H&R Block Stock

Thank you for standing by, and welcome to H&R Block's Fourth Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Jessica Hazel, Vice President, Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to H&R Block's Fiscal 2026 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, August 11, 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'll now turn it over to Curtis.

Good afternoon, everyone, and thank you for joining us. Fiscal 2026 was a meaningful year for H&R Block. We delivered strong results, made significant progress against our strategic priorities and continue to strengthen the quality of the business. Revenue increased 4.9%, EBITDA increased 8.3% and adjusted EPS increased 13.9%. The growth we delivered this year was meaningfully stronger than what we've achieved in recent years. We also generated strong cash flow and returned $714 million to shareholders through dividends and share repurchases.

What matters most is what drove those results. We converted more clients to completion. We retain more clients. We continue to improve the quality of our client base, and we made meaningful progress against the initiatives that matter most to the long-term durability of the business. Taken together, fiscal 2026 strengthened our belief that the strategy is working in that H&R Block is on the right path. The results we delivered this year and the evidence behind that give us greater confidence we can further accelerate long-term shareholder value. Over the past several quarters, we shared elements of the long-term strategy we're executing across H&R Block. Fiscal 2026 marked our first full year executing that strategy. And over the coming quarters, you'll hear more about where we're headed and the opportunities we have in front of us.

As we look back on the year, what stands out most is the evidence that our expert-led technology-enabled strategy is showing up in stronger client outcomes and stronger business performance. One of the clearest proof points we saw this year was in the assisted category. After 2 consecutive years of improving trends, we maintained share in the assisted category in 2026. That matters because it demonstrates that the actions were taken to bolster the client experience are helping strengthen our competitive position in our largest business. We also saw clear evidence that clients are responding to the changes we made to improve the experience. Conversion improved 200 basis points this season, which we believe is the largest single year improvement in our recorded history.

That improvement was a result of deliberate refinements across the customer journey, supported by automation and product enhancements that help create a more personalized experience with fewer friction points. We saw the same pattern in retention. The rate at which clients returned this season increased 190 basis points, and second look continues to be a strong proof point. New clients who received second look returned at a rate more than 600 basis points higher than those that did not. That's because second look delivers something client value deeply, expertise beyond current texture preparation, confidence that H&R Block is working on their behalf to find every dollar they deserve and a relationship with a trusted tax pro, where as their interest in mind, not only in tax season, but throughout the year.

We also continue to see evidence that technology is enhancing rather than replacing the expertise that differentiates H&R Block. This season, we expanded the use of AI and automation across the business, help tax growth focus more of their time on delivering advice, judgment and client support. Siket, our AI Tax Pro system launched across our offices and saw strong adoption throughout the season. While AIX assists with paid DIY filers supported 4.2 million client interactions and drove nearly double the level of engagement we saw a year ago. We also automated and significantly expanded second look, allowing us to bring those benefits to more clients, while help Tax Pro focus on the returns with the greatest opportunity. Together, these advances reinforce an important aspect of our strategy, using technology to scale expertise and deliver better outcomes for clients.

Taken together, these results reinforce our confidence that our strategy is working. We're seeing stronger client outcomes, improving business quality and growing evidence that are expert-led technology-enabled strategy is translating into better performance. That combination is strengthening the durability of business today while creating a stronger foundation for future growth. A major part of our strategy is continuing to win with more complex, higher lifetime value claims. We're not focused on growth for the sake of volume alone. We're focused on attracting and retaining the type of clients that strengthen both the durability and economics of our business. We continue to see that shift in fiscal 2026. More complex clients engage with H&R Block at higher rates and our client continues to move towards the segment, we've been intentionally focused on.

Over the last few years, the percent of clients falling within our target household AGI range of $50,000 to $200,000 has increased from 38% of our clients to 50%. Today, we're serving a higher percentage of clients with investment income, small business and sole proprietary needs and increasingly diverse income streams. That's important because it shows we're not only targeting these relationships, we're succeeding in attracting them. Research tells us that clients with more complex financial-wise, value assistance, expertise and trusted advice. This is exactly where H&R Block stands apart. Our brand, tax expertise, omnichannel model and growing technology capabilities allows us to serve these clients in ways that are increasingly relevant to their needs.

We will continue to lean into these consumer groups rather than pursue lower lifetime value, transaction-oriented clients because volume alone doesn't create durable economic value. As a result, we'll continue to improve the quality of the business. These relationships create more opportunities to serve clients over time, support stronger retention and improve the long-term economics of our client base. Our omnichannel model is becoming an even greater competitive advantage because it's built around a simple idea. Clients don't all need the same level of assistance and their needs change over time. Some clients want to prepare their return entirely on their own. Others want occasional guidance through tools like AI tax assist, somewhat the assurance and accountability that comes from tax per review, and others perform or guided support from a Tax Pro through virtual or in-office experiences.

Our advantage is that we can meet clients where they are and provide the level of assistance they need when they need it. As their needs evolve, we're there every step of the way for them. We believe this flexibility is becoming increasingly important as technology changes how clients engage. Technology can simplify tasks and make assistance more accessible while human expertise provides the judgment, advice and confidence that technology alone cannot. We're not building separate digital and expert-led experiences. We're strengthening an integrated omnichannel model that operates at scale, where technology and human expertise work together to deliver the right level of assistance the way each client prefers.

That's an important distinction. We're not trying to bolt technology onto a fragmented service model or bolt experts on to a digital model. We're building on a foundation that allows clients to move across DIY, virtual and in-person experiences while receiving the level of assistance that's right for them. We believe our ability to combine expertise and technology across the different needs clients have is becoming an increasingly important differentiator and expanding our opportunity for long-term growth. We saw additional evidence of this throughout the season. Clients engage with technology-enabled assistance that scale through a tax assist. At the same time, SITEK Tax Pros navigate complex tax questions more efficiently, while client experience monitors allow clients to explore products and services independently, contributing to a 550 basis point increase in product attachment.

These are practical examples of our omnichannel model in action using technology to make assistance more accessible for clients while allowing our tax pros to focus on the expertise, judgment and advice that matter most. The progress we've discussed so far has strengthened our confidence in our strategy and helped us identify where to move faster. The greatest change happening at H&R Block isn't any single initiative. It's a different way of operating. Back in May, I shared that we ran more than 150 experiments during the season, exponentially more than in prior years. As we continue executing our strategy, we're experimenting more, we're learning faster and using those learnings to make better decisions about where to scale.

That matters because it increases the velocity at which we can improve the client experience, strengthen execution and focused resources beyond the idea showing the greatest potential. This is an important part of building a more durable growth engine and accelerating progress against our strategy. We're not guessing at what could happen or testing in real-world conditions, learning from the results and scaling what works. That approach gives us greater confidence in the choices we're making allows us to move faster when evidence supports it and helps us advance our long-term strategy with greater discipline.

Just as importantly, we're still in the early stages of what this approach can unlock. The progress we saw this year has increased our confidence that there are meaningful opportunities ahead and we expect the pace of learning, experimentation and innovation to continue accelerating. I'd like to share 2 examples that show have this operating model is translating learning in a meaningful progress. The first example is the work that we're doing to test them more consultative expert-led technology-enabled client experience. In 5 pilot offices this past tax season, we delivered a client experience that felt less transactional and more advisory focused on strengthening the client relationship and creating incremental value both during and beyond the annual tax filing event. In these pilot offices, we saw higher client satisfaction, stronger belief in our expertise and value and increase engagement beyond taxes.

These weren't data points alone. We heard it directly from clients. One client told us, "I didn't know taxes could be this easy." Another said, this guidance will really make a difference from my business. Those comments matter because they reinforce a broader belief we have at H&R Block. As technology reduces the effort required to prepare a return, the value of expertise, judgment and trusted advice increases. They also reinforce our belief that clients evaluate trusted relationship that extends beyond the tax return itself. And we can deliver this experience because behind the scenes, technology is handling more of the administrative work, allowing our tax pros to spend less time collecting and entering information and more time providing guidance, planning and advice.

Based on what we learned last tax season, we are expanding this model to a full designated market area for tax season '27. This will allow us to further test and refine the operating model, technology, count and workload needed to deliver this experience consistently and at scale. To enable this experience, we're transforming how work gets done inside our offices by automating away the mechanical aspects of tax pro. From using AI to eliminate manual data entry to automate the initial review of prior year returns, we're creating more capacity for tax pros to focus on delivering the personalized trusted assistance clients value most.

