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hrb-20220331

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	March 31, 2022
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 April 29, 2022: 159,594,159 shares.

Table of Contents

Form 10-Q for the Period ended March 31, 2022

Table of Contents


	PART I
Item 1.	Consolidated Statements of Operations and Comprehensive Income Three and nine months ended March 31, 2022 and 2021	1
	Consolidated Balance Sheets As of March 31, 202 2 and June 30, 2021	2
	Consolidated Statements of Cash Flows Nine months ended March 31, 2022 and 2021	3
	Consolidated Statements of Stockholders' Equity Three and nine months ended March 31, 2022 and 2021	4
	Notes to Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
	PART II
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
	Signatures	31

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PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME					(unaudited, in 000s, except per share amounts)
	Three months ended March 31,				Nine months ended March 31,
	2022		2021		2022		2021
REVENUES:
Service revenues	$	1,841,122	$	1,763,693	$	2,151,824	$	2,262,663
Royalty, product and other revenues	220,635		219,871		261,373		280,212
	2,061,757		1,983,564		2,413,197		2,542,875
OPERATING EXPENSES:
Costs of revenues	831,455		795,494		1,362,310		1,350,730
Selling, general and administrative	344,937		336,833		617,594		621,209
Total operating expenses	1,176,392		1,132,327		1,979,904		1,971,939

Other income (expense), net	238		449		1,989		3,491
Interest expense on borrowings	(23,746)		(22,471)		(69,661)		(78,657)
Income from continuing operations before income taxes	861,857		829,215		365,621		495,770
Income taxes	186,884		69,543		29,666		50,997
Net income from continuing operations	674,973		759,672		335,955		444,773
Net loss from discontinued operations, net of tax benefits of $539, $793, $1,495 and $3,317	(1,796)		(1,425)		(4,984)		(4,533)
NET INCOME	$	673,177	$	758,247	$	330,971	$	440,240
BASIC EARNINGS PER SHARE:
Continuing operations	$	4.13	$	4.15	$	1.95	$	2.38
Discontinued operations	(0.01)		(0.01)		(0.03)		(0.03)
Consolidated	$	4.12	$	4.14	$	1.92	$	2.35
DILUTED EARNINGS PER SHARE:
Continuing operations	$	4.06	$	4.09	$	1.92	$	2.35
Discontinued operations	(0.01)		(0.01)		(0.03)		(0.02)
Consolidated	$	4.05	$	4.08	$	1.89	$	2.33




DIVIDENDS DECLARED PER SHARE	$	0.27	$	0.26	$	0.81	$	0.78
COMPREHENSIVE INCOME:
Net income	$	673,177	$	758,247	$	330,971	$	440,240



Change in foreign currency translation adjustments	5,595		3,955		(3,926)		34,753
Other comprehensive income (loss)	5,595		3,955		(3,926)		34,753
Comprehensive income	$	678,772	$	762,202	$	327,045	$	474,993

See accompanying notes to consolidated financial statements.


