H&R BLOCK INC 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. Tax returns are either prepared by H&R Block tax professionals (in company-owned or franchise offices, virtually or via an internet review) or prepared and filed by our clients through our DIY tax solutions. We also offer small business solutions through our company-owned and franchise offices and online through Wave. We report a single segment that includes all of our continuing operations. 16 Q3 FY2023 Form 10-Q| H&R Block, Inc. Table of Contents Consolidated – Financial Results (in 000s, except per share amounts) Three months ended March 31, 2023 2022 $ Change % Change Revenues: U.S. tax preparation and related services: Assisted tax preparation $ 1,453,049 $ 1,392,142 $ 60,907 4.4 % Royalties 150,163 158,786 (8,623) (5.4) % DIY tax preparation 167,022 175,184 (8,162) (4.7) % Refund Transfers 117,384 132,223 (14,839) (11.2) % Peace of Mind® Extended Service Plan 16,750 17,222 (472) (2.7) % Tax Identity Shield® 8,720 9,078 (358) (3.9) % Other 10,972 10,584 388 3.7 % Total U.S. tax preparation and related services 1,924,060 1,895,219 28,841 1.5 % Financial services: Emerald Card® and Spruce SM 44,358 50,660 (6,302) (12.4) % Interest and fee income on Emerald Advance SM 33,750 30,535 3,215 10.5 % Total financial services 78,108 81,195 (3,087) (3.8) % International 69,417 65,232 4,185 6.4 % Wave 22,064 20,111 1,953 9.7 % Total revenues $ 2,093,649 $ 2,061,757 $ 31,892 1.5 % Compensation and benefits: Field wages 480,779 435,345 (45,434) (10.4) % Other wages 73,503 78,584 5,081 6.5 % Benefits and other compensation 100,368 91,051 (9,317) (10.2) % 654,650 604,980 (49,670) (8.2) % Occupancy 118,111 111,405 (6,706) (6.0) % Marketing and advertising 210,508 196,582 (13,926) (7.1) % Depreciation and amortization 32,313 36,116 3,803 10.5 % Bad debt 34,273 45,051 10,778 23.9 % Other 179,292 182,258 2,966 1.6 % Total operating expenses 1,229,147 1,176,392 (52,755) (4.5) % Other income (expense), net 13,224 238 12,986 ** Interest expense on borrowings (22,298) (23,746) 1,448 6.1 % Pretax income 855,428 861,857 (6,429) (0.7) % Income taxes 209,351 186,884 (22,467) (12.0) % Net income from continuing operations 646,077 674,973 (28,896) (4.3) % Net loss from discontinued operations (2,648) (1,796) (852) (47.4) % Net income $ 643,429 $ 673,177 $ (29,748) (4.4) % DILUTED EARNINGS PER SHARE Continuing operations $ 4.14 $ 4.06 $ 0.08 2.0 % Discontinued operations (0.02) (0.01) (0.01) (100.0) % Consolidated $ 4.12 $ 4.05 $ 0.07 1.7 % Adjusted diluted EPS (1) $ 4.20 $ 4.11 $ 0.09 2.2 % EBITDA (1) $ 910,039 $ 921,719 $ (11,680) (1.3) % (1) All non-GAAP measures are results from continuing operations. See " Non-GAAP Financial Information " at the end of this item for a reconciliation of non-GAAP measures . H&R Block, Inc. |Q3 FY2023 Form 10-Q 17 Table of Contents Three months ended March 31, 2023 compared to March 31, 2022 Revenues increased $31.9 million, or 1.5%, from the prior year. U.S. assisted tax preparation revenues increased $60.9 million, or 4.4%, due to a 3.7% increase in net average charge combined with higher tax return volumes in the current year. U.S. royalty revenue decreased $8.6 million, or 5.4%, due to lower volumes, partially offset by a higher net average charge in the current year. During the year we purchased franchise offices which results in increasing tax preparation revenues and decreasing royalties as the revenues and returns become company-owned after the acquisition. For the three months ended March 31, our total assisted tax return volume, which includes both company-owned and franchise offices, decreased 2.0% from the prior year. U.S. DIY tax preparation revenues decreased $8.2 million, or 4.7%, primarily due to lower software sales and a decline in online paid returns during the quarter compared to the prior year. Refund Transfer revenues decreased $14.8 million, or 11.2%, primarily due to fewer Refund Transfers in the current year. Emerald Card® and Spruce SM revenues decreased $6.3 million, or 12.4%, primarily due to lower card activity in the current year as a result of less funds being loaded to Emerald Cards® in the current year. Total operating expenses increased $52.8 million, or 4.5%, from the prior year. Field wages increased $45.4 million, or 10.4%, primarily due to higher wages in the current year. Benefits and other compensation increased $9.3 million, or 10.2%, due to higher payroll taxes, employee insurance and stock-based compensation. Occupancy expense increased $6.7 million, or 6.0%, primarily due to higher office repairs and rent. Marketing and advertising expense increased $13.9 million, or 7.1%, due to higher television