The second example of how we're transforming is the evolution of our field leadership model. One of our clearest learnings was a critical role year-round leadership plays in developing associates, reinforcing service standards and delivering a more consistent client experience. Those learnings gave us confidence to move faster on changes that will support future phases of our strategy. As part of that effort, we're making an enterprise transition from a seasonal office leadership model to a year-round office leadership model, supported by area experience leaders to manage a small number of offices and focus on developing talent, coaching associates and driving greater consistency throughout the field. We believe delivering more consistent and consultative client experiences requires full-time leaders, who are present not just during tax season, but throughout the year.

These leaders will also help deepen our presence in local communities, helping us compete more effectively against independent providers. We're also streamlining supporting functions to better enable our field teams, increase consistency of execution and accelerate our ability to scale what is working across the organization. These 2 examples, although different in detail, reflect the same principle. When testing gives us strong evidence, we act on it. That discipline allows us to accelerate progress against our strategy, reduce execution risk and build a faster-moving organization capable of compounding progress over time.

Looking back at the year, what gives us confidence is not simply the results we achieved, but the evidence behind them. We're delivering stronger client outcomes, attracting higher lifetime value clients building a more differentiated competitive position and seeing increasing proof that our strategy is working. Just as importantly, we're becoming a faster learning organization. Our ability to test, learn, adapt and scale on works continues to improve, giving us greater confidence in where we invest, where we accelerate and how we create value. While we're still early in the journey, we believe H&R Book is better positioned today than it has been in many years. We have a clear strategy, compelling opportunities ahead and significant runway to further strengthen the business, deepen client relationships and create long-term shareholder value. And with that, I'll turn the call over to Tiffany.

Thank you, Curtis, and good afternoon, everyone. In fiscal 2026, we delivered our strongest financial performance of the past 5 years. Revenue and EBITDA growth as well as margin expansion all accelerated, which reflects the year of successful execution and progress against our strategy. For the fiscal year, we delivered revenue of $3.95 billion, an increase of 4.9% over the prior year. This increase was primarily driven by higher net average charge or NAC and company-owned volume and U.S. assisted tax preparation, growth in international revenue and another year of small business momentum at WAVE. As Curtis shared, we strengthened the quality of our business and as a result, maintained share in our largest category.

This was supported by higher conversion, better retention, and a mix shift towards more complex clients who value confidence and expert judgment. We also continued to benefit from our ability to make low single-digit pricing adjustments while offering a strong value proposition to our clients. In the assisted category overall, we were pleased by our progress this year toward a healthier balance of volume, price and mix, which remains a key element of our strategy. WAVE, an important component of our small business strategy had another very productive year. This marked WAVE's second consecutive year of double-digit revenue growth, driven by our paid pro tier subscriptions and higher payments volume.

Taken together, we believe these top line results reflect a healthy and improving business. Total operating expenses for the fiscal year were $3.04 billion, an increase of 3.6% over the prior year. This increase was primarily due to higher tax professional wages as a result of the better company-owned return volumes, and an increase in occupancy costs and technology-related expenses. Fiscal 2026 EBITDA was $1.06 billion, an increase of 8.3% over the prior year resulting in 80 basis points of EBITDA margin expansion. Our effective tax rate for the fiscal year was 14% compared to 22% in the prior year. As a reminder, during the third quarter, we recognized an $84.1 million onetime noncash tax benefit related to the resolution of an IRS examination which reduced income tax expense and provided a $0.65 benefit to earnings per share.

Net income from continuing operations was $736 million. And earnings per share from continuing operations were $5.69. Adjusted net income was $688 million. Adjusted earnings per share were $5.31, an increase of 13.9% over the prior year. This increase was driven by fewer shares outstanding as a result of share repurchases and higher adjusted net income. Turning to our capital structure and disciplined capital allocation practices, our liquidity position remains strong, supported by the significant and stable free cash flow generation of our business. This year, we generated $756 million of free cash flow, representing a meaningful increase year-over-year and reflecting the strength of our operating model and the quality of our earnings. This cash flow provided flexibility to execute against our capital allocation priorities.

During the year, we repurchased and retired approximately 10.5 million shares, representing 7.9% of shares outstanding at an aggregate cost of $500 million. In fiscal 2026, we returned a total of $714 million to shareholders in the form of dividends and share repurchases. We remain committed to investing in the business, growing the dividend and returning excess capital to shareholders through share repurchases. We believe this disciplined approach to capital allocation continues to drive meaningful long-term shareholder value. Now turning to our fiscal 2027 outlook. I'll begin with the key assumptions underlying our expectations for the year. We expect industry growth to moderate relative to the historical norm of approximately 1%. While unemployment rates remain stable, job growth has slowed. Historically, industry growth has correlated with job growth. So our outlook reflects that backdrop.

Despite the softer industry backdrop, the meaningful progress we delivered in fiscal 2026 and the continued progress against our strategy gives us confidence in our market position heading into 2027. We remain focused on achieving a healthier balance of volume, price and mix, supported by ongoing enhancements to the client experience and serving clients with increasingly complex needs. At the low end of our revenue outlook, we assume we will maintain assisted category market share. While at the high end, we assume assisted category market share growth. We will also continue to acquire franchise locations when opportunities arise at attractive EBITDA multiples. And we expect growth in small business services as we continue to enhance how we bring together our expert advice, product suite and digital capabilities to comprehensively serve small business owners.

With regard to expenses, our outlook assumes continued discipline in managing our cost structure. At the same time, we expect to increase our level of investment in fiscal 2027 to support our strategic priorities. As Curtis discussed, we are scaling initiatives that have demonstrated promising results through testing and accelerating efforts or evidence has strengthened our confidence in the opportunity ahead. These investments support the next phase of our strategy and include efforts such as the expansion of our consultative client experience and technologies that enable greater automation of tax preparation and related workflows. Our continued focus on disciplined cost management allows us to make these investments and still maintain our long-term financial algorithm.

As a result of these and other assumptions, our outlook for fiscal 2027 is revenue in the range of $4.11 billion to $4.16 billion, adjusted EBITDA in the range of $1.11 billion to $1.14 billion, an effective tax rate of approximately 23% and adjusted diluted earnings per share in the range of $6.04 and to $6.24. One additional expense item to note as we review the outlook we provided today in our earnings release. The transition that Curtis discussed from a seasonal office leadership model to a year-round model and the streamlining of support functions, all to better enable our field teams has resulted in an approximately $8.3 million severance charge in the first quarter of fiscal 2027.

This amount has been excluded from our outlook. Durable cash flows remain one of the defining strengths of our business, and we expect fiscal 2027 to be another strong year of free cash flow generation. We will continue to use this cash flow to invest in the business, grow the dividend and return excess capital to shareholders through share repurchases. Consistent with that commitment, today, the Board approved a 10% increase in our quarterly dividend to $0.46 per share.

We are proud that H&R Block has paid quarterly dividends consecutively since becoming public in 1962. Additionally, our fiscal 2027 outlook contemplates approximately $400 million of share repurchases with a plan to execute throughout the entire year subject to market conditions. We have approximately $600 million remaining under our current $1.5 billion share repurchase authorization. Taken together, these inputs underpin our fiscal 2027 outlook and reinforce our focus on disciplined execution of our strategy. We entered the new fiscal year with momentum, confidence in our strategy and a compelling financial profile that enables us to invest in strategic priorities, grow profitability and continue to deliver value to shareholders. With that, I'll turn it back over to Curtis for closing remarks.

Thank you, Tiffany. Results this year reflect the progress we've made executing our strategy. We exceeded financial expectations, further elevated the client experience and continue to strengthen the durability of our business. The evidence we saw throughout the year from stronger conversion and retention to continued improvement in the quality of our client base, reinforces our confidence that the strategy is working and that H&R Block is well positioned for the future. We have an exciting year ahead and I look forward to sharing our Q1 results in November and providing a deeper look at our strategy, execution priorities and longer-term value creation framework at our Investor Day in December. Thank you for your time and your support. And with that, operator, we'll open up the line for questions.

[Operator Instructions] My first question comes from the line of Scott Schneeberger of Oppenheimer & Company.

And congratulations, really good-looking tax here. Curtis, could we talk about, obviously, conversion, retention, complexity, very good for you. Can we talk about where those can go? I mean, you mentioned conversion of record, what is the opportunity in front of you? I guess, we'll hear more at Investor Day in these categories, but you had a nice year on the kind of type of guide that we're looking at this year, which is similar to what you delivered financially this year just ended on what you have coming up, can that persist at that level or further on these drivers?

