Image source: The Motley Fool.
DATE
Wednesday, May 6, 2026 at 4:30 p.m. ET
CALL PARTICIPANTS
- President and Chief Executive Officer — Curtis Campbell
- Chief Financial Officer — Tiffany L. Mason
- Vice President, Investor Relations — Jessica Hazel
Need a quote from a Motley Fool analyst? Email [email protected]
TAKEAWAYS
- Revenue -- $2.4 billion, up 5.3%, primarily from higher NAC and volume in U.S. assisted tax prep, growth in international revenue, and increased refund transfer volume.
- EBITDA -- $1.1 billion, increasing 5.9% and reflecting year-over-year operating leverage.
- Adjusted EPS -- $6.02, up 11.9% from prior year, driven by higher net income and fewer shares outstanding due to repurchases.
- Net Income from Continuing Operations -- $848.8 million, increasing 17.4% versus prior year.
- Operating Cash Flow (first nine months) -- $586.7 million, with $560.9 million returned to shareholders via dividends and repurchases.
- Share Repurchase Activity -- $400 million completed in the first half; Board approval for an incremental $100 million in the fourth quarter, totaling $500 million for the year with $700 million remaining under the repurchase program.
- Effective Tax Rate -- 16.5%, compared to 24.6% in the previous period, influenced by an $84.1 million one-time non-tax benefit from an IRS examination resolution.
- Assisted Channel Market Share -- Flat compared to the industry, representing stabilization after prior declines and three consecutive years of positive trajectory; performance was favorable each week of the tax season.
- Product Attach Rate -- Rose by 550 basis points following rollout of client experience monitors, supporting higher cross-sell of add-on products.
- Client Retention and Conversion -- Retention increased among clients exposed to the Second Look product, with new clients returning at a “600+ basis point higher rate” than those without Second Look; conversion rates improved due to a new personalized pre-appointment experience.
- Tax Refunds/Return Mix -- Average refund amounts for clients increased by approximately 11%; clients receiving refunds rose by about 7%, while those owing the IRS dropped by more than 25%.
- DIY Channel Mix -- Mix of DIY free and paid improved by 140 basis points, with notable growth in AGI bands over $100 thousand.
- Franchise Channel -- 150 franchise acquisitions completed year-to-date, compared to 124 in the same period last year; franchise office performance underperformed company-owned offices by approximately 2% on a like-for-like basis due to volume.
- Guidance Raised -- Full-year outlook increased: revenue forecast at $3.91 billion to $3.92 billion, EBITDA at $1.025 billion to $1.035 billion, effective tax rate around 14%, and adjusted diluted EPS between $5.10 and $5.20 for fiscal 2026.
- AI Adoption and Strategic Focus -- AI-enabled automation scaled for "Second Look," tax pro productivity, and real-time DIY assistance (AI Tax Assist handled 4.1 million messages, up 88%); "Sidekick" AI assistant adopted by tax pros.
SUMMARY
Management highlighted that the stabilization of assisted channel market share corresponded with enhancements to omnichannel offerings combining technology and expert-led support. Strategic AI investments produced measurable improvements in both client-facing tools and tax pro efficiency, aligning with a deliberate shift toward higher-value, more complex clients. Full-year guidance was raised across all major metrics based on sustained financial and operational performance, supported by consistent execution throughout the tax season.
- Management confirmed franchise office buybacks, totaling 150 year-to-date, significantly influenced royalty revenue trends and reflected the company’s long-term strategy for quality control and client experience.
- The client base increasingly comprises higher-AGI, complex filers, while management deprioritized low-lifetime-value DIY users in favor of durable revenue growth.
- A one-time $84.1 million non-tax benefit favorably impacted tax expense and earnings per share, resulting from an IRS examination conclusion.
- Board-approved $100 million incremental share repurchase is attributed to "dislocation in the stock price," with no expected impact on dividend policy pending the annual review.
- Raised guidance explicitly included considerations for peak labor and shifting marketing expenses, as more filers opted to file later in the season.
INDUSTRY GLOSSARY
- NAC (Net Average Charge): The average amount charged to a client, net of discounts and returns, for tax preparation services rendered.
- Second Look: H&R Block (HRB 2.33%) service offering a review of prior-year tax returns for new clients to identify potential errors or missed credits, now enhanced through AI-driven automation.
