H&R BLOCK INC
For the period ended Mar 31, 2024. Filed May 9, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 9, 2024
HRB$52.69-4.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-06.
0001838862-24-000013
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial InformationCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001838862-24-000021
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial InformationThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 64 previous paragraphs and 68 current paragraphs.
33 unchanged; 22 reworded; 10 added; 8 removed; 1 previous and 3 current paragraphs rearranged.
Tables are not compared: 19 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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
Current report
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.
Current report
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.
Removed paragraphs (8)
Previous report
Revenues increased $12.7 million, or 7.6%, from the prior year. U.S. assisted tax preparation revenues increased $7.1 million, or 17.3%, due to higher volumes and a higher net average charge in the current year. Other revenues increased $1.1 million, or 12.7%, primarily due to higher extension filing and bookkeeping fees.
Previous report
Interest and fee income on Emerald Advance SM (EA) increased $2.3 million, or 18.1%, due to an increase in EA Loans and an earlier start to the offering period in the current year.
Previous report
International revenues increased $1.5 million, or 5.4%, primarily due to higher tax return volumes in Australia. Wave revenues increased $1.2 million, or 5.4%, due to higher small business payments processing volumes.
Previous report
Total operating expenses decreased $3.1 million, or 0.7%, from the prior year. Other wages increased $4.1 million, or 5.9%, primarily due to higher corporate wages from higher headcount in the current year. Marketing and advertising expense decreased $3.8 million, or 25.3%, primarily due to vendor refunds for expired customer incentives. Depreciation and amortization expense decreased $2.6 million, or 8.0%, primarily due to lower amortization of capitalized software.
Previous report
Consulting and outsourced services expense decreased $6.2 million, or 27.5%, primarily due to lower contract labor in the current year. Technology-related expenses increased $2.8 million, or 11.3%, due to higher costs of technology in the current year. Legal fees and settlements expense increased $3.2 million, or 148.2%, primarily due to higher legal settlements in the current year.
Previous report
Revenues increased $16.5 million, or 4.8%, from the prior year. U.S. assisted tax preparation revenues increased $10.1 million, or 13.0%, due to a higher net average charge and higher volumes in the current year. Other revenues increased $2.7 million, or 15.1%, primarily due to higher extension filing and bookkeeping fees.
Previous report
International revenues increased $3.3 million, or 3.7%, primarily due to higher tax return volumes in Australia. Wave revenues increased $2.5 million, or 5.6%, due to higher small business payments processing volumes.
Previous report
Financing Activities. Cash provided by financing activities totaled $335.4 million for the six months ended December 31, 2023 compared to $128.8 million in the prior year period. The change is primarily due to borrowings on our CLOC in the current year.
Reworded paragraphs (22)
Previous wording
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 company-owned or franchise offices, virtually or via an internet review) or prepared and filed by our clients through our DIY tax solutions. We also offer small business solutions through our company-owned and franchise offices and online through Wave. We report a single segment that includes all of our continuing operations.
Current wording
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.
Previous wording
Other operating expenses decreased $9.6 million, or 5.2%. The components of other expenses are as follows:
Current wording
Other operating expenses increased $6.6 million, or 3.7%. The components of other expenses are as follows:
Previous wording
Other income (expense), net increased $8.0 million, or 102.1%, due to higher interest income in the current year.
Current wording
Other income (expense), net decreased $8.0 million, or 60.5%, primarily due to income from a legal settlement in the prior year.
Previous wording
We recorded an income tax benefit of $93.8 million in the current year compared to $77.1 million in the prior year. The effective tax rate for the three months ended December 31, 2023, and 2022 was 33.1% and 25.9%, respectively.
Current wording
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.
Previous wording
Emerald Card® and Spruce SM revenues decreased $3.8 million, or 15.6%, 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 SMincreased $2.0 million, or 14.9%, due to an increase in EA Loans and an earlier start to the offering period in the current year.
Current wording
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.
Previous wording
Total operating expenses decreased $2.1 million, or 0.2%, from the prior year period. Other wages increased $12.5 million, or 9.3%, primarily due to higher corporate wages from higher headcount in the current year. Marketing and advertising expense decreased $9.0 million, or 34.9%, primarily due to vendor refunds for expired customer incentives. Depreciation and amortization expense decreased $6.0 million, or 9.1%, primarily due to lower amortization of capitalized software. Bad debt expense increased $3.8 million, or 16.7%, due to an increase in EA loans compared to the prior year.
