UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

January 31, ~~2018~~2021

☐

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~~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 þ☑ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files).

Yes þ☑ 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 þ☑ Accelerated filer ¨ ☐ Non-accelerated filer ¨☐ Smaller reporting company ¨☐Emerging growth company ¨☐

~~(Do not check if a smaller reporting 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 þ☑

The number of shares outstanding of the registrant's Common Stock, without par value, at the close of business on February ~~28, 2018: 209,202,224~~26, 2021: 181,431,272 shares.

~~Table~~ble of Contents

Form 10-Q for the Period Ended January 31, ~~2018~~2021

Table of Contents



			PART I

Item 1.			Consolidated Statements of Operations and Comprehensive Loss
	Three and nine months ended January 31, ~~2018~~2021 and ~~2017~~2020	1

	Consolidated Balance Sheets
	As of January 31, ~~2018,~~2021, January 31, ~~2017~~2020 and April 30, ~~2017~~2020	2

	Consolidated Statements of Cash Flows
	Nine months ended January 31, ~~2018~~2021 and ~~2017~~2 020	3
			Consolidated Statements of Stockholders' Equity Three and nine months ended January 31, 2021 and 2020		4
			Notes to Consolidated Financial Statements		46

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations			2620

Item 3.	Quantitative and Qualitative Disclosures About Market Risk			3431

Item 4.	Controls and Procedures			3431

	PART II
Item 1.			Legal Proceedings		3431
Item 1A.			Risk Factors		31
~~Item 1A.~~			~~Risk Factors~~	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			3532

Item 3.	Defaults Upon Senior Securities			3532

Item 4.	Mine Safety Disclosures			3532
Item 5.			Other Information		32
Item 5.6.			~~Other Information~~Exhibits		3532

~~Item 6.~~	~~Exhibits~~	35

	Signatures	3633

~~Table~~ble of Contents

PART I FINANCIAL INFORMATION


~~ITEM 1.~~	~~FINANCIAL STATEMENTS~~

ITEM 1. FINANCIAL STATEMENTS


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS	CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS							(unaudited, in 000s, except per share amounts)						CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS					(unaudited, in 000s, except per share amounts)
		Three months ended January 31,						Nine months ended January 31,							Three months ended January 31,				Nine months ended January 31,
		2018			2017			2018			2017				2021		2020		2021		2020

REVENUES:														REVENUES:
Service revenues		$	388,771		$	361,397		$	641,389		$	592,721		Service revenues	$	244,692	$	419,955	$	956,605	$	691,762
Royalty, product and other revenues		99,655			90,485			125,693			115,678			Royalty, product and other revenues	63,535		99,250		129,202		138,606
		488,426			451,882			767,082			708,399				308,227		519,205		1,085,807		830,368
OPERATING EXPENSES:														OPERATING EXPENSES:
Cost of revenues:
Compensation and benefits		181,958			165,015			303,434			275,098
Occupancy and equipment		107,981			104,094			311,752			297,586
Provision for bad debt		29,191			28,348			33,429			29,634
Depreciation and amortization		32,046			29,828			90,391			87,206
Other		65,425			61,492			145,329			136,041
		416,601			388,777			884,335			825,565
Selling, general and administrative:
Marketing and advertising		64,209			84,101			82,875			103,663
Compensation and benefits		66,942			58,408			185,453			174,223
Depreciation and amortization		16,442			15,332			46,487			44,986
Other selling, general and administrative		21,505			30,056			66,378			77,500
		169,098			187,897			381,193			400,372
Costs of revenues														Costs of revenues	380,273		462,521		940,364		945,119
Selling, general and administrative														Selling, general and administrative	191,488		209,288		461,368		475,758
Total operating expenses		585,699			576,674			1,265,528			1,225,937			Total operating expenses	571,761		671,809		1,401,732		1,420,877

Other income (expense), net		1,028			134			3,259			4,948			Other income (expense), net	2,367		1,879		4,759		13,741
Interest expense on borrowings		(24,560		)	(25,940		)	(67,102		)	(70,026		)	Interest expense on borrowings	(22,333)		(26,305)		(85,319)		(68,682)
Loss from continuing operations before income taxes (benefit)		(120,805		)	(150,598		)	(562,289		)	(582,616		)
Income taxes (benefit)		122,120			(49,386		)	(43,234		)	(216,963		)
Loss from continuing operations before income tax benefit														Loss from continuing operations before income tax benefit	(283,500)		(177,030)		(396,485)		(645,450)
Income tax benefit														Income tax benefit	(51,669)		(49,004)		(35,730)		(188,146)
Net loss from continuing operations		(242,925		)	(101,212		)	(519,055		)	(365,653		)	Net loss from continuing operations	(231,831)		(128,026)		(360,755)		(457,304)
Net loss from discontinued operations, net of tax benefits of $1,422 and $1,919, $6,094 and $5,120		(2,720		)	(3,302		)	(10,723		)	(8,754		)
Net loss from discontinued operations, net of tax benefits of $1,323, $488, $3,371 and $3,173														Net loss from discontinued operations, net of tax benefits of $1,323, $488, $3,371 and $3,173	(1,163)		(1,657)		(4,706)		(10,625)
NET LOSS		$	(245,645	)	$	(104,514	)	$	(529,778	)	$	(374,407	)	NET LOSS	$	(232,994)	$	(129,683)	$	(365,461)	$	(467,929)

BASIC AND DILUTED LOSS PER SHARE:														BASIC AND DILUTED LOSS PER SHARE:
Continuing operations		$	(1.16	)	$	(0.49	)	$	(2.49	)	$	(1.71	)	Continuing operations	$	(1.27)	$	(0.66)	$	(1.92)	$	(2.31)
Discontinued operations		(0.02		)	(0.01		)	(0.05		)	(0.04		)	Discontinued operations	0		(0.01)		(0.02)		(0.05)
Consolidated		$	(1.18	)	$	(0.50	)	$	(2.54	)	$	(1.75	)	Consolidated	$	(1.27)	$	(0.67)	$	(1.94)	$	(2.36)

DIVIDENDS DECLARED PER SHARE		$	0.24		$	0.22		$	0.72		$	0.66		DIVIDENDS DECLARED PER SHARE	$	0.26	$	0.26	$	0.78	$	0.78

COMPREHENSIVE LOSS:														COMPREHENSIVE LOSS:
Net loss		$	(245,645	)	$	(104,514	)	$	(529,778	)	$	(374,407	)	Net loss	$	(232,994)	$	(129,683)	$	(365,461)	$	(467,929)
Unrealized gains (losses) on securities, net of taxes
Unrealized holding gains (losses) arising during the period, net of tax benefits of $ - , $ 2 , $ - and $8		—			(3		)	1			(14		)

Change in foreign currency translation adjustments		4,848			1,762			5,924			(4,116		)	Change in foreign currency translation adjustments	20,014		(3,574)		39,883		(4,975)
Other comprehensive income (loss)		4,848			1,759			5,925			(4,130		)	Other comprehensive income (loss)	20,014		(3,574)		39,883		(4,975)
Comprehensive loss		$	(240,797	)	$	(102,755	)	$	(523,853	)	$	(378,537	)	Comprehensive loss	$	(212,980)	$	(133,257)	$	(325,578)	$	(472,904)

See accompanying notes to consolidated financial statements.


H&R Block, Inc. \| Q3 FY2021 Form 10-Q			1

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CONSOLIDATED BALANCE SHEETS	(unaudited, in 000s, except share and per share amounts)
As of	January 31, 2021		January 31, 2020		April 30, 2020

ASSETS
Cash and cash equivalents	$	280,249	$	192,340	$	2,661,914
Cash and cash equivalents - restricted	181,159		169,447		211,106
Receivables, less allowance for credit losses of $34,493, $45,254 and $64,648	563,089		819,946		133,197
Prepaid expenses and other current assets	196,145		120,229		80,519
Total current assets	1,220,642		1,301,962		3,086,736
Property and equipment, at cost, less accumulated depreciation and amortization of $851,731, $803,272 and $796,192	162,765		197,569		184,367
Operating lease right of use asset	419,245		463,777		494,788
Intangible assets, net	381,264		433,074		414,976
Goodwill	745,616		838,830		712,138
Deferred tax assets and income taxes receivable	179,598		134,901		151,195
Other noncurrent assets	59,233		82,317		67,847
Total assets	$	3,168,363	$	3,452,430	$	5,112,047
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses	$	160,880	$	156,766	$	203,103
Accrued salaries, wages and payroll taxes	118,517		117,459		116,375
Accrued income taxes and reserves for uncertain tax positions	17,088		36,242		209,816
Current portion of long-term debt	—		649,022		649,384
Operating lease liabilities	186,209		187,890		195,537
Deferred revenue and other current liabilities	208,789		190,242		201,401
Total current liabilities	691,483		1,337,621		1,575,616
Long-term debt and line of credit borrowings	2,369,574		1,880,589		2,845,873
Deferred tax liabilities and reserves for uncertain tax positions	302,120		172,954		182,441
Operating lease liabilities	245,383		289,299		312,566
Deferred revenue and other noncurrent liabilities	94,383		90,346		124,510
Total liabilities	3,702,943		3,770,809		5,041,006
COMMITMENTS AND CONTINGENCIES	0		0		0
STOCKHOLDERS' EQUITY:
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 218,719,439, 228,206,684 and 228,206,684	2,187		2,282		2,282
Additional paid-in capital	778,495		769,990		775,387
Accumulated other comprehensive loss	(11,693)		(25,391)		(51,576)
Retained earnings (deficit)	(616,518)		(367,218)		42,965
Less treasury shares, at cost, of 35,225,825, 35,732,666 and 35,731,376	(687,051)		(698,042)		(698,017)
Total stockholders' equity (deficiency)	(534,580)		(318,379)		71,041
Total liabilities and stockholders' equity	$	3,168,363	$	3,452,430	$	5,112,047

See accompanying notes to consolidated financial statements.



2	Q3 FY2021 Form 10-Q \| H&R Block, Inc. ~~\| Q3 FY2018 Form 10-Q~~	1

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CONSOLIDATED BALANCE SHEETS
(unaudited, in 000s, except
share and per share amounts)

As of January 31, 2018
January 31, 2017
April 30, 2017

ASSETS
Cash and cash equivalents $ 187,366
$ 221,172
$ 1,011,331
Cash and cash equivalents - restricted 83,033
70,166
106,208
Receivables, less allowance for doubtful accounts of $45,215, $47,731 and $55,296 791,618
787,865
162,775
Income taxes receivable 72,775
38,032
—
Prepaid expenses and other current assets 149,349
85,599
65,725
Total current assets 1,284,141
1,202,834
1,346,039
Property and equipment, at cost, less accumulated depreciation and amortization of $757,809, $673,594 and $678,161 249,911
282,358
263,827
Intangible assets, net 390,993
434,720
409,364
Goodwill 504,789
483,320
491,207
Deferred tax assets and income taxes receivable 25,305
71,639
83,728
Other noncurrent assets 106,161
102,760
99,943
Total assets $ 2,561,300
$ 2,577,631
$ 2,694,108
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 163,653
$ 239,085
$ 217,028
Accrued salaries, wages and payroll taxes 135,626
123,457
183,856
Accrued income taxes and reserves for uncertain tax positions 164,246
7,537
348,199
Current portion of long-term debt 1,015
942
981
Deferred revenue and other current liabilities 201,988
183,616
189,216
Total current liabilities 666,528
554,637
939,280
Long-term debt and line of credit borrowings 2,284,231
2,592,622
1,493,017
Deferred tax liabilities and reserves for uncertain tax positions 201,384
109,557
159,085
Deferred revenue and other noncurrent liabilities 107,226
121,631
163,609
Total liabilities 3,259,369
3,378,447
2,754,991
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock, no par, stated value $.01 per share, 800,000,000 shares authorized, shares issued of 246,198,878 2,462
2,462
2,462
Additional paid-in capital 758,361
752,748
754,912
Accumulated other comprehensive loss (9,374 ) (15,363 ) (15,299 )
Retained deficit (729,578 ) (785,823 ) (48,206 )
Less treasury shares, at cost, of 37,079,700, 39,032,420 and 39,027,573 (719,940 ) (754,840 ) (754,752 )
Total stockholders' equity (deficiency) (698,069 ) (800,816 ) (60,883 )
Total liabilities and stockholders' equity $ 2,561,300
$ 2,577,631
$ 2,694,108


CONSOLIDATED STATEMENTS OF CASH FLOWS	(unaudited, in 000s)
Nine months ended January 31,	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(365,461)	$	(467,929)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	117,163		125,409
Provision	25,642		37,517
Deferred taxes	(39,858)		10,795
Stock-based compensation	20,744		22,699

Changes in assets and liabilities, net of acquisitions:

Receivables	(438,307)		(684,323)
Prepaid expenses, other current and noncurrent assets	(68,222)		(1,990)

Accounts payable, accrued expenses, salaries, wages and payroll taxes	(37,601)		(166,204)

Deferred revenue, other current and noncurrent liabilities	(24,951)		(55,064)

Income tax receivables, accrued income taxes and income tax reserves	(94,922)		(282,488)
Other, net	(2,906)		(6,213)
Net cash used in operating activities	(908,679)		(1,467,791)

CASH FLOWS FROM INVESTING ACTIVITIES:



Capital expenditures	(47,996)		(66,510)
Payments made for business acquisitions, net of cash acquired	(15,025)		(450,282)



Franchise loans funded	(24,957)		(32,890)
Payments from franchisees	20,293		14,604

Other, net	(6,427)		45,376
Net cash used in investing activities	(74,112)		(489,702)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of line of credit borrowings	(2,320,000)		(285,000)
Proceeds from line of credit borrowings	1,200,000		1,320,000
Repayments of long-term debt	(650,000)		0
Proceeds from issuance of long-term debt	647,965		0


Dividends paid	(147,887)		(154,827)
Repurchase of common stock, including shares surrendered	(153,158)		(256,199)
Proceeds from exercise of stock options	2,139		2,074
Other, net	(21,884)		(14,136)
Net cash provided by (used in) financing activities	(1,442,825)		611,912

Effects of exchange rate changes on cash	14,004		(359)

Net decrease in cash and cash equivalents, including restricted balances	(2,411,612)		(1,345,940)
Cash, cash equivalents and restricted cash, beginning of period	2,873,020		1,707,727
Cash, cash equivalents and restricted cash, end of period	$	461,408	$	361,787

SUPPLEMENTARY CASH FLOW DATA:
Income taxes paid, net of refunds received	$	96,965	$	84,872
Interest paid on borrowings	78,098		65,972



Accrued additions to property and equipment	2,841		1,662
New operating right of use assets and related lease liabilities	93,381		251,284

See accompanying notes to consolidated financial statements.


H&R Block, Inc. \| Q3 FY2021 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)		Retained Earnings (Deficit)		Treasury Stock			Total Stockholders’ Equity (Deficiency)
	Shares	Amount									Shares			Amount
Balances as of May 1, 2020	228,207	$	2,282		$	775,387	$	(51,576)	$	42,965	(35,731)	$	(698,017)		$	71,041
Net income	—	—			—		—		91,259		—	—			91,259

Other comprehensive income	—	—			—		17,539		—		—	—			17,539
Stock-based compensation	—	—			7,422		—		—		—	—			7,422
Stock-based awards exercised or vested	—	—			(10,027)		—		(1,247)		627	12,247			973
Acquisition of treasury shares(1)	—	—			—		—		—		(204)	(2,913)			(2,913)



Cash dividends declared - $0.26 per share	—	—			—		—		(50,044)		—	—			(50,044)
Balances as of July 31, 2020	228,207	$	2,282		$	772,782	$	(34,037)	$	82,933	(35,308)	$	(688,683)		$	135,277
Net loss	—	—			—		—		(223,726)		—	—			(223,726)

Other comprehensive income	—	—			—		2,330		—		—	—			2,330
Stock-based compensation	—	—			6,768		—		—		—	—			6,768
Stock-based awards exercised or vested	—	—			(262)		—		(220)		13	262			(220)
Acquisition of treasury shares(1)	—	—			—		—		—		(6)	(99)			(99)
Repurchase and retirement of common shares	(9,488)	(95)			(5,597)		—		(144,450)		—	—			(150,142)


Cash dividends declared - $0.26 per share	—	—			—		—		(50,154)		—	—			(50,154)
Balances as of October 31, 2020	218,719	$	2,187		$	773,691	$	(31,707)	$	(335,617)	(35,301)	$	(688,520)		$	(279,966)

Net loss	—	—			—		—		(232,994)		—	—			(232,994)

Other comprehensive income	—	—			—		20,014		—		—	—			20,014
Stock-based compensation	—	—			5,265		—		—		—	—			5,265
Stock-based awards exercised or vested	—	—			(461)		—		(218)		76	1,473			794
Acquisition of treasury shares(1)	—	—			—		—		—		(1)	(4)			(4)



Cash dividends declared - $0.26 per share	—	—			—		—		(47,689)		—	—			(47,689)
Balances as of January 31, 2021	218,719	$	2,187		$	778,495	$	(11,693)	$	(616,518)	(35,226)	$	(687,051)		$	(534,580)

(1) Represents shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards.



24			Q3 ~~FY2018~~FY2021 Form 10-Q \| H&R Block, Inc.

~~Table~~ble of Contents


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY					(amounts in 000s, except per share amounts)
	Common Stock			Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Deficit)		Treasury Stock			Total Stockholders’ Equity (Deficiency)
	Shares	Amount									Shares			Amount
Balances as of May 1, 2019	238,337	$	2,383		$	767,636	$	(20,416)	$	499,386	(36,377)	$	(707,462)		$	541,527
Net loss	—	—			—		—		(150,247)		—	—			(150,247)

Other comprehensive loss	—	—			—		(2,320)		—		—	—			(2,320)
Stock-based compensation	—	—			6,557		—		—		—	—			6,557
Stock-based awards exercised or vested	—	—			(13,789)		—		(2,786)		906	17,631			1,056
Acquisition of treasury shares(1)	—	—			—		—		—		(314)	(9,185)			(9,185)
Repurchase and retirement of common shares	(1,593)	(16)			(955)		—		(43,101)		—	—			(44,072)


Cash dividends declared - $0.26 per share	—	—			—		—		(52,512)		—	—			(52,512)
Balances as of July 31, 2019	236,744	$	2,367		$	759,449	$	(22,736)	$	250,740	(35,785)	$	(699,016)		$	290,804
Net loss	—	—			—		—		(187,999)		—	—			(187,999)

Other comprehensive income	—	—			—		919		—		—	—			919
Stock-based compensation	—	—			9,331		—		—		—	—			9,331
Stock-based awards exercised or vested	—	—			(127)		—		(276)		13	264			(139)
Acquisition of treasury shares(1)	—	—			—		—		—		(6)	(173)			(173)
Repurchase and retirement of common shares	(5,720)	(57)			(3,433)		—		(133,449)		—	—			(136,939)


Cash dividends declared - $0.26 per share	—	—			—		—		(51,551)		—	—			(51,551)
Balances as of October 31, 2019	231,024	$	2,310		$	765,220	$	(21,817)	$	(122,535)	(35,778)	$	(698,925)		$	(75,747)

Net loss	—	—			—		—		(129,683)		—	—			(129,683)

Other comprehensive loss	—	—			—		(3,574)		—		—	—			(3,574)
Stock-based compensation	—	—			6,529		—		—		—	—			6,529
Stock-based awards exercised or vested	—	—			(69)		—		(180)		47	939			690
Acquisition of treasury shares(1)	—	—			—		—		—		(2)	(56)			(56)
Repurchase and retirement of common shares	(2,817)	(28)			(1,690)		—		(64,056)		—	—			(65,774)


Cash dividends declared - $0.26 per share	—	—			—		—		(50,764)		—	—			(50,764)
Balances as of January 31, 2020	228,207	$	2,282		$	769,990	$	(25,391)	$	(367,218)	(35,733)	$	(698,042)		$	(318,379)

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in 000s)
Nine months ended January 31, 2018
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (529,778 ) $ (374,407 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 136,878
132,192
Provision for bad debt 33,429
29,634
Deferred taxes 113,345
6,128
Stock-based compensation 17,065
16,945
Changes in assets and liabilities, net of acquisitions:
Receivables (651,200 ) (646,290 )
Prepaid expenses and other current assets (83,201 ) (23,208 )
Other noncurrent assets 8,310
7,575
Accounts payable and accrued expenses (36,608 ) (33,560 )
Accrued salaries, wages and payroll taxes (49,255 ) (37,978 )
Deferred revenue and other current liabilities 10,113
(44,243 )
Deferred revenue and other noncurrent liabilities (58,695 ) (57,216 )
Income tax receivables, accrued income taxes and income tax reserves (255,650 ) (378,987 )
Other, net (12,454 ) (6,444 )
Net cash used in operating activities (1,357,701 ) (1,409,859 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments and sales of mortgage loans and real estate owned, net —
207,174
Capital expenditures (77,865 ) (73,924 )
Payments made for business acquisitions, net of cash acquired (39,397 ) (52,825 )
Franchise loans funded (20,226 ) (31,788 )
Payments received on franchise loans 13,391
20,816
Other, net 1,524
(4,711 )
Net cash provided by (used in) investing activities (122,573 ) 64,742

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of line of credit borrowings (40,000 ) (445,000 )
Proceeds from line of credit borrowings 830,000
1,545,000
Dividends paid (150,258 ) (141,537 )
Repurchase of common stock, including shares surrendered (7,746 ) (322,782 )
Proceeds from exercise of stock options 28,268
2,403
Other, net (28,922 ) 373
Net cash provided by financing activities 631,342
638,457

Effects of exchange rate changes on cash 1,792
(2,913 )

Net decrease in cash, cash equivalents and restricted cash (847,140 ) (709,573 )
Cash, cash equivalents and restricted cash, beginning of period 1,117,539
1,000,911
Cash, cash equivalents and restricted cash, end of period $ 270,399
$ 291,338

SUPPLEMENTARY CASH FLOW DATA:
Income taxes paid, net of refunds received $ 102,755
$ 158,656
Interest paid on borrowings 57,834
59,809
Accrued additions to property and equipment 1,078
5,959

(1) Represents shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards.

See accompanying notes to consolidated financial statements.



H&R Block, Inc. \| Q3 ~~FY2018~~FY2021 Form 10-Q			35

~~Table~~ble of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION–The consolidated balance sheets as of January 31, ~~2018~~2021 and ~~2017,~~2020, the consolidated statements of operations and comprehensive loss for the three and nine months ended January 31, ~~2018~~2021 and ~~2017, and~~2020, the consolidated statements of cash flows for the nine months ended January 31, ~~2018~~2021 and ~~2017~~2020, and the consolidated statements of stockholders' equity for the three and nine months ended January 31, 2021 and 2020 have been prepared by the Company, without audit. In the opinion of management, all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position, results of operations, and cash flows as of January 31, ~~2018~~2021 and ~~2017~~2020 and for all periods presented, have been made.

