 and 2024, the consolidated statements of cash flows for the three months ended September 30, 2025 and 2024, and the consolidated statements of stockholders' equity for the three months ended September 30, 2025 and 2024 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 September 30, 2025 and 2024 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, 2025 Annual Report on Form 10-K. All amounts presented herein as of June 30, 2025 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 associated with pending claims and litigation, reserves for uncertain tax positions, and fair value of reporting units. 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, which exited its mortgage business in fiscal year 2008. H&R Block, Inc. |Q1 FY2026 Form 10-Q 5 Table of Contents NOTE 2: REVENUE RECOGNITION The majority of our revenues are from our 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 September 30, 2025 2024 Revenues: U.S. assisted tax preparation $ 48,644 $ 42,963 U.S. royalties 5,849 5,852 U.S. DIY tax preparation 3,745 3,236 Refund Transfers 843 860 Peace of Mind® Extended Service Plan 23,509 23,097 Tax Identity Shield® 4,122 3,909 Emerald Card® and Spruce SM 7,852 8,826 Interest and fee income on Emerald Advance® — — International 65,661 64,855 Wave 29,850 26,403 Other 13,476 13,809 Total revenues $ 203,551 $ 193,810 Changes in the balances of deferred revenue and wages for our Peace of Mind® Extended Service Plan (POM) are as follows: (in 000s) POM Deferred Revenue Deferred Wages Three months ended September 30, 2025 2024 2025 2024 Balance, beginning of the period $ 149,302 $ 156,610 $ 19,884 $ 20,212 Amounts deferred 1,534 1,563 8 15 Amounts recognized on previous deferrals ( 26,955 ) ( 27,450 ) ( 3,461 ) ( 3,629 ) Balance, end of the period $ 123,881 $ 130,723 $ 16,431 $ 16,598 As of September 30, 2025, deferred revenue related to POM was $ 123.9 million. W e expect that $ 83.7 million will be recognized over the next twelve months , while the remaining balance will be recognized over the following five years . As of September 30, 2025 and 2024, Tax Identity Shield® (TIS) deferred revenue was $ 18.7 million and $ 17.7 million, respectively. Deferred revenue related to TIS was $ 22.6 million and $ 21.4 million as of June 30, 2025 and 2024, respectively. All deferred revenue related to TIS will be recognized by April 2026 . 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 2.7 million shares for both the three months ended September 30, 2025 and 2024, as the effect would be antidilutive due to the net loss from continuing operations during the periods. 6 Q1 FY2026 Form 10-Q| H&R Block, Inc. Table of Contents The computations of basic and diluted earnings (loss) per share from continuing operations are as follows: (in 000s, except per share amounts) Three months ended September 30, 2025 2024 Net loss from continuing operations attributable to shareholders $ ( 165,368 ) $ ( 171,421 ) Amounts allocated to participating securities ( 262 ) ( 229 ) Net loss from continuing operations attributable to common shareholders $ ( 165,630 ) $ ( 171,650 ) Basic weighted average common shares 131,387 139,154 Potential dilutive shares — — Dilutive weighted average common shares 131,387 139,154 Loss per share from continuing operations attributable to common shareholders: Basic $ ( 1.26 ) $ ( 1.23 ) Diluted ( 1.26 ) ( 1.23 ) 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 0 .8 million and 1.0 million shares, including adjustments for performance achievement and dividend equivalents, under our stock-based compensation plans during the three months ended September 30, 2025 and 2024, respectively. Stock-based compensation expense of our continuing operations totaled $ 6.2 million and $ 8.7 million for the three months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, unrecognized compensation cost for nonvested shares and units totaled $ 68.5 million. NOTE 4: RECEIVABLES Receivables, net of their related allowance, consist of the following: (in 000s) As of September 30, 2025 June 30, 2025 Short-term Long-term Short-term Long-term Loans to franchisees $ 10,833 $ 16,526 $ 7,386 $ 16,402 Receivables for U.S. assisted and DIY tax preparation and related fees 12,594 6,392 15,896 6,361 H&R Block's Instant Refund® receivables 841 974 2,243 939 Emerald Advance® 13,100 24,169 13,899 22,816 Software receivables from retailers 338 — 2,582 — Royalties and other receivables from franchisees 6,366 — 4,414 — Wave payment processing receivables 1,936 — 1,533 — Other 18,137 588 15,668 498 Total $ 64,145 $ 48,649 $ 63,621 $ 47,016 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. Loans with a principal balance more than 90 days past due or on non-accrual status were $3.5 million and $3.1 million as of September 30, 2025 and June 30, 2025, respectively. H&R Block, Inc. |Q1 FY2026 Form 10-Q 7 Table of Contents H&R BLOCK'S INSTANT REFUND ® – H&R Block's Instant Refund® 