Thank you for the question. I hope to see in December. I know that we've talked in the past about our block next strategy. That's important to us. We talked quite a bit in the prepared remarks about our transition from a transactional experience that we deliver to a consultative experience that we deliver. And I'll just give everybody that's listening a little bit of history. I think this is important as we think about the H&R Block journey. When you think about the journey, it's important for us to think about as a company, what business are we actually in? And H&R Block has been around for 70 years, doing tax preparation. But if you dig underneath that, and spend enough time with our clients, Scott and folks, you really quickly discover that what clients are looking for is trust and confidence. That's the key currency in the space that we operate in.

As a part of that, we stepped back as an organization and we define what we would then call our ideal state. So what does the future look like for H&R Block, where we're delivering this level of trust and confidence for every customer that engages with us. And that future is different than what it has been historically for H&R Block. As a part of that, we identified what that would look like. And then we sat down as an organization and we identified what the critical assumptions would be that would be required for us to deliver against that. And that allowed us to create a strategic road map that takes us from today to tomorrow. That strategic road map, as we'll talk about at Investor Day, cuts across multiple phases.

One of the early phases of that journey is us focused on transforming the work that our tax pros do. So you heard me talk a lot about in the last earnings call and in the prepared remarks, about transforming the work that our tax pros do and shifting that from transactional tax preparation, which consists of data collection and data entry to more consultative engagement. And that's really in our sweet spot when you think about the fact that we've been around for 70 years. We do almost 20 tax returns a year. There's really no other player in the U.S. that has the access to the data that we do, that's got the footprint that we do that's got the relationship and all the communities across America. So Phase 1 is that technical transformation.

The other thing that I talked about in the prepared remarks was the transformation of our field leadership. So in order for us to deliver this consultative experience, we need to make sure that we have the system -- support system around our tax pros to enable that. So we are shifting from having seasonal field leadership to having full-time field leadership. And by doing that, we have more hands on the ground, more focused in every office where we can ensure that our tax flows are delivering the experience that we want. So all those things give us confidence that this is just the beginning of the journey.

So we're really excited about the fact that we saw record results this year. But once again, this is the first phase and this transformation ration our block really focused on delivering that trust and confidence that's important to our clients. Focusing...

Appreciate that, Curt. For following up, I'm curious the Big Beautiful Bill -- can you speak now that we're in the look-back period? What type of impact did that have on this past year and the tax season? And what do you anticipate in year '27?

Yes, it's a great question. And once again, for everybody listening, I'll just share some data points here. When you look at the tax law changes from last tax season, really 3 major things resulted in -- from those changes. Number one, the increase in the number of taxpayers were saving a refund, that went up by 6%. That's a really big number in our industry. If you also take a look at the average refund amount that also went up almost 12%. That's a really big number as well. And then if you combine that with the fact that the -- balance does the IRS decreased, that gave taxpayers more confidence that they can do tax on their own. Typically, when we see that in the tax industry, DIY gets a little bit of a tailwind.

Now what I'll just remind everybody of is if you look at the assisted space, that represents over 55% of the market, and it has for many years. So at H&R Block, we remain incredibly confident and assisted, and we believe that that's going to continue to maintain its strength in the industry both this year and moving forward.

Our next question comes from the line of George Tong of Goldman Sachs.

You mentioned your goal of maintaining market share for assisted at the low end of the guide and then outperforming at the midpoint at the higher end of the guide. Can you share your thoughts on how you expect to perform in the DIY category for the upcoming tax season? .

Yes. George, nice to see you. And hopefully, everything is going well in the West Coast. A couple of things that I do want to emphasize, to answer your question, not all DIY market share is created equal. And at H&R Block, our focus is on attracting and retaining more complex clients with higher lifetime value rather than pursuing transactional volume. A couple of additional data points around that. So when you look at our DIY mix between paid and free, that improved 140 basis points. We also delivered DIY growth in AGI bands of $100,000 or more, which is important. All these things connect back to our focus on more complex filers. Now when you take a look at that and you also take a look at the things that are very unique to H&R Block. With our focus on our omnichannel engagement model, we also saw favorable migration from clients from DIY into assisted as their need for more assistance evolved.

That reflects the strength of our omnichannel model. Now I'll also share that DIY remains an important entry point within that model, but we don't manage the business to optimize for DIY volume in isolation. And I think if you were to also step back and look at the DIY industry, in the DIY space, at the very low end, customers often focus on the lowest price or free offerings. And these customers are typically the most transient with the lowest retention and the lowest lifetime value who often move to a new provider at the moment a lower price shows up. So when you think about our focus, as we emphasize on my prepared remarks, it's on the clients who value assistance, trust and guidance. Those are the clients for us that have the longest and strongest lifetime value.

Got it. That's very helpful. And you mentioned the need to increase investments in the upcoming year as you transform the business to be less transactional, more advisory. Can you talk about the specific buckets where you intend to spend and invest and perhaps quantify how much is going into each of those buckets, for example, compensation, platform, technology, et cetera?

George, thanks for the question. So just to give you a few examples, and some of these were woven throughout Curtis's in my prepared remarks. We talked about our consultative client experience and some of the testing that we did in tax season '26, and these proofs-of-concept offices and our ability to roll those to a DMA in tax season '27 so that's one area of investment. That's primarily an investment in labor and training. So that's part of what we're looking to invest in, in fiscal '27. We're also investing in technology. So that technology allows us to do more automation of tax preparation as well as related workflows. So that's entirely a technology investment. .

And then the last example I would give you is around our small business strategy. And we've been hard at work integrating our Wave platform into our broader small business initiative and working to make sure that we have a unified small business strategy that supports our small business customers. We know that's a great growth opportunity for us. And so that's, again, some investment in technology and making sure that we have that unified approach. I'm not going to quantify each of those buckets of investment. I know that's something you're looking for, but that's something that we'll spend more time talking about over the next quarters.

Thanks for the question, though. And then I think, obviously, we're very proud of the fact that we can maintain our long-term algorithm and at the same time, make the investments. I think that's a testament to the work that we're doing internally to drive cost out in other parts of the business and still be able to invest where we need to accelerate our strategy.

Our next question comes from the line of Thomas Wendler of Stephens Inc.

Great quarter. Happy to see it. just wanted to kick things off with a question on second look. It has higher retention. Could you maybe give us a little bit of color on the utilization of second look during this quarter?

Tom, welcome. We're happy to have you. I hope I see you in December. Great question. So let me give you a little bit of background on a Second Look. Second Look has been around for many years. But historically, we've struggled because second look was very, very manual. It required tax pros to do quite a bit of work. And because it required tax pros to do a lot of work, tax pros were not very eager to offer second look to new clients. Now for everybody, listen, let me just explain what again what the Second Look is. So Second Look is the service that we offer at H&R Block. It's unique to new clients. And for new clients, we can take a look at the last 3 years of tax returns to look for any untapped missed opportunities.

And when we find those untapped missed opportunities, our retention rate for those clients goes up significantly. For those slides, it feels like found money. So that's a great service for new clients moving in. Over the last 18 months, we spent quite a bit of time automating Second Look, leveraging some of the newer AI capabilities that we have access to now. So instead of having a small population of our new assisted clients opting to tech Second Look, we have a much higher percentage of people opting in with the goal of every one of our assisted clients that are new, getting Second Look. We're not quite there yet, but we're getting fairly and fairly close without me sharing with specific numbers. Does that help, Tom?

Yes, that definitely helps. I appreciate the color there. And then for my second question here, could you maybe just speak to the success you saw on the international front this quarter. It looks a little bit better than expectations.

Tom, I'd be happy to do that. I will tell you, keep in mind that the tax seasons for Canada and Australia are different. So Australia's tax season runs July through October. Canada's tax season looks more akin to the U.S., not exactly the same, but more akin to the U.S. So keep in mind, there's different tax season. Canada had a good tax season, though not as strong as we would have liked, just given some of the changes in regulation with the CRA. So I would say most of the benefit that we saw in fiscal '26 actually was a benefit from favorable FX rates though the Canadian tax season was good relative to or expectation, not great. And Australia had a very nice tax season, very nice into their tax season overall, but that was earlier in the year. So a little bit of color there on international performance. .

Perfect. Looking forward to seeing everyone during the Investor Day.

Thanks Tom. See you there.

Our next question comes from the line of Kartik Mehta of Northcoast Research.

Even just maybe if you could provide some thoughts on pricing as we go into next season. I think you said you pointed a little bit more balance on obviously, the price and volume metrics. So I'm wondering if you think you'd be able to achieve the same level of price? Or do you think that mix will be a little bit different?

