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~~

September 30, 2022

☐

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~~October 31, 2022: 155,468,155 shares.

Table of Contents

Form 10-Q for the Period ~~Ended~~ ~~January 31, 2018~~ended September 30, 2022

Table of Contents



			PART I

Item 1.			Consolidated Statements of Operations and Comprehensive Loss Three months ended September 3 0 , 2022 and 2021		1
			~~Three and nine months ended January 31, 2018 and 2017~~		1

	Consolidated Balance Sheets
	As of ~~January 31, 2018, January 31, 2017~~September 3 0 , 2022 and ~~April~~June 30, ~~2017~~20 22	2

	Consolidated Statements of Cash Flows
	~~Nine~~ Three months ended ~~January 31, 2018~~September 3 0 , 2022 and ~~2017~~2021	3
			Consolidated Statements of Stockholders' Equity Three months ended September 3 0 , 2022 and 2021		4
			Notes to Consolidated Financial Statements		45

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations			2614

Item 3.	Quantitative and Qualitative Disclosures About Market Risk			3421

Item 4.	Controls and Procedures			3421

	PART II
Item 1.			Legal Proceedings		3421
Item 1A.			Risk Factors		21
~~Item 1A.~~			~~Risk Factors~~	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			3522

Item 3.	Defaults Upon Senior Securities			3522

Item 4.	Mine Safety Disclosures			3522
Item 5.			Other Information		22
Item 5.6.			~~Other Information~~Exhibits		3522

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

	Signatures	3623

Table of Contents

PART I FINANCIAL INFORMATION


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

ITEM 1. FINANCIAL STATEMENTS


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS							(unaudited, in 000s, except per share amounts)
	Three months ended January 31,						Nine months ended January 31,
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS:													CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS:	(unaudited, in 000s, except per share amounts)
	2018			2017			2018			2017					Three months ended September 30,
																2022		2021
REVENUES:													REVENUES:
Service revenues	$	388,771		$	361,397		$	641,389		$	592,721		Service revenues			$	167,194	$	176,977
Royalty, product and other revenues	99,655			90,485			125,693			115,678			Royalty, product and other revenues			12,791		15,647
	488,426			451,882			767,082			708,399						179,985		192,624
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			260,662		241,532
Selling, general and administrative													Selling, general and administrative			128,434		125,864
Total operating expenses	585,699			576,674			1,265,528			1,225,937			Total operating expenses			389,096		367,396

Other income (expense), net	1,028			134			3,259			4,948			Other income (expense), net			3,611		284
Interest expense on borrowings	(24,560		)	(25,940		)	(67,102		)	(70,026		)	Interest expense on borrowings			(15,824)		(22,830)
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			(221,324)		(197,318)
Income tax benefit													Income tax benefit			(53,957)		(47,373)
Net loss from continuing operations	(242,925		)	(101,212		)	(519,055		)	(365,653		)	Net loss from continuing operations			(167,367)		(149,945)
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 $316 and $495													Net loss from discontinued operations, net of tax benefits of $316 and $495			(1,054)		(1,656)
NET LOSS	$	(245,645	)	$	(104,514	)	$	(529,778	)	$	(374,407	)	NET LOSS			$	(168,421)	$	(151,601)

BASIC AND DILUTED LOSS PER SHARE:													BASIC AND DILUTED LOSS PER SHARE:
Continuing operations	$	(1.16	)	$	(0.49	)	$	(2.49	)	$	(1.71	)	Continuing operations			$	(1.05)	$	(0.84)
Discontinued operations	(0.02		)	(0.01		)	(0.05		)	(0.04		)	Discontinued operations			(0.01)		(0.01)
Consolidated	$	(1.18	)	$	(0.50	)	$	(2.54	)	$	(1.75	)	Consolidated			$	(1.06)	$	(0.85)


DIVIDENDS DECLARED PER SHARE	$	0.24		$	0.22		$	0.72		$	0.66		DIVIDENDS DECLARED PER SHARE			$	0.29	$	0.27

COMPREHENSIVE LOSS:													COMPREHENSIVE LOSS:
Net loss	$	(245,645	)	$	(104,514	)	$	(529,778	)	$	(374,407	)	Net loss			$	(168,421)	$	(151,601)
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			(32,345)		(11,177)
Other comprehensive income (loss)	4,848			1,759			5,925			(4,130		)
Other comprehensive loss													Other comprehensive loss			(32,345)		(11,177)
Comprehensive loss	$	(240,797	)	$	(102,755	)	$	(523,853	)	$	(378,537	)	Comprehensive loss			$	(200,766)	$	(162,778)

See accompanying notes to consolidated financial statements.


H&R Block, Inc. \|Q1 FY2023 Form 10-Q			1

Table of Contents


CONSOLIDATED BALANCE SHEETS	(unaudited, in 000s, except share and per share amounts)
As of	September 30, 2022		June 30, 2022
ASSETS
Cash and cash equivalents	$	322,824	$	885,015
Cash and cash equivalents - restricted	108,550		165,698
Receivables, less allowance for credit losses of $65,217 and $65,351	61,035		58,447
Income taxes receivable	154,123		202,838
Prepaid expenses and other current assets	77,906		72,460
Total current assets	724,438		1,384,458
Property and equipment, at cost, less accumulated depreciation and amortization of $867,402 and $857,468	127,934		123,912
Operating lease right of use assets	412,823		427,783
Intangible assets, net	303,483		309,644
Goodwill	746,711		760,401
Deferred tax assets and income taxes receivable	193,761		208,948
Other noncurrent assets	50,082		54,012
Total assets	$	2,559,232	$	3,269,158
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses	$	168,496	$	160,929
Accrued salaries, wages and payroll taxes	56,162		154,764
Accrued income taxes and reserves for uncertain tax positions	188,118		280,115

Operating lease liabilities	197,491		206,898
Deferred revenue and other current liabilities	179,956		196,107
Total current liabilities	790,223		998,813
Long-term debt	1,487,407		1,486,876
Deferred tax liabilities and reserves for uncertain tax positions	229,340		226,362
Operating lease liabilities	222,914		228,820
Deferred revenue and other noncurrent liabilities	94,333		116,656
Total liabilities	2,824,217		3,057,527
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 188,644,066 and 193,571,309	1,887		1,936
Additional paid-in capital	759,629		772,182
Accumulated other comprehensive loss	(53,990)		(21,645)
Retained earnings (deficit)	(311,671)		120,405
Less treasury shares, at cost, of 33,176,727 and 33,640,988	(660,840)		(661,247)
Total stockholders' equity (deficiency)	(264,985)		211,631
Total liabilities and stockholders' equity	$	2,559,232	$	3,269,158

See accompanying notes to consolidated financial statements.



