What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-05-10 · 94 added, 214 removed, 147 unchanged (68% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RECENT DEVELOPMENTS

On December 20, 2021, we entered into a First Amendment to our August 2020 Program Management Agreement (PMA) with MetaBank®, N.A.

(Meta), which among other things, extends the PMA through June 30, 2025, and adds Spruce℠ accounts to the program.

In January 2022, we launched the Spruce℠ mobile banking platform as a part of the Financial Products imperative of our previously-announced Block Horizons 2025 strategic plan.

The Spruce℠ solution, built by H&R Block with banking products powered by Meta, includes a spending account with a debit card, along with a connected savings account that allows for budgeting for specific goals.

On April 1, 2022, we sent a notice of redemption to the trustee to fully redeem our outstanding $500 million 5.500% Senior Notes originally due in November 2022 (2022 Senior Notes).

The redemption price is equal to 100% of the outstanding principal amount of the 2022 Senior Notes, plus accrued and unpaid interest up to, but not including, the redemption date.

The 2022 Senior Notes were redeemed on May 2, 2022.

FINANCIAL OVERVIEW

On March 21, 2020, the federal tax filing deadline in the U.S.

for individual 2019 tax returns was extended from April 15, 2020 to July 15, 2020, shifting a portion of revenues and expenses from that tax season into the nine months ended March 31, 2021.

This extension impacted the typical seasonality of our business and the comparability of our financial results.

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

RESULTS OF OPERATIONS

Our subsidiaries provide assisted and DIY tax preparation solutions through multiple channels (including in-person, online and mobile applications, virtual, and desktop software) and distribute H&R Block-branded products and services, including those of our bank partner, 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 products and services, 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 company-owned or franchise offices, virtually or via an internet review) or prepared and filed by our clients through our DIY tax solutions.

We also offer small business financial solutions through our company-owned and franchise offices and online through Wave.

We 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.

Operating Statistics

Nine months ended March 31, 2022 2021 (1)

Change % Change

Tax returns prepared:

(in 000s) (2)

Company-owned operations 6,209 6,925 (716) (10.3) %

Franchise operations 2,300 2,674 (374) (14.0) %

Total assisted 8,509 9,599 (1,090) (11.4) %

Desktop 1,043 1,405 (362) (25.8) %

Online 4,457 5,459 (1,002) (18.4) %

Total DIY 5,500 6,864 (1,364) (19.9) %

Returns 14,009 16,463 (2,454) (14.9) %

Net Average Charge:

Company-owned operations $ 234.59 $ 221.25 $ 13.34 6.0 %

Franchise operations (4)

$ 229.64 $ 210.56 $ 19.08 9.1 %

Online $ 32.53 $ 34.36 $ (1.83) (5.3) %

(1) Represents a partial 2019 individual tax filing season, which was extended until July 15, 2020.

(2) An assisted tax return is defined as a current or prior year individual or business tax return that has been accepted by the client.

A DIY online return is defined as a current year individual or business tax return that has been accepted by the client.

A DIY desktop return is defined as a current year individual or business tax return that has been electronically submitted to the IRS.

(3) Net average charge is calculated as total tax preparation fees divided by tax returns prepared.

(4) Net average charge related to H&R Block Franchise operations represents tax preparation fees collected by H&R Block franchisees divided by returns prepared in franchise offices.

H&R Block will recognize a portion of franchise revenues as franchise royalties based on the terms of franchise agreements.

We provide Net Average Charge as a key operating metric because we consider it an important supplemental measure useful to analysts, investors, and other interested parties as it provides insights into pricing and tax return mix relative to our customer base, which are significant drivers of revenue.

Our definition of Net Average Charge may not be comparable to similarly titled measures of other companies.

H&R Block, Inc.

|Q3 FY2022 Form 10-Q

RESULTS OF OPERATIONS

Q1 FY2023 Form 10-Q| H&R Block, Inc.

