What changed in this filing

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Item 1. Financial Statements

2024-02-06 compared with 2023-11-07 · 122 added, 85 removed, 373 unchanged (36% of the section changed)

3 unchanged sentences

per share amounts)

Three months ended September 30,

Three months ended December 31, Six months ended December 31,

2023 2022 2023 2022

Service revenues $ 149,081 $ 139,565 $ 320,807 $ 306,759

21 unchanged sentences

Change in foreign currency translation adjustments 11,559 9,307 645 ( 23,038 )

Other comprehensive loss ( 10,914 ) ( 32,345 )

Other comprehensive income (loss) 11,559 9,307 645 ( 23,038 )

Comprehensive loss $ ( 178,196 ) $ ( 214,272 ) $ ( 352,592 ) $ ( 415,038 )

4 unchanged sentences

share and per share amounts)

As of September 30, 2023 June 30, 2023

As of December 31, 2023 June 30, 2023

Cash and cash equivalents $ 321,014 $ 986,975

20 unchanged sentences

Total current liabilities 745,587 938,782

Long-term debt 1,489,514 1,488,974

Long-term debt and line of credit borrowings 2,290,044 1,488,974

Deferred tax liabilities and reserves for uncertain tax positions 235,303 264,567

15 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in 000s)

Three months ended September 30, 2023 2022

Six months ended December 31, 2023 2022

CASH FLOWS FROM OPERATING ACTIVITIES:

21 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments of line of credit borrowings ( 25,000 ) ( 170,000 )

Proceeds from line of credit borrowings 825,000 750,000

Dividends paid ( 89,854 ) ( 89,193 )

1 unchanged sentence

Other, net 4,011 3,639

Net cash used in financing activities ( 195,198 ) ( 246,893 )

Net cash provided by financing activities 335,448 128,813

Effects of exchange rate changes on cash 671 ( 7,790 )

8 unchanged sentences

Accrued dividends payable to common shareholders 45,273 44,569

Accrued purchase of common stock 10,003 32,356

See accompanying notes to consolidated financial statements.

19 unchanged sentences

Balances as of September 30, 2023 175,671 $ 1,757 $ 740,434 $ ( 48,013 ) $ ( 393,621 ) ( 31,742 ) $ ( 645,441 ) $ ( 344,884 )

Net loss — — — — ( 189,755 ) — — ( 189,755 )

Other comprehensive income — — — 11,559 — — — 11,559

Stock-based compensation — — 9,270 — — — — 9,270

Stock-based awards exercised or vested — — ( 165 ) — ( 46 ) 348 7,087 6,876

Acquisition of treasury shares (2)

— — — — — ( 3 ) ( 125 ) ( 125 )

Repurchase and retirement of common shares ( 4,755 ) ( 48 ) ( 2,805 ) — ( 217,467 ) — — ( 220,320 )

Cash dividends declared - $ 0.32 per share

— — — — ( 45,273 ) — — ( 45,273 )

Balances as of December 31, 2023 170,916 $ 1,709 $ 746,734 $ ( 36,454 ) $ ( 846,162 ) ( 31,397 ) $ ( 638,479 ) $ ( 772,652 )

(1) The balance of our accumulated other comprehensive loss consists of foreign currency translation adjustments.

(2) Represents shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards.

See accompanying notes to consolidated financial statements.

Q2 FY2024 Form 10-Q| H&R Block, Inc.

Common Stock Additional

15 unchanged sentences

Balances as of September 30, 2022 188,644 $ 1,887 $ 759,629 $ ( 53,990 ) $ ( 311,671 ) ( 33,177 ) $ ( 660,840 ) $ ( 264,985 )

Net loss — — — — ( 223,579 ) — — ( 223,579 )

Other comprehensive income — — — 9,307 — — — 9,307

Stock-based compensation — — 9,544 — — — — 9,544

Stock-based awards exercised or vested — — 421 — ( 209 ) 52 1,023 1,235

Acquisition of treasury shares (2)

— — — — — ( 2 ) ( 79 ) ( 79 )

Repurchase and retirement of common shares ( 3,241 ) ( 33 ) ( 1,911 ) — ( 128,409 ) — — ( 130,353 )

Cash dividends declared - $ 0.29 per share

— — — — ( 44,569 ) — — ( 44,569 )

Balances as of December 31, 2022 185,403 $ 1,854 $ 767,683 $ ( 44,683 ) $ ( 708,437 ) ( 33,127 ) $ ( 659,896 ) $ ( 643,479 )

(1) The balance of our accumulated other comprehensive loss consists of foreign currency translation adjustments.