H&R Block, Inc. \|Q3 FY2022 Form 10-Q			1

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CONSOLIDATED BALANCE SHEETS	(unaudited, in 000s, except share and per share amounts)
As of	March 31, 2022		June 30, 2021
ASSETS
Cash and cash equivalents	$	1,041,740	$	1,434,381
Cash and cash equivalents - restricted	135,314		149,783
Receivables, less allowance for credit losses of $61,512 and $77,518	261,602		88,932
Income taxes receivable	340,355		330,872
Prepaid expenses and other current assets	89,025		76,414
Total current assets	1,868,036		2,080,382
Property and equipment, at cost, less accumulated depreciation and amortization of $881,841 and $842,861	133,036		139,276
Operating lease right of use assets	390,758		445,847
Intangible assets, net	322,836		351,093
Goodwill	764,428		754,521
Deferred tax assets and income taxes receivable	236,792		181,996
Other noncurrent assets	65,241		61,273
Total assets	$	3,781,127	$	4,014,388
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses	$	225,708	$	164,269
Accrued salaries, wages and payroll taxes	227,075		168,989
Accrued income taxes and reserves for uncertain tax positions	337,363		238,863
Current portion of long-term debt	499,395		—
Operating lease liabilities	187,263		214,190
Deferred revenue and other current liabilities	216,073		196,175
Total current liabilities	1,692,877		982,486
Long-term debt	1,486,530		1,983,719
Deferred tax liabilities and reserves for uncertain tax positions	218,461		301,658
Operating lease liabilities	210,866		244,932
Deferred revenue and other noncurrent liabilities	127,537		113,535
Total liabilities	3,736,271		3,626,330
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 193,571,309 and 216,655,616	1,936		2,167
Additional paid-in capital	767,869		779,465
Accumulated other comprehensive income (loss)	(3,838)		88
Retained earnings (deficit)	(56,790)		286,694
Less treasury shares, at cost, of 33,978,937 and 34,842,125	(664,321)		(680,356)
Total stockholders' equity	44,856		388,058
Total liabilities and stockholders' equity	$	3,781,127	$	4,014,388

See accompanying notes to consolidated financial statements.


2			Q3 FY2022 Form 10-Q\| H&R Block, Inc.

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CONSOLIDATED STATEMENTS OF CASH FLOWS	(unaudited, in 000s)
Nine months ended March 31,	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	330,971	$	440,240
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	107,462		117,037
Provision	59,778		60,428
Deferred taxes	(85,122)		5,763
Stock-based compensation	19,988		21,232

Changes in assets and liabilities, net of acquisitions:

Receivables	(233,362)		(336,868)
Prepaid expenses, other current and noncurrent assets	(16,525)		(37,054)

Accounts payable, accrued expenses, salaries, wages and payroll taxes	122,112		257,034

Deferred revenue, other current and noncurrent liabilities	36,960		30,783

Income tax receivables, accrued income taxes and income tax reserves	36,244		(52,516)
Other, net	(5,378)		(4,723)
Net cash provided by operating activities	373,128		501,356
CASH FLOWS FROM INVESTING ACTIVITIES:



Capital expenditures	(52,718)		(44,220)
Payments made for business acquisitions, net of cash acquired	(25,465)		(15,495)



Franchise loans funded	(18,468)		(26,745)
Payments from franchisees	17,714		28,477

Other, net	7,831		7,969
Net cash used in investing activities	(71,106)		(50,014)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of line of credit borrowings	(705,000)		(3,275,000)
Proceeds from line of credit borrowings	705,000		1,275,000
Repayments of long-term debt	—		(650,000)
Proceeds from issuance of long-term debt	—		647,965


Dividends paid	(143,435)		(147,887)
Repurchase of common stock, including shares surrendered	(555,247)		(188,892)
Proceeds from exercise of stock options	4,605		2,228
Other, net	(13,389)		(19,680)
Net cash used in financing activities	(707,466)		(2,356,266)
Effects of exchange rate changes on cash	(1,666)		10,370
Net decrease in cash and cash equivalents, including restricted balances	(407,110)		(1,894,554)
Cash, cash equivalents and restricted cash, beginning of period	1,584,164		2,769,947
Cash, cash equivalents and restricted cash, end of period	$	1,177,054	$	875,393
SUPPLEMENTARY CASH FLOW DATA:
Income taxes paid, net of refunds received	$	76,894	$	100,118
Interest paid on borrowings	58,009		77,398



Accrued additions to property and equipment	1,336		977
New operating right of use assets and related lease liabilities	126,726		94,260
Accrued dividends payable to common shareholders	43,041		47,181

See accompanying notes to consolidated financial statements.


