Good day, and thank you for standing by. Welcome to the H&R Block 2nd Quarter Fiscal 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jessica Hazel, Vice President, Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome to H&R Block's Fiscal 2026 Second Quarter 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, February 3, 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 will now turn it over to Curtis.

Thank you, Jessica. Good afternoon, everyone, and thank you for joining us. In January, I stepped into the role of president and CEO with a deep sense of responsibility and optimism about the future of our company. This is a pivotal moment for us, given the opportunities ahead to strengthen our core business and accelerate H&R Block's growth. My focus is clear. Build on what works, challenge what needs to evolve, and ensure every decision begins and ends with the client. Today, I'll organize our discussion into three parts. First, we'll focus on core taxes and fundamentals, the table stakes that remain critical for H&R Block. Next, I'll highlight the improvements clients and tax professionals will see and feel firsthand this year. And finally, I'll touch on some of the ways we're positioning the company for long-term growth, laying the foundation for the strategy that will guide us in the years ahead. Tiffany will then walk you through our quarterly results, factors shaping our performance, and the momentum they bring to our full-year outlook. Let's start with the fundamentals that matter. Our strategy begins and ends with a client. We deliver meaningful value through expert-led, technology-enabled experiences. This season, we're focused on reducing friction and creating confidence-building moments for every client, whether they choose to engage in person, online, or through any of the options in our omni-channel model, including access to a broader financial services offering. That means attracting and converting new clients and retaining existing clients with a compelling value for the price they pay and ensuring every experience reinforces why H&R Block is the right choice. This season also brings meaningful tax law changes due to the One Big Beautiful Bill And while the impact varies widely across taxpayers, the net effect is greater complexity, more questions, and a heightened desire for confidence as clients navigate new deductions, exemptions, and eligibility rules. These shifts reinforce the essential role our tax pros play in helping people feel informed and supported at a time when confidence and accuracy matter more than ever. With nearly 9,000 offices nationwide and more than 60,000 highly trained tax pros, we offer scale and expertise that cannot be matched. Our tax pros average 10 years of tenure with H&R Block, combining deep knowledge with empathy to navigate complex tax situations and provide experiences beyond what digital-only solutions can offer. This human connection gives clients reassurance that their returns are handled with care and backed by our accuracy guarantee. Rooted in local presence and trusted expertise, we deliver results clients expect and deserve. Creating confidence and convenience is at the heart of our approach. Clients trust us with what is often their largest financial outcome of the year, and we deliver through accuracy, expertise, and solutions designed to reduce friction at every Whether clients choose to work with a tax pro or file on their own using our award-winning online tax product. Our focus is on experiences that make engagement effortless and build loyalty from day one. Our goal is clear. Every client completes their tax journey confident in their outcome and convinced H&R Block is the partner they want for the future. We know that reaching the right clients is fundamental to our success. Our marketing must connect with those who value trust, accuracy, and personalized service, including consumers and small businesses with more complex needs who represent our greatest opportunity for long-term value creation. This means showing up where they are with messages that resonate and build confidence. And because the landscape is evolving rapidly from our consumer search to where they engage, we're committed to testing new approaches and learning in real time to help ensure our strategy stays effective. By targeting the right audiences and managing our pipeline thoughtfully, we aim to drive engagement and loyalty while staying agile in a changing environment. Our clients expect more than promises. They expect progress they can see and feel in a process that makes filing easy. This season, we're introducing meaningful improvements designed to make the experience, whether with a tax professional or through our digital channels, more seamless, more outcome-oriented, and more valuable. From onboarding that builds trust from day one to tools that reduce friction and instill confidence, these changes reflect our commitment to elevating the client experience while equipping our taxpayers to perform with greater consistency and efficiency. Second Look, a service where we review the last three years of a new client's tax returns to find errors or see if any refund dollars were left on the table has been a part of Block's offering for years. This year we transformed it from a niche offering into a core component of the new client experience. We're significantly scaling this industry-leading service and embedding it as a standard part of how we serve new clients. By integrating Second Look into onboarding and using technology to meaningfully scale, we expect to deepen engagement, improve retention, and foster longer-term loyalty. At the same time, we're further elevating our DIY solutions. Customers who use our top-rated online DIY pay products will experience an even stronger value proposition designed to build confidence at every step. Earlier this season, CNET named H&R Block the best online tax product for 2026, and the enhancements we're introducing this year build on that strong foundation. Our paid SKUs feature AI tax assist and human help, providing real-time guidance to help clients navigate complexity with ease. This year, new clients can also receive Second Look at no cost. And for new early-season filers, we're providing taxable review free of charge. This service includes a professional review of the completed return