H&R Block Inc.

11/09/2026 | Press release | Distributed by Public on 11/09/2026 15:51

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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 services and products, including those of our bank partners, to the general public primarily in the U.S., Canada and Australia. Tax returns are either prepared by H&R Block tax professionals in one of our company-owned or franchise offices, virtually or via an online 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 (including in-person, online and virtual) and online through Wave®. We report a single segment that includes all of our continuing operations.
FINANCIAL RESULTS OVERVIEW
(in 000s, except per share amounts)
Three months ended September 30, 2026 2025 $ Change % Change
Total revenues $ 224,336 $ 203,551 $ 20,785 10.2 %
Total operating expenses $ 456,229 $ 410,582 $ (45,647) (11.1) %
Pretax loss $ (240,855) $ (216,331) $ (24,524) (11.3) %
Net loss from continuing operations $ (188,127) $ (165,368) $ (22,759) (13.8) %
Adjusted net loss from continuing operations(1)
$ (172,116) $ (157,181) $ (14,935) (9.5) %
Net loss $ (188,478) $ (165,819) $ (22,659) (13.7) %
EBITDA(1)
$ (193,126) $ (170,007) $ (23,119) (13.6) %
Adjusted EBITDA(1)
$ (185,175) $ (170,007) $ (15,168) (8.9) %
Diluted loss per share from continuing operations(1)
$ (1.53) $ (1.26) $ (0.27) (21.4) %
Adjusted diluted loss per share from continuing operations(1)
$ (1.40) $ (1.20) $ (0.20) (16.7) %
Weighted average shares outstanding 123,077 131,387 (8,310) (6.3) %
(1) All non-GAAP measures are results from continuing operations. See "Non-GAAP Financial Information" at the end of this item for a reconciliation of non-GAAP measures.
Q1 FY2027 Form 10-Q| H&R Block, Inc.
Three months ended September 30, 2026 compared to September 30, 2025
Revenues
The components of revenue include:
(in 000s)
Three months ended September 30, 2026 2025 $ Change % Change
Revenues:
U.S. services
Tax preparation $ 54,467 $ 51,867 $ 2,600 5.0 %
Small business services 34,896 31,047 3,849 12.4 %
Refund transfers 844 843 1 0.1 %
Tax protection and identity services 34,320 29,180 5,140 17.6 %
Card and related services 7,679 7,852 (173) (2.2) %
Other services 6,469 4,828 1,641 34.0 %
International services 74,813 66,494 8,319 12.5 %
U.S. royalties 5,683 5,849 (166) (2.8) %
Interest and fee income on Emerald Advance® - - - **
Other 5,165 5,591 (426) (7.6) %
Total revenues $ 224,336 $ 203,551 $ 20,785 10.2 %
U.S. tax preparation revenues increased $2.6 million, or 5.0%, primarily due to an increase in net average charge in the current year. Desktop software revenue, which is included in "Other" is included in U.S. consumer DIY tax preparation below. The components of U.S. tax preparation and software revenue include:
(in 000s)
Three months ended September 30, 2026 2025 $ Change % Change
U.S. consumer assisted tax preparation $ 30,742 $ 29,796 $ 946 3.2 %
U.S. consumer DIY tax preparation and software 2,994 2,945 49 1.7 %
Total U.S. consumer tax preparation and software 33,736 32,741 995 3.0 %
U.S. small business assisted tax preparation 20,628 18,848 1,780 9.4 %
U.S. small business DIY tax preparation 694 800 (106) (13.3) %
Total U.S. small business tax preparation 21,322 19,648 1,674 8.5 %
Total U.S. tax preparation and software $ 55,058 $ 52,389 $ 2,669 5.1 %
U.S. small business services revenues increased $3.8 million, or 12.4% due to higher accounting, invoicing and receipts subscriptions and small business payments processing volumes.
U.S. tax protection and identity services revenues increased $5.1 million, or 17.6% primarily due to changes in amortization rates and higher POM and TIS volumes.
International services revenues increased $8.3 million, or 12.5% due primarily to favorable foreign currency exchange rates in Australia.
H&R Block, Inc. |Q1 FY2027 Form 10-Q
Operating Expenses
Total operating expenses increased $45.6 million, or 11.1%, from the prior year.