- Product Attach Rate: The proportion of core tax preparation customers who purchase additional services or financial products per transaction.
- Assisted Channel: Tax preparation delivered by in-person or remote tax professionals, as opposed to client-directed DIY software use.
- DIY Channel: Direct-to-consumer tax preparation performed by clients using digital self-prep tools, with optional support features.
- Franchise Buyback: The company's repurchase of independently operated franchise offices to integrate them as company-owned locations.
- AI Tax Assist: An AI-powered digital tool providing real-time, expert-driven responses to customer tax preparation questions within the DIY platform.
- Sidekick: An internal AI assistant supporting H&R Block tax professionals in researching complex tax scenarios using proprietary and third-party AI technologies.
Full Conference Call Transcript
Curtis Campbell, our President and Chief Executive Officer, and Tiffany L. 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 would like to remind listeners 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 will discuss today are presented on a non-GAAP basis. We have 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, 05/06/2026. 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 the call over to Curtis.
Curtis Campbell: Good afternoon, and thank you for joining us. This quarter, we delivered strong results ahead of expectations across all key metrics. Those results demonstrate that our strategy is translating and that the quality of our business continues to improve. Based on our year-to-date performance, we are raising our full year outlook. This tax season provided early evidence that our strategy focused on expert-led, technology-enabled experiences is showing up in measurable ways, not just in our financial performance, but also in how clients are choosing us: engaging with our experts, experiencing more technology- and AI-enabled service.
Those outcomes reflect capabilities we built steadily over the last year and that we further sharpened this season through strategic experimentation, targeted decisioning, and disciplined execution, all centered on the clients we serve. Our progress this year reinforces that H&R Block, Inc. is uniquely positioned to meet clients where they are, bring their trust to expert judgment, and give them the confidence to navigate the complexity of tax preparation and tax planning. Coming out of the season, it is clear that our focus on assisted is delivering tangible results. A key question surrounding H&R Block, Inc.'s performance has been when we stabilize assisted channel market share. Well, this season we did.
After two years of improving share trends, net progress translated into meaningful inflection in tax season ’26, as we maintained assisted share, holding our position in a highly competitive environment. Importantly, our assisted channel market share performance was favorable each week throughout the entire season. That consistency matters. It reflects stronger execution from the start of the season through the peak. We continue to see our value proposition resonate most in client segments with a strong desire for confidence, trust, and judgment. Clients with more complex needs are choosing to engage with H&R Block, Inc. at higher rates, and our omnichannel model is designed to serve those clients with the right combination of human expertise and technology.
I will speak more to that in a moment. This season's performance underscores the quality, consistency, and strategic focus of the assistance we provide, supporting a more durable business. Our disciplined execution also translated into better outcomes for clients, including evolved experiences that deliver clear expectations, fewer friction points, and more consistent delivery whether our clients engage with us digitally or in person. Those experience improvements drove stronger conversion, higher retention, and better product attach rates, reinforcing both the quality of the experience we are delivering and that our clients are responding to it.
One example of how we improved conversion this season was the introduction of a personalized pre-appointment experience that set clear expectations, reduced unnecessary steps, and guided clients to a more streamlined path into the appointment. By addressing friction early in the journey, clients came into appointments better prepared and more confident, which translated into higher conversion rates. Along with conversion, we also saw meaningful retention improvement this season, with Second Look a clear proof point. Last quarter, I shared our plans to meaningfully automate and scale Second Look while we view it as an important driver of client loyalty over time.
I am pleased to share that new clients who received Second Look last tax season returned at a 600+ basis point higher rate compared to new clients who did not receive Second Look, reinforcing its role in building trust, confidence, and a quality experience from the very start of the relationship. We are now using AI-based technology to scale Second Look and embed it more consistently into the new client experience so more clients can benefit. By automating the initial review of prior-year tax transcripts, we can focus tax pros’ time on returns with the greatest opportunity while still delivering timely, actionable insights for more clients.
This capability allows us to expand Second Look in ways that were not previously feasible and extend its positive impact even further. I have also emphasized our focus on eliminating and/or automating inefficient work so that our tax pros can focus on what matters most to clients, and that is the relational and trust-building experience that differentiates H&R Block, Inc. As part of that effort, this season we equipped all of our offices with client experience monitors, allowing clients to learn about and explore add-on products in a simple, self-guided way without the need for tax pro intervention.
