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 do-it-yourself (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 United States (U.S.), Canada and Australia. Tax returns are either prepared by H&R Block tax professionals in one of our 6,643 company-owned or 2,168 franchise offices (as of March 31, 2024), 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 FY2024 Form 10-Q| H&R Block, Inc. Table of Contents Consolidated – Financial Results (in 000s, except per share amounts) Three months ended March 31, 2024 2023 $ Change % Change Revenues: U.S. tax preparation and related services: Assisted tax preparation $ 1,534,825 $ 1,453,049 $ 81,776 5.6 % Royalties 141,915 150,163 (8,248) (5.5) % DIY tax preparation 198,570 167,022 31,548 18.9 % Refund Transfers 118,937 117,384 1,553 1.3 % Peace of Mind® Extended Service Plan 16,813 16,750 63 0.4 % Tax Identity Shield® 7,536 8,720 (1,184) (13.6) % Other 12,065 10,972 1,093 10.0 % Total U.S. tax preparation and related services 2,030,661 1,924,060 106,601 5.5 % Financial services: Emerald Card® and Spruce SM 41,160 44,358 (3,198) (7.2) % Interest and fee income on Emerald Advance® 21,169 33,750 (12,581) (37.3) % Total financial services 62,329 78,108 (15,779) (20.2) % International 68,264 69,417 (1,153) (1.7) % Wave 23,580 22,064 1,516 6.9 % Total revenues $ 2,184,834 $ 2,093,649 $ 91,185 4.4 % Compensation and benefits: Field wages 510,299 480,779 (29,520) (6.1) % Other wages 75,356 73,503 (1,853) (2.5) % Benefits and other compensation 99,653 100,368 715 0.7 % 685,308 654,650 (30,658) (4.7) % Occupancy 119,364 118,111 (1,253) (1.1) % Marketing and advertising 194,349 210,508 16,159 7.7 % Depreciation and amortization 30,672 32,313 1,641 5.1 % Bad debt 41,008 34,273 (6,735) (19.7) % Other 185,929 179,292 (6,637) (3.7) % Total operating expenses 1,256,630 1,229,147 (27,483) (2.2) % Other income (expense), net 5,224 13,224 (8,000) (60.5) % Interest expense on borrowings (26,070) (22,298) (3,772) (16.9) % Pretax income 907,358 855,428 51,930 6.1 % Income taxes 215,772 209,351 (6,421) (3.1) % Net income from continuing operations 691,586 646,077 45,509 7.0 % Net loss from discontinued operations (849) (2,648) 1,799 67.9 % Net income $ 690,737 $ 643,429 $ 47,308 7.4 % DILUTED EARNINGS PER SHARE Continuing operations $ 4.87 $ 4.14 $ 0.73 17.6 % Discontinued operations (0.01) (0.02) 0.01 50.0 % Consolidated $ 4.86 $ 4.12 $ 0.74 18.0 % Adjusted diluted EPS (1) $ 4.94 $ 4.20 $ 0.74 17.6 % EBITDA (1) $ 964,100 $ 910,039 $ 54,061 5.9 % (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 FY2024 Form 10-Q 17 Table of Contents Three months ended March 31, 2024 compared to March 31, 2023 Revenues increased $91.2 million, or 4.4%, from the prior year. U.S. assisted tax preparation revenues increased $81.8 million, or 5.6%, due to a 4.4% increase in net average charge combined with higher company-owned tax return volumes in the current year. U.S. royalty revenue decreased $8.2 million, or 5.5%, due to lower franchise tax return volumes. 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, 2024 our total assisted tax return volume, which includes both company-owned and franchise offices, decreased 1.1% from the prior year. U.S. DIY tax preparation revenues increased $31.5 million, or 18.9%, primarily due to an 8.9% increase in online paid returns combined with a 10.3% increase in paid net average charge compared to the prior year. Interest and fee income on Emerald Advance® (EA) decreased $12.6 million, or 37.3%, due to lower customer fees under the new EA term loan, partially offset by higher interest income in the current year due to the increase in EA loans and a later due date for the loans than the prior year. Total operating expenses increased $27.5 million, or 2.2%, from the prior year. Field wages increased $29.5 million, or 6.1%, due to higher wages in the current year primarily due to the increase in company-owned volumes. Marketing and advertising expense decreased $16.2 million, or 7.7%, primarily due to the timing of television advertising in the current year compared to the prior year. Bad debt expense increased $6.7 million, or 19.7%, primarily due to an increase in Refund Transfers and higher bad debt rates in the current year. Other operating expenses increased $6.6 million, or 3.7%. The components of other expenses are as follows: (in 000s) Three months ended March 31, 2024 2023 $ Change % Change Consulting and outsourced services $ 37,896 $ 42,130 $ 4,234 10.0 % Bank partner fees 29,681 24,778 (4,903) (19.8) % Client claims and refunds 8,117 8,787 670 7.6 % Employee and travel expenses 8,368 9,906 1,538 15.5 % Technology-related expenses 30,623 26,385 (4,238) (16.1) % Credit card/bank charges 36,702 34,159 (2,543) (7.4) % Insurance 2,645 2,891 246 8.5 % Legal fees and settlements 