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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended
July 31, 2019
 
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from             to             
Commission file number 1-06089

H&R Block, Inc.
(Exact name of registrant as specified in its charter)
Missouri
 
44-0607856
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
One H&R Block Way, Kansas City, Missouri 64105
(Address of principal executive offices, including zip code)
(816) 854-3000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, without par value
HRB
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes     No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes     No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer            Accelerated filer         Non-accelerated filer           Smaller reporting company      Emerging growth company
    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No  
The number of shares outstanding of the registrant's Common Stock, without par value, at the close of business on August 31, 2019: 200,720,054 shares.
 



Table of Contents

Form 10-Q for the Period Ended July 31, 2019
Table of Contents
 
 
 
 
 
Consolidated Statements of Operations and Comprehensive Loss
 
 
Three months ended July 31, 2019 and 2018
 
 
 
 
Consolidated Balance Sheets
 
 
As of July 31, 2019, July 31, 2018 and April 30, 2019
 
 
 
 
Consolidated Statements of Cash Flows
 
 
Three months ended July 31, 2019 and 2018
 
 
 
 
Consolidated Statements of Stockholders' Equity
 
 
Three months ended July 31, 2019 and the fiscal year ended April 30, 2019
 
 
 
 
Notes to Consolidated Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Legal Proceedings
 
 
 
Risk Factors
 
 
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
 
 
 
Exhibits
 
 
 
 




Table of Contents

PART I    FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(unaudited, in 000s, except 
per share amounts)
 
Three months ended July 31,
 
2019

 
2018

 
 
 
 
 
REVENUES:
 
 
 
 
Service revenues
 
$
132,159

 
$
126,860

Royalty, product and other revenues
 
18,203

 
18,323

 
 
150,362

 
145,183

OPERATING EXPENSES:
 
 
 
 
Costs of revenues
 
229,392

 
221,560

Selling, general and administrative
 
116,136

 
105,740

Total operating expenses
 
345,528

 
327,300

 
 
 
 
 
Other income (expense), net
 
9,123

 
4,542

Interest expense on borrowings
 
(21,071
)
 
(21,190
)
Loss from continuing operations before income tax benefit
 
(207,114
)
 
(198,765
)
Income tax benefit
 
(61,390
)
 
(49,968
)
Net loss from continuing operations
 
(145,724
)
 
(148,797
)
Net loss from discontinued operations, net of tax benefits of $1,358 and $1,162
 
(4,523
)
 
(3,873
)
NET LOSS
 
$
(150,247
)
 
$
(152,670
)
 
 
 
 
 
BASIC AND DILUTED LOSS PER SHARE:
 
 
 
 
Continuing operations
 
$
(0.72
)
 
$
(0.72
)
Discontinued operations
 
(0.02
)
 
(0.02
)
Consolidated
 
$
(0.74
)
 
$
(0.74
)
 
 
 
 
 
DIVIDENDS DECLARED PER SHARE
 
$
0.26

 
$
0.25

 
 
 
 
 
COMPREHENSIVE LOSS:
 
 
 
 
Net loss
 
$
(150,247
)
 
$
(152,670
)
Unrealized gains on securities, net of taxes
 

 
3

Change in foreign currency translation adjustments
 
(2,320
)
 
(1,734
)
Other comprehensive loss
 
(2,320
)
 
(1,731
)
Comprehensive loss
 
$
(152,567
)
 
$
(154,401
)
 
 
 
 
 
See accompanying notes to consolidated financial statements.