"H&R Block," "the Company," "we," "our," and "us" are used interchangeably to refer to H&R Block, Inc. or to H&R Block, Inc. and its subsidiaries, as appropriate to the context.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our April 30, ~~2017~~2020 Annual Report to Shareholders on Form 10-K. All amounts presented herein as of April 30, ~~2017~~2020 or for the year then ended are derived from our ~~April 30, 2017~~Annual Report ~~to Shareholders~~ on Form 10-K.

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, ~~the impact~~fair value of ~~legislation commonly referred to as the Tax Cuts and Jobs Act (Tax Legislation),~~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. ~~See note 7 for additional discussion of the impact of the Tax Legislation.~~

SEASONALITY OF BUSINESS–Our operating revenues are seasonal in nature with peak revenues typically occurring in the months of February through April. Therefore, results for interim periods are not indicative of results to be expected for the full year.

IMPACTS OF THE COVID-19 PANDEMIC - During March 2020, the World Health Organization declared the coronavirus (COVID-19) outbreak to be a global pandemic. As a result of the COVID-19 pandemic, on March 21, 2020, the federal tax filing deadline in the United States (U.S.) for individual 2019 tax returns was extended from April 15, 2020 to July 15, 2020. Substantially all U.S. states with an April 15 individual state income tax filing requirement extended their respective deadlines. In Canada, the deadline for individuals to file was extended to June 1, 2020. These extensions impacted the typical seasonality of our business and the comparability of our financial results. Consequently, a portion of revenues and expenses that would have normally been recognized in our fourth quarter of fiscal year 2020 shifted to the first two quarters of fiscal year 2021.

On January 15, 2021, the Internal Revenue Service (IRS) announced that it would begin accepting and processing 2020 individual income tax returns on February 12, 2021. Historically, the IRS has begun accepting and processing returns during our third fiscal quarter. This delay has impacted the timing of recognizing a portion of revenue for the returns that we prepared during the quarter but were not able to electronically file with the IRS. See n ote 2 for additional information.

DISCONTINUED OPERATIONS – Our discontinued operations include the results of operations of Sand Canyon Corporation, previously known as Option One Mortgage Corporation (including its subsidiaries, collectively, SCC), which exited its mortgage business in fiscal year 2008. See ~~notes 9 and~~note 10 for additional information on litigation, claims, and other loss contingencies related to our discontinued operations.

NEW ACCOUNTING PRONOUNCEMENTS –

~~Restricted Cash in Statement of Cash Flows.~~Current Expected Credit Losses. In ~~November~~June 2016, the Financial Accounting Standards Board ~~(FASB)~~ issued Accounting Standards Update No. ~~2016-18, "Restricted Cash (a consensus~~2016-13 (ASU 2016-13), "Measurement of ~~the FASB Emerging Issues Task Force),~~Credit Losses on Financial Instruments," (ASU 2016-18). This guidance requires that restricted cash be included with cash and cash equivalents when reconciling the beginning and end-of-period total amounts shown on the statement of cash flows. This guidance must be applied retrospectively to all periods presented. We adopted ASU 2016-18 effective May 1, 2017. All prior periods have been adjusted to conform to the current period presentation, which ~~resulted in an increase in cash used in operations of $33.9 million for the~~ ~~nine~~ ~~months ended January 31, 2017.~~

~~Stock-Based Compensation.~~ In March 2016, the FASB issued Accounting Standards Update No. 2016-09, "Improvements to Employee Share-Based Payment Accounting," (ASU 2016-09). This guidance requires that, among other things: (1) all excess tax benefits and tax deficiencies would be recognized as income tax expense or benefit in the income statement; and (2) excess tax benefits would not be separated from other income tax cash flows and, thus, would be classified along with other cash flows as an operating activity. The transition requirements for this guidance varies by component, but the changes applicable to us were applied prospectively. We adopted ASU 2016-09 effective May 1, 2017. We recorded a discrete tax benefit of $4.6 million related to stock-based compensation during the ~~nine~~ ~~months ended~~ ~~January 31, 2018~~.



46			Q3 ~~FY2018~~FY2021 Form 10-Q \| H&R Block, Inc.

~~Table~~Ta ble of Contents

replaces the existing incurred credit loss model for an expected credit loss model. We adopted ASU 2016-13 as of May 1, 2020, which did not have a material impact on our consolidated financial statements.

NOTE 2: REVENUE RECOGNITION

The majority of our revenues are from our U.S. Tax Services business. The following table disaggregates our U.S. Tax Services revenues by major service line, with revenues from our international tax services businesses and from Wave included as separate lines:


							(in 000s)
	Three months ended January 31,				Nine months ended January 31,
	2021		2020		2021		2020
Revenues:
U.S. assisted tax preparation	$	154,489	$	283,956	$	541,139	$	358,174
U.S. royalties	23,902		44,965		67,427		59,644
U.S. DIY tax preparation	21,681		34,089		94,331		42,040
International	15,671		11,804		132,347		97,311
Refund Transfers	7		50,494		11,752		52,794
Emerald Card®	21,951		16,657		48,801		39,128
Peace of Mind® Extended Service Plan	16,101		16,954		72,871		75,451
Tax Identity Shield®	4,927		8,138		19,129		17,308
Interest and fee income on Emerald AdvanceSM	27,590		32,741		28,754		33,780
Wave	14,803		11,213		41,197		25,740
Other	7,105		8,194		28,059		28,998
Total revenues	$	308,227	$	519,205	$	1,085,807	$	830,368

Revenue ~~Recognition.~~ ~~In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers," (ASU 2014-09) which~~ is ~~a comprehensive new revenue recognition model that requires an entity to recognize the amount~~recognized upon satisfaction of ~~revenue which reflects the consideration it expects to receive in exchange for~~performance obligations by the transfer of a product or service to the ~~promised goods~~customer. The majority of our services and products have multiple performance obligations. For our tax preparation services, the various performance obligations are generally provided simultaneously at a point in time, and revenue is recognized at that time. We allocate the transaction price to the various performance obligations based on relative standalone selling prices. The value of point-of-sale discounts and coupons are recorded as a reduction of revenue.

U.S. Assisted tax preparation services include tax preparation and electronic filing or services to customers. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract, and clarifies guidance for multiple-element arrangements. This guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for us on May 1, 2018. The standard permits the use of either the full retrospective or modified retrospective transition method.

~~We have substantially completed our evaluation~~printing of the ~~impact of ASU 2014-09 on our United States (U.S.) assisted~~completed tax return. Revenues from tax preparation ~~fees, U.S. royalties,~~ services, including printing for clients that choose to print and mail their returns, are recognized when a completed return is accepted by the customer, and revenues for electronic filing a completed return are recognized when the return is electronically filed.

Royalties are based on contractual percentages of franchise gross receipts and are generally recognized in the period in which the services are provided by the franchisee to the customer.

U.S. DIY tax preparation includes fees for online and desktop tax preparation software and for electronic filing or printing. Revenues for online software, including printing for clients that choose to print and mail their returns, are recognized when the customer uses the software to complete a return and revenues ~~from~~for desktop software are recognized when the software is sold to the end user. Revenues for electronic filing are recognized when the return is electronically filed.

Refund Transfer revenues are recognized when the IRS filing acknowledgment is received and the bank account is established at our banking partner.

Revenues for electronic filing of U.S. returns totaling $18.7 million were deferred as of January 31, 2021 and will be recognized in February 2021 when the associated tax returns are electronically filed.


H&R Block, Inc. \| Q3 FY2021 Form 10-Q			7

Ta ble of Contents

Changes in the balances of deferred revenue and wages for our Peace of Mind® Extended Service Plan (POM)~~, revenues from Refund Transfers (RTs), revenues from H&R Block Emerald Prepaid MasterCard® (Emerald Card), interest~~ are as follows:


							(in 000s)
POM	Deferred Revenue				Deferred Wages
Nine months ended January 31,	2021		2020		2021		2020
Balance, beginning of the period	$	183,685	$	212,511	$	21,618	$	27,306
Amounts deferred	35,977		28,686		1,118		1,827
Amounts recognized on previous deferrals	(84,573)		(87,850)		(9,652)		(12,134)
Balance, end of the period	$	135,089	$	153,347	$	13,084	$	16,999

As of January 31, 2021, deferred revenue related to POM was $135.1 million. We expect that $94.2 million will be recognized over the next twelve months, while the remaining balance will be recognized over the following sixty months.

As of January 31, 2021 and ~~fee income from H&R Block Emerald Advance® lines of credit (EAs) and fees from~~2020, Tax Identity Shield® (TIS) deferred revenue was $20.4 million and ~~based on the preliminary results of our evaluation, we do not expect the application of this guidance to have a material impact on the recognition of~~$21.2 million, respectively. Deferred revenue related to ~~these services. Changes to our client agreements or service design before adoption~~TIS was $30.8 million and $29.7 million as of ~~the new standard could change our preliminary conclusions. We are still evaluating the impact of this guidance as it relates to other~~April 30, 2020 and 2019, respectively. All deferred revenue ~~streams, as well as certain associated expenses. Depending on the results of our review, there could be changes to the classification and timing of recognition of revenues and expenses~~ related to ~~other revenue streams. We currently expect to adopt using~~TIS will be recognized within the full retrospective transition method, under which we will recast prior periods to comply with this new guidance. We are continuing our assessment, including evaluating the standard's impact on our internal controls.next fifteen months.

~~Income Taxes.~~ In October 2016, the FASB issued Accounting Standards Update No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Asset Transfers of Assets Other than Inventory," (ASU 2016-16). The new guidance eliminates the exception for intra-entity transfers other than inventory and requires the recognition of current and deferred income taxes resulting from such a transfer when the transfer occurs. We will adopt this guidance on May 1, 2018 on a modified retrospective basis. We estimate that we will recognize a cumulative-effect adjustment to retained earnings between $95 million and $110 million, which will also result in increases in deferred tax assets and income tax reserves. However, future transactions and law changes prior to adoption could significantly change the impact of adoption.

NOTE ~~2: LOSS~~3: EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY

~~LOSS~~EARNINGS PER SHARE – Basic and diluted ~~loss~~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 or loss from continuing operations attributable to common shareholders by the weighted average shares outstanding during each period. The dilutive effect of potential common shares is included in diluted earnings per share except in those periods with a loss from continuing operations. Diluted earnings per share excludes the impact of shares of common stock issuable upon the lapse of certain restrictions or the exercise of options to purchase ~~3.3~~5.4 million ~~shares for the three and nine months ended~~ ~~January 31, 2018, and~~ ~~4.5 million~~ shares for the three and nine months ended January 31, ~~2017,~~2021 and 3.7 million shares for the three and nine months ended January 31, 2020, as the effect would be antidilutive due to the net loss from continuing operations during those periods.



~~H&R Block, Inc.~~ ~~\| Q3 FY2018 Form 10-Q~~	5

~~Table of Contents~~

The computations of basic and diluted loss per share from continuing operations are as follows:


(in 000s, except per share amounts)	(in 000s, except per share amounts)													(in 000s, except per share amounts)
		Three months ended January 31,						Nine months ended January 31,							Three months ended January 31,				Nine months ended January 31,
		2018			2017			2018			2017				2021		2020		2021		2020
Net loss from continuing operations attributable to shareholders		$	(242,925	)	$	(101,212	)	$	(519,055	)	$	(365,653	)	Net loss from continuing operations attributable to shareholders	$	(231,831)	$	(128,026)	$	(360,755)	$	(457,304)
Amounts allocated to participating securities		(177		)	(143		)	(498		)	(410		)	Amounts allocated to participating securities	(210)		(169)		(592)		(468)
Net loss from continuing operations attributable to common shareholders		$	(243,102	)	$	(101,355	)	$	(519,553	)	$	(366,063	)	Net loss from continuing operations attributable to common shareholders	$	(232,041)	$	(128,195)	$	(361,347)	$	(457,772)

Basic weighted average common shares		209,080			207,862			208,693			214,627			Basic weighted average common shares	183,438		194,077		188,548		198,064
Potential dilutive shares		—			—			—			—			Potential dilutive shares	0		0		0		0
Dilutive weighted average common shares		209,080			207,862			208,693			214,627			Dilutive weighted average common shares	183,438		194,077		188,548		198,064

Loss per share from continuing operations attributable to common shareholders:	Loss per share from continuing operations attributable to common shareholders:													Loss per share from continuing operations attributable to common shareholders:
Basic		$	(1.16	)	$	(0.49	)	$	(2.49	)	$	(1.71	)	Basic	$	(1.27)	$	(0.66)	$	(1.92)	$	(2.31)
Diluted		(1.16		)	(0.49		)	(2.49		)	(1.71		)	Diluted	(1.27)		(0.66)		(1.92)		(2.31)

The decrease in the weighted average shares outstanding for both the three and nine months ended January 31, 2018 increased to 209.1 million and decreased to 208.7 million, respectively, from 207.9 million and 214.6 million, respectively, for the three and nine months ended January 31, 2017. The decrease during the nine month ~~period~~periods is due to share repurchases completed in the current and prior year. We did not repurchase and retire any shares during the nine months ended January 31, 2018. During the nine months ended January 31, 2017, we purchased and immediately retired 14.0 million shares at an aggregate costfiscal years.


8			Q3 FY2021 Form 10-Q \| H&R Block, Inc.

Ta ble of ~~$317.0 million (average price of $22.61 per share).~~Contents

STOCK-BASED COMPENSATION – During the nine months ended January 31, ~~2018, we acquired~~ ~~0.3 million~~ ~~shares of our common stock at an aggregate cost of~~ ~~$7.7 million. These shares represent shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards. During the~~ ~~nine~~ ~~months ended~~ ~~January 31, 2017, we acquired~~ ~~0.3 million~~ ~~shares at an aggregate cost of~~ ~~$5.8 million~~ ~~for similar purposes.~~

~~During the~~ ~~nine~~ ~~months ended~~ ~~January 31, 2018~~ ~~and~~ ~~2017, we issued~~ ~~2.2 million~~ ~~and~~ ~~0.9 million~~ ~~shares of common stock, respectively, due to the vesting or exercise of stock-based awards.~~

~~During the~~ ~~nine~~ ~~months ended~~ ~~January 31, 2018~~,2021, we granted ~~equity~~ awards ~~equivalent to~~ ~~1.2~~of 2.5 million shares under our stock-based compensation plans, consisting primarily of nonvested units. Stock-based compensation expense of our continuing operations totaled ~~$5.4~~$5.8 million and ~~$17.1~~$20.7 million for the three and nine months ended January 31, ~~2018,~~2021, respectively, and ~~$4.5~~$6.6 million and ~~$16.9~~$22.7 million for the three and nine months ended January 31, ~~2017.~~2020, respectively. As of January 31, ~~2018~~,2021, unrecognized compensation cost for stock options totaled ~~$1.2~~$0.8 million,, and for nonvested shares and units totaled ~~$35.7 million~~.$40.9 million.



6	~~Q3 FY2018 Form 10-Q \|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

NOTE 3:4: RECEIVABLES

Receivables, net of their related allowance, consist of the following:


(in 000s)	(in 000s)													(in 000s)
As of		January 31, 2018				January 31, 2017				April 30, 2017				As of	January 31, 2021				January 31, 2020				April 30, 2020
		Short-term		Long-term		Short-term		Long-term		Short-term		Long-term			Short-term		Long-term		Short-term		Long-term		Short-term		Long-term
Loans to franchisees		$	41,062	$	47,434	$	62,603	$	50,021	$	39,911	$	36,614	Loans to franchisees	$	24,558	$	39,106	$	36,372	$	42,079	$	25,397	$	31,329
Receivables for U.S assisted and DIY tax preparation and related fees		299,805		6,316		263,822		5,528		23,025		6,316
Instant Cash Back® receivables		6,848		—		4,590		—		34,940		—
Receivables for U.S. assisted and DIY tax preparation and related fees														Receivables for U.S. assisted and DIY tax preparation and related fees	168,905		3,111		316,987		3,716		47,030		3,112
H&R Block Instant RefundTM receivables														H&R Block Instant RefundTM receivables	1,398		314		6,733		563		15,031		1,325
H&R Block Emerald Advance® lines of credit		353,972		9,081		354,027		6,398		16,202		5,069		H&R Block Emerald Advance® lines of credit	314,015		4,937		373,271		6,179		10,001		14,081
Software receivables from retailers		7,744		—		11,864		—		16,715		—		Software receivables from retailers	4,434		0		8,101		0		7,341		0
Royalties and other receivables from franchisees		56,149		788		64,929		—		13,275		1,585		Royalties and other receivables from franchisees	31,346		214		55,645		67		9,861		42

Wave payment processing receivables														Wave payment processing receivables	2,633		0		3,363		0		3,200		0
Other		26,038		3,608		26,030		4,304		18,707		3,314		Other	15,800		1,448		19,474		1,444		15,336		1,828
		$	791,618	$	67,227	$	787,865	$	66,251	$	162,775	$	52,898

Total														Total	$	563,089	$	49,130	$	819,946	$	54,048	$	133,197	$	51,717

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 ~~consisted~~consist of term loans made primarily to finance the purchase of franchises and revolving lines of credit primarily for the purpose of funding ~~off-season~~ working capital ~~needs and term loans made primarily to finance the purchase of franchises.~~needs. As of January 31, ~~2018~~2021 and ~~2017 and April 30, 2017,~~2020 loans with a principal balance ~~of $1.3 million, $0.1~~of $0.5 million and ~~$0.1~~$0.4 million, respectively, were more than 90 days past due. We had no loans to franchisees on non-accrual status.

H&R BLOCK INSTANT ~~CASH BACK®~~REFUNDTM PROGRAM –~~Refunds advanced under the~~H&R Block Instant ~~Cash Back® program in Canada are not subject to credit approval. Instant Cash Back®~~RefundTM amounts are generally received from the Canada Revenue Agency within 60 days of filing the client's ~~return.~~return, with the remaining balance collectible from the client.

~~H&R BLOCK EMERALD ADVANCE® LINES OF CREDIT~~ –We review the credit quality of our ~~purchased participation interests in EA~~Instant Refund receivables based on pools, which are segregated by the year of origination, with older years being deemed more unlikely to be repaid. ~~These~~Current balances and amounts ~~as of~~ ~~January 31, 2018, by year of origination, are as follows:~~

(in 000s)
Credit Quality Indicator – Year of origination:
2018 $ 352,591
2017 8,342
2016 and prior 6,634
Revolving loans 23,291
390,858
Allowance (27,805 )
Net balance $ 363,053

~~As of~~ ~~January 31, 2018~~ ~~and~~ ~~2017~~ ~~and~~ ~~April 30, 2017, $27.8 million, $25.3 million and $28.0 million of EAs were~~ on non-accrual status and classified as impaired, or more than 60 days past due, ~~respectively.~~by year of origination, as of January 31, 2021 are as follows:


			(in 000s)

Year of Origination	Balance		Non-Accrual

2021	$	737	$	0
2020 and prior	1,002		1,002

	1,739		$	1,002
Allowance	(27)
Net balance	$	1,712



H&R Block, Inc. \| Q3 ~~FY2018~~FY2021 Form 10-Q			79

~~Table~~Ta ble of Contents

H&R BLOCK EMERALD ADVANCE® LINES OF CREDIT –We review the credit quality of our purchased participation interests in Emerald AdvanceSM (EA) receivables based on pools, which are segregated by the year of origination, with older years being deemed more unlikely to be repaid. Balances and amounts on non-accrual status and classified as impaired, or more than 60 days past due, as of January 31, 2021, by year of origination, are as follows:


(in 000s)
Year of origination:	Balance		Non-Accrual
2021	$	309,382	$	0
2020 and prior	12,039		12,039
Revolving loans	23,699		14,246
	345,120		$	26,285
Allowance	(26,168)
Net balance	$	318,952

ALLOWANCE FOR ~~DOUBTFUL ACCOUNTS~~ CREDIT LOSSES –Activity in the allowance for ~~doubtful accounts~~credit losses for our EA and all other short-term and long-term receivables for the nine months ended January 31, ~~2018~~2021 and ~~2017~~2020 is as follows:


(in 000s)
	EAs		All Other		Total
Balances as of May 1, 2020	$	32,034	$	50,446	$	82,480
Provision	12,783		12,859		25,642

Charge-offs, recoveries and other	(18,649)		(54,457)		(73,106)

Balances as of January 31, 2021	$	26,168	$	8,848	$	35,016

Balances as of May 1, 2019	$	27,535	$	53,938	$	81,473
Provision	17,862		19,655		37,517
Charge-offs, recoveries and other	(17,273)		(55,101)		(72,374)
Balances as of January 31, 2020	$	28,124	$	18,492	$	46,616

(in 000s)
EAs
All Other
Total
Balances as of April 30, 2017 $ 10,123
$ 45,173
$ 55,296
Provision 17,682
15,747
33,429
Charge-offs —
(43,510 ) (43,510 )
Balances as of January 31, 2018 $ 27,805
$ 17,410
$ 45,215

Balances as of April 30, 2016 $ 9,007
$ 48,004
$ 57,011
Provision 22,479
7,155
29,634
Charge-offs —
(38,914 ) (38,914 )
Balances as of January 31, 2017 $ 31,486
$ 16,245
$ 47,731

NOTE 4:5: GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the nine months ended January 31, ~~2018~~2021 and ~~2017~~2020 are as follows:


(in 000s)	(in 000s)										(in 000s)
		Goodwill			Accumulated Impairment Losses			Net				Goodwill		Accumulated Impairment Losses		Net
Balances as of April 30, 2017		$	523,504		$	(32,297	)	$	491,207
Balances as of May 1, 2020											Balances as of May 1, 2020	$	850,435	$	(138,297)	$	712,138

Acquisitions		11,579			—			11,579			Acquisitions	6,924		—		6,924
Disposals and foreign currency changes, net		2,003			—			2,003			Disposals and foreign currency changes, net	26,554		—		26,554
Impairments		—			—			—			Impairments	—		0		0
Balances as of January 31, 2018		$	537,086		$	(32,297	)	$	504,789
Balances as of January 31, 2021											Balances as of January 31, 2021	$	883,913	$	(138,297)	$	745,616

Balances as of April 30, 2016		$	503,054		$	(32,297	)	$	470,757
Acquisitions		13,346			—			13,346
Balances as of May 1, 2019											Balances as of May 1, 2019	$	552,234	$	(32,297)	$	519,937
Acquisition of Wave											Acquisition of Wave	300,560		—		300,560
Other acquisitions											Other acquisitions	23,421		—		23,421
Disposals and foreign currency changes, net		(783		)	—			(783		)	Disposals and foreign currency changes, net	(5,088)		—		(5,088)
Impairments		—			—			—			Impairments	—		0		0
Balances as of January 31, 2017		$	515,617		$	(32,297	)	$	483,320
Balances as of January 31, 2020											Balances as of January 31, 2020	$	871,127	$	(32,297)	$	838,830

We test goodwill for impairment annually in our fourth quarter, or more frequently if events occur or circumstances change which would, more likely than not, reduce the fair value of a reporting unit below its carrying value.