11,286 2,685 (8,601) (320.3) % Supplies 11,231 15,956 4,725 29.6 % Other 9,380 11,615 2,235 19.2 % $ 185,929 $ 179,292 $ (6,637) (3.7) % Bank partner fees increased $4.9 million, or 19.8%, due to the increase in Refund Advance loans in the current year. Legal fees and settlements expense increased $8.6 million in the current year. Supplies expense decreased $4.7 million, or 29.6%, primarily due to lower office supplies purchased in the current year. Other income (expense), net decreased $8.0 million, or 60.5%, primarily due to income from a legal settlement in the prior year. We recorded income tax expense of $215.8 million in the current year compared to $209.4 million in the prior year. The effective tax rate for the three months ended March 31, 2024, and 2023 was 23.8% and 24.5%, respectively. 18 Q3 FY2024 Form 10-Q| H&R Block, Inc. Table of Contents Consolidated - Financial Results (in 000s, except per share amounts) Nine months ended March 31, 2024 2023 $ Change % Change Revenues: U.S. tax preparation and related services: Assisted tax preparation $ 1,622,430 $ 1,530,577 $ 91,853 6.0 % Royalties 153,070 161,337 (8,267) (5.1) % DIY tax preparation 215,529 182,330 33,199 18.2 % Refund Transfers 120,892 120,210 682 0.6 % Peace of Mind® Extended Service Plan 59,100 58,840 260 0.4 % Tax Identity Shield® 16,810 19,237 (2,427) (12.6) % Other 32,637 28,845 3,792 13.1 % Total U.S. tax preparation and related services 2,220,468 2,101,376 119,092 5.7 % Financial services: Emerald Card® and Spruce SM 61,493 68,448 (6,955) (10.2) % Interest and fee income on Emerald Advance® 36,702 47,267 (10,565) (22.4) % Total financial services 98,195 115,715 (17,520) (15.1) % International 158,398 156,297 2,101 1.3 % Wave 70,656 66,651 4,005 6.0 % Total revenues $ 2,547,717 $ 2,440,039 $ 107,678 4.4 % Compensation and benefits: Field wages 650,529 618,656 (31,873) (5.2) % Other wages 222,125 207,786 (14,339) (6.9) % Benefits and other compensation 170,964 169,477 (1,487) (0.9) % 1,043,618 995,919 (47,699) (4.8) % Occupancy 319,843 316,874 (2,969) (0.9) % Marketing and advertising 211,135 236,299 25,164 10.6 % Depreciation and amortization 91,004 98,660 7,656 7.8 % Bad debt 67,560 57,018 (10,542) (18.5) % Other 360,111 363,081 2,970 0.8 % Total operating expenses 2,093,271 2,067,851 (25,420) (1.2) % Other income (expense), net 20,982 21,020 (38) (0.2) % Interest expense on borrowings (63,304) (57,107) (6,197) (10.9) % Pretax income 412,124 336,101 76,023 22.6 % Income taxes 72,527 78,254 5,727 7.3 % Net income from continuing operations 339,597 257,847 81,750 31.7 % Net loss from discontinued operations (2,097) (6,418) 4,321 67.3 % Net income $ 337,500 $ 251,429 $ 86,071 34.2 % DILUTED EARNINGS PER SHARE Continuing operations $ 2.34 $ 1.62 $ 0.72 44.4 % Discontinued operations (0.02) (0.04) 0.02 50.0 % Consolidated $ 2.32 $ 1.58 $ 0.74 46.8 % Adjusted diluted EPS (1) $ 2.54 $ 1.80 $ 0.74 41.1 % EBITDA (1) $ 566,432 $ 491,868 $ 74,564 15.2 % (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. H&R Block, Inc. |Q3 FY2024 Form 10-Q 19 Table of Contents Nine months ended March 31, 2024 compared to March 31, 2023 Revenues increased $107.7 million, or 4.4%, from the prior year. U.S. assisted tax preparation revenues increased $91.9 million, or 6.0%, due to a 4.6% increase in net average charge combined with higher company-owned tax return volumes in the current year. U.S. royalties revenue decreased $8.3 million, or 5.1%, due to lower franchise tax return volumes. 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, 2024 our total assisted tax return volume, which includes both company-owned and franchise offices, decreased 1.1% from the prior year. U.S. DIY tax preparation revenues increased $33.2 million, or 18.2%, primarily due to a 9.1% increase in online paid returns combined with a 9.4% increase in paid net average charge compared to the prior year. Emerald Card® and Spruce SM revenues decreased $7.0 million, or 10.2%, due to lower Emerald Card® activity in the current year as a result of less funds being loaded on the cards. Interest and fee income on Emerald Advance® decreased $10.6 million, or 22.4%, due to lower customer fees under the new EA term loan, partially offset by higher interest income due to the increase in EA loans and a longer loan term in the current year. Total operating expenses increased $25.4 million, or 1.2%, from the prior year period. Field wages increased $31.9 million, or 5.2%, due to higher wages in the current year primarily resulting from an increase in company-owned volumes. Other wages increased $14.3 million, or 6.9%, primarily due to higher corporate wages in the current year. Marketing and advertising expense decreased $25.2 million, or 10.6%, primarily due to the timing of television advertising in the current year