1 unchanged sentence

See accompanying notes to consolidated financial statements.

Q1 FY2024 Form 10-Q| H&R Block, Inc.

H&R Block, Inc.

|Q2 FY2024 Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION – The consolidated balance sheets as of September 30, 2023 and June 30, 2023, the consolidated statements of operations and comprehensive loss for the three months ended September 30, 2023 and 2022, the consolidated statements of cash flows for the three months ended September 30, 2023 and 2022, and the consolidated statements of stockholders' equity for the three months ended September 30, 2023 and 2022 have been prepared by the Company, without audit.

In the opinion of management, all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position, results of operations, and cash flows as of September 30, 2023 and 2022 and for all periods presented, have been made.

BASIS OF PRESENTATION – The consolidated balance sheets as of December 31, 2023 and June 30, 2023, the consolidated statements of operations and comprehensive loss for the three and six months ended December 31, 2023 and 2022, the consolidated statements of cash flows for the six months ended December 31, 2023 and 2022, and the consolidated statements of stockholders' equity for the three and six months ended December 31, 2023 and 2022 have been prepared by the Company, without audit.

In the opinion of management, all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position, results of operations, and cash flows as of December 31, 2023 and 2022 and for all periods presented, have been made.

"H&R Block," "the Company," "we," "our," and "us" are used interchangeably to refer to H&R Block, Inc., to H&R Block, Inc.

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See note 9 for additional information on loss contingencies related to our discontinued operations.

H&R Block, Inc.

|Q1 FY2024 Form 10-Q

Q2 FY2024 Form 10-Q| H&R Block, Inc.

REVENUE RECOGNITION

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revenues by major service line, with revenues from our international tax services businesses and from Wave included as separate lines:

Three months ended September 30,

Three months ended December 31, Six months ended December 31,

2023 2022 2023 2022

assisted tax preparation $ 48,342 $ 41,216 $ 87,605 $ 77,528

5 unchanged sentences

Emerald Card® and Spruce SM

11,700 12,478 20,333 24,090

Interest and fee income on Emerald Advance SM

15,235 12,903 15,533 13,517

International 29,569 28,046 90,134 86,880

4 unchanged sentences

POM Deferred Revenue Deferred Wages

Three months ended September 30, 2023 2022 2023 2022

Six months ended December 31, 2023 2022 2023 2022

Balance, beginning of the period $ 167,257 $ 173,486 $ 21,828 $ 19,495

2 unchanged sentences

Balance, end of the period $ 121,863 $ 128,937 $ 16,246 $ 14,493

As of September 30, 2023, deferred revenue related to POM was $ 139.9 million.

As of December 31, 2023, deferred revenue related to POM was $ 121.9 million.

We expect that $ 89.9 million will be recognized over the next twelve months , while the remaining balance will be recognized over the following five years .

As of September 30, 2023 and 2022, Tax Identity Shield® (TIS) deferred revenue was $ 20.8 million and $ 21.2 million, respectively.

As of December 31, 2023 and 2022, Tax Identity Shield® (TIS) deferred revenue was $ 16.5 million and $ 16.8 million, respectively.

Deferred revenue related to TIS was $ 25.2 million and $ 25.8 million as of June 30, 2023 and 2022, respectively.

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Per share amounts are computed by dividing net income (loss) from continuing operations attributable to common shareholders by the weighted average shares outstanding during each period.

Diluted earnings per share excludes the impact of shares of common stock issuable upon the lapse of certain restrictions or the exercise of options to purchase 3.5 million and 4.4 million shares for the three months ended September 30, 2023 and 2022 respectively, as the effect would be antidilutive due to the net loss from continuing operations during the periods.

Q1 FY2024 Form 10-Q| H&R Block, Inc.

Diluted earnings per share excludes the impact of shares of common stock issuable upon the lapse of certain restrictions or the exercise of options to purchase 3.2 million shares for the three and six months ended December 31, 2023 and 4.5 million

H&R Block, Inc.

|Q2 FY2024 Form 10-Q

shares for the three and six months ended December 31, 2022 , as the effect would be antidilutive due to the net loss from continuing operations during the periods.