810			Q3 ~~FY2018~~FY2021 Form 10-Q \| H&R Block, Inc.

~~Table~~Ta ble of Contents

Components of intangible assets are as follows:


(in 000s)
	Gross Carrying Amount		Accumulated Amortization		Net
As of January 31, 2021:
Reacquired franchise rights	$	370,076	$	(174,484)	$	195,592
Customer relationships	316,600		(244,441)		72,159
Internally-developed software	168,642		(123,709)		44,933
Noncompete agreements	41,177		(34,962)		6,215
Franchise agreements	19,201		(15,574)		3,627
Purchased technology	122,700		(68,844)		53,856
Trade name	5,800		(918)		4,882
	$	1,044,196	$	(662,932)	$	381,264
As of January 31, 2020:
Reacquired franchise rights	$	364,376	$	(153,392)	$	210,984
Customer relationships	313,521		(219,664)		93,857
Internally-developed software	154,962		(116,383)		38,579
Noncompete agreements	41,386		(33,151)		8,235
Franchise agreements	19,201		(14,294)		4,907
Purchased technology	122,801		(53,525)		69,276
Trade name	5,800		(338)		5,462
Acquired assets pending final allocation (1)	1,774		0		1,774
	$	1,023,821	$	(590,747)	$	433,074
As of April 30, 2020:
Reacquired franchise rights	$	365,062	$	(159,754)	$	205,308
Customer relationships	314,191		(227,445)		86,746
Internally-developed software	154,083		(113,698)		40,385
Noncompete agreements	41,072		(33,639)		7,433
Franchise agreements	19,201		(14,614)		4,587
Purchased technology	122,700		(57,548)		65,152
Trade name	5,800		(483)		5,317
Acquired assets pending final allocation (1)	48		0		48
	$	1,022,157	$	(607,181)	$	414,976

(in 000s)

Gross
Carrying
Amount

Accumulated
Amortization

Net
As of January 31, 2018:
Reacquired franchise rights $ 339,544
$ (108,063 ) $ 231,481
Customer relationships 251,792
(156,234 ) 95,558
Internally-developed software 151,095
(123,309 ) 27,786
Noncompete agreements 32,853
(29,195 ) 3,658
Franchise agreements 19,201
(11,734 ) 7,467
Purchased technology 54,700
(36,329 ) 18,371
Acquired assets pending final allocation ⁽¹⁾
6,672
—
6,672
$ 855,857
$ (464,864 ) $ 390,993
As of January 31, 2017:
Reacquired franchise rights $ 328,321
$ (85,127 ) $ 243,194
Customer relationships 216,449
(124,771 ) 91,678
Internally-developed software 142,571
(108,047 ) 34,524
Noncompete agreements 31,821
(27,033 ) 4,788
Franchise agreements 19,201
(10,454 ) 8,747
Purchased technology 54,700
(30,457 ) 24,243
Acquired assets pending final allocation ⁽¹⁾
27,546
—
27,546
$ 820,609
$ (385,889 ) $ 434,720
As of April 30, 2017:
Reacquired franchise rights $ 331,150
$ (90,877 ) $ 240,273
Customer relationships 234,603
(133,207 ) 101,396
Internally-developed software 139,709
(108,379 ) 31,330
Noncompete agreements 32,408
(27,559 ) 4,849
Franchise agreements 19,201
(10,774 ) 8,427
Purchased technology 54,700
(31,973 ) 22,727
Acquired assets pending final allocation ⁽¹⁾
362
—
362
$ 812,133
$ (402,769 ) $ 409,364

⁽¹⁾ Represents franchisee and competitor business acquisitions for which final purchase price allocations have not yet been determined.

~~During the~~ ~~nine~~ ~~months ended~~ ~~January 31, 2018~~ ~~and 2017, we~~We made payments to acquire ~~franchisee and competitor~~ businesses totaling ~~$39.4~~$15.0 million and ~~$52.8~~$450.3 million during the nine months ended January 31, 2021 and 2020, respectively. The nine months ended January 31, 2020 included the acquisition of Wave. The amounts and weighted-average lives of intangible assets acquired during the nine months ended January 31, 2021, including amounts capitalized and placed in service related to internally-developed software, are as follows:


(dollars in 000s)
	Amount		Weighted-Average life (in years)
Capitalized software	$	14,389	3
Customer relationships	8,952		5
Reacquired franchise rights	6,005		5
Noncompete agreements	342		5
Total	$	29,688	4


H&R Block, Inc. \| Q3 FY2021 Form 10-Q			11

Ta ble of Contents

Amortization of intangible assets for the three and nine months ended January 31, 2021 was $21.7 million and $62.1 million, respectively, compared to $21.5 million and $61.3 million for the three and nine months ended January 31, ~~2018 was $20.8 million and $59.5 million, respectively. Amortization for the three and nine months ended January 31, 2017 was $19.3 million and $57.3 million,~~2020, respectively. Estimated amortization of intangible assets for fiscal years ~~2018, 2019, 2020,~~ 2021, 2022, 2023, 2024 and ~~2022~~2025 is ~~$79.2~~$83.5 million, ~~$67.3~~$75.5 million, ~~$50.6~~$57.7 million, ~~$35.6~~$38.4 million and ~~$24.3~~$20.3 million, respectively.



~~H&R Block, Inc.~~ ~~\| Q3 FY2018 Form 10-Q~~	9

~~Table of Contents~~

NOTE 5:6: LONG-TERM DEBT

The components of long-term debt are as follows:


							(in 000s)								(in 000s)
As of	January 31, 2018			January 31, 2017			April 30, 2017			As of	January 31, 2021		January 31, 2020		April 30, 2020
Senior Notes, 4.125%, due October 2020	$	650,000		$	650,000		$	650,000		Senior Notes, 4.125%, due October 2020	$	0	$	650,000	$	650,000
Senior Notes, 5.500%, due November 2022	500,000			500,000			500,000			Senior Notes, 5.500%, due November 2022	500,000		500,000		500,000
Senior Notes, 5.250%, due October 2025	350,000			350,000			350,000			Senior Notes, 5.250%, due October 2025	350,000		350,000		350,000
Senior Notes, 3.875%, due August 2030										Senior Notes, 3.875%, due August 2030	650,000		0		0
Committed line of credit borrowings	790,000			1,100,000			—			Committed line of credit borrowings	880,000		1,035,000		2,000,000
Capital lease obligation	5,878			6,820			6,610

Debt issuance costs and discounts	(10,632		)	(13,256		)	(12,612		)	Debt issuance costs and discounts	(10,426)		(5,389)		(4,743)
Total long-term debt										Total long-term debt	2,369,574		2,529,611		3,495,257
Less: Current portion										Less: Current portion	0		(649,022)		(649,384)
Long-term portion										Long-term portion	$	2,369,574	$	1,880,589	$	2,845,873
	2,285,246			2,593,564			1,493,998
Less: Current portion	(1,015		)	(942		)	(981		)
Estimated fair value of long-term debt										Estimated fair value of long-term debt	$	2,499,000	$	2,618,000	$	3,526,000
	$	2,284,231		$	2,592,622		$	1,493,017

On ~~September 22, 2017,~~August 7, 2020, we ~~entered into a Second Amended and Restated Credit and Guarantee Agreement (2017 CLOC), which further amended our First Amended and Restated Credit and Guarantee Agreement (2016 CLOC), extending~~issued $650.0 million of 3.875% Senior Notes due August 15, 2030 (2030 Senior Notes). The 2030 Senior Notes are not redeemable by the ~~scheduled~~bondholders prior to maturity, ~~date from September 22, 2021~~although we have the right to ~~September 22, 2022. Other material terms remain unchanged from~~redeem some or all of these notes at any time, at specified redemption prices. The proceeds of the ~~2016 CLOC. The 2017 CLOC~~2030 Senior Notes were used to repay the $650 million Senior Notes that matured on October 1, 2020.

UNSECURED COMMITTED LINE OF CREDIT – Our unsecured committed line of credit (CLOC) provides for an unsecured senior revolving credit facility in the aggregate principal amount of $2.0 billion, which includes a $200.0 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 ~~2017~~ CLOC will mature on September ~~22, 2022,~~21, 2023, unless extended pursuant to the terms of the ~~2017~~ CLOC, at which time all outstanding amounts thereunder will be due and payable. ~~The 2017~~Our CLOC includes an annual facility fee, which will vary depending on our then current credit ratings.

The ~~2017~~ 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 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 April 30, July 31, and October 31 of each year and (b) 4.50 to 1.00 as of the last day of each fiscal quarter ending on January 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 ~~2017~~ CLOC includes provisions for an equity cure which could potentially allow us to independently cure certain defaults. Proceeds under the ~~2017~~ CLOC may be used for working capital needs or for other general corporate ~~purposes.~~purposes. We were in compliance with these requirements as of January 31, ~~2018.~~2021.

In September 2020, we utilized our cash on hand to repay the outstanding $2.0 billion balance on our CLOC. We had an ~~outstanding~~outstanding balance of ~~$790.0~~$880.0 million under the ~~2017~~ CLOC as of January 31, ~~2018,~~2021 and ~~may~~amounts available to borrow upwere limited by the debt-to-EBITDA covenant to ~~the the full capacity~~approximately $520 million as of ~~$2.0 billion.~~

January 31, 2021.



1012			Q3 ~~FY2018~~FY2021 Form 10-Q \| H&R Block, Inc.

~~Table~~ble of Contents

~~NOTE 6: FAIR VALUE~~

~~ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS~~ ~~– The carrying amounts and estimated fair values of our financial instruments are as follows:~~

(in 000s)
As of January 31, 2018 January 31, 2017 April 30, 2017
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Assets:
Cash and cash equivalents $ 187,366
$ 187,366
$ 221,172
$ 221,172
$ 1,011,331
$ 1,011,331
Cash and cash equivalents - restricted 83,033
83,033
70,166
70,166
106,208
106,208
Receivables, net - short-term 791,618
791,618
787,865
787,865
162,775
162,775
Receivables, net - long-term 67,227
67,227
66,251
66,251
52,898
52,898
Liabilities:
Long-term debt (excluding debt issuance costs) 2,292,612
2,365,881
2,593,564
2,672,370
1,502,735
1,569,033
Contingent consideration 11,906
11,906
9,332
9,332
10,428
10,428

~~Fair value estimates, methods and assumptions are set forth below. Fair value was not estimated for assets and liabilities that are not considered financial instruments.~~


▪	~~Cash and cash equivalents, including restricted - Fair value approximates the carrying amount (Level 1).~~


▪	Receivables, net - short-term - For short-term balances the carrying values reported in the balance sheet approximate fair market value due to the relative short-term nature of the respective instruments (Level 1).

▪

Receivables, net - long-term - The carrying values for the long-term portion of loans to franchisees approximate fair market value due to variable interest rates, low historical delinquency rates and franchise territories serving as collateral (Level 1). Long-term EA receivables and tax preparation receivables are carried at net realizable value which approximates fair value (Level 3). Net realizable value is determined based on historical collection rates.


▪	Long-term debt - The fair value of our Senior Notes is based on quotes from multiple financial institutions (Level 2). For outstanding balances on the 2017 CLOC and 2016 CLOC, fair value approximates the carrying amount (Level 1).


▪	~~Contingent consideration - Fair value approximates the carrying amount (Level 3).~~

NOTE 7: INCOME TAXES

We file a consolidated federal income tax return in the U.S. with the ~~Internal Revenue Service (IRS)~~IRS and file tax returns in various state, local, and foreign jurisdictions. Tax returns are typically examined and either settled upon completion of the examination or through the appeals process. ~~The Company’s~~Our U.S. federal income tax ~~return~~returns for ~~2014 is currently under~~2017 and later years remain open for examination. Our U.S. federal income tax returns for ~~2015 and~~ 2016 ~~have not been audited and remain open to examination. Our U.S. federal income tax returns for 2013~~ and all prior periods are currently closed. With respect to state and local jurisdictions and countries outside of the ~~United States,~~U.S., we are typically subject to examination for three to six years after the income tax returns have been filed. Although the outcome of ~~the~~ tax audits is always uncertain, we believe that adequate amounts of tax, interest, and penalties have been provided for in the accompanying consolidated financial statements for any adjustments that might be incurred due to federal, state, local or foreign audits.

On ~~December 22, 2017,~~March 27, 2020, the ~~U.S. government enacted~~Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was signed into law. The CARES Act includes, among other items, modifications to net operating loss carryback periods, net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act allows a five-year carryback of net operating losses generated between 2018 and 2021 to fully offset taxable income previously subject to a 35% statutory tax rate. As a result of the ~~Tax Legislation, which makes broad~~CARES Act and ~~complex~~ changes to our methods of accounting for items under the ~~U.S.~~Internal Revenue Code, we anticipate generating a loss for tax ~~code that impacted~~purposes on our ~~financial statements,~~calendar 2020 tax return, plan to carry back the ~~most significant being~~loss to two of the five preceding tax years, and obtain a ~~reduction in the U.S.~~refund of previously paid federal ~~corporate~~income taxes. The net operating loss carryback has been factored into our annual effective tax rate which has reduced our effective tax rate and income taxes payable and increased our unrecognized tax benefits, income tax refund receivables, and deferred tax liabilities. We also expect that the net operating loss carryback will reopen our 2015 tax return to examination.

Our effective tax rate from 35% to 21% and the imposition of a one-time transition tax on certain earnings of foreign subsidiaries. In addition, the Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Legislation. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Legislation’s enactment date for companies to complete their analysis and apply the provisions of the Tax Legislation to their financial statements. To the extent



~~H&R Block, Inc.~~ ~~\| Q3 FY2018 Form 10-Q~~	11

~~Table of Contents~~

a company’s accounting for certain income tax effects of the Tax Legislation is incomplete but the company is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the provisions of the tax laws that were in effect immediately before the enactment of the Tax Legislation.

~~We have completed an initial assessment of the corporate income tax impact expected to result from the Tax Legislation. Our financial statements reflect reasonable provisional estimates of~~continuing operations, including the effects of ~~the Tax Legislation in computing our deferred taxes, the one-time transition~~discrete tax ~~which is payable in installments over a period of up to eight years, unrecognized tax benefits,~~items was 9.0% and among other items, the indirect impacts of the Tax Legislation on state taxes. We are in the process of finalizing our assessment of the impact of the Tax Legislation and our provisional estimates may be impacted by additional regulatory guidance that clarifies the interpretations of the Tax Legislation.

~~For~~29.2% for the nine months ended January 31, ~~2018, we~~2021 and 2020, respectively. Discrete items decreased the effective tax rate for the nine months ended January 31, 2021 by 4.9% and increased the effective tax rate for the nine months ended January 31, 2020 by 4.3%. A discrete income tax expense of $19.5 million was recorded ~~an income~~in the nine months ended January 31, 2021 compared to a discrete tax benefit of ~~$43.2 million.~~ $27.7 million in the same period of the prior year. The discrete tax expense recorded in the current period primarily resulted from uncertain tax benefits related to the net operating loss carryback offset by settlements with tax authorities and statute of limitation expirations. The discrete tax benefit recorded in the prior year resulted from the settlement of various matters, including expiration of statute of limitations and resolutions with tax authorities and valuation allowance changes related to utilization of foreign losses. Due to the loss through the third quarter, a discrete tax benefit increases the tax rate while an item of discrete tax expense decreases the tax rate. The impact of discrete tax items combined with the seasonal nature of our business can cause the effective tax rate through our third quarter to be significantly different than the rate for our full fiscal year.

Consistent with prior years, our pretax loss for the nine months ended January 31, ~~2018~~2021 is expected to be offset by income in the fourth quarter due to the established pattern of seasonality in our primary business operations. As such, management has determined that it is ~~at least~~ more-likely-than-not that realization of tax benefits recorded in our financial statements will occur within our fiscal year. The amount of tax benefit recorded for the nine months ended January 31, ~~2018~~2021 reflects management’s estimate of the annual effective tax rate applied to ~~the~~ year-to-date loss from continuing ~~operations.~~

~~Our effective~~operations adjusted for the tax ~~rate from continuing operations, including the effects~~impact of discrete ~~income tax~~ items ~~was 7.7% and 37.2%~~ for the nine months ended January 31, 2018 and 2017, respectively. Rate reconciliations between the statutory U.S. federal corporate income rates and the effective tax rates for continuing operations are below:

Nine months ended January 31, 2018
2017
U.S. statutory tax rate 21.0 % 35.0 %
Change in tax rate resulting from:
State income taxes, net of federal income tax benefit 2.2 % 1.6 %
Earnings taxed in foreign jurisdictions (2.3 )% (5.3 )%
Permanent differences 0.3 % (0.5 )%
Uncertain tax positions 6.0 % 6.5 %
Remeasurement of deferred tax assets and liabilities 2.4 % — %
Tax benefit due to effective date of statutory rate change (16.4 )% — %
One-time transition tax (2.4 )% — %
Other (3.1 )% (0.1 )%
Effective tax rate 7.7 % 37.2 %

The reduced effective tax rate results primarily from the decrease in the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018. The impact of the rate decrease is exaggerated in fiscal year 2018 due to the seasonality of our business and our differing year ends for corporate income tax filing and financial reporting purposes, which is included as "tax benefit due to effective date of statutory rate change" in the table above. Our tax returns for the U.S. are filed on a calendar year-end basis. Therefore, pretax losses for the eight months ended December 31, 2017 result in income tax benefits based on the statutory rate of 35%, while the pretax income we generate in the four months ending April 30, 2018 will be taxed at the statutory rate of 21%.

For the three months ended January 31, 2018, we reported a pretax loss from continuing operations of $120.8 million. As a result of applying the effects of the Tax Legislation to our year-to-date results, we recorded income tax expense during the quarter on our loss from continuing operations. This caused a negative effective tax rate for the quarter and increased our loss from continuing operations. For the six months ended October 31, 2017, we reported a pretax loss from continuing operations of $441.5 million and a tax benefit of $165.4 million, resulting in an effective tax rate of 37.5%. For the nine months ended January 31, 2018, we reported a pretax loss of $562.3 million. Applying a 7.7% year to date effective tax rate to this pretax loss results in a tax benefit of $43.2 million. As a result, we recorded income tax expense of $122.1 million in the third quarter to reflect the impact the Tax Legislation had on our year-to-date results.

periods presented.



12	~~Q3 FY2018 Form 10-Q \|~~ H&R Block, Inc. \| Q3 FY2021 Form 10-Q	13

~~Table~~Ta ble of Contents

Changes in unrecognized tax benefits for nine months ended January 31, 2021 are as follows:


(in 000s)
Nine months ended January 31, 2021	Amount
Balance, beginning of the period	$	168,062
Additions based on tax positions related to prior years	117,770
Reductions based on tax positions related to prior years	(31,958)

Additions based on tax positions related to the current year	11,795
Reductions related to settlements with tax authorities	(26,556)
Expiration of statute of limitations	(5,423)

Balance, end of the period	$	233,690

We had gross unrecognized tax benefits of ~~$163.1~~$233.7 million, ~~$97.1~~$148.7 million and ~~$149.9~~$168.1 million as of January 31, ~~2018~~2021 and ~~2017~~2020 and April 30, ~~2017,~~2020, respectively. The gross unrecognized tax benefits increased ~~$13.1~~$65.6 million and decreased ~~$14.4~~$36.4 million during the nine months ended January 31, ~~2018~~2021 and ~~2017,~~2020, respectively. The increase in unrecognized tax benefits during the nine months ending January 31, ~~2018~~2021 is primarily related to ~~additional uncertain tax positions related to our 2017 tax returns, offset by favorable audit settlements and federal statute of limitation periods ending in~~ the ~~current quarter.~~net operating loss carryback. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately ~~$17.4~~$71.0 million inwithin the next twelve months. The anticipated decrease ~~in unrecognized tax benefits~~ is due to the expiration of statutes of limitations and anticipated closure of various ~~tax~~state matters currently under examination. For such matters where a change in the balance of unrecognized tax benefits is not yet deemed reasonably possible, no estimate has been included. The portion of unrecognized benefits expected to be cash settled within the next twelve months amounts to $15.1 million and is included in accrued income taxes on our consolidated balance sheet. The remaining liability for uncertain tax positions is classified as long-term and is included in other noncurrent liabilities in the consolidated balance sheet.

Deferred tax assets and income taxes receivable decreased by $58.4 million from April 30, 2017 primarily due to a change in tax accounting method related to our deferred POM revenue and intercompany transfers of intangible assets.

While we believe we have identified all material implications the Tax Legislation is expected to have on our financial statements and were able to record a reasonable estimate of the impacts as provisional amounts as of and for the nine months ended January 31, 2018, we are continuing to evaluate the impacts of the Tax Legislation and do not consider these provisional estimates to be final. The final impacts may differ from the estimates provided, and could have a material impact on our financial statements. Given the significant complexity of the Tax Legislation, we anticipate changes may result due to further analyzing the impact of the provisions on our federal and state estimates. In addition, anticipated guidance from the IRS about implementing the Tax Legislation and the potential for additional guidance from the SEC or the FASB related to the Tax Legislation, may cause these estimates to be adjusted.

NOTE 8: OTHER INCOME AND OTHER EXPENSES

The following table shows the components of other income (expense), net:


(in 000s)
	Three months ended January 31,				Nine months ended January 31,
	2021		2020		2021		2020
Interest income	$	123	$	2,397	$	2,011	$	12,648

Foreign currency gains (losses), net	489		(139)		544		(25)
Other, net	1,755		(379)		2,204		1,118
	$	2,367	$	1,879	$	4,759	$	13,741

(in 000s)
Three months ended January 31, Nine months ended January 31,
2018
2017
2018
2017
Mortgage loans and real estate owned, net $ —
$ (377 ) $ —
$ 2,668
Interest income 699
574
3,454
2,364
Foreign currency gains (losses), net 21
80
35
53
Other, net 308
(143 ) (230 ) (137 )
$ 1,028
$ 134
$ 3,259
$ 4,948

NOTE 9: COMMITMENTS AND CONTINGENCIES

~~Changes~~All 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 ~~deferred revenue balances related~~payment of penalties and/or interest to ~~our POM for both company-owned and franchise offices, which is included in deferred revenue and other liabilities in~~ the ~~consolidated balance sheets, are as follows:~~

(in 000s)
Nine months ended January 31, 2018
2017
Balance, beginning of the period $ 211,223
$ 204,342
Amounts deferred for new extended service plans issued 29,023
28,391
Revenue recognized on previous deferrals (86,347 ) (80,651 )
Balance, end of the period $ 153,899
$ 152,082

IRS that a client would otherwise not have been required to pay. Our liability related to estimated losses under the ~~standard~~100% accuracy guarantee was ~~$3.3~~$9.2 million, ~~$5.7~~$7.0 million and ~~$6.8~~$9.4 million as of January 31, ~~2018~~2021 and ~~2017~~2020 and April 30, ~~2017, respectively, and is included as part of our assisted tax preparation services.~~2020, respectively. The short-term and long-term portions of this liability are included in deferred revenue and other liabilities in the consolidated balance sheets.



