H&R Block Q3 2025 Earnings Report

H&R Block EPS Results

• Actual EPS: $5.38
• Consensus EPS: $5.12
• Beat/Miss: Beat by +$0.26
• One Year Ago EPS: $4.94

H&R Block Revenue Results

• Actual Revenue: $2.28 billion
• Expected Revenue: $2.25 billion
• Beat/Miss: Beat by +$29.13 million
• YoY Revenue Growth: +4.20%

H&R Block Announcement Details

• Quarter: Q3 2025
• Date: 5/7/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 4:30PM ET

H&R Block (NYSE:HRB) engages in the provision of tax return preparation solutions, financial products and small business solutions. The company was founded by Henry W. Bloch and Richard A. Bloch on January 25, 1955, and is headquartered in Kansas City, MO.

H&R Block Q3 2025 Earnings Call Transcript

Key Takeaways

• H&R Block reported 4% revenue growth, 5% EBITDA growth, and 9% EPS growth in the third quarter and reaffirmed its fiscal 2025 outlook based on strong net average charge performance and effective labor management.
• The assisted tax prep segment saw 170 basis points of growth, with improved client conversion and retention driven by a redesigned matching algorithm and the expanded Second Look service uncovering missed deductions in nearly 25% of new‐client reviews.
• The DIY channel delivered 8% revenue growth and a 9% increase in net average charge to $81.55, with disciplined promotions fueling a mix shift to more complex SKUs and AI Tax Assist users showing a 13-point higher conversion rate.
• Digital and banking initiatives gained traction, with a 24% rise in fully virtual MyBlock users and the Spruce mobile banking platform surpassing 700,000 sign-ups, 90% cross-sold to tax clients, and average refund savings of 26%.
• Capital return remained a priority, with $400 million in share repurchases year-to-date (5% of shares retired), 123 franchise offices acquired, $1.1 billion still available under the repurchase program, and dividends maintained under a disciplined allocation strategy.

Presentation

[Operator]

Thank you for standing by and welcome to H and R Block's Third Quarter Fiscal Year twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To a question during the session, you will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again.

[Operator]

I would now like to hand the call over to Jordan Eskegen, Program Manager, Investor Relations and ESG. Please go ahead.

[Jordyn Eskijian, Program Manager, Investor Relations & ESG at H&R Block]

Thank you, Latif. Good afternoon, everyone, and welcome to H and R Block's fiscal twenty twenty five third quarter financial results conference call. Joining me today are Jeff Jones, our President and Chief Executive Officer and Tiffany Mason, our Chief Financial Officer. Earlier today, we issued a press release and presentation, which can be downloaded or viewed live on our website at investors.hrblock.com. Our call is being broadcast and webcast live, and a replay of the webcast will be available for ninety days.

[Jordyn Eskijian, Program Manager, Investor Relations & ESG at H&R Block]

Before we begin, I'd like to remind listeners that comments made by management may include forward looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties, and actual results could differ from those projected in any forward looking statement due to numerous factors. For a description of these risks and uncertainties, please see H and R Block's annual report on Form 10 ks and quarterly reports on Form 10 Q as updated periodically with our other SEC filings. Please note some metrics we'll discuss today are presented on a non GAAP basis. We've reconciled the comparable GAAP and non GAAP figures in the appendix of our presentation.

[Jordyn Eskijian, Program Manager, Investor Relations & ESG at H&R Block]

Finally, the content of this call contains time sensitive information accurate only as of today, 05/07/2025. H and R Block undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. With that, I will now turn it over to Jeff.

[Jeffrey Jones, President & CEO at H&R Block]

Good afternoon, everyone. Thank you for joining us. Today, I'm pleased to share the highlights of our performance this tax season and an update on our Block Horizons imperatives. Tiffany will then share the details of our third quarter financial results, and we'll open it up for Q and A. For the third quarter, we delivered revenue growth of 4%, EBITDA growth of 5%, and EPS growth of 9%.