in supporting documents. This unique offering gives DIY clients a bridge to professional insight, creating a distinctive way to sample human expertise that Block has delivered for 70 years. Just as technology is strengthening the value of our DIY products, it's also transforming how our taxpayers deliver for our clients. Our taxpayers have entered the season with enhanced training and advanced AI tools, positioning them to be more effective than ever. At the center is our nationally launched AI-enabled tax pro assistant, which provides real-time guidance during client interactions. This empowers our tax pros to quickly service the insights clients need to achieve their best possible results on the spot. In a year of significant tax law change, when complexity is rising and clients are seeking assurance and clarity more than ever, these capabilities underscore our commitment to leading the assisted channel through expert-led technology-enabled services. Because the real advantage comes when technology enhances, not replaces, the judgment of tax pros, giving clients both a seamless experience and the confidence that only expert insight can provide. We've also introduced tools and workflows that make the experience more consistent and outcome-oriented. Features such as save-the-date, two-year comparisons, and personalized product offerings will be delivered more consistently, supported by automation, so clients feel informed, confident, and cared for throughout the process. I'm optimistic about the plans we've put in place and the discipline guiding every decision. As we move to the season, we're staying closely connected to the metrics that help us understand how work is resonating, especially new client acquisition, conversion through the funnel, and retention of clients we've served before. We're also watching the elements that strengthen satisfaction and loyalty, including offerings like second look and save the date, along with consistent delivery of what clients value most. In small business, we anticipate continued momentum in tax preparation services, bookkeeping, payroll, payments, and invoicing, combining human expertise with digital-first offerings. These insights help refine our roadmap and prioritization. Lastly, I want to share how we think about the future. Block has a proud legacy, but we also have meaningful opportunities to improve, deepening customer centricity, strengthening our learning mindset, harnessing technology to accelerate progress, operating with significantly higher velocity. Historically, our season-to-season approach limited experimentation, speed, and long-term We've developed a multi-year client-centered strategy focused on delivering competence, convenience, and transformative experiences, shifting from a short-term seasonal lens to a clear long-term view of the ideal client and taxpayer experience allows us to test and learn continuously, move faster with sharper hypotheses, and increase our pace of delivery and transformation. This is a fundamental change in how I intend to lead. As we experiment and test, not every test will succeed, but each one creates insight. By embedding disciplined experimentation into our operating rhythm, we'll identify opportunities sooner, adapt more quickly, and create greater value for all stakeholders over time. As we begin to bring this strategy to life, with more to come in the quarters ahead, the first area of focus is elevating our role as trusted advisors. When clients engage with us, they're looking for confidence and convenience, and we're transforming our organization to ensure experiences are grounded in both. Our technology-enabled human expertise positions us to deliver insights that matter, helping clients feel informed and empowered while turning a once-a-year task into a meaningful opportunity to support their broader financial lives. While we're early in this work, we're committed in our vision to combine the judgment and empathy of our tax pros with technology to create personalized guidance that goes beyond tax filing. This approach reinforces what sets H&R Block apart and lays the groundwork for deeper, lasting client relationships. To enable this, we're piloting automation capabilities that streamline work behind the scenes, free tax pros to focus on insights that matter. By embedding AI into workflows, we can extract data from documents, pre-populate returns, and automate repetitive back-office tasks. These efficiencies should reduce manual effort, create greater consistency across the network, and enable more time for meaningful client interactions. While early in testing, this represents an important step towards combining human judgment with technology to significantly elevate the client experience. Turning to small business, we continue to see substantial long-term opportunity, including the chance to grow our share in a very large market and deepen the value we provide through more year-round engagement with each client. As we advance this strategy, we're also taking thoughtful near-term steps to strengthen our foundation, including integrating Wave into H&R Block small business in ways that combine our scale and brand trust with Waze SaaS capability. This integration enhances our ability to tackle complexity for small business owners today while supporting the broader vision we see ahead. Lastly, AI is a critical enabler of our long-term vision. Having spent my career building technology platforms and leading product and engineering teams, I've seen firsthand how technology can unlock step-change improvements in the client experience, productivity, and growth when applied with discipline and purpose. Our approach is intentional, disciplined, and responsible, not focused on using AI for its own sake, but on applying it to real client and associate challenges at scale. We evaluate every opportunity through our framework, how technology elevates the client experience, how it strengthens our associates' expertise, and how it drives productivity across the organization. Throughout today's remarks, I've highlighted several initiatives made possible by advances in AI, technology, and innovation. I'm optimistic about the speed and possibilities this will unlock as we move forward on our journey, and I look forward to sharing more progress in the future. I'll now hand the call over to Tiffany.

