What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-08-14 compared with 2025-08-15 · 52 added, 43 removed, 277 unchanged (26% of the section changed)

7 unchanged sentences

• Revenue increased $184.4 million, or 4.9%, largely due to increases in U.S.

company-owned net average charge and tax return volume coupled with increases in DIY online paid net average charge.

These increases were partially offset by lower interest and fee income on Emerald Advance® due to a decrease in EA loans originated.

• Operating expenses increased $128.0 million, or 4.6%, due to higher compensation and benefits, marketing, consulting, technology, and legal costs, partially offset by lower bad debt.

company-owned net average charge and tax return volume.

International revenues increased due to favorable foreign currency exchange rates in Canada and Australia, and Wave® revenues increased as a result of higher subscription revenue and payments volume.

These increases were partially offset by lower U.S.

royalties revenue due to lower franchise tax return volumes, which was primarily driven by franchise acquisitions.

During the year we purchased franchise offices which resulted in increasing tax preparation revenues and decreasing royalties as the revenues and returns become company-owned after the acquisition.

• Operating expenses increased $104.7 million, or 3.6%, due to higher compensation and benefits, occupancy, and technology costs.

• Pretax income increased $72.5 million, or 9.3%.

• Income tax expense decreased $54.4 million, or 31.6% , primarily due to the settlement of an IRS examination of our 2020 U.S.

federal income tax return and related carryback claims to the 2015 through 2018 tax years.

• Net income from continuing operations of $736.3 million increased 20.8% from the prior year.

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royalties revenue decreased $7.4 million, or 3.9%, due to lower franchise tax return volumes, which was primarily driven by franchise acquisitions.

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.

During the year ended June 30, 2025 our total assisted tax return volume, which includes both company-owned and franchise offices, decreased 0.9% from the prior year.

DIY tax preparation revenues increased $33.9 million, or 9.7%, due to a 9.8% increase in paid net average charge and higher desktop software revenues compared to the prior year.

Interest and fee income on Emerald Advance® decreased $12.0 million, or 29.3%, due to a decrease in EA loans originated during the current year.

Wave revenues increased $12.8 million, or 13.2%, due to higher accounting, invoicing and receipts subscriptions and small business payments processing volumes.

During the year we purchased franchise offices, which resulted in increasing tax preparation revenues and decreasing royalties as the revenues and returns become company-owned after the acquisition.

During the year ended June 30, 2026 our total assisted tax return volume, which includes both company-owned and franchise offices, decreased 0.1% from the prior year due to a decrease in franchise tax return volumes, partially offset by an increase in company-owned tax return volumes.

DIY tax preparation revenues increased $0.9 million, or 0.2%, due to a 4.2% increase in paid net average charge.

International revenues increased $18.4 million , or 7.4%, due to favorable foreign currency exchange rates in Canada and Australia.

Wave® revenues increased $13.5 million, or 12.3%, as a result of higher subscription revenue and payments volume.

Total operating expenses increased $104.7 million, or 3.6%, from the prior year.

Field wages increased $58.4 million, or 6.7%, due to higher tax professional wages in the current year primarily resulting from an increase in U.S.

Field wages increased $69.3 million, or 7.5%, due to increased tax professional wages as a result of higher U.S.

assisted tax preparation revenues.

Other wages increased $8.2 million, or 2.7%, due to higher corporate wages due to salary increases in the current year.

Benefits and other compensation increased $22.0 million, or 9.6%, due to higher employee insurance, severance pay and payroll taxes in the current year.

Marketing and advertising expense increased $8.1 million, or 2.9%, primarily due to higher advertising agency and customer incentive expenses.

Bad debt expense decreased $16.9 million, or 18.5%, due to lower EA bad debt rates coupled with a decrease in EA loans originated during the current year.

Certain wage-related expenses are now being reported in field wages rather than other wages to better align with how costs are managed and evaluated internally.

This change had no impact on total operating expenses, and prior period amounts have not been reclassified.

Occupancy expense increased $18.3 million, or 4.2%, due to an increase in number of leased offices, higher rent, and office-related expenses.

Marketing and advertising expense decreased $8.0 million, or 2.8%, primarily due to lower customer incentive expenses and lower online and television advertising, partially offset by higher advertising production expenses.

Other operating expenses increased $8.5 million, or 1.6%.