2	Q1 FY2023 Form 10-Q\| H&R Block, Inc. ~~\| Q3 FY2018 Form 10-Q~~	1

Table of Contents

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)
Three months ended September 30,	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(168,421)	$	(151,601)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	33,624		35,715
Provision	1,077		1,850
Deferred taxes	16,918		(13,547)
Stock-based compensation	7,654		6,847

Changes in assets and liabilities, net of acquisitions:

Receivables	3,702		35,913
Prepaid expenses, other current and noncurrent assets	(2,669)		8,610

Accounts payable, accrued expenses, salaries, wages and payroll taxes	(129,908)		(134,215)

Deferred revenue, other current and noncurrent liabilities	(41,549)		(27,990)

Income tax receivables, accrued income taxes and income tax reserves	(41,659)		(72,768)
Other, net	(435)		(1,438)
Net cash used in operating activities	(321,666)		(312,624)
CASH FLOWS FROM INVESTING ACTIVITIES:



Capital expenditures	(16,161)		(15,620)
Payments made for business acquisitions, net of cash acquired	(16,507)		(4,265)



Franchise loans funded	(6,686)		(4,474)
Payments from franchisees	2,270		2,839

Other, net	(274)		2,067
Net cash used in investing activities	(37,358)		(19,453)
CASH FLOWS FROM FINANCING ACTIVITIES:






Dividends paid	(43,093)		(48,996)
Repurchase of common stock, including shares surrendered	(202,845)		(165,800)
Proceeds from exercise of stock options	—		3,385
Other, net	(955)		(5,911)
Net cash used in financing activities	(246,893)		(217,322)
Effects of exchange rate changes on cash	(13,422)		(3,959)
Net decrease in cash and cash equivalents, including restricted balances	(619,339)		(553,358)
Cash, cash equivalents and restricted cash, beginning of period	1,050,713		1,584,164
Cash, cash equivalents and restricted cash, end of period	$	431,374	$	1,030,806
SUPPLEMENTARY CASH FLOW DATA:
Income taxes paid (received), net	$	(29,811)	$	38,419
Interest paid on borrowings	19,792		12,594


Accrued purchase of common stock	32,356		4,785
Accrued additions to property and equipment	4,704		6,273
New operating right of use assets and related lease liabilities	52,265		29,371
Accrued dividends payable to common shareholders	46,100		47,940

See accompanying notes to consolidated financial statements.



2	~~Q3 FY2018 Form 10-Q \|~~ H&R Block, Inc. \| Q1 FY2023 Form 10-Q	3

Table 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)(1)		Retained Earnings (Deficit)		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount									Shares			Amount
Balances as of July 1, 2022	193,571	$	1,936		$	772,182	$	(21,645)	$	120,405	(33,641)	$	(661,247)		$	211,631
Net loss	—	—			—		—		(168,421)		—	—			(168,421)
Other comprehensive loss	—	—			—		(32,345)		—		—	—			(32,345)
Stock-based compensation	—	—			5,630		—		—		—	—			5,630
Stock-based awards exercised or vested	—	—			(15,276)		—		(742)		805	15,839			(179)
Acquisition of treasury shares(2)	—	—			—		—		—		(341)	(15,432)			(15,432)
Repurchase and retirement of common shares	(4,927)	(49)			(2,907)		—		(216,813)		—	—			(219,769)


Cash dividends declared - $0.29 per share	—	—			—		—		(46,100)		—	—			(46,100)
Balances as of September 30, 2022	188,644	$	1,887		$	759,629	$	(53,990)	$	(311,671)	(33,177)	$	(660,840)		$	(264,985)

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



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


Cash dividends declared - $0.27 per share	—	—			—		—		(47,940)		—	—			(47,940)
Balances as of September 30, 2021	209,854	$	2,099		$	770,683	$	(11,089)	$	(74,757)	(34,342)	$	(671,408)		$	15,528

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

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

See accompanying notes to consolidated financial statements.



4	Q1 FY2023 Form 10-Q\| H&R Block, Inc. ~~\| Q3 FY2018 Form 10-Q~~	3

Table 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~~September 30, 2022 and ~~2017,~~June 30, 2022, the consolidated statements of operations and comprehensive loss for the three ~~and nine~~ months ended ~~January 31, 2018~~September 30, 2022 and ~~2017, and~~2021, the consolidated statements of cash flows for the ~~nine~~three months ended ~~January 31, 2018~~September 30, 2022 and ~~2017~~2021, and the consolidated statements of stockholders' equity for the three months ended September 30, 2022 and 2021 have been prepared by the Company, without audit. In the opinion of management, all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position, results of operations, and cash flows as of ~~January 31, 2018~~September 30, 2022 and ~~2017~~2021 and for all periods presented, have been made.

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

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our ~~April~~June 30, ~~2017~~2022 Annual Report to Shareholders on Form 10-K. All amounts presented herein as of ~~April~~June 30, ~~2017~~2022 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.

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~~note 9 ~~and 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.~~ In November 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-18, "Restricted Cash (a consensus of the FASB Emerging Issues Task Force)," (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~~.



4	~~Q3 FY2018 Form 10-Q \|~~ H&R Block, Inc. \|Q1 FY2023 Form 10-Q	5

Table of Contents

NOTE 2: REVENUE RECOGNITION

~~Revenue Recognition.~~ ~~In May 2014,~~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 September 30,
		2022		2021
Revenues:
U.S. assisted tax preparation		$	36,312	$	33,607
U.S. royalties		6,228		7,358
U.S. DIY tax preparation		3,158		4,061
Refund Transfers		1,284		1,665
Peace of Mind® Extended Service Plan		24,770		24,836
Tax Identity Shield®		5,167		5,153
Emerald Card® and SpruceSM		11,612		28,258
Interest and fee income on Emerald AdvanceSM		614		479
International		58,834		58,325
Wave		22,646		19,137
Other		9,360		9,745
Total revenues		$	179,985	$	192,624

Changes in 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 amountbalances of revenue which reflects the consideration it expects to receive in exchange for the transfer of the promised goods or services to customers. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty ofdeferred 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~~wages 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 of the impact of ASU 2014-09 on our United States (U.S.) assisted tax preparation fees, U.S. royalties, U.S. DIY tax preparation fees, revenues from~~ 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
Three months ended September 30,	2022		2021		2022		2021
Balance, beginning of the period	$	173,486	$	172,759	$	19,495	$	17,867
Amounts deferred	1,360		1,492		5		7
Amounts recognized on previous deferrals	(28,703)		(28,948)		(2,988)		(2,847)
Balance, end of the period	$	146,143	$	145,303	$	16,512	$	15,027

As of September 30, 2022, deferred revenue related to POM was $146.1 million. We expect that $97.0 million will be recognized over the next twelve months, while the remaining balance will be recognized over the following five years.

As of September 30, 2022 and ~~fee income from H&R Block Emerald Advance® lines of credit (EAs) and fees from~~2021, Tax Identity Shield® (TIS) deferred revenue was $21.2 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~~$23.5 million, respectively. Deferred revenue related to ~~these services. Changes to our client agreements or service design before adoption~~TIS was $25.8 million and $28.3 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~~June 30, 2022 and June 30, 2021, 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 the full retrospective transition method, under which we~~TIS 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.~~be recognized by April 2023.

~~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~~(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~~4.4 million shares and 5.3 million shares for the three ~~and nine~~ months ended ~~January 31, 2018~~,September 30, 2022 and ~~4.5 million~~ ~~shares for the three and nine months ended January 31, 2017,~~2021, respectively, as the effect would be antidilutive due to the net loss from continuing operations during ~~those~~the periods.



