What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-08-17 compared with 2022-08-16 · 89 added, 254 removed, 251 unchanged (58% of the section changed)

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.

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

CHANGE IN FISCAL YEAR END

On June 9, 2021, the Board of Directors approved a change of the Company's fiscal year end from April 30 to June 30.

The Company's 2022 fiscal year began on July 1, 2021 and ended on June 30, 2022.

We have recast the income statement and statement of cash flows for the year ended June 30, 2021 and have provided a comparison to the year ended June 30, 2022.

We have also provided a comparison of the two months ended June 30, 2021 (Transition Period) to the two months ended June 30, 2020.

The recast income statement was derived as follows:

April 30, 2021 Plus:

Two months ended

June 30, 2021

(Transition Period) Less:

Two months ended

June 30, 2020 Year ended

June 30, 2021

Revenues $ 3,413,987 $ 466,106 $ 291,448 $ 3,588,645

Operating expenses 2,644,360 331,751 279,101 2,697,010

Pretax income (loss) 668,736 120,995 (7,402) 797,133

Net income (loss) from continuing operations 590,212 91,119 (9,127) 690,458

FINANCIAL OVERVIEW - YEAR ENDED JUNE 30, 2022 COMPARED TO YEAR ENDED JUNE 30,

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 due to the pandemic.

Therefore, fiscal year 2022 results are not comparable to the prior year period, as 15 days of tax season 2020 were included in the results for the year ended June 30, 2021, resulting in a year-over-year decrease in revenues, net income from continuing operations and EPS as shown in the table below.

Year Ended June 30, 2022 Compared to Year Ended June 30, 2021

This year's tax filing season was expected to return to normal with the pandemic largely behind us, no new federal programs, a large number of stimulus filers having left the industry in the prior year, and strong employment.

Generally, tax return volume was expected to increase compared to the prior year, however, the industry volume declined year over year due to more stimulus filers not returning and the tax deadline being extended in certain states due to natural disasters.

In fiscal year 2023, revenue increased $8.9 million over the prior year, despite the decline in industry volume.

assisted tax preparation revenues were higher $72.5 million primarily due to an increase in net average charge.

Lower Emerald Card® revenues, which is the result of the discontinuance of prior year federal programs, and lower Refund Transfer volume partially offset this increase.

Operating expenses increased $5.1 million primarily due to higher labor costs, which was partially offset by lower consulting and outsourced services expenses.

Higher interest income and lower interest expense on borrowings resulted in an increase in income from continuing operations before income taxes of $52.1 million, or 7.9%.

Income tax expense increased $51.0 million, or 51.8%, due to a higher effective tax rate in the current year.

Net income from continuing operations of $561.8 million increased $1.2 million from the prior year.

Fiscal Year 2023 Compared to Fiscal Year 2022

Revenues Operating Expenses Net Income from Continuing Operations

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Adjusted (1) :

(1) See " Non-GAAP Financial Information " section within this filing for a reconciliation of non-GAAP measures.

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

Fiscal Year End

On June 9, 2021, the Board of Directors approved a change in the Company's fiscal year end from April 30 to June 30.

The Company's transition period was from May 1, 2021 to June 30, 2021 (Transition Period).

2023 Form 10-K | H&R Block, Inc.

RESULTS OF OPERATIONS - YEAR ENDED JUNE 30, 2022 COMPARED TO YEAR ENDED JUNE 30, 2021

Operating Statistics

Year ended June 30, 2022 2021 (1)

TAX RETURNS PREPARED :

(in 000s) (2)

United States:

Company-owned operations 8,769 9,558 (8.3) %

Franchise operations 3,185 3,696 (13.8) %

Total assisted 11,954 13,254 (9.8) %

Desktop 1,868 2,298 (18.7) %

Online 6,661 7,570 (12.0) %

Total DIY 8,529 9,868 (13.6) %

returns 20,483 23,122 (11.4) %

International:

Canada 2,449 2,459 (0.4) %

Australia 668 680 (1.8) %

Total international returns 3,117 3,139 (0.7) %

Tax returns prepared worldwide 23,600 26,261 (10.1) %

NET AVERAGE CHARGE (U.S.