Field compensation and benefits increased $19.3 million, or 23.3% primarily due to our previously announced seasonal office leadership transition which eliminated approximately 200 positions throughout the organization with severance and related costs totaling $8.0 million, and increased tax professional wages associated with certain strategic initiatives and higher international services revenue. Certain wage-related expenses are now being reported in field compensation and benefits rather than corporate compensation and benefits to better align with how costs are managed and evaluated internally. This change had no impact on total operating expenses, and prior period amounts have not been reclassified.
The components of occupancy and equipment expense include:
(in 000s)
Three months ended September 30, 2026 2025 $ Change % Change
Lease and other rent expenses $ 69,641 $ 66,702 $ (2,939) (4.4) %
Office-related expenses 42,684 39,828 (2,856) (7.2) %
Depreciation of equipment 19,942 17,944 (1,998) (11.1) %
Total occupancy and equipment $ 132,267 $ 124,474 $ (7,793) (6.3) %
Occupancy and equipment increased $7.8 million, or 6.3% due to an increase in the number of leased offices, higher rent, repairs and other office-related expenses.
Technology and related expenses increased by $2.9 million, or 9.6% due to higher cloud-related technology spend.
The components of general operations expenses include:
(in 000s)
Three months ended September 30, 2026 2025 $ Change % Change
Banking and payment processing $ 19,854 $ 19,042 $ (812) (4.3) %
Bad debt 4,639 2,205 (2,434) (110.4) %
Other 18,648 15,581 (3,067) (19.7) %
Total general operations expenses $ 43,141 $ 36,828 $ (6,313) (17.1) %
Marketing and advertising expense increased $3.2 million, or 38.6% due to lower vendor refunds for expired customer incentives and higher online advertising.
The components of general corporate expenses include:
(in 000s)
Three months ended September 30, 2026 2025 $ Change % Change
Consulting fees $ 9,475 $ 6,860 $ (2,615) (38.1) %
Legal fees and settlements 6,937 3,462 (3,475) (100.4) %
Other 18,024 15,036 (2,988) (19.9) %
Total general corporate expenses $ 34,436 $ 25,358 $ (9,078) (35.8) %
Legal and professional fees increased $3.5 million, primarily due to higher outside counsel spend and higher legal settlement accruals in the current year. Consulting fees increased $2.6 million, or 38.1%, primarily due to consulting costs that support our strategic priorities.
We recorded income tax benefit of $52.7 million in the current year compared to $51.0 million in the prior year. The effective tax rate for the three months ended September 30, 2026, and 2025 was 21.9% and 23.6%, respectively.
Q1 FY2027 Form 10-Q| H&R Block, Inc.
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 September 30, 2026 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 three months ended September 30, 2026 and 2025. See Item 1 for the complete consolidated statements of cash flows for these periods.
(in 000s)
Three months ended September 30, 2026 2025
Net cash used in:
Operating activities $ (358,456) $ (356,838)
Investing activities (35,665) (20,926)
Financing activities (171,411) (225,025)
Effects of exchange rates on cash (623) (2,949)
Net decrease in cash and cash equivalents, including restricted balances $ (566,155) $ (605,738)
Operating Activities. Cash used in operations totaled $358.5 million for the three months ended September 30, 2026 compared to $356.8 million in the prior year period. The increase is primarily due to higher net loss, and an increase in other assets, offset by lower income taxes paid.
Investing Activities. Cash used in investing activities totaled $35.7 million for the three months ended September 30, 2026 compared to $20.9 million in the prior year period. The increase is primarily due to higher capital expenditures and higher payments made for business acquisitions in the current year.
Financing Activities. Cash used in financing activities totaled $171.4 million for the three months ended September 30, 2026 compared to $225.0 million in the prior year period. The change is primarily due to lower repurchases of common stock, offset by lower proceeds from line of credit borrowings.
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 $52.6 million and $50.2 million for the three months ended September 30, 2026 and 2025, 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.
H&R Block, Inc. |Q1 FY2027 Form 10-Q
During the three months ended September 30, 2026, we repurchased $100.3 million of our common stock at an average price of $45.68 per share, excluding excise taxes in connection with such repurchases. In the prior year period, we repurchased $400.1 million of our common stock at an average price of $50.90 per share, excluding excise taxes in connection with such repurchases. Our current share repurchase program has remaining authorization of $500.0 million and does not have an expiration date.
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 $20.8 million and $13.2 million for the three months ended September 30, 2026 and 2025, 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 $10.3 million and $5.1 million during the three months ended September 30, 2026 and 2025, respectively. See Item 1, note 5 for additional information on our acquisitions.