6	Q1 FY2023 Form 10-Q\| H&R Block, Inc. ~~\| Q3 FY2018 Form 10-Q~~	5

Table of Contents

The computations of basic and diluted ~~loss~~earnings (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 September 30,
		2018			2017			2018			2017					2022		2021
Net loss from continuing operations attributable to shareholders		$	(242,925	)	$	(101,212	)	$	(519,055	)	$	(365,653	)	Net loss from continuing operations attributable to shareholders		$	(167,367)	$	(149,945)
Amounts allocated to participating securities		(177		)	(143		)	(498		)	(410		)	Amounts allocated to participating securities		(179)		(239)
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		$	(167,546)	$	(150,184)

Basic weighted average common shares		209,080			207,862			208,693			214,627			Basic weighted average common shares		159,284		178,099
Potential dilutive shares		—			—			—			—			Potential dilutive shares		—		—
Dilutive weighted average common shares		209,080			207,862			208,693			214,627			Dilutive weighted average common shares		159,284		178,099

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		$	(1.05)	$	(0.84)
Diluted		(1.16		)	(0.49		)	(2.49		)	(1.71		)	Diluted		(1.05)		(0.84)

The decrease in the weighted average shares outstanding for 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 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 cost of $317.0 million (average price of $22.61 per share).fiscal years.

STOCK-BASED COMPENSATION – During the ~~nine~~three 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~~,September 30, 2022, we granted ~~equity~~0.9 million shares under our stock-based compensation plan. We granted awards ~~equivalent to~~ ~~1.2~~of 1.4 million shares under our stock-based compensation plans ~~consisting primarily of nonvested units.~~during the three months ended September 30, 2021. Stock-based compensation expense of our continuing operations totaled ~~$5.4 million and $17.1~~$7.7 million for the three ~~and nine~~ months ended ~~January 31, 2018,~~September 30, 2022 and ~~$4.5 million and $16.9~~$6.8 million for the three ~~and nine~~ months ended ~~January 31, 2017.~~September 30, 2021. As of ~~January 31, 2018~~,September 30, 2022, unrecognized compensation cost for stock options totaled ~~$1.2~~$0.4 million,, and for nonvested shares and units totaled ~~$35.7 million~~.$76.9 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	September 30, 2022				June 30, 2022
		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	$	9,628	$	23,054		$	6,194	$	22,036
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	14,104		2,337			18,893		2,560
H&R Block's Instant RefundSM receivables														H&R Block's Instant RefundSM receivables	1,412		112			3,491		198
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	6,800		7,098			6,691		8,825
Software receivables from retailers		7,744		—		11,864		—		16,715		—		Software receivables from retailers	607		—			3,992		—
Royalties and other receivables from franchisees		56,149		788		64,929		—		13,275		1,585		Royalties and other receivables from franchisees	6,208		55			3,682		73

Wave payment processing receivables														Wave payment processing receivables	1,306		—			1,393		—
Other		26,038		3,608		26,030		4,304		18,707		3,314		Other	20,970		1,679			14,111		1,172
		$	791,618	$	67,227	$	787,865	$	66,251	$	162,775	$	52,898

Total														Total	$	61,035	$	34,335		$	58,447	$	34,864

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~~ September 30, 2022 and ~~2017 and April~~June 30, ~~2017,~~2022, loans with a principal balance ~~of $1.3 million, $0.1 million and $0.1 million, respectively, were~~ more than 90 days past ~~due. We had no loans to franchisees~~due, or on non-accrual ~~status.~~

~~INSTANT CASH BACK® PROGRAM~~ –~~Refunds advanced under the Instant Cash Back® program in Canada~~status, are not ~~subject to credit approval.~~material.


H&R Block, Inc. \|Q1 FY2023 Form 10-Q			7

Table of Contents

H&R BLOCK'S INSTANT REFUNDSM–H&R Block's Instant ~~Cash Back®~~RefundSM 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 tax return year of origination, with older years being deemed more unlikely to be repaid. ~~These~~We establish an allowance for credit losses at an amount that we believe reflects the receivable at net realizable value. In December of each year we charge-off the receivables to an amount we believe represents the net realizable value.

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 tax return year of origination, as of September 30, 2022 are as follows:


			(in 000s)

Tax return year of origination	Current Balance		More Than 60 Days Past Due
2021	$	2,781	$	2,261
2020 and prior	111		111

	2,892		$	2,372
Allowance	(1,368)
Net balance	$	1,524

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 fiscal year of origination, with older years being deemed more unlikely to be repaid. We establish an allowance for credit losses at an amount that we believe reflects the receivable at net realizable value. In December of each year we charge-off the receivables to an amount we believe represents the net realizable value.



~~H&R Block, Inc.~~ ~~\| Q3 FY2018 Form 10-Q~~	7

~~Table~~Balances and amounts on non-accrual status and classified as impaired, or more than 60 days past due, by fiscal year of ~~Contents~~

origination, as of September 30, 2022 are as follows:


(in 000s)
Fiscal year of origination	Current Balance		Non-Accrual
2022	$	23,865	$	23,865
2021 and prior	429		429
Revolving loans	15,745		14,369
	40,039		$	38,663
Allowance	(26,141)
Net balance	$	13,898

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~~three months ended ~~January 31, 2018~~September 30, 2022 and ~~2017~~2021 is as follows:


(in 000s)
	EAs		All Other		Total
Balances as of July 1, 2022	$	26,141	$	51,126	$	77,267
Provision	—		1,077		1,077

Charge-offs, recoveries and other	—		(1,281)		(1,281)

Balances as of September 30, 2022	$	26,141	$	50,922	$	77,063
Balances as of July 1, 2021	$	27,704	$	60,272	$	87,976
Provision	—		1,850		1,850
Charge-offs, recoveries and other	—		(3,583)		(3,583)
Balances as of September 30, 2021	$	27,704	$	58,539	$	86,243

(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


8			Q1 FY2023 Form 10-Q\| H&R Block, Inc.

Table of Contents

NOTE 4:5: GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the ~~nine~~three months ended ~~January 31, 2018~~ ~~and 2017~~September 30, 2022 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 July 1, 2022											Balances as of July 1, 2022	$	898,698	$	(138,297)	$	760,401

Acquisitions		11,579			—			11,579			Acquisitions	7,879		—		7,879
Disposals and foreign currency changes, net		2,003			—			2,003			Disposals and foreign currency changes, net	(21,569)		—		(21,569)
Impairments		—			—			—			Impairments	—		—		—
Balances as of January 31, 2018		$	537,086		$	(32,297	)	$	504,789
Balances as of September 30, 2022											Balances as of September 30, 2022	$	885,008	$	(138,297)	$	746,711

Balances as of April 30, 2016		$	503,054		$	(32,297	)	$	470,757
Acquisitions		13,346			—			13,346
Disposals and foreign currency changes, net		(783		)	—			(783		)
Impairments		—			—			—
Balances as of January 31, 2017		$	515,617		$	(32,297	)	$	483,320

We test goodwill for impairment annually as of February 1, 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.



