hrb h&r block investor conference 2015

8/20/2019 HRB H&R Block Investor Conference 2015

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COLBY BROWNVice President, Investor Relations


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Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do notstrictly to historical or current facts. They often include words or variation of words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," ""forecasts," "targets," "would," "will," "should," "could" or "may" or other similar expressions. Forward-looking statements provide management's current expectations oof future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future areforward-looking statements. They may include estimates of revenues, income, earnings per share, cost savings, capital expenditures, dividends, share repurchases, liquiditcapital structure or other financial items, descriptions of management’s plans or objectives for future operations, products or services, or descriptions of assumptions undeany of the above. All forward-looking statements speak only as of the date they are made and reflect the company's good faith beliefs, assumptions and expectations, but tnot guarantees of future performance or events. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect cin underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that mcause such differences include, but are not limited to, a variety of economic, competitive and regulatory factors, many of which are beyond the company's control, that aredescribed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2015 in the section entitled "Risk Factors” and additional factors we may describe fromin other filings with the Securities and Exchange Commission. You may get such filings for free at our webs ite at http://investors.hrblock.com . You shoulpossible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

Non-GAAP MeasuresWe refer to certain Non-GAAP financial measures in this presentation. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measu

financial performance prepared in accordance with GAAP. Because these measures are not measures of financial performance under GAAP and are susceptible to varyincalculations, they may not be comparable to similarly titled measures for other companies. For a description of these non-GAAP financial measures, including the reasonmanagement uses each measure, and reconcilia tions of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance wplease refer to our previously filed press releases posted on our investor relations website at http://investors.hrblock.com .

Market and Industry Data The data included in this presentation regarding the tax preparation services industry, including trends in the market and the Company's position and the position of its comwithin this industry, are based on the Company's estimates, which have been derived from management’s knowledge and experience in the industry, and information obtaicustomers, trade and business organizations, internal research, publicly available information, industry publications and surveys and other contacts in the industry. The Chas also cited information compiled by industry publications, governmental agencies and publicly available sources. Although the Company believes these third-party soureliable, it has not independently verified the data obtained from these sources and it cannot assure you of the accuracy or completeness of the data. Estimates of market srelative positions in a market are difficult to develop and inherently uncertain and the Company cannot assure you that it is accurate. Accordingly, you should not place unweight on the industry and market share data presented in this presentation.

Safe Harbor Statement

http://investors.hrblock.com/http://investors.hrblock.com/http://investors.hrblock.com/http://investors.hrblock.com/


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BILL COBB

President & CEO

H&R Bl ock

T he Leader i n Tax Pr epar at i on


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Today’s Objectives

A Look Back at Our Transformation

Opportunities Going Forward

Continue Driving Value ForShareholders


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Jason HousPresident U.S. Tax Pr

& Develo

Greg Macfarlane Chief Financial Officer

Kathy Pickering Vice President, Regulatory Affairs

Mark Ciaramitaro Vice President, Taxes and Healthcare Services

Today’s Presenters

Laura Scobie Vice President, Client Insights


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WhoToda

Positio

the F

A Look BackIndustryIssues

What I’ll Cover


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A Look Back


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A Look Back

A Companyin Turmoil

LaggingResults

“FinSuper

Unsure of what we wanted to be… and who our clients were


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Activist involvement Revolving leadership- Four CEOs from

2007 – April 2011

LeadershipChallenges


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Why I Took the CEO Job

Great Company Great Products Gr


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The Need For Focus…The Need For Focus

Core tax bus

Sustainably the top line

Improving m


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Exiting Non-Core Businesses

d h l


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BEFORETHE TAX EVENT

EMERALDADVANCELine of credit

DURING

EMERALDCARD

Reloadable debitcard

Year-round

THE TAX EVENT

REFUNDTRANSFER

Fees from refund

AF

PEACE OFMIND

Audit rep,covers additional tax if

HRB error

THE T

The only company with a suite of products like thi

Innovated With Tax Plus Strategy

l d


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$1.2 billionof product revenue

11% growth over 3 years

Tax Plus Strategy Has Generated…

S bl L d hi


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Executed our strategy

Continuity of leadership

Multiple tax seasons with proven results

Stable Leadership

B k Di i


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Final step in transformatioback to a focused tax com

More value for shareholde

through new capital struct Freedom to make decisio

Bank Divestiture

f l h h ld


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consecutive quarterlydividend

A History of Returning Capital to Shareholders

213 th 33%dividend increase

C it l St t


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$3.5B share repurchase program throughJune 2019

$1.5B Tender Offer – 40.5M shares at$37 per share

Upsized line of credit from $1.5B to $2B

Issued $1B of new long-term debt

Capital Structure

Si M 2011


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Repurchased 76.4 million shares

That’s 25% of outstanding shares,average price of $26.38 per share

Since May 2011…


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We DidWhat We Said We Would D

A Transformed Company


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2007

Mortgage

Option One

Broker Dealer

RSMTax

Preparation

Consulting

Non-Core Add-onsBank

TaxProd

• Assisted• Online• Mobile• Desktop• International

• Emer• Refu• Emer• Peace• Tax I

Today

A Transformed Company

TaxPreparation


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…and Our Business Results?

Revenue Has Grown Three Straight Years


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Revenue Has Grown Three Straight Years

$2,906$3,024 $3,079

FY13 FY14 FY15

( m i l l i o n s )

Profitability Has Dramatically Increased


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EBITDA i ncr eased $136 mi l l i on si nce FY11

2011 2012 2013 2014 2015

31%31%30%26%

28%

EBITDA ma r gin up 5 poin t s si nce FY12

Note: EBITDA (earning before interest, taxes, depreciation, and amortization) is a non-GAAP financial measure. Please refer to our Dec 7, 2015 earning release for more specific information.