Our tax pros are naturally focused on accuracy, advice, and building trust with clients, so simplifying choices, improving clarity, and digitally engaging clients through the client experience monitors proved very successful. Coming out of the season, we saw a 550 basis point increase in product attach, and clients reported greater comfort with the process. Recent tax law changes also contributed to positive client outcomes this season. Average refund amounts for H&R Block, Inc. clients increased by approximately 11%. We saw approximately 7% growth in clients who received a refund and more than a 25% decline in clients who owe the IRS. Those recent tax changes also created new opportunity to help clients access meaningful benefits.
A clear example is five thirty eight Trump accounts where we helped enroll more than 2 million accounts, representing over 90% of eligible clients whose children qualify for the $1 thousand fee contribution. Together, these results underscore the role we play in helping millions of clients navigate complexity, support important financial goals for their families, and strengthen their financial confidence. We are also seeing our strategy translate clearly in the segments that are most critical to the long-term health of the business. That impact is most evident with more complex clients where confidence, trust, and judgment play a central role in the decision to engage.
As our execution and customer experience improved, we have seen a greater mix shift towards higher-complexity clients this year, reinforcing that our model resonates most where expertise truly matters. As we have said before, not all market share is created equal, particularly in the DIY channel. Customer lifetime value matters more to the financial health of our business than raw volume. Our focus remains on attracting and retaining clients who are more likely to build long-term relationships with us rather than optimizing for lower lifetime value, transitory filers. This season’s results reflect deliberate progress in this area, improving both durability and economics within our business. The gains we are seeing reinforce our focus.
They are proof points that disciplined execution and deliberate choices are translating into higher-quality, more durable growth. This season reinforced that the winning model in an AI-driven future is expert-led, technology-enabled experiences, particularly in a high-stakes, highly regulated environment like tax preparation. As AI adoption increases, accuracy and confidence matter more than ever, and clients continue to value the trust, judgment, and accountability that come from working with a tax expert. Our model is well positioned in this environment, and our approach continues to receive external recognition. CNET not only named H&R Block, Inc. the best online tax product, but also recognized H&R Block, Inc.'s AI-powered tax platform with its Best Use of AI award.
That recognition highlights how we pair advanced technology with trusted expertise to deliver better experiences for our clients. And we saw this expert-led, technology-enabled positioning reinforced through client and tax pro behaviors and outcomes this season. Let me touch on a few examples of how this came to life. This year, we rolled out Sidekick, our AI-enabled tax pro assistant. Through our collaboration with OpenAI and grounded in the expertise of H&R Block, Inc.'s Tax Institute, we created a unique AI tool that allows tax pros to query and research complex tax topics.
Sidekick received positive feedback and saw strong adoption all season, underscoring the power of embedding AI-assisted support directly into the expert workflow while professional judgment remains critical and amplifies impact for clients. Similarly, within the paid DIY filing experience, AI Tax Assist provided clients with real-time, expert-informed answers, and it is becoming increasingly effective as we incorporate learnings from each season. This tax season, AI Tax Assist supported 4.1 million client messages and responses, representing an 88% increase year over year. We gave you these examples along with the AI-enabled scaling of Second Look I discussed earlier to illustrate how we are applying AI in practice, drawing on the capabilities we develop in-house and with select external partners.
They reinforce that our strategy is not about replacing expertise with technology, but about using technology to scale expertise, strengthen trust, and deliver more consistent, higher-quality outcomes for our clients whether they work with our tax pros or choose to self-prepare. I have shared the evidence of our strategy at work this season, reflected in stronger conversion, higher client retention, better client experiences, and improvements in the quality of our business. What I want to focus on next is what I believe will continue to drive results next season and for years to come. At the core is how we operate.
We have embedded a disciplined learning mindset into how we run the business, focused on identifying what drives meaningful impact, learning from what happens in the wild, and scaling what works. This is not about one-off initiatives. It is about building repeatable execution that compounds over time. Our approach is intentional and focused on removing friction and elevating outcomes for the clients we serve. Not every experiment will earn the right to scale. Some experiments will fail. But every experiment must generate learnings that sharpen execution and accelerate our velocity. We ran more than 150 experiments this season, which is exponentially higher than in prior years.