advertising. Bad debt expense decreased $10.8 million, or 23.9%, due to fewer Refund Transfers compared to the prior year. Other operating expenses decreased $3.0 million, or 1.6%. The components of other expenses are as follows: (in 000s) Three months ended March 31, 2023 2022 $ Change % Change Consulting and outsourced services $ 42,130 $ 46,402 $ 4,272 9.2 % Bank partner fees 24,778 23,686 (1,092) (4.6) % Client claims and refunds 8,787 10,730 1,943 18.1 % Employee and travel expenses 9,906 9,515 (391) (4.1) % Technology-related expenses 26,385 26,373 (12) — % Credit card/bank charges 34,159 30,770 (3,389) (11.0) % Insurance 2,891 4,099 1,208 29.5 % Legal fees and settlements 2,685 7,125 4,440 62.3 % Supplies 15,956 14,243 (1,713) (12.0) % Other 11,615 9,315 (2,300) (24.7) % $ 179,292 $ 182,258 $ 2,966 1.6 % Other income (expense), net increased $13.0 million primarily due to income from a legal settlement and interest in the current year. We recorded an income tax expense of $209.4 million in the current year compared to $186.9 million in the prior year. The effective tax rate for the three months ended March 31, 2023, and 2022 was 24.5% and 21.7%, respectively. Diluted earnings per share from continuing operations increased 2.0% from the prior year due to fewer shares outstanding from share repurchases, partially offset by lower net income compared to the prior year. 18 Q3 FY2023 Form 10-Q| H&R Block, Inc. Table of Contents Consolidated - Financial Results (in 000s, except per share amounts) Nine months ended March 31, 2023 2022 $ Change % Change Revenues: U.S. tax preparation and related services: Assisted tax preparation $ 1,530,577 $ 1,456,594 $ 73,983 5.1 % Royalties 161,337 169,548 (8,211) (4.8) % DIY tax preparation 182,330 188,455 (6,125) (3.3) % Refund Transfers 120,210 134,665 (14,455) (10.7) % Peace of Mind® Extended Service Plan 58,840 59,373 (533) (0.9) % Tax Identity Shield® 19,237 19,431 (194) (1.0) % Other 28,845 27,736 1,109 4.0 % Total U.S. tax preparation and related services 2,101,376 2,055,802 45,574 2.2 % Financial services: Emerald Card® and Spruce SM 68,448 103,748 (35,300) (34.0) % Interest and fee income on Emerald Advance SM 47,267 43,438 3,829 8.8 % Total financial services 115,715 147,186 (31,471) (21.4) % International 156,297 151,464 4,833 3.2 % Wave 66,651 58,745 7,906 13.5 % Total revenues $ 2,440,039 $ 2,413,197 $ 26,842 1.1 % Compensation and benefits: Field wages 618,656 561,482 (57,174) (10.2) % Other wages 207,786 200,715 (7,071) (3.5) % Benefits and other compensation 169,477 146,708 (22,769) (15.5) % 995,919 908,905 (87,014) (9.6) % Occupancy 316,874 306,523 (10,351) (3.4) % Marketing and advertising 236,299 223,796 (12,503) (5.6) % Depreciation and amortization 98,660 107,462 8,802 8.2 % Bad debt 57,018 59,760 2,742 4.6 % Other 363,081 373,458 10,377 2.8 % Total operating expenses 2,067,851 1,979,904 (87,947) (4.4) % Other income (expense), net 21,020 1,989 19,031 956.8 % Interest expense on borrowings (57,107) (69,661) 12,554 18.0 % Pretax income 336,101 365,621 (29,520) (8.1) % Income taxes 78,254 29,666 (48,588) (163.8) % Net income from continuing operations 257,847 335,955 (78,108) (23.2) % Net loss from discontinued operations (6,418) (4,984) (1,434) (28.8) % Net income $ 251,429 $ 330,971 $ (79,542) (24.0) % DILUTED EARNINGS PER SHARE Continuing operations $ 1.62 $ 1.92 $ (0.30) (15.6) % Discontinued operations (0.04) (0.03) (0.01) (33.3) % Consolidated $ 1.58 $ 1.89 $ (0.31) (16.4) % Adjusted diluted EPS (1) $ 1.80 $ 2.11 $ (0.31) (14.7) % EBITDA (1) $ 491,868 $ 542,744 $ (50,876) (9.4) % (1) All non-GAAP measures are results from continuing operations. See " Non-GAAP Financial Information " at the end of this item for a reconciliation of non-GAAP measures. H&R Block, Inc. |Q3 FY2023 Form 10-Q 19 Table of Contents Nine months ended March 31, 2023 compared to March 31, 2022 Revenues increased $26.8 million, or 1.1%, from the prior year. U.S. assisted tax preparation revenues increased $74.0 million, or 5.1%, due to a 3.4% increase in net average charge combined with higher tax return volumes in the current year. U.S. royalties revenue decreased $8.2 million, or 4.8%, due to lower volumes, partially offset by a higher net average charge in the current year. During the year we purchased franchise offices which results in increasing tax preparation revenues and decreasing royalties as the revenues and returns become company-owned after the acquisition. Through the nine months ended March 31, our total assisted tax return volume, which includes both company-owned and franchise offices, decreased 1.6% from the prior year. U.S. DIY tax preparation revenues decreased $6.1 million, or 