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~~Our liability~~Liabilities related to acquisitions for (1) estimated contingent consideration was $11.9 million, $9.3 million and $10.4 million as of January 31, 2018 and 2017 and April 30, 2017, respectively, with amounts recorded in deferred revenue and other liabilities. Estimates of contingent payments are typically based on expected financial performance of the acquired business and economic conditions at the time of ~~acquisition.~~acquisition and (2) estimated accrued compensation related to continued employment of key employees were $18.8 million, $11.4 million and $14.2 million as of January 31, 2021 and 2020 and April 30, 2020, respectively, with amounts recorded in deferred revenue and other liabilities. Should actual results differ from our ~~assumptions,~~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 revolving lines of credit. Our total obligation under these lines of credit was ~~$41.5~~$29.3 million at January 31, ~~2018~~,2021, and net of amounts drawn and outstanding, our remaining commitment to fund totaled ~~$12.6~~$13.7 million.


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Both the U.S. and Canada implemented emergency economic relief programs as a way of minimizing the economic impact of the global COVID-19 pandemic. In ~~connection~~the U.S., the CARES Act includes, among other items, provisions relating to refundable payroll tax credits and deferment of certain tax payments through the end of calendar 2020. In Canada the COVID-19 Economic Response Plan includes the Canada Emergency Wage Subsidy (CEWS). For our U.S. businesses we have elected to defer the employer-paid portion of social security taxes and are evaluating the employee retention credit, and in Canada we have received $15.9 million in wage subsidies during the nine months ended January 31, 2021 which has been treated as a government subsidy to offset related operating expenses.

On August 5, 2020, we entered into a Program Management Agreement with ~~our agreement with BofI Federal Bank,~~MetaBank®, N.A. (Meta), a ~~federal savings~~wholly-owned subsidiary of Meta Financial Group, Inc. Under the Meta Program Management Agreement and its ancillary agreements and related product schedules, Meta acts as the bank ~~(BofI),~~provider of H&R Block-branded financial products. Emerald AdvanceSM lines of credit (EAs) are originated by Meta, and we ~~are required to~~ purchase a 90% participation interest, at par, in ~~all EAs~~the advances originated by ~~our lending partner.~~Meta. At January 31, ~~2018~~,2021, the principal balance of purchased participation interests for the current year totaled ~~$345.0~~$303.2 million.

On July 27, 2017, we entered into a Refund Advance Program Agreement and certain ancillary agreements with BofI, pursuant to which they will originate and fund Refund Advance loans, and provide technology, software, and underwriting support services related to such loans during the 2018 tax season. The Refund Advance Program Agreement was subsequently amended on November 9, 2017. Refund Advance loans are originated by Meta and offered to certain assisted U.S. tax preparation clients, based on client eligibility as determined by ~~the loan originator.~~Meta. We pay ~~loan origination~~ fees based on ~~volume~~loan size and customer type. The ~~loan origination~~ fees are intended to cover expected loan losses and payments to capital providers, among other items. We have provided two ~~limited~~ guarantees related to this agreement. We have provided a ~~limited~~ guarantee up to ~~$10~~$18.0 million related to certain loans to clients prior to the IRS accepting electronic filing. At January 31, ~~2018~~2021, we ~~had~~ accrued an estimated liability of ~~$1.6~~$1.3 million related to this guarantee, compared to ~~$0.6~~$1.9 million at January 31, ~~2017. We paid $0.4 million related to this~~2020, under a similar guarantee ~~for the fiscal year 2017 tax season.~~with our prior bank partner. Additionally, we provided a ~~limited~~ guarantee ~~for the remaining~~related to loans up to ~~$57 million in the aggregate, which would cover certain incremental loan losses. We~~virtual assisted clients. There is no maximum exposure under this guarantee. At January 31, 2021, we had no amounts accrued under this guarantee and we do not expect that a material amount will be paid for this guarantee under anticipated loss ~~scenarios.~~

~~LOSS CONTINGENCIES PERTAINING TO DISCONTINUED MORTGAGE OPERATIONS~~ – SCC ceased originating mortgage loans in December 2007 and, in April 2008, sold its servicing assets and discontinued its remaining operations. Mortgage loans originated by SCC were sold either as whole loans to single third-party buyers, who generally securitized such loans, or in the form of residential mortgage-backed securities (RMBSs). In connection with the sale of loans and/or RMBSs, SCC made certain representations and warranties. Claims under these representations and warranties together with any settlement arrangementsscenarios related to ~~these losses are collectively referred to as "representation and warranty claims."~~

SCC accrues a liability for losses related to representation and warranty claims when those losses are believed to be both probable and reasonably estimable. SCC’s loss estimate as of January 31, 2018, is based on the best information currently available, management judgment, developments in relevant case law, and the terms of bulk settlements. In periods when a liability is accrued for such loss contingencies, the liability is included in deferred revenue and other current liabilities on the consolidated balance sheets. A rollforward of SCC’s accrued liability for these loss contingencies is as follows:

(in 000s)
Nine months ended January 31, 2018
2017
Balance, beginning of the period $ 4,500
$ 65,265
Loss provisions —
235
Payments (4,500 ) (61,000 )
Balance, end of the period $ —
$ 4,500

~~Settlement payments were made during the current fiscal quarter pursuant to a settlement agreement entered into in~~ fiscal year ~~2016.~~2021 tax season.

See note 10, which addresses contingent losses that may be incurred with respect to various indemnification or contribution claims by underwriters, depositors, and securitization trustees in securitization transactions in which SCC participated.



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NOTE 10: LITIGATION AND OTHER RELATED CONTINGENCIES

We are a defendant in numerous litigation 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 to which we are subject. In some of the matters, very large or indeterminate amounts, including punitive damages, are 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 of the court. 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 a claim bears little relevance to its merits or disposition value due to this variability in pleadings and our experience in litigating or resolving through settlement of numerous claims over an extended period of time.

The outcome of a litigation 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 trial and appellate courts will apply the law. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.

In addition to litigation matters, we are also subject to claims and other loss contingencies arising out of our business activities, including as described below.

We accrue liabilities for litigation, claims, including indemnification and contribution claims, and other related loss contingencies and any related settlements (each referred to, individually, as a "matter" and, collectively, as "matters") when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. ~~Liabilities have been accrued for certain of the matters noted below.~~ 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


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or make other expenditures or accrue liabilities in amounts that could not be reasonably estimated as of January 31, ~~2018.~~2021. 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. As of January 31, ~~2018~~2021 and ~~2017~~2020 and April 30, ~~2017,~~2020, our total accrued liabilities were ~~$2.5~~$5.5 million, ~~$1.7~~$1.6 million and ~~$2.3~~$1.6 million, ~~respectively, for matters addressed in this note.~~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 ~~loss is believed to be reasonably possible, but a~~ liability has not been ~~accrued.~~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. 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 January 31, 2018, we believe the aggregate range of reasonably possible losses in excess of amounts accrued is not material.

~~For other matters,~~Matters for which we are not currently able to estimate the reasonably possible loss or range of ~~loss.~~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 on motions or appeals, analysis 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 January 31, 2021, 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.

On a quarterly and annual basis, we review relevant information with respect to litigation and other loss contingencies and update our accruals, disclosures, and estimates of reasonably possible loss or range of loss based



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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, but~~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.

LITIGATION, CLAIMS OR OTHER LOSS CONTINGENCIES PERTAINING TO CONTINUING OPERATIONS –

Free File Litigation. On May 6, 2019, the Los Angeles City Attorney filed a lawsuit on behalf of the People of the State of California in the Superior Court of California, County of Los Angeles (Case No. 19STCV15742). The case is styled The People of the State of California v. HRB Digital LLC, et al. The complaint alleges that H&R Block, Inc. and HRB Digital LLC engaged in unfair, fraudulent and deceptive business practices and acts in connection with the IRS Free File Program in violation of the California Unfair Competition Law, California Business and Professions Code §§17200 et seq. The complaint seeks injunctive relief, restitution of monies paid to H&R Block by persons in the State of California who were eligible to file under the IRS Free File Program for the time period starting 4 years prior to the date of the filing of the complaint, pre-judgment interest, civil penalties and costs. The City Attorney subsequently dismissed H&R Block, Inc. from the case and amended its complaint to add HRB Tax Group, Inc. We filed a motion to stay the case based on the primary jurisdiction doctrine, which was denied. A trial date has been set for August 9, 2022. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter.

On May 17, 2019, a putative class action complaint was filed against H&R Block, Inc., HRB Tax Group, Inc. and HRB Digital LLC in the Superior Court of the State of California, County of San Francisco (Case No. CGC-19576093). The case is styled Snarr v. HRB Tax Group, Inc., et al. The case was removed to the United States District Court for the Northern District of California on June 21, 2019 (Case No. 3:19-cv-03610-SK). The plaintiff filed a first amended


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complaint on August 9, 2019, dropping H&R Block, Inc. from the case. In the amended complaint, the plaintiff seeks to represent classes of all persons, between May 17, 2015 and the present, who (1) paid to file one or more federal tax returns through H&R Block’s internet-based filing system, (2) were eligible to file those tax returns for free through the H&R Block Free File offer of the IRS Free File Program, and (3) resided in and were citizens of California at the time of the payments. The plaintiff generally alleges unlawful, unfair, fraudulent and deceptive business practices and acts in connection with the IRS Free File Program in violation of the California Consumers Legal Remedies Act, California Civil Code §§1750, et seq., California False Advertising Law, California Business and Professions Code §§17500, et seq., and California Unfair Competition Law, California Business and Professions Code §§17200 et seq. The plaintiff seeks declaratory and injunctive relief, restitution, compensatory damages, punitive damages, interest, attorneys’ fees and costs. We filed a motion to stay the proceedings based on the primary jurisdiction doctrine and a motion to compel arbitration, both of which were denied. We filed an appeal of the denial of the motion to compel arbitration, which was denied on December 9, 2020. We filed an answer to the amended complaint on April 7, 2020, and a renewed motion to compel arbitration and to stay the litigation on February 22, 2021. A trial date has been set for October 18, 2022. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter.

On September 26, 2019, a putative class action complaint was filed against H&R Block, Inc., HRB Tax Group, Inc., HRB Digital LLC and Free File, Inc. in the United States District Court for the Western District of Missouri (Case No. 4:19-cv-00788-GAF) styled Swanson v. H&R Block, Inc., et al. The plaintiff seeks to represent both a nationwide class and a California subclass of all persons eligible for the IRS Free File Program who paid to use an H&R Block product to file an online tax return for the 2002 through 2018 tax filing years. The plaintiff generally alleges unlawful, unfair, fraudulent and deceptive business practices and acts in connection with the IRS Free File Program in violation of the California Consumers Legal Remedies Act, California Civil Code §§1750, et seq., California False Advertising Law, California Business and Professions Code §§17500, et seq., California Unfair Competition Law, California Business and Professions Code §§17200, et seq., in addition to breach of contract and fraud. The plaintiff seeks injunctive relief, disgorgement, compensatory damages, statutory damages, punitive damages, interest, attorneys’ fees and costs. The court granted a motion to dismiss filed by defendant Free File, Inc. for lack of personal jurisdiction. The court granted our motion to compel arbitration and stayed the case pending the outcome of arbitration. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter.

We have also received and are responding to certain governmental inquiries relating to the IRS Free File Program.

LITIGATION, CLAIMS, INCLUDING INDEMNIFICATION AND CONTRIBUTION CLAIMS, OR OTHER LOSS CONTINGENCIES PERTAINING TO 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, remains, and may in the future be, subject to litigation, claims, including indemnification and contribution claims, and other loss contingencies pertaining to SCC's mortgage business activities that occurred prior to such termination and sale. These ~~contingencies,~~lawsuits, claims, and ~~lawsuits~~other loss contingencies include actions by regulators, third parties seeking indemnification or contribution, including depositors, underwriters, and securitization trustees, individual plaintiffs, and cases in which plaintiffs seek to represent a class of others alleged to be similarly situated. Among other things, these ~~contingencies,~~lawsuits, claims, and ~~lawsuits~~contingencies allege or may allege discriminatory or unfair and deceptive loan origination and servicing (including debt collection, foreclosure, and eviction) practices, other common law torts, rights to indemnification or contribution, breach of contract, violations of securities laws, and violations of a variety of federal statutes, including the Truth in Lending Act (TILA), Equal Credit Opportunity Act, Fair Housing Act, Real Estate Settlement Procedures Act (RESPA), Home Ownership & Equity Protection Act (HOEPA), as well as similar state statutes. 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, some of which are beyond the Company's control, and the indeterminate damages sought in some of these matters.

Mortgage loans originated by SCC were sold either as whole loans to single third-party buyers, who generally securitized such loans, or in the form of ~~RMBSs.~~residential mortgage-backed securities (RMBSs). In connection with the sale of loans and/or RMBSs, SCC made certain representations and warranties. Claims under these representations


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and warranties together with any settlement arrangements related to these losses are collectively referred to as "representation and warranty claims." The statute of limitations for a contractual claim to enforce a representation and warranty obligation is generally six years or such shorter limitations period that may apply under the law of a state where the economic injury occurred. On June 11, 2015, the New York Court of Appeals, New York’s highest court, held in ACE Securities Corp. v. DB Structured Products, Inc., that the six-year statute of limitations under New York law starts to run at the time the representations and warranties are made, not the date when the repurchase demand was denied. This decision applies to claims and lawsuits brought against SCC where New York law governs. New York law governs many, though not all, of the RMBS transactions into which SCC entered. However, this decision would not affect representation and warranty claims and lawsuits SCC has received or may receive, for example, where the statute of limitations has been tolled by agreement or a suit was timely filed.

In response to the statute of limitations rulings in the ACE case and similar rulings in other state and federal courts, parties seeking to pursue representation and warranty claims or lawsuits have sought, and may in the future seek, to distinguish certain aspects of the ACE decision, pursue alternate legal theories of recovery, or assert claims against other contractual parties such as securitization trustees. For example, a 2016 ruling by a New York intermediate appellate court, followed by the federal district court in the second Homeward case described below, allowed a counterparty to pursue litigation on additional loans in the same trust even though only some of the loans complied with the condition precedent of timely pre-suit notice and opportunity to cure or repurchase. Additionally, plaintiffs in litigation to which SCC is not party have alleged breaches of an independent contractual duty to provide notice of material breaches of representations and warranties and pursued separate claims to which, they argue, the statute of limitations ruling in the ACE case does not apply. The impact on SCC from alternative legal theories seeking to avoid or distinguish the ACE decision, or judicial limitations on the ACE decision, is unclear. SCC has not accrued liabilities for claims not subject to a tolling arrangement or not relating back to timely filed litigation.

On May 31, 2012, a lawsuit was filed by Homeward Residential, Inc. (Homeward) in the Supreme Court of the State of New York, County of New York, against SCC styled Homeward Residential, Inc. v. Sand Canyon Corporation (Index No. 651885/2012). SCC removed the case to the United States District Court for the Southern District of New York on



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June 28, 2012 (Case No. 12-cv-5067). The plaintiff, in its capacity as the master servicer for Option One Mortgage Loan Trust 2006-2 and for the benefit of the trustee and the certificate holders of such trust, asserts claims for breach of contract, anticipatory breach, indemnity, and declaratory judgment in connection with alleged losses incurred as a result of the breach of representations and warranties relating to SCC and to loans sold to the trust. The trust was originally collateralized with approximately 7,500 loans. The plaintiff seeks specific performance of alleged repurchase obligations or damages to compensate the trust and its certificate holders for alleged actual and anticipated losses, as well as a repurchase of all loans due to alleged misrepresentations by SCC as to itself and as to the loans' compliance with its underwriting standards and the value of underlying real estate. In response to a motion filed by SCC, the court dismissed the plaintiff's claims for breach of the duty to cure or repurchase, anticipatory breach, indemnity, and declaratory judgment. The case ~~is proceeding~~proceeded on the remaining claims. Representatives of a holder of certificates in the trust filed a motion to intervene to add H&R Block, Inc. to the lawsuit and assert claims against H&R Block, Inc. based on alter ego, corporate veil-piercing, and agency law. On February 12, 2018, the court denied the motion to intervene. Discovery in the case closed on September 30, 2019, with motions for summary judgment filed on December 6, 2019. On November 9, 2020, the court granted SCC's motion for summary judgment and dismissed Homeward's claims in their entirety as untimely under the applicable statute of limitations. Homeward appealed that ruling on December 4, 2020, and the appeal remains pending. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter.

On September 28, 2012, a second lawsuit was filed by Homeward in the United States District Court for the Southern District of New York against SCC styled Homeward Residential, Inc. v. Sand Canyon Corporation (Case No. 12-cv-7319). The plaintiff, in its capacity as the master servicer for Option One Mortgage Loan Trust 2006-3 and for the benefit of the trustee and the certificate holders of such trust, asserts claims for breach of contract and indemnity in connection with losses allegedly incurred as a result of the breach of representations and warranties relating to 96 loans sold to the trust. The trust was originally collateralized with approximately 7,500 loans. The plaintiff seeks specific performance of alleged repurchase obligations or damages to compensate the trust and its certificate holders for alleged actual and anticipated losses. In response to a motion filed by SCC, the court


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dismissed the plaintiff's claims for breach of the duty to cure or repurchase and for indemnification of its costs associated with the litigation. On September 30, 2016, the court granted a motion allowing the plaintiff to file a second amended complaint to include breach of contract claims with respect to 649 additional loans in the trust and to allow such claims with respect to other loans in the trust proven to be in material breach of SCC’s representations and warranties. SCC filed a motion for reconsideration, followed by a motion for leave to appeal the ruling, both of which were denied. On October 6, 2016, the plaintiff filed its second amended complaint. In response to a motion filed by SCC, the court dismissed the plaintiff's claim for breach of one of the representations. The case ~~is proceeding~~proceeded on the remaining claims. Representatives of a holder of certificates in the trust filed a motion to intervene to add H&R Block, Inc. to the lawsuit and assert claims against H&R Block, Inc. based on alter ego, corporate veil-piercing, and agency law. On February 12, 2018, the court denied the motion to intervene. The settlement payments that were made in fiscal year 2018 for representation and warranty claims ~~as disclosed in note 9, are~~ related to some of the loans in this case. Discovery in the case closed on September 30, 2019, with motions for summary judgment filed on December 6, 2019. On November 9, 2020, the court granted SCC's motion for summary judgment and dismissed Homeward's claims in their entirety as untimely under the applicable statute of limitations. Homeward appealed that ruling on December 4, 2020, and the appeal remains pending. We have not concluded that a loss related to this ~~lawsuit~~matter is probable, nor have we accrued a liability related to this ~~lawsuit.~~matter.

~~Underwriters~~Parties, including underwriters, depositors, and ~~depositors~~securitization trustees, are, or have been, involved in multiple lawsuits, threatened lawsuits, and settlements related to securitization transactions in which SCC participated. ~~These lawsuits allege or alleged a~~A variety of claims are alleged in these matters, including violations of federal and state securities laws and common law fraud, based on alleged materially inaccurate or misleading ~~disclosures.~~disclosures, that originators, depositors, securitization trustees, or servicers breached their representations and warranties or otherwise failed to fulfill their obligations, or that securitization trustees violated statutory requirements by failing to properly protect the certificate holders’ interests. SCC has received notices of claims for indemnification or potential indemnification obligations relating to such matters, including lawsuits or settlements to which underwriters, depositors, or ~~depositors~~securitization trustees are party. Based on information currently available to SCC, it believes that the 21 lawsuits in which notice of a claim has been made involve 39 securitization transactions with original investments of approximately $14 billion (of which the outstanding principal amount is approximately $3.4 billion). Additional lawsuits against the ~~underwriters or depositors~~parties to the securitization transactions may be filed in the future, and SCC may receive additional notices of claims for indemnification, contribution or ~~contribution from underwriters or depositors~~similar obligations with respect to existing or new lawsuits or settlements of such ~~lawsuits.~~lawsuits or other claims. Certain of the notices received included, and future notices may include, a reservation of rights to assert claims for contribution, which are referred to herein as "contribution claims." Contribution claims may become operative if indemnification is unavailable or insufficient to cover all of the losses and expenses involved. We have not concluded that a loss related to any of these indemnification or contribution ~~claims is probable, nor have we accrued a liability related to any of these claims.~~

Securitization trustees also are, or have been, involved in lawsuits related to securitization transactions in which SCC participated. Plaintiffs in these lawsuits allege, among other things, that originators, depositors, servicers, or other parties breached their representations and warranties or otherwise failed to fulfill their obligations, including that securitization trustees breached their contractual obligations, breached their fiduciary duties, or violated statutory requirements by failing to properly protect the certificate holders’ interests. SCC has received notices from securitization trustees of potential indemnification obligations, and may receive additional notices with respect to



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~~existing or new lawsuits or settlements of such lawsuits, in its capacity as originator, depositor, or servicer. We have not concluded that a loss related to any of these indemnification~~ claims is probable, nor have we accrued a liability related to any of these claims.

If the amount that SCC is ultimately required to pay with respect to claims and litigation related to its past sales and securitizations of mortgage loans, 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 may also 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 January 31, ~~2018,~~2021, total approximately ~~$303~~$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.

~~LITIGATION, CLAIMS AND~~ OTHER ~~LOSS CONTINGENCIES PERTAINING TO OTHER DISCONTINUED OPERATIONS~~ –

~~Express IRA Litigation.~~ On January 2, 2008, the Mississippi Attorney General in the Chancery Court of Hinds County, Mississippi First Judicial District (Case No. G 2008 6 S 2) filed a lawsuit regarding our former Express IRA product that is styled ~~Jim Hood, Attorney for the State of Mississippi v. H&R Block, Inc., H&R Block Financial Advisors, Inc~~., ~~et al.~~ The complaint alleges fraudulent business practices, deceptive acts and practices, common law fraud and breach of fiduciary duty with respect to the sale of the product in Mississippi and seeks equitable relief, disgorgement of profits, damages and restitution, civil penalties and punitive damages. We have not concluded that a loss related to this matter is probable, nor have we accrued a loss contingency related to this matter.

Although we sold H&R Block Financial Advisors, Inc. (HRBFA) effective November 1, 2008, we remain responsible for any liabilities relating to the Express IRA litigation through an indemnification agreement.

~~OTHER~~ – We are from time to time a party to litigation, claims 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.

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.