FINANCING RESOURCES - The 2025 CLOC has capacity up to $1.5 billion and is scheduled to expire in July 2030. Proceeds under the 2025 CLOC may be used for working capital needs or for other general corporate purposes. We had no outstanding balance on our 2025 CLOC and amounts available to borrow were not limited by the debt-to-EBITDA covenant as of September 30, 2026.
The following table provides ratings for debt issued by Block Financial LLC (Block Financial) as of September 30, 2026 and June 30, 2026:
As of September 30, 2026
June 30, 2026
Short-term Long-term Outlook Short-term Long-term Outlook
Moody's P-3 Baa3 Stable P-3 Baa3 Stable
S&P A-2 BBB Stable A-2 BBB Stable
Other than described above, there have been no material changes in our borrowings from those reported as of June 30, 2026 in our Annual Report on Form 10-K.
CASH AND OTHER ASSETS - As of September 30, 2026, we held cash and cash equivalents, excluding restricted amounts, of $390.5 million, including $250.6 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 September 30, 2026.
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 $0.6 million and $2.9 million during the three months ended September 30, 2026 and 2025, respectively.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS - In September 2026, we amended our Program Management Agreement with Pathward, N.A. to extend its term through June 30, 2030. There have been no other material changes in our contractual obligations and commercial commitments from those reported in our June 30, 2026 Annual Report on Form 10-K.
SUMMARIZED GUARANTOR FINANCIAL STATEMENTS - Block Financial is a 100% owned subsidiary of H&R Block, Inc. Block Financial is the Issuer and H&R Block, Inc. is the full and unconditional Guarantor of our Senior Notes, CLOC and other indebtedness issued from time to time.
Q1 FY2027 Form 10-Q| H&R Block, Inc.
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 September 30, 2026 June 30, 2026
Current assets $ 39,383 $ 32,872
Noncurrent assets 1,860,579 1,878,969
Current liabilities 75,792 85,795
Noncurrent liabilities 1,497,886 1,495,419
SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER (in 000s)
Three months ended September 30, 2026
Twelve months ended June 30, 2026
Total revenues $ 8,320 $ 123,960
Income from continuing operations before income taxes 5,003 55,541
Net income from continuing operations 3,852 42,766
Net income 3,502 40,044
The table above reflects $1.8 billion of non-current intercompany receivables due to the Issuer from non-guarantor subsidiaries as of both September 30, 2026 and June 30, 2026.
REGULATORY ENVIRONMENT
There have been no material changes in our regulatory environment from what was reported in our June 30, 2026 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, goodwill impairments, severance and related costs of discrete strategic initiatives, and material discrete tax impacts of IRS examination settlements. 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 net income 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. |Q1 FY2027 Form 10-Q
The following is a reconciliation of net loss to EBITDA and adjusted EBITDA from continuing operations, which are non-GAAP financial measures:
(in 000s)
Three months ended September 30,
2026 2025
Net loss - as reported $ (188,478) $ (165,819)
Discontinued operations, net 351 451
Net loss from continuing operations - as reported (188,127) (165,368)
Add back:
Income tax benefit (52,728) (50,963)
Interest expense 15,538 17,402
Depreciation and amortization 32,191 28,922
(4,999) (4,639)
EBITDA from continuing operations $ (193,126) $ (170,007)
Severance and related costs of discrete strategic initiatives 7,951 -
Adjusted EBITDA from continuing operations $ (185,175) $ (170,007)
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)
Three months ended September 30,
2026 2025
Net loss from continuing operations - as reported $ (188,127) $ (165,368)
Adjustments:
Amortization of intangibles related to acquisitions (pretax) 12,250 10,979
Severance and related costs of discrete strategic initiatives (pretax) 7,951 -
Tax effect of pretax adjustments (1)
(4,190) (2,792)
Adjusted net loss from continuing operations $ (172,116) $ (157,181)
Diluted loss per share from continuing operations - as reported $ (1.53) $ (1.26)
Adjustments, net of tax 0.13 0.06
Adjusted diluted loss per share from continuing operations $ (1.40) $ (1.20)
(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
Q1 FY2027 Form 10-Q| H&R Block, Inc.
disease, 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, 2026 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 Estimates" of our Annual Report on Form 10-K for the fiscal year ended June 30, 2026.
H&R Block Inc. published this content on November 09, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 09, 2026 at 21:51 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]