Company-owned operations $ 238.87 $ 223.94 6.7 %

Franchise operations (4)

$ 230.58 $ 212.32 8.6 %

Online $ 37.87 $ 39.17 (3.3) %

TAX OFFICES (as of March 31) :

Company-owned offices 6,492 6,512 (0.3) %

Franchise offices 2,605 2,759 (5.6) %

offices 9,097 9,271 (1.9) %

International offices :

Canada 987 983 0.4 %

Australia 404 422 (4.3) %

Total international offices 1,391 1,405 (1.0) %

Tax offices worldwide 10,488 10,676 (1.8) %

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

(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.

| 2022 Form 10-K

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

Year ended June 30, 2023 2022 $ Change % Change

tax preparation and related services:

Assisted tax preparation $ 2,167,138 $ 2,094,612 $ 72,526 3.5 %

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DIY tax preparation 314,758 319,086 (4,328) (1.4) %

International 231,335 229,407 1,928 0.8 %

Refund Transfers 143,310 162,893 (19,583) (12.0) %

Emerald Card® 125,444 144,095 (18,651) (12.9) %

Peace of Mind® Extended Service Plan 95,181 94,637 544 0.6 %

Tax Identity Shield® 38,265 39,114 (849) (2.2) %

Other 45,252 45,961 (709) (1.5) %

tax preparation and related services 3,014,535 2,981,545 32,990 1.1 %

Financial services:

Emerald Card® and Spruce SM

84,651 125,444 (40,793) (32.5) %

Interest and fee income on Emerald Advance SM

47,554 43,981 3,573 8.1 %

Total financial services 132,205 169,425 (37,220) (22.0) %

International 235,131 231,335 3,796 1.6 %

Wave 90,314 80,965 9,349 11.5 %

Other 45,961 41,234 4,727 11.5 %

Total revenues $ 3,472,185 $ 3,463,270 $ 8,915 0.3 %

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

YEAR ENDED JUNE 30, 2022 COMPARED TO YEAR ENDED JUNE 30, 2021

Revenues decreased $125.4 million, or 3.5%, from the prior year.

The decrease in revenue is due to lower tax return volumes in the current year as the prior year includes an additional tax season deadline due to the 2020 tax season being extended to July 15, 2020.

This resulted in a decrease in U.S.

tax preparation, royalty and Refund Transfer revenues.

Emerald Card® revenues decreased $18.7 million, or 12.9%, due to some stimulus payments being loaded on to Emerald Cards in the prior year, which was partially offset by additional activity in the current year related to the IRS loading Child Tax Credits monthly to Emerald Cards during July through December 2021.

Interest and fees on

2022 Form 10-K | H&R Block, Inc.

Emerald Advances decreased $9.3 million, or 17.4%, due to a decline in Emerald Advances.

H&R Block, Inc.

| 2023 Form 10-K

FISCAL YEAR 2023 COMPARED TO FISCAL YEAR 2022

Revenues increased $8.9 million, or 0.3%, from the prior year.

assisted tax preparation revenues increased $72.5 million, or 3.5%, due to a 4.0% increase in net average charge, partially offset by lower tax return volumes in the current year.

royalties revenue decreased $14.6 million, or 6.5%, 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 year ended June 30, 2023, our total assisted tax return volume, which includes both company-owned and franchise offices, decreased 3.2% from the prior year.

DIY tax preparation revenues decreased $4.3 million, or 1.4%, due to a decline in online paid returns and lower software sales in the current year.

Refund Transfer revenues decreased $19.6 million, or 12.0%, due to fewer Refund Transfers in the current year.

Emerald Card® and Spruce SM revenues decreased $40.8 million, or 32.5%, primarily due to higher Emerald Card® activity in the prior year, which was the result of the IRS loading Child Tax Credits monthly to Emerald Cards® and lower Refund Transfer volume in the current year.