I have talked about several already, and I will not go through all of them, but I do want to highlight one that illustrates how this discipline translates into real impact. One of those meaningful areas of progress this season has been AI automation. We are accelerating our testing and use of more advanced AI tools across tax preparation with a clear goal: eliminating manual data entry, which is a non–value-added step for both clients and tax pros. These efforts are designed to handle more of the mechanical work behind the scenes—the data collection, data entry, and calculations—while keeping tax pros firmly in the role of review, judgment, and advice.
By reducing time spent on manual tasks, we can free up capacity for tax pros to generate deeper insights and enable higher-value client conversations. This combination creates a structural advantage relative to purely digital models, particularly in a category where mistakes carry real consequences and confidence matters. Results from our AI-enabled automation experimentation this season have been strong. Although there is still more to learn, we are encouraged by what we are seeing, with a clear path to further scaling over time and expanding our ability to help and empower financial freedom for millions of Americans.
I have covered a significant amount of information today and shared examples of how we are operating with discipline, testing in real-world conditions, learning quickly, and scaling what works. The takeaway is that this is how we compound progress over time and continue to raise the consistency, quality, and durability of our business. What we saw this tax season reinforces that our strategy is delivering results while also making clear that we are just getting started. There is significant opportunity ahead to raise the bar in execution, deepen our impact with more complex clients, and further scale the capabilities driving consistency and quality across the business.
Our omnichannel model is designed to extend that execution across client needs and the ways clients choose to engage. I also want to mention I am excited about the leadership team we have in place. They bring a strong combination of deep industry experience and fresh perspectives, and I am confident this team will continue to execute with discipline and momentum as we move forward. As we look ahead, our priorities are clear. We will continue to elevate the client experience, serve more complex clients, expand our small business opportunity, and apply AI and technology to scale trusted expertise and deliver consistent expert-led outcomes at a level independents cannot match. I will now hand the call over to Tiffany.
Tiffany L. Mason: Thank you, Curtis, and good afternoon, everyone. In the third quarter, we delivered strong year-over-year growth across our key financial metrics, with revenue up 5%, EBITDA up 6%, and adjusted EPS up 12%, reflecting performance above expectations. Based on our year-to-date results, including a strong tax season, we have raised our full year outlook. In the third quarter, we delivered revenue of $2.4 billion, an increase of 5.3% over the prior year. This increase was primarily driven by higher NAC and volume in U.S. assisted tax prep, growth in international revenue, and an increase in refund transfer volume.
As Curtis noted, our assisted channel market share trend improved meaningfully this season, marking the third consecutive year of improvement in our core business. We were able to maintain our market share position this season through better execution in a highly competitive environment. In the DIY channel, not all market share is created equally because of the free and paid dynamic, and we have made a strategic choice to prioritize lifetime value. While our assisted volume growth outpaced DIY, key underlying health metrics improved across the business. We drove improved conversion rates in both channels year over year, supported by lower friction and better client experiences.
We delivered higher retention rates among prior clients, and our mix continued to shift toward more complex returns, particularly with $100 thousand+ AGI clients. Adjustments were made without impacting clients’ value perception. Taken together, we believe these results reflect a healthy and improving business. Total operating expenses for the quarter were $1.4 billion, a 4.8% increase over the prior year. This increase was primarily due to higher field wages as a result of higher assisted revenue. As we have experienced the last few years, a significant amount of volume is processed in the final weeks of the season, which puts pressure on labor capacity resulting in overtime.
Additionally, as we serve increasingly more complex clients, we have an opportunity to allocate return volume more effectively across our tax pro population. Third quarter EBITDA increased 5.9% over the prior year to $1.1 billion. Our effective tax rate was 16.5% compared to 24.6% last year. During the quarter, we recognized a one-time non-tax benefit related to the resolution of an IRS examination that we have previously discussed. This $84.1 million benefit reduced income tax expense and provided a $0.65 benefit to earnings per share. Net income from continuing operations was $848.8 million, an increase of 17.4%, and earnings per share from continuing operations were $6.61, an increase of 24.2%.
Adjusted net income was $773.7 million, an increase of 5.8%, and adjusted earnings per share were $6.02, an increase of 11.9%. The increase was a result of fewer shares outstanding from share repurchases and higher net income. Our disciplined approach to capital allocation continues to create meaningful shareholder value. We generate significant, stable annual cash flow and expect the same for this fiscal year. We use this cash flow to invest in the business, grow the dividend, and return excess capital to shareholders through share repurchases. In the first nine months of the fiscal year, we generated operating cash flow of $586.7 million.