Profitability Has Dramatically Increased

Digital


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Revenue growth outpacing industry

Consumer awareness has increased 16 pts to 6since 2010

Digital

International


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New Markets

India and U.S. Expat Tax Services

Australia6% Market Share+5% Revenue

Growth in FY15

1

10% Market Share+13% RevenueGrowth in FY15

1

Canada$239M of FY15

revenue

1In local currency. USD results impacted by foreign currency translation impacts. Canada includes tax prep fees for returns preparedthrough May 5, 2015 due to the extension of the Canadian tax season.

International

Invested Back Into the Business


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Continued enhancements of our retail stores

OutsideInside

Invested Back Into the Business

Technology Investments


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Technology Investments

Bought Franchise & Independent Locations


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Bought Franchise & Independent Locations

The Market Has Responded


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Nov.$

May 2, 2011

$17.48

The Market Has Responded


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We’re Committedto Leading This Industry


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Industry Issues


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Dealing With Fraud


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Public-Private Partnership

Federal Government State Tax AIndustry

Dealing With Fraud


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Stolen Identity Refund Fraudis Just One Part of the Problem

EITC Fraud & Improper Payments


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DIY filers don’t have to anssame eligibility questions

Migration from assisted to dprimarily due to fraud

Excluding fraud, percentageassisted filers may have gro

EARNED INCOME

TAX CREDIT

1Source: H&R Block estimates

EITC Fraud & Improper Payments

Lack of Return Preparer Minimum Standards


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Unscrupulouspreparers

Only 4 spreparer

That Makes No Sense

All 50 states setstandards for barbers

ac o etu epa e u Sta da ds


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We Need…Mandatory Testing, Continuing

Education & Background Checkfor All Paid Return Preparers

The Industry Leader in Fighting Fraud


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“…we must come together as an industry, with government, to mthe system safer for consumers and stop the billions of fraudulenrefunds that are issued every year.”

- Bill Cobb, Feb. 17, 2015, New York Times

“…we urge Congress to listen to consumove to enact minimum standards for

preparers and implement consistent anmeasures for all taxpayers…”

- Bill Cobb, April 8, 2014, testimthe Senate Finance Committee

The Industry Leader in Fighting Fraud

Why We Continue Talking About Fraud


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“…we urge Congress to listen to consumers andmove to enact minimum standards for return

preparers and implement consistent anti-fraudmeasures for all taxpayers…”

- Bill Cobb, April 8, 2014, testimony beforethe Senate Finance Committee

ReduceFraud

Level PlayingField

Better Cons

y g

Complexity and Tax Reform


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Candidates Air SharpDifferences on Taxes- Politico

p y

Complexity and Tax Reform


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Public PoliciesAdministered

Through the TaxCode

We FLaw…80,000

Eve

ComplexityImpacts Us Too

p y


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Over 3 million ACA clients served last seaso

Millions enrolled through the exchanges

ACA opportunity will take several years to un

Enduring Taxpayer Truths


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Want AccurateTax Return

Pay Only WhatThey Owe

Want MaximumRefund S

g p y

7The Tax Code


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In 1955, much simpler butpeople still wanted help…

74,000+ pages & counting

…H&R Blockinvented the industry

60,044

26,300

16,500

5044003,102

1955


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People Want H


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We Serve the Entire Category

To This Point…


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Industry

Capital Structure

Transformation


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The Future

The Tax Preparation Industry Is…


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Steady and…

Not very exciting to s

Challenges Of…


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Implementing complex

new tax lawsTackling issues affectingmillions of Americans

Navigating the assistedand DIY categories


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Challengestranslate intoopportunities

Opportunity in the Tax Preparation Industr


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135 million returns filed itax season…and counting

No one better able to help

H&R Block is the CIndustry Leader

SCALEBRAND AWARENESS


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SCALE

INNOVATTAX PROFESSIONALS

BRAND AWARENESS

Growth Potential & Stability


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Over $3 Billionin Annual Revenue

Growing Profit2011 2012 2013 2

HRB EBITD

$813M

Note: See description of non-GAAP measures earlier in this presentation.

Growth Potential & Stability


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Proven RecorReturning Cato Sharehold

Return on Invested CapitalNearing Top Decile

of S&P 500 1

ROIC

1Source: FactSet, H&R Block internal calculation


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There’sROOM TO RUN

In Assisted,We’re Bringing New Ideas


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ServeWith

SophistiSitu

We’re Bringing New Ideas

Better AlignServices to

Dynamics of theTax Season

Meet Challengeof Growing

Early SeasonClients

In Digital


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Growing Revenue & Awarenessof Our DIY Products

In International


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Fast Growing Business Exciting Opportunities inIndia and Expat Service

Tax Plus Products


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Continuing to Meet Growing Needof Our Clients

In Conclusion…


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Excited to be inThis Industry

ContinuinLead

H&R Block is aGreat Investment


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KATHY PICKERINGVice President, Regulatory Affairs &Executive Director of the Tax Institute

Fr aud’s Impact on t he Tax Pr epar at i onIndust r y and t he Way For w ar d

The Impact of Fraud & the Lackof Standards


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EITCImproperPayments

ReturnPreparerStandards

StoIden

Refund

of Standards

Two Key Themes


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Opens the Door to Tax Refund Frau

Lack of ConsistentStandardsAnonymity

of DIY


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Why Should You Care?

Why Should You Care?

Solutions being implemented for upcomingtax seasons

Will impact the industry…

…especially our competitors


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The Amount of Fraud & DollaRepresented are Staggering…

EITC Improper Payments


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~22-26%

$65.6BILLION

Worst among allprograms

EITC IMPROPER

Source: Department of the Treasury Agency Financial Report

Return Preparer Standards


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Unique Insight on Competency

Potential Acquisitions Must Meet Block’s Crite

Number of Returns Professional Appearance Computer Systems

H&R Block Reviews Actual Tax ReturnsAccording to Our Standards to Assess Qualit

Return Preparer Standards


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1 in 2Prospects has

Non-Compliance Issues

1 in 4Committing Fra

The Results Are Shocking

Stolen Identity Refund Fraud


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Problem Growing Worse

Source: Treasurer Inspector General for Tax Administration, March 2015

Federal Tax ID Theft Cases

440K1.1M

1.8M

2.9M

?

