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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
March 31, 2024
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 April 30, 2024: 139,529,924 shares.



Table of Contents

Form 10-Q for the Period ended March 31, 2024
Table of Contents



Table of Contents
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,
2024202320242023
REVENUES:
Service revenues$1,993,556 $1,885,035 $2,314,363 $2,191,794 
Royalty, product and other revenues191,278 208,614 233,354 248,245 
2,184,834 2,093,649 2,547,717 2,440,039 
OPERATING EXPENSES:
Costs of revenues926,008 883,686 1,485,193 1,442,693 
Selling, general and administrative330,622 345,461 608,078 625,158 
Total operating expenses1,256,630 1,229,147 2,093,271 2,067,851 
Other income (expense), net5,224 13,224 20,982 21,020 
Interest expense on borrowings(26,070)(22,298)(63,304)(57,107)
Income from continuing operations before income taxes907,358 855,428 412,124 336,101 
Income taxes215,772 209,351 72,527 78,254 
Net income from continuing operations691,586 646,077 339,597 257,847 
Net loss from discontinued operations, net of tax benefits of $254, $792, $627 and $1,920
(849)(2,648)(2,097)(6,418)
NET INCOME$690,737 $643,429 $337,500 $251,429 
BASIC EARNINGS PER SHARE:
Continuing operations$4.94 $4.22 $2.37 $1.65 
Discontinued operations(0.01)(0.01)(0.01)(0.04)
Consolidated$4.93 $4.21 $2.36 $1.61 
DILUTED EARNINGS PER SHARE:
Continuing operations$4.87 $4.14 $2.34 $1.62 
Discontinued operations(0.01)(0.02)(0.02)(0.04)
Consolidated$4.86 $4.12 $2.32 $1.58 
DIVIDENDS DECLARED PER SHARE$0.32 $0.29 $0.96 $0.87 
COMPREHENSIVE INCOME:
Net income$690,737 $643,429 $337,500 $251,429 
Change in foreign currency translation adjustments(9,882)402 (9,237)(22,636)
Other comprehensive income (loss)(9,882)402 (9,237)(22,636)
Comprehensive income$680,855 $643,831 $328,263 $228,793 
See accompanying notes to consolidated financial statements.










H&R Block, Inc. |Q3 FY2024 Form 10-Q
1

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CONSOLIDATED BALANCE SHEETS(unaudited, in 000s, except 
share and per share amounts)
As ofMarch 31, 2024June 30, 2023
ASSETS
Cash and cash equivalents$794,617 $986,975 
Cash and cash equivalents - restricted18,078 28,341 
Receivables, less allowance for credit losses of $56,180 and $55,502
346,784 59,987 
Prepaid expenses and other current assets105,873 112,183 
Total current assets1,265,352 1,187,486 
Property and equipment, at cost, less accumulated depreciation and amortization of $884,321 and $846,177
139,542 130,015 
Operating lease right of use assets392,091 438,299 
Intangible assets, net277,218 277,043 
Goodwill787,634 775,453 
Deferred tax assets and income taxes receivable287,810 211,391 
Other noncurrent assets63,675 52,571 
Total assets$3,213,322 $3,072,258 
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses$247,109 $159,901 
Accrued salaries, wages and payroll taxes238,864 95,154 
Accrued income taxes and reserves for uncertain tax positions351,721 271,800 
Operating lease liabilities185,396 205,391 
Deferred revenue and other current liabilities220,466 206,536 
Total current liabilities1,243,556 938,782 
Long-term debt1,490,570 1,488,974 
Deferred tax liabilities and reserves for uncertain tax positions277,957 264,567 
Operating lease liabilities214,990 240,543 
Deferred revenue and other noncurrent liabilities116,055 107,328 
Total liabilities3,343,128 3,040,194 
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 170,915,771 and 178,935,578
1,709 1,789 
Additional paid-in capital753,605 770,376 
Accumulated other comprehensive loss(46,336)(37,099)
Retained deficit(200,296)(48,677)
Less treasury shares, at cost, of 31,388,403 and 32,785,658
(638,488)(654,325)
Total stockholders' equity (deficiency)(129,806)32,064 
Total liabilities and stockholders' equity$3,213,322 $3,072,258 
See accompanying notes to consolidated financial statements.
2
Q3 FY2024 Form 10-Q| H&R Block, Inc.

Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited, in 000s)
Nine months ended March 31,20242023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$337,500 $251,429 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization91,004 98,660 
Provision for credit losses61,359 49,174 
Deferred taxes(58,223)6,685 
Stock-based compensation25,310 26,785 
Changes in assets and liabilities, net of acquisitions:
Receivables(348,106)(237,395)
Prepaid expenses, other current and noncurrent assets(18,037)(17,438)
Accounts payable, accrued expenses, salaries, wages and payroll taxes223,045 122,025 
Deferred revenue, other current and noncurrent liabilities12,483 22,054 
Income tax receivables, accrued income taxes and income tax reserves93,961 179,692 
Other, net(32)(3,285)
Net cash provided by operating activities420,264 498,386 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(53,831)(56,661)
Payments made for business acquisitions, net of cash acquired(43,163)(47,740)
Franchise loans funded(18,815)(21,566)
Payments from franchisees12,884 14,963 
Other, net3,282 9,717 
Net cash used in investing activities(99,643)(101,287)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of line of credit borrowings(1,025,000)(970,000)
Proceeds from line of credit borrowings1,025,000 970,000 
Dividends paid(135,127)(133,762)
Repurchase of common stock, including shares surrendered(379,018)(365,852)
Other, net(6,358)(5,973)
Net cash used in financing activities(520,503)(505,587)
Effects of exchange rate changes on cash(2,739)(7,880)
Net decrease in cash and cash equivalents, including restricted balances(202,621)(116,368)
Cash, cash equivalents and restricted cash, beginning of period1,015,316 1,050,713 
Cash, cash equivalents and restricted cash, end of period$812,695 $934,345 
SUPPLEMENTARY CASH FLOW DATA:
Income taxes paid (received), net$35,888 $(110,028)
Interest paid on borrowings66,464 59,429 
Accrued additions to property and equipment1,477 4,378 
New operating right of use assets and related lease liabilities139,872 131,949 
Accrued dividends payable to common shareholders44,648 44,163 
See accompanying notes to consolidated financial statements.
H&R Block, Inc. | Q3 FY2024 Form 10-Q
3

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(amounts in 000s, except per share amounts)
Common StockAdditional
Paid-in
Capital
Accumulated Other
Comprehensive
Loss(1)
Retained
Deficit
Treasury StockTotal
Stockholders’
Equity
SharesAmountSharesAmount
Balances as of July 1, 2023178,936 $1,789 $770,376 $(37,099)$(48,677)(32,786)$(654,325)$32,064 
Net loss    (163,482)  (163,482)
Other comprehensive loss   (10,914)   (10,914)
Stock-based compensation  6,211     6,211 
Stock-based awards exercised or vested  (34,226) (3,220)1,867 37,348 (98)
Acquisition of treasury shares(2)
     (823)(28,464)(28,464)
Repurchase and retirement of common shares(3,265)(32)(1,927) (131,341)  (133,300)
Cash dividends declared - $0.32 per share
    (46,901)  (46,901)
Balances as of September 30, 2023175,671 $1,757 $740,434 $(48,013)$(393,621)(31,742)$(645,441)$(344,884)
Net loss    (189,755)  (189,755)
Other comprehensive income   11,559    11,559 
Stock-based compensation  9,270     9,270 
Stock-based awards exercised or vested  (165) (46)348 7,087 6,876 
Acquisition of treasury shares(2)
     (3)(125)(125)
Repurchase and retirement of common shares(4,755)(48)(2,805) (217,467)  (220,320)
Cash dividends declared - $0.32 per share
    (45,273)  (45,273)
Balances as of December 31, 2023170,916 $1,709 $746,734 $(36,454)$(846,162)(31,397)$(638,479)$(772,652)
Net income    690,737   690,737 
Other comprehensive loss   (9,882)   (9,882)
Stock-based compensation  7,140     7,140 
Stock-based awards exercised or vested  (269) (223)16 300 (192)
Acquisition of treasury shares(2)
     (7)(309)(309)
Cash dividends declared - $0.32 per share
— — — — (44,648)— — (44,648)
Balances as of March 31, 2024170,916 $1,709 $753,605 $(46,336)$(200,296)(31,388)$(638,488)$(129,806)
(1) The balance of our accumulated other comprehensive 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.