During that period, we have returned $560.9 million to shareholders in the form of dividends and share repurchases, with Board approval to repurchase an incremental $100 million of stock in the fourth quarter under our previously disclosed $1.5 billion repurchase program. We have approximately $700 million remaining under that program. Turning to our full year outlook, based on strong year-to-date performance, we are raising our guidance for fiscal 2026. As reflected in today's earnings release, we now expect revenue in the range of $3.91 billion to $3.92 billion, EBITDA in the range of $1.025 billion to $1.035 billion, an effective tax rate of approximately 14%, and adjusted diluted earnings per share in the range of $5.10 to $5.20.
Our updated outlook reflects the strength and consistency of our execution every quarter of fiscal 2026. And with the tax season now complete, we have also incorporated full season results, peak period labor costs, and a planned shift in marketing expense that aligns with later-season filing dynamics. We were pleased with our third quarter operational and financial results, yet the more important takeaway is what they reflect about the trajectory of our business. We are creating a more durable, expert-led, technology-enabled model, providing assistance to our clients wherever and however they choose to engage with us. That positions us to generate more cash flow and deliver greater value for shareholders.
With that, I will turn it back over to Curtis for closing remarks.
Curtis Campbell: Thank you, Tiffany. This quarter reflects continued progress against our strategy and improved execution across the business. As the results show, better client experiences, stronger retention, and a continued shift towards more complex clients are contributing to a more durable business. I want to thank our tax pros, associates, franchisees, and partners for their continued dedication to serving clients with expertise and with care. And importantly, I want to thank our clients for their continued trust and confidence in H&R Block, Inc. At the core of what we do, H&R Block, Inc. is in the business of trust, and we do not take that responsibility lightly. It remains central to everything that we are.
We will now open the call for questions.
Operator: You may press star 11 to ask a question. Press star 11 again to remove yourself from the queue. Our first question comes from the line of Kartik Mehta of Northcoast Research. Your line is open, Kartik.
Kartik Mehta: Hey. Good afternoon. Curtis, I wanted to just look at assisted market share and your perspective on that this tax season. I know the tax results you give are from July 1 through April 30, but if you looked at the tax season from January 1 through the thirtieth, kind of the IRS data that is out now, how would you characterize market share for H&R Block, Inc. this season on the assisted side?
Curtis Campbell: I am happy to talk about our results this season. Let me touch on that, Kartik, and thank you for the question. I hope you are doing well. We had a really strong season in assisted this year, and just a reminder, assisted gained share in three of the last five tax seasons. This tax season, tax law changes, as you know, resulted in an increase in the number of taxpayers receiving a refund. If you take a look at the information from the IRS, it also resulted in an increase in the average refund amount by 11% and a decrease in the amount of balance dues by a little over 20%.
All those things are strong positives for most taxpayers. Now keep in mind—and most people know this to some extent—higher refunds were enabled by the fact that payroll providers and employers did not adjust the withholding tables by the time the tax changes from the one big beautiful bill came out late last year. Oftentimes as well, tax law changes are believed to drive tailwinds for assisted, especially with their potential negative impacts to taxpayers. In this case, this tax season, taxpayer impacts were super positive. There was very little additional boost or tailwind to the assisted market.
As we start to think about next year, employers and payroll providers are working on updating their withholding tables, so there could be an adjustment back to a normal. We might see refund amounts decrease and balance dues increase.
Tiffany L. Mason: I would just punctuate too, we were really pleased with the team’s performance this tax season and really pleased with the fact that after two years of making progressive improvement in our assisted channel market share, we were able to hold flat market share relative to industry growth. So really pleased with the team’s performance.
Kartik Mehta: And then just, Curtis, on your Tax Pro product, I know you tried something a little bit different there. How do you think of the success of that business and maybe what kind of conversion rate you were able to have because of the program?
Curtis Campbell: Yeah. And, Kartik, when you say our tax pro product, what specifically are you talking about?
Kartik Mehta: Well, I apologize. Tax Pro Review is the DIY product that allows a tax preparer to review the tax return.