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

~~Table of Contents~~

Components of intangible assets are as follows:


(in 000s)
	Gross Carrying Amount		Accumulated Amortization		Net
As of September 30, 2022:
Reacquired franchise rights	$	383,809	$	(200,442)	$	183,367
Customer relationships	335,766		(283,515)		52,251
Internally-developed software	138,600		(112,561)		26,039
Noncompete agreements	41,949		(38,106)		3,843
Franchise agreements	19,201		(17,708)		1,493
Purchased technology	122,700		(90,125)		32,575
Trade name	5,800		(1,885)		3,915
	$	1,047,825	$	(744,342)	$	303,483










As of June 30, 2022:
Reacquired franchise rights	$	379,114	$	(197,068)	$	182,046
Customer relationships	331,020		(278,717)		52,303
Internally-developed software	137,638		(107,111)		30,527
Noncompete agreements	41,789		(37,684)		4,105
Franchise agreements	19,201		(17,388)		1,813
Purchased technology	122,700		(87,910)		34,790
Trade name	5,800		(1,740)		4,060

	$	1,037,262	$	(727,618)	$	309,644

(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 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~~$16.5 million and ~~$52.8~~$4.3 million during the three months ended September 30, 2022 and 2021, respectively. The amounts and weighted-average lives of intangible assets acquired


H&R Block, Inc. \|Q1 FY2023 Form 10-Q			9

Table of Contents

during the three months ended September 30, 2022, including amounts capitalized related to internally-developed software, are as follows:


(dollars in 000s)
	Amount		Weighted-Average Life (in years)
Internally-developed software	$	1,254	2
Customer relationships	6,331		5
Reacquired franchise rights	4,897		4
Noncompete agreements	220		5
Total	$	12,702	4

Amortization of intangible assets for the three ~~and nine~~ months ended ~~January 31, 2018~~September 30, 2022 was ~~$20.8~~$18.4 million ~~and $59.5~~compared to $19.8 million ~~respectively. Amortization~~ for the three ~~and nine~~ months ended ~~January 31, 2017 was $19.3 million and $57.3 million, respectively.~~September 30, 2021. Estimated amortization of intangible assets for fiscal years ~~2018, 2019, 2020, 2021~~ending June 30, 2023, 2024, 2025, 2026, and ~~2022~~2027 is ~~$79.2~~$68.8 million, ~~$67.3~~$49.1 million, ~~$50.6~~$27.5 million, ~~$35.6~~$19.3 million and ~~$24.3~~$13.8 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)
As of	September 30, 2022		June 30, 2022


Senior Notes, 5.250%, due October 2025	$	350,000	$	350,000
Senior Notes, 2.500%, due July 2028	500,000		500,000
Senior Notes, 3.875%, due August 2030	650,000		650,000


Debt issuance costs and discounts	(12,593)		(13,124)
Total long-term debt	1,487,407		1,486,876
Less: Current portion	—		—
Long-term portion	$	1,487,407	$	1,486,876
Estimated fair value of long-term debt	$	1,312,000	$	1,377,000

(in 000s)
As of January 31, 2018
January 31, 2017
April 30, 2017
Senior Notes, 4.125%, due October 2020 $ 650,000
$ 650,000
$ 650,000
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
Committed line of credit borrowings 790,000
1,100,000
—
Capital lease obligation 5,878
6,820
6,610
Debt issuance costs and discounts (10,632 ) (13,256 ) (12,612 )
2,285,246
2,593,564
1,493,998
Less: Current portion (1,015 ) (942 ) (981 )
$ 2,284,231
$ 2,592,622
$ 1,493,017

On September 22, 2017, 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 the scheduled maturity date from September 22, 2021 to September 22, 2022. Other material terms remain unchanged from the 2016 CLOC. The 2017 CLOCOur unsecured committed line of credit (CLOC) provides for an unsecured senior revolving credit facility in the aggregate principal amount of ~~$2.0~~$1.5 billion, which includes a ~~$200.0~~$175.0 million sublimit for swingline loans and a $50.0 million sublimit for standby letters of credit. We may request increases in the aggregate principal amount of the revolving credit facility of up to $500.0 million, subject to obtaining commitments from lenders and meeting certain other conditions. The ~~2017~~ CLOC will mature on ~~September 22, 2022,~~June 11, 2026, 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, as defined by the CLOC agreement, calculated on a consolidated basis of no greater than (a) 3.50 to 1.00 as of the last day of each fiscal quarter ending on ~~April~~March 31, June 30, ~~July 31,~~ and ~~October 31~~September 30 of each year and (b) 4.50 to 1.00 as of the last day of each fiscal quarter ending on ~~January~~December 31 of each year; (2) a covenant requiring us to maintain an interest coverage ratio (EBITDA-to-interest expense) calculated on a consolidated basis of not less than 2.50 to 1.00 as of the last date of any fiscal quarter; and (3) covenants restricting our ability to incur certain additional debt, incur liens, merge or consolidate with other companies, sell or dispose of assets (including equity interests), liquidate or dissolve, engage in certain transactions with affiliates or enter into certain restrictive agreements. The ~~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.~~

~~We had an outstanding balance of $790.0 million under the 2017 CLOC as of January 31, 2018, and may borrow up to the the full capacity of $2.0 billion.~~

September 30, 2022.



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We had no outstanding balance under our CLOC and amounts available to borrow were limited by the debt-to-EBITDA covenant to approximately $1.47 billion as of September 30, 2022.

~~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) 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~~2015, 2016, 2019 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~~2018, 2017, 2014 and all years prior ~~periods~~to 2014 are closed. On October 4, 2022, the IRS notified us that it plans to audit our 2020 tax return and related carryback claims. With respect to federal, 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,~~We had gross unrecognized tax benefits of $231.7 million and $232.0 million as of September 30, 2022 and June 30, 2022, respectively. The gross unrecognized tax benefits decreased by $0.3 million during the ~~U.S. government enacted~~three months ended September 30, 2022 due to settlements with state tax authorities. We believe it is reasonably possible that the ~~Tax Legislation, which makes broad and complex changes~~balance of unrecognized tax benefits could decrease by approximately $33.1 million within the next twelve months. The anticipated decrease is due to the ~~U.S. tax code that impacted our financial statements, the most significant being~~expiration of statutes of limitations and anticipated closure of various state matters currently under examination or in appeals. For such matters where a ~~reduction~~change in the ~~U.S. federal corporate income~~balance of unrecognized tax benefits is not yet deemed reasonably possible, no estimate has been included.

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



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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 discrete tax items, was 24.4% and 24.0% for the Tax Legislation in computing our deferred taxes, the one-time transition tax, which is payable in installments over a period of up to eight years, unrecognized tax benefits, 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 the nine~~three months ended ~~January 31, 2018, we recorded an income tax benefit of $43.2 million.~~ September 30, 2022 and 2021, respectively.

Consistent with prior years, our pretax loss for the ~~nine~~three months ended ~~January 31, 2018~~September 30, 2022 is expected to be offset by income in ~~the~~our third and fourth ~~quarter~~quarters 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~~three months ended ~~January 31, 2018~~September 30, 2022 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~~periods presented.

NOTE 8: COMMITMENTS AND CONTINGENCIES

Assisted tax returnsare covered by our 100% accuracy guarantee, whereby we will reimburse a client for penalties and ~~2017, respectively. Rate reconciliations between the statutory U.S. federal corporate income rates and the effective~~interest attributable to an H&R Block error on a return. DIY tax ~~rates for continuing operations~~returns 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~~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 ~~primarily from the decrease~~ in ~~the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018. The impact~~payment of ~~the rate decrease is exaggerated in fiscal year 2018 due~~penalties and/or interest 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~~IRS that a client would otherwise not have been required 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.