H&R Block, Inc. \| Q3 FY2022 Form 10-Q			3

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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)(1)		Retained Earnings (Deficit)		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount									Shares			Amount
Balances as of July 1, 2021	216,656	$	2,167		$	779,465	$	88	$	286,694	(34,842)	$	(680,356)		$	388,058
Net loss	—	—			—		—		(151,601)		—	—			(151,601)
Other comprehensive loss	—	—			—		(11,177)		—		—	—			(11,177)
Stock-based compensation	—	—			5,627		—		—		—	—			5,627
Stock-based awards exercised or vested	—	—			(10,328)		—		(291)		705	13,765			3,146
Acquisition of treasury shares(2)	—	—			—		—		—		(205)	(4,817)			(4,817)
Repurchase and retirement of common shares	(6,802)	(68)			(4,081)		—		(161,619)		—	—			(165,768)


Cash dividends declared - $0.27 per share	—	—			—		—		(47,940)		—	—			(47,940)
Balances as of September 30, 2021	209,854	$	2,099		$	770,683	$	(11,089)	$	(74,757)	(34,342)	$	(671,408)		$	15,528
Net loss	—	—			—		—		(190,605)		—	—			(190,605)
Other comprehensive income	—	—			—		1,656		—		—	—			1,656
Stock-based compensation	—	—			5,640		—		—		—	—			5,640
Stock-based awards exercised or vested	—	—			(1,709)		—		(219)		122	2,400			472
Acquisition of treasury shares(2)	—	—			—		—		—		(2)	(52)			(52)
Repurchase and retirement of common shares	(6,589)	(66)			(3,953)		—		(154,778)		—	—			(158,797)


Cash dividends declared - $0.27 per share	—	—			—		—		(46,497)		—	—			(46,497)
Balances as of December 31, 2021	203,265	$	2,033		$	770,661	$	(9,433)	$	(466,856)	(34,222)	$	(669,060)		$	(372,655)












Net income	—	—			—		—		673,177		—	—			673,177

Other comprehensive income	—	—			—		5,595		—		—	—			5,595
Stock-based compensation	—	—			5,619		—		—		—	—			5,619
Stock-based awards exercised or vested	—	—			(2,595)		—		(201)		244	4,771			1,975
Acquisition of treasury shares(2)	—	—			—		—		—		(1)	(32)			(32)
Repurchase and retirement of common shares	(9,694)	(97)			(5,816)		—		(219,868)		—	—			(225,781)


Cash dividends declared - $0.27 per share	—	—			—		—		(43,042)		—	—			(43,042)
Balances as of March 31, 2022	193,571	$	1,936		$	767,869	$	(3,838)	$	(56,790)	(33,979)	$	(664,321)		$	44,856

(1) The balance of our accumulated other comprehensive income (loss) consists of foreign currency translation adjustments.

(2)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.


4			Q3 FY2022 Form 10-Q\| H&R Block, Inc.

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	Common Stock			Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)(1)		Retained Earnings (Deficit)		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount									Shares			Amount
Balances as of July 1, 2020	228,207	$	2,282		$	772,943	$	(39,781)	$	(18,455)	(35,478)	$	(692,187)		$	24,802
Net loss	—	—			—		—		(62,256)		—	—			(62,256)
Other comprehensive income	—	—			—		8,816		—		—	—			8,816
Stock-based compensation	—	—			7,259		—		—		—	—			7,259
Stock-based awards exercised or vested	—	—			(2,613)		—		(636)		215	4,176			927
Acquisition of treasury shares(2)	—	—			—		—		—		(42)	(596)			(596)
Repurchase and retirement of common shares	(5,957)	(60)			(3,514)		—		(84,884)		—	—			(88,458)


Cash dividends declared - $0.26 per share	—	—			—		—		(50,154)		—	—			(50,154)
Balances as of September 30, 2020	222,250	$	2,222		$	774,075	$	(30,965)	$	(216,385)	(35,305)	$	(688,607)		$	(159,660)
Net loss	—	—			—		—		(255,751)		—	—			(255,751)
Other comprehensive income	—	—			—		21,982		—		—	—			21,982
Stock-based compensation	—	—			5,181		—		—		—	—			5,181
Stock-based awards exercised or vested	—	—			(134)		—		(220)		8	144			(210)
Acquisition of treasury shares(2)	—	—			—		—		—		(3)	(44)			(44)
Repurchase and retirement of common shares	(3,531)	(35)			(2,083)		—		(59,566)		—	—			(61,684)