?

201520142013201220112010


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Why is theStolen Identity Refund Fraud (SIR

Problem Getting Worse?

Stolen Identity Refund Fraudd i hi “ i i i ”


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H&R Block is leading the way forward for the indu

Fraud is reaching a “tipping point”

Must be addressed effectively…

…or else it puts the entire taxadministration process at risk



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StoIden

Refund

Anti-Poverty Program for Working FamiliesEITC Overview


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$6,242

Bills RentCar Repair

EITC Eligibility


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Children must live withtaxpayer for at least 6 moTaxpayer must have earnincome

Blended family complex

What is an Improper Payment?


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Right Household,Wrong Person AcLack of Documentation

EITC Fraud and Improper Payments


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In Tax Season 2015:

~22% to

~26% of EITC payments were improper That amounts to $14-17 billion

There is a history here… Between years 2012 – 2015, Treasury estimated atotal of ~$60 billion in fraud and improper payme

Source: Department of the Treasury Agency Financial Report

Driving Change to Reduce Fraud


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We Need Practical Measuresto Reduce Fraud

Protect the Program for Tit was Meant to Benef

EITC by Number of Children & Filing Statu


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$2,000

$4,000

$6,000

$20,000 $40,000 $60,0

CreditAmount

Income

EITC by Number of Children & Filing Statu


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$6,000

$2,000

$4,000

$20,000 $40,000 $60,000

CreditAmount

Income


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EITC Fraud Migration – Many Factors at Pla


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Increasing Availabilityof Technology DIY Software

IncreasingReturn P

Ghost Preparers DIY CompetitiveOffers

Free / Free

TS16 Changes: Pl d TS17 Ch

EITC: Some Good News


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Pilot test in DIY to learnthe impact of additional

questions

Gov’t-Industry ProgressTS16 Changes:

Retail clients no longersubjected to certain

invasive questions

There’s More to CPlanned TS17 Chan

Consistency in Eeligibility cross cha

Legislation:Reduce refund

for unsubstantiatEITC claims

Will This Stop EITC Fraud?


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In the short term, no, but…

This will reduce EITC fimproper payments

It will get fixed

It’s just a question of wh



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StoIden

Refund

No Federal Minimum Standards in the IndustryIRS’ return preparer program


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IRS return preparer programoverruled in court in 2014

Some states responding with own minimum standards

Others considering starting

minimum standards programsOregon: GAO report found stpreparers more accurate 1

1Source: Government Accountability Office, 2008

All the IRS is Able to Require is…


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• Name, SSN, DOB

• $50 fee

• Explanations if you owe taor have a felony record

PTIN – Preparer Tax ID Number

H&R Block SetsHigh Standards

60 hours of bincome tax tr


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gfor its 80,000 Tax

Preparers Competency

18 hours of coeducation ann

Background c

Internal comp& ethics prog


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StoIden

Refund

Stolen Identity Refund Fraud 101


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Name, SSN,DOB

AnonymousTransaction

FunnelM

The Nature of Fraud is Changing


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Self describe“The Queen o

Tax Fraud


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Understand the tax code and the holes in tax administration systems

Employ computer programmers, write scripts & submit returns in vo

Reverse engineer IRS and state fraud filters

Target HomeDepot


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Anthem

p

A small percentage of success means a huge p

Relatively low risk of getting caught, very high

Why We’ve Seen an Increase inStolen Identity Refund Fraud


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Accessibility ofStolen Identities

Rise inAnonymous

UnauthenticatedAccounts


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Team ofDedicated

FraudAnalysts

RequiredAccepted

Federal ReturnBefore State

AutheIde

for our

Emer

Stolen Identity Refund Fraud Needs to beAddressed in a Cohesive and Unified Way


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Public-Private Partnership

Federal Government State Tax Industry

Everyone Can Agree…


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And a Common

Fighting Frauda Unified Def

for 2016 & Be

We Have a Common Enemy


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How are Government & InduLeveling the Playing Field?

The DIY online filing process is virtually anonymous

Key Reasons SIRF Has Increased


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e o e g p ocess s v tua y a o y ous

IRS and the states can’t always see the tax filer behavi

- Devices being used

- Location of IP address

A th ti t li fil id t

For 2016, All Software Providers Must…


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Authentication

Authenticate online filer ident

Implement strong security pro- Stronger passwords- Security questions

Not a heavy lift for H&R Block

Each tax preparation comp

Also for the 2016 Tax Season…Information Sharing


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required to conduct fraudmonitoring and analysis

Report leads to the IRS in amanner

Secure infrastructure that r

taxpayer rights and protectpersonal information

Not a Heavy Lift for H&R Block

Key Changes for 2017 & Beyond


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SecurityTechnology

CentralizedInformation

SharingFinaPro

What These Changes Mean


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H&R Block is well-positioned

Our solid relationships with the IRS and Statbetter protects our programs and products

Our competitors have to catch up with us.