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We had gross unrecognized tax benefits of $163.1 million, $97.1 million and $149.9 million as of January 31, 2018 and 2017 and April 30, 2017, respectively. The gross unrecognized tax benefits increased $13.1 million and decreased $14.4 million during the nine months ended January 31, 2018 and 2017, respectively. The increase in unrecognized tax benefits during the nine months ending January 31, 2018 is 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. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately $17.4 million in 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 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,
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 in deferred revenue balances related 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

pay. Our liability related to estimated losses under the ~~standard~~100% accuracy guarantee was ~~$3.3 million, $5.7~~$12.7 million and ~~$6.8~~$14.0 million as of ~~January 31, 2018~~September 30, 2022 and ~~2017~~ ~~and~~ ~~April~~June 30, ~~2017, respectively, and is included as part of our assisted tax preparation services.~~2022, 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 $16.0 million and $12.9 million as of September 30, 2022 and June 30, 2022, 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~~$15.3 million at ~~January 31, 2018~~,September 30, 2022, and net of amounts drawn and outstanding, our remaining commitment to fund totaled ~~$12.6~~$8.7 million.

In connection with our agreement with BofI Federal Bank, a federal savings bank (BofI), we are required to purchase a 90% participation interest, at par, in all EAs originated by our lending partner. At ~~January 31, 2018, the principal balance of purchased participation interests for current year totaled $345.0 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 offered to certain assisted U.S. tax preparation clients, based on client eligibility as determined by the loan originator. We pay loan origination fees based on volume 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 million related to loans to clients prior to the IRS accepting electronic filing. At January 31, 2018 we had accrued an estimated liability of $1.6 million related to this guarantee, compared to $0.6 million at January 31, 2017. We paid $0.4 million related to this guarantee for the fiscal year 2017 tax season. Additionally, we provided a limited guarantee for the remaining loans, up to $57 million in the aggregate, which would cover certain incremental loan losses. 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 arrangements 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.~~

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:~~9: LITIGATION AND OTHER RELATED CONTINGENCIES

We are a defendant in numerous litigation and arbitration matters, arising both in the ordinary course of business and otherwise, including as described below. The matters described below are not all of the lawsuits or arbitrations to which we are subject. In some of the matters, very large or indeterminate amounts, including punitive damages, ~~are~~may be sought. U.S. jurisdictions permit considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the ~~jurisdiction of the court.~~jurisdiction. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. We believe that the monetary relief which may be specified in a lawsuit or a claim bears little relevance to its merits or disposition value due to this variability in pleadings and our experience in ~~litigating or~~handling and 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~~courts and ~~appellate courts~~arbitrators 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 and arbitration 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,~~arbitration, 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 or make other expenditures or accrue liabilities in amounts that could not be reasonably estimated as of ~~January 31, 2018.~~September 30, 2022. 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 and 2017 and April 30, 2017, our~~Our total accrued liabilities were ~~$2.5 million,~~ $1.7 million as of September 30, 2022 and ~~$2.3 million, respectively, for matters addressed in this note.~~June 30, 2022.

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 or arbitrators on motions or appeals, ~~analysis~~analyses by experts, or the status or terms of any settlement negotiations.

OnThe estimated range of reasonably possible loss is based upon currently available information and is subject to significant judgment and a ~~quarterly~~variety of assumptions, as well as known and ~~annual basis,~~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 September 30, 2022, 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.


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At the end of each reporting period, we review relevant information with respect to litigation, arbitration and other related loss contingencies and update our accruals, disclosures, and estimates of reasonably possible loss or range of loss based



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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 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, 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, claims, and lawsuits 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, claims, and lawsuits 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. In connection with the sale of loans and/or RMBSs, SCC made certain representations and warranties. 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~~



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

~~Table of Contents~~

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 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 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. 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 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 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 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 for representation and warranty claims, as disclosed in note 9, are related to some of the loans in this case. We have not concluded that a loss related to this lawsuit is probable, nor have we accrued a liability related to this lawsuit.

Underwriters and depositors are, or have been, involved in multiple lawsuits related to securitization transactions in which SCC participated. These lawsuits allege or alleged a variety of claims, including violations of federal and state securities laws and common law fraud, based on alleged materially inaccurate or misleading disclosures. SCC has received notices of claims for indemnification relating to lawsuits to which underwriters or depositors 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 may be filed in the future, and SCC may receive additional notices of claims for indemnification or contribution from underwriters or depositors with respect to existing or new lawsuits or settlements of such lawsuits. 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



~~H&R Block, Inc.~~ ~~\| Q3 FY2018 Form 10-Q~~	17

~~Table of Contents~~

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, total approximately $303 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.

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.

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

~~NOTE 11: CONDENSED CONSOLIDATING FINANCIAL STATEMENTS~~

~~Block Financial LLC (Block Financial) is~~Free File Litigation. On May 6, 2019, the Los Angeles City Attorney filed a ~~100% owned subsidiary~~lawsuit on behalf of the ~~Company.~~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, ~~Financial~~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. We filed a motion for summary judgment, which remains pending. A trial date is set for August 14, 2023. 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 ~~Issuer~~IRS Free File Program.

DISCONTINUED MORTGAGE OPERATIONS – Although SCC ceased its mortgage loan origination activities in December 2007 and sold its loan servicing business in April 2008, SCC or the Company has been and may in the future be, subject to litigation and other loss contingencies, including indemnification and contribution claims, pertaining to SCC's mortgage business activities that occurred prior to such termination and sale.

Parties, including underwriters, depositors, and securitization trustees, have been, remain, or may in the future be, involved in lawsuits, threatened lawsuits, or settlements related to securitization transactions in which SCC participated. A variety of claims are alleged in these matters, including violations of federal and state securities laws and common law fraud, breaches of representations and warranties, or violations of statutory requirements. SCC has received notices of potential indemnification or contribution obligations relating to such matters. Additional lawsuits against the parties to the securitization transactions may be filed in the future, and SCC may receive additional notices of potential indemnification, contribution or similar obligations with respect to existing or new lawsuits or settlements of such lawsuits or other claims. We have not concluded that a loss related to any of these potential indemnification or contribution claims is probable, nor have we accrued a liability related to any of these claims.

It is difficult to predict either the likelihood of new matters being initiated or the outcome of existing matters. In many of these matters it is not possible to estimate a reasonably possible loss or range of loss due to, among other things, the inherent uncertainties involved in these matters and the indeterminate damages sought. If the amount that SCC is ultimately required to pay with respect to loss contingencies, together with payment of SCC's related administration and legal expense, exceeds SCC's net assets, the creditors of SCC, other potential claimants, or a bankruptcy trustee if SCC were to file or be forced into bankruptcy, may attempt to assert claims against us for payment of SCC's obligations. Claimants also may attempt to assert claims against or seek payment directly from the Company even if SCC's assets exceed its liabilities. SCC's principal assets, as of September 30, 2022, total approximately $264 million and consist of an intercompany note receivable. We believe our legal position is ~~the full~~strong on any potential corporate veil-piercing arguments; however, if this position is challenged 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.

not upheld, it could



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

~~Table of Contents~~

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~~ \|Q1 FY2023 Form 10-Q			1913

Table of Contents

have a material adverse effect on our business and our consolidated financial position, results of operations, and cash flows.

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~~OTHER – We are from time to time a party to litigation, arbitration and do-it-yourself (DIY) tax return preparation solutions through multiple channels (including in-person, online and mobile applications, and desktop software) and distribute H&R Block-branded financial products and services, including thoseother 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 ~~partners, to the general public primarily in the U.S., Canada, Australia,~~position, results of operations, and their respective territories. Tax returns are either prepared by H&R Block tax professionals (in company-owned or franchise offices or virtually via the internet) or prepared and filed by our clients through our DIY tax solutions. We operate as a single segment that includes all of our continuing operations, which are designed to enable clients to obtain tax preparation and related services seamlessly.cash flows.