Wave revenues increased $9.3 million, or 11.5%, due to higher small business payments processing volumes.

Total operating expenses increased $5.1 million, or 0.2%, from the prior year.

Marketing and advertising expense increased $19.5 million, or 7.4%, due to higher online advertising and agency fees in the current year.

Field wages increased $32.8 million, or 4.1%, primarily due to higher wages in the current year.

Other wages decreased $10.8 million, or 3.8%, due to lower corporate bonuses in the current year.

Benefits and other compensation increased $13.6 million, or 6.6%, due to higher payroll taxes and employee insurance.

Occupancy expense increased $15.0 million or 3.6%, primarily due to higher rent and office repairs.

Depreciation and amortization expense decreased $11.7 million, or 8.2%, due primarily to lower amortization of acquired intangibles.

Bad debt expense decreased $10.6 million, or 12.8%, due to lower Refund Transfer volume and lower bad debt rates.

Other operating expenses increased $28.7 million, or 6.0%.

Bad debt expense decreased $11.4 million, or 15.9%, primarily due to fewer Refund Transfers and lower bad debt rates compared to the prior year.

Other operating expenses decreased $24.5 million, or 4.8%.

The components of other expenses are as follows:

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$ 482,041 $ 506,517 $ 24,476 4.8 %

Employee and travel expenses increased $7.8 million, or 32.4%, due to less travel in the prior year as a result of COVID-19 travel restrictions.

Technology-related expenses increased $12.4 million, or 14.5%, due to increased investments in information technology.

Interest expense on borrowings decreased $11.2 million , or 11.3% , primarily due to lower borrowings on our CLOC in the current year.

Consulting and outsourced services expense decreased $27.3 million, or 20.0%, 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 23.8%, due to more travel in the current year.

Insurance expense decreased $6.4 million, or 42.2%, due to due to favorable developments in insurance loss reserves.

Legal fees and settlements expense decreased $7.6 million, or 38.6%, due to lower fees in the current year.

Other income (expense), net increased $33.0 million primarily due to higher interest income and income from a legal settlement in the current year.

Interest expense on borrowings decreased $15.3 million, or 17.3%, 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.

2023 Form 10-K | H&R Block, Inc.

We recorded income tax expense of $149.4 million in the current year compared to $98.4 million in the prior year.

The decrease is primarily related to lower pretax income in the current 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, 2023, and 2022 was 21.0% and 14.9%, respectively.

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

See the discussion of loss contingencies related to our discontinued operations in Item 1A, Risk Factors and in Item 8, note 12 to the consolidated financial statements.

H&R Block, Inc.

| 2022 Form 10-K

RESULTS OF OPERATIONS - YEAR ENDED APRIL 30, 2021 COMPARED TO YEAR ENDED APRIL 30, 2020

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

Year ended April 30, 2021 2020 $ Change % Change

assisted tax preparation $ 2,035,107 $ 1,533,303 $ 501,804 32.7 %

royalties 226,253 193,411 32,842 17.0 %

DIY tax preparation 313,055 208,901 104,154 49.9 %

International 249,868 180,065 69,803 38.8 %

Refund Transfers 163,329 154,687 8,642 5.6 %

Emerald Card® 136,717 92,737 43,980 47.4 %

Peace of Mind® Extended Service Plan 98,882 105,185 (6,303) (6.0) %

Tax Identity Shield® 40,624 31,797 8,827 27.8 %

Interest and fee income on Emerald Advance SM

53,430 60,867 (7,437) (12.2) %

Wave 58,277 36,711 21,566 58.7 %

Other 38,445 42,056 (3,611) (8.6) %

Total revenues 3,413,987 2,639,720 774,267 29.3 %

Compensation and benefits:

