H&R Block Reports Strong Q1 Growth Amid Challenges

H&R Block ((HRB)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for H&R Block showcased a generally positive sentiment, highlighting significant revenue growth, improved EBITDA, and substantial returns to shareholders. Despite reporting a net loss, the company demonstrated strong performance in key areas such as small business and Wave, while maintaining a disciplined capital allocation strategy.

Revenue Growth and Improved EBITDA

H&R Block achieved a 5% revenue growth and a 9.4% improvement in EBITDA compared to the prior year. The total revenue for Q1 was $204 million, marking an increase of $10 million over the previous year. This growth underscores the company’s robust financial health and operational efficiency.

Capital Return to Shareholders

The company returned approximately $455 million in capital to shareholders during the quarter through dividends and share repurchases. This brings the cumulative total of capital returned to shareholders since 2016 to nearly $5 billion, reflecting a strong commitment to shareholder value.

Decrease in Operating Expenses

Total operating expenses for the quarter were $411 million, a decrease of $12 million compared to the prior year. This reduction was primarily due to lower legal fees and settlements, indicating effective cost management strategies.

Continued Growth in Small Business and Wave

H&R Block continues to experience double-digit growth at Wave and momentum in high-margin subscription products such as Pro-Tier. The company also reported strong payments volume, highlighting its success in the small business sector.

Dividend Increase and Share Repurchases

The regular quarterly dividend reflected a 12% increase announced in August. The company completed its share repurchase plan for fiscal 2026, retiring approximately 6% of shares outstanding, further enhancing shareholder value.

Net Loss from Continuing Operations

The net loss from continuing operations was $165 million, representing a 3.5% improvement over the prior year. Although still a notable loss, this improvement signals progress in addressing financial challenges.

Adjusted Loss Per Share Increase

The adjusted loss per share was $1.20 compared to $1.17 last year, with a $0.03 year-over-year increase. Despite this, the net loss improved by $6 million, indicating a positive trend in financial performance.

Seasonal Business Impact

The first quarter consistently reflects a pattern of net loss due to the highly seasonal nature of the business, contributing just over 5% of annual total revenue. This seasonal impact is a known factor in the company’s financial cycle.

Forward-Looking Guidance

H&R Block reaffirmed its full-year outlook, expecting revenue between $3.875 billion and $3.895 billion, EBITDA between $1.015 billion and $1.035 billion, and an effective tax rate of approximately 25%. The company plans to focus on improving client experience, leveraging AI to enhance productivity, and targeting clients with the greatest lifetime value, with plans to maintain low single-digit price increases across its services.

In summary, H&R Block’s earnings call reflected a positive sentiment with notable achievements in revenue growth and shareholder returns, despite the challenges of a net loss. The company’s strategic focus on small business growth, cost management, and shareholder value positions it well for future success.