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

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.

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



2614			~~Q3 FY2018~~Q1 FY2023 Form ~~10-Q \|~~ 10-Q\| H&R Block, Inc.

Table of Contents


Consolidated – Financial Results			(in 000s, except per share amounts)
Three months ended September 30,	2022		2021		$ Change		% Change
Revenues:
U.S. tax preparation and related services:
Assisted tax preparation	$	36,312	$	33,607	$	2,705	8.0	%
Royalties	6,228		7,358		(1,130)		(15.4)	%
DIY tax preparation	3,158		4,061		(903)		(22.2)	%
Refund Transfers	1,284		1,665		(381)		(22.9)	%
Peace of Mind® Extended Service Plan	24,770		24,836		(66)		(0.3)	%
Tax Identity Shield®	5,167		5,153		14		0.3	%
Other	9,360		9,745		(385)		(4.0)	%
Total U.S. tax preparation and related services:	86,279		86,425		(146)		(0.2)	%
Financial services:
Emerald Card® and SpruceSM	11,612		28,258		(16,646)		(58.9)	%
Interest and fee income on Emerald AdvanceSM	614		479		135		28.2	%
Total financial services	12,226		28,737		(16,511)		(57.5)	%
International	58,834		58,325		509		0.9	%
Wave	22,646		19,137		3,509		18.3	%
Total revenues	$	179,985	$	192,624	$	(12,639)	(6.6)	%
Compensation and benefits:
Field wages	61,673		56,079		(5,594)		(10.0)	%
Other wages	63,753		58,064		(5,689)		(9.8)	%
Benefits and other compensation	34,832		25,450		(9,382)		(36.9)	%
	160,258		139,593		(20,665)		(14.8)	%
Occupancy	97,590		95,822		(1,768)		(1.8)	%
Marketing and advertising	10,649		10,073		(576)		(5.7)	%
Depreciation and amortization	33,624		35,715		2,091		5.9	%
Bad debt	329		1,043		714		68.5	%
Other	86,646		85,150		(1,496)		(1.8)	%
Total operating expenses	389,096		367,396		(21,700)		(5.9)	%
Other income (expense), net	3,611		284		3,327		1,171.5	%
Interest expense on borrowings	(15,824)		(22,830)		7,006		30.7	%
Pretax loss	(221,324)		(197,318)		(24,006)		(12.2)	%
Income tax benefit	(53,957)		(47,373)		6,584		13.9	%
Net loss from continuing operations	(167,367)		(149,945)		(17,422)		(11.6)	%
Net loss from discontinued operations	(1,054)		(1,656)		602		36.4	%
Net loss	$	(168,421)	$	(151,601)	$	(16,820)	(11.1)	%
BASIC AND DILUTED LOSS PER SHARE:
Continuing operations	$	(1.05)	$	(0.84)	$	(0.21)	(25.0)	%
Discontinued operations	(0.01)		(0.01)		—		—	%
Consolidated	$	(1.06)	$	(0.85)	$	(0.21)	(24.7)	%




Adjusted diluted EPS(1)	$	(0.99)	$	(0.78)	$	(0.21)	(26.9)	%
EBITDA (1)	$	(171,876)	$	(138,773)	$	(33,103)	(23.9)	%

(1) All non-GAAP measures are results from continuing operations. See "Non-GAAP Financial Information" at the end of this item for a reconciliation of non-GAAP measures.

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~~September 30, 2022 compared to ~~January 31, 2017~~September 30, 2021

Revenues ~~increased $36.5~~decreased $12.6 million, or ~~8.1%~~6.6%, from the prior year. U.S. assisted tax preparation ~~fees~~revenues increased ~~$22.1~~$2.7 million, or ~~9.0%~~8.0%, primarily due to a ~~5.6% increase in tax return volumes and a 3.8% increase in~~higher net average charge and slightly higher return volume in the current year. U.S. ~~royalties increased $2.2~~royalty revenue decreased $1.1 million, or ~~5.0%~~15.4%, ~~as we saw an increase in net average charge and royalties from our franchisees related to their offering 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~~the timing of ~~tax returns and favorable exchange rates in our Canadian and Australian operations.~~

royalty incentives.



H&R Block, Inc. ~~\| Q3 FY2018~~ \|Q1 FY2023 Form 10-Q			2715

Table of Contents

~~Revenues from RTs increased $3.4~~Emerald Card and Spruce revenues decreased $16.6 million, or ~~7.3%~~58.9%, ~~primarily~~ due to ~~a price increase~~the IRS loading Child Tax Credits monthly to Emerald Cards® in ~~retail office locations, while~~the prior year.

International tax preparation volumes increased in Australia, which was largely offset by the impacts of foreign currency exchange rates compared to the prior year. Wave revenues ~~from Emerald Card transactions~~ increased ~~$2.0~~$3.5 million, or ~~14.4%~~18.3%, due ~~primarily~~ to higher ~~fees and higher volumes from our Refund Advance offering.~~

~~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.~~small business payments processing volumes.

Total operating expenses increased ~~$9.0~~$21.7 million, or ~~1.6%~~5.9%, from the prior year. Field wages increased ~~$13.9~~$5.6 million, or 10%, due to higher field management wages and a bonus accrual adjustment in the prior year. Other wages increased $5.7 million, or 9.8%, ~~primarily~~ due to higher ~~commission-based~~corporate wages ~~resulting from higher tax return volumes. Other wages increased $5.5 million, or 12.3%, due to increased headcount primarily related to information technology resources.~~in the current year. Benefits and other compensation increased ~~$6.0~~$9.4 million, or ~~16.6%~~36.9%, ~~primarily~~ due to higher employee insurance costs and higher payroll taxes onas a result of the increase in wages. Occupancy expense increased ~~wages, along with higher stock-based compensation and medical liability reserves. Occupancy and equipment costs increased $3.9~~$1.8 million, or ~~3.7%~~1.8%, ~~primarily~~ due to higher office rent rates ~~and an increase~~ in the ~~number of company-owned tax offices due to the acquisition of franchisees. Marketing~~current year. Depreciation and ~~advertising~~amortization expense decreased ~~$19.9~~$2.1 million, or ~~23.7%~~5.9%, due to ~~the timing~~lower amortization of ~~these~~acquired intangibles.

Other operating expenses ~~as certain expenses shifted to our fourth quarter. Depreciation and amortization~~ increased ~~$3.3~~$1.5 million, or ~~7.4%, primarily due to amortization resulting from acquisition of franchisee and competitor businesses.~~

~~Other expenses decreased $5.1 million, or 5.8%~~1.8%. The components of other expenses are as follows:


							(in 000s)
Three months ended September 30,	2022		2021		$ Change		% Change
Consulting and outsourced services	$	18,053	$	25,857	$	7,804	30.2	%
Bank partner fees	(19)		108		127		**
Client claims and refunds	6,770		6,015		(755)		(12.6)	%
Employee and travel expenses	6,068		4,290		(1,778)		(41.4)	%
Technology-related expenses	25,915		20,325		(5,590)		(27.5)	%
Credit card/bank charges	16,201		14,961		(1,240)		(8.3)	%
Insurance	3,718		3,331		(387)		(11.6)	%
Legal fees and settlements	2,286		3,042		756		24.9	%
Supplies	3,395		2,823		(572)		(20.3)	%
Other	4,259		4,398		139		3.2	%
	$	86,646	$	85,150	$	(1,496)	(1.8)	%

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 )%

Consulting and outsourced services expense decreased $7.8 million, or 30.2%, due to lower call center expenses and data processing fees related to lower activity on Emerald Cards. Employee and travel expenses increased $1.8 million, or 41.4%, due to more travel in the current year. Technology-related expenses increased $5.6 million, or 27.5%, due to increased investments in information technology. Credit card and bank charges increased $1.2 million, or 8.3%, due to higher Wave small business payment processing fees.