The computations of basic and diluted earnings (loss) per share from continuing operations are as follows:

(in 000s, except per share amounts)

Three months ended September 30,

Three months ended December 31, Six months ended December 31,

2023 2022 2023 2022

Net loss from continuing operations attributable to shareholders $ ( 189,116 ) $ ( 220,863 ) $ ( 351,989 ) $ ( 388,230 )

8 unchanged sentences

The decrease in the weighted average shares outstanding is due to share repurchases completed in the current and prior fiscal years.

STOCK-BASED COMPENSATION – We granted 1.6 million and 0.9 million shares, including adjustments for performance achievement and dividend equivalents, under our stock-based compensation plans during the three months ended September 30, 2023 and 2022, respectively.

Stock-based compensation expense of our continuing operations totaled $ 7.6 million and $ 7.7 million for the three months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, unrecognized compensation cost for nonvested shares and units totaled $ 67.6 million.

STOCK-BASED COMPENSATION – We granted 1.7 million and 1.0 million shares, including adjustments for performance achievement and dividend equivalents, under our stock-based compensation plans during the six months ended December 31, 2023 and 2022, respectively.

Stock-based compensation expense of our continuing operations totaled $ 9.9 million and $ 17.5 million for the three and six months ended December 31, 2023, respectively, and $ 10.2 million and $ 17.9 million for the three and six months ended December 31, 2022, respectively.

As of December 31, 2023, unrecognized compensation cost for nonvested shares and units totaled $ 59.2 million.

Receivables, net of their related allowance, consist of the following:

As of September 30, 2023 June 30, 2023

As of December 31, 2023 June 30, 2023

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

2 unchanged sentences

assisted and DIY tax preparation and related fees 6,901 6,925 11,061 6,824

H&R Block's Instant Refund SM receivables

H&R Block's Instant Refund® receivables

3,460 305 8,499 414

H&R Block Emerald Advance®

Emerald Advance SM

347,025 9,410 10,834 7,089

4 unchanged sentences

Total $ 397,453 $ 38,574 $ 59,987 $ 34,641

Q2 FY2024 Form 10-Q| H&R Block, Inc.

Balances presented above as short-term are included in receivables, while the long-term portions are included in other noncurrent assets in the consolidated balance sheets.

LOANS TO FRANCHISEES – Franchisee loan balances consist of term loans made primarily to finance the purchase of franchises and revolving lines of credit primarily for the purpose of funding working capital needs.

As of September 30, 2023 and June 30, 2023, loans with a principal balance more than 90 days past due, or on non-accrual status, are not material.

H&R Block, Inc.

|Q1 FY2024 Form 10-Q

H&R BLOCK'S INSTANT REFUND SM – H&R Block's Instant Refund SM amounts are generally received from the Canada Revenue Agency within 60 days of filing the client's return, with the remaining balance collectible from the client.

As of December 31, 2023 and June 30, 2023, loans with a principal balance more than 90 days past due, or on non-accrual status, are not material.

H&R BLOCK'S INSTANT REFUND ® – H&R Block's Instant Refund® amounts are generally received from the Canada Revenue Agency within 60 days of filing the client's return, with the remaining balance collectible from the client.

We review the credit quality of our Instant Refund receivables based on pools, which are segregated by the tax return year of origination, with older years being deemed more unlikely to be repaid.

1 unchanged sentence

In December of each year, we charge-off the receivables and the related allowance to an amount we believe represents the net realizable value.

B alances and amounts on non-accrual status and classified as impaired, or more than 60 days past due, by tax return year of origination, as of September 30, 2023 are as foll ows:

B alances and amounts on non-accrual status, classified as impaired, or more than 60 days past due, by tax return year of origination, as of December 31, 2023 are as foll ows:

Tax return year of origination Balance More Than 60 Days Past Due

2 unchanged sentences

3,765 $ 3,643

Allowance ( 1,965 )

Net balance $ 3,765

H&R BLOCK EMERALD ADVANCE ® – Historically, Emerald Advance® lines of credit (EA LOCs) have been offered to clients in our offices from mid-November through mid-January.

EMERALD ADVANCE SM – Historically, Emerald Advance SM lines of credit (EA LOCs) have been offered to clients in our offices from mid-November through mid-January.