3.3%, primarily due to lower software sales and a decline in online paid returns during the quarter compared to the prior year. Refund Transfer revenues decreased $14.5 million, or 10.7%, due to fewer Refund Transfers in the current year. Emerald Card® and Spruce SM revenues decreased $35.3 million, or 34.0%, primarily due to higher card activity in the prior year, which is the result of the IRS loading Child Tax Credits monthly to Emerald Cards®. Wave revenues increased $7.9 million, or 13.5%, due to higher small business payments processing volumes. Total operating expenses increased $87.9 million, or 4.4%, from the prior year period. Field wages increased $57.2 million, or 10.2%, primarily due to higher wages in the current year. Other wages increased $7.1 million, or 3.5%, due to higher corporate wages in the current year. Benefits and other compensation increased $22.8 million, or 15.5%, due to higher payroll taxes, employee insurance and stock-based compensation. Occupancy expense increased $10.4 million, or 3.4%, primarily due to higher rent and office repairs. Marketing and advertising expense increased $12.5 million, or 5.6%, due to higher television advertising. Depreciation and amortization expense decreased $8.8 million, or 8.2%, due primarily to lower amortization of acquired intangibles. Other operating expenses decreased $10.4 million, or 2.8%. The components of other expenses are as follows: (in 000s) Nine months ended March 31, 2023 2022 $ Change % Change Consulting and outsourced services $ 82,635 $ 99,870 $ 17,235 17.3 % Bank partner fees 23,981 26,344 2,363 9.0 % Client claims and refunds 21,002 22,945 1,943 8.5 % Employee and travel expenses 30,675 23,222 (7,453) (32.1) % Technology-related expenses 76,789 69,998 (6,791) (9.7) % Credit card/bank charges 67,682 63,441 (4,241) (6.7) % Insurance 6,260 11,780 5,520 46.9 % Legal fees and settlements 7,155 14,227 7,072 49.7 % Supplies 23,291 22,161 (1,130) (5.1) % Other 23,611 19,470 (4,141) (21.3) % $ 363,081 $ 373,458 $ 10,377 2.8 % Consulting and outsourced services expense decreased $17.2 million, or 17.3%, due to higher spend in the prior year related to our strategic imperatives, and lower call center volumes and Emerald Card® data processing in the current year. Employee and travel expenses increased $7.5 million, or 32.1%, due to more travel in the current year. Technology-related expenses increased $6.8 million, or 9.7%, due to increased investments in information technology. Legal fees and settlements expense decreased $7.1 million, or 49.7%, due to lower fees in the current year. Other income (expense), net increased $19.0 million due to higher interest and income from a legal settlement in the current year. Interest expense on borrowings decreased $12.6 million, or 18.0%, due to the repayment of our $500 million 5.500% Senior Notes in May 2022, partially offset by higher interest expense on our CLOC borrowings in the current year. 20 Q3 FY2023 Form 10-Q| H&R Block, Inc. Table of Contents We recorded income tax expense of $78.3 million in the current year compared to $29.7 million in the prior year. The effective tax rate for the nine months ended March 31, 2023, and 2022 was 23.3% and 8.1%, respectively. See Item 1, note 7 to the consolidated financial statements for additional discussion. Total U.S. return volume, which includes our assisted and DIY operations, from July 1, 2022 through April 30, 2023 decreased 1.3% compared to the prior year period. Our business is highly seasonal and results for the nine months ended March 31, as well as results for the period ended April 30, may not be indicative of results for the fiscal year ended June 30, 2023. FINANCIAL CONDITION These comments should be read in conjunction with the consolidated balance sheets and consolidated statements of cash flows included in Part 1, Item 1 . CAPITAL RESOURCES AND LIQUIDITY – OVERVIEW – Our primary sources of capital and liquidity include cash from operations (including changes in working capital), draws on our CLOC, and issuances of debt. We use our sources of liquidity primarily to fund working capital, service and repay debt, pay dividends, repurchase shares of our common stock, and acquire businesses. Our operations are highly seasonal and substantially all of our revenues and cash flow are generated during the period from February through April in a typical year. Therefore, we normally require the use of cash to fund losses and working capital needs, periodically resulting in a working capital deficit, during the months of May through January. We typically have relied on available cash balances from the prior tax season and borrowings to meet liquidity needs. Given the