Field wages 797,262 678,813 (118,449) (17.4) %

Other wages 272,664 218,548 (54,116) (24.8) %

Benefits and other compensation 208,147 175,535 (32,612) (18.6) %

1,278,073 1,072,896 (205,177) (19.1) %

Occupancy 414,389 410,402 (3,987) (1.0) %

Marketing and advertising 261,960 255,094 (6,866) (2.7) %

Depreciation and amortization 156,852 169,536 12,684 7.5 %

Bad debt 78,763 77,470 (1,293) (1.7) %

Impairment of goodwill — 106,000 106,000 100.0 %

Other 454,323 471,239 16,916 3.6 %

Total operating expenses 2,644,360 2,562,637 (81,723) (3.2) %

Other income (expense), net 5,979 15,637 (9,658) (61.8) %

Interest expense on borrowings (106,870) (96,094) (10,776) (11.2) %

Income (loss) from continuing operations before income taxes (benefit) 668,736 (3,374) 672,110 **

Income taxes (benefit) 78,524 (9,530) (88,054) **

Net income from continuing operations 590,212 6,156 584,056 9,487.6 %

Net loss from discontinued operations (6,421) (13,682) 7,261 53.1 %

Net income (loss) $ 583,791 $ (7,526) $ 591,317 **

DILUTED EARNINGS (LOSS) PER SHARE:

Continuing operations $ 3.11 $ 0.03 $ 3.08 10,266.7 %

Discontinued operations (0.03) (0.07) 0.04 57.1 %

Consolidated $ 3.08 $ (0.04) $ 3.12 **

Adjusted diluted EPS (1)

$ 3.39 $ 0.84 $ 2.55 303.6 %

$ 932,458 $ 262,256 $ 670,202 255.6 %

Adjusted EBITDA (1)

$ 932,458 $ 368,256 $ 564,202 153.2 %

(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.

2022 Form 10-K | H&R Block, Inc.

YEAR ENDED APRIL 30, 2021 COMPARED TO YEAR ENDED APRIL 30, 2020

Due to the extension of the 2019 individual tax deadline to July 2020 related to the COVID-19 pandemic, we had significant increases in the number of tax returns prepared in all categories during the first half of the year ended April 30, 2021.

Additionally, while the 2020 individual tax deadline was also extended to May 17, 2021, we prepared more tax returns through April 30, 2021 than we did in the prior year.

As a result of these increases in volume during the year ended April 30, 2021, U.S.

assisted and DIY tax preparation revenues and royalties increased compared to the prior year.

International revenues increased $69.8 million, or 38.8%, due to higher tax returns prepared by our Canadian operations primarily due to the extension of the 2019 individual tax deadline and favorable foreign currency exchange rates.

Emerald Card® revenues increased $44.0 million, or 47.4%, due to higher card activity from an increase in tax refunds loaded on to cards, as well as some Economic Impact Payments loaded on to cards.

Wave revenues increased $21.6 million, or 58.7%, due to higher small business payment processing volumes over the prior year as small business owners shift to online payment options and an additional two months of revenue in the year ended April 30, 2021, as we acquired Wave on June 28, 2019.

Total operating expenses increased $81.7 million or 3.2% from the prior year.

Field wages increased $118.4 million, or 17.4%, due to higher tax preparation volumes.

Other wages increased $54.1 million, or 24.8%, due primarily to higher bonus accruals.

Benefits and other compensation increased $32.6 million, or 18.6%, primarily due to higher payroll taxes as a result of higher wages.

Depreciation and amortization expense decreased $12.7 million, or 7.5%, due to lower depreciation on leasehold improvements and lower amortization of acquired intangibles.

Additionally, we recorded an impairment of goodwill of $106.0 million related to Wave in the prior year.

Other operating expenses decreased $16.9 million, or 3.6%.