~~NOTE 11: CONDENSED CONSOLIDATING FINANCIAL STATEMENTS~~

Block Financial LLC (Block Financial) is a 100% owned subsidiary of the Company. Block Financial is the Issuer and the Company is the full and unconditional Guarantor of the Senior Notes, our 2017 CLOC and other indebtedness issued from time to time. These condensed consolidating financial statements have been prepared using the equity method of accounting. Earnings of subsidiaries are, therefore, reflected in the Company's investment in subsidiaries account. The elimination entries eliminate investments in subsidiaries, related stockholders' equity and other intercompany balances and transactions.



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CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (in 000s)
Three months ended January 31, 2018 H&R Block, Inc.
(Guarantor)
Block Financial
(Issuer)
Other
Subsidiaries
Eliminations
Consolidated
H&R Block
Total revenues $ —
$ 55,795
$ 449,608
$ (16,977 ) $ 488,426
Cost of revenues —
33,805
391,772
(8,976 ) 416,601
Selling, general and administrative —
10,823
166,276
(8,001 ) 169,098
Total operating expenses —
44,628
558,048
(16,977 ) 585,699
Other income (expense), net (250,732 ) 7,819
(20,071 ) 264,012
1,028
Interest expense on external borrowings —
(24,491 ) (69 ) —
(24,560 )
Loss from continuing operations before income taxes (benefit) (250,732 ) (5,505 ) (128,580 ) 264,012
(120,805 )
Income taxes (benefit) (5,087 ) 15,600
111,607
—
122,120
Net loss from continuing operations (245,645 ) (21,105 ) (240,187 ) 264,012
(242,925 )
Net loss from discontinued operations —
(2,720 ) —
—
(2,720 )
Net loss (245,645 ) (23,825 ) (240,187 ) 264,012
(245,645 )
Other comprehensive income 4,848
—
4,848
(4,848 ) 4,848
Comprehensive loss $ (240,797 ) $ (23,825 ) $ (235,339 ) $ 259,164
$ (240,797 )

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (in 000s)
Three months ended January 31, 2017 H&R Block, Inc.
(Guarantor)
Block Financial
(Issuer)
Other
Subsidiaries
Eliminations
Consolidated
H&R Block
Total revenues $ —
$ 53,990
$ 411,099
$ (13,207 ) $ 451,882
Cost of revenues —
33,242
364,286
(8,751 ) 388,777
Selling, general and administrative —
10,693
181,660
(4,456 ) 187,897
Total operating expenses —
43,935
545,946
(13,207 ) 576,674
Other income (expense), net (106,332 ) 14,978
(1,777 ) 93,265
134
Interest expense on external borrowings —
(25,858 ) (82 ) —
(25,940 )
Loss from continuing operations before tax benefit (106,332 ) (825 ) (136,706 ) 93,265
(150,598 )
Income tax benefit (1,818 ) (2,939 ) (44,629 ) —
(49,386 )
Net income (loss) from continuing operations (104,514 ) 2,114
(92,077 ) 93,265
(101,212 )
Net loss from discontinued operations —
(3,282 ) (20 ) —
(3,302 )
Net loss (104,514 ) (1,168 ) (92,097 ) 93,265
(104,514 )
Other comprehensive income 1,759
—
1,759
(1,759 ) 1,759
Comprehensive loss $ (102,755 ) $ (1,168 ) $ (90,338 ) $ 91,506
$ (102,755 )



H&R Block, Inc. \| Q3 ~~FY2018~~FY2021 Form 10-Q			19

~~Table~~Ta ble of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RECENT DEVELOPMENTS

On July 1, 2020, we provided written notice to Axos Bank (Axos) of the termination of the Program Management Agreement by and between Emerald Financial Services, LLC , a wholly–owned indirect subsidiary of the Company, and Axos, effective July 1, 2020. On August 5, 2020, we entered into a Program Management Agreement with MetaBank®, N.A. (Meta), a wholly-owned subsidiary of Meta Financial Group, Inc. Under the Meta Program Management Agreement and its ancillary agreements and related product schedules, Meta acts as the bank provider of H&R Block-branded financial products, including Emerald AdvanceSM, Emerald Card®, Emerald Savings, Refund Advance, and Refund Transfer in the United States.

FINANCIAL OVERVIEW

With the economic impact of the pandemic being felt across the U.S., we remain committed to helping people gain access to their refunds while shifting how we operate to help promote the safety and well-being of associates and clients. We continue to provide in-person appointments where permitted and have instituted guidelines for our tax offices based on Centers for Disease Control and Prevention recommendations. Clients may also choose to drop-off at our locations nationwide or choose to file with a tax pro virtually.

As a result of the COVID-19 pandemic, 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, and substantially all U.S. states with an April 15 individual state income tax filing requirement extended their respective deadlines. In Canada, the deadline for individuals to file was extended to June 1, 2020. In addition, governments around the world took a variety of actions to contain the spread of COVID-19. Jurisdictions in which we operate imposed various restrictions on our business, including capacity and other operational limitations, social distancing requirements, and in limited instances required us to close certain offices. Consequently, a portion of revenues and expenses that would have normally been recognized in our fourth quarter of fiscal year 2020 shifted to the first two quarters of fiscal year 2021.

We believe that the ongoing pandemic, coupled with the timing of Economic Impact Payments (EIPs) and the Internal Revenue Service’s (IRS) announcement to not accept and process returns until February 12, has resulted in a delayed start to the current tax season. Historically, the IRS has begun accepting and processing returns during our third fiscal quarter. These delays have impacted tax return volumes and the timing of recognizing a portion of revenue for the returns that we prepared during the quarter but were not able to electronically file with the IRS.

These events have impacted the typical seasonality of our business and the comparability of our financial results.

Our revenues for the three months ended January 31, 2021 decreased $211.0 million, or 40.6%, when compared to the prior year period, primarily due to a delayed start to the 2021 tax season, and we recorded a pretax loss of $283.5 million compared to $177.0 million in the prior year. Our revenues for the nine months ended January 31, 2021, increased $255.4 million, or 30.8%, when compared to the prior year period, primarily due to the extension of the 2020 tax season, partially offset by a delayed start to the 2021 tax season, and we recorded pretax loss of $396.5 million compared to $645.5 million in the prior year.

RESULTS OF OPERATIONS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (in 000s)
Nine months ended January 31, 2018
H&R Block, Inc.
(Guarantor)

Block Financial
(Issuer)

Other
Subsidiaries

Eliminations

Consolidated
H&R Block

Total revenues $ —
$ 85,056
$ 704,762
$ (22,736 ) $ 767,082
Cost of revenues —
46,769
846,685
(9,119 ) 884,335
Selling, general and administrative —
17,614
377,196
(13,617 ) 381,193
Total operating expenses —
64,383
1,223,881
(22,736 ) 1,265,528
Other income (expense), net (538,995 ) 20,884
(33,710 ) 555,080
3,259
Interest expense on external borrowings —
(66,873 ) (229 ) —
(67,102 )
Loss from continuing operations before income taxes (benefit) (538,995 ) (25,316 ) (553,058 ) 555,080
(562,289 )
Income taxes (benefit) (9,217 ) 9,987
(44,004 ) —
(43,234 )
Net loss from continuing operations (529,778 ) (35,303 ) (509,054 ) 555,080
(519,055 )
Net loss from discontinued operations —
(10,721 ) (2 ) —
(10,723 )
Net loss (529,778 ) (46,024 ) (509,056 ) 555,080
(529,778 )
Other comprehensive income 5,925
—
5,925
(5,925 ) 5,925
Comprehensive loss $ (523,853 ) $ (46,024 ) $ (503,131 ) $ 549,155
$ (523,853 )

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (in 000s)
Nine months ended January 31, 2017
H&R Block, Inc.
(Guarantor)

Block Financial
(Issuer)

Other
Subsidiaries

Eliminations

Consolidated
H&R Block

Total revenues $ —
$ 80,428
$ 641,322
$ (13,351 ) $ 708,399
Cost of revenues —
47,514
786,946
(8,895 ) 825,565
Selling, general and administrative —
14,905
389,923
(4,456 ) 400,372
Total operating expenses —
62,419
1,176,869
(13,351 ) 1,225,937
Other income (expense), net (379,767 ) 17,011
(24,601 ) 392,305
4,948
Interest expense on external borrowings —
(69,420 ) (606 ) —
(70,026 )
Loss from continuing operations before tax benefit (379,767 ) (34,400 ) (560,754 ) 392,305
(582,616 )
Income tax benefit (5,360 ) (14,695 ) (196,908 ) —
(216,963 )
Net loss from continuing operations (374,407 ) (19,705 ) (363,846 ) 392,305
(365,653 )
Net loss from discontinued operations —
(8,733 ) (21 ) —
(8,754 )
Net loss (374,407 ) (28,438 ) (363,867 ) 392,305
(374,407 )
Other comprehensive loss (4,130 ) —
(4,130 ) 4,130
(4,130 )
Comprehensive loss $ (378,537 ) $ (28,438 ) $ (367,997 ) $ 396,435
$ (378,537 )



20	~~Q3 FY2018 Form 10-Q \|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

CONDENSED CONSOLIDATING BALANCE SHEETS (in 000s)
As of January 31, 2018 H&R Block, Inc.
(Guarantor)
Block Financial
(Issuer)
Other
Subsidiaries
Eliminations
Consolidated
H&R Block
Cash & cash equivalents $ —
$ 4,475
$ 182,891
$ —
$ 187,366
Cash & cash equivalents - restricted —
—
83,033
—
83,033
Receivables, net —
396,046
395,572
—
791,618
Income taxes receivable 3,250
—
69,525
—
72,775
Prepaid expenses and other current assets —
2,908
146,441
—
149,349
Total current assets 3,250
403,429
877,462
—
1,284,141
Property and equipment, net —
814
249,097
—
249,911
Intangible assets, net —
—
390,993
—
390,993
Goodwill —
—
504,789
—
504,789
Deferred tax assets and income taxes receivable —
20,427
4,878
—
25,305
Investments in subsidiaries 1,655,160
—
67,690
(1,722,850 ) —
Amounts due from affiliates —
1,910,351
2,335,670
(4,246,021 ) —
Other noncurrent assets —
66,497
39,664
—
106,161
Total assets $ 1,658,410
$ 2,401,518
$ 4,470,243
$ (5,968,871 ) $ 2,561,300

Accounts payable and accrued expenses $ 2,516
$ 15,514
$ 145,623
$ —
$ 163,653
Accrued salaries, wages and payroll taxes —
954
134,672
—
135,626
Accrued income taxes and reserves for uncertain tax positions —
—
164,246
—
164,246
Current portion of long-term debt —
—
1,015
—
1,015
Deferred revenue and other current liabilities —
29,052
172,936
—
201,988
Total current liabilities 2,516
45,520
618,492
—
666,528
Long-term debt —
2,279,368
4,863
—
2,284,231
Deferred tax liabilities and reserves for uncertain tax positions 18,293
8,037
175,054
—
201,384
Deferred revenue and other noncurrent liabilities —
903
106,323
—
107,226
Amounts due to affiliates 2,335,670
—
1,910,351
(4,246,021 ) —
Total liabilities 2,356,479
2,333,828
2,815,083
(4,246,021 ) 3,259,369
Stockholders' equity (deficiency) (698,069 ) 67,690
1,655,160
(1,722,850 ) (698,069 )
Total liabilities and stockholders' equity $ 1,658,410
$ 2,401,518
$ 4,470,243
$ (5,968,871 ) $ 2,561,300



~~H&R Block, Inc.~~ ~~\| Q3 FY2018 Form 10-Q~~	21

~~Table of Contents~~

CONDENSED CONSOLIDATING BALANCE SHEETS (in 000s)
As of January 31, 2017
H&R Block, Inc.
(Guarantor)

Block Financial
(Issuer)

Other
Subsidiaries

Eliminations

Consolidated
H&R Block

Cash & cash equivalents $ —
$ 4,272
$ 216,900
$ —
$ 221,172
Cash & cash equivalents - restricted —
8,052
62,114
—
70,166
Receivables, net —
422,034
365,831
—
787,865
Income taxes receivable —
—
38,032
—
38,032
Prepaid expenses and other current assets —
3,217
82,382
—
85,599
Total current assets —
437,575
765,259
—
1,202,834
Property and equipment, net —
81
282,277
—
282,358
Intangible assets, net —
—
434,720
—
434,720
Goodwill —
—
483,320
—
483,320
Deferred tax assets and income taxes receivable 3,330
54,777
13,532
—
71,639
Investments in subsidiaries 1,370,585
—
80,699
(1,451,284 ) —
Amounts due from affiliates —
2,168,620
2,166,873
(4,335,493 ) —
Other noncurrent assets —
67,619
35,141
—
102,760
Total assets $ 1,373,915
$ 2,728,672
$ 4,261,821
$ (5,786,777 ) $ 2,577,631

Accounts payable and accrued expenses $ 1,941
$ 15,051
$ 222,093
$ —
$ 239,085
Accrued salaries, wages and payroll taxes —
461
122,996
—
123,457
Accrued income taxes and reserves for uncertain tax positions —
—
7,537
—
7,537
Current portion of long-term debt —
—
942
—
942
Deferred revenue and other current liabilities —
33,872
149,744
—
183,616
Total current liabilities 1,941
49,384
503,312
—
554,637
Long-term debt and line of credit borrowings —
2,586,744
5,878
—
2,592,622
Deferred tax liabilities and reserves for uncertain tax positions 5,917
10,786
92,854
—
109,557
Deferred revenue and other noncurrent liabilities —
1,059
120,572
—
121,631
Amounts due to affiliates 2,166,873
—
2,168,620
(4,335,493 ) —
Total liabilities 2,174,731
2,647,973
2,891,236
(4,335,493 ) 3,378,447
Stockholders' equity (deficiency) (800,816 ) 80,699
1,370,585
(1,451,284 ) (800,816 )
Total liabilities and stockholders' equity $ 1,373,915
$ 2,728,672
$ 4,261,821
$ (5,786,777 ) $ 2,577,631



22	~~Q3 FY2018 Form 10-Q \|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

CONDENSED CONSOLIDATING BALANCE SHEETS (in 000s)
As of April 30, 2017
H&R Block, Inc.
(Guarantor)

Block Financial
(Issuer)

Other
Subsidiaries

Eliminations

Consolidated
H&R Block

Cash & cash equivalents $ —
$ 4,486
$ 1,006,845
$ —
$ 1,011,331
Cash & cash equivalents - restricted —
8,060
98,148
—
106,208
Receivables, net —
61,250
101,525
—
162,775
Prepaid expenses and other current assets —
2,280
63,445
—
65,725
Total current assets —
76,076
1,269,963
—
1,346,039
Property and equipment, net —
78
263,749
—
263,827
Intangible assets, net —
—
409,364
—
409,364
Goodwill —
—
491,207
—
491,207
Deferred tax assets and income taxes receivable 5,587
30,743
47,398
—
83,728
Investments in subsidiaries 2,158,234
—
113,714
(2,271,948 ) —
Amounts due from affiliates —
1,493,195
2,194,294
(3,687,489 ) —
Other noncurrent assets —
51,829
48,114
—
99,943
Total assets $ 2,163,821
$ 1,651,921
$ 4,837,803
$ (5,959,437 ) $ 2,694,108

Accounts payable and accrued expenses $ 2,086
$ 14,218
$ 200,724
$ —
$ 217,028
Accrued salaries, wages and payroll taxes —
851
183,005
—
183,856
Accrued income taxes and reserves for uncertain tax positions —
—
348,199
—
348,199
Current portion of long-term debt —
—
981
—
981
Deferred revenue and other current liabilities —
26,759
162,457
—
189,216
Total current liabilities 2,086
41,828
895,366
—
939,280
Long-term debt —
1,487,389
5,628
—
1,493,017
Deferred tax liabilities and reserves for uncertain tax positions 28,324
8,037
122,724
—
159,085
Deferred revenue and other noncurrent liabilities —
953
162,656
—
163,609
Amounts due to affiliates 2,194,294
—
1,493,195
(3,687,489 ) —
Total liabilities 2,224,704
1,538,207
2,679,569
(3,687,489 ) 2,754,991
Stockholders' equity (deficiency) (60,883 ) 113,714
2,158,234
(2,271,948 ) (60,883 )
Total liabilities and stockholders' equity $ 2,163,821
$ 1,651,921
$ 4,837,803
$ (5,959,437 ) $ 2,694,108



~~H&R Block, Inc.~~ ~~\| Q3 FY2018 Form 10-Q~~	23

~~Table of Contents~~

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (in 000s)
Nine months ended January 31, 2018
H&R Block, Inc.
(Guarantor)

Block Financial
(Issuer)

Other
Subsidiaries

Eliminations

Consolidated
H&R Block

Net cash used in operating activities $ —
$ (353,081 ) $ (1,004,620 ) $ —
$ (1,357,701 )
Cash flows from investing:
Capital expenditures —
(794 ) (77,071 ) —
(77,865 )
Payments made for business acquisitions, net of cash acquired —
—
(39,397 ) —
(39,397 )
Franchise loans funded —
(20,080 ) (146 ) —
(20,226 )
Payments received on franchise loans —
13,058
333
—
13,391
Intercompany borrowings (payments) —
(427,473 ) (129,736 ) 557,209
—
Other, net —
(9,039 ) 10,563
—
1,524
Net cash used in investing activities —
(444,328 ) (235,454 ) 557,209
(122,573 )
Cash flows from financing:
Repayments of line of credit borrowings —
(40,000 ) —
—
(40,000 )
Proceeds from line of credit borrowings —
830,000
—
—
830,000
Dividends paid (150,258 ) —
—
—
(150,258 )
Repurchase of common stock, including shares surrendered (7,746 ) —
—
—
(7,746 )
Proceeds from exercise of stock options 28,268
—
—
—
28,268
Intercompany borrowings (payments) 129,736
—
427,473
(557,209 ) —
Other, net —
(662 ) (28,260 ) —
(28,922 )
Net cash provided by financing activities —
789,338
399,213
(557,209 ) 631,342
Effects of exchange rates on cash —
—
1,792
—
1,792
Net decrease in cash, cash equivalents and restricted cash —
(8,071 ) (839,069 ) —
(847,140 )
Cash, cash equivalents and restricted cash, beginning of period —
12,546
1,104,993
—
1,117,539
Cash, cash equivalents and restricted cash, end of period $ —
$ 4,475
$ 265,924
$ —
$ 270,399



24	~~Q3 FY2018 Form 10-Q \|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (in 000s)
Nine months ended January 31, 2017
H&R Block, Inc.
(Guarantor)

Block Financial
(Issuer)

Other
Subsidiaries

Eliminations

Consolidated
H&R Block

Net cash used in operating activities $ —
$ (420,319 ) $ (989,540 ) $ —
$ (1,409,859 )
Cash flows from investing:
Principal payments on mortgage loans and sale of real estate owned, net —
207,174
—
—
207,174
Capital expenditures —
(14 ) (73,910 ) —
(73,924 )
Payments made for business acquisitions, net of cash acquired —
—
(52,825 ) —
(52,825 )
Franchise loans funded —
(31,568 ) (220 ) —
(31,788 )
Payments received on franchise loans —
20,605
211
—
20,816
Intercompany borrowings (payments) —
(891,350 ) (461,916 ) 1,353,266
—
Other, net —
(10,233 ) 5,522
—
(4,711 )
Net cash provided by (used in) investing activities —
(705,386 ) (583,138 ) 1,353,266
64,742
Cash flows from financing:
Repayments of line of credit borrowings —
(445,000 ) —
—
(445,000 )
Proceeds from line of credit borrowings —
1,545,000
—
—
1,545,000
Dividends paid (141,537 ) —
—
—
(141,537 )
Repurchase of common stock, including shares surrendered (322,782 ) —
—
—
(322,782 )
Proceeds from exercise of stock options 2,403
—
—
—
2,403
Intercompany borrowings (payments) 461,916
—
891,350
(1,353,266 ) —
Other, net —
—
373
—
373
Net cash provided by financing activities —
1,100,000
891,723
(1,353,266 ) 638,457
Effects of exchange rates on cash —
—
(2,913 ) —
(2,913 )
Net decrease in cash, cash equivalents and restricted cash —
(25,705 ) (683,868 ) —
(709,573 )
Cash, cash equivalents and restricted cash, beginning of period —
38,029
962,882
—
1,000,911
Cash, cash equivalents and restricted cash, end of period $ —
$ 12,324
$ 279,014
$ —
$ 291,338



~~H&R Block, Inc.~~ ~~\| Q3 FY2018 Form 10-Q~~	25

~~Table of Contents~~


~~ITEM 2.~~	~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Our subsidiaries provide assisted and ~~do-it-yourself (DIY)~~DIY tax ~~return~~ preparation solutions through multiple channels (including in-person, online and mobile applications, virtual, and desktop software) and distribute H&R Block-branded ~~financial~~ products and services, including those of our financial partners, to the general public primarily in the U.S., Canada ~~Australia,~~ and ~~their respective territories.~~Australia. Tax returns are either prepared by H&R Block tax professionals (in company-owned or franchise offices, virtually or ~~virtually~~ via ~~the internet)~~an internet review) or prepared and filed by our clients through our DIY tax solutions. We ~~operate as~~also offer small business financial solutions through our company-owned and franchise offices and online through Wave. We report a single segment that includes all of our continuing ~~operations, which are designed to enable clients to obtain tax preparation and related services seamlessly.~~

~~RESULTS OF OPERATIONS~~

Operating Statistics (U.S. only)
Nine months ended January 31, 2018
2017
Change
% Change
Tax returns prepared: (in 000s) ⁽¹⁾

Company-owned operations 1,424
1,349
75
5.6 %
Franchise operations 736
731
5
0.7 %
Total assisted 2,160
2,080
80
3.8 %

Desktop 151
155
(4 ) (2.6 )%
Online 1,126
1,056
70
6.6 %
Total DIY Tax Software 1,277
1,211
66
5.5 %

IRS Free File 94
96
(2 ) (2.1 )%
Total U.S. returns 3,531
3,387
144
4.3 %

Net Average Charge: ⁽²⁾

Company-Owned Operations $ 235.57
$ 226.96
$ 8.61
3.8 %
Franchise Operations ⁽³⁾
226.07
219.26
6.81
3.1 %
Total DIY Tax Software 30.39
30.35
0.04
0.1 %

As of January 31, 2018
2017
Change
% Change
Tax offices:
Company-owned offices 6,690
6,650
40
0.6 %
Franchise offices 3,291
3,386
(95 ) (2.8 )%
Total U.S. offices 9,981
10,036
(55 ) (0.5 )%


⁽¹⁾	An assisted tax return is defined as a current or prior year individual tax return that has been accepted and paid for by the client. Also included are business returns. A DIY Tax software return is defined as a return that has been electronically filed and accepted by the IRS. Also included are online returns paid and printed.


