H&R Block, Inc. Q4 FY2025 earnings call

• Total revenue grew by 4.2% in fiscal 2025, with EBITDA at $976 million within outlook but lower than anticipated due to operating expense headwinds.
• Announced a 12% increase in quarterly dividend, with over $4.5 billion returned to shareholders since 2016 through dividends and share repurchases.
• Assisted revenue grew 6.1%, DIY revenue grew 9.7%, with client growth in higher income segments for the third consecutive year.
• Improved client conversion in retail offices and DIY through better client welcome, tax pro matching, and AI Tax Assist enhancements.
• Small Business had record revenue year with double-digit growth, including success in assisted small business tax and DIY strategies for customized client experiences.
• Wave had a productive year with 13% annual revenue increase, and Spruce mobile banking saw significant account growth and deposit increase.

In fiscal 2025, assisted revenue grew by 6.1% and DIY revenue grew by 9.7%. Small Business delivered double-digit top line growth, making fiscal 2025 a record revenue year. Wave had a 13% annual revenue increase. Spruce mobile banking saw newly created accounts rise by nearly 40% and total deposits reach $1.75 billion. Assisted revenue contributed to growth, with company-owned assisted filing volume increasing and market share trend improving. DIY saw improvements in AI Tax Assist leading to higher conversion rates. Small Business benefited from multiyear success, including assisted small business tax performance and DIY strategies for customized client experiences.

• Fiscal 2026 outlook: revenue range $3.875 billion to $3.895 billion, EBITDA range $1.015 billion to $1.035 billion, effective tax rate ~25%, adjusted EPS $4.85 to $5, assuming ~$400 million share repurchases in H1 2026.
• Assumes similar shift to assisted business as seen in tax season 2025, with focus on healthier balance of volume, price, and mix.
• Expects small business to be a meaningful revenue driver, and intends to continue acquiring franchise locations at attractive EBITDA multiples.

• External factors delayed completion of tax matters under examination, affecting net income.
• Elevated health care costs, legal fees, and severance-related charges in fiscal 2025 impacted EBITDA results.
• Uncertainty around macroeconomic conditions and industry changes could affect performance.

Q: What are assumptions for assisted and DIY market growth next year?

A: Assumes similar level of shift to assisted business as seen in tax season 2025, with base assumption based on anticipation of tax bill details and execution.

Q: Will there be changes to bank products to drive early season filers?

A: Plans to discuss tax season plan in November for competitive reasons, but tax season plan is being considered.

Q: How does the executive change affect strategy?

A: No strategic shift expected as succession is internal with someone who knows the industry and was part of strategy development; Q1 call will share tax season plans and broader business perspective beyond tax season 2026.

Q: Elaborate on healthier balance of volume, price, and mix for 2026 tax season?

A: Refers to driving price increases in assisted and DIY, greater volume performance, and better mix (complexity of client), continuing progression of revenue mix from fiscal 2024 to 2025.

Q: What are determinants for landing at top end of 2026 guidance range?

A: Effectiveness in driving qualified traffic to top of funnel and improving client conversion in retail operations.