The components of other expenses are as follows:

Year ended April 30, 2021 2020 $ Change % Change

Consulting and outsourced services $ 127,262 $ 118,267 $ (8,995) (7.6) %

Bank partner fees 23,681 55,633 31,952 57.4 %

Client claims and refunds 28,756 35,498 6,742 19.0 %

Employee and travel expenses 21,704 40,892 19,188 46.9 %

Technology-related expenses 80,766 68,907 (11,859) (17.2) %

Credit card/bank charges 81,154 48,826 (32,328) (66.2) %

Insurance 11,420 15,015 3,595 23.9 %

Legal fees and settlements 22,172 27,436 5,264 19.2 %

Supplies 31,843 31,290 (553) (1.8) %

Other 25,565 29,475 3,910 13.3 %

$ 454,323 $ 471,239 $ 16,916 3.6 %

Bank partner fees decreased $32.0 million, or 57.4%, due to lower RA and RT volumes, lower fees paid to our bank partner, and lower accruals for our RA credit loss guarantees.

Employee and travel expenses decreased $19.2 million, or 46.9%, due to COVID-19 travel restrictions.

Technology-related expenses increased $11.9 million, or 17.2%, due to increased investments in information technology.

Credit card and bank charges increased $32.3 million, or 66.2%, as a result of higher transaction volumes for assisted and DIY tax preparation, higher Wave payment processing fees and fees related to the Emerald Card ® .

Losses of our discontinued mortgage operations are primarily related to legal expenses which are lower in the year ended April 30, 2021.

See the discussion of loss contingencies related to our discontinued operations in Item 1A, Risk Factors and in Item 8, note 12 to the consolidated financial statements.

H&R Block, Inc.

| 2022 Form 10-K

RESULTS OF OPERATIONS - TRANSITION PERIOD COMPARISON

Consolidated – Financial Results (in 000s)

Two months ended June 30, (Transition Period)

2021 2020 $ Change % Change

Total revenues $ 466,106 $ 291,448 $ 174,658 59.9 %

Compensation and benefits 148,817 123,081 (25,736) (20.9) %

Occupancy 65,429 66,318 889 1.3 %

Marketing and advertising 11,873 9,088 (2,785) (30.6) %

Depreciation and amortization 24,586 26,621 2,035 7.6 %

Bad debt 6,458 2,869 (3,589) (125.1) %

Other 74,588 51,124 (23,464) (45.9) %

Total operating expenses 331,751 279,101 (52,650) (18.9) %

Other income (expense), net 672 1,661 (989) (59.5) %

Interest expense on borrowings (14,032) (21,410) 7,378 34.5 %

Income (loss) from continuing operations before income taxes 120,995 (7,402) 128,397 **

Income taxes 29,876 1,725 (28,151) (1,631.9) %

Net income (loss) from continuing operations 91,119 (9,127) 100,246 **

Net loss from discontinued operations (1,509) (1,423) (86) (6.0) %

Net income (loss) $ 89,610 $ (10,550) $ 100,160 **

The comparison of the year ended April 30, 2021 to April 30, 2020 has been omitted from this Form 10-K, but can be found in our Form 10-K for the fiscal year ended June 30, 2022, filed on August 16, 2022.

TWO MONTHS ENDED JUNE 30, 2021 COMPARED TO TWO MONTHS ENDED JUNE 30, 2020

Revenues increased $174.7 million, or 59.9%, from the prior year comparative period.

The increase in revenue is primarily a result of higher tax return volumes during the Transition Period as the 2020 individual tax deadline in the U.S.

was extended to May 17, 2021, whereas in the prior year comparative period, the 2019 individual tax deadline in the U.S.

was extended to July 15, 2020 resulting in increases in tax preparation, royalties and Refund Transfer revenues.

Total operating expenses increased $52.6 million, or 18.9%, from the prior year comparative period.

Compensation and benefits increased $25.7 million, or 20.9%, due to higher tax preparation volumes, higher information technology wages, higher bonus accruals and Canadian wage subsidies received in the prior year comparative period.

Bad debt increased $3.6 million, or 125.1%, due to higher Refund Transfer volumes as a result of the extended tax season.

Other expenses increased $23.5 million, or 45.9% due to higher consulting and outsourced services, higher technology-related expenses and higher credit card and bank charges.

We recorded income tax expense of $29.9 million during the Transition Period compared to $1.7 million in the prior year comparative period.