[Jeffrey Jones, President & CEO at H&R Block]

We saw an increase in company owned assisted volume, higher overall net average charge, or NAC, and effective labor management. Based on these results, we're reiterating our outlook for fiscal twenty five, which Tiffany will talk more about in detail later in the call. It was a strong quarter, and while we still have work to do, our transformation continues to gather momentum and deliver results. Let me start with some commentary on the industry. While industry volume grew approximately 1% as anticipated, clients shifted from DIY to assisted this season.

[Jeffrey Jones, President & CEO at H&R Block]

As a result, the assisted category delivered growth of 170 basis points compared to 90 basis points of growth in DIY. This shift underscores the importance of the assisted category, and highlights clients' desire for human health and expertise, a domain where H and R Block is the category leader and has been delivering for seven decades. Over the last couple of years, we've also observed an industry shift in overall filing behavior during the season, with more clients waiting until closer to the deadline to complete their tax returns. This year, there was an acceleration of this trend, and as a result, we experienced record high volumes in our tax offices in the final two days of the season compared to recent history. In uncertain times, we know it's even more important to provide expertise and value to our clients, and we did just that this tax season.

[Jeffrey Jones, President & CEO at H&R Block]

Now taking a closer look at our own performance. Through April 30, I'm pleased that we improved our volume and market share trends year over year in the assisted channel. This tax season, we redesigned the assisted client experience with two important goals: to convert more clients who started tax prep with us, and to improve retention. To do this, we improved our tax pro matching algorithm, and introduced new steps in our process to ensure our tax pros better understood clients' needs and managed their expectations. We drove an increase in assisted client conversion for the second consecutive year, demonstrating the benefits of the continued improvements we've made.

[Jeffrey Jones, President & CEO at H&R Block]

We saw higher overall client satisfaction scores in the key experience pillars of empathy, ease, and expertise. Importantly, we also increased the number of appointments set for next tax season versus this time last year. Setting future appointments is important for retention and engagement. Additionally, this season, we enhanced and automated our second look service, where we review the last three years of a new client's tax returns to see if any refund dollars were left on the table. Through Second Book, we consistently deliver meaningful value to clients by uncovering missed deductions and credits on prior year returns.

[Jeffrey Jones, President & CEO at H&R Block]

We had a tenfold increase in new clients who participated in the service this season, and we identified noteworthy discrepancies in nearly a quarter of those reviews. This demonstrates the expertise and thoroughness of our tax professionals and maximizes client refund dollars. Second Look is unique among nationwide task repairs, and offered free of charge to our clients, reinforcing our commitment to providing exceptional value and expert assistance. Our trusted brand name is a competitive differentiator, and we remain the category leader in assisted tasks. Our local value proposition is strong, underpinned by our extensive retail footprint of nearly 9,000 offices conveniently located within five miles of most Americans in all 50 states.

[Jeffrey Jones, President & CEO at H&R Block]

Our brand is well known, and more consumers are benefiting from our ability to handle all types of returns in financial situations, as we're serving more complex clients who have higher lifetime value to block. For the third consecutive year, we have seen client growth in all segments above $80,000 in income, with our fastest growing segment again being clients with over $100,000 in income. All in all, this year was another important step in demonstrating our leadership in the assisted tax business, and the consumer shift toward the assisted category further demonstrates that clients are increasingly seeking expert help and value, and we have a trusted brand and proven track record of serving those needs. Shifting gears to DIY. For the quarter, we delivered DIY revenue growth of 8% year over year, and saw customer satisfaction scores increase across all dimensions.

[Jeffrey Jones, President & CEO at H&R Block]

Through April 30, DIY paid NAC was strong at 81.55 up 9% versus the prior year, with more than half of that growth coming from a mix shift to more complex SKUs, demonstrating the strength of our product. While online paid volume was essentially flat this season, we believe this is a reasonable outcome as we remain disciplined in what was an unprecedented promotional environment. As you may recall, last year we began providing a breakout of free and paid DIY filing volume in the appendix of our earnings presentation. We believe this transparency is important because while free DIY clients help our market share, they don't generate revenue, and consequently many have limited lifetime value to block. We recognize that most free filers will likely always file for free, and they are the least loyal one to one provider.

