H&R Block : Q2 FY2021 Slide Presentation

December 8, 2020

Safe Harbor Statement

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 not relate strictly to historical or current facts. They often include words or variation of words such as "expects," "anticipates," "intends," "plans," "believes," "commits," "seeks," "estimates," "projects," "forecasts," "targets," "would," "will," "should," "goal," "could," "may," or other similar expressions. Forward-looking statements provide management's current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, client trajectory, income, effective tax rate, earnings per share, cost savings, capital expenditures, dividends, share repurchases, liquidity, capital structure, market share, industry volumes, or other financial items, descriptions of management's plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above. They also include the expected impact of the coronavirus (COVID-19) pandemic, including, without limitation, the impact on economic and financial markets, the Company's capital resources and financial condition, the expected use of proceeds under the Company's revolving credit facility, future expenditures, potential regulatory actions, such as extensions of tax filing deadlines or other related relief, changes in consumer behaviors and modifications to the Company's operations related thereto. All forward- looking statements speak only as of the date they are made and reflect the Company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to a variety of economic, competitive, and regulatory factors, many of which are beyond the Company's control, that are described in our Annual Report on Form 10-K for the most recently completed fiscal year in the section entitled "Risk Factors" and additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. You may get such filings for free at our website at http://investors.hrblock.com. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

Safe Harbor Statement

Non-GAAP Measures

We refer to certain Non-GAAP financial measures in this presentation, including earnings from continuing operations before interest, taxes, depreciation, and amortization ("EBITDA"), EBITDA Margin from continuing operations, calculated as EBITDA from continuing operations divided by revenues from continuing operations ("EBITDA Margin"), adjusted diluted earnings per share from continuing operations, and free cash flow. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with accounting principles generally accepted in the United States (GAAP). Because these measures are not measures of financial performance under GAAP and are susceptible to varying calculations, they may not be comparable to similarly titled measures for other companies. For a description of these non- GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP, please refer to 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 competitors within this industry, are based on the company's estimates, which have been derived from management's knowledge and experience in the industry, and information obtained from customers, trade and business organizations, internal research, publicly available information, industry publications and surveys and other contacts in the industry. The company has also cited information compiled by industry publications, governmental agencies and publicly available sources. Although the company believes these third-party sources to be reliable, 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 size and relative 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 undue weight on the industry and market share data presented in this presentation.

Jeff Jones

President and Chief Executive Officer

Why we're here

Three key takeaways

1		2		3

We are a stronger	Our strategy	We are focused
company today	development	on execution and
		process has been	value creation
		rigorous and
		methodical

Our Senior Leadership Team

We continue to strengthen our team

Jeff Jones		Kirk Simpson		Karen Orosco
President and		CEO and Co-Founder Wave		Senior Vice President
Chief Executive Officer				U.S. Retail
Joined 2017		Joined 2019		Joined 1999
Les Whiting		Julius Lai		Heather Watts
Chief Financial Services		Chief Product and		Senior Vice President
Officer		Experience Officer		DIY Tax
Joined 2020		Joined 2020		Joined 1997
Tony Bowen		Tom Gerke		Alan Lowden
Chief Financial Officer		General Counsel and Chief		Chief Information Officer
		Administrative Officer
Joined 2004		Joined 2012		Joined 2012
Tiffany Scalzitti Monroe		Daniel Rieger		Jamil Khan
Chief People Officer		Vice President of		Chief Strategy and
		International		Development Officer

Joined 2018

Joined 2014

Joined 2019

Exploring the benefits of

Block Horizons

AGENDA

	Block Horizons Strategy		Jeff Jones
	Small Business		Kirk Simpson
		Karen Orosco
	Financial Products		Les Whiting
	Block Experience		Julius Lai
		Heather Watts
	Financial Principles & Outlook		Tony Bowen
	Closing & Q&A		Jeff Jones

We are purpose-driven:To provide help and inspire confidence

in our clients and communities everywhere

Leveraging our human advantage and technological expertise

Trusted advisor for customers

Supporting communities through

Make Every Block Better

We are strategically positioning the company for success

SPRING

FALL

2018

Assessed multiple adjacencies to

SPRING

2019

Confirmed opportunities

in small business and financial products; acquired Wave

FALL

2020

Block Horizons to drive next phase of growth

FALL

2017

Thorough look- back upon Jeff's arrival as CEO

2018

Implemented Upfront Transparent Pricing and accelerated technology investments

drive growth

We've already made significant progress

Talent	Brand
and Culture

Digital & Data	Improvement
Platforms	in Consumer Tax

Our five-year roadmap is built on three strategic imperatives

Small		Financial		Block
Business		Products		Experience

Build direct, valuable	Evolve the Emerald Card	Make tax easier, faster and
relationships with small	into a consumer-centric,	more personalized by
business owners through	mobile-first solution for the	blending digital tools with
Block Advisors and Wave	underbanked	human expertise and care

The focus of our business is changing

HISTORICAL ROLE

FUTURE ROLE

Small Business

Over 2 million customers,	Tailored customer experience and services
à to drive growth through Block Advisors and
without strategic focus
	Wave

Financial Products

Primarily linked to tax	Create a mobile-centric banking alternative
event and to distribute	à leveraging our technology platform and
refunds	favorable banking partnership

Consumer Tax

Traditional delivery model	Converged platform blending human
of Assisted or DIY	à expertise and digital capabilities