⁽²⁾	~~Net average charge is calculated as tax preparation fees divided by tax returns prepared. For DIY Tax Software, net average charge excludes IRS Free File.~~


⁽³⁾	Net average charge related to H&R Block Franchise Operations represents tax preparation fees collected by H&R Block franchisees divided by returns prepared in franchise offices. H&R Block will recognize a portion of franchise revenues as franchise royalties based on the terms of franchise agreements.

operations.



2620			Q3 ~~FY2018~~FY2021 Form 10-Q \| H&R Block, Inc.

~~Table~~Ta ble of Contents


U.S. Operating Statistics	Three Months Ended January 31,
	2021		2020		Change		% Change
Tax returns prepared: (in 000s) (1)

Company-owned operations	725		1,188		(463)		(39.0)	%
Franchise operations	286		516		(230)		(44.6)	%
Total assisted	1,011		1,704		(693)		(40.7)	%

Desktop	36		88		(52)		(59.1)	%
Online	813		1,273		(460)		(36.1)	%
Total DIY	849		1,361		(512)		(37.6)	%



Total U.S. Returns	1,860		3,065		(1,205)		(39.3)	%

Net Average Charge: (2)
Company-owned operations	$	230.29	$	239.18	$	(8.89)	(3.7)	%
Franchise operations (3)	$	227.73	$	236.34	$	(8.61)	(3.6)	%
DIY	$	32.75	$	25.05	$	7.70	30.7	%

As of January 31,	2021		2020		Change		% Change
Tax offices:
Company-owned offices	6,512		6,552		(40)		(0.6)	%
Franchise offices	2,759		2,909		(150)		(5.2)	%
Total U.S. offices	9,271		9,461		(190)		(2.0)	%

(1) An assisted tax return is defined as a current or prior year individual or business tax return that has been accepted and paid for by the client. A DIY online return is defined as a current year individual or business tax return that has been accepted and paid for by the client. A DIY desktop return is defined as a current year individual or business tax return that has been electronically submitted to the IRS.

Consolidated – Financial Results (in 000s, except per share amounts)
Three months ended January 31, 2018 2017 $ Change % Change
Revenues:
U.S. assisted tax preparation fees $ 267,328
$ 245,262
$ 22,066
9.0 %
U.S. royalties 45,420
43,254
2,166
5.0 %
U.S. DIY tax preparation fees 31,322
30,745
577
1.9 %
International revenues 12,308
10,914
1,394
12.8 %
Revenues from Refund Transfers 50,770
47,323
3,447
7.3 %
Revenues from Emerald Card® 16,125
14,100
2,025
14.4 %
Revenues from Peace of Mind® Extended Service Plan 19,967
18,135
1,832
10.1 %
Interest and fee income on Emerald Advance 31,075
30,060
1,015
3.4 %
Other 14,111
12,089
2,022
16.7 %
Total revenues 488,426
451,882
36,544
8.1 %

Compensation and benefits:
Field wages 156,027
142,084
13,943
9.8 %
Other wages 50,717
45,172
5,545
12.3 %
Benefits and other compensation 42,156
36,167
5,989
16.6 %
248,900
223,423
25,477
11.4 %
Occupancy and equipment 107,731
103,867
3,864
3.7 %
Marketing and advertising 64,209
84,101
(19,892 ) (23.7 )%
Depreciation and amortization 48,488
45,160
3,328
7.4 %
Provision for bad debt 29,191
28,348
843
3.0 %
Supplies 4,950
4,453
497
11.2 %
Other 82,230
87,322
(5,092 ) (5.8 )%
Total operating expenses 585,699
576,674
9,025
1.6 %
Other income (expense), net 1,028
134
894
**
Interest expense on borrowings (24,560 ) (25,940 ) 1,380
5.3 %
Pretax loss (120,805 ) (150,598 ) 29,793
19.8 %
Income taxes (benefit) 122,120
(49,386 ) (171,506 ) **
Net loss from continuing operations (242,925 ) (101,212 ) (141,713 ) (140.0 )%
Net loss from discontinued operations (2,720 ) (3,302 ) 582
17.6 %
Net loss $ (245,645 ) $ (104,514 ) $ (141,131 ) (135.0 )%

Basic and diluted loss per share:
Continuing operations $ (1.16 ) $ (0.49 ) $ (0.67 ) (136.7 )%
Discontinued operations (0.02 ) (0.01 ) (0.01 ) (100.0 )%
Consolidated $ (1.18 ) $ (0.50 ) $ (0.68 ) (136.0 )%

EBITDA from continuing operations ⁽¹⁾
$ (47,757 ) $ (79,498 ) $ 31,741
39.9 %


⁽¹⁾	~~See "Non-GAAP Financial Information" at the end of this item for a reconciliation of non-GAAP measures.~~

~~Three months ended January 31, 2018 compared to January 31, 2017~~

~~Revenues increased $36.5 million, or 8.1%, from the prior year. U.S. assisted~~(2) Net average charge is calculated as total tax preparation fees, ~~increased $22.1 million, or 9.0%, primarily~~including any amounts deferred, divided by tax returns prepared. A portion of tax preparation fees were deferred as of January 31, 2021 due to the delay in the IRS accepting returns.

(3) Net average charge related to H&R Block Franchise operations represents tax preparation fees collected by H&R Block franchisees divided by returns prepared in franchise offices. H&R Block will recognize a ~~5.6% increase in tax return volumes and a 3.8% increase in~~portion of franchise revenues as franchise royalties based on the terms of franchise agreements.

We provide net average charge ~~in the current year. U.S. royalties increased $2.2 million, or 5.0%,~~ as a key operating metric because we ~~saw~~consider it an ~~increase in~~important supplemental measure useful to analysts, investors, and other interested parties as it provides insights into pricing and tax return mix relative to our customer base, which are significant drivers of revenue. Our definition of net average charge ~~and royalties from our franchisees related~~may not be comparable to ~~their offering~~similarly titled measures of ~~Refund Advance loans, while tax return volumes were essentially flat.~~

~~International revenues increased $1.4 million, or 12.8%, primarily due to higher volumes of tax returns and favorable exchange rates in our Canadian and Australian operations.~~

other companies.



H&R Block, Inc. \| Q3 ~~FY2018~~FY2021 Form 10-Q			2721

Ta ble of Contents

RESULTS OF OPERATIONS


Consolidated – Financial Results			(in 000s, except per share amounts)
Three months ended January 31,	2021		2020		$ Change		% Change
Revenues:
U.S. assisted tax preparation	$	154,489	$	283,956	$	(129,467)	(45.6)	%
U.S. royalties	23,902		44,965		(21,063)		(46.8)	%
U.S. DIY tax preparation	21,681		34,089		(12,408)		(36.4)	%
International	15,671		11,804		3,867		32.8	%
Refund Transfers	7		50,494		(50,487)		(100.0)	%
Emerald Card®	21,951		16,657		5,294		31.8	%
Peace of Mind® Extended Service Plan	16,101		16,954		(853)		(5.0)	%
Tax Identity Shield®	4,927		8,138		(3,211)		(39.5)	%
Interest and fee income on Emerald AdvanceSM	27,590		32,741		(5,151)		(15.7)	%
Wave	14,803		11,213		3,590		32.0	%
Other	7,105		8,194		(1,089)		(13.3)	%
Total revenues	308,227		519,205		(210,978)		(40.6)	%

Compensation and benefits:
Field wages	127,002		165,435		(38,433)		(23.2)	%
Other wages	62,254		63,808		(1,554)		(2.4)	%
Benefits and other compensation	39,637		45,397		(5,760)		(12.7)	%
	228,893		274,640		(45,747)		(16.7)	%
Occupancy	100,823		102,788		(1,965)		(1.9)	%
Marketing and advertising	66,825		84,760		(17,935)		(21.2)	%
Depreciation and amortization	39,856		44,147		(4,291)		(9.7)	%
Bad debt	25,790		36,527		(10,737)		(29.4)	%
Other	109,574		128,947		(19,373)		(15.0)	%
Total operating expenses	571,761		671,809		(100,048)		(14.9)	%
Other income (expense), net	2,367		1,879		488		26.0	%
Interest expense on borrowings	(22,333)		(26,305)		3,972		15.1	%
Pretax loss	(283,500)		(177,030)		(106,470)		(60.1)	%
Income tax benefit	(51,669)		(49,004)		(2,665)		(5.4)	%
Net loss from continuing operations	(231,831)		(128,026)		(103,805)		(81.1)	%
Net loss from discontinued operations	(1,163)		(1,657)		494		29.8	%
Net loss	$	(232,994)	$	(129,683)	$	(103,311)	(79.7)	%

BASIC AND DILUTED LOSS PER SHARE:
Continuing operations	$	(1.27)	$	(0.66)	$	(0.61)	(92.4)	%
Discontinued operations	—		(0.01)		0.01		100.0	%
Consolidated	$	(1.27)	$	(0.67)	$	(0.60)	(89.6)	%

EBITDA from continuing operations (1)	$	(221,311)	$	(106,578)	$	(114,733)	(107.7)	%

(1) See "Non-GAAP Financial Information" at the end of this item for a reconciliation of non-GAAP measures.

Three months ended January 31, 2021 compared to January 31, 2020

Revenues decreased $211.0 million, or 40.6%, from the prior year period. We believe that the ongoing pandemic, coupled with the timing of EIPs, has resulted in a delayed start to the tax season. Additionally, the IRS delayed the date that it will begin accepting and processing tax returns. This resulted in a decrease in the volume of U.S. tax returns prepared and a deferral of $18.7 million of revenues related to electronic filing causing declines in U.S. assisted tax preparation, royalties and U.S. DIY tax preparation revenues.


22			Q3 FY2021 Form 10-Q \| H&R Block, Inc.

~~Table~~Ta ble of Contents

~~Revenues from RTs~~Refund Transfer revenues decreased $50.5 million as a result of the IRS not accepting electronically filed returns. Emerald Card® revenues increased ~~$3.4~~$5.3 million, or ~~7.3%~~31.8%, ~~primarily~~ due to ~~a price increase in retail office locations, while revenues from~~higher card activity as some EIPs were loaded on to Emerald ~~Card transactions increased $2.0~~Cards. Interest and fees on Emerald Advances decreased $5.2 million, or ~~14.4%~~15.7%, due ~~primarily~~to lower Emerald AdvanceSM volumes. Wave revenues increased $3.6 million, or 32.0%, due to higher ~~fees and higher~~small business payments processing volumes ~~from our Refund Advance offering.~~as small business owners shift to online payment options.

~~Other revenues increased $2.0 million, or 16.7%, primarily due to increased units sold in prior years of tax identity protection services to our clients.~~

Total operating expenses ~~increased $9.0~~decreased $100.0 million, or ~~1.6%~~14.9%, from the prior year. Field wages ~~increased $13.9~~decreased $38.4 million, or ~~9.8%, primarily due to higher commission-based wages resulting from higher tax return volumes. Other wages increased $5.5 million, or 12.3%~~23.2%, due to ~~increased headcount primarily related~~lower tax preparation volumes resulting from the delayed start to ~~information technology resources.~~the tax season. Benefits and other compensation ~~increased $6.0~~decreased $5.8 million, or ~~16.6%~~12.7%, ~~primarily~~ due to ~~higher~~lower payroll taxes ~~on increased wages, along with higher~~and lower stock-based compensation and medical liability reserves. Occupancy and equipment costs increased $3.9 million, or 3.7%, primarily due to higher rent rates and an increase in the number of company-owned tax offices due to the acquisition of franchisees.expense. Marketing and advertising expense decreased ~~$19.9~~$17.9 million, or ~~23.7%~~21.2%, due to the timing of ~~these expenses, as certain expenses shifted to our fourth quarter.~~television and online advertising. Depreciation and amortization ~~increased $3.3~~expense decreased $4.3 million, or ~~7.4%~~9.7%, ~~primarily~~ due to lower depreciation on leasehold improvements and lower amortization ~~resulting from acquisition~~ of ~~franchisee~~acquired intangibles. Bad debt decreased $10.7 million, or 29.4%, due to lower Refund Transfer and ~~competitor businesses.~~Emerald AdvanceSM volumes.

Other expenses decreased ~~$5.1~~$19.4 million, or ~~5.8%~~15.0%. The components of other expenses are as follows:


Three months ended January 31,	2021		2020		$ Change		% Change
Consulting and outsourced services	$	30,116	$	32,124	$	(2,008)	(6.3)	%
Bank partner fees	11,716		29,448		(17,732)		(60.2)	%
Client claims and refunds	7,215		6,604		611		9.3	%
Employee travel and related expenses	5,838		10,921		(5,083)		(46.5)	%
Technology-related expenses	19,725		19,199		526		2.7	%
Credit card/bank charges	13,038		10,627		2,411		22.7	%
Insurance	3,126		3,309		(183)		(5.5)	%
Legal fees and settlements	2,825		4,838		(2,013)		(41.6)	%
Supplies	9,266		6,412		2,854		44.5	%
Other	6,709		5,465		1,244		22.8	%
	$	109,574	$	128,947	$	(19,373)	(15.0)	%

Three months ended January 31, 2018 2017 $ Change % Change
Consulting and outsourced services $ 23,515
$ 28,505
$ (4,990 ) (17.5 )%
Bank partner fees 24,239
20,539
3,700
18.0 %
Client claims and refunds 7,282
5,122
2,160
42.2 %
Employee travel and related expenses 12,849
11,472
1,377
12.0 %
Credit card/bank charges 3,682
3,567
115
3.2 %
Insurance (348 ) 3,898
(4,246 ) **
Legal fees and settlements 703
2,741
(2,038 ) (74.4 )%
Other 10,308
11,478
(1,170 ) (10.2 )%
$ 82,230
$ 87,322
$ (5,092 ) (5.8 )%

Bank partner fees decreased $17.7 million, or 60.2%, primarily due to lower Refund Advance and Refund Transfer volumes. Employee travel and related expenses decreased $5.1 million, or 46.5%, due to travel restrictions as a result of COVID-19.

~~Income taxes increased $171.5 million from the prior year. For the three months ended January 31, 2018, we~~We recorded ~~income tax expense of $122.1 million compared to~~ an income tax benefit in the current year of ~~$49.4~~$51.7 million compared to $49.0 million in the prior year, primarily due to discrete benefits of $12.6 million in the current quarter versus $2.5 million in the prior year period. The effective tax rate for the three months ended January 31, 2017. This increase is primarily due to our provisional estimates of the impacts of the Tax Legislation in relation to the seasonality of our business. Income tax expense recorded during the three months ended January 31, 2018 includes $149.4 million related to the impacts of the Tax Legislation.2021, and 2020 was 18.2% and 27.7%, respectively. See Item 1, note 7 to the consolidated financial statements for additional discussion.

~~Tax returns prepared in company-owned and franchise offices~~Total U.S. return volume from January 1, 2021 through February 28, ~~2018 increased 0.7% from~~2021 decreased 15.0% compared to the prior ~~year.~~year period due to fewer Assisted and DIY tax returns prepared due to the delayed start to the current tax season. Our business is highly seasonal and results for the ~~quarter~~three months ended January 31, as well as results for the period ended February 28, may not be indicative of results for the ~~entire fiscal year.~~current tax season.



28	~~Q3 FY2018 Form 10-Q \|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

Consolidated – Financial Results (in 000s, except per share amounts)
Nine months ended January 31, 2018 2017 $ Change % Change
Revenues:
U.S. assisted tax preparation fees $ 333,956
$ 306,030
$ 27,926
9.1 %
U.S. royalties 59,395
56,607
2,788
4.9 %
U.S. DIY tax preparation fees 38,811
36,748
2,063
5.6 %
International revenues 100,659
93,328
7,331
7.9 %
Revenues from Refund Transfers 54,721
51,314
3,407
6.6 %
Revenues from Emerald Card® 40,292
35,809
4,483
12.5 %
Revenues from Peace of Mind® Extended Service Plan 76,495
67,855
8,640
12.7 %
Interest and fee income on Emerald Advance 32,333
31,519
814
2.6 %
Other 30,420
29,189
1,231
4.2 %
Total revenues 767,082
708,399
58,683
8.3 %

Compensation and benefits:
Field wages 261,866
237,223
24,643
10.4 %
Other wages 140,637
129,479
11,158
8.6 %
Benefits and other compensation 86,384
82,619
3,765
4.6 %
488,887
449,321
39,566
8.8 %
Occupancy and equipment 311,335
297,275
14,060
4.7 %
Marketing and advertising 82,875
103,663
(20,788 ) (20.1 )%
Depreciation and amortization 136,878
132,192
4,686
3.5 %
Provision for bad debt 33,429
29,634
3,795
12.8 %
Supplies 12,052
11,467
585
5.1 %
Other 200,072
202,385
(2,313 ) (1.1 )%
Total operating expenses 1,265,528
1,225,937
39,591
3.2 %
Other income (expense), net 3,259
4,948
(1,689 ) (34.1 )%
Interest expense on borrowings (67,102 ) (70,026 ) 2,924
4.2 %
Pretax loss (562,289 ) (582,616 ) 20,327
3.5 %
Income tax benefit (43,234 ) (216,963 ) (173,729 ) (80.1 )%
Net loss from continuing operations (519,055 ) (365,653 ) (153,402 ) (42.0 )%
Net loss from discontinued operations (10,723 ) (8,754 ) (1,969 ) (22.5 )%
Net loss $ (529,778 ) $ (374,407 ) $ (155,371 ) (41.5 )%

Basic and diluted loss per share:
Continuing operations $ (2.49 ) $ (1.71 ) $ (0.78 ) (45.6 )%
Discontinued operations (0.05 ) (0.04 ) (0.01 ) (25.0 )%
Consolidated $ (2.54 ) $ (1.75 ) $ (0.79 ) (45.1 )%

EBITDA from continuing operations ⁽¹⁾
$ (358,309 ) $ (380,398 ) $ 22,089
5.8 %


⁽¹⁾H&R Block, Inc. \| Q3 FY2021 Form 10-Q			~~See "Non-GAAP Financial Information" at the end of this item for a reconciliation of non-GAAP measures.~~23

~~Nine months ended January 31, 2018 compared~~

Ta ble of Contents


U.S. Operating Statistics	Nine Months Ended January 31,
	2021		2020		Change		% Change
Tax returns prepared: (in 000s) (1)

Company-owned operations	2,353		1,476		877		59.4	%
Franchise operations	931		676		255		37.7	%
Total assisted	3,284		2,152		1,132		52.6	%

Desktop	572		142		430		302.8	%
Online	1,977		1,386		591		42.6	%
Total DIY	2,549		1,528		1,021		66.8	%



Total U.S. Returns	5,833		3,680		2,153		58.5	%

Net Average Charge: (2)
Company-owned operations	$	235.30	$	244.88	$	(9.58)	(3.9)	%
Franchise operations (3)	$	226.98	$	242.76	$	(15.78)	(6.5)	%
DIY	$	39.41	$	27.52	$	11.89	43.2	%

~~Revenues increased $58.7 million, or 8.3%, from the prior year. U.S. assisted~~(2) Net average charge is calculated as total tax preparation fees, ~~increased $27.9 million, or 9.1%, primarily~~including any amounts deferred, divided by tax returns prepared. A portion of tax preparation fees were deferred as of January 31, 2021 due to ~~a 5.6% increase~~the delay in ~~tax return volumes and a 3.8% increase in net average charge. U.S. royalties increased $2.8 million, or 4.9%, as we saw an increase in net~~the IRS accepting returns.

(3) Net average charge ~~and royalties from our franchisees~~ related to ~~their offering~~H&R Block Franchise operations represents tax preparation fees collected by H&R Block franchisees divided by returns prepared in franchise offices. H&R Block will recognize a portion of ~~Refund Advance loans, while tax return volumes were essentially flat. U.S. DIY fees increased $2.1 million, or 5.6%, primarily due to higher online tax return volumes.~~

franchise revenues as franchise royalties based on the terms of franchise agreements.


24			Q3 FY2021 Form 10-Q \| H&R Block, Inc.

Ta ble of Contents


Consolidated - Financial Results			(in 000s, except per share amounts)
Nine months ended January 31,	2021		2020		$ Change		% Change
Revenues:
U.S. assisted tax preparation	$	541,139	$	358,174	$	182,965	51.1	%
U.S. royalties	67,427		59,644		7,783		13.0	%
U.S. DIY tax preparation	94,331		42,040		52,291		124.4	%
International	132,347		97,311		35,036		36.0	%
Refund Transfers	11,752		52,794		(41,042)		(77.7)	%
Emerald Card®	48,801		39,128		9,673		24.7	%
Peace of Mind® Extended Service Plan	72,871		75,451		(2,580)		(3.4)	%
Tax Identity Shield®	19,129		17,308		1,821		10.5	%
Interest and fee income on Emerald AdvanceSM	28,754		33,780		(5,026)		(14.9)	%
Wave	41,197		25,740		15,457		60.1	%
Other	28,059		28,998		(939)		(3.2)	%
Total revenues	1,085,807		830,368		255,439		30.8	%

Compensation and benefits:
Field wages	306,551		280,231		26,320		9.4	%
Other wages	182,010		178,389		3,621		2.0	%
Benefits and other compensation	105,581		100,579		5,002		5.0	%
	594,142		559,199		34,943		6.2	%
Occupancy	297,881		292,470		5,411		1.9	%
Marketing and advertising	94,953		101,190		(6,237)		(6.2)	%
Depreciation and amortization	117,163		125,409		(8,246)		(6.6)	%
Bad debt	28,759		37,594		(8,835)		(23.5)	%
Other	268,834		305,015		(36,181)		(11.9)	%
Total operating expenses	1,401,732		1,420,877		(19,145)		(1.3)	%
Other income (expense), net	4,759		13,741		(8,982)		(65.4)	%
Interest expense on borrowings	(85,319)		(68,682)		(16,637)		(24.2)	%
Pretax loss	(396,485)		(645,450)		248,965		38.6	%
Income tax benefit	(35,730)		(188,146)		152,416		81.0	%
Net loss from continuing operations	(360,755)		(457,304)		96,549		21.1	%
Net loss from discontinued operations	(4,706)		(10,625)		5,919		55.7	%
Net loss	$	(365,461)	$	(467,929)	$	102,468	21.9	%

BASIC AND DILUTED LOSS PER SHARE:
Continuing operations	$	(1.92)	$	(2.31)	$	0.39	16.9	%
Discontinued operations	(0.02)		(0.05)		0.03		60.0	%
Consolidated	$	(1.94)	$	(2.36)	$	0.42	17.8	%

EBITDA from continuing operations (1)	$	(194,003)	$	(451,359)	$	257,356	57.0	%

(1) See "Non-GAAP Financial Information" at the end of this item for a reconciliation of non-GAAP measures.

