Revenue: $2.3 billion, an increase of 4.2%. EBITDA: $1 billion, an increase of 5%. Earnings Per Share (EPS): Increased 9.2% to $5.32. Adjusted EPS: Increased 8.9% to $5.38. Net Income: $722.9 million, an increase of 4.5%. Operating Expenses: $1.3 billion, an increase of 3.4%. DIY Revenue Growth: 8% year-over-year. Assisted Revenue Growth: 170 basis points increase. Effective Tax Rate: 24.6% for the quarter. Share Repurchase: $400 million, retiring 6.5 million shares. Fiscal Year Revenue Outlook: $3.69 billion to $3.75 billion. Fiscal Year EBITDA Outlook: $975 million to $1.02 billion. Fiscal Year Adjusted EPS Outlook: $5.15 to $5.35.

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Release Date: May 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

H&R Block Inc (NYSE:HRB) reported revenue growth of 4%, EBITDA growth of 5%, and EPS growth of 9% for the third quarter. The company experienced an increase in company-owned assisted volume and higher overall net average charge (NAC). H&R Block Inc (NYSE:HRB) saw a tenfold increase in new clients participating in their Second Look service, which reviews past tax returns for missed deductions. The DIY segment delivered revenue growth of 8% year-over-year, with strong customer satisfaction scores. The company reported a 24% increase in clients served fully virtually, reflecting a growing preference for convenience blended with expert help.

Negative Points

Total Assisted volumes were down 0.8%, which is below the broader industry volume growth of 1.7% as reported by the IRS. The company faced lower international revenues due to unfavorable foreign exchange rates and lower return volumes in Canada. Online paid DIY volume was essentially flat, indicating a lack of market share gain in this segment. H&R Block Inc (NYSE:HRB) experienced higher operating expenses due to increased tax professional wages and benefits. The company expects EBITDA to be slightly below the midpoint of the range for the year due to higher-than-anticipated legal fees and settlements.

Q & A Highlights

Q: Jeff, the Assisted segment has grown faster than the DIY segment for four out of five years. Why is there a shift towards Assisted? A: Jeffrey Jones, President and CEO, explained that during uncertain times, clients seek help due to the high stakes of taxes. This year, there was a mix shift to Assisted, with clients filing later, influenced by conversations about potential tax changes.

Q: Was there a difference in volume between the early and latter parts of the tax season? A: Jeffrey Jones noted that the season started slow but ended strong, with record volumes on April 14 and 15. They observed a trend towards serving more complex, higher-income clients, which will influence future product offerings.

Story Continues

Q: Can you explain the decline in franchise operations and the impact of franchise buybacks? A: Tiffany Mason, CFO, stated that the decline is primarily due to franchise buybacks, which are part of their growth strategy. They acquired 123 locations this fiscal year, contributing to the shift rather than an absolute decline in volume.

Q: How did the competitive landscape affect the DIY segment, particularly with online paid and free volumes? A: Jeffrey Jones highlighted that despite a flat online paid volume, they focused on complex clients, leading to revenue growth. They chose not to invest heavily in free clients, unlike competitors, focusing instead on clients with potential to become paying customers.

Q: Why did Assisted volumes decline compared to industry growth, and were there any competitive changes in the Assisted space? A: Jeffrey Jones acknowledged the need to improve share despite positive trends in client complexity and retention. He noted that while a competitor increased promotions, the main competition remains the independent category.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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