compared to the prior year. Depreciation and amortization expense decreased $7.7 million, or 7.8%, primarily due to lower amortization of capitalized software. Bad debt expense increased $10.5 million, or 18.5%, due to an increase in Refund Transfers and EA loans coupled with higher bad debt rates compared to the prior year. Other operating expenses decreased $3.0 million, or 0.8%. The components of other expenses are as follows: (in 000s) Nine months ended March 31, 2024 2023 $ Change % Change Consulting and outsourced services $ 67,297 $ 82,635 $ 15,338 18.6 % Bank partner fees 28,616 23,981 (4,635) (19.3) % Client claims and refunds 17,463 21,002 3,539 16.9 % Employee and travel expenses 26,429 30,675 4,246 13.8 % Technology-related expenses 80,962 76,789 (4,173) (5.4) % Credit card/bank charges 71,639 67,682 (3,957) (5.8) % Insurance 8,071 6,260 (1,811) (28.9) % Legal fees and settlements 19,715 7,155 (12,560) (175.5) % Supplies 18,349 23,291 4,942 21.2 % Other 21,570 23,611 2,041 8.6 % $ 360,111 $ 363,081 $ 2,970 0.8 % Consulting and outsourced services expense decreased $15.3 million, or 18.6%, due to lower contract labor, Emerald Card® data processing and call center expenses in the current year. Legal fees and settlements expense increased $12.6 million, or 175.5%, in the current year. We recorded income tax expense of $72.5 million in the current year compared to $78.3 million in the prior year. The effective tax rate for the nine months ended March 31, 2024, and 2023 was 17.6% and 23.3%, respectively. See Item 1, note 7 to the consolidated financial statements for additional discussion. Assisted tax return volume, which includes our company-owned and franchise operations, decreased 1.2% from July 1, 2023 through April 30, 2024 compared to the prior year period. DIY online paid tax return volume from July 1, 2023 through April 30, 2024, increased 5.9% compared to the prior year period. Our business is highly 20 Q3 FY2024 Form 10-Q| H&R Block, Inc. Table of Contents 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, 2024. 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 unsecured committed line of credit (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, 2024 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, 2024 and 2023. See Item 1 for the complete consolidated statements of cash flows for these periods. (in 000s) Nine months ended March 31, 2024 2023 Net cash provided by (used in): Operating activities $ 420,264 $ 498,386 Investing activities (99,643) (101,287) Financing activities (520,503) (505,587) Effects of exchange rates on cash (2,739) (7,880) Net decrease in cash and cash equivalents, including restricted balances $ (202,621) $ (116,368) Operating Activities. Cash provided by operations totaled $420.3 million for the nine months ended March 31, 2024 compared to $498.4 million in the prior year period. The change is primarily due to higher receivables in the current year and the receipt of income tax receivables in the prior year, partially offset by lower bonus and payroll tax payments in the current year. Investing Activities. Cash used in investing activities totaled $99.6 million for the nine months ended March 31, 2024 compared to $101.3 million in the prior year period. The change is primarily due to lower payments to acquire businesses in the current year. Financing Activities. Cash used in financing activities totaled $520.5 million for the nine months ended March 31, 2024 compared to $505.6 million in the prior year period. The change is primarily due to higher shares surrendered related to the vesting of stock-based compensation awards in the current year. 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 $135.1 million and $133.8 million for the nine months ended March 31, 2024 and 2023, respectively. Although we have historically paid dividends and plan H&R Block, Inc. |Q3 FY2024 Form 10-Q 21 Table of Contents to continue to do so, there can be no assurances that circumstances will not change in the future that could affect our ability or decisions to pay dividends. During the nine months ended March 31, 2024, we repurchased $350.1 million of our common stock at an average price of $43.66 per share, excluding excise taxes in connection with such repurchases. In the prior year period, we repurchased $350.1 million of our common stock at an average price of $42.86 per share. Our current share repurchase program has remaining authorization of $350.0 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 $53.8 million and $56.7 million for the nine months ended March 31, 2024 and 2023, 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 $43.2 million and $47.7 million during the nine months ended March 31, 2024 and 2023, 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 outst anding balance