H&R Block, Inc. Q1 FY2026 earnings call

• The company is off to a strong start to fiscal '26 with early results in assisted consumer tax, small business tax, and Wave.
• Marketing team focuses on strengthening communication of value propositions, personalization, and funnel management. Retail and DIY teams aim to eliminate customer experience friction and manage conversions.
• Key products like Second Look, AI Tax Assist, Tax Pro Review, and Spruce play important roles.
• First quarter total revenue was $204 million, operating expenses were $411 million (a decrease of $12M year-over-year), EBITDA loss was $170 million (an improvement of $18M or 9.4% year-over-year).
• Long-term capital allocation priorities include investing in the business, growing the dividend, and opportunistic share repurchases; $455 million was returned to shareholders in the quarter.
• Strategic focus on consumers and small businesses, with a large total addressable market for tax preparation and related services.

In the first quarter, H&R Block achieved a 5% revenue growth to $204 million, an increase of $10 million over the prior year. The growth was driven by higher net average charge (NAC) and volumes in the U.S. assisted category, and continuing double-digit growth at Wave. The U.S. assisted business helped individuals file prior year and amended returns related to Second Look and small business clients file entity returns ahead of deadlines. Wave saw momentum in its high-margin subscription product Pro-Tier and strong payments volume. Historically, Q1 contributes just over 5% of annual total revenue.

• Expect revenue between $3.875 billion and $3.895 billion, EBITDA between $1.015 billion and $1.035 billion, effective tax rate of approximately 25%, and adjusted EPS between $4.85 and $5.
• Anticipate industry growth to remain consistent with historical trends (~1%).
• Focus on achieving a healthier balance of volume, price, and mix supported by client experience improvements.
• Anticipate small business to be a more meaningful revenue contributor.
• Committed to acquiring franchise locations at attractive EBITDA multiples.

• Comments made by management may include forward-looking statements involving material risks and uncertainties. Actual results could differ due to numerous factors. For a description of these risks and uncertainties, see H&R Block's annual report on Form 10-K and quarterly reports on Form 10-Q as updated periodically with other SEC filings.

Q: As you head into next year's tax season, can you talk a bit more about changes you're planning to make to marketing and operations assisted to stem some of the share losses from prior years?

A: Curtis Campbell mentioned investments in Second Look and AI to elevate offerings and optimize for the season.

Q: Can you elaborate on your pricing strategy in DIY and how you expect that to impact both margins and market share performance?

A: Tiffany Mason stated pricing strategy is consistent with prior years, expecting low single-digit price increases across both assisted and DIY channels, leaning into value provided to consumers.

Q: With the anticipated complexity from the new tax bill, can you speak about the magnitude you're expecting and preparation? Also, regarding government shutdown, should we anticipate a slow start?

A: Tiffany Mason said the new bill is expected to be a tailwind, using prior share shift as a proxy. Jeffrey Jones stated no indication season will start late.

Q: Address AI differentiation and threat, and marketing to free customers (free forever vs free temporarily) for upcoming season?

A: Curtis Campbell said AI is an opportunity for better experience and operation optimization, citing AI Tax Assist. Jeffrey Jones spoke about better targeting of free client cohorts for appropriate messaging.