Kartik, great to hear from you. So let me start by just saying we were really pleased with our price volume and mix performance in fiscal '26. I said that in my prepared remarks, maybe just to give you a little bit more color. If I think about the assisted channel for just a minute, volume in the assisted channel was up 2%. NAC was up 4.1% in fiscal '26. And NAC, you'll know -- you'll remember, is a mix of price and mix. price was up about 3%, mix was up 1%. So when we think about price volume and mix for assisted, it was that nice healthy balance. That's what we've been striving to with our teams for the last couple of years, and we struck that nice balance. .

That's a concerted effort of ours, and we continue to strike that balance and have that plan going forward. We continue to have pricing power in the industry. We continue to plan for low single-digit price increases as we think about fiscal '27 and that's what's certainly baked into and inherent in our guidance that we gave today for this next upcoming year.

And then, sir, just a follow-up. You talked about maybe 150-plus. As you look into next fiscal year, how many of those tests, do you think you'll actually implement? How many do you think you'll repeat? And I'm assuming there will be new ones as well.

Thank you, Kartik. And Go Brown as you get prepared for the NFL season. Yes, sir. When you think about our velocity of tests, I mentioned to you quite a bit. It was fairly low before I joined H&R Block. And one of our biggest currencies as business leaders is learnings. And what helps us is we've got a clear vision of what the future looks like. We've got a very clear vision of what we think the ideal state client experience looks like. And earlier on the call, I described these critical assumptions. These are the big, big questions that we have to answer as an organization to be able to deliver that instant client experience. That's going to focus us on running as many or more experiments in the next fiscal year.

And just like I shared in my prepared remarks, not every experiment that we're going to run is going to prove to be successful, but every experiment we run is going to 100% deliver learnings, and we leverage those learnings to refine and improve experiences. I'll give you one example. So this past tax season, we ran in 5 pilot offices across the network an experience that was much different than our typical expectation on block. And I talked quite a bit about the importance of us shifting from transactional experiences to consultative experiences. And in those 5 offices, the focus of the engagement with clients was purely around a relational consultative experience and leverage improvements in workflow and capabilities and technology to remove the manual effort from our taxes so think about the data entry and data collection and then leverage other technology insights and data that allows our tax pros to show up as experts in the eyes of clients and provide guidance and advice.

I visited most of these offices, Kartik. And I'll tell you, a lot of folks that are typically fairly well off. They spend thousands of dollars every year with CPAs and they spend thousands of dollars of CPAs with the hope of getting some level of trusted advice, consultation and guidance on what the future looks like. And once again, at H&R Block, we don't think that, that should reside just with wealthy people. So as you think about our future, especially when it comes to our ideal state, we're looking to democratize those experiences and make them available to Main Street America. And the amount of positive feedback that we got on those 5 offices was just -- it was incredible. That gave us confidence to scale from those 5 offices into a full DMA for '27.

Now when we scale into a full day a card, I expect for us to get more learning because what we're trying to learn there what is it going to take for us to do that broader scale with the goal of this eventually becoming how we do, what we do at H&R Block how we deliver the experience to every customer that engages with us. So I expect the rate of experimentation, not to slow down is probably going to increase moving forward. But all of it is in service to our ideal state and block next.

I appreciate it.

Yes, sir.

Our next question comes from the line of Alex Paris of Barrington Research.

I'll add my congratulations to a nice finish to the fiscal year. I had a couple of questions about the underlying assumptions for fiscal 2027 guidance. And I appreciate all the color that you gave in the press release and in the prepared comments. But it looks like at the midpoint, if I did my math right, revenue of about 4.8% growth, EBITDA, 6.4%; adjusted EPS, 15.6%. Can you remind us all and me specifically, the long-term growth algorithm? And has there been any change to the long-term growth algorithm over the last few years?

Sure, Alex. I'd be happy to. So you're in the ballpark in terms of the midpoint of our outlook. The long-term growth algorithm suggests that revenue can grow 3% to 6% that EBITDA will grow at 1.5x the rate of revenue growth and that EPS will grow double digit. That long-term algorithm is predicated on an industry that is low growth so operating in that low-growth industry, upside from strategic programs that allow us to grow higher into the range, that 3% to 6% revenue range. That we can continue to take low single-digit pricing and that we can continue to get about 1% from franchise acquisitions. So as you think about our guide for this fiscal year, and even what we were able to accomplish, frankly, in fiscal '26.

Obviously, we're seeing the impact of an industry that's slow growing, and we're seeing the fruits from our strategic initiatives start to pay dividends. As I answered in one of the earlier questions around opportunities for margin expansion, we're balancing taking cost out of our cost base. and doing the hard work of making that a reality, but at the same time investing in strategic initiatives that help us further our road map relative to Block Next, the strategy that we're deploying. And we're just at the beginning innings of that, but we're making good progress. So the fact that we were able to deliver 80 basis points of margin expansion in fiscal '26 and that we're guiding to an additional at the midpoint, call it, 50 basis points of margin expansion in fiscal '27 is, I think those are really good examples of us being on our way to delivering that algorithm over the next few years. So hopefully, that helps, but happy to provide any additional color should you need it.

No, that's great. And then going back to the assumptions, you said industry growth to moderate from the typical 1% growth rate. Do you still expect growth in the industry in fiscal 2027, given the dynamics of the employment market.

Yes, we do. And so maybe just to double click on that for just a minute. So yes, we still expect growth in the industry. Moderate is the operative word for sure. And the reason we say moderate is simply because unemployment rates are stable. The unemployment rate, most recent news headline is 4.1% and the current calendar year. But job growth has slowed. And we've seen nonfarm payroll slow last year, the prediction is it will slow again this year. And so if you think about that, obviously, we have a base level of filing volume because if the unemployment rate is stable, folks are working, they're filing their taxes. But if jobs growth is slowing, then the growth in the industry, growth of new filings is where the lack of growth is stemming from. So we just expect moderation. We don't expect a decline or stagnation, and that's what underpins our outlook. So we start with that. .

And then we build on top of that expectation for industry growth, what we think we can achieve with our own execution. And obviously, we had great execution last year, and we think that continues as we get deeper into our strategy. and start to achieve some of the things that Curtis talked about in his prepared remarks today.

That's great. And I'm not looking at my spreadsheet. But what about -- what are your expectations about the breakdown in industry growth between assisted and DIY? The same as it usually is a little slower and assisted a little faster on DIY and then what would be your expectation in H&R Block for your own assisted versus DIY.

Yes. It's a great question. I think I'll circle back to Curtis' earlier comment, and that's that we believe Assist is going to continue to maintain its strength as the leading category within the tax pros industry.

Fair enough. And then lastly, on opportunistic franchise acquisitions, which is one of the assumptions. There was an outlay of about $58 million for those acquisitions in fiscal 2026. And that was up from $36 million, $58 million versus $36 million, do you expect a similar level of franchise acquisition activity in fiscal 2027?

Yes. So as you know, that's a core part of our long-term algorithm. In fiscal '26, we did 160 franchise buybacks. That compares to about 124 franchise buybacks in the previous year. Those are opportunistic. We do those when we have franchisees who don't have a generational succession plan. So they ebb and flow as these opportunities arise. We'll do somewhere probably in the range of 100 or so, 100 million to 125 but again, opportunistically, and that's certainly embedded in our guide that we provided today.

Great. I think I have 1 more question, but I'm forgetting it right now. I'll just get it on our follow-up conversation. I appreciate the additional color. .

Our next question comes from the line of Scott Schneeberger of Oppenheimer & Company.

Just 1 follow-up. Curtis, I think it's a good time. Could you please speak earlier in this year, we had issue with an AI trade that went against the tax preparation companies. Could you please outline why this should not be impacting H&R Block and some of what you're doing internally, but also just some of why it's an overdone viewpoint. .

Yes. Happy to definitely spend some time on that. I'll give you H&R Block's perspective. We believe that we're uniquely positioned to win in an AI-driven tax industry. And our belief is that we can seamlessly blend AI capabilities with our 70 years of human expertise and accountability in ways that, frankly, others can't. We believe that we've proved that in our 5 office tests. We'll expand that as we move into DMA and I hope everybody listening knows this, but I'll just emphasize this.

When you think about tax preparation, tax preparation is incredibly high stakes. For most Americans, this is their biggest paycheck of the year. So -- if you were to talk to most Americans and ask them, like, what are the 3 things that you would want nothing to do with. My guess would be those 3 answers would be, number one, going to the dentist. I had to do that the other week and getting a cavity drilled out. That's not fun. If you live in California or Texas going to the DMD is never fun folks. And the last thing is getting audited by the IRS. Nobody wants those things. So if you think about the stakes, they're super, super high. And when stakes are super high, especially with more complex clients, and once again, we're focused on more complex clients, they're typically seeking confidence, judgment and accountability.