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(amounts in 000s, except per share amounts)
Common StockAdditional
Paid-in
Capital
Accumulated Other
Comprehensive
Loss(1)
Retained
Earnings
(Deficit)
Treasury StockTotal
Stockholders’
Equity
SharesAmountSharesAmount
Balances as of July 1, 2022193,571 $1,936 $772,182 $(21,645)$120,405 (33,641)$(661,247)$211,631 
Net loss— — — — (168,421)— — (168,421)
Other comprehensive loss— — — (32,345)— — — (32,345)
Stock-based compensation— — 5,630 — — — — 5,630 
Stock-based awards exercised or vested— — (15,276)— (742)805 15,839 (179)
Acquisition of treasury shares(2)
— — — — — (341)(15,432)(15,432)
Repurchase and retirement of common shares(4,927)(49)(2,907)— (216,813)— — (219,769)
Cash dividends declared - $0.29 per share
— — — — (46,100)— — (46,100)
Balances as of September 30, 2022188,644 $1,887 $759,629 $(53,990)$(311,671)(33,177)$(660,840)$(264,985)
Net loss— — — — (223,579)— — (223,579)
Other comprehensive income— — — 9,307 — — — 9,307 
Stock-based compensation— — 9,544 — — — — 9,544 
Stock-based awards exercised or vested— — 421 — (209)52 1,023 1,235 
Acquisition of treasury shares(2)
— — — — — (2)(79)(79)
Repurchase and retirement of common shares(3,241)(33)(1,911)— (128,409)— — (130,353)
Cash dividends declared - $0.29 per share
— — — — (44,569)— — (44,569)
Balances as of December 31, 2022185,403 $1,854 $767,683 $(44,683)$(708,437)(33,127)$(659,896)$(643,479)
Net income— — — — 643,429 — — 643,429 
Other comprehensive income— — — 402 — — — 402 
Stock-based compensation— — 7,830 — — — — 7,830 
Stock-based awards exercised or vested— — (244)— (213)13 265 (192)
Acquisition of treasury shares(2)
— — — — — (6)(219)(219)
Cash dividends declared - $0.29 per share
— — — — (44,163)— — (44,163)
Balances as of March 31, 2023185,403 $1,854 $775,269 $(44,281)$(109,384)(33,120)$(659,850)$(36,392)
(1) The balance of our accumulated other comprehensive 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.

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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 March 31, 2024 and June 30, 2023, the consolidated statements of operations and comprehensive income for the three and nine months ended March 31, 2024 and 2023, the consolidated statements of cash flows for the nine months ended March 31, 2024 and 2023, and the consolidated statements of stockholders' equity for the three and nine months ended March 31, 2024 and 2023 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, 2024 and 2023 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.
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 June 30, 2023 Annual Report on Form 10-K. All amounts presented herein as of June 30, 2023 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.
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 loss contingencies related to our discontinued operations.
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NOTE 2: REVENUE RECOGNITION
The majority of our revenues are from our United States (U.S.) tax services business. The following table disaggregates our U.S. 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,
2024202320242023
Revenues:
U.S. assisted tax preparation$1,534,825 $1,453,049 $1,622,430 $1,530,577 
U.S. royalties141,915 150,163 153,070 161,337 
U.S. DIY tax preparation198,570 167,022 215,529 182,330 
Refund Transfers118,937 117,384 120,892 120,210 
Peace of Mind® Extended Service Plan16,813 16,750 59,100 58,840 
Tax Identity Shield®7,536 8,720 16,810 19,237 
Emerald Card® and SpruceSM
41,160 44,358 61,493 68,448 
Interest and fee income on Emerald Advance®21,169 33,750 36,702 47,267 
International68,264 69,417 158,398 156,297 
Wave23,580 22,064 70,656 66,651 
Other12,065 10,972 32,637 28,845 
Total revenues$2,184,834 $2,093,649 $2,547,717 $2,440,039 
Changes in the balances of deferred revenue and wages for our Peace of Mind® Extended Service Plan (POM) are as follows:
(in 000s)
POMDeferred RevenueDeferred Wages
Nine months ended March 31,2024202320242023
Balance, beginning of the period$167,257 $173,486 $21,828 $19,495 
Amounts deferred72,369 76,231 8,324 8,451 
Amounts recognized on previous deferrals(68,445)(67,276)(8,324)(7,084)
Balance, end of the period$171,181 $182,441 $21,828 $20,862 
As of March 31, 2024, deferred revenue related to POM was $171.2 million. We expect that $96.4 million will be recognized over the next twelve months, while the remaining balance will be recognized over the following five years.
As of March 31, 2024 and 2023, Tax Identity Shield® (TIS) deferred revenue was $31.6 million and $33.3 million, respectively. Deferred revenue related to TIS was $25.2 million and $25.8 million as of June 30, 2023 and 2022, respectively. All deferred revenue related to TIS will be recognized by April 2025.
NOTE 3: EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY
EARNINGS PER SHARE – Basic and diluted earnings (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 (loss) from continuing operations attributable to common shareholders by the weighted average shares outstanding during each period. 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 one thousand and 0.2 million shares for the three and nine months ended March 31, 2024,
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respectively, and 0.7 million and 0.6 million shares for the three and nine months ended March 31, 2023, respectively, as the effect would be antidilutive.
