H&R Block, Inc. 2026 Q4 Earnings Call

Please go ahead. Thank you.

Good afternoon, and welcome to H&R Block's fiscal 2026 financial results conference call. Joining me today are Curtis Campbell, our President and Chief Executive Officer, and Tiffany Mason, our Chief Financial Officer. Earlier today, we issued a press release and presentation which can be downloaded or viewed live on our website at investors.hrblock.com. Our call is being broadcast and webcast live, and a replay of the webcast will be available for 90 days. Before we begin, I'd like to remind listeners that comments made by management may include forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties, and actual results could differ from those projected in any forward-looking statement due to numerous factors.

For a description of these risks and uncertainties, please see H&R Block's annual report on Form 10-K and quarterly reports on Form 10-Q as updated periodically with our other SEC filings. Please note some metrics we'll discuss today are presented on a non-GAAP basis. We've reconciled the comparable GAAP and non-GAAP figures in the appendix of our presentation. Finally, the content of this call contains time-sensitive information accurate only as of today, August 11th, 2026. H&R Block undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. I'll now turn it over to Curtis.

Good afternoon, everyone, and thank you for joining us. Fiscal 2026 was a meaningful year for H&R Block. We delivered strong results, made significant progress against our strategic priorities, and continued to strengthen the quality of the business. Revenue increased 4.9%, EBITDA increased 8.3%, and adjusted EPS increased 13.9%. The growth we delivered this year was meaningfully stronger than what was achieved in recent years. We also generated strong cash flow and returned $714 million to shareholders through dividends and share repurchases. What matters most is what drove those results. We converted more clients to completion, we retained more clients, we continued to improve the quality of our client base, and we made meaningful progress against the initiatives that matter most to the long-term durability of the business. Taken together, fiscal 2026 strengthened our belief that the strategy's working and that H&R Block is on the right path.

The results we delivered this year, and the evidence behind them, give us greater confidence we can further accelerate long-term shareholder value. Over the past several quarters, we've shared elements of the long-term strategy we're executing across H&R Block. Fiscal 2026 marked our first full year executing that strategy, and over the coming quarters, you'll hear more about where we're headed and the opportunities we have in front of us. As we look back on the year, what stands out most is the evidence that our expert-led, technology-enabled strategy is showing up in stronger client outcomes and stronger business performance. One of the clearest proof points we saw this year was in the assisted category. After two consecutive years of improving trends, we maintained share in the assisted category in 2026.

That matters because it demonstrates that the actions we're taking to bolster the client experience are helping strengthen our competitive position in our largest business. We also saw clear evidence that clients are responding to the changes we made to improve the experience. Conversion improved 200 basis points this season, which we believe is the largest single-year improvement in our recorded history. That improvement was a result of deliberate refinements across the customer journey, supported by automation and product enhancements that help create a more personalized experience with fewer friction points. We saw this same pattern in retention. The rate at which clients returned this season increased 190 basis points, and Second Look continues to be a strong proof point. New clients who received Second Look returned at a rate more than 600 basis points higher than those that did not.

That's because Second Look delivers something clients value deeply, expertise beyond current tax year preparation, confidence that H&R Block is working on their behalf to find every dollar they deserve, and a relationship with a trusted tax pro who has their interest in mind, not only in tax season but throughout the year. We also continue to see evidence that technology's enhancing rather than replacing the expertise that differentiates H&R Block. This season, we expanded the use of AI and automation across the business to help tax pros focus more of their time on delivering advice, judgment, and client support. Sidekick, our AI tax pro assistant, launched across our offices and saw strong adoption throughout the season, while AI Tax Assist for paid DIY filers supported 4.2 million client interactions and drove nearly double the level of engagement we saw a year ago.