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. B alances and amounts on non-accrual status, classified as impaired, or more than 60 days past due, by tax return year of origination, as of September 30, 2025 are as foll ows: (in 000s) Tax return year of origination Balance More Than 60 Days Past Due 2024 $ 2,237 $ 2,085 2023 and prior 657 657 2,894 $ 2,742 Allowance ( 1,079 ) Net balance $ 1,815 EMERALD ADVANCE ® – We review the credit quality of our purchased participation interests in Emerald Advance® (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. Typically, in December of each year, we charge-off the receivables and the related allowance for EAs to an amount we believe represents the net realizable value. Balances and amounts on non-accrual status, classified as impaired, or more than 60 days past due, by fiscal year of origination, as of September 30, 2025 are as follows: (in 000s) Fiscal year of origination Balance Non-Accrual 2025 $ 34,444 $ 34,444 2024 and prior 22,488 22,488 56,932 $ 56,932 Allowance ( 19,663 ) Net balance $ 37,269 8 Q1 FY2026 Form 10-Q| H&R Block, Inc. Table of Contents ALLOWANCE FOR CREDIT LOSSES – Activity in the allowance for credit losses for EA and all other short-term and long-term receivables for the three months ended September 30, 2025 and 2024 is as follows: (in 000s) EAs All Other Total Balances as of July 1, 2025 $ 19,663 $ 45,156 $ 64,819 Provision for credit losses — 975 975 Charge-offs, recoveries and other — ( 1,365 ) ( 1,365 ) Balances as of September 30, 2025 $ 19,663 $ 44,766 $ 64,429 Balances as of July 1, 2024 $ 33,536 $ 45,327 $ 78,863 Provision for credit losses — 1,024 1,024 Charge-offs, recoveries and other — ( 1,462 ) ( 1,462 ) Balances as of September 30, 2024 $ 33,536 $ 44,889 $ 78,425 NOTE 5: GOODWILL AND INTANGIBLE ASSETS Changes in the carrying amount of goodwill for the three months ended September 30, 2025 are as follows: (in 000s) Goodwill Accumulated Impairment Losses Net Balances as of July 1, 2025 $ 940,350 $ ( 138,297 ) $ 802,053 Acquisitions (1) 1,897 — 1,897 Disposals and foreign currency changes, net ( 6,211 ) — ( 6,211 ) Impairments — — — Balances as of September 30, 2025 $ 936,036 $ ( 138,297 ) $ 797,739 (1) All goodwill added during the period is expected to be tax-deductible for federal income tax reporting. We test goodwill for impairment annually as of February 1, or more frequently if events occur or circumstances change which would, more likely than not, reduce the fair value of a reporting unit below its carrying value. H&R Block, Inc. |Q1 FY2026 Form 10-Q 9 Table of Contents Components of intangible assets are as follows: (in 000s) Gross Carrying Amount Accumulated Amortization Net As of September 30, 2025: Reacquired franchise rights $ 417,736 $ ( 246,916 ) $ 170,820 Customer relationships 356,998 ( 292,643 ) 64,355 Internally-developed software 120,434 ( 117,622 ) 2,812 Noncompete agreements 23,178 ( 20,405 ) 2,773 Purchased technology 68,100 ( 56,899 ) 11,201 Trade name 5,800 ( 3,625 ) 2,175 $ 992,246 $ ( 738,110 ) $ 254,136 As of June 30, 2025: Reacquired franchise rights $ 415,700 $ ( 243,330 ) $ 172,370 Customer relationships 354,107 ( 287,067 ) 67,040 Internally-developed software 119,959 ( 117,604 ) 2,355 Noncompete agreements 23,070 ( 20,188 ) 2,882 Purchased technology 68,100 ( 55,655 ) 12,445 Trade name 5,800 ( 3,480 ) 2,320 $ 986,736 $ ( 727,324 ) $ 259,412 We made payments to acquire businesses totaling $ 5.1 million and $ 5.9 million during the three months ended September 30, 2025 and 2024, respectively. The amounts and weighted-average lives of intangible assets acquired during the three months e nded September 30, 2025, including amounts capitalized related to internally-developed software, a re as follows: (dollars in 000s) Amount Weighted-Average Life (in years) Customer relationships $ 3,043 5 Reacquired franchise rights 2,117 7 Internally-developed software 556 3 Noncompete agreements 127 5 Total $ 5,843 6 Amortization of intangible assets for the three months ended September 30, 2025 was $ 11.1 million compared to $ 12.9 million for the three months ended September 30, 2024. Estimated amortization of intangible assets for fiscal years ending June 30, 2026, 2027, 2028, 2029, and 2030 is $ 42.6 million, $ 36.1 million, $ 27.8 million, $ 19.1 million and $ 9.4 million, respectively. 