And in those cases, AI alone, they can't fulfill the test because the risk is too high. So AI alone is not sufficient. Now I know that we mentioned this a couple of times, I'll just reiterate this. When you look historically at the industry that we operate in, 55% or more taxpayers continue to seek assistance. And it's not because tax preparation is a calculation. It's because the stakes are high. It's because they're seeking judgment, confidence and trust. As we think about AI, we think about AI at H&R Block as being a tailwind. It enables us to deliver more of the trust and confidence -- as I look back on the work that we've done in this first phase of our Block next strategy, a lot of it was focused on automating the manual tax preparation tasks. So think about data collection and data entry. That's step one. We have to automate that for tax pros to spend enough time to focus on a consultative engagement. As we think about the future, it is our belief that H&R Block is structurally advantaged, especially in the environment that we exist in today. Once again, we go back to the 70 years that we built on trust, judgment and accountability. And we lean into the fact that at H&R Block we use AI to amplify expertise, not replace it. That's our position around AI. We've proved that we can leverage it multiple times during this tax season. It's going to be a core part of what we do. But we're not leveraging to replace people. We're using to amplify trust and confidence through our people. Is that helpful?

That's great. Appreciate it. .

Thank you. Good question.

Thank you. I would now like to turn the conference back to Jessica Hazel, for closing remarks. Madam?

Thank you, everyone, for joining us today. We appreciate your support, and we look forward to reconnecting with you again soon.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to H&R Block's Third Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Jessica Hazel, Vice President, Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to H&R Block's Fiscal 2026 Third 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 would 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 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, May 6, 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 the call over to Curtis.

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 and 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 is uniquely positioned to meet clients where they are, earn their trust through expert judgment and give them the confidence to navigate the complexity of tax preparation and tax planning.

Coming out of the season, it's clear that our focus on assistance is delivering tangible results. A key question surrounding H&R Block's performance has been when we stabilize assisted channel market share. Well, this season, we did. After 2 years of improving share trends, that 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 at higher rates, and our omnichannel model is designed to serve those clients with the right combination of human expertise and technology. I'll 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 with 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're delivering and 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 through 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 and why we view it as an important driver of client loyalty over time. I'm pleased to share that new clients who received Second Look last tax season returned at a 600-plus 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 to 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've 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's the relational and trust-building experience that differentiates H&R Block.

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 flows 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 clients increased by approximately 11%. We saw approximately 7% growth in clients who received the refund and a more than 25% decline in clients who owed the IRS.

Those recent tax changes also created new opportunities to help clients access meaningful benefits. A clear example is 538A Trump Accounts, where we helped enroll more than 2 million accounts, representing over 90% of eligible clients whose children qualified for the $1,000 seed 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're also seeing our strategy translate clearly in the segments that are most impactful 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've seen a greater mix shift towards higher complexity clients this year, reinforcing that our model resonates most where expertise truly matters.

As we 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 the 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're 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 the high stakes, highly regulated environment by tax preparation. As AI adoption increases, accuracy and confidence matter more than ever, and clients continue to value the trust, judgment and accountability that comes 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 the best online tax product, but also recognized H&R Block'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 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'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 to the expert workflow where professional judgment remains critical and AI amplifies impact for clients.

Similarly, within the paid DIY filing experience, AI Tax Assist provided clients with real-time expert-informed answers and 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.

Together these examples, along with AI-enabled scaling of Second Look I discussed earlier, illustrate how we're 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've 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've embedded a disciplined learning mindset into how we run the business, focused on identifying what drives meaningful impact, learning for what happens in the wild and scaling what works. This isn't about one-off initiatives. It's 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 talked about several already, and I won't go through all of them, but I do want to highlight one that illustrates how this discipline translates into real impact.

One of the meaningful areas of progress this season has been AI automation. We're 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 task, we can free up capacity for our 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 car real consequences and confidence matters.

Results from our AI-enabled automation experimentation this season have been strong. Although there's still more to learn, we're encouraged by what we're seeing with a clear path to further scaling over time and expanding our ability to help empower financial freedom for millions of Americans.

I've covered a significant amount of information today and shared examples of how we're operating with discipline, testing in real-world conditions and 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're 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'm excited about the leadership team we have in place. They bring a strong combination of deep industry experience and fresh perspectives, and I'm 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'll now hand the call over to Tiffany.

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. So 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 $100,000-plus AGI clients. We also continue to benefit from our ability to make low single-digit pricing adjustments 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've 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 onetime noncash 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 9 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. Currently, 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 '26. And with the tax season now complete, we've 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'll turn it back over to Curtis for closing remarks.

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. At the core of what we do, H&R Block is in the business of trust, and we don't take that responsibility lightly. It remains central to everything that we are.

And with that, operator, we'll open up the line for questions.

[Operator Instructions] Our first question comes from the line of Kartik Mehta of Northcoast Research.

Curtis, I wanted to just look at Assisted market share and kind of your perspective on that this tax season. I know the tax results we give are kind of from July 1 to April 30. But if you looked at the tax season from January 1 through April 30, kind of the IRS data that's out now, how would you characterize kind of market share for H&R Block this season on the Assisted side?

Yes, I'm happy to talk about our results this season. Let me touch on the Kartik, and thank you for the question. I hope you're doing well. We had a really strong season in Assisted. We had a really strong season in Assisted this year. And just a reminder, Assisted gained share in 3 of the last 5 tax seasons.

This tax season and 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 didn't adjust their 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 when there are potential negative impacts to taxpayers.

So Kartik think fear uncertainty is down. In this case, this tax season and taxpayer impacts were super positive. There's very little additional boost or tailwind in the Assisted market. I'd say as we start to think about next year, employers and payroll providers are working on updating their withholding payables. So there could be an adjustment back to a normal, and we might see refund amounts decrease and balance dues increase.

Kartik, 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 2 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.

And then just, Curtis, on your tax pro product, I know you tried something a little bit different there. And I'm wondering how you think of the success of that business and maybe how many -- what kind of conversion rate you were able to have because of the program?

Yes. And Kartik, when you say our tax pro product, what specifically are you talking about?

I apologize, Tax Assist, a DIY product that allows a tax preparer to review the tax return.

For sure. So we saw nice progress there. You know that's 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 Assist. And I'll take it all the way back to one of the talking points in my prepared remarks. I talked a lot about assistance.

It's really important for us from a strategic standpoint to lean into assistance 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 that we ran this year. We'll continue to learn just like we do every year.

Our next question comes from the line of Scott Schneeberger of Oppenheimer & Company.

Just following up on Kartik's question. I think just a little confusion. Maybe, Tiffany, could you discuss this year and the last 2 years of the market share progression in Assisted of H&R Block versus itself? I think it's a different dynamic versus the industry, but versus itself is what I think you're outlining. Could you quantify it each of the last 3 years so we can gauge the progression?

Yes, Scott, I can. So we saw improved market share performance in each of the last 3 seasons. So we were down in market share in Assisted in the Assisted channel in tax season '24. We made improvement in tax season '25. I'm not going to give you basis points because obviously, that's proprietary information, but we were down in each of the last 2 years, but 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're looking at data, I think I can help reconcile some of this confusion because if you're 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's point number one. So that reflects full year-to-date performance. Obviously, the information that you're looking at from the IRS, which is publicly reported, is data that is 1 week in arrears. So that data is as of April 24, and it only reflects the tax season, okay? So those are 2 different points in time with 2 different starting points.

And then the third thing I'll say is our data also that's on the operating statistics table includes all filing data. So 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're 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're really proud of.

And just a clarification. It sounds like you're measuring from summer last year. So when you do the comparison. So any commentary on just maybe extensions and what impact that had in the back half of last year, assuming that is the time frame that you're capturing in this measure?

So Scott, that's not what I said. So the operating statistics table that you're 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. Right. That's a great performance for us.

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.

Looking forward. Okay. Got you. And I understand. So were you using the most recent IRS we see public or the one that -- the prior week that captures the last week of the deadline?

Yes. So our commentary was based on the same information you can see in the public data, which is as of April 24. That's the last time the IRS reported publicly.

Got you. Okay. That's really helpful. clarifies a lot. I guess just -- and sorry, I know I took up a bunch of time there. I just -- I guess I'll ask on the buybacks, the strategy with the buybacks. Obviously, there's a very opportune share price at H&R Block probably behind the decision. Often, you haven't done it in this time period. Just some commentary on that and how that might impact your normally elevated repurchase activity in the, I guess, we'll call it the fiscal first half of your new fiscal year.