Consolidated – Financial Results (in 000s, except per share amounts)

Three months ended March 31, 2022 2021 $ Change % Change

Three months ended September 30, 2022 2021 $ Change % Change

tax preparation and related services:

Assisted tax preparation $ 36,312 $ 33,607 $ 2,705 8.0 %

1 unchanged sentence

DIY tax preparation 3,158 4,061 (903) (22.2) %

International 65,232 62,869 2,363 3.8 %

Refund Transfers 1,284 1,665 (381) (22.9) %

Emerald Card® 50,660 73,647 (22,987) (31.2) %

Peace of Mind® Extended Service Plan 24,770 24,836 (66) (0.3) %

Tax Identity Shield® 5,167 5,153 14 0.3 %

Interest and fee income on Emerald Advance SM

30,535 38,247 (7,712) (20.2) %

Wave 20,111 16,082 4,029 25.1 %

Other 9,360 9,745 (385) (4.0) %

Total revenues 2,061,757 1,983,564 78,193 3.9 %

Compensation and benefits:

Field wages 435,345 409,741 (25,604) (6.2) %

Other wages 78,584 78,181 (403) (0.5) %

Benefits and other compensation 91,051 92,825 1,774 1.9 %

604,980 580,747 (24,233) (4.2) %

Occupancy 111,405 113,759 2,354 2.1 %

Marketing and advertising 196,582 183,109 (13,473) (7.4) %

Depreciation and amortization 36,116 39,100 2,984 7.6 %

Bad debt 45,051 46,066 1,015 2.2 %

Other 182,258 169,546 (12,712) (7.5) %

Total operating expenses 1,176,392 1,132,327 (44,065) (3.9) %

Other income (expense), net 238 449 (211) (47.0) %

Interest expense on borrowings (23,746) (22,471) (1,275) (5.7) %

Pretax income 861,857 829,215 32,642 3.9 %

Income taxes 186,884 69,543 (117,341) (168.7) %

Net income from continuing operations 674,973 759,672 (84,699) (11.1) %

Net loss from discontinued operations (1,796) (1,425) (371) (26.0) %

Net income $ 673,177 $ 758,247 $ (85,070) (11.2) %

DILUTED EARNINGS PER SHARE:

Continuing operations $ 4.06 $ 4.09 $ (0.03) (0.7) %

Discontinued operations (0.01) (0.01) — — %

Consolidated $ 4.05 $ 4.08 $ (0.03) (0.7) %

Adjusted diluted EPS (1)

$ 4.11 $ 4.11 $ — — %

tax preparation and related services:

86,279 86,425 (146) (0.2) %

(1) All non-GAAP measures are results from continuing operations.

See " Non-GAAP Financial Information " at the end of this item for a reconciliation of non-GAAP measures .

Three months ended March 31, 2022 compared to March 31, 2021

Revenues increased $78.2 million, or 3.9%, from the prior year.

Revenues for U.S.

assisted tax preparation increased $101.3 million, or 7.8%, largely due to a higher net average charge in the current year combined with higher tax return volumes.

royalties revenues increased $8.7 million, or 5.8%, due to an increase in tax preparation fees.

DIY tax preparation revenues decreased $6.1 million, or 3.4%, due to lower tax return volumes.

Emerald Card® revenues decreased $23.0 million, or 31.2%, due to lower card activity in the current

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

quarter as some stimulus payments were loaded on to Emerald Cards in the prior year.

Interest and fees on Emerald Advances decreased $7.7 million, or 20.2%, due to a decline in Emerald Advances SM in the current year.

Wave revenues increased $4.0 million, or 25.1%, due to higher small business payments processing volumes.

Total operating expenses increased $44.1 million, or 3.9%, from the prior year.

Field wages increased $25.6 million, or 6.2%, due to higher hourly wage rates.

Marketing expense increased $13.5 million, or 7.4%, due to higher online advertising and agency fees .

Depreciation and amortization expense decreased $3.0 million, or 7.6%, due to lower amortization on acquired intangibles and depreciation on equipment.

Other expenses increased $12.7 million, or 7.5%.

The components of other expenses are as follows:

Three months ended March 31, 2022 2021 $ Change % Change

Consulting and outsourced services $ 46,402 $ 48,845 $ 2,443 5.0 %

Bank partner fees 23,686 22,981 (705) (3.1) %

Client claims and refunds 10,730 10,057 (673) (6.7) %

Employee and travel expenses 9,515 5,523 (3,992) (72.3) %

Technology-related expenses 26,373 23,425 (2,948) (12.6) %

Credit card/bank charges 30,770 27,906 (2,864) (10.3) %

Insurance 4,099 3,135 (964) (30.7) %

Legal fees and settlements 7,125 3,311 (3,814) (115.2) %

Supplies 14,243 14,551 308 2.1 %

Other 9,315 9,812 497 5.1 %

Financial services:

Emerald Card® and Spruce SM

11,612 28,258 (16,646) (58.9) %

Employee and travel expenses increased $4.0 million, or 72.3%, due to less travel in the prior year as a result of COVID-19 restrictions.