~~Income taxes~~Other income (expense), net increased ~~$171.5~~$3.3 million ~~from~~primarily due to higher interest income as a result of higher interest rates. Interest expense on borrowings decreased $7.0 million, or 30.7%, due to the ~~prior year. For the three months ended January 31, 2018, we~~repayment of our $500 million 5.500% Senior Notes in May 2022.

We recorded ~~income tax expense of $122.1 million compared to~~ an income tax benefit of ~~$49.4~~$54.0 million in the current year compared to $47.4 million in the prior year. 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. See Item 1, note 7 to the consolidated financial statements for additional discussion.September 30, 2022, and 2021 was 24.4% and 24.0%, respectively.

Tax returns prepared in company-owned and franchise offices through February 28, 2018 increased 0.7% from the prior year. Our business is highly seasonal and results for the quarter ended January 31, as well as results for the period ended February 28, may not be indicative of results for the entire fiscal year.



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

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

Revenues increased $58.7 million, or 8.3%, from the prior year. U.S. assisted tax preparation fees increased $27.9 million, or 9.1%, primarily due to a 5.6% increase 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 average charge and royalties from our franchisees related to their offering 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.



~~H&R Block, Inc.~~ ~~\| Q3 FY2018 Form 10-Q~~	29

~~Table of Contents~~

~~International revenues increased $7.3 million, or 7.9%, primarily due to higher volumes 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 in the timing of forecasted claims.~~

Total operating expenses increased $39.6 million, or 3.2%, from the prior year. Field wages increased $24.6 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%, due to the timing of these expenses, as certain expenses shifted to our fourth quarter. Bad debt expense increased $3.8 million primarily 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.

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

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 )%

The income tax benefit decreased $173.7 million compared to the prior year to $43.2 million primarily due to our provisional estimates of 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 effective tax rate for fiscal year 2018 will be 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. 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.



3016			~~Q3 FY2018~~Q1 FY2023 Form ~~10-Q \|~~ 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 ~~from~~and working capital needs, periodically resulting in a working capital deficit, during the months of May through ~~January, and~~January. We typically ~~rely~~have relied on available cash balances from the prior tax season and borrowings to meet ~~our off-season~~ liquidity needs.

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~~September 30, 2022 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~~three months ended ~~January 31, 2018~~September 30, 2022 and ~~2017~~.2021. See Item 1 for the complete consolidated statements of cash flows for these periods.


	(in 000s)
Three months ended September 30,	2022		2021
Net cash used in:
Operating activities	$	(321,666)	$	(312,624)
Investing activities	(37,358)		(19,453)
Financing activities	(246,893)		(217,322)
Effects of exchange rates on cash	(13,422)		(3,959)
Net decrease in cash and cash equivalents, including restricted balances	$	(619,339)	$	(553,358)

(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,~~totaled $321.7 million for the three months ended September 30, 2022 compared to $312.6 million in the prior year period. The change is primarily due to ~~changes~~the timing of receivables collections and an increase in ~~tax balances resulting from the Tax Legislation and prior year settlement payments related to representation and warranty claims,~~our net loss, partially offset by the receipt of an ~~increased loss for~~income tax receivable in the ~~period.~~current year.

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~~$37.4 million for the ~~nine~~three months ended ~~January 31, 2018~~September 30, 2022 compared to ~~$638.5~~$19.5 million in the prior year period. ~~This~~The change ~~resulted~~is primarily ~~from lower borrowings on our CLOC~~due to payments to acquire businesses in the current year.

Financing Activities. Cash used in financing activities totaled $246.9 million for the three months ended September 30, 2022 compared to $217.3 million in the prior year ~~and~~period. The change is due to higher share repurchases in the ~~prior year period.~~current year.

CASH REQUIREMENTS –

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

We have consistently paid quarterly dividends. Dividends paid totaled $~~150.3~~43.1 million and $~~141.5~~49.0 million for the ~~nine~~three months ended ~~January 31, 2018~~September 30, 2022 and ~~2017~~,2021, 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.

In August 2022, the Board of Directors approved a $1.25 billion share repurchase program, effective through fiscal year 2025. During the three months ended September 30, 2022, we repurchased $219.8 million of our common stock at an average price of $44.60 per share. In the prior year period, we repurchased $165.8 million of our common stock at an average price of $24.37 per share. Our current share repurchase program has remaining authorization of $1.03 billion which is effective through June 2025.

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.


H&R Block, Inc. \|Q1 FY2023 Form 10-Q			17

Table of Contents

Capital Investment. Capital expenditures totaled ~~$77.9~~$16.2 million and ~~$73.9~~$15.6 million for the ~~nine~~three months ended ~~January 31, 2018~~September 30, 2022 and ~~2017,~~2021, 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~~$16.5 million and ~~$52.8~~$4.3 million ~~for~~during the ~~nine~~three months ended ~~January 31, 2018~~September 30, 2022 and ~~2017,~~2021, respectively. See Item 1, note 5 for additional information on our acquisitions.

FINANCING RESOURCES – ~~Our 2017~~The CLOC has capacity up to ~~$2.0~~$1.5 billion and is scheduled to expire in ~~September 2022.~~June 2026. Proceeds under the ~~2017~~ CLOC may be used for working capital needs or for other general corporate purposes. We ~~were in compliance with our 2017 CLOC covenants and~~ had anno outstanding balance ~~of $790.0 million~~under our CLOC and amounts available to borrow were limited by the debt-to-EBITDA covenant to approximately $1.47 billion 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.~~



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

~~Table of Contents~~

September 30, 2022.

The following table provides ratings for debt issued by Block Financial LLC (Block Financial) as of ~~January 31, 2018~~September 30, 2022 and ~~April~~June 30, ~~2017:~~

2022:

As of

September 30, 2022

June 30, 2022

Short-term

Long-term

Outlook

Short-term

Long-term

Outlook

Moody's

P-3

Baa3

Positive

P-3

Baa3

Stable

S&P

A-2

BBB

Stable

A-2

BBB

Stable

~~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~~June 30, ~~2017~~2022 in our Annual Report to Shareholders on Form 10-K.

CASH AND OTHER ASSETS – As of ~~January 31, 2018~~,September 30, 2022, we held cash and cash equivalents, excluding restricted amounts, of ~~$187.4~~$322.8 million, including ~~$94.4~~$127.4 million held by our foreign subsidiaries. We received $100.6 million of our federal income tax receivable subsequent to September 30, 2022.

Foreign Operations. Seasonal borrowing needs of our Canadian operations 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 forward contracts outstanding as of ~~January 31, 2018.~~September 30, 2022.

We do not currently intend to repatriate ~~any~~ non-borrowed funds held by our foreign ~~subsidiaries.~~subsidiaries in a manner that would trigger a material tax liability.