Current wording
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.
Previous wording
Other operating expenses decreased $3.5 million, or 3.6%. The components of other expenses are as follows:
Current wording
Other operating expenses decreased $3.0 million, or 0.8%. The components of other expenses are as follows:
Previous wording
Consulting and outsourced services expense decreased $11.1 million, or 27.4%, due to lower contract labor and call center expenses in the current year. Legal fees and settlements expense increased $4.0 million, or 88.6%, primarily due to higher legal settlements in the current year.
Current wording
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.
Previous wording
We recorded an income tax benefit of $143.2 million in the current year compared to $131.1 million in the prior year. The effective tax rate for the six months ended December 31, 2023, and 2022 was 28.9% and 25.2%, respectively. See Item 1, note 7 to the consolidated financial statements for additional discussion.
Current wording
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.
Previous wording
DISCUSSION OF CONSOLIDATED STATEMENTS OF CASH FLOWS– The following table summarizes our statements of cash flows for the six months ended December 31, 2023 and 2022. See Item 1 for the complete consolidated statements of cash flows for these periods.
Current wording
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.
Previous wording
Operating Activities. Cash used in operations totaled $942.2 million for the six months ended December 31, 2023 compared to $780.5 million in the prior year period. The change is primarily due to the receipt of income tax receivables in the prior year and higher EA receivables in the current year, partially offset by lower bonus and payroll tax payments in the current year.
Current wording
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.
Previous wording
Investing Activities. Cash used in investing activities totaled $71.0 million for the six months ended December 31, 2023 compared to $99.1 million in the prior year period. The change is primarily due to lower payments to acquire businesses and capital expenditures in the current year.
Current wording
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.
Previous wording
We have consistently paid quarterly dividends. Dividends paid totaled$89.9 million and$89.2 million for the six months ended December 31, 2023 and 2022, respectively. Although we have historically paid dividends and plan to continue to do so, there can be no assurances that circumstances will not change in the future that could affect our ability or decisions to pay dividends.
Current wording
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.
Previous wording
During the six months ended December 31, 2023, 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.
Current wording
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.
Previous wording
Capital Investment. Capital expenditures totaled $32.7 million and $41.5 million for the six months ended December 31, 2023 and 2022, respectively. Our capital expenditures relate primarily to recurring improvements to retail offices, as well as investments in computers, software and related assets. In addition to our capital expenditures, we also made payments to acquire businesses. We acquired franchisee and competitor businesses totaling $27.2 million and $39.8 million during the six months ended December 31, 2023 and 2022, respectively. See Item 1, note 5 for additional information on our acquisitions.
Current wording
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.
Previous wording
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 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.
Current wording
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.
Previous wording
CASH AND OTHER ASSETS– As of December 31, 2023, we held cash and cash equivalents, excluding restricted amounts, of $321.0 million, including $140.0 million held by our foreign subsidiaries.
Current wording
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.
Previous wording
The impact of changes in foreign exchange rates during the period on our international cash balances resulted in an increase of $0.7 million during the six months ended December 31, 2023 and a decrease of $7.8 million during the six months ended December 31, 2022.
Current wording
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.
Previous wording
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 $341.8 million during the six months ended December 31, 2023.
Current wording
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.
Previous wording
The table above reflects $2.1 billion and $1.7 billion of non-current intercompany receivables due to the Issuer from non-guarantor subsidiaries as of December 31, 2023 and June 30, 2023, respectively.
Current wording
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.
Previous wording
The following is a reconciliation of net loss to EBITDA from continuing operations, which is a non-GAAP financial measure:
Current wording
The following is a reconciliation of net income to EBITDA from continuing operations, which is a non-GAAP financial measure:
Previous wording
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 disease (including the coronavirus (COVID-19) pandemic), severe weather events, natural or manmade disasters, or changes in the regulatory environment in which we operate.
Current wording
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
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Nine months ended March 31, 2024 compared to March 31, 2023
Current report — wording carried from elsewhere
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
Current report — wording carried from elsewhere
disease (including the coronavirus (COVID-19) pandemic), severe weather events, natural or manmade disasters, or changes in the regulatory environment in which we operate.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Six months ended December 31, 2023 compared to December 31, 2022