Image source: The Motley Fool.
CALL PARTICIPANTS
- President and Chief Executive Officer — Jeffrey Jones
- Chief Financial Officer — Tiffany Mason
- President of Global Consumer Tax and Chief Product Officer, CEO Elect — Curtis Campbell
- Vice President, Investor Relations — Jessica Hazel
Need a quote from a Motley Fool analyst? Email [email protected]
TAKEAWAYS
- Revenue — $204 million total revenue for the first quarter of fiscal year 2026, up 5% from the prior year, driven by higher net average charge, increased U.S. assisted volumes, and double-digit WAVE growth.
- EBITDA — Loss of $170 million in the first quarter of fiscal year 2026, a 9.4% EBITDA improvement versus last year, reflecting disciplined expense management and lower legal fees.
- Net loss from continuing operations — $165 million net loss from continuing operations for the first quarter of fiscal year 2026, representing a 3.5% improvement over the prior year.
- Loss per share — Adjusted loss per share was $1.20 compared to $1.17 last year, with management noting that fewer outstanding shares increased this metric in a loss quarter.
- Total operating expenses — $411 million total operating expenses for the first quarter of fiscal year 2026, decreased by $12 million due to normalization of legal fees.
- Share repurchases — 7.9 million shares bought for $400 million in the first quarter of fiscal year 2026, completing the fiscal 2026 repurchase plan and retiring approximately 6% of outstanding shares.
- Dividend — Regular quarterly dividend paid, reflecting a 12% increase announced in August; next dividend payment announced during the call.
- Capital returned to shareholders — $455 million in capital returned to shareholders in the first quarter of fiscal year 2026, totaling nearly $5 billion returned to shareholders since 2016.
- WAVE segment — Continued double-digit revenue growth and high-margin subscription adoption, especially in Pro Tier.
- Fiscal 2026 outlook — Revenue projected at $3.875-$3.895 billion for fiscal year 2026, EBITDA (non-GAAP) between $1.015-$1.035 billion, and adjusted EPS expected at $4.85-$5.
- Effective tax rate — 23.6% for the first quarter of fiscal year 2026, compared to 26.2% in the prior year.
- Strategic priorities — Management reaffirmed focus on complex paid filers, further AI investment, enhancing client experience, and prioritized acquisition of franchise locations at attractive EBITDA multiples.
- Pricing strategy — CFO Mason said, “we expect to be able to continue to take low single-digit price. And that’s true across both channels, assisted and DIY.”
- Assisted market share shift — Referencing last tax season, management used a 20 basis point increase in assisted share, shifting from DIY, as a forecast proxy for potential effects of the new tax bill.
SUMMARY
H&R Block (HRB +1.72%) reported 5% revenue growth for the first quarter of fiscal year 2026, citing higher average charges and expanding volumes in its key U.S. assisted and WAVE segments. Management completed its fiscal 2026 share repurchase plan, retiring approximately 6% of outstanding shares in the first quarter of fiscal year 2026, and returned a total of $455 million to shareholders. The company affirmed its fiscal 2026 outlook, projecting continued top-line growth, stable margins, and ongoing capital return through increased dividends and repurchases. Executives highlighted ongoing investment in AI-driven client solutions and a strategic focus on complex paid filers for sustained long-term value creation. H&R Block will transition to Curtis Campbell as CEO in January, with management signaling strong leadership continuity and product innovation priorities.
- CEO Jones referenced “no indication whatsoever that the season will start late” despite government funding uncertainties, emphasizing operational preparedness for flexibility if required.
- President Campbell said, “we see AI as an opportunity, without a doubt, to ensure that we’re delivering the best experiences possible and we can optimize both our operations and the experience for our clients.”
- Management positioned the Second Look product and Spruce as key differentiators, with Second Look providing reviewed savings opportunities for new clients.
- Internal projections assume the assisted tax preparation market will continue to gain share, supported by increased demand resulting from tax law complexity and anticipated regulatory changes.
INDUSTRY GLOSSARY
- Second Look: H&R Block’s service that reviews a new client’s past three years of tax returns to uncover missed refund opportunities.
- WAVE: H&R Block’s digital financial solutions platform for small businesses, offering bookkeeping, payroll, invoicing, and payments tools.
- Spruce: H&R Block’s personal finance platform supporting year-round client financial wellness.