[Jeffrey Jones, President & CEO at H&R Block]

Others, such as young college educated consumers, have a greater potential to become paid filers in the future as their circumstances evolve. We continue to believe a strategic focus on paid filers and free filers who have potential to become paid filers over time is the best use of capital to deliver financial returns in the business. We were once again very pleased with the performance of our AI Tax Assist tool in our DIY paid SKUs. We launched this tool to give clients easy access to our extensive body of tax knowledge, along with expert help, at no extra charge. Building on last year's success, we expanded the knowledge base to cover more topics with a greater degree of accuracy.

[Jeffrey Jones, President & CEO at H&R Block]

We continue to see higher user engagement and satisfaction among clients who used AI Tax Assist. In fact, conversion was 13 points higher among clients who used the tool than those who didn't, reinforcing the confidence it provided in their tax outcome by offering expert help. AI Tax Assist provides clients with more personalized guidance through the filing process. This, coupled with live expert help, is a powerful value proposition and competitive differentiator for Blob, particularly as clients must pay more to receive the same level of expert help in competitors' products. Additionally, we continue to see DIY clients upgrading to Tax Pro Review, which delivered another year of growth.

[Jeffrey Jones, President & CEO at H&R Block]

Clients turning over their work for us to complete reaffirms the value and demand for our professional expertise. And finally, we were pleased with the performance of MyBlock, H and R Block's mobile app and digital front door. We remain well positioned to serve clients however they want to be served, fully virtual to fully in person in every way in between. This season, we increased the total number of clients served fully virtually by 24%, reflecting our clients' growing preference for convenience blended with expert help. MyBlock underscores our commitment to adapting to client needs and delivering unmatched service and expertise in person and online.

[Jeffrey Jones, President & CEO at H&R Block]

Now let's move on to a quick update on our other Block Horizon strategic imperatives, starting with small business. Assisted small business tax performed well again this quarter, delivering high single digit revenue growth. We saw positive trends in entity returns and other more complex filings, and our bold marketing messages, including our up to 30% price advantage over a typical CPA or accountant, resonated. In DIY, we continue to improve the appeal of our small business SKUs, and we're pleased with the growth in top of funnel registrations. Last season, we launched new custom experiences for clients tailored to their occupation, which gained traction.

[Jeffrey Jones, President & CEO at H&R Block]

We increased the number of custom experiences from five to 20, covering over 70% of clients and driving another year of improved conversion. We also maintain momentum in our year round bookkeeping and payroll services, which together delivered double digit revenue growth year over year. At Wave, our key priorities of accelerating revenue growth and driving profitability remain unchanged, and we continue to see momentum in Wave's high margin subscription product ProTier. To that end, I'm pleased that we delivered revenue growth of 13% in the quarter. Overall, I'm pleased with our performance as an increasing number of small businesses are choosing Block, and I'm excited about the continued opportunity ahead.

[Jeffrey Jones, President & CEO at H&R Block]

Turning to financial products. Spruce, our mobile banking platform, continued to deliver on its mission of helping people improve their financial well-being. Since launch through April 30, results showed over 700,000 sign ups, a nearly 50% increase compared to the prior year. In addition, about half of all deposits over the last year continue to be non tax related, highlighting the product's ability to engage users year round. Notably, our cross selling efforts have been highly effective, as approximately 90% of our new Spruce clients also completed a tax return with H and R Block, and half of those clients were new to our brand.