H&R Block, Inc. | Q1 FY2020 Form 10-Q
1

Table of Contents

CONSOLIDATED BALANCE SHEETS
 
(unaudited, in 000s, except 
share and per share amounts)
 
As of
 
July 31, 2019

 
July 31, 2018

 
April 30, 2019

 
 


 


 
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
607,668

 
$
979,116

 
$
1,572,150

Cash and cash equivalents - restricted
 
157,786

 
131,376

 
135,577

Receivables, less allowance for doubtful accounts of $66,652, $65,445 and $67,228
 
76,128

 
70,576

 
138,965

Prepaid expenses and other current assets
 
105,123

 
101,055

 
146,667

Total current assets
 
946,705

 
1,282,123

 
1,993,359

Property and equipment, at cost, less accumulated depreciation and amortization of $764,891, $768,302 and $745,761
 
199,679

 
227,003

 
212,092

Operating lease right of use asset
 
486,147

 

 

Intangible assets, net
 
419,391

 
354,831

 
342,493

Goodwill
 
821,278

 
507,941

 
519,937

Deferred tax assets and income taxes receivable
 
142,416

 
131,683

 
141,979

Other noncurrent assets
 
94,384

 
101,457

 
90,085

Total assets
 
$
3,110,000

 
$
2,605,038

 
$
3,299,945

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
Accounts payable and accrued expenses
 
$
122,156

 
$
145,471

 
$
249,525

Accrued salaries, wages and payroll taxes
 
48,166

 
37,468

 
196,527

Accrued income taxes and reserves for uncertain tax positions
 
182,928

 
178,313

 
271,973

Operating lease liabilities
 
186,355

 

 

Deferred revenue and other current liabilities
 
193,364

 
202,744

 
204,976

Total current liabilities
 
732,969

 
563,996

 
923,001

Long-term debt
 
1,493,289

 
1,495,006

 
1,492,629

Deferred tax liabilities and reserves for uncertain tax positions
 
199,714

 
231,292

 
197,906

Operating lease liabilities
 
292,818

 

 

Deferred revenue and other noncurrent liabilities
 
100,406

 
122,735

 
144,882

Total liabilities
 
2,819,196

 
2,413,029

 
2,758,418

COMMITMENTS AND CONTINGENCIES
 


 


 


STOCKHOLDERS' EQUITY:
 
 
 
 
 
 
Common stock, no par, stated value $.01 per share, 800,000,000 shares authorized, shares issued of 236,744,360, 242,026,278 and 238,336,760
 
2,367

 
2,420

 
2,383

Additional paid-in capital
 
759,449

 
752,109

 
767,636

Accumulated other comprehensive loss
 
(22,736
)
 
(16,034
)
 
(20,416
)
Retained earnings
 
250,740

 
163,567

 
499,386

Less treasury shares, at cost, of 35,785,391, 36,517,685 and 36,377,441
 
(699,016
)
 
(710,053
)
 
(707,462
)
Total stockholders' equity
 
290,804

 
192,009

 
541,527

Total liabilities and stockholders' equity
 
$
3,110,000

 
$
2,605,038

 
$
3,299,945

 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.

2
Q1 FY2020 Form 10-Q | H&R Block, Inc.

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(unaudited, in 000s)
 
Three months ended July 31,
 
2019

 
2018

CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net loss
 
$
(150,247
)
 
$
(152,670
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
38,605

 
40,432

Provision for bad debt
 
552

 
1,617

Deferred taxes
 
6,825

 
9,595

Stock-based compensation
 
6,674

 
4,359

Changes in assets and liabilities, net of acquisitions:
 
 
 
 
Receivables
 
60,519

 
66,202

Prepaid expenses, other current and noncurrent assets
 
(9,917
)
 
(12,161
)
Accounts payable, accrued expenses, salaries, wages and payroll taxes
 
(284,643
)
 
(203,482
)
Deferred revenue, other current and noncurrent liabilities
 
(45,769
)
 
(40,760
)
Income tax receivables, accrued income taxes and income tax reserves
 
(99,929
)
 
(89,661
)
Other, net
 
(6,499
)
 
966

Net cash used in operating activities
 
(483,829
)
 
(375,563
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Capital expenditures
 
(15,181
)
 
(12,057
)
Payments made for business acquisitions, net of cash acquired
 
(394,411
)
 
(1,449
)
Franchise loans funded
 
(2,806
)
 
(1,805
)
Payments from franchisees
 
2,647

 
5,104

Other, net
 
50,944

 
3,645

Net cash used in investing activities
 
(358,807
)
 
(6,562
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Dividends paid
 
(52,512
)
 
(52,104
)
Repurchase of common stock, including shares surrendered
 
(36,456
)
 
(101,665
)
Proceeds from exercise of stock options
 
1,206

 
1,355

Other, net
 
(12,431
)
 
(17,494
)
Net cash used in financing activities
 
(100,193
)
 
(169,908
)
 
 
 
 
 
Effects of exchange rate changes on cash
 
556

 
(1,153
)
 
 
 
 
 
Net decrease in cash and cash equivalents, including restricted balances
 
(942,273
)
 
(553,186
)
Cash, cash equivalents and restricted cash, beginning of period
 
1,707,727

 
1,663,678

Cash, cash equivalents and restricted cash, end of period
 
$
765,454

 
$
1,110,492

 
 
 
 
 
SUPPLEMENTARY CASH FLOW DATA:
 
 
 
 
Income taxes paid, net of refunds received
 
$
36,138

 
$
31,969

Interest paid on borrowings
 
15,519

 
15,519

Accrued additions to property and equipment
 
127

 
9,974

Accrued purchase of common stock
 
16,801

 

 
 
 
 
 
See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
(amounts in 000s, except per share amounts)
 
 
 
Common Stock
 
Additional
Paid-in
Capital

 
Accumulated Other
Comprehensive
Income (Loss)

 
Retained
Earnings

 
Treasury Stock
 
Total
Stockholders’
Equity

 
 
Shares

 
Amount

 
 
 
 
Shares

 
Amount

 
Balances as of May 1, 2019
 
238,337

 
$
2,383

 
$
767,636

 
$
(20,416
)
 
$
499,386

 
(36,377
)
 
$
(707,462
)
 
$
541,527

Net loss
 

 

 

 

 
(150,247
)
 

 

 
(150,247
)
Other comprehensive loss
 

 

 

 
(2,320
)
 

 

 

 
(2,320
)
Stock-based compensation
 

 

 
6,557

 

 

 

 

 
6,557

Stock-based awards exercised or vested
 

 

 
(13,789
)
 

 
(2,786
)
 
906

 
17,631

 
1,056

Acquisition of treasury shares
 

 

 

 

 

 
(314
)
 
(9,185
)
 
(9,185
)
Repurchase and retirement of common shares
 
(1,593
)
 
(16
)
 
(955
)
 

 
(43,101
)
 

 

 
(44,072
)
Cash dividends declared - $0.26 per share
 

 

 

 

 
(52,512
)
 

 

 
(52,512
)
Balances as of July 31, 2019
 
236,744

 
$
2,367

 
$
759,449

 
$
(22,736
)
 
$
250,740

 
(35,785
)
 
$
(699,016
)
 
$
290,804

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.


















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Table of Contents

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
(amounts in 000s, except per share amounts)
 
 
 
Common Stock
 
Additional
Paid-in
Capital

 
Accumulated
Other
Comprehensive
Income (Loss)

 
Retained
Earnings (Deficit)

 
Treasury Stock
 
Total
Stockholders’
Equity (Deficiency)

 
 
Shares

 
Amount

 
 
 
 
Shares

 
Amount

 
Balances as of May 1, 2018
 
246,199

 
$
2,462

 
$
760,250

 
$
(14,303
)
 
$
362,980

 
(36,945
)
 
$
(717,678
)
 
$
393,711

Net loss
 

 

 

 

 
(152,670
)
 

 

 
(152,670
)
Cumulative effect of ASU 2016-16 (1)
 

 

 

 

 
100,950

 

 

 
100,950

Other comprehensive loss
 

 

 

 
(1,731
)
 

 

 

 
(1,731
)
Stock-based compensation
 

 

 
4,307

 

 

 

 

 
4,307

Stock-based awards exercised or vested
 

 

 
(9,945
)
 

 
(1,029
)
 
627

 
12,185

 
1,211

Acquisition of treasury shares
 

 

 

 

 

 
(200
)
 
(4,560
)
 
(4,560
)
Repurchase and retirement of common shares
 
(4,173
)
 
(42
)
 
(2,503
)
 

 
(94,560
)
 

 

 
(97,105
)
Cash dividends declared - $0.25 per share
 

 

 

 

 
(52,104
)
 

 

 
(52,104
)
Balances as of July 31, 2018
 
242,026

 
$
2,420

 
$
752,109

 
$
(16,034
)
 
$
163,567

 
(36,518
)
 
$
(710,053
)
 
$
192,009

Net loss
 

 

 

 

 
(176,276
)
 

 

 
(176,276
)
Other comprehensive loss
 

 

 

 
(2,846
)
 

 

 

 
(2,846
)
Stock-based compensation
 

 

 
7,352

 

 

 

 

 
7,352

Stock-based awards exercised or vested
 

 

 
(226
)
 

 
(202
)
 
35

 
675

 
247

Acquisition of treasury shares
 

 

 

 

 

 
(16
)
 
(431
)
 
(431
)
Cash dividends declared - $0.25 per share
 

 

 

 

 
(51,380
)
 

 

 
(51,380
)
Balances as of October 31, 2018
 
242,026

 
$
2,420

 
$
759,235

 
$
(18,880
)
 
$
(64,291
)
 
(36,499
)
 
$
(709,809
)
 
$
(31,325
)
Net loss
 

 

 

 

 
(126,454
)
 

 

 
(126,454
)
Other comprehensive income
 

 

 

 
1,238

 

 

 

 
1,238

Stock-based compensation
 

 

 
6,067

 

 

 

 

 
6,067

Stock-based awards exercised or vested
 

 

 
(5
)
 

 
(169
)
 
41

 
796

 
622

Acquisition of treasury shares
 

 

 

 

 

 
(2
)
 
(56
)
 
(56
)
Repurchase and retirement of common shares
 
(525
)
 
(5
)
 
(315
)
 

 
(11,981
)
 

 

 
(12,301
)
Cash dividends declared - $0.25 per share
 

 

 

 

 
(51,382
)
 

 

 
(51,382
)
Balances as of January 31, 2019
 
241,501

 
$
2,415

 
$
764,982

 
$
(17,642
)
 
$
(254,277
)
 
(36,460
)
 
$
(709,069
)
 
$
(213,591
)
Net income
 

 

 

 

 
877,909

 

 

 
877,909

Other comprehensive loss
 

 

 

 
(2,774
)
 

 

 

 
(2,774
)
Stock-based compensation
 

 

 
5,784

 

 

 

 

 
5,784

Stock-based awards exercised or vested
 

 

 
(1,231
)
 

 
(150
)
 
84

 
1,634

 
253

Acquisition of treasury shares
 

 

 

 

 

 
(1
)
 
(27
)
 
(27
)
Repurchase and retirement of common shares
 
(3,164
)
 
(32
)
 
(1,899
)
 

 
(73,501
)
 

 

 
(75,432
)
Cash dividends declared - $0.25 per share
 

 

 

 

 
(50,595
)
 

 

 
(50,595
)
Balances as of April 30, 2019
 
238,337

 
$
2,383

 
$
767,636

 
$
(20,416
)
 
$
499,386

 
(36,377
)
 
$
(707,462
)
 
$
541,527

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) 
ASU 2016-16 was effective on May 1, 2018 and we adopted using the modified retrospective transition method. We recognized a $101.0 million cumulative effect adjustment to increase the opening balance of retained earnings and increase deferred tax assets resulting from intra-entity transfers of intellectual property in fiscal year 2018.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                  (unaudited)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATIONThe consolidated balance sheets as of July 31, 2019 and 2018, the consolidated statements of operations and comprehensive loss for the three months ended July 31, 2019 and 2018, the consolidated statements of cash flows for the three months ended July 31, 2019 and 2018, and the consolidated statements of stockholders' equity for the three months ended July 31, 2019 and the quarterly periods within the fiscal year ended April 30, 2019 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 July 31, 2019 and 2018 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. or to H&R Block, Inc. and its subsidiaries, as appropriate to the context.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our April 30, 2019 Annual Report to Shareholders on Form 10-K. All amounts presented herein as of April 30, 2019 or for the year then ended are derived from our Annual Report on Form 10-K.
MANAGEMENT ESTIMATESThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates, assumptions and judgments are applied in the evaluation of contingent losses arising from our discontinued mortgage business, contingent losses associated with pending claims and litigation, reserves for uncertain tax positions, and related matters. Estimates have been prepared based on the best information available as of each balance sheet date. As such, actual results could differ materially from those estimates.
SEASONALITY OF BUSINESSOur operating revenues are seasonal in nature with peak revenues typically occurring in the months of February through April. Therefore, results for interim periods are not indicative of results to be expected for the full year.
DISCONTINUED OPERATIONS – Our discontinued operations include the results of operations of Sand Canyon Corporation, previously known as Option One Mortgage Corporation (including its subsidiaries, collectively, SCC), which exited its mortgage business in fiscal year 2008. See notes 9 and 11 for additional information on litigation, claims, and other loss contingencies related to our discontinued operations.
WAVE ACQUISITION On June 28, 2019, we completed our acquisition of Wave HQ Inc. (formerly known as Wave Financial Inc.) and its subsidiaries (collectively, "Wave") for $407.0 million, subject to customary post-closing adjustments for working capital. The acquisition was funded with available cash. Wave is a provider of software solutions and related services specifically designed to help small business owners manage their finances. Major revenue sources include fees earned by providing payment processing, payroll services, and bookkeeping services. We believe the acquisition of Wave enhances our position in the small business market.
Included in the transaction price is $11.4 million of amounts held in escrow, of which $8.2 million will be treated as compensation expense over the next two years as certain key employees are required to remain employees to receive payment. Amounts held in escrow are included in restricted cash in the consolidated balance sheet at July 31, 2019. Additionally, key employees are participating in a management incentive program consisting of cash performance incentives and stock-based compensation which will be earned over the next three years and is not considered part of the purchase price.
Given the proximity of the closing of the transaction to the end of the current reporting period, the valuation of identified intangible assets is still in progress and the allocation of the purchase price between intangible assets and goodwill is incomplete. As of July 31, 2019, the Company has recorded a provisional estimate of identified intangible assets and goodwill. The Company expects to finalize the valuation and useful life determination for the acquired intangible assets and the related income tax impacts during the fiscal year, and therefore, the purchase price allocation is subject to change.

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The assets acquired, net of liabilities assumed on the acquisition date, and the provisional estimates of identified intangible assets and goodwill, are as follows:
(in 000s)
 
Assets acquired and liabilities assumed, net
 
$
4,495

Cash held in escrow
 
3,212

Identifiable intangible assets
 
87,760

Goodwill
 
303,359

Total identifiable assets and goodwill
 
$
398,826

 
 
 

Revenues of $3.6 million and pretax losses of $5.3 million were recognized by Wave from the period of June 28, 2019 through July 31, 2019, which are included in our consolidated statement of operations for the three-month period ended July 31, 2019. Had we acquired Wave as of May 1, 2018, we would have reported consolidated revenues of $156.9 million and $152.0 million for the three months ended July 31, 2019 and 2018, respectively, and consolidated pretax losses from continuing operations of $218.1 million and $211.2 million for the three months ended July 31, 2019 and 2018, respectively. Pro-forma adjustments primarily include provisional estimates of amortization of intangible assets and certain compensation expenses.
NEW ACCOUNTING PRONOUNCEMENTS – 
Leases. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases” (ASU 2016-02), which requires the recognition of lease assets and lease liabilities on the balance sheet by lessees for leases previously classified as operating leases. We adopted this guidance and related amendments as of May 1, 2019 using the alternative transition method, which allows companies the option of using the effective date of the new standard as the initial application date (at the beginning of the period in which it adopted, rather than at the beginning of the earliest comparative period).
At July 31, 2019, the Company has recognized $486.1 million and $479.2 million of operating lease right-of-use (ROU) assets and operating lease liabilities, respectively. As part of adopting the standard, pre-existing liabilities for deferred rent and various lease incentives were reclassified as a component of the lease assets. We elected the package of practical expedients which allows us to not reassess historical lease classification, initial direct costs or contracts related to leases. For leases with an initial term of twelve months or less we have elected to only recognize retail office leases on our balance sheet. We elected the practical expedient to account for lease and non-lease components (such as common area maintenance, utilities, insurance and taxes) as a single lease component for all classes of underlying assets. We also elected the practical expedient to not reassess whether land easement contracts meet the definition of a lease. We did not elect the practical expedient of hindsight when determining the lease term of existing contracts at the effective date.
The adoption of the new standard did not materially affect our consolidated statement of operations or cash flows. See note 10, Leases, for additional information.
NOTE 2: REVENUE RECOGNITION
The majority of our revenues are from our U.S. Tax Services business. The following table disaggregates our U.S. Tax Services revenues by major service line, with revenues from our international Tax Services businesses and from Wave included as separate lines:

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Table of Contents

 
 
 
 
(in 000s)

Three months ended July 31,
 
2019
 
2018
Revenues:
 
 
 
 
U.S. assisted tax preparation
 
$
32,992

 
$
31,104

U.S. royalties
 
6,859

 
7,571

U.S. DIY tax preparation
 
3,410

 
2,781

International
 
40,581

 
39,179

Refund Transfers
 
1,509

 
1,424

Emerald Card®
 
13,855

 
14,246

Peace of Mind® Extended Service Plan
 
32,837

 
36,577

Tax Identity Shield®
 
4,522

 
4,741

Interest and fee income on Emerald AdvanceTM
 
554

 
447

Wave
 
3,625

 

Other
 
9,618

 
7,113

Total revenues
 
$
150,362

 
$
145,183

 
 
 
 
 

Wave revenues primarily consist of fees received to process payment transactions and are generally calculated as a percentage of the transaction amounts processed. Revenues are recognized upon authorization of the transaction.
Changes in the balances of deferred revenue and wages for Peace of Mind® Extended Service Plan (POM) are as follows:
 
 
 
 
 
 
 
 
(in 000s)

POM
 
Deferred Revenue
 
Deferred Wages
Three months ended July 31,
 
2019

 
2018

 
2019

 
2018

Balance, beginning of the period
 
$
212,511

 
$
218,274

 
$
27,306

 
$
32,683

Amounts deferred
 
1,723

 
1,392

 
23

 
62

Amounts recognized on previous deferrals
 
(38,212
)
 
(40,857
)
 
(5,324
)
 
(5,917
)
Balance, end of the period
 
$
176,022

 
$
178,809

 
$
22,005

 
$
26,828

 
 
 
 
 
 
 
 
 

As of July 31, 2019, deferred revenue related to POM was $176.0 million. We expect that $110.7 million will be recognized over the next twelve months, while the remaining balance will be recognized over the following sixty months.
As of July 31, 2019 and 2018, Tax Identity Shield® (TIS) deferred revenue was $25.4 million and $31.9 million, respectively. Deferred revenue related to TIS was $29.7 million and $36.4 million at April 30, 2019 and 2018, respectively. All deferred revenue related to TIS will be recognized within the next nine months.
NOTE 3: LOSS PER SHARE AND STOCKHOLDERS' EQUITY
LOSS PER SHARE – Basic and diluted loss per share is computed using the two-class method. The two-class method is an earnings allocation formula that determines net income per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Per share amounts are computed by dividing net income or loss from continuing operations attributable to common shareholders by the weighted average shares outstanding during each period. The dilutive effect of potential common shares is included in diluted earnings per share except in those periods with a loss from continuing operations. 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 3.7 million shares for the three months ended July 31, 2019, and 3.4 million shares for the three months ended July 31, 2018, as the effect would be antidilutive due to the net loss from continuing operations during those periods.

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The computations of basic and diluted loss per share from continuing operations are as follows:
(in 000s, except per share amounts)
 
Three months ended July 31,
 
2019

 
2018

Net loss from continuing operations attributable to shareholders
 
$
(145,724
)
 
$
(148,797
)
Amounts allocated to participating securities
 
(149
)
 
(142
)
Net loss from continuing operations attributable to common shareholders
 
$
(145,873
)
 
$
(148,939
)
 
 
 
 
 
Basic weighted average common shares
 
202,037

 
207,673

Potential dilutive shares
 

 

Dilutive weighted average common shares
 
202,037

 
207,673

 
 
 
 
 
Loss per share from continuing operations attributable to common shareholders:
Basic
 
$
(0.72
)
 
$
(0.72
)
Diluted
 
(0.72
)
 
(0.72
)
 
 
 
 
 

The weighted average shares outstanding for the three months ended July 31, 2019 decreased to 202.0 million from 207.7 million for the three months ended July 31, 2018. The decrease is due to share repurchases completed in the current quarter and in the prior year.
STOCK-BASED COMPENSATION – During the three months ended July 31, 2019, we also acquired 0.3 million shares of our common stock at an aggregate cost of $9.2 million, which represent shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards. During the three months ended July 31, 2018, we acquired 0.2 million shares at an aggregate cost of $4.6 million for similar purposes.
During the three months ended July 31, 2019 and 2018, we issued 0.9 million and 0.6 million shares of common stock, respectively, due to the vesting or exercise of stock-based awards.
During the three months ended July 31, 2019, we granted equity awards equivalent to 1.3 million shares under our stock-based compensation plans, consisting primarily of nonvested units. Stock-based compensation expense of our continuing operations totaled $6.7 million and $4.4 million for the three months ended July 31, 2019 and 2018, respectively. As of July 31, 2019, unrecognized compensation cost for stock options totaled $0.5 million, and for nonvested shares and units totaled $55.9 million.
NOTE 4: RECEIVABLES
Receivables, net of their related allowance, consist of the following:
(in 000s)
 
As of
 
July 31, 2019
 
July 31, 2018
 
April 30, 2019
 
 
Short-term
 
Long-term
 
Short-term
 
Long-term
 
Short-term
 
Long-term
Loans to franchisees
 
$
12,301

 
$
45,542

 
$
28,250

 
$
35,776

 
$
22,427

 
$
35,325

Receivables for U.S. assisted and DIY tax preparation and related fees
 
19,686

 
3,716

 
9,084

 
5,503

 
34,284

 
3,716

H&R Block Instant RefundTM receivables
 
880

 
1,780

 
1,306

 
2,031

 
37,319

 
1,701

H&R Block Emerald AdvanceTM lines of credit
 
8,136

 
10,249

 
7,694

 
11,800

 
8,546

 
12,418

Software receivables from retailers
 
1,395

 

 
3,372

 

 
9,354

 

Royalties and other receivables from franchisees
 
7,834

 
99

 
4,257

 

 
11,888

 
97

Wave payment processing receivables
 
3,041

 

 

 

 

 

Other
 
22,855

 
2,251

 
16,613

 
3,665

 
15,147

 
2,382

Total
 
$
76,128

 
$
63,637

 
$
70,576

 
$
58,775

 
$
138,965

 
$
55,639

 
 
 
 
 
 
 
 
 
 
 
 
 


H&R Block, Inc. | Q1 FY2020 Form 10-Q
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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 off-season working capital needs. As of July 31, 2019 and 2018, loans with a principal balance of $2.0 million and $1.2 million, respectively, were more than 90 days past due. We had no loans to franchisees on non-accrual status.
H&R BLOCK INSTANT REFUNDTM PROGRAM H&R Block Instant RefundTM (formerly Instant Cash Back®) amounts are generally received from the Canada Revenue Agency (CRA) 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 year of origination, with older years being deemed more unlikely to be repaid. Current balances and amounts on non-accrual status and classified as impaired, or more than 60 days past due, by year of origination, as of July 31, 2019 are as follows:
 
 
 
 
(in 000s)

Year of Origination
 
Current Balance