Yes, Scott, thanks for the question. So 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 you know, and I said in my prepared remarks, we did $400 million in the first half of the fiscal year. So that will bring -- assuming we can get it done in the fourth quarter, that will bring our full year fiscal '26 share repurchase to $500 million. So a fantastic result.

We'll be able to take advantage of what has been some dislocation in the stock price. And so that should be a great result for us this fiscal year. It has right now no bearing on fiscal '27, but I also can't project any expectations. We obviously haven't guided to fiscal '27. And anything that we do in fiscal '27 is still subject to Board approval. So more to come as we get to next quarter and guide for the next fiscal year.

Our next question comes from the line of George Tong of Goldman Sachs.

You made the decision to prioritize lifetime value with DIY. It's understandable that online free DIY volumes fell this year, but also noticed that online paid DIY volumes fell too. Can you talk about the dynamics here and what's behind that?

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 paid and certain categories are paid and of course, they're free.

If I take a look at the data for this season, our DIY mix between free and paid improved by 140 basis points. And we saw really strong year-over-year growth in AGI bands over $100,000. That's very positive. as a part of our strategy. When I think about DIY, I do want to call out that it's an important entry point within our model. We don't manage the business to optimize for DIY volume in isolation. At the end of the day, our approach is going to be focusing on clients that are looking for the right level of assistance that we can deliver through our omnichannel model.

Okay. Got it. So it sounds like it's a decision to selectively go after customers that can eventually upsell themselves and deemphasize paying clients that don't have much monetization opportunity.

For sure because we've got to look at our customer acquisition cost versus lifetime value. That's a really important equation for the business. In my prepared remarks, I talked a lot about assistance and I talked about 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's really important for us strategically to focus on clients that align with that.

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, that's like a structural dynamic that will persist over the medium term or if that's something that just happened this year?

Yes, George, thanks for the question. So let's just -- let's unpack franchise for just a minute. So a couple of things to point out. So if you're looking at the decline in royalty revenue year-over-year, of course, 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've 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.

So if you think about the success we've had 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 don't think there's necessarily a structural difference, but I do think there's just some local market differences as we compete head-to-head with independents across our geographic base in the U.S.

[Operator Instructions] Our next question comes from the line of Alex Paris of Barrington Research.

Congrats, guys, on the beat and raise in the quarter. Most of my questions have been asked and answered. Just a quick question, a 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 9 months or the full year? Was it like 124, my notes show?

Yes, you got it, Alex. It was 124. You got it right on the dot. And thank you for the congratulations. We appreciate it.

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%, healthier balance of volume, price and mix. That's what I'm talking about. Did anything come in materially better or worse than you had expected going into the season?

Yes. Alex, I would say a couple of things I'll note. So 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 of price, volume and mix. You opened the door there, so I'm going to take it. If we think about our performance in the Assisted channel, Volume in the Assisted channel, and you can see it in that operating statistics channel -- in that operating statistics table, excuse me, volume is up 2.1% and NAC is up 3.9%. So we -- this is probably the healthiest balance we've seen in some time. So we're really proud of that.

NAC, in particular, if you unpack that, we took a low single-digit price increase in the Assisted channel and the rest of that is mix. So again, really nice balance. So that's playing out the way that we had expected. If I think about the inflection from the tax season, so Q3 into Q4, the only thing I would point out would be the shift that you can see in marketing. So 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's a little bit of shift in marketing dollars from Q3 to Q4. That's something to think about as you plan the rest of the year relative to our results. And the other would just be the same thing with field labor. So obviously, you see peak volumes in the early part of April, which hits our Q4, that's when you're 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.

Yes, 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'll talk specifically about AI. I often get that question on the road. It's our belief that H&R Block 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 can't.

And I'll unpack this for everybody just real quick on the call. When you think about tax preparation, we view 2 components of tax preparation. There's the actual data collection, data entry and calculation portion. We often call it the mechanical portion. We call that component one. And then you have component 2, which is the relational experience where trust, accountability and judgment live, that is really important folks as 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, the trust, the judgment, the accountability. And when you think about the high stakes world of taxes, and everybody remember, this is the biggest paycheck of the year for most Americans. When taxpayers get this wrong, bad things happen. Typically, taxpayers, they don't want to get this wrong. And history shows us that.

So 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's not for calculations. It's for confidence, guidance and accountability that comes from working with the taxpayers. So as we think about an AI-driven future, we believe the premium on trust increases and the winner is going to be those that can seamlessly blend AI speed with consistent human expertise.

And that's why you heard me emphasize earlier our expert-led technology-enabled focus. It's at the core of what we're doing at Blocknex with our go-forward strategy. And we believe H&R Block is structurally advantaged in this environment with 70 years both on trust, judgment and accountability. And by the way, decades of real-class scenarios and data, we're using AI to amplify expertise, not replace it. So we think that we're well positioned from a strategic standpoint to continue to win. Thank you for the question, Alex.

I appreciate the color. And then my last question is really regarding the long-term algorithm. As I start to think towards fiscal 2027 and beyond, I think the long-term growth algorithm, I'm wondering if there's any change to it, but historically, it's been 3% to 6% revenue growth, adjusted EBITDA growing 1.5x that rate and EPS growing at double-digit rate. Is that a reasonable proxy at this juncture going forward? Are there any thoughts or changes to that long-term algorithm?

Yes. No changes, Alex. We're committed to the long-term growth algorithm. And if anything, as we start to get some proof points on the Board around the strategy that Curtis just talked about and some of the things that we talked about in our scripted remarks today, we have even more conviction that, that's the right code for us to be in.

And then the last question and kind of relates to a prior question regarding the incremental share repurchases expected in the fourth quarter. I think the question was, does that have any impact on expected share repurchases next year? Obviously, the Board has to opine there. I'm wondering a similar question, does it have any impact on dividend? Because I know the Board reviews the dividend only once annually, and we usually find out about it after the fourth quarter. But the incremental $100 million, does that have any impact or bearing on a decision whether to maintain, which would be the minimum expectation or raise the dividend this summer?

So our capital allocation priorities are unchanged. So priority #1 is to invest in the business. Number two is grow the dividend; and number three is return excess capital to shareholders through share repurchase. So as the Finance committee of the Board meets this summer in advance of the August earnings call, they'll think about our capital allocation in that order. So obviously, more to come, but shouldn't be any concern with any of the dividend protocol or anything thereafter.

And for what it's 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 bogeyman. It seems like AI is a significant tailwind potentially for you in terms of, without getting into it again, efficiency of the tax pros and the client experience.

Alex. Let me give you a virtual high five. Thank you.

Thank you. I would now like to turn the conference back to Jessica Hazel for closing remarks. Madam?

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

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the H&R Block Second Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] 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 in 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 3 parts. First, we'll focus on core tax season 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. Building 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 the 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 omnichannel model, including access to our 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 Act. And while the impact varies widely across taxpayers, the net effect is greater complexity, for 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 [ books ] averaged 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 step. With our 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 turning confident in their outcome and convinced H&R Block as a 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 1 to tools that reduce friction and instill confidence. These changes reflect our commitment to elevating the client experience while equipping our tax pros to perform with greater consistency and efficiency.

Second, look, a service where we review the last 3 years of a new client's tax returns define errors or see if any refund dollars were left on the table has been a part of Blocks 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 health providing real-time guidance to help clients navigate complexity with these.

This year, new clients can also receive second look at no cost. And for new early season filers, we're providing tax per 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, the Block has delivered for 70 years.

Just as technology is strengthening the value of our DIY products, it's also transforming how our tax growth deliver for our clients. Our tax ports have entered this 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 system 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 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, 2-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 serve before. We're also watching the elements of strength in 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 road map 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 thinking. We've developed a multiyear client center strategy focused on delivering confidence, convenience and transformative experiences. Shifting from a short-term seasonal lens to a clear long-term view of the ideal client and tax for 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 our intend to lead. As we experiment and test, not every test will succeed, but each 1 creates insight. By embedding disciplined experimentation into our operating rhythm, will 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 advisers.

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 insight that matter. By embedding AI into workflows, we can extract data from documents prepopulate 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 way into H&R Block small business in ways that combine our scale and brand trust with Wave's 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. Now technology elevates the client experience, and 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, I 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, an increase of 11% over the prior year.