The computations of basic and diluted earnings per share from continuing operations are as follows:
(in 000s, except per share amounts)
Three months ended March 31,Nine months ended March 31,
2024202320242023
Net income from continuing operations attributable to shareholders$691,586 $646,077 $339,597 $257,847 
Amounts allocated to participating securities(2,788)(2,822)(1,350)(1,064)
Net income from continuing operations attributable to common shareholders$688,798 $643,255 $338,247 $256,783 
Basic weighted average common shares139,525 152,281 142,724 155,249 
Potential dilutive shares2,015 3,280 1,870 3,239 
Dilutive weighted average common shares141,540 155,561 144,594 158,488 
Earnings per share from continuing operations attributable to common shareholders:
Basic$4.94 $4.22 $2.37 $1.65 
Diluted4.87 4.14 2.34 1.62 
The decrease in the weighted average shares outstanding is due to share repurchases completed in the current and prior fiscal years.
STOCK-BASED COMPENSATION – We granted 1.7 million and 1.1 million shares, including adjustments for performance achievement and dividend equivalents, under our stock-based compensation plans during the nine months ended March 31, 2024 and 2023, respectively. Stock-based compensation expense of our continuing operations totaled $7.8 million and $25.3 million for the three and nine months ended March 31, 2024, respectively, and $8.9 million and $26.8 million for the three and nine months ended March 31, 2023, respectively. As of March 31, 2024, unrecognized compensation cost for nonvested shares and units totaled $49.5 million.
NOTE 4: RECEIVABLES
Receivables, net of their related allowance, consist of the following:
(in 000s)
As ofMarch 31, 2024June 30, 2023
Short-termLong-termShort-termLong-term
Loans to franchisees$17,454 $16,922 $6,344 $19,206 
Receivables for U.S. assisted and DIY tax preparation and related fees187,579 8,360 11,061 6,824 
H&R Block's Instant Refund® receivables
24,184 1,048 8,499 414 
Emerald Advance®53,978 11,875 10,834 7,089 
Software receivables from retailers9,957  1,650  
Royalties and other receivables from franchisees35,293  3,416  
Wave payment processing receivables2,165  964  
Other16,174 1,777 17,219 1,108 
Total$346,784 $39,982 $59,987 $34,641 

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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 working capital needs. As of March 31, 2024 and June 30, 2023, loans with a principal balance more than 90 days past due, or on non-accrual status, are not material.
H&R BLOCK'S INSTANT REFUND® H&R Block's Instant Refund® amounts are generally received from the Canada Revenue Agency 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 tax return year of origination, with older years being deemed more unlikely to be repaid. We establish an allowance for credit losses at an amount that we believe reflects the receivable at net realizable value. In December of each year, we charge-off the receivables and the related allowance to an amount we believe represents the net realizable value.
Balances and amounts on non-accrual status, classified as impaired, or more than 60 days past due, by tax return year of origination, as of March 31, 2024 are as follows:
(in 000s)
Tax return year of originationBalanceMore Than 60 Days Past Due
2023$23,736 $ 
2022 and prior2,426 2,426 
26,162 $2,426 
Allowance(930)
Net balance$25,232 
EMERALD ADVANCE® Historically, Emerald Advance® lines of credit (EA LOCs) have been offered to clients in our offices from mid-November through mid-January. If the borrower met certain criteria as agreed in the loan terms, the line of credit could be utilized year-round (Revolving Loan). In fiscal year 2024, EAs are being offered as term loans (EA TLs), and we discontinued EA LOCs, including the Revolving Loans. EA TLs are due on March 31, whereas, EA LOCs were required to be paid down to zero by February 15 in the prior year. See note 8 for discussion of the new EA TL.
We review the credit quality of our purchased participation interests in EA receivables based on pools, which are segregated by the fiscal year of origination, with older years being deemed more unlikely to be repaid. We establish an allowance for credit losses at an amount that we believe reflects the receivable at net realizable value. Typically, in December of each year, we charge-off the receivables and the related allowance for EA LOCs, excluding Revolving Loans, to an amount we believe represents the net realizable value. However, due to the discontinuation of EA LOCs, we charged-off the receivables and the related allowance of 2023 EA LOCs and
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Revolving Loans during the quarter ended September 30, 2023 to an amount that we believe represents net realizable value.