[Jeffrey Jones, President & CEO at H&R Block]

And by electing to deposit their federal tax refund into their Spruce account, clients were able to access their refund up to five days early. For the third consecutive year, clients using Spruce's smart tax refund feature saved an average of 26% of their tax refund, surpassing the recommended 15%. This demonstrates Bruce's ability to help clients better manage their finances and foster smart savings habits. I'm proud of how our team has continued to deliver value to clients, regardless of the broader market conditions, which speaks to the strength and resilience of our business model. Amid an evolving economic backdrop, one thing remains constant: consumers and small business owners want trusted support when it comes to their taxes and financial needs.

[Jeffrey Jones, President & CEO at H&R Block]

I will now turn it over to Tiffany to discuss our financial results.

[Tiffany Mason, Chief Financial Officer at H&R Block]

Thank you, Jeff, and good afternoon, everyone. I want to begin by reiterating H and R Block's investment thesis, particularly in this market. We have a resilient business with strong financial fundamentals, consistent cash flow generation, and a shareholder friendly capital return practice. There are three key components. First, we operate in a very stable industry.

[Tiffany Mason, Chief Financial Officer at H&R Block]

Tax preparation, the core of what we do, is steadfast and resilient. Second, our national office footprint, robust DIY offering and strong brand recognition are cornerstones and have paved the way for consistent performance and sustainable growth. Third, our financial profile is compelling. We deliver healthy margins, generate high free cash flow, have a strong balance sheet and are disciplined in our capital allocation priorities. All of this is why I remain confident in our ability to continue driving significant value for our shareholders, even in the current economic backdrop.

[Tiffany Mason, Chief Financial Officer at H&R Block]

Now, turning to our results for the third quarter. We delivered $2,300,000,000 of revenue, an increase of 4.2%. The increase was the result of higher overall NAC in The US and greater company owned assisted return volume, partially offset by lower international revenues due to lower return volume and an unfavorable foreign exchange rate in Canada and lower interest and fee income on Emerald Advance. In the assisted channel, we struck a healthy balance of price, volume and mix in the quarter, which is a testament to our redesigned client experience and our unwavering commitment to delivering value for our clients. Total operating expenses in the quarter were 1,300,000,000 an increase of 3.4%, primarily due to higher tax professional wages and benefits as a result of the increase in company owned assisted return volume.

[Tiffany Mason, Chief Financial Officer at H&R Block]

The industry continues to experience the shift in overall filing behavior later in the season, and I'm pleased with how effectively we were able to manage labor throughout. Our effective tax rate in the quarter was 24.6% and net income from continuing operations was $722,900,000 an increase of 4.5%. EBITDA was $1,000,000,000 an increase of 5%. Earnings per share from continuing operations increased 9.2% to $5.32 while adjusted earnings per share from continuing operations increased 8.9% to $5.38 due to higher net income and fewer shares outstanding from share repurchases. From a capital allocation perspective, our priorities are unchanged.

[Tiffany Mason, Chief Financial Officer at H&R Block]

We invest in the business, grow the dividend and return excess capital to shareholders through share repurchase. Our strong capital allocation practices continue to yield meaningful results. We completed our share repurchase plans in the first two quarters of this fiscal year, repurchasing $400,000,000 and retiring 6,500,000.0 shares, or another 5% of our shares outstanding. We have approximately $1,100,000,000 remaining on our $1,500,000,000 share repurchase program. We also continue to opportunistically repurchase franchise locations, buying back 123 offices so far this fiscal year.

[Tiffany Mason, Chief Financial Officer at H&R Block]

We continue to see strong interest from franchisees willing to sell to us, and we're pleased with how this strategy supports our long term revenue and earnings growth. Finally, we are reiterating our fiscal twenty five outlook. We are on plan for revenue and we expect EBITDA to be slightly below the midpoint of the range for the year due to higher than anticipated legal fees and settlements. For the full fiscal year, we continue to expect revenue to be in the range of 3,690,000,000 to $3,750,000,000 EBITDA to be in the range of $975,000,000 to $1,020,000,000 the effective tax rate to be approximately 13%, which is lower than historical levels due to the expected closure of various matters under examination and the expiration of certain statutes of limitations And adjusted diluted earnings per share to be in the range of $5.15 to $5.35 The lower effective tax rate is expected to provide a one time benefit of approximately $0.50 to EPS this fiscal year. We believe this will be another year of top line growth, strong cash flow generation and double digit EPS growth.

