What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-08-15 compared with 2024-08-15 · 50 added, 54 removed, 270 unchanged (28% of the section changed)

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RESULTS OF OPERATIONS

Our subsidiaries provide assisted and DIY tax preparation solutions through multiple channels (including in-person, online and mobile applications, virtual, and desktop software) and distribute H&R Block-branded products and services, including those of our bank partners, to the general public primarily in the U.S., Canada and Australia.

Our subsidiaries provide assisted and DIY tax preparation solutions through multiple channels (including in-person, online and mobile applications, virtual, and desktop software) and distribute H&R Block-branded services and products, including those of our bank partners, to the general public primarily in the U.S., Canada and Australia.

Tax returns are either prepared by H&R Block tax professionals in one of our 6,701 company-owned or 2,013 franchise offices (as of March 31, 2025), virtually or via an online review or prepared and filed by our clients through our DIY tax solutions.

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We report a single segment that includes all of our continuing operations.

In fiscal year 2024, revenue increased $138.2 million over the prior year.

assisted tax preparation revenues were higher $107.7 million due to an increase in net average charge and company-owned tax return volumes.

DIY tax preparation revenues increased $35.1 million due to increases in online paid returns and paid net average charge.

Operating expenses increased $81.6 million due to higher labor costs and bad debt expense, which was partially offset by lower consulting and outsourced services expenses.

This resulted in an increase in pretax income of $51.1 million, or 7.2%.

Net income from continuing operations of $598.0 million increased $36.2 million from the prior year.

Fiscal Year 2024 Compared to Fiscal Year 2023

Revenues Operating Expenses Net Income from Continuing Operations

Diluted EPS from Continuing Operations EBITDA (1) from Continuing Operations

Adjusted (1) :

A summary of our fiscal year 2025 results is as follows:

• Revenue increased $150.6 million, or 4.2%, 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.

• Pretax income increased $19.1 million, or 2.5%.

• Net income from continuing operations of $609.5 million increased 1.9% from the prior year.

• EBITDA (1) of $976.3 million increased $13.2 million, or 1.4%.

• Diluted earnings per share from continuing operations increased $0.28, or 6.8%, and adjusted diluted earnings per share from continuing operations (1) increased $0.25, or 5.7%.

(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.

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Revenues increased $150.6 million, or 4.2%, from the prior year.

assisted tax preparation revenues increased $107.7 million, or 5.0%, due to a 4.0% increase in net average charge combined with higher company-owned tax return volumes in the current year.

royalties revenue decreased $5.8 million, or 2.8%, due to lower franchise tax return volumes.

assisted tax preparation revenues increased $138.4 million, or 6.1%, due to a 5.1% increase in net average charge combined with a 1.0% increase in company-owned tax return volumes in the current year.

royalties revenue decreased $11.9 million, or 5.8%, 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 $35.1 million, or 11.1%, due to a 5.4% increase in online paid returns combined with a 6.8% increase in paid net average charge compared to the prior year.

Emerald Card® and Spruce SM revenues decreased $8.6 million, or 10.1%, 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 Advance® decreased $6.6 million, or 13.9%, due to lower customer fees under the new EA term loans, partially offset by higher interest income due to the increase in EA term loans and a longer loan term in the current year.

International revenues increased $12.0 million, or 5.1%, due to higher tax returns prepared by our Canadian and Australian operations, partially offset by unfavorable foreign currency exchange rates.

Wave revenues increased $6.2 million, or 6.8%, due to higher small business payments processing volumes.

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.

Total operating expenses increased $128.0 million, or 4.6%, from the prior year.

Field wages increased $27.3 million, or 3.2%, due to higher wages in the current year primarily resulting from an increase in company-owned volumes.

Other wages increased $25.0 million, or 9.1%, due to higher corporate bonuses and wages in the current year.

Benefits and other compensation increased $8.2 million, or 3.7%, due to higher payroll taxes.

Marketing and advertising expense decreased $8.5 million, or 3.0%, due to vendor refunds for expired customer incentives and lower agency fees.

Depreciation and amortization decreased $8.7 million, or 6.7%, due to lower amortization of capitalized software.

Bad debt expense increased $31.1 million, or 51.5%, due to higher EA bad debt rates coupled with an increase in EAs and RTs compared to 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.

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.

Other operating expenses increased $46.8 million, or 9.7%.

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$ 531,858 $ 485,011 $ (46,847) (9.7) %

Consulting and outsourced services expense decreased $16.4 million, or 15.0%, due to lower contract labor, Emerald Card® data processing and call center expenses in the current year.

Legal fees and settlements expense increased $16.5 million in the current year.

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 $10.5 million, or 9.7%, 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.

We recorded income tax expense of $172.0 million in the current year compared to $164.4 million in the prior year.

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

2024 Form 10-K | H&R Block, Inc.

FISCAL YEAR 2024 COMPARED TO FISCAL YEAR 2023

The comparison of fiscal year 2024 to 2023 has been omitted from this Form 10-K, but can be found in our Form 10-K for the fiscal year ended June 30, 2024, 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 $680.9 million for the year ended June 30, 2025 compared to $720.9 million in the prior year period.