Thank you, Curtis, and good afternoon, everyone. We are pleased with our results for the first half of the fiscal year, and as Curtis shared, believe we are well positioned for the tax season, which gives us the confidence to reaffirm our fiscal 2026 outlook. Before I get into the details of the quarter, I'd like to remind everyone that our business is highly seasonal, and historically, Q2 contributes approximately 5% of our annual total revenue and typically results in a net loss. For the second quarter, we delivered revenue of 199 million dollars an increase of 11 percent over the prior year this increase was primarily driven by higher assisted tax prep volume and net average charge or knack continued double digit wave growth and higher diy software sales in our company-owned offices we saw strong demand for tax prep services through the end of the extension season and drove improved conversion year-over-year. NAC also improved, reflecting a favorable mix of more complex clients and disciplined pricing actions. At WAVE, we were pleased to once again deliver strong results in our high-margin subscription product pro tier, as well as increased payments volume. This reinforces our commitment to fully integrate WAVE into H&R Block's small business solution by year-end. In Q2, we also completed our Emerald Advance offer period. Applications exceeded our expectations, and the average loan amount was above the prior year, resulting in favorable loan volume. Total operating expenses for the quarter were $498 million, a 5% increase over the prior This increase was primarily due to higher field wages as a result of higher assisted revenue and increased consulting costs associated with a strategic sourcing and cost optimization initiative we expect this initiative to drive sustainable savings over the next several years these operating expense increases were expected and contemplated in our full year outlook our second quarter evital loss was 266 million dollars compared to a prior year loss of 261 million dollars the effective tax rate was 24.3 percent compared to 22.4 percent in the prior year our net loss from continuing operations was 242 million dollars representing a 40 basis point improvement over the prior year loss per share from continuing operations was one dollar and 91 $1.01, while adjusted loss per share was $1.84 compared to $1.73 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. This dynamic is reflected in the $0.11 year-over-year increase in adjusted loss per share, even as our net loss improved. Our disciplined approach to capital allocation continues to drive meaningful value for our shareholders. We generate significant, stable cash flow and expect this year to be no different. We then invest in the business, grow the dividend, and return excess capital to shareholders through share repurchases. In the first half of this fiscal year, we have returned $508 million to shareholders in the form of dividends and share repurchases we have approximately 700 million dollars remaining on our current share repurchase program turning to our full year outlook we are reaffirming the following ranges as provided in today's earnings release revenue between 3.875 and 3.895 billion dollars EBITDA between 1.015 and 1.035 billion dollars an effective tax rate rate of approximately 25%, and adjusted EPS between $4.85 and $5. Our outlook continues to contemplate certain key assumptions. First, industry growth in line with historical norms, or about 1%. A continued emphasis on achieving a healthier balance of volume, price, and mix over time. The strategic prioritization of assisted and paid DIY, the two areas that deliver the strongest biggest lifetime value for H&R blocks. An expanding contribution from small business as a meaningful revenue driver in fiscal 2026 and beyond. And continued franchise acquisitions when opportunities arise at attractive EBITDA multiples, which remains a prudent and value accretive use of capital.