10 Q1 FY2026 Form 10-Q| H&R Block, Inc. Table of Contents NOTE 6: LONG-TERM DEBT The components of long-term debt are as follows: (in 000s) As of September 30, 2025 June 30, 2025 Senior Notes, 5.250 %, due October 2025 $ — $ 350,000 Senior Notes, 2.500 %, due July 2028 500,000 500,000 Senior Notes, 3.875 %, due August 2030 650,000 650,000 Senior Notes, 5.375%, due September 2032 350,000 — Committed line of credit borrowings 245,000 — Debt issuance costs and discounts ( 10,038 ) ( 6,802 ) Total long-term debt 1,734,962 1,493,198 Less: Current portion — ( 349,893 ) Long-term portion $ 1,734,962 $ 1,143,305 Estimated fair value of long-term debt $ 1,698,000 $ 1,437,000 On August 26, 2025, we issued $ 350.0 million of 5.375% Senior Notes due September 15, 2032 (2032 Senior Notes). The 2032 Senior Notes are not redeemable by the bondholders prior to maturity, although we have the right to redeem some or all of these notes at any time, at specified redemption prices. The net proceeds from the 2032 Senior Notes will be used for general corporate purposes, which includes, among other uses, the redemption of the $ 350.0 million in principal outstanding of our 5.250% notes due October 2025 (2025 Senior Notes). We redeemed our 2025 Senior Notes at 100% of the principal amount, plus accrued and unpaid interest, on September 19, 2025. UNSECURED COMMITTED LINE OF CREDIT – On July 11, 2025, we entered into a Fifth Amended and Restated Credit and Guarantee Agreement (2025 CLOC), which amended and restated our Fourth Amended and Restated Credit and Guarantee Agreement, extended the scheduled maturity date to July 11, 2030, maintained the aggregate principal amount of $1.5 billion, and revised the interest rate table. All other material terms remain substantially unchanged from our previous CLOC. The 2025 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 2025 CLOC will mature on July 11, 2030, unless extended pursuant to the terms of the 2025 CLOC, at which time all outstanding amounts thereunder will be due and payable. Our 2025 CLOC includes an annual facility fee, which will vary depending on our then current credit ratings. The 2025 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 2025 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 2025 CLOC includes provisions for an equity cure which could potentially allow us to independently cure certain defaults. Proceeds under the 2025 CLOC may be used for working capital needs or for other general corporate pu rposes. We were in compliance with these requirements as of September 30, 2025. H&R Block, Inc. |Q1 FY2026 Form 10-Q 11 Table of Contents We had an outstanding balance of $245.0 million under our 2025 CLOC and amounts available to borrow were not limited by the debt-to-EBITDA covenant as of September 30, 2025. 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. On July 4,2025, H.R. 1 was signed into law. The legislation did not have a material impact on our tax benefit for the three months ended September 30, 2025, and we do not expect it to materially change our effective income tax rate for the fiscal year ending June 30, 2026. Our effective tax rate for continuing operations, including the effects of discrete tax items, was 23.6 % and 26.2 % for the three months ended September 30, 2025 and 2024, respectively. Consistent with prior years, our pretax loss for the three months ended September 30, 2025 is expected to be offset by income in our third and fourth quarters due to the established pattern of seasonality in our primary business operations. As such, management has determined that it is more-likely-than-not that realization of tax benefits recorded in our financial statements will occur within our fiscal year. The amount of tax benefit recorded for the three months ended September 30, 2025 reflects management’s estimate of the annual effective tax rate applied to year-to-date loss from continued 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. Similarly, DIY tax returns are covered by our 100% accuracy guarantee, whereby we will reimburse a client (up to a maximum of $ 10,000 in the U.S.) if our software makes an arithmetic error that results in payment of penalties and/or interest to the 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 $ 10.4 million and $ 11.4 million as of September 30, 2025 and June 30, 2025, 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 $ 30.6 million and $ 29.6 million as of September 30, 2025 and June 30, 2025 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 short-term lines of credit for the purpose of meeting their seasonal working capital needs. Our total obligation under these lines of credit was $ 13.2 million at September 30, 2025, and net of amounts drawn and outstanding, our remaining commitment to fund totaled $ 8.1 million. NOTE 9: LITIGATION AND OTHER RELATED CONTINGENCIES We are a defendant in numerous litigation and arbitration matters, arising both in the ordinary course of business and otherwise, including as described below. The matters described below are not all of the lawsuits or arbitrations to which we are subject. In some of the matters, very large or indeterminate amounts, including punitive damages, 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 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. 12 Q1 FY2026 Form 10-Q| H&R Block, Inc. Table of Contents 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 September 30, 2025. 