Technology-related expenses increased $2.9 million, or 12.6%, due to increased investments in information technology.

Credit card and bank charges increased $2.9 million, or 10.3%, due to higher Wave small business payment processing fees.

Legal fees and settlements increased $3.8 million, or 115.2%, due to higher fees attributable to certain pending litigation matters.

We recorded an income tax expense of $186.9 million in the current year compared to $69.5 million in the prior year.

The effective tax rate for the three months ended March 31, 2022, and 2021 was 21.7% and 8.4%, respectively.

The lower rate in prior year is a result of tax benefits recorded related to our net operating loss carrybacks to 35% tax years.

federal tax filing deadline for 2021 individual income tax returns was April 18, 2022, the deadline for 2020 tax returns was May 17, 2021 and the deadline for 2019 tax returns was July 15, 2020.

Therefore, the year-over-year periods are not directly comparable.

Our business is highly seasonal and results for the three months ended March 31 may not be indicative of results for the entire tax season.

H&R Block, Inc.

|Q3 FY2022 Form 10-Q

Consolidated - Financial Results (in 000s, except per share amounts)

Nine months ended March 31, 2022 2021 $ Change % Change

assisted tax preparation $ 1,456,594 $ 1,532,079 $ (75,485) (4.9) %

royalties 169,548 178,126 (8,578) (4.8) %

DIY tax preparation 188,455 234,871 (46,416) (19.8) %

International 151,464 148,282 3,182 2.1 %

Refund Transfers 134,665 141,309 (6,644) (4.7) %

Emerald Card® 103,748 96,045 7,703 8.0 %

Peace of Mind® Extended Service Plan 59,373 63,430 (4,057) (6.4) %

Tax Identity Shield® 19,431 22,446 (3,015) (13.4) %

Interest and fee income on Emerald Advance SM

614 479 135 28.2 %

Total financial services 12,226 28,737 (16,511) (57.5) %

International 58,834 58,325 509 0.9 %

Wave 22,646 19,137 3,509 18.3 %

Other 27,736 28,819 (1,083) (3.8) %

Total revenues $ 179,985 $ 192,624 $ (12,639) (6.6) %

12 unchanged sentences

Interest expense on borrowings (15,824) (22,830) 7,006 30.7 %

Pretax income 365,621 495,770 (130,149) (26.3) %

Income taxes 29,666 50,997 21,331 41.8 %

Net income from continuing operations 335,955 444,773 (108,818) (24.5) %

Pretax loss (221,324) (197,318) (24,006) (12.2) %

Income tax benefit (53,957) (47,373) 6,584 13.9 %

Net loss from continuing operations (167,367) (149,945) (17,422) (11.6) %

Net loss from discontinued operations (1,054) (1,656) 602 36.4 %

Net income $ 330,971 $ 440,240 $ (109,269) (24.8) %

DILUTED EARNINGS PER SHARE:

Net loss $ (168,421) $ (151,601) $ (16,820) (11.1) %

BASIC AND DILUTED LOSS PER SHARE:

Continuing operations $ (1.05) $ (0.84) $ (0.21) (25.0) %

6 unchanged sentences

See " Non-GAAP Financial Information " at the end of this item for a reconciliation of non-GAAP measures .

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

Three months ended September 30, 2022 compared to September 30, 2021

Revenues decreased $12.6 million, or 6.6%, from the prior year.

The decrease in revenue is due to lower tax return volumes in the current year as the 2019 tax season was extended to July 15, 2020 in the prior year period, whereas the 2020 tax season deadline of May 17, 2021 did not extend into the nine month period ended March 31, 2022.

This resulted in a decrease in U.S.

tax preparation, royalty and Refund Transfer revenues.

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

Emerald Card® revenues increased $7.7 million, or 8.0%, due to higher card activity which is a result of the IRS loading Child Tax Credits monthly to Emerald Cards® in July through December 2021.