- Assisted: Tax preparation category where returns are filed with the help of a professional, as opposed to DIY (Do-It-Yourself) filings.
- Pro Tier: WAVE’s subscription offering targeting professional small business customers, noted for higher margins.
- AI Tax Assist: H&R Block’s artificial intelligence tool providing real-time tax help to do-it-yourself clients.
- NAC (Net Average Charge): Internal metric representing average revenue received per client transaction.
Full Conference Call Transcript
Jessica Hazel: Thank you. Good afternoon, and welcome to H&R Block, Inc.’s fiscal 2026 first quarter financial results conference call. Joining me today are Jeffrey Jones, our President and Chief Executive Officer, Tiffany Mason, our Chief Financial Officer, and Curtis Campbell, our CEO elect and current President of Global Consumer Tax and Chief Product 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 ninety 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, Inc.’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, 11/06/2025.
H&R Block, Inc. undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. I will now turn it over to Jeffrey Jones.
Jeffrey Jones: Thank you, Jessica. Good afternoon, everyone, and thank you for joining us. I’m going to kick us off with a few opening comments and highlight some of our plans for the upcoming tax season. Tiffany will then provide details on our Q1 performance and outlook for fiscal year 2026. Curtis will share some observations on the business and then I’ll come back to wrap the call before Q&A. We are off to a strong start to fiscal 2026, and I’m pleased to see the early results in several areas of our business: Assisted Consumer Tax, Small Business Tax, and WAVE.
At this time of year, teams are putting finishing touches on our tax season plans considering the successes and key learnings from last year. At the top of the list continues to be the work of the marketing team to strengthen how we communicate our consumer and small business value propositions, our approach to personalization, and management of the funnel. The retail and DIY teams are focused on capturing the demand created by marketing by eliminating customer experience for and managing more clients through the conversion. Second Look, AI Tax Assist, Tax Pro Review, and Spruce are key products that deliver great value to clients and help distinguish Block. And will all play important roles in our tax season plans.
With this context, I’ll turn it over to Tiffany to provide detail on our first quarter performance, capital allocation priorities, and our fiscal 2026 outlook.
Tiffany Mason: Thank you, Jeff, and good afternoon, everyone. We are off to a strong start this fiscal year. In the first quarter, we achieved revenue growth of 5%, and delivered a 9.4% EBITDA improvement compared to the prior year. Additionally, we returned approximately $455 million in capital to our shareholders during the quarter. As I review details of our first quarter results, I’d like to remind everyone that our business is highly seasonal. And this quarter consistently reflects that pattern. Historically, Q1 contributes just over 5% of our annual total revenue, and typically results in a net loss. In the first quarter, we generated $204 million in total revenue, an increase of $10 million over the prior year.
This 5% growth was driven by higher net average charge or NAC, and higher volumes in the U.S. assisted category, and continuing double-digit growth at WAVE. In our U.S. Assisted business during the first quarter, we helped individuals file prior year and amended returns that were often related to our Second Look offering and complete their current year returns ahead of the extension deadline. As a reminder, Second Look is a unique offering that provides new clients a review of their past three years’ tax returns to identify any missed refund opportunities. We also helped our small business clients file their entity returns ahead of the September 15 extension deadline.
At Wave, we continue to see momentum in our high-margin subscription Pro Tier, as well as strong payments volume. Total operating expenses for the quarter were $411 million, a decrease of $12 million compared to the prior year. This favorability was primarily the result of lower legal fees and settlements. As a reminder, we reported significantly elevated legal expenses in last year’s first quarter. In contrast, legal expenses this quarter were consistent with our historical trend for this period. We remain disciplined in managing expenses, which is reflected in our strong first quarter results and our full-year outlook. Our first quarter EBITDA loss was $170 million, an improvement of $18 million or 9.4% compared to last year.
The effective tax rate was 23.6% compared to 26.2% in the prior year. Last year, we recognized a larger excess tax benefit from stock-based compensation, which contributed to a higher effective tax rate for the period. Our net loss from continuing operations was $165 million, representing a 3.5% improvement over the prior year. Loss per share from continuing operations was $1.20 while adjusted loss per share was $1.20, compared to $1.17 last year. As a reminder, in quarters with a loss, having fewer shares outstanding increases the loss per share. However, this is accretive as we generate earnings for the full year.
See More