If the borrower met certain criteria as agreed in the loan terms, the line of credit could be utilized year-round (Revolving Loan).

In fiscal year 2024, EAs are being offered as term loans (EA TLs), and we are discontinuing the EA LOCs, including the Revolving Loans.

In fiscal year 2024, EAs are being offered as term loans (EA TLs), and we discontinued EA LOCs, including the Revolving Loans.

See note 8 for discussion of the new EA TL.

2 unchanged sentences

Typically, in December of each year, we charge-off the receivables and the related allowance for EA LOCs, excluding Revolving Loans, to an amount we believe represents the net realizable value.

However, due to the discontinuation of EA LOCs, we have charged-off the receivables and the related allowance of EA LOCs and Revolving Loans to an amount that we believe represents net realizable value as of September 30, 2023.

Balances and amounts on non-accrual status and classified as impaired, or more than 60 days past due, by fiscal year of origination, as of September 30, 2023 are as follows:

However, due to the discontinuation of EA LOCs, we charged-off the receivables and the related allowance of EA LOCs and Revolving Loans during the quarter ended September 30, 2023 to an amount that we believe represents net realizable value.

Balances and amounts on non-accrual status, classified as impaired, or more than 60 days past due, by fiscal year of origination, as of December 31, 2023 are as follows:

Fiscal year of origination Balance Non-Accrual

2023 – Lines of credit $ 11,643 $ 11,643

2022 and prior – Lines of credit 2,951 2,951

Revolving Loans 1,940 1,129

2024 – Term loans $ 358,084 $ —

2023 and prior – Lines of credit and Revolving Loans 15,908 15,908

373,992 $ 15,908

Allowance ( 17,557 )

Net balance $ 356,435

Q1 FY2024 Form 10-Q| H&R Block, Inc.

ALLOWANCE FOR CREDIT LOSSES – Activity in the allowance for credit losses for our EA and all other short-term and long-term receivables for the three months ended September 30, 2023 and 2022 is as follows:

H&R Block, Inc.

|Q2 FY2024 Form 10-Q

ALLOWANCE FOR CREDIT LOSSES – Activity in the allowance for credit losses for our EA and all other short-term and long-term receivables for the six months ended December 31, 2023 and 2022 is as follows:

EAs All Other Total

2 unchanged sentences

Charge-offs, recoveries and other ( 27,714 ) ( 37,613 ) ( 65,327 )

Balances as of September 30, 2023 $ — $ 35,469 $ 35,469

Balances as of December 31, 2023 $ 17,557 $ 1,146 $ 18,703

Balances as of July 1, 2022 $ 26,141 $ 51,126 $ 77,267

1 unchanged sentence

Charge-offs, recoveries and other ( 14,814 ) ( 51,429 ) ( 66,243 )

Balances as of September 30, 2022 $ 26,141 $ 50,922 $ 77,063

Gross charge-offs of EAs were $ 27.7 million for the three months ended September 30, 2023, of which $ 15.4 million related to EA LOCs originated in fiscal year 2023 and $ 12.3 million related to Revolving Loans.

Balances as of December 31, 2022 $ 26,408 $ 1,197 $ 27,605

Gross charge-offs of EAs were $ 27.7 million for the six months ended December 31, 2023, of which $ 15.4 million related to EA LOCs originated in fiscal year 2023 and $ 12.3 million related to Revolving Loans.

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the three months ended September 30, 2023 are as follows:

Changes in the carrying amount of goodwill for the six months ended December 31, 2023 are as follows:

Goodwill Accumulated Impairment Losses Net

4 unchanged sentences

Impairments — — —

Balances as of September 30, 2023 $ 909,117 $ ( 138,297 ) $ 770,820

Balances as of December 31, 2023 $ 927,365 $ ( 138,297 ) $ 789,068

(1) All goodwill added during the period is expected to be tax-deductible for federal income tax reporting.

We test goodwill for impairment annually as of February 1, or more frequently if events occur or circumstances change which would, more likely than not, reduce the fair value of a reporting unit below its carrying value.

H&R Block, Inc.

|Q1 FY2024 Form 10-Q

Q2 FY2024 Form 10-Q| H&R Block, Inc.