The effective tax rate for the two months ended June 30, 2021, and 2020 was 24.7% and (23.3)%, respectively.

For more discussion regarding the two months ended June 30, 2021 compared to the two months ended June 30, 2020, s ee our June 30, 2021 Transition Report filed on Form 10-Q.

The comparison of the two months ended June 30, 2021 to the two months ended June 30, 2020 has been omitted from this Form 10-K, but can be found in our Form 10-K for the fiscal year ended June 30, 2022, filed on August 16, 2022.

FINANCIAL CONDITION

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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

2022 Form 10-K | H&R Block, Inc.

and working capital needs, periodically resulting in a working capital deficit, from May through January.

Therefore, we normally require the use of cash to fund losses and working capital needs, periodically resulting in a working capital deficit, from 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 June 30, 2023 are sufficient to meet our future operating and financing needs.

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

See Item 8 for the complete consolidated statements of cash flows for the years ended June 30, 2022, April 30, 2021, April 30, 2020 and the two months ended June 30, 2021.

DISCUSSION OF CONSOLIDATED STATEMENTS OF CASH FLOWS – The following table summarizes our statements of cash flows for fiscal year 2023 and 2022.

See Item 8 for the complete consolidated statements of cash flows for these periods.

Year ended June 30, 2023 2022

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 553,674 $ 683,949

Other operating cash flows 254,863 77,287

Net cash provided by operating activities 808,537 761,236

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures (61,955) (53,053)

Payments made for business acquisitions, net of cash acquired (35,920) (17,024)

Other investing cash flows 21,334 27,430

Net cash used in investing activities (76,541) (42,647)

CASH FLOWS FROM FINANCING ACTIVITIES:

Line of credit borrowings, net — (2,000,000)

Repayments of long-term debt (500,000) (650,000)

Proceeds from issuance of long-term debt — 1,142,400

Dividends paid (186,476) (195,068)

Repurchase of common stock, including shares surrendered (563,174) (193,551)

Other financing cash flows (7,696) (21,610)

Net cash used in financing activities (1,257,346) (1,917,829)

Effects of exchange rate changes on cash (8,101) 13,457

Net change in cash and cash equivalents $ (533,451) $ (1,185,783)

Net cash provided by (used in):

Operating activities $ 821,841 $ 808,537

Investing activities (101,389) (76,541)

Financing activities (750,992) (1,257,346)

Effects of exchange rates on cash (4,857) (8,101)

Net decrease in cash and cash equivalents, including restricted balances $ (35,397) $ (533,451)

Operating Activities.

Cash provided by operating activities totaled $821.8 million for the year ended June 30, 2023 compared to $808.5 million in the prior year period.

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

The change is primarily due to the receipt of income tax receivables in the current year, partially offset by lower bonus accruals in the current year.

Investing Activities.

Cash used in investing activities totaled $101.4 million for the year ended June 30, 2023 compared to $76.5 million for the prior year period.

The increase is primarily due to higher payments to acquire businesses.

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

H&R Block, Inc.

| 2023 Form 10-K

Financing Activities.

Cash used in financing activities totaled $1.3 billion for the year ended June 30, 2022 compared to $1.9 billion for the prior year period.

The decrease is primarily due to the repayment of the $2.0 billion draw on our CLOC in the prior year, partially offset by proceeds from the issuance of long-term debt in the prior year.

Cash us ed in financing activities totaled $751.0 million for the year ended June 30, 2023 compared to $1.3 billion for the prior year period.

The change is primarily due to repayment of our $500 million 5.500% Senior Notes in the prior year.

CASH REQUIREMENTS –

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We have consistently paid quarterly dividends.

Dividends paid totaled $186.5 million and $195.1 million in the years ended June 30, 2022 and June 30, 2021, respectively.

Although we have historically paid dividends and plan

H&R Block, Inc.

| 2022 Form 10-K

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.

Our current share repurchase program ended in June 2022.