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$ 540,327 $ 531,858 $ (8,469) (1.6) %

Consulting and outsourced services expense increased $11.3 million, or 12.1%, due to higher Emerald Card® data processing and spend related to various strategic projects.

Technology-related expenses increased by $10.0 million, or 8.4%, due to higher cloud-related technology spend.

Legal fees and settlements expense increased $9.3 million, primarily due to higher outside counsel spend in the current year.

Credit card and bank charges increased by $6.4 million, or 5.8% primarily due to higher small business payments transaction fees and credit card fees associated with higher tax preparation revenues.

We recorded income tax expense of $117.6 million in the current year compared to $172.0 million in the prior year.

The increase is due to higher pretax income and effective tax rate in the current year.

The effective tax rate for the year ended June 30, 2026, and 2025 was 13.8% and 22.0%, respectively.

The decrease in the effective tax rate was primarily attributable to the settlement of an IRS examination of our 2020 U.S.

federal income tax return and related carryback claims to the 2015 through 2018 tax years.

The closure of the IRS examination resulted in a discrete income tax benefit of $84.1 million, which was recorded in income tax expense.

See Item 8, note 9 to the consolidated financial statements for additional discussion.

2026 Form 10-K | H&R Block, Inc.

FISCAL YEAR 2025 COMPARED TO FISCAL YEAR 2024

The comparison of fiscal year 2025 to 2024 has been omitted from this Form 10-K, but can be found in our Form 10-K for the fiscal year ended June 30, 2025, filed on August 15, 2024.

2025 Form 10-K | H&R Block, Inc.

FINANCIAL CONDITION

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Cash provided by operating activities totaled $838.7 million for the year ended June 30, 2026 compared to $680.9 million in the prior year period.

The decrease is primarily due to changes in income tax reserves and accounts payable.

The increase is primarily due to higher net income, accrued wages and deferred revenue, partially offset by the release of income tax reserves associated with the settlement of the IRS examination of our 2020 U.S.

federal income tax return and related carryback claims to the 2015 through 2018 tax years.

Investing Activities.

Cash used in investing activities totaled $124.8 million for the year ended June 30, 2026 compared to $105.4 million for the prior year period.

The increase is primarily due to higher capital expenditures, partially offset by lower payments made for business acquisitions in the current year.

The increase is primarily due to higher payments made for business acquisitions in the current year.

Financing Activities.

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Dividends paid totaled $211.0 million and $197.3 million in the years ended June 30, 2026 and 2025, 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.

Although we have historically paid dividends and plan to

H&R Block, Inc.

| 2026 Form 10-K

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.

On August 15, 2024, the Board of Directors approved a $1.5 billion share repurchase program.

2 unchanged sentences

In the prior year, we repurchased $400.1 million of our common stock at an average price of $61.10 per share, excluding excise taxes in connection with such repurchases.

Our current share repurchase program has remaining authorization of $1.1 billion and does not have an expiration date.

Our current share repurchase program has remaining authorization of $600.0 million and does not have an expiration date.

Share repurchases are subject to prevailing market prices, may be made in open market transactions (some of which may be effectuated under SEC Rule 10b5-1) and remain subject to the discretion of our Board of Directors.

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Contractual Obligations and Commercial Commitments.

Effective October 18, 2024, we amended our Program Management Agreement (PMA) with Pathward®, N.A to extend the term of the PMA for two years until June 30, 2027.

We are party to many contractual obligations involving commitments to make payments to third parties, which may impact our short-term and long-term liquidity and capital resource needs.

1 unchanged sentence

See Item 8, note 7 , 10 , and 11 to the consolidated financial statements for additional information.

FINANCING RESOURCES – During fiscal year 2025, our existing CLOC had capacity of up to $1.5 billion and was scheduled to expire in June 2026.

On July 11, 2025, we entered into a Fifth Amended and Restated Credit and Guarantee Agreement, which amended and restated our existing CLOC, extended the scheduled maturity date to July 11, 2030, maintained the aggregate principal amount of $1.5 billion, and revised the interest rate table.

Other material terms remain substantially unchanged from the Fourth Amended and Restated Credit and Guarantee Agreement.

FINANCING RESOURCES – On July 11, 2025, we entered into a Fifth Amended and Restated Credit and Guarantee Agreement (2025 CLOC), which amended and restated our existing CLOC, 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 the Fourth Amended and Restated Credit and Guarantee Agreement.

Proceeds under the 2025 CLOC may be used for working capital needs or for other general corporate purposes.