Nine months ended January 31, 2021 compared to January 31, 2020

Due to the extension of the 2020 tax season related to the COVID-19 pandemic, we had significant increases in the number of tax returns and revenues in all categories during the first half of fiscal year 2021. These increases were partially offset by the delayed start to the 2021 tax season. As a result, total revenues increased $255.4 million, or 30.8%, compared to the prior year period.

International revenues increased $35.0 million, or 36.0%, primarily due to the 2020 tax season extension in Canada. Refund Transfer revenues decreased $41.0 million, or 77.7%, as a result of the IRS not accepting electronically filed returns. Emerald Card® revenues increased $9.7 million, or 24.7%, due to due to higher card activity as some EIPs were loaded on to Emerald Cards. Wave revenues increased $15.5 million, or 60.1% due to


H&R Block, Inc. \| Q3 ~~FY2018~~FY2021 Form 10-Q			2925

~~Table~~Ta ble of Contents

~~International revenues increased $7.3 million, or 7.9%, primarily due~~higher small business payments processing volumes over the prior year as small business owners shift to ~~higher volumes~~online payment options and an additional two months of ~~tax returns and favorable exchange rates in our Australian operations.~~

Revenues from RTs increased $3.4 million, or 6.6%, primarily due to a price increase, while revenues from Emerald Card transactions increased $4.5 million, or 12.5%, primarily due to higher fees and interchange income.

~~Revenues from POM increased $8.6 million, or 12.7%, due to an increase in units sold in prior years and changes~~revenue in the ~~timing of forecasted claims.~~current year, as we acquired Wave on June 28, 2019.

Total operating expenses ~~increased $39.6~~decreased $19.1 million, or ~~3.2%~~1.3%, from the prior ~~year.~~year period. Field wages increased ~~$24.6~~$26.3 million, or 10.4%, primarily due to higher commission-based wages resulting from higher tax return volumes and higher office labor in our Australian operations. Other wages increased $11.2 million, or 8.6%, due to increased headcount primarily related to information technology resources and inflationary increases in corporate support wages. Occupancy and equipment costs increased $14.1 million, or 4.7%, primarily due to higher rent rates and an increase in the number of company-owned tax offices due to the acquisition of franchisees. Marketing and advertising decreased $20.8 million, or 20.1%9.4%, due to the ~~timing~~extended 2020 tax season, partially offset by Canadian wage subsidies and lower 2021 tax season volumes. Depreciation and amortization expense decreased $8.2 million, or 6.6%, due to lower depreciation on leasehold improvements and lower amortization of ~~these expenses, as certain expenses shifted to our fourth quarter.~~acquired intangibles. Bad debt expense ~~increased $3.8~~decreased $8.8 million, ~~primarily~~or 23.5%, due to ~~recoveries made on older EA balances in the prior year, partially offset by a reduction in the overall bad debt rate on current year balances.~~lower Refund Transfer and Emerald AdvanceSM volumes.

Other expenses decreased ~~$2.3~~$36.2 million, or ~~1.1%~~11.9%. The components of other expenses are as follows:


Nine months ended January 31,	2021		2020		$ Change		% Change
Consulting and outsourced services	$	69,742	$	74,597	$	(4,855)	(6.5)	%
Bank partner fees	11,066		32,303		(21,237)		(65.7)	%
Client claims and refunds	17,888		25,305		(7,417)		(29.3)	%
Employee travel and related expenses	15,298		33,159		(17,861)		(53.9)	%
Technology-related expenses	55,554		50,178		5,376		10.7	%
Credit card/bank charges	39,727		24,455		15,272		62.4	%
Insurance	9,340		11,548		(2,208)		(19.1)	%
Legal fees and settlements	16,110		21,139		(5,029)		(23.8)	%
Supplies	16,218		14,958		1,260		8.4	%
Other	17,891		17,373		518		3.0	%
	$	268,834	$	305,015	$	(36,181)	(11.9)	%

Nine months ended January 31, 2018 2017 $ Change % Change
Consulting and outsourced services $ 61,607
$ 67,794
$ (6,187 ) (9.1 )%
Bank partner fees 27,235
23,682
3,553
15.0 %
Client claims and refunds 33,647
31,500
2,147
6.8 %
Employee travel and related expenses 29,284
29,478
(194 ) (0.7 )%
Credit card/bank charges 10,904
8,492
2,412
28.4 %
Insurance 6,765
11,587
(4,822 ) (41.6 )%
Legal fees and settlements 8,600
7,468
1,132
15.2 %
Other 22,030
22,384
(354 ) (1.6 )%
$ 200,072
$ 202,385
$ (2,313 ) (1.1 )%

Bank partner fees decreased $21.2 million, or 65.7%, primarily due to lower Refund Advance and Refund Transfer volumes. Employee travel and related expenses decreased $17.9 million, or 53.9%, due to travel restrictions as a result of COVID-19. Credit card and bank charges increased $15.3 million, or 62.4%, as a result of higher transaction volumes for assisted and DIY tax preparation and higher Wave payments processing fees.

~~The~~Other income ~~tax benefit~~(expense), net decreased ~~$173.7 million compared to the prior year to $43.2~~$9.0 million primarily due to lower interest income as a result of lower interest rates.

Interest expense on borrowings increased $16.6 million primarily due to higher CLOC borrowings and our ~~provisional estimates of~~2030 Senior Notes.

Income tax benefits decreased $152.4 million, 81.0% due to lower losses in the impacts of the Tax Legislation in relation to the seasonality of our business. The income tax benefit recorded during the nine months ended January 31, 2018 includes $149.4 million of additional tax expense related to the impacts of the Tax Legislation.

~~We currently estimate that our annual~~current year and a lower effective tax rate ~~for fiscal year 2018 will be~~of 9.0% compared to 29.2% in ~~a range of approximately 6% to 9%. While we believe we have identified all material implications~~ the Tax Legislation is expected to have on our financial statements and were able to record a reasonable estimate of the impacts as provisional amounts as of and for the nine months ended January 31, 2018, we are continuing to evaluate the impacts of the Tax Legislation and do not consider these provisional estimates to be final. The final impacts may differ from the estimates provided, and could have a material impact on our financial statements. Given the significant complexity of the Tax Legislation, we anticipate changes may result due to further analyzing the impact of the provisions on our federal and state estimates. In addition, anticipated guidance from the IRS about implementing the Tax Legislation and the potential for additional guidance from the SEC or the FASB related to the Tax Legislation, may cause these estimates to be adjusted.prior year. See Item 1, note 7 to the consolidated financial statements for additional discussion.

FINANCIAL CONDITION

These comments should be read in conjunction with the consolidated balance sheets and consolidated statements of cash flows included in Part 1, Item 1.1.

CAPITAL RESOURCES AND LIQUIDITY –

OVERVIEW – Our primary sources of capital and liquidity include cash from operations (including changes in working capital), draws on our ~~2017~~ CLOC, and issuances of debt. We use our sources of liquidity primarily to fund working capital, service and repay debt, pay dividends, repurchase shares of our common stock, and acquire businesses.



30	~~Q3 FY2018 Form 10-Q \|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

Our operations are highly seasonal and substantially all of our revenues and cash flow are generated during the period from February through ~~April.~~April in a typical year. Therefore, we normally require the use of cash to fund losses and working capital needs, periodically resulting in a working capital deficit, from May through ~~January, and~~January. We typically ~~rely~~have relied on available cash balances from the prior tax season and borrowings to meet liquidity needs in our ~~off-season liquidity needs.~~first three quarters.


26			Q3 FY2021 Form 10-Q \| H&R Block, Inc.

Ta ble of Contents

Given the likely availability of a number of liquidity options discussed herein, we believe that, in the absence of any unexpected developments, our existing sources of capital as of January 31, ~~2018~~2021 are sufficient to meet our operating, investing and financing needs.

DISCUSSION OF CONSOLIDATED STATEMENTS OF CASH FLOWS – The following table summarizes our statements of cash flows for the nine months ended January 31, ~~2018~~2021 and ~~2017~~.2020. See Item 1 for the complete consolidated statements of cash flows for these periods.


	(in 000s)
Nine months ended January 31,	2021		2020
Net cash provided by (used in):
Operating activities	$	(908,679)	$	(1,467,791)
Investing activities	(74,112)		(489,702)
Financing activities	(1,442,825)		611,912
Effects of exchange rates on cash	14,004		(359)
Net change in cash, cash equivalents and restricted cash	$	(2,411,612)	$	(1,345,940)

(in 000s)
Nine months ended January 31, 2018
2017
Net cash provided by (used in):
Operating activities $ (1,357,701 ) $ (1,409,859 )
Investing activities (122,573 ) 64,742
Financing activities 631,342
638,457
Effects of exchange rates on cash 1,792
(2,913 )
Net change in cash, cash equivalents and restricted cash $ (847,140 ) $ (709,573 )

Operating Activities. Cash used in operations decreased, primarily due to ~~changes in~~the extension of the 2020 tax ~~balances resulting from~~season into this fiscal year due to COVID-19 and the ~~Tax Legislation and prior year settlement payments related~~delayed start to ~~representation and warranty claims, partially offset by an increased loss for~~ the ~~period.~~2021 tax season.

Investing Activities. Cash used in investing activities totaled ~~$122.6 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~January 31, 2018~~ ~~compared to cash provided of~~ ~~$64.7 million~~ ~~in the prior year period. This change resulted primarily from cash received from our portfolio of mortgage loans in the prior year, which was sold in fiscal year 2017.~~

~~Financing Activities.~~ ~~Cash provided by financing activities totaled $631.3~~$74.1 million for the nine months ended January 31, ~~2018~~2021 compared to ~~$638.5~~$489.7 million in the prior year period. This change is due to the prior year acquisition of Wave.

Financing Activities. Cash used in financing activities totaled $1.4 billion for the nine months ended January 31, 2021 compared to cash provided by financing activities of $611.9 million in the prior year period. This change resulted primarily from ~~lower borrowings~~the repayment of the $2.0 billion draw outstanding on our CLOC induring the current ~~year and share repurchases in the prior year period.~~year.

CASH REQUIREMENTS –

Dividends and Share Repurchases. Returning capital to shareholders in the form of dividends and the repurchase of outstanding shares has historically been a significant component of our capital allocation plan.

We have consistently paid quarterly dividends. Dividends paid totaled ~~$150.3~~$147.9 million and ~~$141.5~~$154.8 million for the nine months ended January 31, ~~2018~~2021 and ~~2017~~,2020, respectively. Although we have historically paid dividends and plan to continue to do so, there can be no assurances that circumstances will not change in the future that could affect our ability or decisions to pay dividends.

Our current share repurchase program has remaining authorization of $601.8 million which is effective through June 2022. During the nine months ended January 31, 2021, we repurchased $150.1 million of our common stock at an average price of $15.83 per share. In the prior year period, we repurchased $246.8 million of our common stock at an average price of $24.36 per share.

Share repurchases may be effectuated through open market transactions, some of which may be effectuated under SEC Rule 10b5-1. The Company may cancel, suspend, or extend the period for the purchase of shares at any time. Any repurchases will be funded primarily through available cash and cash from operations. Although we may continue to repurchase shares, there is no assurance that we will purchase up to the full Board authorization.

Capital Investment. Capital expenditures totaled ~~$77.9~~$48.0 million and ~~$73.9~~$66.5 million for the nine months ended January 31, ~~2018~~2021 and ~~2017,~~2020, respectively. Our capital expenditures relate primarily to recurring improvements to retail offices, as well as investments in computers, software and related assets. In addition to our capital expenditures, we also made payments to acquire businesses. We acquired franchisee and competitor businesses totaling ~~$39.4~~$15.0 million in the current year compared to Wave and ~~$52.8~~franchisee and competitor businesses totaling $450.3 million in the prior year. See Item 1, note 5for ~~the nine months ended January 31, 2018 and 2017, respectively.~~additional information on our acquisitions.

FINANCING RESOURCES – ~~Our 2017 CLOC has capacity up to~~In the fourth quarter of fiscal year 2020, we drew down the full $2.0 billion available under our CLOC to increase our cash position and ~~is scheduled to expire~~maximize flexibility in light of the uncertainty surrounding the impact of the COVID-19 pandemic, which we repaid in full in September ~~2022. Proceeds under the 2017 CLOC may be used for working capital needs or for other general corporate purposes.~~2020. We ~~were in compliance with our 2017 CLOC covenants and~~ had an outstanding balance of ~~$790.0~~$880.0 million under the CLOC as of January 31, ~~2018. See Item 1, note 5 to the consolidated financial statements for discussion of the Senior Notes and our 2017 CLOC.~~

2021.



H&R Block, Inc. \| Q3 ~~FY2018~~FY2021 Form 10-Q			3127

~~Table~~Ta ble of Contents

On August 7, 2020, we issued the 2030 Senior Notes. We used the net proceeds from the 2030 Senior Notes to repay our $650 million Senior Notes that matured on October 1, 2020.

The following table provides ratings for debt issued by Block Financial as of January 31, ~~2018~~2021 and April 30, ~~2017:~~

2020:

As of

January 31, 2021

April 30, 2020

Short-term

Long-term

Outlook

Short-term

Long-term

Outlook

Moody's

P-3

Baa3

Stable

P-3

Baa3

Negative

S&P

A-2

BBB

Negative

A-2

BBB

Negative

~~As of~~

~~January 31, 2018~~

~~April 30, 2017~~

~~Short-term~~

~~Long-term~~

~~Outlook~~

~~Short-term~~

~~Long-term~~

~~Outlook~~

~~Moody's~~

~~P-3~~

~~Baa3~~

~~Stable~~

~~P-3~~

~~Baa3~~

~~Stable~~

~~S&P~~

~~A-2~~

~~BBB~~

~~Stable~~

~~A-2~~

~~BBB~~

~~Negative~~

Other than as described above, there have been no material changes in our borrowings from those reported as of April 30, ~~2017~~2020 in our Annual Report on Form 10-K.

CASH AND OTHER ASSETS – As of January 31, ~~2018~~,2021, we held cash and cash equivalents, excluding restricted amounts, of ~~$187.4~~$280.2 million, including ~~$94.4~~$71.1 million held by our foreign subsidiaries.

Foreign Operations. ~~Seasonal borrowing needs of~~ When necessary, our ~~Canadian operations~~international businesses are ~~typically~~ funded by our U.S. operations. To mitigate foreign currency exchange rate risk, we sometimes enter into foreign exchange forward contracts. There ~~were no~~was one forward ~~contracts~~contract outstanding as of January 31, ~~2018.~~2021, which had a recorded amount of $2.0 million.

We do not currently intend to repatriate any non-borrowed funds held by our foreign subsidiaries.

The impact of changes in foreign exchange rates during the period on our international cash balances resulted in an increase of ~~$1.8~~$14.0 million during the nine months ended January 31, ~~2018~~2021 compared to aan decrease of ~~$2.9~~$0.4 million in the prior year.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS – ~~In connection with our agreement with BofI, we are required~~Except as described in Item 1, note 9 related to ~~purchase a 90% participation interest, at par, in all EAs originated by our lending partner. At~~ ~~January 31, 2018~~, the ~~principal balance of~~Emerald AdvanceSM purchased participation interests ~~totaled $345.0 million.~~

~~As discussed further~~and Refund Advance guarantees under the Program Management Agreement with Meta, and in ~~Item~~I tem 1, note 96 related to the consolidated financial statements, we have provided limited guarantees under our Refund Advance Program Agreement of up to $10 million related to loans to clients prior to the IRS accepting electronic filing, with additional limited guarantees for the remaining loans, up to $57 million in the aggregate, which would cover certain incremental loan losses.

~~There~~2030 Senior Notes issuance, there have been no ~~other~~ material changes in our contractual obligations and commercial commitments from those reported as of April 30, ~~2017~~2020 in our Annual Report on Form 10-K.

SUMMARIZED GUARANTOR FINANCIAL STATEMENTS –Block Financial is a 100% owned subsidiary of H&R Block, Inc. Block Financial is the Issuer and H&R Block, Inc. is the full and unconditional Guarantor of our Senior Notes, CLOC and other indebtedness issued from time to time.

~~REGULATORY ENVIRONMENT~~ – The ~~Tax Legislation, which was signed into law~~following table presents summarized financial information for H&R Block, Inc. (Guarantor) and Block Financial (Issuer) on ~~December 22, 2017, includes major changes~~a combined basis after intercompany eliminations and excludes investments in and equity earnings in non-guarantor subsidiaries.


SUMMARIZED BALANCE SHEET - GUARANTOR AND ISSUER			(in 000s)
As of	January 31, 2021		April 30, 2020

Current assets	$	355,197	$	53,865
Noncurrent assets	2,178,757		3,644,369
Current liabilities	43,677		697,797
Noncurrent liabilities	2,378,024		2,854,211


SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER			(in 000s)
	Nine months ended January 31, 2021		Twelve months ended April 30, 2020

Total revenues	$	90,925	$	184,415
Income (loss) from continuing operations before income taxes	(33,862)		30,231
Net income (loss) from continuing operations	(22,272)		23,559
Net income (loss)	(27,065)		10,497

The table above reflects $2.1 billion and $3.6 billion of non-current intercompany receivables due to the ~~U.S. federal income taxation~~Issuer from non-guarantor subsidiaries as of ~~individuals~~January 31, 2021 and corporations. For a discussion of the impact of the corporate tax law changes included in the Tax Legislation on our consolidated financial statements, see Item 1, note 7 to the consolidated financial statements. With respect to the individual income tax changes within the Tax Legislation, we do not anticipate any material impact to our business or our consolidated financial position, results of operations, or cash flows for fiscal year 2018. We are continuing to evaluate the impact, which may be material, that the individual income tax changes in the Tax Legislation could have on our business and consolidated financial position, results of operations, and cash flows in the fiscal year ending April 30, ~~2019 and beyond.~~2020, respectively.


28			Q3 FY2021 Form 10-Q \| H&R Block, Inc.

Ta ble of Contents

REGULATORY ENVIRONMENT

On November 17, 2017, the Consumer Financial Protection Bureau (CFPB) ~~officially~~ published its final rule changing the regulation of certain consumer credit products, including payday loans, vehicle title loans, and high-cost installment loans ~~(the “Payday Rule”)~~(Payday Rule). Certain limited provisions of the Payday Rule became effective on January 16, 2018, but most provisions ~~do not become effective until~~were scheduled to go into effect on August 19, 2019. ~~However, on January 16,~~On November 6, 2018, a judge from the U.S. District Court for the Western District of Texas issued a stay of the Payday Rule's August 19, 2019 compliance date, which stay remains in effect until further notice from the Court. On July 7, 2020, the CFPB ~~stated its intention to engage in~~issued a ~~rulemaking process so that~~final rule revoking the ~~CFPB may reconsider~~mandatory underwriting provisions of the Payday Rule.

Given ~~this development,~~these developments and the recent change in administration, we are unsure whether, when, or in what form the Payday Rule will go into effect. The timing to resolve the litigation is unclear. We do not currently expect the Payday Rule ~~will be revised. Depending on the outcome of that rulemaking process, which may include the Payday Rule becoming effective in its current form, the Payday Rule may~~to have a material adverse impact on the EAEmerald AdvanceSM product, our business, ~~and~~or our consolidated financial position, results of operations, and cash flows. We will continue to monitor and analyze the potential impact of any further Payday Rule developments on the ~~Company as the CFPB’s rulemaking process progresses.~~



32	~~Q3 FY2018 Form 10-Q \|~~ ~~H&R Block, Inc.~~

~~Table of Contents~~

On October 5, 2016, the CFPB released its final rule regulating certain prepaid products (the “Prepaid Card Rule”). The Prepaid Card Rule was scheduled to take effect on April 1, 2018. However, on January 25, 2018, the CFPB amended the Prepaid Card Rule and extended the general effective date until April 1, 2019. Once effective, the Prepaid Card Rule will apply to the H&R Block Emerald Prepaid MasterCard®, but we do not believe the rule will apply to the EA or Refund Advance products because they are non-covered separate credit products. The Prepaid Card Rule, among other things: (i) requires consumer disclosures to be made prior to acquiring a prepaid account; (ii) requires periodic statements or online access to specified account information; and (iii) requires online posting of the Cardholder Agreement and submission of new and revised Cardholder Agreements to the CFPB. We are continuing to assess the impact of these changes on the H&R Block Emerald Prepaid MasterCard®, but we do not currently expect that the Prepaid Card Rule will have a material adverse effect on our business or our consolidated financial position, results of operations, and cash flows.Company.

There have been no other material changes in our regulatory environment from what was reported as of April 30, ~~2017~~2020 in our Annual Report on Form 10-K.

NON-GAAP FINANCIAL INFORMATION

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Because these measures are not measures of financial performance under GAAP and are susceptible to varying calculations, they may not be comparable to similarly titled measures for other companies.

We consider our non-GAAP financial measures to be performance measures and a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business.

We make adjustments for certain non-GAAP financial measures related to amortization of intangibles from acquisitions and goodwill impairments. We may consider whether other significant items that arise in the future should be excluded from our non-GAAP financial measures.

We measure the performance of our business using a variety of metrics, including earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing ~~operations.~~operations, adjusted EBITDA from continuing operations, EBITDA margin from continuing operations, adjusted EBITDA margin from continuing operations, adjusted diluted earnings per share from continuing operations and free cash flow. We also use EBITDA from continuing operations and pretax income of continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees.

The following is a reconciliation of net loss to EBITDA from continuing operations, ~~to net loss:~~which is a non-GAAP financial measure:


							(in 000s)
	Three months ended January 31,				Nine months ended January 31,
	2021		2020		2021		2020
Net loss - as reported	$	(232,994)	$	(129,683)	$	(365,461)	$	(467,929)
Discontinued operations, net	1,163		1,657		4,706		10,625
Net loss from continuing operations - as reported	(231,831)		(128,026)		(360,755)		(457,304)
Add back:
Income tax benefit of continuing operations	(51,669)		(49,004)		(35,730)		(188,146)
Interest expense of continuing operations	22,333		26,305		85,319		68,682
Depreciation and amortization of continuing operations	39,856		44,147		117,163		125,409
	10,520		21,448		166,752		5,945
EBITDA from continuing operations	$	(221,311)	$	(106,578)	$	(194,003)	$	(451,359)

(in 000s)
Three months ended January 31, Nine months ended January 31,
2018
2017
2018
2017
Net loss - as reported $ (245,645 ) $ (104,514 ) $ (529,778 ) $ (374,407 )
Discontinued operations, net 2,720
3,302
10,723
8,754
Net loss from continuing operations - as reported (242,925 ) (101,212 ) (519,055 ) (365,653 )
Add back:
Income taxes of continuing operations 122,120
(49,386 ) (43,234 ) (216,963 )
Interest expense of continuing operations 24,560
25,940
67,102
70,026
Depreciation and amortization of continuing operations 48,488
45,160
136,878
132,192
195,168
21,714
160,746
(14,745 )
EBITDA from continuing operations $ (47,757 ) $ (79,498 ) $ (358,309 ) $ (380,398 )


H&R Block, Inc. \| Q2 FY2021 Form 10-Q			29

Ta ble of Contents

The following is a reconciliation of our results from continuing operations to our adjusted results from continuing operations, which are non-GAAP financial measures:


(in 000s, except per share amounts)
	Three months ended January 31,				Nine months ended January 31,
	2021		2020		2021		2020

Net loss from continuing operations - as reported	$	(231,831)	$	(128,026)	$	(360,755)	$	(457,304)

Adjustments:
Amortization of intangibles related to acquisitions (pretax)	16,293		19,179		52,176		54,997
Tax effect of adjustments (1)	1,012		(4,956)		(4,143)		(13,667)
Adjusted net loss from continuing operations	$	(214,526)	$	(113,803)	$	(312,722)	$	(415,974)

Diluted loss per share - as reported	$	(1.27)	$	(0.66)	$	(1.92)	$	(2.31)
Adjustments, net of tax	0.10		0.07		0.26		0.21
Adjusted loss per share	$	(1.17)	$	(0.59)	$	(1.66)	$	(2.10)

(1)Tax effect of adjustments is the difference between the tax provision calculated on a GAAP basis and on an adjusted non-GAAP basis.