What These Changes Mean for Competitors

Assisted Independent Competito


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Assisted Independent CompetitoWithout an IT staff, the risks are much gre

Smaller DIY CompetitorsMany have not had centralized fraud deteand compliance capabilities

DIY


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Again, H&R Block isWell-Positioned

A H li i P bl

A Good Start


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More Needs to be Done in

A Holistic Problem…

Only Solved by Working Together

Standards Technology Investment Legisla

Final Thoughts


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None of the steps individually solve the problem

But together—IRS, States and Industry—we are makpositive difference

It’s the right thing to do…- For taxpayers- For the tax industry


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Fuel i ng New Cl i ent Gr ow t hi n Assi st ed Tax Pr epar at i on

LAURA SCOBIE Vice President, Client Insights

Growing Assisted Tax


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Segmentation Early SeasonGrowth New B

Lau

We Understand Tax Filers


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135 million tax season filers


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SIMILAR NEEDSGROUP INTO SEGMENTS

SEGMENTA

SEGMENTB

SEGMENTC

All about the moneySEGMENTA Refund is their biggest payday of the year


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SEGMENTB

SEGMENTC

High touch, year-roundBelieve their situation is complexWilling to pay for more expertise

Believe they are capable of preparing own tax

We Have a Way Forward


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For How to WinAll Types of New

We Have a Way Forward

SEGMENTA

All about the moneyRefund is their biggest payday of the year


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Works 60 hours a week as a waitress

Single mother of 2

Receives the Earned Income Tax Credit

1 of 33 million eligible

TS15 RETURN COUNT BY DAY - H&R BLOCK SEGMENT

Segment A Files Early in the Season


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LATE SEASON

JANUARY FEBRUARY MARCH

MAR

EARLY SEASON

H&R Block TS15 ResultsEarly Season Focus is Critical


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JAN FEB MAR APR

H&R Block TS15 Results


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JAN FEB

EITC makes up2/3 of client loss

W ll k b d

H&R Block Has Historically Done WellWith EITC Clients


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Well known brand

Respected

Products that benefit thSkilled at handling comp


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We Know What Really Matt


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We Know What it Takto Win Them Back.


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A POWERFUL

EARLY SEASON


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EARLY SEASONMARKETING PROGRAM

Positive Differencein Our Clients’ Lives

Stand Out inMarketpla

TARGETED MARKETIN


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TARGETED MARKETIN

LikelySwitchers

CustomerRelationshipManagement

(CRM)

BilingualMessaging A

A Targeted Multi Year, Multi DimensioPlan to Win Back EITC Clients

TARGETED MARKETIN


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TARGETED MARKETIN

CLIENT EXPERIENCE

GOVERNMENT RELATIO

CLIENT EXPERIENCE


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CLIENT EXPERIENCE

MoreBilingual

Associates

More Quality

Tax Pros

Person

Inter

GOVERNMENT RELATIO


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GOVERNMENT RELATIO



StoIden

Refund

A Targeted Multi Year, Multi DimensionaPlan to Win Back EITC Clients

TARGETED MARKETIN


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GOVERNMENT RELATIO

TARGETED MARKETIN

CLIENT EXPERIENCE

Added level of expertiseSEGMENT

B


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Partner year-round

Believe their situation is complicate

Same person every year

Get to know their personal situation

Premium started

H&R Block Premium


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Experts at navigatingcomplex taxsituations

Premium started

1982

Deliver onSegment B clieneeds year after y

Historically Prem

Transitioning Premium


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We’ve decided to giveit more attention

Historically Prem

lacked focus

Created a new brand business mo


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INTRODUCING….INTRODUCING


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1 in 5 are Small Business Owners

Block Advisors Will Offer


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PAYROLL BOOKKEEPING BU

PERSONAL TAXES

Two Businesses, Two Types of Clients,Two Avenues For Growth


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Tax is a financial event

Skilled tax professionals

Accurate Return + TaxProducts

We get you every dollar youdeserve

Tax is about a refund

Tax is a year-round

Tax + Planning + SmBusiness

Team of tax advisor

Customized tax plan

Tax is part of a fina

Different Consumers


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Different ConsumersDifferent Needs

Different Value Propositions

Launching With…


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287 Locations Converted PremOffices


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www.blockadvisors.com

H&R Block’s Winning Formula in DIY


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JASON HOUSEWORTH

President, U.S. Product Strategy & Development

H&R Block s Winning Formula in DIY

F


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Fr

Value / PConve

DIY TrendsShaping theDigital Category

H&R Block’sWinningFormula in DIY

H&R Block’s Formula in


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“I’ fid t I t

The Do-It-Yourself (DIY) User~40% of all tax filers


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SEGMENTC

“I’m confident I can prepare my own tax re

“I want control of the tax process.”

“It’s convenient to do taxes when I want.”

“If I do it myself, I’m going to savemoney for the time I invested.”

Product Innovation: Int ell igence as a serv ice

‘Multi-Screen’ Focus

Brand:& Tax



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Consistent Product Innovation


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TS2013TS2011

TS11


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TS13


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TS16


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TS16


156/264

>8 Million

MyBlock


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RegisteredClients

>8 MillionR i d

MyBlock


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RegisteredClients


Tax Return

DIY Results Over 4 Years


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7%Tax Return

9%Revenue CA

Note: Period covered includes FY12 – FY15, excludes FFA returns

Designed For All Types of Devices


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+30 pts Mobile Improve

Brand: Awareness& Tax Services



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+16 pts AwareGrow



Brand:& Tax



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(Continue) Industry Leading, Proactive & Secure Anti-Fraud Platform

Fr


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H&R Block’sFormula to Win Value / P

Conve

8%9%

8% 8% 7% 7%

12%

9%

Florida Return Fluctuations


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7%

-8%

5%

TS12 TS13 TS

US Unemployment Florida Unemployment IRS DIY E-File Growth FloridaSource: IRS Weekly E-File Reports from May/June 2010-2015 and Bureau of Labor Statistics

Our View:


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Federal filters caused fraud to originatein other states via online filings

“So far in this year’s tax filing season [TS15]

State e-File Fraud


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So far in this year s tax filing season [TS15],Intuit seen between three and 37-fold increases in unlinked,

state-only returns. Convinced that most of thoserequests are fraudulent, the company now blocks usfrom filing unlinked returns via TurboTax.”