Interest and fees on Emerald Advances decreased $9.4 million, or 17.7%, due to a decline in Emerald Advances.

assisted tax preparation revenues increased $2.7 million, or 8.0%, primarily due to a higher net average charge and slightly higher return volume in the current year.

royalty revenue decreased $1.1 million, or 15.4%, due to the timing of royalty incentives.

H&R Block, Inc.

|Q1 FY2023 Form 10-Q

Emerald Card and Spruce revenues decreased $16.6 million, or 58.9%, due to the IRS loading Child Tax Credits monthly to Emerald Cards® in the prior year.

International tax preparation volumes increased in Australia, which was largely offset by the impacts of foreign currency exchange rates compared to the prior year.

Wave revenues increased $3.5 million, or 18.3%, due to higher small business payments processing volumes.

Total operating expenses increased $8.0 million, or 0.4%, from the prior year period.

Field wages decreased $7.1 million, or 1.3%, due to lower tax preparation volumes in the current year as a result of the tax season extension in the prior year.

Benefits and other compensation decreased $7.6 million, or 4.9%, due to lower payroll taxes as a result of lower wages.

Marketing and advertising expense increased $9.7 million, or 4.5%, due to higher online advertising and agency fees in the current year.

Depreciation and amortization expense decreased $9.6 million, or 8.2%, due primarily to lower amortization of acquired intangibles.

Other expenses increased $33.1 million, or 9.7%.

Total operating expenses increased $21.7 million, or 5.9%, from the prior year.

Field wages increased $5.6 million, or 10%, due to higher field management wages and a bonus accrual adjustment in the prior year.

Other wages increased $5.7 million, or 9.8%, due to higher corporate wages in the current year.

Benefits and other compensation increased $9.4 million, or 36.9%, due to higher employee insurance costs and higher payroll taxes as a result of the increase in wages.

Occupancy expense increased $1.8 million, or 1.8%, due to higher office rent rates in the current year.

Depreciation and amortization expense decreased $2.1 million, or 5.9%, due to lower amortization of acquired intangibles.

Other operating expenses increased $1.5 million, or 1.8%.

The components of other expenses are as follows:

Nine months ended March 31, 2022 2021 $ Change % Change

Three months ended September 30, 2022 2021 $ Change % Change

Consulting and outsourced services $ 18,053 $ 25,857 $ 7,804 30.2 %

9 unchanged sentences

$ 86,646 $ 85,150 $ (1,496) (1.8) %

Consulting and outsourced services expense increased $8.0 million, or 8.7%, due to higher call center expenses and data processing fees related to higher activity on Emerald Cards®.

Consulting and outsourced services expense decreased $7.8 million, or 30.2%, due to lower call center expenses and data processing fees related to lower activity on Emerald Cards.

Employee and travel expenses increased $1.8 million, or 41.4%, due to more travel in the current year.

Technology-related expenses increased $5.6 million, or 27.5%, due to increased investments in information technology.

Credit card and bank charges increased $9.7 million, or 17.9%, due to higher Wave small business payment processing fees and fees related to Emerald Cards ® .

Interest expense on borrowings decreased $9.0 million, or 11.4%, primarily due to higher CLOC borrowings in the prior year.

We recorded an income tax expense of $29.7 million in the current year compared to $51.0 million in the prior year, the decrease is primarily related to lower pretax income in the current year.

The effective tax rate for the nine months ended March 31, 2022, and 2021 was 8.1% and 10.3% , respectively.

See Item 1, note 7 to the consolidated financial statements for additional discussion.

Credit card and bank charges increased $1.2 million, or 8.3%, due to higher Wave small business payment processing fees.

Other income (expense), net increased $3.3 million primarily due to higher interest income as a result of higher interest rates.

Interest expense on borrowings decreased $7.0 million, or 30.7%, due to the repayment of our $500 million 5.500% Senior Notes in May 2022.

We recorded an income tax benefit of $54.0 million in the current year compared to $47.4 million in the prior year.

The effective tax rate for the three months ended September 30, 2022, and 2021 was 24.4% and 24.0%, respectively.

FINANCIAL CONDITION

3 unchanged sentences

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.

Q1 FY2023 Form 10-Q| H&R Block, Inc.

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

H&R Block, Inc.

|Q3 FY2022 Form 10-Q

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 31, 2022 are sufficient to meet our operating, investing and financing needs.

DISCUSSION OF CONSOLIDATED STATEMENTS OF CASH FLOWS – The following table summarizes our statements of cash flows for the nine months ended March 31, 2022 and 2021.