FORWARD-LOOKING INFORMATION

This report and other documents filed with the ~~Securities and Exchange Commission (SEC)~~SEC may contain forward-looking statements. In addition, our senior management may make forward-looking statements orally to analysts, investors, the media and others. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as "expects," "anticipates," "intends," "plans," "believes," "commits," "seeks," "estimates," "projects," "forecasts," "targets," "would," "will," "should," "goal," "could," "may" or other similar expressions. Forward-looking statements provide management's current expectations



~~H&R Block, Inc.~~ ~~\| Q3 FY2018 Form 10-Q~~	33

~~Table of Contents~~

or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, client trajectory, income, effective tax rate, earnings per share, cost savings, capital expenditures, dividends, ~~stock repurchase,~~share repurchases, liquidity, capital structure, market share, industry volumes or other financial items, descriptions of management's plans or objectives for future operations, services or products, or descriptions of assumptions underlying any of the above. They may also include the expected impact of the coronavirus (COVID–19) pandemic, including, without limitation, the impact on economic and financial markets, the Company's capital resources and financial condition, future expenditures, potential regulatory actions, such as extensions of tax filing deadlines or other related relief, changes in consumer behaviors and modifications to the Company's operations relating thereto.

All forward-looking statements speak only as of the date they are made and reflect the Company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law.

By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive, operational and regulatory factors, many of which are beyond the Company's control. In addition, factors that may cause the Company’s actual effective tax rate to differ from estimates include the Company’s actual results from operations compared to current estimates, future discrete items, changes in interpretations and assumptions the Company has made, ~~guidance from the IRS, SEC, or the FASB about the Tax Legislation,~~ and future actions of the Company. Investors should understand that it is not possible to predict or identify all such factors and, consequently, should not consider any such list to be a complete set of all potential risks or uncertainties.


30			Q3 FY2021 Form 10-Q \| H&R Block, Inc.

Ta ble of Contents

Details about risks, uncertainties and assumptions that could affect various aspects of our business are included throughout our Annual Report on Form 10-K for the fiscal year ended April 30, ~~2017~~2020 and are also described from time to time in other filings with the SEC. Investors should carefully consider all of these risks, and should pay particular attention to Item 1A, "Risk Factors," and Item 7 under "Critical Accounting Policies" of our Annual Report on Form 10-K for the fiscal year ended April 30, ~~2017 and Item 1A, Risk Factors in any subsequently-filed Quarterly Reports on Form 10-Q.~~2020.


~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risks from those reported at April 30, ~~2017~~2020 in our Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES – As of the end of the period covered by this Form 10-Q, management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING – There were no changes during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of our material pending legal proceedings, see discussion in Part I, Item 1, note 10 to the consolidated financial statements.

ITEM 1A. RISK FACTORS

~~Except~~We face legal actions in connection with our various business activities, and current or future legal actions may damage our reputation, impair our product offerings, or result in material liabilities and losses.

We have been named, and from time to time will likely continue to be named, in various legal actions, including arbitrations, class or representative actions, actions or inquiries by state attorneys general and other regulators, and other litigation arising in connection with our various business activities, including relating to our various service and product offerings. For example, as ~~described~~previously reported, we are subject to litigation and have received and are responding to certain governmental inquiries relating to the IRS Free File program. These inquiries include requests for information and, in some cases, subpoenas from regulators and state attorneys general. On July 15, 2020, the New York State Department of Financial Services issued a press release and report on its investigation of certain tax preparers, including us, related to the IRS Free File program. We cannot predict whether this report or other inquiries could lead to further inquiries, further litigation, fines, injunctions or other regulatory or legislative actions or impacts on our brand, reputation and business. See discussion in Part I, Item ~~2, Regulatory Environment,~~1, note 10 to the consolidated financial statements, and Item 8, note 13 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020. We also grant our franchisees a limited license to use our registered trademarks and, accordingly, there is risk that one or more of the franchisees may be alleged to be controlled by us. Third parties, regulators or courts may seek to hold us responsible for the actions or failures to act by our franchisees. Adverse outcomes related to legal actions could result in substantial damages and could cause our earnings to decline. Negative public opinion could also result from our or our franchisees’ actual or alleged conduct in such claims, possibly damaging our reputation, which, in turn, could adversely affect our business prospects and cause the market price of our securities to decline.

Except as indicated above, there have been no material changes in our risk factors from those reported at April 30, ~~2017~~2020 in our Annual Report on Form 10-K.



34	~~Q3 FY2018 Form 10-Q \|~~ H&R Block, Inc. \| Q3 FY2021 Form 10-Q	31

~~Table~~ble of Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

A summary of our purchases of H&R Block common stock during the third quarter of fiscal year ~~2018~~2021 is as follows:


(in 000s, except per share amounts)
	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
November 1 - November 30	—			—	$	601,837
December 1 - December 31	1	$	18.33	—	$	601,837
January 1 - January 31	—			—	$	601,837
	1	$	18.33	—

(in 000s, except per share amounts)

Total Number of
Shares Purchased ⁽¹⁾

Average
Price Paid
per Share

Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs ⁽²⁾

Maximum Dollar Value of
Shares that May Yet Be
Purchased Under the Plans
or Programs ⁽²⁾

November 1 - November 30 —
$ —
—
$ 1,183,190
December 1 - December 31 3
$ 27.22
—
$ 1,183,190
January 1 - January 31 3
$ 26.69
—
$ 1,183,190
6
$ 26.80
—

(1)We purchased approximately 1 thousand shares in connection with funding employee income tax withholding obligations arising upon the lapse of restrictions on restricted share units.


(2)In September 2015, we announced that our Board of Directors approved a $3.5 billion share repurchase program, effective through June 2019. In June 2019, our Board of Directors extended the share repurchase program through June 2022. ⁽¹⁾	~~We purchased approximately~~ ~~6 thousand~~ ~~shares in connection with funding employee income tax withholding obligations arising upon the lapse of restrictions on restricted shares and restricted share units.~~


⁽²⁾	~~In September 2015, we announced that our Board of Directors approved a $3.5 billion share repurchase program, effective through June 2019.~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K:


~~12.1~~ 31.1			~~Computation of Ratio of Earnings to Fixed Charges for H&R Block, Inc.~~


~~12.2~~	~~Computation of Ratio of Earnings to Fixed Charges for Block Financial LLC.~~


~~31.1~~	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


31.2			Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


32.1			Certification by Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.


32.2			Certification by Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.


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~~101.LAB~~	Inline XBRL Taxonomy Extension Label Linkbase

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~~101.PRE~~	Inline XBRL Taxonomy Extension Presentation Linkbase

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~~101.DEF~~	Inline XBRL Taxonomy Extension Definition Linkbase
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



32	Q3 FY2021 Form 10-Q \| H&R Block, Inc. ~~\| Q3 FY2018 Form 10-Q~~	35

~~Table~~ble of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


H&R BLOCK, INC.

~~H&R BLOCK, INC.~~

/s/ Jeffrey J. Jones II
Jeffrey J. Jones II
President and Chief Executive Officer
March ~~7, 2018~~9, 2021

/s/ Tony G. Bowen
Tony G. Bowen
Chief Financial Officer
March ~~7, 2018~~9, 2021

/s/ Kellie J. Logerwell
Kellie J. Logerwell
Chief Accounting Officer
March ~~7, 2018~~9, 2021



36	~~Q3 FY2018 Form 10-Q \|~~ H&R Block, Inc. \| Q3 FY2021 Form 10-Q	33



(in 000s)
Credit Quality Indicator – Year of origination:
2018	$	352,591
2017	8,342
2016 and prior	6,634
Revolving loans	23,291
	390,858
Allowance	(27,805		)
Net balance	$	363,053



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS													(in 000s)
Three months ended January 31, 2018	H&R Block, Inc. (Guarantor)			Block Financial (Issuer)			Other Subsidiaries			Eliminations			Consolidated H&R Block
Total revenues	$	—		$	55,795		$	449,608		$	(16,977	)	$	488,426
Cost of revenues	—			33,805			391,772			(8,976		)	416,601
Selling, general and administrative	—			10,823			166,276			(8,001		)	169,098
Total operating expenses	—			44,628			558,048			(16,977		)	585,699
Other income (expense), net	(250,732		)	7,819			(20,071		)	264,012			1,028
Interest expense on external borrowings	—			(24,491		)	(69		)	—			(24,560		)
Loss from continuing operations before income taxes (benefit)	(250,732		)	(5,505		)	(128,580		)	264,012			(120,805		)
Income taxes (benefit)	(5,087		)	15,600			111,607			—			122,120
Net loss from continuing operations	(245,645		)	(21,105		)	(240,187		)	264,012			(242,925		)
Net loss from discontinued operations	—			(2,720		)	—			—			(2,720		)
Net loss	(245,645		)	(23,825		)	(240,187		)	264,012			(245,645		)
Other comprehensive income	4,848			—			4,848			(4,848		)	4,848
Comprehensive loss	$	(240,797	)	$	(23,825	)	$	(235,339	)	$	259,164		$	(240,797	)



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS													(in 000s)
Three months ended January 31, 2017	H&R Block, Inc. (Guarantor)			Block Financial (Issuer)			Other Subsidiaries			Eliminations			Consolidated H&R Block
Total revenues	$	—		$	53,990		$	411,099		$	(13,207	)	$	451,882
Cost of revenues	—			33,242			364,286			(8,751		)	388,777
Selling, general and administrative	—			10,693			181,660			(4,456		)	187,897
Total operating expenses	—			43,935			545,946			(13,207		)	576,674
Other income (expense), net	(106,332		)	14,978			(1,777		)	93,265			134
Interest expense on external borrowings	—			(25,858		)	(82		)	—			(25,940		)
Loss from continuing operations before tax benefit	(106,332		)	(825		)	(136,706		)	93,265			(150,598		)
Income tax benefit	(1,818		)	(2,939		)	(44,629		)	—			(49,386		)
Net income (loss) from continuing operations	(104,514		)	2,114			(92,077		)	93,265			(101,212		)
Net loss from discontinued operations	—			(3,282		)	(20		)	—			(3,302		)
Net loss	(104,514		)	(1,168		)	(92,097		)	93,265			(104,514		)
Other comprehensive income	1,759			—			1,759			(1,759		)	1,759
Comprehensive loss	$	(102,755	)	$	(1,168	)	$	(90,338	)	$	91,506		$	(102,755	)



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS													(in 000s)
Nine months ended January 31, 2018	H&R Block, Inc. (Guarantor)			Block Financial (Issuer)			Other Subsidiaries			Eliminations			Consolidated H&R Block
Total revenues	$	—		$	85,056		$	704,762		$	(22,736	)	$	767,082
Cost of revenues	—			46,769			846,685			(9,119		)	884,335
Selling, general and administrative	—			17,614			377,196			(13,617		)	381,193
Total operating expenses	—			64,383			1,223,881			(22,736		)	1,265,528
Other income (expense), net	(538,995		)	20,884			(33,710		)	555,080			3,259
Interest expense on external borrowings	—			(66,873		)	(229		)	—			(67,102		)
Loss from continuing operations before income taxes (benefit)	(538,995		)	(25,316		)	(553,058		)	555,080			(562,289		)
Income taxes (benefit)	(9,217		)	9,987			(44,004		)	—			(43,234		)
Net loss from continuing operations	(529,778		)	(35,303		)	(509,054		)	555,080			(519,055		)
Net loss from discontinued operations	—			(10,721		)	(2		)	—			(10,723		)
Net loss	(529,778		)	(46,024		)	(509,056		)	555,080			(529,778		)
Other comprehensive income	5,925			—			5,925			(5,925		)	5,925
Comprehensive loss	$	(523,853	)	$	(46,024	)	$	(503,131	)	$	549,155		$	(523,853	)



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS													(in 000s)
Nine months ended January 31, 2017	H&R Block, Inc. (Guarantor)			Block Financial (Issuer)			Other Subsidiaries			Eliminations			Consolidated H&R Block
Total revenues	$	—		$	80,428		$	641,322		$	(13,351	)	$	708,399
Cost of revenues	—			47,514			786,946			(8,895		)	825,565
Selling, general and administrative	—			14,905			389,923			(4,456		)	400,372
Total operating expenses	—			62,419			1,176,869			(13,351		)	1,225,937
Other income (expense), net	(379,767		)	17,011			(24,601		)	392,305			4,948
Interest expense on external borrowings	—			(69,420		)	(606		)	—			(70,026		)
Loss from continuing operations before tax benefit	(379,767		)	(34,400		)	(560,754		)	392,305			(582,616		)
Income tax benefit	(5,360		)	(14,695		)	(196,908		)	—			(216,963		)
Net loss from continuing operations	(374,407		)	(19,705		)	(363,846		)	392,305			(365,653		)
Net loss from discontinued operations	—			(8,733		)	(21		)	—			(8,754		)
Net loss	(374,407		)	(28,438		)	(363,867		)	392,305			(374,407		)
Other comprehensive loss	(4,130		)	—			(4,130		)	4,130			(4,130		)
Comprehensive loss	$	(378,537	)	$	(28,438	)	$	(367,997	)	$	396,435		$	(378,537	)



CONDENSED CONSOLIDATING BALANCE SHEETS											(in 000s)
As of January 31, 2018	H&R Block, Inc. (Guarantor)			Block Financial (Issuer)		Other Subsidiaries		Eliminations			Consolidated H&R Block
Cash & cash equivalents	$	—		$	4,475	$	182,891	$	—		$	187,366
Cash & cash equivalents - restricted	—			—		83,033		—			83,033
Receivables, net	—			396,046		395,572		—			791,618
Income taxes receivable	3,250			—		69,525		—			72,775
Prepaid expenses and other current assets	—			2,908		146,441		—			149,349
Total current assets	3,250			403,429		877,462		—			1,284,141
Property and equipment, net	—			814		249,097		—			249,911
Intangible assets, net	—			—		390,993		—			390,993
Goodwill	—			—		504,789		—			504,789
Deferred tax assets and income taxes receivable	—			20,427		4,878		—			25,305
Investments in subsidiaries	1,655,160			—		67,690		(1,722,850		)	—
Amounts due from affiliates	—			1,910,351		2,335,670		(4,246,021		)	—
Other noncurrent assets	—			66,497		39,664		—			106,161
Total assets	$	1,658,410		$	2,401,518	$	4,470,243	$	(5,968,871	)	$	2,561,300

Accounts payable and accrued expenses	$	2,516		$	15,514	$	145,623	$	—		$	163,653
Accrued salaries, wages and payroll taxes	—			954		134,672		—			135,626
Accrued income taxes and reserves for uncertain tax positions	—			—		164,246		—			164,246
Current portion of long-term debt	—			—		1,015		—			1,015
Deferred revenue and other current liabilities	—			29,052		172,936		—			201,988
Total current liabilities	2,516			45,520		618,492		—			666,528
Long-term debt	—			2,279,368		4,863		—			2,284,231
Deferred tax liabilities and reserves for uncertain tax positions	18,293			8,037		175,054		—			201,384
Deferred revenue and other noncurrent liabilities	—			903		106,323		—			107,226
Amounts due to affiliates	2,335,670			—		1,910,351		(4,246,021		)	—
Total liabilities	2,356,479			2,333,828		2,815,083		(4,246,021		)	3,259,369
Stockholders' equity (deficiency)	(698,069		)	67,690		1,655,160		(1,722,850		)	(698,069		)
Total liabilities and stockholders' equity	$	1,658,410		$	2,401,518	$	4,470,243	$	(5,968,871	)	$	2,561,300



CONDENSED CONSOLIDATING BALANCE SHEETS											(in 000s)
As of January 31, 2017	H&R Block, Inc. (Guarantor)			Block Financial (Issuer)		Other Subsidiaries		Eliminations			Consolidated H&R Block
Cash & cash equivalents	$	—		$	4,272	$	216,900	$	—		$	221,172
Cash & cash equivalents - restricted	—			8,052		62,114		—			70,166
Receivables, net	—			422,034		365,831		—			787,865
Income taxes receivable	—			—		38,032		—			38,032
Prepaid expenses and other current assets	—			3,217		82,382		—			85,599
Total current assets	—			437,575		765,259		—			1,202,834
Property and equipment, net	—			81		282,277		—			282,358
Intangible assets, net	—			—		434,720		—			434,720
Goodwill	—			—		483,320		—			483,320
Deferred tax assets and income taxes receivable	3,330			54,777		13,532		—			71,639
Investments in subsidiaries	1,370,585			—		80,699		(1,451,284		)	—
Amounts due from affiliates	—			2,168,620		2,166,873		(4,335,493		)	—
Other noncurrent assets	—			67,619		35,141		—			102,760
Total assets	$	1,373,915		$	2,728,672	$	4,261,821	$	(5,786,777	)	$	2,577,631

Accounts payable and accrued expenses	$	1,941		$	15,051	$	222,093	$	—		$	239,085
Accrued salaries, wages and payroll taxes	—			461		122,996		—			123,457
Accrued income taxes and reserves for uncertain tax positions	—			—		7,537		—			7,537
Current portion of long-term debt	—			—		942		—			942
Deferred revenue and other current liabilities	—			33,872		149,744		—			183,616
Total current liabilities	1,941			49,384		503,312		—			554,637
Long-term debt and line of credit borrowings	—			2,586,744		5,878		—			2,592,622
Deferred tax liabilities and reserves for uncertain tax positions	5,917			10,786		92,854		—			109,557
Deferred revenue and other noncurrent liabilities	—			1,059		120,572		—			121,631
Amounts due to affiliates	2,166,873			—		2,168,620		(4,335,493		)	—
Total liabilities	2,174,731			2,647,973		2,891,236		(4,335,493		)	3,378,447
Stockholders' equity (deficiency)	(800,816		)	80,699		1,370,585		(1,451,284		)	(800,816		)
Total liabilities and stockholders' equity	$	1,373,915		$	2,728,672	$	4,261,821	$	(5,786,777	)	$	2,577,631



CONDENSED CONSOLIDATING BALANCE SHEETS											(in 000s)
As of April 30, 2017	H&R Block, Inc. (Guarantor)			Block Financial (Issuer)		Other Subsidiaries		Eliminations			Consolidated H&R Block
Cash & cash equivalents	$	—		$	4,486	$	1,006,845	$	—		$	1,011,331
Cash & cash equivalents - restricted	—			8,060		98,148		—			106,208
Receivables, net	—			61,250		101,525		—			162,775
Prepaid expenses and other current assets	—			2,280		63,445		—			65,725
Total current assets	—			76,076		1,269,963		—			1,346,039
Property and equipment, net	—			78		263,749		—			263,827
Intangible assets, net	—			—		409,364		—			409,364
Goodwill	—			—		491,207		—			491,207
Deferred tax assets and income taxes receivable	5,587			30,743		47,398		—			83,728
Investments in subsidiaries	2,158,234			—		113,714		(2,271,948		)	—
Amounts due from affiliates	—			1,493,195		2,194,294		(3,687,489		)	—
Other noncurrent assets	—			51,829		48,114		—			99,943
Total assets	$	2,163,821		$	1,651,921	$	4,837,803	$	(5,959,437	)	$	2,694,108

Accounts payable and accrued expenses	$	2,086		$	14,218	$	200,724	$	—		$	217,028
Accrued salaries, wages and payroll taxes	—			851		183,005		—			183,856
Accrued income taxes and reserves for uncertain tax positions	—			—		348,199		—			348,199
Current portion of long-term debt	—			—		981		—			981
Deferred revenue and other current liabilities	—			26,759		162,457		—			189,216
Total current liabilities	2,086			41,828		895,366		—			939,280
Long-term debt	—			1,487,389		5,628		—			1,493,017
Deferred tax liabilities and reserves for uncertain tax positions	28,324			8,037		122,724		—			159,085
Deferred revenue and other noncurrent liabilities	—			953		162,656		—			163,609
Amounts due to affiliates	2,194,294			—		1,493,195		(3,687,489		)	—
Total liabilities	2,224,704			1,538,207		2,679,569		(3,687,489		)	2,754,991
Stockholders' equity (deficiency)	(60,883		)	113,714		2,158,234		(2,271,948		)	(60,883		)
Total liabilities and stockholders' equity	$	2,163,821		$	1,651,921	$	4,837,803	$	(5,959,437	)	$	2,694,108



Operating Statistics (U.S. only)
Nine months ended January 31,	2018		2017		Change			% Change
Tax returns prepared: (in 000s) ⁽¹⁾
Company-owned operations	1,424		1,349		75			5.6	%
Franchise operations	736		731		5			0.7	%
Total assisted	2,160		2,080		80			3.8	%

Desktop	151		155		(4		)	(2.6	)%
Online	1,126		1,056		70			6.6	%
Total DIY Tax Software	1,277		1,211		66			5.5	%

IRS Free File	94		96		(2		)	(2.1	)%
Total U.S. returns	3,531		3,387		144			4.3	%

Net Average Charge: ⁽²⁾
Company-Owned Operations	$	235.57	$	226.96	$	8.61		3.8	%
Franchise Operations ⁽³⁾	226.07		219.26		6.81			3.1	%
Total DIY Tax Software	30.39		30.35		0.04			0.1	%

As of January 31,	2018		2017		Change			% Change
Tax offices:
Company-owned offices	6,690		6,650		40			0.6	%
Franchise offices	3,291		3,386		(95		)	(2.8	)%
Total U.S. offices	9,981		10,036		(55		)	(0.5	)%



(in 000s, except per share amounts)
	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽²⁾
November 1 - November 30	—	$	—	—	$	1,183,190
December 1 - December 31	3	$	27.22	—	$	1,183,190
January 1 - January 31	3	$	26.69	—	$	1,183,190
	6	$	26.80	—