Components of intangible assets are as follows:

1 unchanged sentence

Amortization Net

As of September 30, 2023:

As of December 31, 2023:

Reacquired franchise rights $ 400,059 $ ( 220,263 ) $ 179,796

15 unchanged sentences

$ 1,067,824 $ ( 790,781 ) $ 277,043

We made payments to acquire businesses totaling $ 6.9 million and $ 16.5 million during the three months ended September 30, 2023 and 2022, respectively.

The amounts and weighted-average lives of intangible assets acquired during the three months e nded September 30, 2023 a re as follows:

We made payments to acquire businesses totaling $ 27.2 million and $ 39.8 million during the six months ended December 31, 2023 and 2022, respectively.

The amounts and weighted-average lives of intangible assets acquired during the six months e nded December 31, 2023 a re as follows:

(dollars in 000s)

4 unchanged sentences

Total $ 29,479 5

Amortization of intangible assets for the three months ended September 30, 2023 was $ 15.8 million compared to $ 18.4 million for the three months ended September 30, 2022.

Amortization of intangible assets for the three and six months ended December 31, 2023 was $ 15.4 million and $ 31.2 million, respectively, compared to $ 18.5 million and $ 36.9 million for the three and six months ended December 31, 2022, respectively.

Estimated amortization of intangible assets for fiscal years ending June 30, 2024, 2025, 2026, 2027, and 2028 is $ 59.9 million, $ 39.9 million, $ 30.2 million, $ 23.9 million and $ 16.3 million, respectively.

Q1 FY2024 Form 10-Q| H&R Block, Inc.

H&R Block, Inc.

|Q2 FY2024 Form 10-Q

LONG-TERM DEBT

The components of long-term debt are as follows:

As of September 30, 2023 June 30, 2023

As of December 31, 2023 June 30, 2023

Senior Notes, 5.250 %, due October 2025

4 unchanged sentences

650,000 650,000

Committed line of credit borrowings 800,000 —

Debt issuance costs and discounts ( 9,956 ) ( 11,025 )

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

We were in compliance with these requirements as of September 30, 2023.

We had no outst anding balance under our CLOC and amounts available to borrow were not limited by the debt-to-EBITDA covenant as of September 30, 2023.

We were in compliance with these requirements as of December 31, 2023.

We had an outst anding balance of $ 800.0 million under our CLOC and amounts available to borrow were not limited by the debt-to-EBITDA covenant as of December 31, 2023.

We file a consolidated federal income tax return in the U.S.

with the Internal Revenue Service (IRS) and file tax returns in various state, local, and foreign jurisdictions.

We had gross unrecognized tax benefits of $ 237.9 million and $ 240.1 million as of September 30, 2023 and June 30, 2023, respectively.

The gross unrecognized tax benefits decreased by $ 2.2 million during the three months ended September 30, 2023.

We had gross unrecognized tax benefits of $ 208.4 million and $ 240.1 million as of December 31, 2023 and June 30, 2023, respectively.

The gross unrecognized tax benefits decreased by $ 31.7 million during the six months ended December 31, 2023 due to expiration of statutes of limitations and settlements with state tax authorities.

We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately $ 117.4 million within the next twelve months.

1 unchanged sentence

For such matters where a change in the balance of unrecognized tax benefits is not yet deemed reasonably possible, no estimate has been included.

Our effective tax rate for continuing operations, including the effects of discrete tax items, was 23.3 % and 24.4 % for the three months ended September 30, 2023 and 2022, respectively.

H&R Block, Inc.

|Q1 FY2024 Form 10-Q

Consistent with prior years, our pretax loss for the three months ended September 30, 2023 is expected to be offset by income in our third and fourth quarters due to the established pattern of seasonality in our primary business operations.

Q2 FY2024 Form 10-Q| H&R Block, Inc.

Our effective tax rate for continuing operations, including the effects of discrete tax items, was 28.9 % and 25.2 % for the six months ended December 31, 2023 and 2022, respectively.

Discrete items increased the effective tax rate by 5.4% and 1.4% for the six months ended December 31, 2023, and 2022, respectively.

A discrete income tax benefit of $26.6 million and $7.2 million were recorded in the six months ended December 31, 2023 and 2022, respectively.

The discrete tax benefit recorded in the current period primarily resulted from settlements with tax authorities and state statute of limitations expirations.

The discrete tax benefit recorded in the prior period primarily resulted from state statute of limitations expirations and refund interest.