[Tiffany Mason, Chief Financial Officer at H&R Block]

We are committed to and confident about driving ongoing value for shareholders. And with that, I will turn it back over to Jeff for

[Tiffany Mason, Chief Financial Officer at H&R Block]

closing remarks.

[Jeffrey Jones, President & CEO at H&R Block]

Thank you, Tiffany. As we conclude our prepared remarks, I'd like to take a moment to share a personal note of appreciation. In this milestone year, as we celebrate H and R Block's seventieth anniversary, it's more important than ever to recognize the remarkable leaders who have contributed to our legacy. To the engineers, designers, and product leaders, to all those behind the scenes, and to everyone on the front line, thank you for all of you do, and here's to many more years of making a meaningful impact together.

[Jeffrey Jones, President & CEO at H&R Block]

From here, we are focused on finishing the year strong, and I look forward to sharing more on our year end call in August. Now operator, we will open the line for questions.

[Operator]

Our first question comes from the line of Kartik Mehta of Northcoast Research. Please go ahead, Kartik.

[Kartik Mehta, Executive MD & Director of Research at Northcoast Research]

Thanks. Hey, Jeff. Hey, Tiffany. Just to get a bigger picture industry question for you, I think it's been four out of five years now that the assisted segment has grown faster than the DIY segment. And that's not what I think most everybody expected at least at the start of this season.

[Kartik Mehta, Executive MD & Director of Research at Northcoast Research]

Any thoughts on why we're seeing

[Kartik Mehta, Executive MD & Director of Research at Northcoast Research]

this shift? Any theories or what you're seeing?

[Jeffrey Jones, President & CEO at H&R Block]

Hey, Kartik. Thanks for that question. I think one of the things we definitely have learned is when there is uncertainty, given the high stakes that taxes are for most Americans, they seek help. And that doesn't just mean tax policy changes, but it means wondering about things that are being spoken about. This year, even though the overall growth ended up being about 1% to your point, we saw a mix shift to assisted and we saw people filing later and later, a continued trend from the pandemic really.

[Jeffrey Jones, President & CEO at H&R Block]

We actually surveyed hundreds of customers during the season just to try to understand that dynamic and what we found were they were more aware than we expected them to be about conversations of potential changes. No taxes on tips really rose to the top as an example. So we do think consumers are listening to the conversation and we think they were waiting to see if any of those changes may happen. And if you look back over the last several years, while expert might not say there were major changes per se, there are lots of conversations about changes and we hypothesize that consumers noticing that.

[Kartik Mehta, Executive MD & Director of Research at Northcoast Research]

Hey, Jeff, just as a

[Kartik Mehta, Executive MD & Director of Research at Northcoast Research]

follow-up and I apologize, you might

[Kartik Mehta, Executive MD & Director of Research at Northcoast Research]

have said this during your prepared remarks, but

[Kartik Mehta, Executive MD & Director of Research at Northcoast Research]

I got disconnected. As you look at the season for H and L plot, you know, there a difference in volume in the early season and latter part of the season? And if so, do you think there do you need to make any changes to products that you're offering clients?

[Jeffrey Jones, President & CEO at H&R Block]

Yeah, another great question. I mean, we definitely saw a season start slow. We saw a season end very strong. I did mention in my prepared remarks that on the last two days, April fourteen and fifteen, we saw record volume in our offices compared to recent history. So we do see a trend.

[Jeffrey Jones, President & CEO at H&R Block]

We also are seeing a trend in the kind of clients we're serving. More complex, higher NAC, higher income clients. And we do every year, we'll digest the full season and start to evaluate for next year and beyond what changes to our offering do we think we need to make as a result of delays and as a result of the positive trend we're seeing in terms of the clients we're serving.