Taken together, these inputs underpin our fiscal 2026 outlook and reinforce our focus on disciplined execution of our strategy which we believe positions us well to continue delivering meaningful value for our shareholders with that i'll turn it back over to curtis for closing remarks thanks tiffany our priorities are clear we're focused on the client equipping our tax pros to build trust and deliver meaningful outcomes at every turn coupled with products designed for clarity confidence and convenience we focus on meeting clients where they are on their terms By combining discipline execution with a commitment to progress, we're positioning H&R Block for lasting growth. I am confident in our team's ability to adapt, deliver, and strengthen our company for the future. Thank you for your continued trust and partnership. Now, Operator, we will open up the line for questions.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Alex Paris with Barrington Research. Your line is open.

Hi, guys. Thanks for taking my questions, and congrats on the better-than-expected off-season quarter.

Thanks, Alex.

Thank you. I just wanted to ask the typical first question. The IRS opened for e-files about a week ago last Monday. First off, was there any impact of this partial government shutdown in the last few days?

Yeah, how are you doing, Alex? Thank you for the question. So I'll go ahead and jump in. We don't see any material impact from the government shutdown. I'll remind everybody that Block has been in business for 70 years, so we are not unfamiliar with government shutdowns. So our taxpayers are prepared to guide our clients through any uncertainty, especially any connected to the one big beautiful goal.

Gotcha. And then, you know, again, data is limited. It's very, very early in the tax season. But any trends to note out of the first 10 days or so?

It's early in the tax season, without a doubt. So we followed up last Monday. Tiffany talked about this, but we expect the industry to grow at approximately 1% this year. I'll tell you, I'm confident in the work that teams have done to prepare for this season. As I mentioned in my prepared remarks, we're focused on executing not just for the season, but we're also focused on testing and experimenting on new capabilities and experiences that are connected to our multi-year strategy that we'll share more about as we go throughout the year. I also want to highlight, Alex, a couple other things that are important. The changes that we made the second look to scale it, the work that we've done to embed AI-enabled tax pro assistance into the tools of our tax pros, the advancements we've made the TPR, the work we've done to optimize our assisted virtual experience, and especially the training our taxpayers have to help clients navigate any uncertainty due to the one big beautiful bill, I'm just – I feel like a well-positioned for the season.

Yeah, no, sounds like it. One of the other things I think we talked about on the last call is you expect not only normal growth, 1%-ish, you know, for tax filing this year, but also that assisted should take some share from DIY, again, say to the tune of about 20 basis points. Any change in that expectation, you know, perhaps driven by One Big Beautiful Bill and increased complexity?

No, we'd expect a tailwind from the One Big Beautiful Bill.

What we historically see is when there's significant tax complexity, it drives clients to seek And you're still thinking low single-digit price increases across both assisted and DIY? That's correct. All right. Well, thank you for that. I appreciate it. Good luck on the balance of the season. We'll have checkpoints between now and then, and I'll get back in the queue.

Thank you, Alex.

Thank you. Our next question comes from Kartik Mehta with North Coast Research. Your line is open.

Hey, good evening. Curtis, as you look at this tax season, are you anticipating similar behavior to last year in terms of the peaks, or do you think the one big beautiful bill will change that in any way?