The impact of discrete tax items combined with the seasonal nature of our business can cause the effective tax rate in our second quarter to be significantly different than the rate for our full fiscal year.

Consistent with prior years, our pretax loss for the six months ended December 31, 2023 is expected to be offset by income in our third and fourth quarters due to the established pattern of seasonality in our primary business operations.

As such, management has determined that it is more-likely-than-not that realization of tax benefits recorded in our financial statements will occur within our fiscal year.

The amount of tax benefit recorded for the three months ended September 30, 2023 reflects management’s estimate of the annual effective tax rate applied to year-to-date loss from continuing operations adjusted for the tax impact of discrete items for the periods presented.

The amount of tax benefit recorded for the six months ended December 31, 2023 reflects management’s estimate of the annual effective tax rate applied to year-to-date loss from continuing operations adjusted for the tax impact of discrete items for the periods presented.

COMMITMENTS AND CONTINGENCIES

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DIY tax returns are covered by our 100% accuracy guarantee, whereby we will reimburse a client up to a maximum of $ 10,000 if our software makes an arithmetic error that results in payment of penalties and/or interest to the respective taxing authority that a client would otherwise not have been required to pay.

Our liability related to estimated losses under the 100% accuracy guarantee was $ 14.4 million and $ 15.8 million as of September 30, 2023 and June 30, 2023, respectively.

Our liability related to estimated losses under the 100% accuracy guarantee was $ 11.9 million and $ 15.8 million as of December 31, 2023 and June 30, 2023, respectively.

The short-term and long-term portions of this liability are included in deferred revenue and other liabilities in the consolidated balance sheets.

Liabilities related to acquisitions for (1) estimated contingent consideration based on expected financial performance of the acquired business and economic conditions at the time of acquisition and (2) estimated accrued compensation related to continued employment of key employees were $ 20.3 million and $ 18.3 million as of September 30, 2023 and June 30, 2023 respectively, with amounts recorded in deferred revenue and other liabilities.

Liabilities related to acquisitions for (1) estimated contingent consideration based on expected financial performance of the acquired business and economic conditions at the time of acquisition and (2) estimated accrued compensation related to continued employment of key employees were $ 31.7 million and $ 18.3 million as of December 31, 2023 and June 30, 2023 respectively, with amounts recorded in deferred revenue and other liabilities.

Should actual results differ from our estimates, future payments made will differ from the above estimate and any differences will be recorded in results from continuing operations.

We have contractual commitments to fund certain franchises with approved short-term lines of credit for the purpose of meeting their seasonal working capital needs.

Our total obligation under these lines of credit was $ 14.4 million at September 30, 2023, and net of amounts drawn and outstanding, our remaining commitment to fund totaled $ 8.4 million.

We purchase a 90% participation interest in each EA originated by Pathward®, N.A.

(Pathward) in accordance with our agreement.

Historically, EA LOCs have been offered to our clients in our offices.

In fiscal year 2024, EAs are being offered as term loans and we are discontinuing EA LOCs.

Our total obligation under these lines of credit was $ 20.8 million at December 31, 2023, and net of amounts drawn and outstanding, our remaining commitment to fund totaled $ 6.2 million.

Effective October 20, 2023, we amended the Program Management Agreement and entered into a new participation agreement related to EA TLs originated by Pathward®, N.A.

In fiscal year 2024, EAs are being offered as term loans and we discontinued EA LOCs.

EA TLs are interest bearing with principal and interest due in full on March 31, and there are no annual fees or required monthly payments.

EA TLs are offered to clients in our offices, in November and December, in amounts of $350 to $1,300.

Effective October 20, 2023, we amended the Program Management Agreement and entered into a new participation agreement related to EA TLs originated by Pathward.

We will continue to purchase a 90% participation interest in each loan made by Pathward in accordance with the participation agreement.

We continue to purchase a 90% participation interest in each loan made by Pathward in accordance with the participation agreement.

We purchased participation interests of $ 341.8 million during the six months ended December 31, 2023 .

LITIGATION AND OTHER RELATED CONTINGENCIES

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Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction.

In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters.

In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible

H&R Block, Inc.

|Q2 FY2024 Form 10-Q

verdicts in the jurisdiction for similar matters.

We believe that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value due to this variability in pleadings and our experience in handling and resolving numerous claims over an extended period of time.

1 unchanged sentence

Among other things, uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how courts and arbitrators will apply the law.