[Kartik Mehta, Executive MD & Director of Research at Northcoast Research]

Okay. Thank you, Jeff. I really appreciate it.

[Jeffrey Jones, President & CEO at H&R Block]

Thanks, Garthi.

[Operator]

Thank you.

[Operator]

Our next question comes from the line of Scott Schneeberger of Oppenheimer and Company. Please go ahead, Scott.

[Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.]

Thanks very much. Good afternoon. Jeff or Tiffany, I think it would be helpful, you had growth year over year assistant company owned operations and declines year over year in franchise operations. However, it looked like you had a good amount of conversions this year. And there's a footnote in the slide deck.

[Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.]

But could you speak to the decline in franchise operations? How much was that just moving one category to the other? And how much of it was organic? And on the organic side, why? Thanks.

[Jeffrey Jones, President & CEO at H&R Block]

You want to take the first part, I'll comment on that.

[Tiffany Mason, Chief Financial Officer at H&R Block]

Yeah, sure. Scott, thanks for the question. So first, on franchise side, obviously, we opportunistically buy back franchise locations from time to time as franchisees don't have a generational succession plan and they're looking for an exit. And that's a great way for us to grow our long term algorithm, and it's a core part of that algorithm for us. We purchase those at very attractive multiples and we get a strong ROI on that capital allocation.

[Tiffany Mason, Chief Financial Officer at H&R Block]

Fiscal year to date, we've acquired about 123 of those, which is at the low end of the 125 to 150 that we typically guide. So we'll obviously finish the year somewhere at the low end of that range. So we're definitely seeing a shift more so than an absolute decline in volume from our franchise base. And then Jeff, why don't you talk

[Tiffany Mason, Chief Financial Officer at H&R Block]

about that?

[Jeffrey Jones, President & CEO at H&R Block]

Yes, Scott, I guess I would

[Jeffrey Jones, President & CEO at H&R Block]

just add real quickly. I mean, you've heard me talk about this for several quarters, the intense focus on converting more of the clients that are starting with us in company locations. And listen, we're not ready to declare victory yet. We always have more to do, but we absolutely this year improve that trajectory. We improve conversion for the second year in a row.

[Jeffrey Jones, President & CEO at H&R Block]

We're going to improve retention for the year among new and prior clients. And that's really been as a result of a focus on the new client experience, some of the things I've talked about, the way we delivered upfront transparent pricing, second look, etcetera. So again, feel really good about the improved performance trajectory of both volume and share.

[Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.]

All right, thanks. I'm going to swing over to do it yourself. And again here, and I'm sure you have plenty to say on this Jeff, online paid looking relatively flat. So that's not taking share in the category, but that's pretty close to maintaining and really nice net average charge growth there for sure. If you could speak to what occurred there in the mix and then obviously online free down a lot.

[Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.]

Could you just speak to the competitive dynamic there as well? Kind of a two part question. Thanks.

[Jeffrey Jones, President & CEO at H&R Block]

You got it. If I missed part of that just let me know. To start with, yes, we were pleased with the revenue growth in DIY and I think especially pleased with the fact that about half of that was from more complex clients. So, over many years now, as we've improved our DIY product, I would just simply call it the upper end of complexity has not been our strength. But as we continue to improve the product, we are attracting and serving more complex DIY filers and that's a very good sign.

[Jeffrey Jones, President & CEO at H&R Block]

Paid volume you commented on. The context for free, it was, as I said in my prepared remarks, an unprecedented promotional environment. And I'm proud that we were disciplined in how we invested to win the business of paying clients. And we chose not to invest to win free clients that we know are going to remain free. Clearly, one of our DIY competitors decided to spend what we think was an unprecedented amount in advertising and promotions this year.

[Jeffrey Jones, President & CEO at H&R Block]

They saw value in free that we didn't. And we just think the best use of capital for shareholders to create real value is to focus on paying clients and those that are currently free that demonstrate propensity to become paying clients. That's how we thought about it.

[Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.]

Thanks. And just a great answers. And just a quick follow-up on that last part, Jeff. What do you think occurs next year in the pay free balance? What's the consideration, at least of yours, you can't speak for the whole industry, but how do you think this involves?

[Jeffrey Jones, President & CEO at H&R Block]

Yeah, I mean, I can't speak too much about next year yet because we're trying to finish this year, but I think strategically the idea of how do we demonstrate great value to increasingly sophisticated and complex clients to win more that pay us is the strategic notion. Now there are free clients, as I mentioned, that we believe have the potential to become paying. That's a different kind of free client. We've seen over many, many years that the pure free client certainly counts for volume and market share, but that's it. And we know that they are the most difficult to retain and they are the most fickle to other opportunities.

[Jeffrey Jones, President & CEO at H&R Block]

And so then it becomes you win them and how do you keep them the next year. So I think that sums up strategically how we're thinking about it.

[Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.]

Great. Thanks. Appreciate the answers.

[Jeffrey Jones, President & CEO at H&R Block]

Thanks, Todd.

[Operator]

Thank you. Our next question comes from the line of George Tong of Goldman Sachs. Please go ahead, George.

[George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs]

Hi. Thanks. Good afternoon. If you look at total assisted volumes, they were down 0.8%, which compares the broader industry volume growth as reported by the IRS of around 1.7% growth. Can you talk about what accounted for that difference in assisted volumes versus industry volumes?

[Jeffrey Jones, President & CEO at H&R Block]

Yeah. I mean, there's no question, as I mentioned earlier, George, we're not ready to declare victory yet, but we feel really good about the fact that we have improved the performance trajectory in both volume and share. And this year in assisted, we improved conversion for the second year in a row, we improved retention, and importantly we're growing again with higher more complex clients. Those are all very positive signs given our focus on conversion, but you're absolutely right. We still didn't grow share and we remain intently focused on getting there.

[George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs]

Got it. And in the assisted category, did you notice any changes in the competitive landscape as a large competitor decided to push more aggressively into the assisted space?

[Jeffrey Jones, President & CEO at H&R Block]

Well, there's no question that our largest DIY competitor spent a tremendous amount this year, at least it seems like it. We don't know their data obviously, And they offered significant promotions this year, 100% free for everybody kinds of promotions. But the number one competitor in the assisted business is the independent category by far. That's where we have to keep demonstrating value to win. We know to this point that competitor has not impacted our performance at all.

[Jeffrey Jones, President & CEO at H&R Block]

They report in a couple weeks and we look forward to seeing what kind

[Jeffrey Jones, President & CEO at H&R Block]

of volume they report in the assisted business.

[George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs]

Got it. Very helpful. Thank you.

[Jeffrey Jones, President & CEO at H&R Block]

Thanks, George.

[Operator]

Thank you. Our next question comes from the line of Alex Paris of Barrington Research. Please go ahead, Alex.

[Alex Paris, President at Barrington Research Associates]

Hi, guys. Thanks for taking my questions. I have a couple of follow ups, I think primarily. So first off, franchise location volume is down 7.2%. I think, Tiffany, you explained that due to franchise buybacks.

[Alex Paris, President at Barrington Research Associates]

You did 128 year to date. How many did you do last year?

[Tiffany Mason, Chief Financial Officer at H&R Block]

Last year, we did 158, Alex.

[Alex Paris, President at Barrington Research Associates]

Okay. And then how much of that decline do you think is attributable to the buyback? Would the franchise location still have been down had it not been for those buybacks?

[Tiffany Mason, Chief Financial Officer at H&R Block]

It's primarily attributable to buybacks. Franchise locations are doing well.

[Alex Paris, President at Barrington Research Associates]

And then related question on the NAC. Company owned stores tend to get a higher NAC than franchise stores and the year over year growth rate was better on the NAC from company owned stores. What do you attribute that the difference between a company owned store and a franchise stores NAC?