Curtis Campbell: For sure. So we saw nice progress there. That has been an offering for us for many years now. We continue to lever that up. We saw really good results from a conversion perspective for those paid filers that utilize Tax Pro Review, as well as other promos that we ran this year. I will take it all the way back to one of the talking points in my prepared remarks. I talked a lot about assisted. It is really important for us from a strategic standpoint to lean into assisted and those filers that are looking for that from us from a trust, confidence, and judgment perspective. We saw really strong performance in TPR, as well as other promos.
We will continue to learn just like we do every year.
Kartik Mehta: Perfect. Thank you. Really appreciate it.
Curtis Campbell: Thanks, Kartik.
Operator: Our next question comes from the line of Scott Schneeberger of Oppenheimer & Co. Your line is open, Scott.
Scott Schneeberger: Thanks very much. Good afternoon, all. Just following up on Kartik’s question. I think there is a little confusion. Maybe, Tiffany, could you discuss this year and the last two years of the market share progression in assisted of H&R Block, Inc. versus itself? I think it is a different dynamic versus the industry, but versus itself is what I think you are outlining. Could you quantify it each of the last three years so we can gauge the progression?
Tiffany L. Mason: Yeah, Scott, I can. We saw improved market share performance in each of the last three seasons. We were down in market share in the assisted channel in tax season ’24. We made improvement in tax season ’25. I am not going to give you basis points because that is proprietary information, but we were down in each of the last two years, but the trajectory was improving, and we are flat relative to the industry in tax season ’26. So we made sizable progress from last tax season to this tax season.
I want to make sure that as you are looking at data, I can help reconcile some of this confusion because if you are looking at our operating statistics table, which is in the slide deck that we posted on our Investor Relations website just before the call, that data runs from July 1 until April 30. So that reflects full year-to-date performance. Obviously, the information that you are looking at from the IRS is publicly reported data that is one week in arrears. So that data is as of April 24, and it only reflects the tax season. So those are two different points in time with two different starting points.
And then the third thing I will say is our data also on the operating statistics table includes all filing data, not just e-file, which is what the IRS reports, but it would also include things like paper filings and entity filings, for example. But what I will tell you is when we share our market share statistics, we do it on the same basis that the IRS reports. So we are talking about e-file data, like-for-like versus the IRS, and that data suggests that our market share is flat for the season, which we are really proud of.
Scott Schneeberger: Thanks, Tiffany. And just a clarification: when you do the comparison, are you measuring from summer last year? Any commentary on extensions and what impact that had in the back half of last year, assuming that is the time frame that you are capturing in this measure?
Tiffany L. Mason: The operating statistics table that you are looking at is from last summer through the tax season, but when we give our market share commentary in our prepared remarks, it is just like the IRS reports. So from January 1 through the end of the tax season, our market share is flat in the assisted channel. That is great news. To your point about extension data for this tax season, extensions are up, so we should continue to have good performance through this coming extension season.
Scott Schneeberger: Looking forward. Okay, gotcha. And I understand. Were you using the most recent IRS we see public or the prior week that captures the last week before the deadline?
Tiffany L. Mason: Our commentary was based on the same information you can see in the public data, which is as of April 24. That is the last time the IRS reported publicly.
Scott Schneeberger: Gotcha. Okay. Thanks. That is really helpful. And then on the buybacks, the strategy with the buybacks—obviously there is a very opportune share price at H&R Block, Inc., probably behind the decision. Often, you have not done it in this time period. Some commentary on that and how that might impact your normally elevated repurchase activity in the fiscal first half of your new fiscal year?
Tiffany L. Mason: Scott, thanks for the question. We are really pleased that the Board approved an incremental $100 million share repurchase, of course subject to market conditions, for the fourth quarter of this fiscal year. As I said in my prepared remarks, we did $400 million in the first half of the fiscal year, so assuming we can get it done in the fourth quarter, that will bring our full-year fiscal 2026 share repurchase to $500 million. A fantastic result. We will be able to take advantage of what has been some dislocation in the stock price, and that should be a great result for us this fiscal year. It has, right now, no bearing on fiscal 2027.
But I also cannot project any expectations. We obviously have not guided fiscal 2027, and anything that we do in fiscal 2027 is still subject to Board approval. So more to come as we get to next quarter and guide for the next fiscal year.