Hey, Karthik, how are you doing? Thanks for your question. And, you know, what we've seen over the last several years is slower starts to the season from an industry perspective. I wouldn't expect that to change. Without a doubt, the one big beautiful bill will drop uncertainty. I don't think that it's going to dramatically change taxpayer behavior, year, other than the fact that they need to reach out for assistance more, but I don't think that's going to change the timing of which they reach out to get their taxes done.

And then, Curtis, I know it's early in 10 days, but have you seen a change in the refund amount? Is that, you know, the expectation is that it will be larger than last year. Has that come to fruition, even though it might be early?

Yes, it's really, really early. that I would say that I would expect, depending on the client, there to be a portion of their client base that does receive a bigger refund. And you know this. When we look at the standard deduction, that's up $750. We look at the other incremental changes with the TIPS income deduction, the overtime pay deduction, the new senior deduction, and the increase in default deduction. Those are, in some cases, pretty big moves. So I would expect, depending on who you are as a taxpayer, you could see a slightly higher refund.

Perfect. Thank you very much.

It's too early for us to share data that confirms what we're seeing. It's too early for that, but I would expect that to be the case.

Okay. Well, thank you. I appreciate that.

Thanks, Kartik.

Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open.

Hi, this is Sammy on for George. Given expectations for greater complexity and a shift towards assisted filing this tax season, what's driving your outlook for assisted share loss rather than stabilization? or even gain since this type of environment is just run?

Yeah, let me jump in on this one. So, for us, what's important to understand is why our market share hasn't consistently grown in the system. So, I start there from a CEO perspective. We've got names of clients that choose to start with us every year, and we leave far too many in our mid to lower funnel. This comes down to, at the end of the day, us understanding why. And we've spent quite a bit of time over the last six months examining every aspect of the client journey in our assisted business, and the same thing for our taxpayers, examining every step of the journey for our taxpayers as they've worked to engage with our clients. And a large portion of the reason why we've had some challenges is a significant amount of manual processes that are dependent on our taxpayers to operate consistently at a high level. As I mentioned in my prepared remarks, we're focused on leveraging technology to reduce that manual, non-value-added work. We believe this is going to help automate workflows, ensure consistent funnel management, at the end of the day, deliver better client experiences. Our clients care about confidence, convenience, and the belief that they're getting every dollar they deserve. And us enabling taxpayers to lean into that via technology enables that. This is not going to be an overnight transformation of H&R Block. This will be a, you know, multi-year journey, but we believe this is the best journey for us at Block to best improve that client experience.

And I just want to make one, two points of clarification really. So we've been chipping away at the assisted share loss over the last couple of tax seasons and we're making progress. That's point number one. And point number two is when you think about our full year outlook, the high end of our range assumes that we hold share in the assisted category. So that's the top end of our guidance range. And I just want to make sure we make that point very clearly on the call today.

Got it. And as you implement AI tools that make DIY filing easier, such as the AI access, is that a long-term threat to your assisted business as customers start to find it easier to use the DIY channel?

Thank you for your question. We don't think so. It's important for us to meet clients where they are, and we envision a future where there's blended experiences. And a part of our multi-year strategy is to ensure that our DIY clients do have the ability to connect with tax pros, especially when they run into fear, uncertainty, and doubt. So we don't think that that's going to be a challenge or head into our business. We think that's a core part of our multi-year strategy.

Got it. Thank you.

Thank you.

Thank you. As a reminder, to ask a question or re-enter the queue, please press star 11. Again, that is star 11 to ask a question. Our next question comes from Scott Schneeberger with Oppenheimer. Your line is open.

Thanks very much. Good afternoon. Curtis and or Tiffany, just curious, with the 1% industry volume growth that you anticipate and you've been carrying that view for a while, what are some drivers that may lead to upside or downside as you contemplate that as you look out over the season?