The impact of changes in foreign exchange rates during the period on our international cash balances resulted in ~~an increase~~a decrease of ~~$1.8~~$13.4 million during the ~~nine~~three months ended ~~January 31, 2018 compared to~~September 30, 2022 and in a decrease of ~~$2.9~~$4.0 million induring the ~~prior year.~~three months ended September 30, 2021.

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

As discussed further in Item 1, note 9 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 have been no ~~other~~ material changes in our contractual obligations and commercial commitments from those reported ~~as of~~ ~~April 30, 2017~~in our June 30, 2022 Annual Report to Shareholders 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	September 30, 2022		June 30, 2022
Current assets	$	50,399	$	38,922
Noncurrent assets	1,682,102		1,698,242
Current liabilities	106,679		75,855
Noncurrent liabilities	1,497,818		1,495,732


18			Q1 FY2023 Form 10-Q\| H&R Block, Inc.

Table of Contents


SUMMARIZED STATEMENTS OF OPERATIONS - GUARANTOR AND ISSUER			(in 000s)
	Three months ended September 30, 2022		Twelve months ended June 30, 2022
Total revenues	$	13,420	$	199,683
Income from continuing operations before income taxes	771		44,404
Net income from continuing operations	3,490		41,979
Net income	2,437		35,007

The table above reflects $1.6 billion of non-current intercompany receivables due to the ~~U.S. federal income taxation~~Issuer from non-guarantor subsidiaries as of ~~individuals~~September 30, 2022 and ~~corporations. For a discussion of the impact of the corporate tax law changes included~~June 30, 2022.

REGULATORY ENVIRONMENT

As previously disclosed, 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.

~~On November 17,~~ 2017 the Consumer Financial Protection Bureau (CFPB) ~~officially~~ published its final rule ~~changing the regulation of~~regulating certain consumer credit products ~~including payday loans, vehicle title loans, and high-cost installment loans (the “Payday Rule”).~~(Payday Rule), which the CFPB later limited by removing the mandatory underwriting provisions. Certain limited provisions of the Payday Rule became effective ~~on January 16,~~in 2018, but most provisions ~~do not become~~were scheduled to go into effect in 2019. Litigation in a federal district court in Texas had stayed that effective date, but on August 31, 2021 the judge in that litigation ruled in favor of the CFPB. The plaintiffs appealed, and, on October 14, 2021, the United States Court of Appeals for the Fifth Circuit extended the compliance deadline until ~~August~~after the appeal is resolved. On October 19, ~~2019. However, on January 16, 2018,~~2022, the appellate court found that the funding mechanism for the CFPB ~~stated its intention to engage in a rulemaking process so that~~was unconstitutional and vacated the Payday Rule; however, the CFPB may ~~reconsider~~take further action to challenge this ruling.

We are unsure whether, when, or in what form the Payday ~~Rule. Given this development,~~Rule will go into effect. Though 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 EA product, our business, and our consolidated financial position, results of operations, and cash flows. We will continue to analyze the potential impact 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®~~AdvanceSM, 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.~~flows, we will continue to monitor and analyze the potential impact of any further developments on the Company.

There have been no other material changes in our regulatory environment from what was reported ~~as of April 30, 2017~~ in our June 30, 2022 Annual Report to Shareholders 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, adjusted diluted earnings per share from continuing operations, free cash flow and free cash flow yield. 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.


H&R Block, Inc. \|Q1 FY2023 Form 10-Q			19

Table of Contents

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


				(in 000s)
	Three months ended September 30,
		2022		2021
Net loss - as reported		$	(168,421)	$	(151,601)
Discontinued operations, net		1,054		1,656
Net loss from continuing operations - as reported		(167,367)		(149,945)
Add back:
Income tax benefit		(53,957)		(47,373)
Interest expense		15,824		22,830
Depreciation and amortization		33,624		35,715
		(4,509)		11,172
EBITDA from continuing operations		$	(171,876)	$	(138,773)

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


(in 000s, except per share amounts)
	Three months ended September 30,
		2022		2021
Net loss from continuing operations - as reported		$	(167,367)	$	(149,945)
Adjustments:
Amortization of intangibles related to acquisitions (pretax)		12,696		14,870
Tax effect of adjustments (1)		(3,221)		(3,635)
Adjusted net loss from continuing operations		$	(157,892)	$	(138,710)
Diluted loss per share from continuing operations - as reported		$	(1.05)	$	(0.84)
Adjustments, net of tax		0.06		0.06
Adjusted diluted loss per share from continuing operations		$	(0.99)	$	(0.78)

(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 )

(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.


20			Q1 FY2023 Form 10-Q\| H&R Block, Inc.

Table of Contents

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.~~Company, and increases in applicable tax rates in jurisdictions where the Company operates. 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.

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~~June 30, ~~2017~~2022 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~~June 30, ~~2017 and Item 1A, Risk Factors in any subsequently-filed Quarterly Reports on Form 10-Q.~~2022.


~~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~~in our June 30, 2022 Annual Report to Shareholders 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~~three months ended September 30, 2022 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 109 to the consolidated financial statements.

ITEM 1A. RISK FACTORS

~~Except as described in Part I, Item 2, Regulatory Environment, there~~There have been no material changes in our risk factors from those reported ~~at April 30, 2017~~ in our June 30, 2022 Annual Report to Shareholders on Form 10-K.



34	~~Q3 FY2018 Form 10-Q \|~~ H&R Block, Inc. \|Q1 FY2023 Form 10-Q	21

Table 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~~three months ended September 30, 2022 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)
July 1 - July 31	2	$	36.77	—	$	—
August 1 - August 31	1,021	$	45.88	684	$	1,218,409
September 1 - September 30	4,245	$	44.33	4,243	$	1,030,304
	5,268	$	44.63	4,927

(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 341 thousand shares in connection with funding employee income tax withholding obligations arising upon the lapse of restrictions on restricted share units.


(2)In August 2022, we announced that our Board of Directors approved a $1.25 billion share repurchase program, effective through June 2025. ⁽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~~ 10.1			~~Computation~~Form of ~~Ratio of Earnings~~2018 Long Term Incentive Plan Award Agreement for Restricted Share Units, as approved on August 11, 2022, filed as Exhibit 10.1 to ~~Fixed Charges for H&R Block, Inc.~~the Company's current report on Form 8-K filed August 17, 2022, file number 1-06089, is incorporated herein by reference.


~~12.2~~ 10.2			~~Computation~~Form of ~~Ratio of Earnings~~2018 Long Term Incentive Plan Award Agreement for Performance Share Units, as approved on August 11, 2022, filed as Exhibit 10.2 to ~~Fixed Charges for Block Financial LLC.~~the Company's current report on Form 8-K filed August 17, 2022, file number 1-06089, is incorporated herein by reference.


~~31.1~~ 22			List of Guarantor and Issuer Subsidiaries, filed as Exhibit 22 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2022, file number 1-06089, is incorporated herein by reference.
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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22	Q1 FY2023 Form 10-Q\| H&R Block, Inc. ~~\| Q3 FY2018 Form 10-Q~~	35

Table 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~~November 3, 2022

/s/ Tony G. Bowen
Tony G. Bowen
Chief Financial Officer
~~March 7, 2018~~November 3, 2022

/s/ Kellie J. Logerwell
Kellie J. Logerwell
Chief Accounting Officer
~~March 7, 2018~~November 3, 2022



36	~~Q3 FY2018 Form 10-Q \|~~ H&R Block, Inc. \|Q1 FY2023 Form 10-Q	23



(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	—