H&R Block Announces Fiscal 2014 Results

• Total revenues increased $118 million, or 4%, to $3.024 billion ¹
• EBITDA increased 8% to $940 million, or 31% of revenues ²
• Non-GAAP adjusted earnings per share³ from continuing operations up 5% to $1.67

H&R Block, Inc. (NYSE: HRB), the world’s largest consumer tax services provider, today announced its financial results for the fiscal year ended April 30, 2014. Revenues increased 4.1 percent, to $3.024 billion, driven by improved return mix and changes to the company’s pricing strategy in its retail locations, digital tax software product enhancements and monetization efforts, and increased Tax Plus financial services product revenues. Returns prepared by and through H&R Block declined 2.6% to 24.2 million worldwide, primarily due to the company’s decision to discontinue its U.S.-based free federal 1040EZ promotion in virtually all markets. Earnings per share from continuing operations increased to $1.81. On an adjusted non-GAAP basis, earnings per share from continuing operations increased 5.0 percent to $1.67.

The company’s increase in revenues in fiscal 2014 was consistent with its recently outlined strategy to grow revenues through a balance of improved return mix and increased product attachments. This included the discontinuation of the company’s free federal 1040EZ promotion in virtually all markets, the exit from unprofitable retail partnerships, and enhancements to its online digital tax software offering focused on improving monetization and conversion. Additionally, the company achieved EBITDA margin expansion, while continuing to invest in initiatives that contributed to improved client satisfaction and helped maintain retention levels for clients filing forms other than the 1040EZ.

The company also served a greater proportion of its clients with its Tax Plus financial services products and increased year-round usage of its best-in-class general purpose reloadable debit card, the award winning Emerald Prepaid MasterCard^®. Revenue per card increased 13 percent, driven by an increase in reloader rates and average deposits per card. The company issued 2.4 million Emerald Cards in fiscal 2014 with approximately $9.2 billion in total deposits.

CEO Perspective

“We delivered a strong year of both revenue and earnings growth and lived up to our long-standing tradition of being the world’s leading tax services provider,” said Bill Cobb, H&R Block’s president and chief executive officer. “Though we anticipated an overall decline in return counts, our Tax Plus strategy is working, and we will continue to focus on enhancing the client experience and delivering best-in-class products and services to drive profitable growth. Our improving client satisfaction scores are a testament to the value we bring to our clients, positioning us well for 2015 and beyond,” added Cobb.

Fiscal 2014 Results From Continuing Operations *Adjusted amounts and EBITDA (earnings before interest, taxes, depreciation and amortization) are non-GAAP financial measures. See “About Non-GAAP Financial Information” below for more information regarding financial measures not prepared in accordance with generally accepted accounting principles (GAAP).

CFO Perspective

“By executing on our Tax Plus objectives, we delivered exceptional results this year, growing both our top and bottom line,” said Greg Macfarlane, H&R Block’s chief financial officer. “Our productivity initiatives enabled us to manage our costs more efficiently and drive margin expansion, while continuing to invest in our business, ultimately creating shareholder value.”

Business Segment Results and Highlights

Tax Services

• Revenues increased 4.2 percent to $3.0 billion, driven by improved mix and changes to the company’s pricing strategy in its retail locations, digital tax software product enhancements and monetization efforts, and increased Tax Plus financial services product revenues
• U.S. assisted tax preparation fees and royalties increased 4.0 percent to $2.1 billion, primarily due to incremental revenue from the company’s decision to discontinue its free federal 1040EZ promotion in virtually all markets, pricing changes, and improved return mix
• Revenues related to Tax Plus financial services products increased 11.2 percent to $432 million, primarily due to pricing changes in the company’s refund transfer offering, higher Peace of Mind revenues, and increased usage and average deposit per card on its Emerald Prepaid Master Card
• International revenue decreased 6.7 percent to $232 million, driven by unfavorable exchange rates and timing differences due to a 5-day extension in the Canadian tax season this year to May 5, which is subsequent to the company’s fiscal year end. Including revenues from returns prepared through May 5, international revenues increased 5.6 percent in local currency.
• Total expenses increased 2.9 percent to $2.1 billion, driven by increased compensation and benefits, including variable compensation resulting from higher tax preparation fees, and depreciation and amortization expenses
• Adjusted non-GAAP pretax income improved 6.3 percent to $874 million

Corporate

• Pretax loss improved by $20 million to $99 million, primarily due to a non-recurring gain from the sale of residual interests in mortgage loan securitizations
• Net balance of mortgage loans held for investment declined $70 million to $268 million, while provision for loan losses declined 38 percent to $8 million
• Effective tax rate from continuing operations increased to 34.8 percent, due to discrete tax adjustments

Discontinued Operations

• Reduction of net loss to $25 million compared to $31 million in the prior year
• Sand Canyon Corporation (SCC), a separate legal entity of H&R Block, Inc., continued to engage in settlement discussions with counterparties that represent a significant majority of previously denied and expected future representation and warranty claims. Based on these actions, SCC recorded a provision of $25 million during the fourth quarter, increasing its accrual for contingent losses related to representations and warranty claims to $184 million at April 30.

Balance Sheet

• As of April 30, the company had unrestricted cash of $2.2 billion and total outstanding debt of $906.5 million
• Shareholder equity at April 30 was $1.6 billion

Dividends

A previously announced quarterly cash dividend of 20 cents per share is payable on July 1, 2014 to shareholders of record as of June 16, 2014. The July 1 dividend payment will be H&R Block’s 207^th consecutive quarterly dividend since the company went public in 1962.

Conference Call

In conjunction with the announcement of fiscal 2014 results, the company will host a conference call at 8:30 a.m. Eastern time on June 11, 2014 for analysts, institutional investors, and shareholders to discuss fiscal 2014 results, future outlook and a general business update. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:

U.S./Canada (888) 895-5260 or International (443) 842-7595

Conference ID: 34435396

The call will also be webcast in a listen-only format for the media and public. The link to the webcast can be accessed directly at investors.hrblock.com.

A replay of the call will be available beginning at 11:30 a.m. Eastern time on June 11, 2014, and continuing until July 12, 2014, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 34435396. The webcast will be available for replay June 11, 2014 at investors.hrblock.com.

About H&R Block
H&R Block, Inc. (NYSE: HRB) is the world’s largest consumer tax services provider. More than 650 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2014, H&R Block had annual revenues over $3.0 billion with 24.2 million tax returns prepared worldwide. Tax return preparation services are provided in approximately 12,000 company-owned and franchise retail tax offices worldwide by professional tax preparers, and through H&R Block Tax Software products. H&R Block Bank provides affordable banking products and services. For more information, visit the H&R Block Newsroom.

About Non-GAAP Financial Information
This press release and the accompanying tables include non-GAAP financial information. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles, please see the section of the accompanying tables titled “Non-GAAP Financial Information.”

Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” “forecasts,” “targets,” “would,” “will,” “should,” “could” or “may” or other similar expressions. Forward-looking statements provide management’s current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, income, earnings per share, capital expenditures, dividends, liquidity, capital structure or other financial items, descriptions of management’s plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above. All forward-looking statements speak only as of the date they are made and reflect the company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive and regulatory factors, many of which are beyond the company’s control and which are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2013 in the section entitled “Risk Factors,” as well as additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

For Further Information

Investor Relations:
Colby Brown
(816) 854-4559
colby.brown@hrblock.com

Media Relations:
Gene King
(816) 854-4672
gene.king@hrblock.com

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