- Indu Kodukul a , Chief Information Security Officer at Intuit(February 15, 2015)

IRS e-File Rejects


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The rate of rejects should be similar acroDIY software providers

It is not

Valid reasons exist for e-Files to be rejected

69

58

8% E-file Growth

92% E-file Growth

65%

High IRS Reject Rates Correspond WithHigh e-File Growth


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H&R Block DIY Turbo Tax Tax Act Free Tax USA 1040.com

TS13 % TS14 % TS15 %

22 212217

22 22 24

9% E-fileGrowth 26

44

1716 14 13

IRS REJECT % RATES

0% E-fileGrowth

Source: H&R Block analysis of IRS Third Party Data Sort e-file data from 2013-2015

Fr


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H&R Block’sFormula to Win Value / P

Conve

DIY

Value/Premium Convergence


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Value DIYer:Competitors loseability to compete

on price alone

PremiCateraising simple

HRB is well-positioned for the future

Free Federal Charged up to

Simple DIYer Complex DIYer Result

Tax Season 2015


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Free State $40 more

+3 pts deskto

+1040 onlin

Category Leader +1040EZ sh

Free Federal

$9.99 State

No price

increase

Source: H&R Block estimates, companies’ 10-Ks

IRS e-File

+6.3%

Revenue

+12.3%

Result

Sustainable G

Tax Season 2015


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+6.2%

-1.2%

+9.2%

+13.4%

Revenue from1040EZ Volum

Revenue from

Category Leader

Source: H&R Block analysis of IRS Third Party Data Sort e-file data , companies’ 10Ks



Brand:& Tax



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(Continue) Industry Leading, Proactive & Secure Anti-Fraud Platform

ACA Updat e


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MARK CIARAMITAROVice President, Taxes & Healthcare Services


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DESIRED OUTCOMES

Expanded Health

OBJECTIVES

Driving Consistent

MEC

“Individua

The Affordable Care Act


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Insurance Coverage

Reducing HealthcareCosts

Quality

ImprovingAffordability

Expanding Access

Health Plan

Health Insu“Marketpla

Expanded

“EmployerCadillac Ta

ACA tax impact on filersis pervasive and complex

ACA tax impacOpportunities for tax i

1 2As an Investor, Why Should You Care?


178/264

H&R Block isbest positioned to capitalize

Still in early stag

opportunitywill take time to dev

3 4

ACA Agenda


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WhatHappened

in 2015

Going FImplicaExpec

What’s NewFor 2016


180/264

TS15: What Happe

Percent Uninsured in U.S. by Quarter

16.4 16.617.5 18

17

Lower Uninsured Rates


181/264

Source: Gallup Healthways Survey 2015; Kaiser Foundation

16.1 16.1 16.3

2009 2010 2011 2012 2013 2014

~17 million gained insurance coverage

Tax Filers Experienced New ACA Tax Form

89621095A Penalty Worksheet


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Premium TaxCredit (PTC)

Reconciliation

Insurance CoverageVerification

Shared ResponsibilityPayment (SRP)

3M

2.3%Premium Tax CrReconciliation

2M1.4% Did not properly file

ACA-Impacted Filers


183/264

Source: IRS June 2015 ACA Press Release

8M

5.5%Shared RespPayment (SR

25MACA- Impacted

Households

Percent ages above r epr esent p ercent of IRS base of ~135M ta x season ret urns

12M8.7%Exemptions

ASSISTED DIY

Channel Mix Among ACA-Impacted Retur~40%~60%


184/264

54%

60%

65%

Exemption

PTCReconciliation

Penalty

The Most Significant Impact Faced by ACA Filers


185/264

Many were caught o…was on their refund


186/264

Premium Tax Credit Reconciliation

$9.6B total claimed Form 8962

ACA Refund Impacts


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$2,998 average received

3.1M impacted

51% owe back….average >30% refureduction

Source: IRS ACA Factsheet Publication Date 7/30/15

Extended without 896

16%

Made math errorsor should not have paid

17%

ACA Tax Filing Mistakes


188/264

2.2MTax Filing

ErrorsFailed toproperly file 32%

Filed Incwithout 835%

Source: IRS June 2015 ACA Press Release

Not filing properly can mean losingaccess to Premium Tax Credits


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H&R Block Results

TRAINING

~7 Hours ACA certification training

I l d b b d d Bl kW k

H&R Block Readiness


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Instructor led, web-based and BlockWorkssoftware practice

Included over 50 case studies

Invested and deployed extensiveACA support resources

RESULTS

Invested 600k total hours of ACA-specific training

T i d 80k 10k ffi

H&R Block Readiness


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Trained > 80k tax pros across 10k offices

Higher average Net Promoter Scores

Tax professionals capable ofhandling full range ofACA situations

$More Likely to be…

Profile of ACA Impacted HRB Client


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Early SeasonFiler

New, Assisted 1040A or EZ ResidenceNon-Expansi

CA

Lower Average Income Single/H

% HRB Clients Impacted by ACA Tax Forms

Similar to Overall Tax Category16.6%

Majority of

16.4%Premium Tax Reconciliation


193/264

Majority ofACA-impacted filers,claimed exemptionsor paid a penalty

Exemptions

Penalty Works

Average Shared Responsibility Payment Amount(Per Return)

$178$201

HRB Clients Saw Lower Penalty Payment


194/264

70% DIY

Significant # of tax filers impacted…especially lower income households

2015 Key Learnings

Add d t l it l d t fili g i f


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Added tax complexity led to filing issues for many

HRB’s % of returns impacted by ACA tax forms was similar to overallcategory…retail clients impacted at a higher rate

ACA related tax refund impacts were a surprise & in some cases significantmany filers…and some delayed filing