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 September 30, 2022 are sufficient to meet our operating, investing and financing needs.

DISCUSSION OF CONSOLIDATED STATEMENTS OF CASH FLOWS – The following table summarizes our statements of cash flows for the three months ended September 30, 2022 and 2021.

See Item 1 for the complete consolidated statements of cash flows for these periods.

Nine months ended March 31, 2022 2021

Net cash provided by (used in):

Three months ended September 30, 2022 2021

Net cash used in:

Operating activities $ (321,666) $ (312,624)

2 unchanged sentences

Effects of exchange rates on cash (13,422) (3,959)

Net decrease in cash, cash equivalents and restricted cash $ (407,110) $ (1,894,554)

Net decrease in cash and cash equivalents, including restricted balances $ (619,339) $ (553,358)

Operating Activities.

Cash provided by operations totaled $373.1 million for the nine months ended March 31, 2022 compared to $501.4 million in the prior year period.

The change is primarily due to higher bonus and payroll tax payments and a decrease in net income in the current year, partially offset by the timing of receivables collections in the current year.

Cash used in operations totaled $321.7 million for the three months ended September 30, 2022 compared to $312.6 million in the prior year period.

The change is primarily due to the timing of receivables collections and an increase in our net loss, partially offset by the receipt of an income tax receivable in the current year.

Investing Activities.

Cash used in investing activities totaled $71.1 million for the nine months ended March 31, 2022 compared to $50.0 million in the prior year period.

The change is primarily due to an increase in capital expenditures and payments to acquire businesses in the current year.

Cash used in investing activities totaled $37.4 million for the three months ended September 30, 2022 compared to $19.5 million in the prior year period.

The change is primarily due to payments to acquire businesses in the current year.

Financing Activities.

Cash used in financing activities totaled $707.5 million for the nine months ended March 31, 2022 compared to $2.4 billion in the prior year period.

The change is primarily due to the repayment of the $2.0 billion draw on our CLOC in the prior year, partially offset by higher share repurchases in the current year.

Cash used in financing activities totaled $246.9 million for the three months ended September 30, 2022 compared to $217.3 million in the prior year period.

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

CASH REQUIREMENTS –

2 unchanged sentences

We have consistently paid quarterly dividends.

Dividends paid totaled $143.4 million and $147.9 million for the nine months ended March 31, 2022 and 2021, respectively.

Dividends paid totaled $43.1 million and $49.0 million for the three months ended September 30, 2022 and 2021, respectively.

Although we have historically paid dividends and plan to continue to do so, there can be no assurances that circumstances will not change in the future that could affect our ability or decisions to pay dividends.

During the nine months ended March 31, 2022, we repurchased $550.3 million of our common stock at an average price of $23.84 per share.

In August 2022, the Board of Directors approved a $1.25 billion share repurchase program, effective through fiscal year 2025.

During the three months ended September 30, 2022, we repurchased $219.8 million of our common stock at an average price of $44.60 per share.

In the prior year period, we repurchased $165.8 million of our common stock at an average price of $24.37 per share.

Our current share repurchase program has remaining authorization of $13.8 million which is effective through June 2022.

Our current share repurchase program has remaining authorization of $1.03 billion which is effective through June 2025.

Share repurchases may be effectuated through open market transactions, some of which may be effectuated under SEC Rule 10b5-1.

2 unchanged sentences

Although we may continue to repurchase shares, there is no assurance that we will purchase up to the full Board authorization.

H&R Block, Inc.

|Q1 FY2023 Form 10-Q

Capital Investment.

Capital expenditures totaled $52.7 million and $44.2 million for the nine months ended March 31, 2022 and 2021, respectively.

Capital expenditures totaled $16.2 million and $15.6 million for the three months ended September 30, 2022 and 2021, respectively.

Our capital expenditures relate primarily to recurring improvements to retail offices, as well as investments in computers, software and related assets.

In addition to our capital expenditures, we also made payments to acquire businesses.

We acquired franchisee and competitor businesses

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

totaling $25.5 million and $15.5 million during the nine months ended March 31, 2022 and 2021, respectively.

We acquired franchisee and competitor businesses totaling $16.5 million and $4.3 million during the three months ended September 30, 2022 and 2021, respectively.

See Item 1, note 5 for additional information on our acquisitions.