likely availability of a number of liquidity options discussed herein, we believe that, in the absence of any unexpected developments, our existing sources of capital as of March 31, 2023 are sufficient to meet our operating, investing and financing needs. DISCUSSION OF CONSOLIDATED STATEMENTS OF CASH FLOWS – The following table summarizes our statements of cash flows for the nine months ended March 31, 2023 and 2022. See Item 1 for the complete consolidated statements of cash flows for these periods. (in 000s) Nine months ended March 31, 2023 2022 Net cash provided by (used in): Operating activities $ 498,386 $ 373,128 Investing activities (101,287) (71,106) Financing activities (505,587) (707,466) Effects of exchange rates on cash (7,880) (1,666) Net decrease in cash and cash equivalents, including restricted balances $ (116,368) $ (407,110) Operating Activities. Cash provided by operations totaled $498.4 million for the nine months ended March 31, 2023 compared to $373.1 million in the prior year period. The change is primarily due to the receipt of income tax receivables in the current year, partially offset by a decrease in our net income in the current year. Investing Activities. Cash used in investing activities totaled $101.3 million for the nine months ended March 31, 2023 compared to $71.1 million in the prior year period. The change is primarily due to higher payments to acquire businesses in the current year. Financing Activities. Cash used in financing activities totaled $505.6 million for the nine months ended March 31, 2023 compared to $707.5 million in the prior year period. The change is primarily due to higher repurchases of common stock in the prior year. H&R Block, Inc. |Q3 FY2023 Form 10-Q 21 Table of Contents CASH REQUIREMENTS – Dividends and Share Repurchases. Returning capital to shareholders in the form of dividends and the repurchase of outstanding shares is, and has historically been, a significant component of our capital allocation plan. We have consistently paid quarterly dividends. Dividends paid totaled $133.8 million and $143.4 million for the nine months ended March 31, 2023 and 2022, respectively. Although we have historically paid dividends and plan to continue to do so, there can be no assurances that circumstances will not change in the future that could affect our ability or decisions to pay dividends. In August 2022, the Board of Directors approved a $1.25 billion share repurchase program, effective through fiscal year 2025. During the nine months ended March 31, 2023, we repurchased $350.1 million of our common stock at an average price of $42.86 per share. In the prior year period, we repurchased $550.3 million of our common stock at an average price of $23.84 per share. Our current share repurchase program has remaining authorization of $900.0 million, 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. The Company may cancel, suspend, or extend the period for the purchase of shares at any time. Any repurchases will be funded primarily through available cash and cash from operations. Although we may continue to repurchase shares, there is no assurance that we will purchase up to the full Board authorization. Capital Investment. Capital expenditures totaled $56.7 million and $52.7 million for the nine months ended March 31, 2023 and 2022, respectively. Our capital expenditures relate primarily to recurring improvements to retail offices, as well as investments in computers, software and related assets. In addition to our capital expenditures, we also made payments to acquire businesses. We acquired franchisee and competitor businesses totaling $47.7 million and $25.5 million during the nine months ended March 31, 2023 and 2022, respectively. See Item 1, note 5 for additional information on our acquisitions. FINANCING RESOURCES – The CLOC has capacity up to $1.5 billion and is scheduled to expire in June 2026. Proceeds under the CLOC may be used for working capital needs or for other general corporate purposes. We had no outstanding balance under our CLOC and amounts available to borrow were limited by the debt-to-EBITDA covenant to approximately $1.4 billion as of March 31, 2023. The following table provides ratings for debt issued by Block Financial LLC (Block Financial) as of March 31, 2023 and June 30, 2022: As of March 31, 2023 June 30, 2022 Short-term Long-term Outlook Short-term Long-term Outlook 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 as of June 30, 2022 in our Annual Report to Shareholders on Form 10-K. CASH AND OTHER ASSETS – As of March 31, 2023, we held cash and cash equivalents, excluding restricted amounts, of $909.1 million, including $82.8 million held by our foreign subsidiaries. Foreign Operations. Seasonal borrowing needs of our Canadian operations are typically funded by our U.S. operations. To mitigate foreign currency risk, we sometimes enter into foreign exchange forward contracts. There were no forward contracts outstanding as of March 31, 2023. We do not currently intend to repatriate non-borrowed funds held by our foreign subsidiaries in a manner that would trigger a material tax liability. The impact of changes in foreign exchange rates during the period on our international cash balances resulted in a decrease of $7.9 million and $1.7 million during the nine months ended March 31, 2023 and 2022, respectively. 