Balances and amounts on non-accrual status, classified as impaired, or more than 60 days past due, by fiscal year of origination, as of March 31, 2024 are as follows:
(in 000s)
Fiscal year of originationBalanceNon-Accrual
2024 – Term loans$77,595 $ 
2023 and prior – Lines of credit and Revolving Loans8,941 8,941 
86,536 $8,941 
Allowance(20,683)
Net balance$65,853 
ALLOWANCE FOR CREDIT LOSSES Activity in the allowance for credit losses for our EA and all other short-term and long-term receivables for the nine months ended March 31, 2024 and 2023 is as follows:
(in 000s)
EAsAll OtherTotal
Balances as of July 1, 2023$27,386 $35,108 $62,494 
Provision for credit losses21,011 40,348 61,359 
Charge-offs, recoveries and other(27,714)(37,455)(65,169)
Balances as of March 31, 2024$20,683 $38,001 $58,684 
Balances as of July 1, 2022$26,141 $51,126 $77,267 
Provision for credit losses16,702 32,472 49,174 
Charge-offs, recoveries and other(14,814)(51,081)(65,895)
Balances as of March 31, 2023$28,029 $32,517 $60,546 
Gross charge-offs of EAs were $27.7 million for the nine months ended March 31, 2024, of which $15.4 million related to EA LOCs originated in fiscal year 2023 and $12.3 million related to Revolving Loans.
NOTE 5: GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying amount of goodwill for the nine months ended March 31, 2024 are as follows:
(in 000s)
GoodwillAccumulated Impairment LossesNet
Balances as of July 1, 2023$913,750 $(138,297)$775,453 
Acquisitions(1)
18,929  18,929 
Disposals and foreign currency changes, net(6,748) (6,748)
Impairments   
Balances as of March 31, 2024$925,931 $(138,297)$787,634 
(1)    All goodwill added during the period is expected to be tax-deductible for federal income tax reporting.
In conjunction with our annual impairment test, we tested goodwill for impairment during the quarter and did not identify any impairment.
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Components of intangible assets are as follows:
(in 000s)
Gross Carrying AmountAccumulated
Amortization
Net
As of March 31, 2024:
Reacquired franchise rights$403,242 $(224,204)$179,038 
Customer relationships385,290 (318,502)66,788 
Internally-developed software133,289 (128,487)4,802 
Noncompete agreements44,158 (41,148)3,010 
Franchise agreements19,201 (19,201) 
Purchased technology122,700 (102,165)20,535 
Trade name5,800 (2,755)3,045 
$1,113,680 $(836,462)$277,218 
As of June 30, 2023:
Reacquired franchise rights$392,452 $(212,495)$179,957 
Customer relationships351,695 (301,062)50,633 
Internally-developed software133,380 (120,054)13,326 
Noncompete agreements42,596 (39,617)2,979 
Franchise agreements19,201 (18,668)533 
Purchased technology122,700 (96,565)26,135 
Trade name5,800 (2,320)3,480 
$1,067,824 $(790,781)$277,043 
We made payments to acquire businesses totaling $43.2 million and $47.7 million during the nine months ended March 31, 2024 and 2023, respectively. The amounts and weighted-average lives of intangible assets acquired during the nine months ended March 31, 2024 are as follows:
(dollars in 000s)
AmountWeighted-Average Life (in years)
Customer relationships$34,084 5
Reacquired franchise rights10,856 5
Noncompete agreements1,581 5
Total$46,521 5
Amortization of intangible assets for the three and nine months ended March 31, 2024 was $15.0 million and $46.2 million, respectively, compared to $17.8 million and $54.7 million for the three and nine months ended March 31, 2023, respectively. Estimated amortization of intangible assets for fiscal years ending June 30, 2024, 2025, 2026, 2027, and 2028 is $61.1 million, $42.8 million, $33.1 million, $26.5 million and $18.7 million, respectively.
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NOTE 6: LONG-TERM DEBT
The components of long-term debt are as follows:
(in 000s)
As ofMarch 31, 2024June 30, 2023
Senior Notes, 5.250%, due October 2025
$350,000 $350,000 
Senior Notes, 2.500%, due July 2028
500,000 500,000 
Senior Notes, 3.875%, due August 2030
650,000 650,000 
Debt issuance costs and discounts(9,430)(11,025)
Total long-term debt1,490,570 1,488,975 
Less: Current portion  
Long-term portion$1,490,570 $1,488,975 
Estimated fair value of long-term debt$1,381,000 $1,339,000 
Our unsecured committed line of credit (CLOC) provides for an unsecured senior revolving credit facility in the aggregate principal amount of $1.5 billion, which includes a $175.0 million sublimit for swingline loans and a $50.0 million sublimit for standby letters of credit. We may request increases in the aggregate principal amount of the revolving credit facility of up to $500.0 million, subject to obtaining commitments from lenders and meeting certain other conditions. The CLOC will mature on June 11, 2026, unless extended pursuant to the terms of the CLOC, at which time all outstanding amounts thereunder will be due and payable. Our CLOC includes an annual facility fee, which will vary depending on our then current credit ratings.