Cash dividends declared - $0.26 per share	—	—			—		—		(47,689)		—	—			(47,689)
Balances as of December 31, 2020	218,719	$	2,187		$	777,039	$	(8,983)	$	(579,611)	(35,300)	$	(688,507)		$	(497,875)
Net income	—	—			—		—		758,247		—	—			758,247
Other comprehensive income	—	—			—		3,955		—		—	—			3,955
Stock-based compensation	—	—			6,943		—		—		—	—			6,943
Stock-based awards exercised or vested	—	—			(1,071)		—		(214)		111	2,174			889
Acquisition of treasury shares(2)	—	—			—		—		—		(2)	(39)			(39)
Repurchase and retirement of common shares	(2,063)	(20)			(1,219)		—		(36,832)		—	—			(38,071)


Cash dividends declared - $0.26 per share	—	—			—		—		(47,181)		—	—			(47,181)
Balances as of March 31, 2021	216,656	$	2,167		$	781,692	$	(5,028)	$	94,409	(35,191)	$	(686,372)		$	186,868

(1) The balance of our accumulated other comprehensive income (loss) consists of foreign currency translation adjustments.

(2) 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.


H&R Block, Inc. \|Q3 FY2022 Form 10-Q			5

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION – The consolidated balance sheets as of March 31, 2022 and June 30, 2021, the consolidated statements of operations and comprehensive income for the three and nine months ended March 31, 2022 and 2021, the consolidated statements of cash flows for the nine months ended March 31, 2022 and 2021, and the consolidated statements of stockholders' equity for the three and nine months ended March 31, 2022 and 2021 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 March 31, 2022 and 2021 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., to H&R Block, Inc. and its subsidiaries, or to H&R Block, Inc.'s operating subsidiaries, as appropriate to the context.

On June 9, 2021, the Board of Directors approved a change of the Company's fiscal year end from April 30 to June 30. The Company's 2022 fiscal year began on July 1, 2021 and will end on June 30, 2022. As a result of this change, the Company filed a Transition Report on Form 10-Q that included the financial information for the transition period from May 1, 2021 to June 30, 2021 (Transition Period). 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, 2021 Annual Report to Shareholders on Form 10-K and our June 30, 2021 Transition Report filed on Form 10-Q.

MANAGEMENT ESTIMATES – The 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.

On March 21, 2020, the federal tax filing deadline in the U.S. for individual 2019 tax returns was extended from April 15, 2020 to July 15, 2020, shifting a portion of revenues and expenses from that tax season into the nine months ended March 31, 2021. This extension impacted the typical seasonality of our business and the comparability of our financial results.

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 9 for additional information on litigation, claims, and other loss contingencies related to our discontinued operations.


6			Q3 FY2022 Form 10-Q\| H&R Block, Inc.

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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 March 31,				Nine months ended March 31,
	2022		2021		2022		2021
Revenues:
U.S. assisted tax preparation	$	1,392,142	$	1,290,892	$	1,456,594	$	1,532,079
U.S. royalties	158,786		150,117		169,548		178,126
U.S. DIY tax preparation	175,184		181,294		188,455		234,871
International	65,232		62,869		151,464		148,282
Refund Transfers	132,223		134,799		134,665		141,309
Emerald Card®	50,660		73,647		103,748		96,045
Peace of Mind® Extended Service Plan	17,222		17,668		59,373		63,430
Tax Identity Shield®	9,078		8,643		19,431		22,446
Interest and fee income on Emerald AdvanceSM	30,535		38,247		43,438		52,812
Wave	20,111		16,082		58,745		44,656
Other	10,584		9,306		27,736		28,819
Total revenues	$	2,061,757	$	1,983,564	$	2,413,197	$	2,542,875

Changes in the balances of deferred revenue and wages for our Peace of Mind® Extended Service Plan (POM) are as follows:

(in 000s)

POM