Scott Schneeberger: Okay. Fair enough. Thanks, Tiffany. I will turn it over.
Tiffany L. Mason: Thank you.
Operator: Our next question comes from the line of George Tong of Goldman Sachs. Please go ahead, George.
George Tong: Hi. Thanks. Good afternoon. You made the decision to prioritize lifetime value with DIY. It is understandable that online free DIY volumes fell this year, but I also noticed that online paid DIY volumes fell too. Can you talk about the dynamics here and what is behind that?
Curtis Campbell: Yes, George, thank you for your question. Let me emphasize first that not all DIY market share is created equal, and our focus is on attracting and retaining more complex clients with higher lifetime value rather than pursuing transactional, low-lifetime-value clients. That applies to certain categories of paid and, of course, the free. If I take a look at the data for this season, our DIY mix between free and paid improved by 140 basis points. We saw really strong year-over-year growth in AGI bands over $100 thousand. It is very positive and a part of our strategy. When I think about DIY, I do want to call out that it is an important entry point within our model.
We do not manage the business to optimize for DIY volume in isolation. At the end of the day, our approach is focusing on clients that are looking for the right level of assistance that we can deliver through our omnichannel model.
George Tong: Got it. So it sounds like it is a decision to selectively go after customers that can eventually upsell themselves and de-emphasize paying clients that do not have much monetization opportunity.
Curtis Campbell: For sure, because we have to look at our customer acquisition cost versus lifetime value. That is a really important equation for the business. In my prepared remarks, I talked a lot about assisted and our strategy. I talked about the evolution of us leveraging AI to automate the transactional aspects of tax preparation to focus on the relational pieces. It is really important for us strategically to focus on clients that align with that.
George Tong: Understood. And then as a follow-up, on the assisted side, I noticed that the franchise operations volumes fell this tax season. Can you elaborate on that—if you think that is a structural dynamic that will persist over the medium term, or if that is something that happened this year?
Tiffany L. Mason: Yeah, George, thanks for the question. Let us unpack franchise for just a minute. A couple of things to point out. If you are looking at the decline in royalty revenue year over year, we do have the franchise buyback strategy. I would say the decline in royalty revenue is largely a result of our buyback strategy. Year to date, we have done about 150 franchise acquisitions. However, if you set those acquisitions aside and you just look on a like-for-like basis this year versus last year at our franchisee base, the franchise footprint is underperforming our company office footprint by about 2%, and that was entirely driven by volume.
If you think about the initiatives in our company offices, both in driving conversion of our WIP and in driving higher retention through some of our strategic initiatives, we are seeing our company offices perform a bit better. I do not think there is necessarily a structural difference, but I do think there are some local market differences as we compete head to head with independents across our geographic base in the U.S.
Curtis Campbell: Okay.
George Tong: Got it. Very helpful. Thank you.
Operator: Thank you. Star 11 on your telephone if you would like to ask a question. Our next question comes from the line of Alexander Paris of Barrington Research. Please go ahead, Alex.
Alexander Paris: Thank you, and congrats on the beat and raise in the quarter. Most of my questions have been asked and answered. Just a quick follow-up on the last one. Tiffany, you mentioned you did approximately 150 franchise buybacks this year, year to date. What was the number last year for either the nine months or the full year? Was it 124? My notes show that.
Tiffany L. Mason: You got it, Alex. It was 124. You got it right on the dot. And thank you for the congratulations. We appreciate it.
Alexander Paris: You got it. And then with regard to the raised guidance, were there any divergences from the underlying assumptions that you had for the season? For example, you talked about industry growth of 1%, and a healthier balance of volume, price, and mix. Did anything come in materially better or worse than you had expected going into the season?
Tiffany L. Mason: Alex, I would say a couple of things. None of the underlying assumptions really changed. Industry growth rate is coming in right where we expected. I do want to highlight the pursuit of the healthier balance with price, volume, and mix. If we think about our performance in the assisted channel—and you can see it in that operating statistics table—volume is up 2.1% and NAC is up 3.9%. This is probably the healthiest balance we have seen in some time, so we are really proud of that. NAC, in particular, if you unpack that, we took a low single-digit price increase, we used channel, and the rest of that is mix.
