H&R BLOCK, INC.

Red flags

• The $84.1 million discrete tax benefit from settling the IRS examination reduced the effective tax rate to 13.8%; adjusted EPS of $5.31 is a better baseline than reported continuing-operations EPS of $5.69.
• Revenue and cash flow are highly concentrated in the February-April tax season; the company states it generally operates at a loss and incurs fixed costs from May through January, increasing the impact of any peak-season disruption.
• H&R Block has received governmental inquiries related to the IRS Free File Program and DIY tax services; potential outcomes include additional costs, fines, penalties, injunctions, or other relief.
• Pathward originated 100% of Emerald Advance volume, and H&R Block purchased participation interests representing 87% of FY2026 volume, creating material counterparty and credit exposure.
• The company guaranteed up to $18.0 million of certain Refund Advance loans and carried a $2.5 million related liability at June 30, 2026; it paid $2.0 million net of recoveries during FY2026.
• Field wages increased 7.5% to $996.7 million, while total operating expenses increased 3.6%, creating ongoing margin sensitivity to seasonal labor and occupancy costs.