FINANCING RESOURCES – The CLOC has cap acity up to $1.5 billion and is scheduled to expire in June 2026.

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

On April 1, 2022, we sent a notice of redemption to the trustee to fully redeem our outstanding 2022 Senior Notes originally due in November 2022.

The redemption price is equal to 100% of the outstanding principal amount of the 2022 Senior Notes, plus accrued and unpaid interest up to, but not including, the redemption date.

The 2022 Senior Notes were redeemed on May 2, 2022.

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

As of March 31, 2022 June 30, 2021

We had no outstanding balance under our CLOC and amounts available to borrow were limited by the debt-to-EBITDA covenant to approximately $1.47 billion as of September 30, 2022.

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

As of September 30, 2022 June 30, 2022

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

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

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

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

Other than described above, there have been no material changes in our borrowings from those reported in our April 30, 2021 Annual Report to Shareholders on Form 10-K or our June 30, 2021 Transition Report filed on Form 10-Q.

CASH AND OTHER ASSETS – As of March 31, 2022, we held cash and cash equivalents, excluding restricted amounts, of $1.0 billion, including $131.8 million held by our foreign subsidiaries.

Other than described above, there have been no material changes in our borrowings from those reported as of June 30, 2022 in our Annual Report to Shareholders on Form 10-K.

CASH AND OTHER ASSETS – As of September 30, 2022, we held cash and cash equivalents, excluding restricted amounts, of $322.8 million, including $127.4 million held by our foreign subsidiaries.

We received $100.6 million of our federal income tax receivable subsequent to September 30, 2022.

Foreign Operations.

1 unchanged sentence

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

There were no forward contracts outstanding as of March 31, 2022.

There were no forward contracts outstanding as of September 30, 2022.

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

The impact of changes in foreign exchange rates during the period on our international cash balances resulted in an decrease of $1.7 million during the nine months ended March 31, 2022 and in an increase of $10.4 million during the nine months ended March 31, 2021.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS – Except as described in Recent Developments related to our amended PMA agreement with Meta, there have been no material changes in our contractual obligations and commercial commitments from those reported in our April 30, 2021 Annual Report to Shareholders on Form 10-K or our June 30, 2021 Transition Report filed on Form 10-Q.

The impact of changes in foreign exchange rates during the period on our international cash balances resulted in a decrease of $13.4 million during the three months ended September 30, 2022 and in a decrease of $4.0 million during the three months ended September 30, 2021.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS – There have been no material changes in our contractual obligations and commercial commitments from those reported in our June 30, 2022 Annual Report to Shareholders on Form 10-K.

SUMMARIZED GUARANTOR FINANCIAL STATEMENTS – Block Financial is a 100% owned subsidiary of H&R Block, Inc.

4 unchanged sentences

SUMMARIZED BALANCE SHEET - GUARANTOR AND ISSUER (in 000s)

As of March 31, 2022 June 30, 2021

As of September 30, 2022 June 30, 2022

Current assets $ 50,399 $ 38,922

2 unchanged sentences

Noncurrent liabilities 1,497,818 1,495,732

H&R Block, Inc.

|Q3 FY2022 Form 10-Q

Q1 FY2023 Form 10-Q| H&R Block, Inc.

SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER (in 000s)

Nine months ended March 31, 2022 Two months ended June 30, 2021

Three months ended September 30, 2022 Twelve months ended June 30, 2022

Total revenues $ 13,420 $ 199,683

2 unchanged sentences

Net income 2,437 35,007

The table above reflects $2.1 billion of non-current intercompany receivables due to the Issuer from non-guarantor subsidiaries as of March 31, 2022 and June 30, 2021.

The table above reflects $1.6 billion of non-current intercompany receivables due to the Issuer from non-guarantor subsidiaries as of September 30, 2022 and June 30, 2022.

REGULATORY ENVIRONMENT

3 unchanged sentences

The plaintiffs appealed, and, on October 14, 2021, the United States Court of Appeals for the Fifth Circuit extended the compliance deadline until after the appeal is resolved.

On October 19, 2022, the appellate court found that the funding mechanism for the CFPB was unconstitutional and vacated the Payday Rule;

however, the CFPB may take further action to challenge this ruling.

We are unsure whether, when, or in what form the Payday Rule will go into effect.