196/264

ACA:What’s New in TS1

NEW:

New Coverage Verification Notices


197/264

1095-A continues as“must have”

filing document

1095-B & C notices sent to all covered houWill generate lots of questions

…but in most cases not required in order

Why…because IRS will now hALL household coverage data

Expect Increased IRS Enforcement


198/264

Refunds for Marketplace enrowho don’t properly reconcile tPremium Tax Credits will be h

IRS ACA Notices


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Expect millions to be sent in 2016

$695/Adult

or 2.5%

$325/Adult

or 2%

Increased ACA tax penaltiesnon-coverage

Higher of 2% or $325/adult for

Average penalty will increa~$400-$500

Shared ResponsibilityPayment Rates

Increasing ACA Penalties


200/264

20162015

$95/Adultor 1%

2014

Increased motivation to secqualified coverage

More interest in exemptions

Even higher penalties for 20Higher of 2.5% or $695/adultAverage Penalty

~$200 ~$500 ~$800

Source: IRS.gov, Internal HRB estimates

Must file using form 8962

Thi l i i b h i d

More “Reconciliation”


201/264

This complexity impacts both prior and a newgroup of enrollees

Expect number of impacted filers to double

Marketplace Enrollment Growth Uncertain

DRIVERS

• Increased Shared Responsibility P• Increased IRS enforcement• Targeted enrollment outreach effo

• Easier Marketplace sign up & Au• Medicaid Expansion some state

20-25M

14M


202/264

Medicaid Expansion …some state

2015

11M

2014

7MLIMITERS

• Growing employment coverage• Premium & Out of Pocket Afforda• Proper documentation/HHS enfor• Stalling Medicaid expansion• High enrollee churn

Source: HHS October 2015 release; Kaiser Foundation

Upper Limit2016 Est.

New 2016Enrollment Dates

penfo

New Marketplace Enrollment Dates


203/264

Continuing Our Enrollment SPartnership With


204/264

Going ForwACA Implications & Ex

2016 Implications

Client confusion with new 1095 notices

Higher penalties will impact filers


205/264

Higher penalties will impact filersIncreased IRS enforcement

Greater interest in exemption expertise

Continuing tax refund surprisesOverall… more ACA-impacted tax clients

Premium TaxCredit (PTC)Reconciliation

Exemption

KEY DRI• Growing Mar

enrollment

• Higher penalt

Expected ACA Tax Form Mix Changes


206/264

Now

Exemption

PenaltyWorksheet

Future 1

• Higher penalt

• Increased IRSenforcement

• Exemption Ex

1HRB estimates

16.4%

20-25%

IMPLICA

• Client growt

• Client retent

Growth in ACA-Impacted Clients Expecte

…Over Time


207/264

Now Future

Client retent

• Higher taxpreparation

WhatH d Going FI liWhat’s New

What We Covered


208/264

WhatHappenedin 2015

Going FImplicaExpec

What s NewFor 2016

H&R Block is best positioned as ACA tax impaccontinues to expand because of our….


209/264

TRUSTEDBRAND

TAXEXPERTISE

NETWORK

INVESTMENT& ASSETS


210/264

LookQ2 OverviewHRB & the

Tax Industry

What We’ll Cover


211/264

Financials Outlo

Look

Looking Out

Q2 Overview Tax Industry


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Q2 Overview

Actual Ad

(in millions, except EPS) Fiscal Year2016

Fiscal Year2015

Fiscal Year2016

Revenue $ 128 $ 135 $ 128

EBITDA $ (181) $ (148) $ (169)

Q2 FY16 Summary – Continuing Operation


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EBITDA $ (181) $ (148) $ (169)

Pretax Loss $ (238) $ (201) $ (226)

Net Loss $ (143) $ (113) $ (135)

Weighted-Avg. Shares - Diluted 266.3 275.1 266.3EPS $ (0.54) $ (0.41) $ (0.51)

Note: Adjusted amounts and EBITDA (earning before interest, taxes, depreciation, and amortization) are non-GAAP financial measures. Please refer to ourDec 7, 2015 earning release for more specific information.

Sand Canyon Corporation (SCC), H&R Block’s legacy sub-prime mortgage loanbusiness has been in wind-down, including its remaining obligations underrepresentation and warranties (R&W), since it ceased originating mortgage loanDecember 2007

SCC has neither issued nor securitized mortgage loans in the past 7 years

SCC remains engaged in bulk settlement discussions with the counterparties from

Limited Mortgage Exposure Expected


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g g pwhich SCC has received a significant majority of its asserted claims

Accrual for representation and warranty claims of $154M at October 31, 2015

SCC is, and has always been, operated as a separate legal entity from H&R BlocH&R Block believes its legal position is strong on any potential corporate veil parguments

Formally exitedbanking system

Simultaneously enternew banking relatio

YTD Highlights


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Announced new

capital structure

Executed key par

capital structur

Initially chartered to offer banking products tounbanked/underbanked tax clients

Dodd-Frank Act of 2010 imposed restrictive capitalrequirements on H&R Block Inc as the holding com

Why Exit the Banking System?


216/264

p prequirements on H&R Block, Inc. as the holding comof H&R Block Bank

Capital requirements didn’t make good business senseunder current business model

Post Regulatory Approval, We Moved Fas

31


217/264

Closed divestitless than 30 d

Regulatory approvalof H&R Block Bankdivestiture

31

No longer regulated as a savings and loan holdicompany

Successfully transitioned operations to BofI

Successful Bank Transition


218/264

Currently offering Emerald Advance, ready tooffer other products in the upcoming tax season

Seamless client experience


219/264

Share RPr

Added $1B of long-termdebt in two tranches:

$650 million, 4.125%notes due 2020

$3.5B reprogram rJune 2019

Complete

Long Term DebtLine of Credit

Upsized from $1.5B to$2.0B

Covenants in line withnew financial structure

New Capital Structure


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Note: Details regarding the bank divestiture and related agreements, capital structure transactions and share repurchase program can be found in previously filedpress releases issued, as well as Forms 8-K filed with the Securities and Exchange Commission in September and October of 2015.