22 Q3 FY2023 Form 10-Q| H&R Block, Inc. Table of Contents CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS – Emerald Advance SM lines of credit (EAs) are originated by Pathward TM N.A. (Pathward). We purchase a 90% participation interest, at par, in all EAs originated by Pathward in accordance with our participation agreement. See Item 1, note 4 to the consolidated financial statements for additional information about these balances. There have been no other 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. Block Financial is the Issuer and H&R Block, Inc. is the full and unconditional Guarantor of our Senior Notes, CLOC and other indebtedness issued from time to time. The following table presents summarized financial information for H&R Block, Inc. (Guarantor) and Block Financial (Issuer) on a combined basis after intercompany eliminations and excludes investments in and equity earnings in non-guarantor subsidiaries. SUMMARIZED BALANCE SHEET - GUARANTOR AND ISSUER (in 000s) As of March 31, 2023 June 30, 2022 Current assets $ 43,069 $ 38,922 Noncurrent assets 1,718,492 1,698,242 Current liabilities 81,271 75,855 Noncurrent liabilities 1,493,576 1,495,732 SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER (in 000s) Nine months ended March 31, 2023 Twelve months ended June 30, 2022 Total revenues $ 137,676 $ 199,683 Income from continuing operations before income taxes 23,904 44,404 Net income from continuing operations 21,027 41,979 Net income 14,609 35,007 The table above reflects $1.7 billion and $1.6 billion of non-current intercompany receivables due to the Issuer from non-guarantor subsidiaries as of March 31, 2023 and June 30, 2022, respectively. REGULATORY ENVIRONMENT As previously disclosed, in 2017 the Consumer Financial Protection Bureau (CFPB) published its final rule regulating certain consumer credit products (Payday Rule), which the CFPB later limited by removing the mandatory underwriting provisions. Certain limited provisions of the Payday Rule became effective in 2018, but most provisions were scheduled to go into effect in 2019. Litigation in a federal district court in Texas had stayed that effective date, but on August 31, 2021 the judge in that litigation ruled in favor of the CFPB. The plaintiffs appealed, and, on October 14, 2021, the United States Court of Appeals for the Fifth Circuit extended the compliance deadline until after the appeal is resolved. On October 19, 2022, the appellate court found that the funding mechanism for the CFPB was unconstitutional and vacated the Payday Rule. On November 14, 2022, the CFPB filed a petition for review with the United States Supreme Court, which the Supreme Court granted on February 27, 2023. We are unsure whether, when, or in what form the Payday Rule will go into effect. Though we do not currently expect the Payday Rule to have a material adverse impact on Emerald Advance SM , our business, or our consolidated financial position, results of operations, and cash flows, we will continue to monitor and analyze the potential impact of any further developments on the Company. There have been no other material changes in our regulatory environment from what was reported in our June 30, 2022 Annual Report to Shareholders on Form 10-K. H&R Block, Inc. |Q3 FY2023 Form 10-Q 23 Table of Contents NON-GAAP FINANCIAL INFORMATION Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Because these measures are not measures of financial performance under GAAP and are susceptible to varying calculations, they may not be comparable to similarly titled measures for other companies. We consider our non-GAAP financial measures to be performance measures and a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business. We make adjustments for certain non-GAAP financial measures related to amortization of intangibles from acquisitions and goodwill impairments. We may consider whether other significant items that arise in the future should be excluded from our non-GAAP financial measures. We measure