We also automated and significantly expanded Second Look, allowing us to bring those benefits to more clients while helping tax pros focus on the returns with the greatest opportunity. Together, these advances reinforce an important aspect of our strategy, using technology to scale expertise and deliver better outcomes for clients. Taken together, these results reinforce our confidence that our strategy's working. We're seeing stronger client outcomes, improving business quality, and growing evidence that our expert-led, technology-enabled strategy is translating into better performance. That combination is strengthening the durability of business today while creating a stronger foundation for future growth. A major part of our strategy is continuing to win with more complex, higher lifetime value clients. We're not focused on growth for the sake of volume alone. We're focused on attracting and retaining the type of clients that strengthen both the durability and economics of our business.

We continue to see that shift in fiscal 2026. More complex clients engage with H&R Block at higher rates, and our client mix continues to move towards the segment we've been intentionally focused on. Over the last few years, the percent of clients falling within our target household AGI range of $50,000 to $200,000 has increased from 38% of our clients to 50%. Today, we're serving a higher percentage of clients with investment income, small business and sole proprietor needs, and increasingly diverse income streams. That's important because it shows we're not only targeting these relationships, we're succeeding in attracting them. Research tells us that clients with more complex financial lives value assistance, expertise, and trusted advice. This is exactly where H&R Block stands apart. Our brand, tax expertise, omni-channel model, and growing technology capabilities allows us to serve these clients in ways that are increasingly relevant to their needs.

We will continue to lean into these consumer groups rather than pursue lower lifetime value, transaction-oriented clients, because volume alone doesn't create durable economic value. As a result, we'll continue to improve the quality of the business. These relationships create more opportunities to serve clients over time, support stronger retention, and improve the long-term economics of our client base. Our omni-channel model is becoming an even greater competitive advantage because it's built around a simple idea. Clients don't all need the same level of assistance, and their needs change over time. Some clients want to prepare their return entirely on their own. Others want occasional guidance through tools like AI Tax Assist. Some want the assurance and accountability that comes from tax pro review, and others prefer more guided support from a tax pro through virtual or in-office experiences.

Our advantage is that we can meet clients where they are and provide the level of assistance they need when they need it. As their needs evolve, we're there every step of the way for them. We believe this flexibility is becoming increasingly important as technology changes how clients engage. Technology can simplify tasks and make assistance more accessible, while human expertise provides the judgment, advice, and confidence that technology alone cannot. We're not building separate digital and expert-led experiences. We're strengthening an integrated omni-channel model that operates at scale, where technology and human expertise work together to deliver the right level of assistance the way each client prefers. That's an important distinction. We're not trying to bolt technology onto a fragmented service model or bolt experts onto a digital model.

We're building on a foundation that allows clients to move across DIY, virtual, and in-person experiences while receiving the level of assistance that's right for them. We believe our ability to combine expertise and technology across the different needs clients have is becoming an increasingly important differentiator and expanding our opportunity for long-term growth. We saw additional evidence of this throughout the season. Clients engage with technology-enabled assistance at scale through AI Tax Assist. At the same time, Sidekick helped tax pros navigate complex tax questions more efficiently, while client experience monitors allowed clients to explore products and services independently, contributing to a 550 basis point increase in product attachment. These are practical examples of our omni-channel model in action, using technology to make assistance more accessible for clients while allowing our tax pros to focus on the expertise, judgment, and advice that matter most.

The progress we've discussed so far has strengthened our confidence in our strategy and helped us identify where to move faster. The greatest change happening at H&R Block isn't any single initiative. It's a different way of operating. Back in May, I shared that we ran more than 150 experiments during the season, exponentially more than in prior years. As we continue executing our strategy, we're experimenting more. We're learning faster and using those learnings to make better decisions about where to scale. That matters because it increases the velocity at which we can improve the client experience, strengthen execution, and focus resources behind the ideas showing the greatest potential. This is an important part of building a more durable growth engine and accelerating progress against our strategy. We're not guessing at what could happen. We're testing in real-world conditions, learning from the results, and scaling what works.