Again, really nice balance, and that is playing out the way that we had expected. If I think about the inflection from the tax season (Q3 into Q4), the only things I would point out would be the shift that you can see in marketing. We made an intentional shift to match the timing of our marketing spend with the way that the season was unfolding and the way that we continue to see filers come later and later into the season. So there is a little bit of shift in marketing dollars from Q3 to Q4. That is something to think about as you plan the rest of the year relative to our results.
And the other would be the same thing with field labor. As we see peak volumes in April, which hits our Q4, you are going to see those peak labor costs as well. Otherwise, no dramatic difference in what we had planned at the start of the year. Curtis, maybe you want to spend a few minutes talking about strategy.
Curtis Campbell: For sure. Alex, thanks for the question. Let me double down a little bit on strategy. I know I talked about this in the prepared remarks. I will talk specifically about AI. It is our belief that H&R Block, Inc. is uniquely positioned to win in an AI-driven tax industry. We can seamlessly blend AI capabilities with our 70 years of human expertise and accountability in a way that we believe independents cannot. We view two components of tax preparation. There is the actual data collection, data entry, and calculation portion—we often call that the mechanical portion, component one. Then you have component two, which is the relational experience where trust, accountability, and judgment live.
That is really important and a part of our strategy. We believe as AI automates the mechanical work of tax prep, differentiation is going to shift away from those mechanical pieces towards the relational pieces that matter most to clients—trust, judgment, and accountability. In the high-stakes world of taxes—this is the biggest paycheck of the year for most Americans—when taxpayers get this wrong, bad things happen. Typically, taxpayers do not want to get it wrong, and history shows us that. Over the last 30 years, the percentage of taxpayers seeking assistance has remained fairly constant through the transition from paper to box software to cloud to mobile to machine learning to Gen 1 AI.
More than half of taxpayers continue to seek assistance, and it is not for calculations. It is for confidence, guidance, and accountability that comes from working with a tax pro. As we think about an AI-driven future, we believe the premium on trust increases. The winners are going to be those that can seamlessly blend AI speed with consistent human expertise, and that is why you heard me emphasize earlier our expert-led, technology-enabled focus. It is at the core of what we are doing at Block. With our go-forward strategy, we believe H&R Block, Inc. is structurally advantaged in this environment.
With 70 years built on trust, judgment, and accountability—and decades of real client scenarios and data—we are using AI to amplify expertise, not replace it. So we think that we are well positioned from a strategic standpoint to continue to win. Thank you for the question, Alex.
Alexander Paris: I appreciate the color. And then my last question is regarding the long-term algorithm. As I start to think towards fiscal 2027 and beyond, the long-term growth algorithm has historically been 3% to 6% revenue growth, adjusted EBITDA growing 1.5x that rate, and EPS growing at a double-digit rate. Is that a reasonable proxy at this juncture going forward, or are there any thoughts or changes to that long-term algorithm?
Tiffany L. Mason: No changes, Alex. We are committed to the long-term growth algorithm. If anything, as we start to get some proof points on the board around the strategy that Curtis just talked about—some of the things that we talked about in our scripted remarks today—we have even more conviction that is the right ZIP code for us to be in.
Alexander Paris: And the last question relates to a prior question regarding the incremental share repurchases expected in the fourth quarter. Does that have any impact on the dividend? I know the Board reviews the dividend only once annually, and we usually find out about it after the fourth quarter. But does the incremental $100 million have any impact or bearing on a decision whether to maintain, which would be the minimum expectation, or raise the dividend this summer?
Tiffany L. Mason: Our capital allocation priorities are unchanged. Priority number one is to invest in the business, number two is grow the dividend, and number three is return excess capital to shareholders through share repurchase. As the Finance Committee of the Board meets this summer in advance of the August earnings call, they will think about our capital allocation in that order. Obviously, more to come, but there should not be any concern with any of the dividend protocol or anything thereafter.
Alexander Paris: And for what it is worth, I applaud the decision of the Board to increase share repurchases in the fourth quarter given the dislocation in the stock price, driven largely by the AI boogeyman. It seems like AI is a significant tailwind potentially for you in terms of the efficiency of the tax pros and the client experience.
Curtis Campbell: Thank you, Alex. We are going to give you a virtual high five. Thank you.
Operator: Thank you. I would now like to turn the conference back to Jessica Hazel for closing remarks. Madam?
Jessica Hazel: Thank you, everyone, for joining us today. We look forward to reconnecting with you again soon.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