2 unchanged sentences

We had no balance outstanding under our 2025 CLOC as of June 30, 2026.

See Item 8, note 7 to the consolidated financial statements for discussion of our CLOC and Senior Notes, including discussion of the amendment and restatement of our CLOC effective July 11, 2025.

On August 26, 2025, we issued $350.0 million of 5.375% Senior Notes due September 15, 2032 (2032 Senior Notes).

We redeemed our 5.250% notes due October 2025 (2025 Senior Notes) at 100% of the principal amount, plus accrued and unpaid interest, on September 19, 2025.

See Item 8, note 7 for additional information on our 2025 CLOC and Senior Notes.

2026 Form 10-K | H&R Block, Inc.

6 unchanged sentences

Foreign Operations.

Seasonal borrowing needs of our Canadian operations are typically funded by our U.S.

To mitigate foreign currency risk, we sometimes enter into foreign exchange forward contracts.

Seasonal borrowing needs of our Canadian operations are sometimes funded by our U.S.

To mitigate foreign currency risk, we may enter into foreign exchange forward contracts.

There were no forward contracts outstanding as of June 30, 2026.

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

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

The impact of changes in foreign exchange rates during the period on our international cash balances resulted in a decrease of $4.9 million and $0.1 million during the years ended June 30, 2026 and 2025, respectively.

17 unchanged sentences

The table above reflects $1.8 billion of non-current intercompany receivables due to the Issuer from non-guarantor subsidiaries.

H&R Block, Inc.

| 2025 Form 10-K

CRITICAL ACCOUNTING ESTIMATES

4 unchanged sentences

See Item 8, note 1 to the consolidated financial statements for discussion of our significant accounting policies.

H&R Block, Inc.

| 2026 Form 10-K

LITIGATION AND OTHER RELATED CONTINGENCIES –

26 unchanged sentences

Our uncertain tax positions arise from items such as apportionment of income for state purposes, transfer pricing, and the deductibility of intercompany transactions.

We evaluate each uncertain tax position based

2025 Form 10-K | H&R Block, Inc.

on its technical merits.

We evaluate each uncertain tax position based on its technical merits.

For each position, we consider all applicable information including relevant tax laws, the taxing authorities' potential position, our tax return position, and the possible settlement outcomes to determine the amount of liability to record.

3 unchanged sentences

Actual results may differ from our current judgments due to a variety of factors, including changes in law, interpretations of law by taxing authorities that differ from our assessments, changes in the jurisdictions in which we operate and results of routine tax examinations.

We believe we have adequately provided for any reasonably foreseeable outcomes related to these matters.

We believe we have adequately provided for any reasonably foreseeable outcomes

2026 Form 10-K | H&R Block, Inc.

related to these matters.

However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, or when statutes of limitation on potential assessments expire.

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Regulatory attention in the area of financial services and products may in the future impact our program, our contractual arrangements with our bank partner or other partners, or the offering of financial services and products to our clients.

We work to comply with those laws that are

H&R Block, Inc.

| 2025 Form 10-K

applicable to us or our services or products, and we continue to monitor developments in the regulatory environment in which we operate.

We work to comply with those laws that are applicable to us or our services or products, and we continue to monitor developments in the regulatory environment in which we operate.

See further discussion of these items in our Item 1A.

2 unchanged sentences

We cannot predict what effect future laws, changes in interpretations of existing laws or the results of future governmental inquiries with respect to services and products or other matters relating to our business may have on our consolidated financial position, results of operations and cash flows.

We have received certain governmental inquiries related to the IRS Free File Program and our DIY tax preparation services.

We have received certain governmental inquiries related to the IRS Free File Program

H&R Block, Inc.

| 2026 Form 10-K

and our DIY tax preparation services.

We may also be subject to future inquiries or other proceedings regarding these programs or other aspects of our business.

5 unchanged sentences

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 make adjustments for certain non-GAAP financial measures related to material discrete tax impacts of IRS examination settlements, 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 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 net income 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.

9 unchanged sentences

EBITDA from continuing operations $ 1,056,939 $ 976,343

2025 Form 10-K | H&R Block, Inc.

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:

3 unchanged sentences

Amortization of intangibles related to acquisitions (pretax) 46,870 44,673

Discrete tax impact of IRS examination settlements (84,113) —

Tax effect of adjustments (1)

5 unchanged sentences

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

2026 Form 10-K | H&R Block, Inc.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis