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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 endedJanuary 31, 2021
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)
Missouri44-0607856
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, without par valueHRBNew 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 February 26, 2021: 181,431,272 shares.



Table of Contents

Form 10-Q for the Period Ended January 31, 2021
Table of Contents



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 January 31,Nine months ended January 31,
2021202020212020
REVENUES:
Service revenues$244,692 $419,955 $956,605 $691,762 
Royalty, product and other revenues63,535 99,250 129,202 138,606 
308,227 519,205 1,085,807 830,368 
OPERATING EXPENSES:
Costs of revenues380,273 462,521 940,364 945,119 
Selling, general and administrative191,488 209,288 461,368 475,758 
Total operating expenses571,761 671,809 1,401,732 1,420,877 
Other income (expense), net2,367 1,879 4,759 13,741 
Interest expense on borrowings(22,333)(26,305)(85,319)(68,682)
Loss from continuing operations before income tax benefit(283,500)(177,030)(396,485)(645,450)
Income tax benefit(51,669)(49,004)(35,730)(188,146)
Net loss from continuing operations(231,831)(128,026)(360,755)(457,304)
Net loss from discontinued operations, net of tax benefits of $1,323, $488, $3,371 and $3,173
(1,163)(1,657)(4,706)(10,625)
NET LOSS$(232,994)$(129,683)$(365,461)$(467,929)
BASIC AND DILUTED LOSS PER SHARE:
Continuing operations$(1.27)$(0.66)$(1.92)$(2.31)
Discontinued operations (0.01)(0.02)(0.05)
Consolidated$(1.27)$(0.67)$(1.94)$(2.36)
DIVIDENDS DECLARED PER SHARE$0.26 $0.26 $0.78 $0.78 
COMPREHENSIVE LOSS:
Net loss$(232,994)$(129,683)$(365,461)$(467,929)
Change in foreign currency translation adjustments20,014 (3,574)39,883 (4,975)
Other comprehensive income (loss)20,014 (3,574)39,883 (4,975)
Comprehensive loss$(212,980)$(133,257)$(325,578)$(472,904)
See accompanying notes to consolidated financial statements.
H&R Block, Inc. | Q3 FY2021 Form 10-Q
1

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CONSOLIDATED BALANCE SHEETS(unaudited, in 000s, except 
share and per share amounts)
As ofJanuary 31, 2021January 31, 2020April 30, 2020
ASSETS
Cash and cash equivalents$280,249 $192,340 $2,661,914 
Cash and cash equivalents - restricted181,159 169,447 211,106 
Receivables, less allowance for credit losses of $34,493, $45,254 and $64,648
563,089 819,946 133,197 
Prepaid expenses and other current assets196,145 120,229 80,519 
Total current assets1,220,642 1,301,962 3,086,736 
Property and equipment, at cost, less accumulated depreciation and amortization of $851,731, $803,272 and $796,192
162,765 197,569 184,367 
Operating lease right of use asset419,245 463,777 494,788 
Intangible assets, net381,264 433,074 414,976 
Goodwill745,616 838,830 712,138 
Deferred tax assets and income taxes receivable179,598 134,901 151,195 
Other noncurrent assets59,233 82,317 67,847 
Total assets$3,168,363 $3,452,430 $5,112,047 
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses$160,880 $156,766 $203,103 
Accrued salaries, wages and payroll taxes118,517 117,459 116,375 
Accrued income taxes and reserves for uncertain tax positions17,088 36,242 209,816 
Current portion of long-term debt 649,022 649,384 
Operating lease liabilities186,209 187,890 195,537 
Deferred revenue and other current liabilities208,789 190,242 201,401 
Total current liabilities691,483 1,337,621 1,575,616 
Long-term debt and line of credit borrowings2,369,574 1,880,589 2,845,873 
Deferred tax liabilities and reserves for uncertain tax positions302,120 172,954 182,441 
Operating lease liabilities245,383 289,299 312,566 
Deferred revenue and other noncurrent liabilities94,383 90,346 124,510 
Total liabilities3,702,943 3,770,809 5,041,006 
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 218,719,439, 228,206,684 and 228,206,684
2,187 2,282 2,282 
Additional paid-in capital778,495 769,990 775,387 
Accumulated other comprehensive loss(11,693)(25,391)(51,576)
Retained earnings (deficit)(616,518)(367,218)42,965 
Less treasury shares, at cost, of 35,225,825, 35,732,666 and 35,731,376
(687,051)(698,042)(698,017)
Total stockholders' equity (deficiency)(534,580)(318,379)71,041 
Total liabilities and stockholders' equity$3,168,363 $3,452,430 $5,112,047 
See accompanying notes to consolidated financial statements.
2
Q3 FY2021 Form 10-Q | H&R Block, Inc.

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CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited, in 000s)
Nine months ended January 31,20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(365,461)$(467,929)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization117,163 125,409 
Provision25,642 37,517 
Deferred taxes(39,858)10,795 
Stock-based compensation20,744 22,699 
Changes in assets and liabilities, net of acquisitions:
Receivables(438,307)(684,323)
Prepaid expenses, other current and noncurrent assets(68,222)(1,990)
Accounts payable, accrued expenses, salaries, wages and payroll taxes(37,601)(166,204)
Deferred revenue, other current and noncurrent liabilities(24,951)(55,064)
Income tax receivables, accrued income taxes and income tax reserves(94,922)(282,488)
Other, net(2,906)(6,213)
Net cash used in operating activities(908,679)(1,467,791)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(47,996)(66,510)
Payments made for business acquisitions, net of cash acquired(15,025)(450,282)
Franchise loans funded(24,957)(32,890)
Payments from franchisees20,293 14,604 
Other, net(6,427)45,376 
Net cash used in investing activities(74,112)(489,702)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of line of credit borrowings(2,320,000)(285,000)
Proceeds from line of credit borrowings1,200,000 1,320,000 
Repayments of long-term debt(650,000) 
Proceeds from issuance of long-term debt647,965  
Dividends paid(147,887)(154,827)
Repurchase of common stock, including shares surrendered(153,158)(256,199)
Proceeds from exercise of stock options2,139 2,074 
Other, net(21,884)(14,136)
Net cash provided by (used in) financing activities(1,442,825)611,912 
Effects of exchange rate changes on cash14,004 (359)
Net decrease in cash and cash equivalents, including restricted balances(2,411,612)(1,345,940)
Cash, cash equivalents and restricted cash, beginning of period2,873,020 1,707,727 
Cash, cash equivalents and restricted cash, end of period$461,408 $361,787 
SUPPLEMENTARY CASH FLOW DATA:
Income taxes paid, net of refunds received$96,965 $84,872 
Interest paid on borrowings78,098 65,972 
Accrued additions to property and equipment2,841 1,662 
New operating right of use assets and related lease liabilities93,381 251,284 
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(amounts in 000s, except
per share amounts)
Common StockAdditional
Paid-in
Capital
Accumulated Other
Comprehensive
Income (Loss)
Retained
Earnings
(Deficit)
Treasury StockTotal
Stockholders’
Equity
(Deficiency)
SharesAmountSharesAmount
Balances as of May 1, 2020228,207 $2,282 $775,387 $(51,576)$42,965 (35,731)$(698,017)$71,041 
Net income    91,259   91,259 
Other comprehensive income   17,539    17,539 
Stock-based compensation  7,422     7,422 
Stock-based awards exercised or vested  (10,027) (1,247)627 12,247 973 
Acquisition of treasury shares(1)
     (204)(2,913)(2,913)
Cash dividends declared - $0.26 per share
    (50,044)  (50,044)
Balances as of July 31, 2020228,207 $2,282 $772,782 $(34,037)$82,933 (35,308)$(688,683)$135,277 
Net loss    (223,726)  (223,726)
Other comprehensive income   2,330    2,330 
Stock-based compensation  6,768     6,768 
Stock-based awards exercised or vested  (262) (220)13 262 (220)
Acquisition of treasury shares(1)
     (6)(99)(99)
Repurchase and retirement of common shares(9,488)(95)(5,597) (144,450)  (150,142)
Cash dividends declared - $0.26 per share
    (50,154)  (50,154)
Balances as of October 31, 2020218,719 $2,187 $773,691 $(31,707)$(335,617)(35,301)$(688,520)$(279,966)
Net loss    (232,994)  (232,994)
Other comprehensive income   20,014    20,014 
Stock-based compensation  5,265     5,265 
Stock-based awards exercised or vested  (461) (218)76 1,473 794 
Acquisition of treasury shares(1)
     (1)(4)(4)
Cash dividends declared - $0.26 per share
— — — — (47,689)— — (47,689)
Balances as of January 31, 2021218,719 $2,187 $778,495 $(11,693)$(616,518)(35,226)$(687,051)$(534,580)
(1)    Represents shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards.
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(amounts in 000s, except
per share amounts)
Common StockAdditional
Paid-in
Capital
Accumulated Other
Comprehensive
Income (Loss)
Retained
Earnings
(Deficit)
Treasury StockTotal
Stockholders’
Equity
(Deficiency)
SharesAmountSharesAmount
Balances as of May 1, 2019238,337 $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(1)
— — — — — (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, 2019236,744 $2,367 $759,449 $(22,736)$250,740 (35,785)$(699,016)$290,804 
Net loss— — — — (187,999)— — (187,999)
Other comprehensive income— — — 919 — — — 919 
Stock-based compensation— — 9,331 — — — — 9,331 
Stock-based awards exercised or vested— — (127)— (276)13 264 (139)
Acquisition of treasury shares(1)
— — — — — (6)(173)(173)
Repurchase and retirement of common shares(5,720)(57)(3,433)— (133,449)— — (136,939)
Cash dividends declared - $0.26 per share
— — — — (51,551)— — (51,551)
Balances as of October 31, 2019231,024 $2,310 $765,220 $(21,817)$(122,535)(35,778)$(698,925)$(75,747)
Net loss— — — — (129,683)— — (129,683)
Other comprehensive loss— — — (3,574)— — — (3,574)
Stock-based compensation— — 6,529 — — — — 6,529 
Stock-based awards exercised or vested— — (69)— (180)47 939 690 
Acquisition of treasury shares(1)
— — — — — (2)(56)(56)
Repurchase and retirement of common shares(2,817)(28)(1,690)— (64,056)— — (65,774)
Cash dividends declared - $0.26 per share
— — — — (50,764)— — (50,764)
Balances as of January 31, 2020228,207 $2,282 $769,990 $(25,391)$(367,218)(35,733)$(698,042)$(318,379)
(1)    Represents shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards.
See accompanying notes to consolidated financial statements.

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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 January 31, 2021 and 2020, the consolidated statements of operations and comprehensive loss for the three and nine months ended January 31, 2021 and 2020, the consolidated statements of cash flows for the nine months ended January 31, 2021 and 2020, and the consolidated statements of stockholders' equity for the three and nine months ended January 31, 2021 and 2020 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 January 31, 2021 and 2020 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, 2020 Annual Report to Shareholders on Form 10-K. All amounts presented herein as of April 30, 2020 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, fair value of reporting units, 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 BUSINESS – Our 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.
IMPACTS OF THE COVID-19 PANDEMIC - During March 2020, the World Health Organization declared the coronavirus (COVID-19) outbreak to be a global pandemic. As a result of the COVID-19 pandemic, on March 21, 2020, the federal tax filing deadline in the United States (U.S.) for individual 2019 tax returns was extended from April 15, 2020 to July 15, 2020. Substantially all U.S. states with an April 15 individual state income tax filing requirement extended their respective deadlines. In Canada, the deadline for individuals to file was extended to June 1, 2020. These extensions impacted the typical seasonality of our business and the comparability of our financial results. Consequently, a portion of revenues and expenses that would have normally been recognized in our fourth quarter of fiscal year 2020 shifted to the first two quarters of fiscal year 2021.
On January 15, 2021, the Internal Revenue Service (IRS) announced that it would begin accepting and processing 2020 individual income tax returns on February 12, 2021. Historically, the IRS has begun accepting and processing returns during our third fiscal quarter. This delay has impacted the timing of recognizing a portion of revenue for the returns that we prepared during the quarter but were not able to electronically file with the IRS. See note 2 for additional information.
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 note 10 for additional information on litigation, claims, and other loss contingencies related to our discontinued operations.
NEW ACCOUNTING PRONOUNCEMENTS – 
Current Expected Credit Losses. In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-13 (ASU 2016-13), "Measurement of Credit Losses on Financial Instruments," which
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replaces the existing incurred credit loss model for an expected credit loss model. We adopted ASU 2016-13 as of May 1, 2020, which did not have a material impact on our consolidated financial statements.
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:
(in 000s)
Three months ended January 31,Nine months ended January 31,
2021202020212020
Revenues:
U.S. assisted tax preparation$154,489 $283,956 $541,139 $358,174 
U.S. royalties23,902 44,965 67,427 59,644 
U.S. DIY tax preparation21,681 34,089 94,331 42,040 
International15,671 11,804 132,347 97,311 
Refund Transfers7 50,494 11,752 52,794 
Emerald Card®21,951 16,657 48,801 39,128 
Peace of Mind® Extended Service Plan16,101 16,954 72,871 75,451 
Tax Identity Shield®4,927 8,138 19,129 17,308 
Interest and fee income on Emerald AdvanceSM
27,590 32,741 28,754 33,780 
Wave14,803 11,213 41,197 25,740 
Other7,105 8,194 28,059 28,998 
Total revenues$308,227 $519,205 $1,085,807 $830,368 
Revenue is recognized upon satisfaction of performance obligations by the transfer of a product or service to the customer. The majority of our services and products have multiple performance obligations. For our tax preparation services, the various performance obligations are generally provided simultaneously at a point in time, and revenue is recognized at that time. We allocate the transaction price to the various performance obligations based on relative standalone selling prices. The value of point-of-sale discounts and coupons are recorded as a reduction of revenue.
U.S. Assisted tax preparation services include tax preparation and electronic filing or printing of the completed tax return. Revenues from tax preparation services, including printing for clients that choose to print and mail their returns, are recognized when a completed return is accepted by the customer, and revenues for electronic filing a completed return are recognized when the return is electronically filed.
Royalties are based on contractual percentages of franchise gross receipts and are generally recognized in the period in which the services are provided by the franchisee to the customer.
U.S. DIY tax preparation includes fees for online and desktop tax preparation software and for electronic filing or printing. Revenues for online software, including printing for clients that choose to print and mail their returns, are recognized when the customer uses the software to complete a return and revenues for desktop software are recognized when the software is sold to the end user. Revenues for electronic filing are recognized when the return is electronically filed.
Refund Transfer revenues are recognized when the IRS filing acknowledgment is received and the bank account is established at our banking partner.
Revenues for electronic filing of U.S. returns totaling $18.7 million were deferred as of January 31, 2021 and will be recognized in February 2021 when the associated tax returns are electronically filed.
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