This increase was primarily driven by higher assisted tax prep volume and net average charge or NAC, continued double-digit wage 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 year. This increase was primarily due to higher field wages as a result of higher assisted revenue and increased consulting costs associated with the 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 EBITDA loss was $266 million compared to a prior year loss of $261 million. The effective tax rate was 24.3% compared to 22.4% in the prior year.

Our net loss from continuing operations was $242 million, representing a 40 basis point improvement over the prior year. Loss per share from continuing operations was $1.91 and while adjusted loss per share was $1.84 compared to $1.73 last year.

As a reminder, in quarters with the 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 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 billion and $3.895 billion, EBITDA between $1.015 billion and $1.035 billion, an effective tax 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 lifetime value for H&R Block. And 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 disciplined 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.

[Operator Instructions] Our first question comes from Alex Paris with Barrington Research.

Congrats on the better-than-expected off-season quarter. 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?

Yes. 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 tax flows are prepared to guide our clients for any uncertainty, especially any connected to the One Big Beautiful Bill.

Got you. And then 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 that fall opened 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 the 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 multiyear strategy that we'll share more about as we go throughout the year.

I also want to highlight, Alex, a couple of other things that are important. The changes that we made in the second look to scale it. The work that we've done to embed AI enabled text for assistance into the tools of our tax pros the advancements we've made to TPR, the work we've done to optimize our assisted virtual experience and especially the training our taxes had to help clients navigate any uncertainty due to the One Big Beautiful Bill. I'm just -- I feel like we're well positioned for the season.

Yes. No, sounds like -- one of the other things I think we talked about on the last call is you expect not only normal growth 1%-ish 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, 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 assistance.

And you're still thinking low single-digit price increases across both assisted and DIY?

That's correct.

Great. All right. Well, I appreciate 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.

Our next question comes from Kartik Mehta with Northcoast Research.

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?

Thanks for your question. And 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 drive uncertainty.

I don't think that it's going to dramatically change taxpayer behavior other than the fact that they may 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, Chris, I know it's early in 10 days, but have you seen a change in the refund amount? Is that -- the expectation is that it will be larger than last year. Have you -- has that come to fruition even though it might be early?

Yes, it's really, really early, but 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 when you 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 an 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. To really address the share data that confirms what we're seeing. It's too early for that, but I would expect that to be the case.

Our next question comes from George Tong with Goldman Sachs.

This is Sami on for George. Given expectations for greater complexity and a shift towards the business filing this tax season, what's driving your outlook for assisted share loss rather than stabilization or even gains since this type of environment plays Ostrand?

Yes. Let me jump in on this one. So for what's important to understand is why our market share hasn't consistently grown in a system.

So I start there from a CEO perspective. We've got millions of clients that choose to start with us every year, and we lease far too many in our mid- to lower funnel, this comes down to at the end of the day, us understanding why. And we spent quite a bit of time over the last 6 months examining every aspect of the client journey in our assisted business, in the same thing for tax examining every separate majority for our tax pros as they work to engage with our clients.

In a large portion of the reason why we've had some challenges is a significant amount of manual processes that are dependent on our tax pros to operate consistently at a high level. As I mentioned in my prepared remarks, right, 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 with they're getting every dial they deserve. And us enabling tax pros to lean into that via technology enables that. This is not going to be an overnight transformation at H&R Block. This will be a multiyear journey, but we believe this is the best journey for us a Block to best improve that client experience.

And I just want to make 1 -- 2 points of clarification really. So we've been keeping away at the assisted share loss over the last couple of tax seasons and we're making progress. That's point number one.

And then point number 2 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 [ II ] filing easier such as the 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 the 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 multiyear strategy is to ensure that our DIY clients do have the ability to connect with tax pros, especially when they run in a fear uncertainty and doubt. So we don't think that that's going to be a challenge or a headwind to our business. We think that's a core part of our multiyear strategy. .

[Operator Instructions] Our next question comes from Scott Schneeberger with Oppenheimer.

Curtis, [ Ed ] 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?

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 2 channels assisted in DIY, we certainly think there's an opportunity given the tailwind from One Big Beautiful Bill that we could see benefit to the assisted channel.

So we expect to see some movement from DIY to assisted, and we've seen that 3 out of the last 4 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.

Okay. Appreciate that. 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 as you care to share?

Yes. Thank you for the question. We don't see any incremental changes in our historical 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 pros 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. And 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 the 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 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 the extent where it's going to be available to the bulk of our clients in 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 multiyear strategy is our tax growth spend more time on relationship building, guidance and coaching, helping their clients give the financial success versus tactical work. The other thing that I want to call that I think is important to understand is why clients choose to work with the 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. We are looking for confidence, trust and judgment with the 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. 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.

Yes, Scott, thanks for the question. So we had -- we entered into an arrangement with a consulting firm to take a look at some strategic sourcing opportunities as a way to drive cost 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 last -- the first half of this year. Those -- 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.

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. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to H&R Block's First Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to hand the call over to Jessica Hazel, Vice President, Investor Relations. Please go ahead. .

Thank you. Good afternoon, and welcome to H&R Block's Fiscal 2026 First Quarter Financial Results Conference Call. Joining me today are Jeff 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 90 days. Before we begin, I'd like to remind listeners -- the comments made by management may include forward-looking statements within the meaning of federal securities laws.

These statements involve material risks and uncertainties and 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 and -- 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, November 6, 2025, and 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 Jeff.

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 '26, 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 friction 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.

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 deadlines. As a reminder, second look is a unique offering that provides new clients a review of their past 3 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 product, Protea, 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 $1.26, 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. This dynamic is reflected in the $0.03 year-over-year increase in adjusted loss per share even as our net loss improved by $6 million. Our long-term capital allocation priorities remain unchanged and continue to drive meaningful results as we invest in the business, grow the dividend and through opportunistic share repurchases, return excess capital to shareholders.

Last month, we paid our regular quarterly dividend, which you'll recall reflected the 12% increase we announced in August. And on Tuesday, we announced our next quarterly dividend payment. During the quarter, we also repurchased a total of 7.9 million shares of stock for $400 million at an average price of $50.90 per share.

This completed our share repurchase plan for fiscal 2026 and retired approximately 6% of our shares outstanding. In total, we returned approximately $455 million to shareholders in the first quarter, through dividends and share repurchases, bringing the cumulative total of capital return to H&R Block shareholders since 2016 to nearly $5 billion.

We are proud of this track record and remain committed to our disciplined approach to capital allocation. Our first quarter results and full year plans position us well to reaffirm the outlook we provided in August. We continue to expect revenue between $3.875 billion and $3.895 billion, EBITDA between $1.015 billion and $1.035 billion, an effective tax rate of approximately 25% and adjusted EPS between $4.85 and $5.

Let me briefly revisit some of the key assumptions that shaped our full year outlook. First, we expect industry growth to remain consistent with historical trends or about 1%. Second, we're focused on achieving a healthier balance of volume, price and mix supported by ongoing improvements to client experience and conversion. Third, we anticipate small business will continue to be a more meaningful revenue contributor.

And lastly, we remain committed to acquiring franchise locations when opportunities arise at attractive EBITDA multiples. I'll close with a reminder -- our investment thesis remains strong amid ever-evolving industry and macroeconomic conditions. We operate in a stable industry. We have a strong national presence, and we maintain a compelling financial profile with healthy margins and disciplined capital allocation.

This underpins our confidence in driving substantial long-term value for shareholders. With that, I'm pleased to welcome Curtis whom I've had the privilege to work alongside for the last 15 months to his first earnings call.

Thank you, Tiffany. I'm pleased to be here. If I transition with Jeff and prepared to step into the CEO role on January 1, we wanted to leverage today's call to share some of the key themes that reflect the alignment between the 2 of us the Board and the entire leadership team. I hope that this will serve as a backdrop for our conversations in the coming quarters. Hearing Jeff speak about our business over time, you know that we serve 2 distinct audiences, consumers and small businesses. .

There are 3 points about these audiences and our priorities that I'd like to share. First, the total addressable market for tax preparation and related small business services are very large, with over 130 million returns fought annually, the U.S. consumer tax preparation TAM is estimated between $20 billion to $25 billion.

Additionally, there are roughly 35 million self-employed individuals and small businesses nationwide representing a significant segment of the economy. The U.S. small business TAM, including entity formation, tax preparation, bookkeeping, payroll, invoicing and payments is estimated at more than $100 billion. Given that, we have ample opportunity for continued growth with both audiences.