$350 million, 5.25%notes due 2025

Offer Oct

~40.5 milrepurchasper share

Current shoutstandin

Provides seasonalliquidity for next 5years

l dl

The leading global consumer tax compan S t r a

t e g y

Capital Structure Now Aligned With Our

Strategy and Business Model


221/264

Strong free cashflow generation,

high margins,

& quick cashconversion cycle

Low capital needs,primarily technology

& officeinfrastructure,

… approx 3-4% ofrevenues a year

Seasonacapita

due

offseason B u s i n e s s

M o

d e

l

Current long-term credit ratings of BBB stable/Baa3 stable aS&P and Moody’s, respectively

Investment grade ratings metrics assume adjusted gross debt

to adjusted EBITDA ratios of 2.5 to 3.01

Debt Capacity


222/264

As of Oct. 31, HRB’s adjusted gross debt to adjusted EBITDratio is approximately 2.2 – 2.5 based on outstanding long-term debt as of Oct. 31, historical EBITDA levels and possibfuture average line of credit draws

1 Adjusted gross debt to adjusted EBITDA is based on a rolling 4-quarter average of out standing short-and-long-term gross debt and includes adjustments to gross debtand to EBITDA for items such as operating leases. Refer to SEC filings for additional information.

$250 $280 $200 $315 $1

$451 $467$409

$532

$219 $220 i l l i o n s

$1,

$1

Not

Substantial Return of Capital to

Shareholders


223/264

1 Represents dividends paid and share repurchases through December 7, 2015. Refer to press releases issued and SEC filings from September and October 2015for additional information.

$201 $187 $209 $217 $219 $220$

FY10 FY11 FY12 FY13 FY14 FY15 FY

$ m

% of Net Income–cont ops

99% 119% 118% 114% 44% 45%

$

$200 $315 $1,500

$409

$532

$219 $220

$1,610

$1500

Not at scale

Si nce May 2 011 :

Repurchased ~7(~25% of shares

Raised the divide i l l i o n s

… Especially the Last 4 ½ Years


224/264

$209 $217 $219 $220$110

FY12 FY13 FY14 FY15 FYTD16

$110

Returned a total oof capital

$ m

ShareRepurchaseDividends

Paid

Note: FY2016 represents dividends paid and share repurchases through December 7, 2015. Refer to press releases issued and SEC filings from September and October 2015 for additional inform

H&R Block & the Tax Indu


225/264

We are here for the long term.

We invented this industry.


226/264

g

We will be successful.

80

100

120

140

160U.S. Tax Filings (in millions)

Large, Resilient Industry That Grows

With Employment


227/264

0

20

40

60

U.S. Tax Filings Non-Farm EmploymentSources: IRS and Bureau of Labor Statistics

Industry Pricing is Inelastic

Taxes are non-discretionary

Complexity-based pricing model

Approximately 75% of all tax filers get a refund 1


228/264

pp y git’s their most significant financial event each year

Foundedthe industry

680+ millionreturns

since 1955

Largesttax prep

providero

We Know More About Tax Preparation

Than Anyone


229/264

Large amountsof data;

understandcustomer needs

File ~1 in 7

U.S tax returns

Ability tacquire best prep busines

in industr

We only compete in onespace…TAX

No distractions with nbusinesses

We Are All In


230/264

Help from one end of thepreparation spectrum to the

otherASSISTEDDIY

44%9%

5%

1%

Intuit

Independent

Branded Assisted PreparersOther DIY

U.S. Industry Tax Preparation Revenue

HRB is Well-Established & Positioned to Gro


231/264

26%

15%

$20 BillionMarketH&R Block

Independent

CPAsCPAs

Sources: IRS data, competitor public filings, competitive intelligence data

We provide a lifetime experience forour clients

We are not solving for a quarter.


232/264

our clients.

Maintaining longer-term focus is critical.


233/264

Looking

Brand Says it All


234/264

Br

1Source: Millward Brown

Consistent and Stable EarningsHigh MarginsSignificant Free Cash Flow

Seasonal Liquidity NeedsStrong Capital EfficiencySuperior ROIC

Affordable Care ActCRM

DigitalInternationalTax Plus

Invest in Strategic Initiatives2

Provide Adequate Funds for Operational and Liquidity Needs1

We Have the Capital to Make Things Happen


235/264

CRMInformation SecurityOffice Footprint

Block Advisors

Tax PlusFranchise/Independent A&D

213 consecutive dividends; current ~2.2% yield; 46% div. payout ratio in FY1

Support Quarterly Dividend

Ceased being regulated as a savings a loan holding company

Strategic Returns of Capital

3

4

Unmatched Distribution


236/264

H&R Block Premium was an underutilized assewith a history of revenue growth

Rebranded and redesigned to better meet clients’ needs

Investment within targeted capital

Block Advisors


237/264

Longer-term strategic opportunity

expenditure levels

Looking


238/264

IncreasedStandards areInevitable

Quality

Fraud


239/264

Q yShould be a baselinein the industryTaxpayer protectionis paramount

Impacts all

It will be fixed

Value DIYer:Competitors loseability to compete

PremiCategoryprice to f

DIY

HRB Well-Positioned for DIY Changes


240/264

y pon price alone

p

Healthcare is Here to Stay


241/264

H&R Block is best positioned as ACA tax impaccontinues to expand because of our….