Hi, Scott. Thanks for the question. So, certainly the 1% industry growth is historically what we've seen. That's total industry growth, as we talked about earlier in the call today, we think as we look between the two channels, assisted and DIY, we certainly think there's an opportunity given the tailwind from One Big Beautiful Bill, that we could see benefit to the assisted So, we expect to see some movement from DIY to assisted, and we've seen that three out the last four years. To the extent that we see potentially larger refund sizes, there might be some upside to industry growth overall as a result, but we don't expect that to be outsized. So I think 1% is the right place to be, and that's certainly what we've embedded in our guidance.

Thanks, Stephanie. Appreciate that. On your marketing approach this year, just maybe some discussion on timing on a year-over-year basis and magnitude of spending. Obviously, it's all captured in guidance, but just some nuances there if you care to share. Thanks.

Yeah, thank you for your question. We don't see any incremental changes in our historical of marketing spend, but what I do want to talk about from a marketing perspective is our focus this season. As I mentioned a couple of times, it's on meeting customers where they are, with a specific focus on our highest lifetime value customers, and our focus this year from a theme perspective is leveraging the expertise of our tax firms to navigate complexity. You'll see that in our TV commercials. You'll see that in our digital display ads. Let me talk a little bit about connecting AI to marketing. Without a doubt, you guys probably see that consumer behavior is changing in how they search. We're responding to that from an H&R Block perspective. We're evolving from SEO search to AI engine optimization to ensure that we've got the right content, the right visibility, and the right measurement in place. But I think more about AI, I do want to talk about AI specific to H&R Block. From an H&R Block perspective, we see AI as an enabler. It's an opportunity to help us significantly improve the client and tax pro experience. And once again, as I mentioned in prepared remarks, I shared numerous examples of how we're leveraging AI to drive improved experiences. First being AI-enabled tax pro assistance embedded in the tools for our tax pros. The second one being leveraging AI to enable us to be able to scale Second Look. Historically, Second Look was a very manual process. It required a lot of work by our tax pros. Because it was so manual, not all of our tax pros were eager to offer that to our clients. Leveraging AI and technology, we've streamlined that to an extent where it's going to be available to the bulk of our clients and our assisted business this year. The third thing is leveraging AI to reduce the manual work of our tax pros. Today, our tax pros spend a large majority of their time on data collection and data entry. Our focus in our multi-year strategy is our tax pros spend more time on relationship building, guidance, and coaching, helping their clients get their financial success versus tactical work. The other thing that I want to call it that I think is important to understand is why clients choose to work with a tax pro. Now, technically, most clients could choose to use DIY solutions. However, there's a reason out of the almost 150 million people in the U.S. that do taxes today, 55% seek assistance. And it's not because they're looking for an answer to a math problem. They're looking for confidence, trust, and judgment with a personal connection that comes from working with a tax pro. And that 55% of the population that leverages the assist of a tax pro, that's been pretty consistent through multiple technology innovations from paper to desktop software to online software to mobile. So we don't think about AI as a disruptor. We absolutely think about it as an opportunity.

Great. Thank you, Curtis. And then just the last one, Tiffany, real quick. I saw in the release increased consulting costs year over year. Just curious what that is, if that's something that's going to perpetuate.

Yeah, Scott, thanks for the question. So we entered into an arrangement with a consulting firm to take a look at some strategic sourcing opportunities as a way to drive costs out of the organization. As we think about funding growth going forward, we have to look for ways to self-fund that growth because obviously we're committed to our long-term growth algorithm. So, we completed that exercise in the first half of this year. That initiative, that consulting engagement that we entered into is going to create some savings for us, sustainable savings going forward, that we'll be able to reinvest in some of the work that we need to do from a strategy perspective. That was all contemplated in our outlook, by the way, so no step change.

Understood. Thanks very much.

Thanks, Scott.

Thank you, Scott.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Jessica Hazel for closing remarks.

Thank you, everyone, for joining us today. We look forward to reconnecting with you again soon.

This concludes today's conference call.

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