under our CLOC and amounts available to borrow were not limited by the debt-to-EBITDA covenant as of March 31, 2024. The following table provides ratings for debt issued by Block Financial LLC (Block Financial) as of March 31, 2024 and June 30, 2023: As of March 31, 2024 June 30, 2023 Short-term Long-term Outlook Short-term Long-term Outlook Moody's P-3 Baa3 Stable P-3 Baa3 Positive 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, 2023 in our Annual Report on Form 10-K. CASH AND OTHER ASSETS – As of March 31, 2024, we held cash and cash equivalents, excluding restricted amounts, of $794.6 million, including $130.8 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, 2024. We do not currently intend to repatriate non-borrowed funds held by our foreign subsidiaries in a manner that would trigger a material tax liability. The impact of changes in foreign exchange rates during the period on our international cash balances resulted in an decrease of $2.7 million and $7.9 million during the nine months ended March 31, 2024 and 2023, respectively. CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS – EAs are originated by Pathward. We purchase a 90% participation interest, at par, in all EAs originated by Pathward in accordance with our participation agreement. Effective October 20, 2023, we amended the Program Management Agreement and entered into a new participation agreement related to EAs originated by Pathward. We purchased participation interests of $346.3 million during the nine months ended March 31, 2024. There have been no other material changes in our contractual obligations and commercial commitments from those reported in our June 30, 2023 Annual Report on Form 10-K. 22 Q3 FY2024 Form 10-Q| H&R Block, Inc. Table of Contents 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, 2024 June 30, 2023 Current assets $ 90,867 $ 37,407 Noncurrent assets 1,724,972 1,725,234 Current liabilities 77,019 78,259 Noncurrent liabilities 1,491,783 1,494,010 SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER (in 000s) Nine months ended March 31, 2024 Twelve months ended June 30, 2023 Total revenues $ 119,650 $ 160,236 Income from continuing operations before income taxes 70,417 40,258 Net income from continuing operations 54,127 31,713 Net income 52,029 23,613 The table above reflects $1.7 billion of non-current intercompany receivables due to the Issuer from non-guarantor subsidiaries as of March 31, 2024 and June 30, 2023, respectively. REGULATORY ENVIRONMENT There have been no material changes in our regulatory environment from what was reported in our June 30, 2023 Annual Report on Form 10-K. 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 U.S. generally accepted accounting principles (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. H&R Block, Inc. |Q3 FY2024 Form 10-Q 23 Table of Contents 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, 2024 2023 2024 2023 Net income - as reported $ 690,737 $ 643,429 $ 337,500 $ 251,429 Discontinued operations, net 849 2,648 2,097 6,418 Net income from continuing operations - as reported 691,586 646,077 339,597 257,847 Add back: Income taxes 215,772 209,351 72,527 78,254 Interest expense 26,070 22,298 63,304 57,107 Depreciation and amortization 30,672 32,313 91,004 98,660 272,514 263,962 226,835 234,021 EBITDA from continuing operations $ 964,100 $ 910,039 $ 566,432 $ 491,868 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, 2024 2023 2024 2023 Net income from continuing operations - as reported $ 691,586 $ 646,077 $ 339,597 $ 257,847 Adjustments: Amortization of intangibles related to acquisitions (pretax) 12,869 13,011 37,693 38,546 Tax effect of adjustments (1) (2,793) (3,190) (8,815) (9,198) Adjusted net income from continuing operations $ 701,622 $ 655,898 $ 368,475 $ 287,195 Diluted earnings per share from continuing operations - as reported $ 4.87 $ 4.14 $ 2.34 $ 1.62 Adjustments, net of tax 0.07 0.06 0.20 0.18 Adjusted diluted earnings per share from continuing operations $ 4.94 $ 4.20 $ 2.54 $ 1.80 (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 Securities and Exchange Commission (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," "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 external events beyond the Company's control, such as outbreaks of infectious 24 Q3 FY2024 Form 10-Q| H&R Block, Inc. Table of Contents disease (including the coronavirus (COVID-19) pandemic), severe weather events, natural or manmade disasters, or changes in the regulatory environment in which we operate. 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. 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, 2023 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, 2023. 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, 2023 Annual Report on Form 10-K.