the performance of our business using a variety of metrics, including earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations, adjusted EBITDA from continuing operations, adjusted diluted earnings per share from continuing operations, free cash flow and free cash flow yield. We also use EBITDA from continuing operations and pretax income of continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees. The following is a reconciliation of net income to EBITDA from continuing operations, which is a non-GAAP financial measure: (in 000s) Three months ended March 31, Nine months ended March 31, 2023 2022 2023 2022 Net income - as reported $ 643,429 $ 673,177 $ 251,429 $ 330,971 Discontinued operations, net 2,648 1,796 6,418 4,984 Net income from continuing operations - as reported 646,077 674,973 257,847 335,955 Add back: Income taxes 209,351 186,884 78,254 29,666 Interest expense 22,298 23,746 57,107 69,661 Depreciation and amortization 32,313 36,116 98,660 107,462 263,962 246,746 234,021 206,789 EBITDA from continuing operations $ 910,039 $ 921,719 $ 491,868 $ 542,744 24 Q3 FY2023 Form 10-Q| H&R Block, Inc. Table of Contents The following is a reconciliation of our results from continuing operations to our adjusted results from continuing operations, which is a non-GAAP financial measure: (in 000s, except per share amounts) Three months ended March 31, Nine months ended March 31, 2023 2022 2023 2022 Net income from continuing operations - as reported $ 646,077 $ 674,973 $ 257,847 $ 335,955 Adjustments: Amortization of intangibles related to acquisitions (pretax) 13,011 13,979 38,546 43,141 Tax effect of adjustments (1) (3,190) (4,545) (9,198) (10,102) Adjusted net income from continuing operations $ 655,898 $ 684,407 $ 287,195 $ 368,994 Diluted earnings per share from continuing operations - as reported $ 4.14 $ 4.06 $ 1.62 $ 1.92 Adjustments, net of tax 0.06 0.05 0.18 0.19 Adjusted diluted earnings per share from continuing operations $ 4.20 $ 4.11 $ 1.80 $ 2.11 (1) Tax effect of adjustments is the difference between the tax provision calculated on a GAAP basis and on an adjusted non-GAAP basis. FORWARD-LOOKING INFORMATION This report and other documents filed with the SEC may contain forward-looking statements. In addition, our senior management may make forward-looking statements orally to analysts, investors, the media and others. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as "expects," "anticipates," "intends," "plans," "believes," "commits," "seeks," "estimates," "projects," "forecasts," "targets," "would," "will," "should," "goal," "could," "may" or other similar expressions. Forward-looking statements provide management's current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, client trajectory, income, effective tax rate, earnings per share, cost savings, capital expenditures, dividends, share repurchases, liquidity, capital structure, market share, industry volumes or other financial items, descriptions of management's plans or objectives for future operations, services or products, or descriptions of assumptions underlying any of the above. They may also include the expected impact of 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. All forward-looking statements speak only as of the date they are made and reflect the Company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive, operational and regulatory factors, many of which are beyond the Company's control. In addition, factors that may cause the Company’s actual effective tax rate to differ from estimates include the Company’s actual results from operations compared to current estimates, future discrete items, changes in interpretations and assumptions the Company has made, future actions of the Company, and increases in applicable tax rates in jurisdictions where the Company operates. Investors should understand that it is not possible to predict or identify all such factors and, consequently, should not consider any such list to be a complete set of all potential risks or uncertainties. H&R Block, Inc. |Q3 FY2023 Form 10-Q 25 Table of Contents Details about risks, uncertainties and assumptions that could affect various aspects of our business are included throughout our Annual Report on Form 10-K for the fiscal year ended June 30, 2022 and are also described from time to time in other filings with the SEC. Investors should carefully consider all of these risks, and should pay particular attention to Item 1A, "Risk Factors," and Item 7 under "Critical Accounting Policies" of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in our market risks from those reported in our June 30, 2022 Annual Report to Shareholders on Form 10-K.