The change is primarily due to deferred taxes, the receipt of income tax receivables in the prior year, and higher receivables in the current year, partially offset by lower bonus payments in the current year.

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

Investing Activities.

Cash used in investing activities totaled $105.4 million for the year ended June 30, 2025 compared to $93.9 million for the prior year period.

The decrease is primarily due to lower capital expenditures and payments to acquire businesses in the current year.

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

Financing Activities.

Cash used in financing activities totaled $647.4 million for the year ended June 30, 2025 compared to $564.3 million for the prior year period.

The change is primarily due to lower share repurchases in the current year.

The increase is primarily due to higher repurchases of common stock and dividends in the current year.

CASH REQUIREMENTS –

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Dividends paid totaled $197.3 million and $179.8 million in the years ended June 30, 2025 and 2024, respectively.

Although we have historically paid dividends and plan to

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.

H&R Block, Inc.

| 2025 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, our Board of Directors authorized a new share repurchase program under which we may repurchase up to $1.5 billion of our outstanding common stock.

This repurchase program does not have an expiration date and replaced the previously existing share repurchase program.

During the year ended June 30, 2024, we repurchased $350.1 million of our common stock at an average price of $43.66 per share under the previously existing share repurchase authorization.

In the prior year, we repurchased $550.2 million of our common stock at an average price of $37.59 per share.

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

The repurchase program does not have an expiration date and replaced the previously existing share repurchase program.

During the year ended June 30, 2025, 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.

In the prior year, 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.

Our current share repurchase program has remaining authorization of $1.1 billion 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 20, 2023, we amended the Program Management Agreement (PMA) with Pathward and entered into a new participation agreement related to EAs.

Additionally, on April 1, 2024, we further amended the PMA to facilitate an interest-bearing feature for Spruce savings accounts.

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

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.

Our contractual obligations primarily consist of operating leases, contingent acquisition payments, and long-term debt and related interest payments.

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

FINANCING RESOURCES – Our CLOC has capacity up to $1.5 billion and is scheduled to expire in June 2026.

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.

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

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

See Item 8, note 7 to the consolidated financial statements for discussion of our CLOC and Senior Notes.

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.

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

The following table provides ratings for debt issued by Block Financial LLC (Block Financial) as of June 30, 2025 and 2024:

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Short-term Long-term Outlook Short-term Long-term Outlook

Moody's P-3 Baa3 Stable P-3 Baa3 Positive

Moody's P-3 Baa3 Stable P-3 Baa3 Stable

S&P A-2 BBB Stable A-2 BBB Stable

CASH AND OTHER ASSETS – As of June 30, 2024, we held cash and cash equivalents, excluding restricted amounts, of $1.1 billion, including $170.8 million held by our foreign subsidiaries.

2024 Form 10-K | H&R Block, Inc.

CASH AND OTHER ASSETS – As of June 30, 2025, we held cash and cash equivalents, excluding restricted amounts, of $983.3 million, including $205.9 million held by our foreign subsidiaries.

Foreign Operations.

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It does not represent our maximum loss exposure.

As of June 30, 2024, 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, was not material.

As of June 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.

However, our judgments on whether a loss is probable, reasonably possible, or remote, and our estimates of probable loss amounts may differ from actual results due to difficulties in predicting changes in or interpretations of, laws, predicting the outcome of court trials, arbitration hearings, settlement discussions and related activity, predicting the outcome of class certification actions, and numerous other uncertainties.

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The federal government, various state, local, provincial and foreign governments, and some self-regulatory organizations have enacted statutes and ordinances, or adopted rules and regulations, regulating many aspects of our business.

These aspects include, but are not limited to, commercial income tax return preparation, income tax courses, the electronic filing of income tax returns, the offering of RTs and RAs, privacy and data security, consumer protection, marketing and advertising, franchising, antitrust and competition, sales methods, and financial services and products.

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.

These aspects include, but are not limited to, commercial income tax return preparation, income tax courses, the electronic filing of income tax returns, the offering of RTs and RAs, privacy and data security, consumer protection, marketing and advertising, artificial intelligence, franchising, antitrust and competition, sales methods, and financial services and products.

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

There has been recent increased regulatory focus in the area of financial services and products, which has impacted or may in the future impact our program, our contractual arrangements with our bank partner or other partners, or the offering of financial products and services to our clients.

For example, as previously disclosed, in 2017 the CFPB published a final rule regulating certain consumer credit products (Payday Rule).

The Payday Rule was challenged through litigation, which stayed the compliance deadline.

On May 16, 2024, the U.S.

Supreme Court upheld the constitutionality of the CFPB, and the new effective date of the Payday Rule is currently set for March 30, 2025, though further developments are possible.

Though we do not expect the Payday Rule to have a material adverse impact on us, we will continue to monitor and analyze the potential impact of this and other current and future regulatory developments related to financial services and products.

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.

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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