The CLOC is subject to various conditions, triggers, events or occurrences that could result in earlier termination and contains customary representations, warranties, covenants and events of default, including, without limitation: (1) a covenant requiring the Company to maintain a debt-to-EBITDA ratio, as defined by the CLOC agreement, calculated on a consolidated basis of no greater than (a) 3.50 to 1.00 as of the last day of each fiscal quarter ending on March 31, June 30, and September 30 of each year and (b) 4.50 to 1.00 as of the last day of each fiscal quarter ending on December 31 of each year; (2) a covenant requiring us to maintain an interest coverage ratio (EBITDA-to-interest expense) calculated on a consolidated basis of not less than 2.50 to 1.00 as of the last date of any fiscal quarter; and (3) covenants restricting our ability to incur certain additional debt, incur liens, merge or consolidate with other companies, sell or dispose of assets (including equity interests), liquidate or dissolve, engage in certain transactions with affiliates or enter into certain restrictive agreements. The CLOC includes provisions for an equity cure which could potentially allow us to independently cure certain defaults. Proceeds under the CLOC may be used for working capital needs or for other general corporate purposes. We were in compliance with these requirements as of March 31, 2024.
We had no outstanding balance under our CLOC and amounts available to borrow were not limited by the debt-to-EBITDA covenant as of March 31, 2024.
NOTE 7: INCOME TAXES
We file a consolidated federal income tax return in the U.S. with the Internal Revenue Service (IRS) and file tax returns in various state, local, and foreign jurisdictions.
We had gross unrecognized tax benefits of $245.8 million and $240.1 million as of March 31, 2024 and June 30, 2023, respectively. The gross unrecognized tax benefits increased by $5.7 million during the nine months ended March 31, 2024. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately $121.8 million within the next twelve months. The anticipated decrease is due to the expiration of statutes of limitations and anticipated closure of various matters currently under examination or in appeals. For such matters where a change in the balance of unrecognized tax benefits is not yet deemed reasonably possible, no estimate has been included.
Our effective tax rate for continuing operations, including the effects of discrete tax items, was 17.6% and 23.3% for the nine months ended March 31, 2024 and 2023, respectively. Discrete items decreased the effective tax rate
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by 6.3% and 1.3% for the nine months ended March 31, 2024, and 2023, respectively. Discrete income tax benefits of $26.0 million and $4.2 million were recorded in the nine months ended March 31, 2024 and 2023, respectively. The discrete tax benefit recorded in the current period primarily resulted from settlements with tax authorities and statute of limitations expirations. The discrete tax benefit recorded in the prior period primarily resulted from state statute of limitations expirations. The impact discrete tax items have on our tax rate through the third quarter are slightly exaggerated versus the impact discrete tax items have on the full fiscal year tax rate.
NOTE 8: COMMITMENTS AND CONTINGENCIES
Our U.S. and Canadian businesses offer our 100% accuracy guarantee. Assisted tax returns are covered by our 100% accuracy guarantee, whereby we will reimburse a client for penalties and interest attributable to an H&R Block error on a return. DIY tax returns are covered by our 100% accuracy guarantee, whereby we will reimburse a client up to a maximum of $10,000 if our software makes an arithmetic error that results in payment of penalties and/or interest to the respective taxing authority that a client would otherwise not have been required to pay. Our liability related to estimated losses under the 100% accuracy guarantee was $13.6 million and $15.8 million as of March 31, 2024 and June 30, 2023, respectively. The short-term and long-term portions of this liability are included in deferred revenue and other liabilities in the consolidated balance sheets.
Liabilities related to acquisitions for (1) estimated contingent consideration based on expected financial performance of the acquired business and economic conditions at the time of acquisition and (2) estimated accrued compensation related to continued employment of key employees were $27.9 million and $18.3 million as of March 31, 2024 and June 30, 2023 respectively, with amounts recorded in deferred revenue and other liabilities. Should actual results differ from our estimates, future payments made will differ from the above estimate and any differences will be recorded in results from continuing operations.
We have contractual commitments to fund certain franchises with approved short-term lines of credit for the purpose of meeting their seasonal working capital needs. Our total obligation under these lines of credit was $21.3 million at March 31, 2024, and net of amounts drawn and outstanding, our remaining commitment to fund totaled $9.9 million.