Though we do not currently expect the Payday Rule to have a material adverse impact on Emerald 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 April 30, 2021 Annual Report to Shareholders on Form 10-K or our June 30, 2021 Transition Report filed on Form 10-Q.

There have been no other material changes in our regulatory environment from what was reported in our June 30, 2022 Annual Report to Shareholders on Form 10-K.

NON-GAAP FINANCIAL INFORMATION

4 unchanged sentences

We may consider whether other significant items that arise in the future should be excluded from our non-GAAP financial measures.

We measure the performance of our business using a variety of metrics, including earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations, adjusted EBITDA from continuing operations, EBITDA margin from continuing operations, adjusted EBITDA margin from continuing operations, adjusted diluted earnings per share from continuing operations and free cash flow.

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.

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

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

Three months ended March 31, Nine months ended March 31,

2022 2021 2022 2021

Net income - as reported $ 673,177 $ 758,247 $ 330,971 $ 440,240

H&R Block, Inc.

|Q1 FY2023 Form 10-Q

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

Three months ended September 30,

Net loss - as reported $ (168,421) $ (151,601)

Discontinued operations, net 1,054 1,656

Net income from continuing operations - as reported 674,973 759,672 335,955 444,773

Income taxes 186,884 69,543 29,666 50,997

Net loss from continuing operations - as reported (167,367) (149,945)

Income tax benefit (53,957) (47,373)

Interest expense 15,824 22,830

4 unchanged sentences

(in 000s, except per share amounts)

Three months ended March 31, Nine months ended March 31,

2022 2021 2022 2021

Net income from continuing operations - as reported $ 674,973 $ 759,672 $ 335,955 $ 444,773

Three months ended September 30,

Net loss from continuing operations - as reported $ (167,367) $ (149,945)

Amortization of intangibles related to acquisitions (pretax) 12,696 14,870

1 unchanged sentence

(3,221) (3,635)

Adjusted net income from continuing operations $ 684,407 $ 764,202 $ 368,994 $ 483,704

Diluted earnings per share from continuing operations - as reported $ 4.06 $ 4.09 $ 1.92 $ 2.35

Adjusted net loss from continuing operations $ (157,892) $ (138,710)

Diluted loss per share from continuing operations - as reported $ (1.05) $ (0.84)

Adjustments, net of tax 0.06 0.06

Adjusted diluted earnings per share from continuing operations $ 4.11 $ 4.11 $ 2.11 $ 2.56

Adjusted diluted loss per share from continuing operations $ (0.99) $ (0.78)

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

7 unchanged sentences

They may include estimates of revenues, client trajectory, income, effective tax rate, earnings per share, cost savings, capital expenditures, dividends, share repurchases, liquidity, capital structure, market share, industry volumes or other financial items, descriptions of management's plans or objectives for future operations, services or products, or descriptions of assumptions underlying any of the above.

They may also include the expected impact of the coronavirus (COVID–19) pandemic, including, without limitation, the impact on economic

H&R Block, Inc.

|Q3 FY2022 Form 10-Q

and financial markets, the Company's capital resources and financial condition, future expenditures, potential regulatory actions, such as extensions of tax filing deadlines or other related relief, changes in consumer behaviors and modifications to the Company's operations relating thereto.

They may also include the expected impact of 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 or other related relief, changes in consumer behaviors and modifications to the Company's operations relating thereto.

Q1 FY2023 Form 10-Q| H&R Block, Inc.

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.

4 unchanged sentences

Investors should understand that it is not possible to predict or identify all such factors and, consequently, should not consider any such list to be a complete set of all potential risks or uncertainties.

Details about risks, uncertainties and assumptions that could affect various aspects of our business are included throughout our Annual Report on Form 10-K for the fiscal year ended April 30, 2021 and are also described from time to time in other filings with the SEC.

Investors should carefully consider all of these risks, and should pay particular attention to Item 1A, "Risk Factors," and Item 7 under "Critical Accounting Policies" of our Annual Report on Form 10-K for the fiscal year ended April 30, 2021.

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 and are also described from time to time in other filings with the SEC.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risks from those reported in our April 30, 2021 Annual Report to Shareholders on Form 10-K or our June 30, 2021 Transition Report filed on Form 10-Q.

There have been no material changes in our market risks from those reported in our June 30, 2022 Annual Report to Shareholders on Form 10-K.

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-Q

Item 2. Management’s Discussion and Analysis