[Jeffrey Jones, President & CEO at H&R Block]

I I guess the first thing I'd say is remember franchisees all set their own pricing. There is a range of pricing across franchisees from more than company to less than company. There is a combination of complexity and mix of clients that we all serve given their local communities and competitive sets. So we're blending a lot of things together to get to comparison. So, it's a little hard to pull apart, but those are some of the things that drive performance.

[Alex Paris, President at Barrington Research Associates]

Got you. Thank you for that. Then I had a question about just volumes in general. I suppose this happens almost every year, but but there there were a number of filing extensions this year due to floods and weather and things like that. A number of states, Alabama, Florida, Georgia, North Carolina, South Carolina extended their deadline to May 1.

[Alex Paris, President at Barrington Research Associates]

And I believe LA County extended their deadline to September, due to the wildfires there earlier this year. Any impact from that on Q3? And will it positively influence volumes in Q4?

[Tiffany Mason, Chief Financial Officer at H&R Block]

Yeah, thanks for the question, Alex. So you're right. The extensions that were a result of the hurricanes from last fall, so that was the first group that you rattled off there. Those extensions were all up until May 1. So a little bit of migration from Q3 to Q4 in terms of the potential impact, but all within our current fiscal year.

[Tiffany Mason, Chief Financial Officer at H&R Block]

So all within fiscal twenty five. The California wildfires that impacted LA County, those extensions are until October of 'twenty excuse me, of our fiscal 'twenty six. And so we will see a little bit of push into the next fiscal year, but not material to our guidance for this fiscal year, for fiscal 'twenty five.

[Alex Paris, President at Barrington Research Associates]

Gotcha. That's helpful. Then I realize you were not contemplating any incremental volume from 1099s, but I was wondering what was the experience with 1099s this year and the influence on both volume and neck?

[Jeffrey Jones, President & CEO at H&R Block]

Alex, it's Jeff. There was no material impact. Didn't know what to assume. We didn't plan for it in terms of our outlook and we didn't see any material impact from it at all.

[Alex Paris, President at Barrington Research Associates]

Great. Last question. I saw yesterday the Board of Directors approved the $0.03 $75 quarterly dividend. I realize that the dividend is reviewed annually, usually after fourth quarter. What's the policy with regard to dividends?

[Alex Paris, President at Barrington Research Associates]

Is there a payout ratio that you're trying to achieve when reviewing the dividend?

[Tiffany Mason, Chief Financial Officer at H&R Block]

Yeah, Alex, the short answer is yes. There's a dividend payout ratio that we're looking to achieve. That's obviously a board level decision. And we have a finance committee as a part of the board that reviews that annually. And you're right about the timing.

[Tiffany Mason, Chief Financial Officer at H&R Block]

So all of that is subject to discussion over the next coming months.

[Jeffrey Jones, President & CEO at H&R Block]

The only thing else I would add, which we've been consistent about is after we reinvest in the business, it's the number one capital priority above share repurchase, but everything else applies.

[Alex Paris, President at Barrington Research Associates]

Right. Super helpful, Thanks for the color. That's it for me.

[Jeffrey Jones, President & CEO at H&R Block]

Thank you. Thanks, Alex.

[Operator]

Thank you. I would now like to turn the conference back to Jordan Eskejan for closing remarks. Madam?

[Jordyn Eskijian, Program Manager, Investor Relations & ESG at H&R Block]

Thanks, Latif. This concludes our third quarter fiscal twenty twenty five financial results conference call.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Jordyn Eskijian, Program Manager, Investor Relations & ESG
• Jeffrey Jones, President & CEO
• Tiffany Mason, Chief Financial Officer

Analysts

• Kartik Mehta, Executive MD & Director of Research at Northcoast Research
• Scott Schneeberger, Managing Director at Oppenheimer & Co. Inc.
• George Tong, Sr. Research Analyst - Equity Research at Goldman Sachs
• Alex Paris, President at Barrington Research Associates