Second, we'll continue to focus our investments on more complex paid filers who have greater needs, demonstrate stronger loyalty, intend to value additional services. This is true for consumers and small business owners alike. We've spoken about our success in attracting these types of customers over the last couple of years and remains important. Unlike many industries, market share in the tax prep industry does not directly equate to revenue. To focus on client growth that delivers the greatest long-term economic benefit to our business, we'll continue to evolve how we attract those clients who are free today but have the propensity to become paying clients over time.

We're committed to making investments in acquiring customers that deliver the strongest lifetime value. Third, we continue to invest in improving the experience and innovating on products and services for both audiences. For example, in the Consumer business, our second look offering helps new clients recover missed savings from prior returns, sometimes thousands of dollars and Spruce supports year-round financial wellness while also playing a key role in elevating the client experience.

In small business, integrating Wave's digital first product capabilities into our block advisers offering creates a more unified experience and expand the value we deliver to small business clients. And without a doubt, I'm excited about the potential it brings. With my background in technology and product, you should expect me to accelerate the evolution of our product design and engineering capabilities with a focus on ensuring that we're leveraging technology and AI to improve the customer experience, increase the efficiency and effectiveness of our tax professionals and drive productivity improvements throughout the organization.

Jeff and I, the Board and the entire leadership team are aligned on these 3 things. It's also important to remember that delivering assistance to our clients in whatever way they desire remains critically important. Our omnichannel experience allows clients to seek assistance on their terms, whether that's face-to-face, virtual or fully digital with support from solutions like MyBlock, a tax assist and Tax Pro Review.

For additional industry context, the IRS classified filings that the are signed by a tax professional or signed by itself prepare and the industry refers to this classification has assisted in DIY. Based on industry reporting, the market has split roughly 55% assisted in 45% DIY. However, what's easy to forget is that assisted continues to show strength and has gained share in 3 of the last 4 years and is projected to gain further share in 2026.

This reflects the importance customers place on the expertise confidence and trust that comes from working with a tax professional, especially in light of the numerous tax law changes and complexity in the tax code at a state and federal level. Capturing market share and assisted requires us to demonstrate our value versus independence, a highly fragmented and largest segment of the market, which remains our primary competitive focus. Having worked in the industry for approximately a decade in spending the last 1.5 years leading our Global Consumer Tax business, I know firsthand that H&R Block's edge lies in our ability to meet customers where they are digitally and in person.

It's this unique combination of trusted human expertise and forward-thinking innovation that will set us apart. To wrap, I look forward to sharing more and getting to know you in the coming years. Now let me hand it back to Jeff for closing comments before moving to Q&A.

Thanks Curtis. I hope you can see why we're all excited about Curtis. He brings both leadership and strategic continuity and a fresh perspective on all that lies ahead. This is my final call as CEO of H&R Block. Over the last 1.5 years, Curtis and I have worked closely alongside the entire senior leadership team and with input from the Board not only to deliver on our business objectives, but also to develop a shared perspective for our next chapter.

And I want to acknowledge how fortunate we are to be able to make such a smooth transition between Curtis and me. H&R Block plays an important role in enabling financial freedom for our clients by maximizing tax outcomes, providing actionable advice and value-added services for small businesses and offering a platform for financial wellness through Spruce, reflecting on our performance, progress and lessons learned over multiple years, we have even greater conviction in what the company can achieve when we execute at our best.

I've appreciated your engagement over these last 8 years. And as I move into my advisory role for Curtis in January, I do so with great belief in all that remains possible for H&R Block. Now operator, we will open the line for questions.

[Operator Instructions] Our first question comes from the line of George Tong of Goldman Sachs.

I'd like to extend my congrats and thanks to Jeff. So as you head into next year's tax season, can you talk a bit more about changes you're planning to make to marketing and operations assisted to stem some of the share losses from prior years? .

George, let me just say thank you for that compliment. It's been great working with you since I've been here. I'm going to turn it over to Curtis to answer your question. I appreciate it. .

George, good to meet you, and I look forward to future conversations with you. When I think about our assisted business, we're excited about the work that the teams have done to elevate the quality and scalability of our offerings. And as you know, we continue to focus on learnings every year to ensure that we're optimized every season. We're excited about the outlook this go around. A couple of unique things that I do want to call out for ASIA specifically will be the investments that we're making in second look. And as a reminder to folks here, second look is a service that we offer to new clients in which we're able to take a 3-year look back on prior returns to potentially uncover miss opportunities.

And oftentimes, that turns into significant savings for our customers, and it's very unique to H&R Block. We're excited about that. The other thing that we're really excited about is our investment in AI moving forward and our ability to actually improve the productivity of our tax pros, that along with the fact that the improvements that we've made, leaning into the 1 big beautiful build and ensure that we're optimizing the tax outcomes for our clients are things that we're pretty bullish on moving into the season.

Helpful. And then can you elaborate on your pricing strategy in DIY and how you expect that to impact both margins and market share performance? .

Sure, George. Nice to hear from you. So our pricing strategy for the upcoming season is consistent with prior years and that we expect to be able to continue to take low single-digit price, and that's true across both channels, assisted and DIY. Our customer satisfaction metrics remain strong, and we are leaning into the value that we provide consumers in both channels, making sure that we amplify the benefits that we provide to consumers and as Curtis suggested, elevating client experience when we can. So we continue to be confident in that strategy.

[Operator Instructions] Our next question comes from the line of Scott Schneeberger of Oppenheimer & Company.

I appreciate it. Curtis welcome again, and Jeff, best wishes in the future have enjoyed it. I guess to start off here, this is for anyone who wants to take it. With the -- and you guys alluded to it during the prepared remarks, that it's anticipated that next year is probably going to have complexity from the new tax bill, and that's probably going to drive to assist it.

Can you speak about kind of magnitude you're expecting there and things you're doing to prepare as such. And kind of a part of a government tie-in Part B to this question is with the government shutdown, should we anticipate a slow start to the year? And what is H&R Block considering on that front as far as preparation for the open .

Scott, let me take your second part first. I mean as you know very well, we're in constant contact with Treasury and IRS and we've had no indication whatsoever that the season will start late. .

Obviously, we've been through a lot of things in the last number of years, the pandemic included. And so we've built a really nice playbook on how to think about being nimble and flexible if something were to happen -- but sitting here today, we have no indication that the season is going to get off to a late start. And then I'll hand it over to Tiffany.

Great. And Scott, on the first part of your question around the uncertainty with the bill with 1 big beautiful bill, what we built into our outlook and the way that we're thinking about the impact of that is that we certainly expect it to be a tailwind. We are cautiously optimistic -- and the proxy that we used to represent that opportunity is the share shift that we saw between the DIY business to the assisted business last tax season. That was about 20 basis points of shift -- and again, we use that as a proxy for this upcoming season.

Scott, I'll jump in on the 1 big beautiful Bill comment as well. And you know this for 70 years, H&R Blocks worked really closely with the federal government and the individual states. -- we think that we're well positioned to ensure that our clients receive the best outcomes possible. And this year is a great year for people to lean into their tax press and engage with us and have great outcomes. .

Excellent. Just 2 more. I'll ask them together, but I encourage them mostly for you, but -- and feel free to ask me to repeat, so I'm going to ask them both upfront. First 1 is just if you can address now that you've been there a bit and really dug in. AI differentiation, I mean, there is certainly a persistent outside threat to the H&R Block business model, but H&R Block has done a really good job innovating on that front.

So I'd love your take on what you see there as far as opportunity and what you can advance and also addressing the threat as well? And then the second question is just as you addressed in the prepared remarks, the free customers, kind of the marketing to the free forever versus the free temporarily. What might we see that's new and different this upcoming season?

Scott, let me tackle the AIN and you know this from my background, I'm a deep technologist. And we see AI as an opportunity without a doubt to ensure that we're delivering the best experience as possible, and we can optimize both our operations and the experience for our clients. A great example that you're familiar with, would be the work that we're doing with AI Tax Assist, which provides clients with real-time help in our DIY product. So AI is absolutely going to be a part of our toolkit moving forward. Do you me to take the marketing piece or .

Yes. I mean the -- Scott, so just your -- the second part of your question about the free clients. I mean, I think what we're getting better and better at is both understanding the cohorts of consumers that are likely free forever versus those predisposed to become paying over time. which requires us to get better and better at reaching them individually. I'm not sure that you, in particular, would see something different this year per se. -- because it's really about how we connect with those individual client cohorts to make sure we're getting the right messages to the right people. But that is absolutely an important focus as we think about paying clients in DIY and how we deliver great value to them. .

Thank you. I would now like to turn the conference back to Jessica Hazel, for closing remarks. Jessica? .

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

This concludes today's conference call. Thank you for participating. You may now disconnect.