Effective October 20, 2023, we amended the Program Management Agreement and entered into a new participation agreement related to EA TLs originated by Pathward®, N.A. (Pathward). In fiscal year 2024, EAs are being offered as term loans and we discontinued EA LOCs. EA TLs are interest bearing with principal and interest due in full on March 31, and there are no annual fees or required monthly payments. EA TLs are offered to clients in our offices, in November and December, in amounts of $350 to $1,300. We continue to purchase a 90% participation interest in each loan made by Pathward in accordance with the participation agreement. We purchased participation interests of $346.3 million during the nine months ended March 31, 2024.
Refund Advance loans are originated by Pathward and offered to certain assisted U.S. tax preparation clients, based on client eligibility as determined by Pathward. We pay fees primarily based on loan size and customer type. We have provided a guarantee up to $18.0 million related to certain loans to clients prior to the IRS accepting electronic filing. At March 31, 2024, we accrued an estimated liability of $1.4 million related to this guarantee, compared to $0.8 million at March 31, 2023.
NOTE 9: LITIGATION AND OTHER RELATED CONTINGENCIES
We are a defendant in numerous litigation and arbitration matters, arising both in the ordinary course of business and otherwise, including as described below. The matters described below are not all of the lawsuits or arbitrations to which we are subject. In some of the matters, very large or indeterminate amounts, including punitive damages, may be sought. U.S. jurisdictions permit considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. We believe that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value due to this variability in pleadings and our experience in handling and resolving numerous claims over an extended period of time.
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The outcome of a matter and the amount or range of potential loss at particular points in time may be difficult to ascertain. Among other things, uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how courts and arbitrators will apply the law. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will view the relevant evidence and applicable law.
In addition to litigation and arbitration matters, we are also subject to other loss contingencies arising out of our business activities, including as described below.
We accrue liabilities for litigation, arbitration and other related loss contingencies and any related settlements when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued. If no amount within the range can be identified as a better estimate than any other amount, we accrue the minimum amount in the range.
For such matters where a loss is believed to be reasonably possible, but not probable, or the loss cannot be reasonably estimated, no accrual has been made. It is possible that such matters could require us to pay damages or make other expenditures or accrue liabilities in amounts that could not be reasonably estimated as of March 31, 2024. While the potential future liabilities could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known, we do not believe any such liabilities are likely to have a material adverse effect on our business and our consolidated financial position, results of operations, and cash flows. Our accrued liabilities were $5.2 million and $0.2 million as of March 31, 2024 and June 30, 2023, respectively.
Our estimate of the aggregate range of reasonably possible losses includes (1) matters where a liability has been accrued and there is a reasonably possible loss in excess of the amount accrued for that liability, and (2) matters where a liability has not been accrued but we believe a loss is reasonably possible. This aggregate range only represents those losses as to which we are currently able to estimate a reasonably possible loss or range of loss. It does not represent our maximum loss exposure.
Matters for which we are not currently able to estimate the reasonably possible loss or range of loss are not included in this range. We are often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the reasonably possible loss or range of loss, such as precise information about the amount of damages or other remedies being asserted, the defenses to the claims being asserted, discovery from other parties and investigation of factual allegations, rulings by courts or arbitrators on motions or appeals, analyses by experts, or the status or terms of any settlement negotiations.
The estimated range of reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions, as well as known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. As of March 31, 2024, we believe the estimate of the aggregate range of reasonably possible losses in excess of amounts accrued, where the range of loss can be estimated, is not material.
At the end of each reporting period, we review relevant information with respect to litigation, arbitration and other related loss contingencies and update our accruals, disclosures, and estimates of reasonably possible loss or range of loss based on such reviews. Costs incurred with defending matters are expensed as incurred. Any receivable for insurance recoveries is recorded separately from the corresponding liability, and only if recovery is determined to be probable and reasonably estimable.
We believe we have meritorious defenses to the claims asserted in the various matters described in this note, and we intend to defend them vigorously. The amounts claimed in the matters are substantial, however, and there can be no assurances as to their outcomes. In the event of unfavorable outcomes, it could require modifications to our operations; in addition, the amounts that may be required to be paid to discharge or settle the matters could be substantial and could have a material adverse impact on our business and our consolidated financial position, results of operations, and cash flows.
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LITIGATION, CLAIMS OR OTHER LOSS CONTINGENCIES PERTAINING TO CONTINUING OPERATIONS
On February 23, 2024, the Federal Trade Commission (FTC) filed an administrative complaint before the FTC alleging unfair or deceptive business acts or practices in connection with certain aspects of our DIY tax preparation services. A hearing before an administrative law judge (ALJ) of the FTC is scheduled for October 23, 2024. We filed a complaint in federal court in the Western District of Missouri challenging the constitutionality of the ALJ’s removal protections and seeking to enjoin the ALJ’s participation in the adjudication of the matter, which remains pending. We have also received and are responding to certain governmental inquiries and other matters relating to the IRS Free File Program and other aspects of our DIY tax preparation services, including the use of pixels. An accrual related to these matters is included in our loss contingency accrual.