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 accrued liabilities were $ 6.8 million and $ 6.2 million as of September 30, 2025 and June 30, 2025, 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 September 30, 2025, 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. At the end of each reporting period, we review relevant information with respect to litigation, arbitration and other related loss contingencies and update our accruals, disclosures, and estimates of reasonably possible loss or range of loss based on such reviews. Costs incurred with defending matters are expensed as incurred. Any receivable for insurance recoveries is recorded separately from the corresponding liability, and only if recovery is determined to be probable and reasonably estimable. We believe we have meritorious defenses to the claims asserted in the various matters described in this note, and we intend to defend them vigorously. The amounts claimed in the matters are substantial, however, and there can be no assurances as to their outcomes. In the event of unfavorable outcomes, it could require modifications to our operations; in addition, the amounts that may be required to be paid to discharge or settle the matters could be substantial and could have a material adverse impact on our business and our consolidated financial position, results of operations, and cash flows. H&R Block, Inc. |Q1 FY2026 Form 10-Q 13 Table of Contents We have received and are responding to certain governmental inquiries, class actions and mass arbitrations relating to the IRS Free File Program and other aspects of our DIY tax preparation services, including the use of pixels. An accrual related to these matters is included in our loss contingency accrual. 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. 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. NOTE 10: SEGMENT INFORMATION We provide assisted and DIY tax preparation solutions through multiple channels (including in-person, online and mobile applications, virtual, and desktop software) and distribute H&R Block-branded services and products, including those of our bank partners, to the general public primarily in the U.S., Canada and Australia. Tax returns are prepared by H&R Block tax professionals in one of our company-owned or franchise offices, virtually or via an online review, or they are prepared and filed by our clients through our DIY tax solutions. We also offer small business solutions through our company-owned and franchise offices (including in-person, online and virtual) and online through Wave. We report a single segment that includes all of our continuing operations. The majority of our revenues are from our U.S. tax services business. The Company's Chief Operating Decision Maker (CODM) is our chief executive officer, who regularly reviews consolidated financial information to evaluate financial performance and allocate resources. Specifically, the CODM uses revenues, operating expenses, net income and EBITDA at a consolidated level, as key financial metrics in deciding how to reinvest to grow the business. These financial metrics are used by the CODM to make operating decisions and identify growth opportunities. The measure of segment assets is total consolidated assets as presented on the consolidated balance sheet. The following table presents the significant revenue and expense categories included in the segment's net income from continuing operations as regularly provided to the CODM on a consolidated basis and then reconciled to net income for the three months ended September 30, 2025 and 2024. 14 Q1 FY2026 Form 10-Q| H&R Block, Inc. Table of Contents Consolidated – Financial Results (in 000s, except per share amounts) Three months ended September 30, 2025 2024 Revenues: U.S. tax preparation and related services: Assisted tax preparation $ 48,644 $ 42,963 Royalties 5,849 5,852 DIY tax preparation 3,745 3,236 Refund Transfers 843 860 Peace of Mind® Extended Service Plan 23,509 23,097 Tax Identity Shield® 4,122 3,909 Emerald Card® and Spruce SM 7,852 8,826 Interest and fee income on Emerald Advance® — — International 65,661 64,855 Wave 29,850 26,403 Other 13,476 13,809 Total revenues $ 203,551 $ 193,810 Compensation and benefits: Field wages 69,715 68,094 Other wages 79,279 77,335 Benefits and other compensation 36,662 38,754 185,656 184,183 Occupancy 102,796 101,318 Marketing and advertising 8,342 9,972 Depreciation and amortization 28,922 28,831 Bad debt 2,205 2,730 Other 82,661 95,107 Total operating expenses 410,582 422,141 Other income (expense), net 8,102 11,917 Interest expense on borrowings (17,402) (15,847) Loss from continuing operations before income taxes (216,331) (232,261) Income tax benefit (50,963) (60,840) Segment net income from continuing operations ( 165,368 ) ( 171,421 ) Reconciliation of segment profit: Reconciling items: Net loss from discontinued operations (451) (1,155) Net loss $ (165,819) $ (172,576) H&R Block, Inc. |Q1 FY2026 Form 10-Q 15 Table of Contents