242/264

TRUSTED

BRAND

TAX

EXPERTISE

NETWORKINVESTMENT

& ASSETS

Premium TaxCredit (PTC)

Reconciliation

Exemption

High

v e

C o m p

l e x

i t y

Expected ACA Tax Form Mix Changes


243/264

PenaltyWorksheet

NowLow

R e

l a t i v

Future 11HRB estimates

16.4%

20-25%

Growth in ACA-Impacted Clients Expecte

…Over Time


244/264

Now Future


245/264

Financials

PRICE VOLUM

Four Key Components of Revenue


246/264

MIX ATTAC

PRICEPleased with resultsStrategic vs. tactical

approach

VOLUM



247/264

MIX ATTAC

PRICE VOLUMDisappointed with assresults, mostly early se

Multi-year solutio



248/264

MIX ATTAC

PRICE VOLUM



249/264

MIXPleased with improvement

Focus on lifetime value ATTAC

PRICE VOLUM



250/264

MIX

ATTACPleased with attach Strong product offe

Tar get Range of 28% t o 32%

28%

26%

30%31%

Strong EBITDA Margin Outperforms Pee


251/264

1Source: BloombergNote: All numbers represent continuing operations

S&P500

119% 19% 19% 19%

2012 201420132011

C a p E

x % o

f R e v e n u e

91 89 92116

1601

5%

4%

Peak Year: FY2020

D&A($M)

C E

Capital-Light Model


252/264

2%

3%

4% 4%

FY12 FY15FY14FY13FY11

Future Range: 3% - 4%

CapEx% of

Revenue

FYE


253/264

Independents

Acquiring quality businannual basisAttractive rate of returnExpansion into key cliesegments

Franchise Buybacks

Repurchasing offices previouslysold to franchiseesPurchased 341 offices in FY15,expect ~260 offices in FY16Attractive rate of return

Franchise Buybacks Winding Down;Independent Acquisitions Continue


254/264

Arbitrage opportunityFewer available qualitybusinesses going forwar

Company-run to franchise splitexpected to be approx. 65%/35%Likely minimal buybackopportunity after Tax Season2016

20.5%

14.4%

24.6% 25.4% 24

ROIC

Consistently Strong ROIC


255/264

9.8% 8.9% 9.4% 9.1% 9.WACC

Source: Company calculation

FY13FY12FY11 FY14 FY

High-end of corp. tax rate

40%39%

41% 41%39% 39%

38% 37%

40%

34%35%

HRB Effective Tax Rate

FY2004

FY2012

Cleaned up compliance/accouThen Now

A Focus on Income Taxes


256/264

High end of corp. tax rateDriven by distribution modelTax compliance/accounting

issues

p pActive planning and focusExecuted a number of strateg

one-time and long-termEstablished efficient structurenon-U.S. cash

High-end of corp. tax rate

40%39%

41% 41%39% 39%

38% 37%

40%

34%35%

HRB Effective Tax Rate

FY2004

FY2012

Cleaned up compliance/accouThen Now

3-Year Savings of ~ $100 million

A Focus on Income Taxes


257/264

High end of corp. tax rateDriven by distribution modelTax compliance/accounting

issues

p pActive planning and focusExecuted a number of strateg

one-time and long-termEstablished efficient structurenon-U.S. cash

Future Expected Base Tax Rate: ~ 35-36%


258/264

Outloo

Market Outlook FY 2016 3-Year Expec

IRS Tax Filings

Assist ed

DIY

Increase 1 - 2%

Increase 0 - 1%

Increase 4 - 5%

Increase 1 - 2%

Consistent growt

Digital expected

Market Outlook


259/264

Annual Impact, $M Revenue Expense/OtherEBITDA/

Pretax Inc. C

BofI Management AgreementEconomics

$(12)-(15) $18-20 $(30)-(35) Trans.-basCard and Rparticipati

Lost Interest Income on AFSSecurities

(6) - (6) Securities

New Accounting Treatment (9) (9) - Reclassifireflect non

Financial Impact of Bank Divestiture


260/264

Total Annual Impact $(27)-(30) $9-11 $(36)-(41)

Net Impact FY16 v s. FY15 ~(1)%decrease~0.5%

increase~1 pt drop inEBITDA

margin

Note: See description of non-GAAP measures earlier in this presentation.

HRB Outlook FY2016 3-Year Ex

Impact from Bank Divestiture

1% reduction of overall revenue5% reduction in pretax earnings1 point reduction in EBITDAMargin

Co

One-Time Bank Transaction &Capital Structure Costs

~$22M

Foreign Exchange 1% reduction of overall revenue~$0.01 EPS decrease Not provid

Inflationary increase

HRB Outlook


261/264

Compensation & Benefits Inflationary increaseFY15 training costs offset byfranchise and independentacquisitions

Inflationa

Adjusted EBITDA Margin 29% - 30% 28

Interest Expense $66M - $69M Not provi

HRB Outlook FY2016 3-Year Ex

Capital Expenditures ~3% – 4% of revenue ~3% - 4%

A&D/Franchise Buybacks

Independent acquisitionsconsistent with prior yearsFranchise buybacks: approx.260 officesTotal acquisitions ~$90M-$100M

Franchise bwinding dow

Depreciation & AmortizationAmort. – Acquisition Related

~$175M - $180M~$58M - $60M

~$180~$60

HRB Outlook


262/264

Amort. Acquisition RelatedD&A – Non-Acq. Related

$ $~$117M - $120M

$~$120

Tax Rate Effective Tax Rate ~33% - 34% Base Tax Rat

Weighted Average DilutedShares Outstanding

250M - 255M Not provi

Predictable

and GrowingCore Industry

Long TSignifican

SoDigitalE i

“Tax Plus”Product Attach

Favorable MacroConditionsHealthcare

Reform

Growth

HRB Investment Thesis


263/264

R

InternationalGrowth

Expansion

Consistent

Management

Limited Mortgage Loan

Exposure Expected

Stability


264/264

hrb h&r block investor conference 2015

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