DISCONTINUED MORTGAGE OPERATIONS – Although SCC ceased its mortgage loan origination activities in December 2007 and sold its loan servicing business in April 2008, SCC or the Company has been and may in the future be, subject to litigation and other loss contingencies, including indemnification and contribution claims, pertaining to SCC's mortgage business activities that occurred prior to such termination and sale.
Parties, including underwriters, depositors, and securitization trustees, have been, remain, or may in the future be, involved in lawsuits, threatened lawsuits, or settlements related to securitization transactions in which SCC participated. A variety of claims are alleged in these matters, including violations of federal and state securities laws and common law fraud, breaches of representations and warranties, or violations of statutory requirements. SCC has received notices of potential indemnification or contribution obligations relating to such matters. Additional lawsuits against the parties to the securitization transactions may be filed in the future, and SCC may receive additional notices of potential indemnification, contribution or similar obligations with respect to existing or new lawsuits or settlements of such lawsuits or other claims. We have not concluded that a loss related to any of these potential indemnification or contribution claims is probable, nor have we accrued a liability related to any of these claims.
It is difficult to predict either the likelihood of new matters being initiated or the outcome of existing matters. In many of these matters it is not possible to estimate a reasonably possible loss or range of loss due to, among other things, the inherent uncertainties involved in these matters and the indeterminate damages sought. If the amount that SCC is ultimately required to pay with respect to loss contingencies, together with payment of SCC's related administration and legal expense, exceeds SCC's net assets, the creditors of SCC, other potential claimants, or a bankruptcy trustee if SCC were to file or be forced into bankruptcy, may attempt to assert claims against us for payment of SCC's obligations. Claimants also may attempt to assert claims against or seek payment directly from the Company even if SCC's assets exceed its liabilities. SCC's principal assets, as of March 31, 2024, total approximately $271 million and consist of an intercompany note receivable. We believe our legal position is strong on any potential corporate veil-piercing arguments; however, if this position is challenged and not upheld, it could have a material adverse effect on our business and our consolidated financial position, results of operations, and cash flows.
OTHER – We are from time to time a party to litigation, arbitration and other loss contingencies not discussed herein arising out of our business operations. These matters may include actions by state attorneys general, other state regulators, federal regulators, individual plaintiffs, and cases in which plaintiffs seek to represent others who may be similarly situated.
While we cannot provide assurance that we will ultimately prevail in each instance, we believe the amount, if any, we are required to pay to discharge or settle these other matters will not have a material adverse impact on our business and our consolidated financial position, results of operations, and cash flows.

H&R Block, Inc. |Q3 FY2024 Form 10-Q
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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Our subsidiaries provide assisted and do-it-yourself (DIY) tax preparation solutions through multiple channels (including in-person, online and mobile applications, virtual, and desktop software) and distribute H&R Block-branded products and services, including those of our bank partners, to the general public primarily in the United States (U.S.), Canada and Australia. Tax returns are either prepared by H&R Block tax professionals in one of our 6,643 company-owned or 2,168 franchise offices (as of March 31, 2024), virtually or via an internet review or prepared and filed by our clients through our DIY tax solutions. We also offer small business solutions through our company-owned and franchise offices and online through Wave. We report a single segment that includes all of our continuing operations.
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Consolidated – Financial Results(in 000s, except per share amounts)
Three months ended March 31,20242023$ Change% Change
Revenues:
U.S. tax preparation and related services:
Assisted tax preparation$1,534,825 $1,453,049 $81,776 5.6 %
Royalties141,915 150,163 (8,248)(5.5)%
DIY tax preparation198,570 167,022 31,548 18.9 %
Refund Transfers118,937 117,384 1,553 1.3 %
Peace of Mind® Extended Service Plan16,813 16,750 63 0.4 %
Tax Identity Shield®7,536 8,720 (1,184)(13.6)%
Other12,065 10,972 1,093 10.0 %
Total U.S. tax preparation and related services2,030,661 1,924,060 106,601 5.5 %
Financial services:
Emerald Card® and SpruceSM
41,160 44,358 (3,198)(7.2)%
Interest and fee income on Emerald Advance®21,169 33,750 (12,581)(37.3)%
Total financial services62,329 78,108 (15,779)(20.2)%
International68,264