Q1 FY2024 Form 10-Q| H&R Block, Inc.

Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will view the relevant evidence and applicable law.

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For such matters where a loss is believed to be reasonably possible, but not probable, or the loss cannot be reasonably estimated, no accrual has been made.

It is possible that such matters could require us to pay damages or make other expenditures or accrue liabilities in amounts that could not be reasonably estimated as of September 30, 2023.

It is possible that such matters could require us to pay damages or make other expenditures or accrue liabilities in amounts that could not be reasonably estimated as of December 31, 2023.

While the potential future liabilities could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known, we do not believe any such liabilities are likely to have a material adverse effect on our business and our consolidated financial position, results of operations, and cash flows.

Our accrued liabilities were $ 0.2 million as of September 30, 2023 and June 30, 2023.

Our accrued liabilities were $ 1.8 million and $ 0.2 million as of December 31, 2023 and June 30, 2023, respectively.

Our estimate of the aggregate range of reasonably possible losses includes (1) matters where a liability has been accrued and there is a reasonably possible loss in excess of the amount accrued for that liability, and (2) matters where a liability has not been accrued but we believe a loss is reasonably possible.

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The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate.

As of September 30, 2023, we believe the estimate of the aggregate range of reasonably possible losses in excess of amounts accrued, where the range of loss can be estimated, is not material.

As of December 31, 2023, we believe the estimate of the aggregate range of reasonably possible losses in excess of amounts accrued, where the range of loss can be estimated, is not material.

At the end of each reporting period, we review relevant information with respect to litigation, arbitration and other related loss contingencies and update our accruals, disclosures, and estimates of reasonably possible loss or range of loss based on such reviews.

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In the event of unfavorable outcomes, it could require modifications to our operations;

in addition, the amounts that may be required to be paid to discharge or settle the matters could be substantial and could have a material adverse impact on our business and our consolidated financial position, results of operations, and cash flows.

H&R Block, Inc.

|Q1 FY2024 Form 10-Q

in addition, the amounts that may be required to be paid to discharge or settle the matters could

Q2 FY2024 Form 10-Q| H&R Block, Inc.

be substantial and could have a material adverse impact on our business and our consolidated financial position, results of operations, and cash flows.

LITIGATION, CLAIMS OR OTHER LOSS CONTINGENCIES PERTAINING TO CONTINUING OPERATIONS –

9 unchanged sentences

We filed a motion for summary judgment, which was denied.

A trial date is set for February 20, 2024.

We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter.

We have received and are responding to certain governmental inquiries and other matters relating to the IRS Free File Program and to our DIY tax preparation services.

We received a demand and draft complaint in February 2023 from the Federal Trade Commission (FTC) relating to our DIY tax preparation services.

The parties have reached an agreement to settle this matter.

An accrual related to this matter is included in our loss contingency accrual.

In January 2024, we received a revised demand and draft complaint from the Federal Trade Commission (FTC) relating to certain aspects of our DIY tax preparation services.

If the parties are not able to reach amicable resolution, the FTC may seek resolution through litigation.

We have also received and are responding to certain governmental inquiries and other matters relating to the IRS Free File Program and other aspects of our DIY tax preparation services, including the use of pixels.

We have not concluded that a loss related to these matters is probable, nor have we accrued a liability related to these matters.

9 unchanged sentences

Claimants also may attempt to assert claims against or seek payment directly from the Company even if SCC's assets exceed its liabilities.

SCC's principal assets, as of September 30, 2023, total approximately $ 265 million and consist of an intercompany note receivable.

SCC's principal assets, as of December 31, 2023, total approximately $ 268 million and consist of an intercompany note receivable.

We believe our legal position is strong on any potential corporate veil-piercing arguments;

2 unchanged sentences

These matters may include actions by state attorneys general, other state regulators, federal regulators, individual plaintiffs, and cases in which plaintiffs seek to represent others who may be similarly situated.

H&R Block, Inc.

|Q2 FY2024 Form 10-Q

While we cannot provide assurance that we will ultimately prevail in each instance, we believe the amount, if any, we are required to pay to discharge or settle these other matters will not have a material adverse impact on our business and our consolidated financial position, results of operations, and cash flows.

Q1 FY2024 Form 10-Q| H&R Block, Inc.

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

What changed 10-Q

Item 1. Financial Statements