As a part of the repurchase program, in the current year, we purchased $550.3 million of our common stock at an average price of $23.84 per share.

Dividends paid totaled $177.9 million and $186.5 million in the years ended June 30, 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 year ended June 30, 2023, we repurchased $550.2 million of our common stock at an average price of $37.59 per share.

In the prior year, we repurchased $550.3 million of our common stock at an average price of $23.84 per share.

Our share repurchase program has remaining authorization of $700.0 million which is effective through fiscal year 2025.

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

4 unchanged sentences

(in 000s, except per share amounts)

June 30, 2023 Year ended

June 30, 2022 Two months ended

2 unchanged sentences

April 30, 2021 Year ended

April 30, 2020 Year ended

April 30, 2020

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We had no balance outstanding under our CLOC as of June 30, 2023.

In May 2022, we redeemed our outstanding $500 million 5.500% Senior Notes originally due in November 2022.

The redemption price was 100% of the outstanding principal amount, plus accrued and unpaid interest up to, but not including, the redemption date.

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

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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

CASH AND OTHER ASSETS – As of June 30, 2023, we held cash and cash equivalents, excluding restricted amounts, of $987.0 million, including $293.4 million held by our foreign subsidiaries.

We received $52.2 million of our federal income tax receivable subsequent to June 30, 2022.

Foreign Operations.

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There were no forward contracts outstanding as of June 30, 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 $8.1 million during the year end ed June 30, 2022 and an increase of $13.5 million during the year ended June 30, 2021.

We do not currently 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 $8.1 million during the years ended June 30, 2023 and 2022, respectively.

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

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Unrecognized tax benefits are recorded in the balance sheet as either a liability or reductions to recorded tax assets as applicable.

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

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

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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 outcome related to these matters.

We believe we have adequately provided for any reasonably foreseeable outcomes 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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We test goodwill for impairment annually in the third quarter or more frequ ently if events occur or circumstances change which would, more likely than not, reduce the fair value of a reporting unit below its carrying value.

Our goodwill impairment analysis utilizes both the income and market approaches, which includes revenue and expense forecasts, changes in working capital and selection of a discount rate, all of which are highly subjective.

We first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

If, based on a review of qualitative factors, it is more likely than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative analysis.

Our goodwill impairment analysis utilizes both income and market approaches, which includes revenue and expense forecasts, changes in working capital and selection of a discount rate, all of which are highly subjective.

Assumptions and Approach Used.

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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.

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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 relating to the IRS Free File Program.

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

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

Regulatory inquiries may result in us incurring additional expense, diversion of management's attention, adverse judgments, settlements, fines, penalties, injunctions or other relief.

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2023 Form 10-K | H&R Block, Inc.

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

Year ended June 30, 2022 June 30, 2021 April 30, 2021 April 30, 2020

Net income (loss) - as reported $ 553,674 $ 683,949 $ 583,791 $ (7,526)

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

Year ended June 30, 2023 June 30, 2022

Net income - as reported $ 553,700 $ 553,674

Discontinued operations, net 8,100 6,972

Net income from continuing operations - as reported 561,800 560,646

Income taxes (benefit) 98,423 106,675 78,524 (9,530)

Income taxes 149,412 98,423

Interest expense 72,978 88,282

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EBITDA from continuing operations $ 914,691 $ 889,529

Impairment of goodwill — — — 106,000

Adjusted EBITDA from continuing operations $ 889,529 $ 1,051,442 $ 932,458 $ 368,256

The following is a reconciliation of our results from continuing operations to our adjusted results from continuing operations, which are non-GAAP financial measures:

(in 000s, except per share amounts)

Year ended June 30, 2022 June 30, 2021 April 30, 2021 April 30, 2020

Year ended June 30, 2023 June 30, 2022

Net income from continuing operations - as reported $ 561,800 $ 560,646

Amortization of intangibles related to acquisitions (pretax) 51,411 56,292

Impairment of goodwill (pretax) — — — 106,000

Tax effect of adjustments (1)

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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