I M P E R A T I V E # 1

Small Business

Kirk Simpson

Co-Founder and CEO Wave

Karen Orosco

Senior Vice President, U.S. Retail

Strengthen the spirit of entrepreneurship

and help small business owners thrive

H&R Block is well-positioned in small business

	Large Base			Strong			Creating a
	of 2.4 Million			Entrepreneurial			Superior
	Customers			Spirit			Customer
									Experience

~$500 million in annual small business revenue

Small business is a significant opportunity for Block and Wave

U.S. Number of

Small Businesses

					2.4%		CAGR
n s	35					31.6
28.7	30.1
ll i o	30
		5.8		5.9	0.9%
M i	25	5.7
	20
	15
	23.0	24.3		25.7	2.8%
	10
	5
	0	2013	2015		2017
				1-499 Employees		Self-employed

U.S. Small Business

Revenue

			3.2%		CAGR
o n s	$8
		6.8
i			5.9
l l		5.3
T r i	$6
		5.6
	$4	4.2	4.8		3.7%
	$2
	1.1	1.1	1.2	1.1%
	$0
	2010	2014	2018

Source: Bureau of Labor Statistics, Business Employment Dynamics, County Business Patterns and Nonemployer Statistics

Even through COVID,

small businesses are resilient

Business Applications for the U.S.

1. ,000
   450,000
   400,00 0
   350,0 00

1. 0,000
   250,000

2012

2014

2016

2018

2020

1

A "once in a generation" surge in start-ups

2

Small businesses will lead the recovery

3

Increasing adoption of digital tools

Source: National Bureau of Economic Research, Impact of COVID-19, July 2020; U.S. Census Bureau; The Economist(10/10/20)

We have a clear view of our target customer

Small Business Targets

0-9		REVENUE OF	SEEKS BENEFITS OF
EMPLOYEES	$10,000 +		YEAR-ROUND
				RELATIONSHIPS

We will go to market with two small business brands: Block Advisors and Wave

Human help and expertise with virtual and physical options

Initial focus on tax, bookkeeping and payroll

30,000 tax pros eligible for Block Advisors certification across 7,500 locations

DIY software for small business owners

Invoicing, payments and more plus Wave Money, the embedded business banking account

Integration with Block Advisors for tax

Our position of strength is grounded in understanding small business owners' needs

Customer needs define the opportunity

Our research shows small business owners:

Are short on time

Lack financial expertise

Struggle to find support and resources

Our Block Advisors value proposition, products, and brand strategy are built to address these needs

Block Advisors offerings

create value for business owners year-round

One source for small business service needs

Consultative advisor team to help boost cash flow and profitability

Block Advisors branding builds on trust in

H&R Block brand

Year-round help with small business questions

We've redesigned

the entire small business workflow

Appointment

Setting

• New service offerings
• Client chooses physical or virtual service
• Match client to certified Block Advisor

	Completion			Post-Service
	and Filing			Follow-Up
	•	Upfront price			•	Entity Approve Online
	•	Showcase Advisor			•	Mobile payment
		expertise and care			•	Year-round support from
	• Get to know your				Advisor team
		business questions

New capabilities will enable growth

We have launched new products in

response to customer needs…

Small Business P&L

Business Audit Support

Quarterly Payment Consultation

…and they are resonating

with clients

More than half of those who used Small Business P&L recalled it

More than 65% of these clients gave it the highest value scores

We will continue to broaden our offering over time

Certified Block Advisor tax pros provide unique expertise and build long-termrelationships

Unique & Differentiated

Client Experience in 7,500 Locations

Expert Advice, Available

In-Person or Digitally

30,000 Tax Pros Eligible for Enhanced Training & Certification

Hold Highest Levels of Tax Knowledge

We have an integrated go-to-marketstrategy

Investing in marketing, branding and expanded offerings to drive Block Advisors growth

Will use partnerships to round out relationships, product and service selection

Our heritage positions us for upside in small business tax

Current H&R Block Market Share

Consumer tax	2x
returns

Small business

tax returns

1%	~$60M
incremental	in incremental
business tax	revenue
market share

equates to

Wave is a robust platform that allows us to continue to build value-addedservices

Annually via Wave…

$22 billion in invoices sent

$2 billion in payments processed

$650 million in payroll funds dispersed

Wave Money provides fully integrated digital banking capabilities

First-to-market,software-powered small business bank account

No monthly fees or minimums

Instant access to funds from your invoice payments

Seamless integration with Wave accounting platform

Tremendous synergy potential for Block Advisors and Wave

Wave and Block together offer seamless support for small business tax

I M P E R A T I V E # 2

Financial Products

Les Whiting

Chief Financial Services Officer

Develop new products and experiences that create financial confidence and help ease

financial burden

Providing financial services for the underbanked is a significant opportunity

Underbanked households as

a fraction of total US households

24%

Underbanked

31M underbanked households

in the U.S.

Source: FDIC "How America Banks: Household Use of Banking and Financial Services," October 2020.

The growing dissatisfaction with traditional banks provides an opening for challengers

Higher fees and minimums

Increasing lack of trust in traditional banks

Seeking low-fee,mobile-centric alternatives

Fewer branches, comfort with digital

COVID is accelerating consumer moves to digital banking

46%

74%

79%

Using online/mobile banking more than pre-COVID

Plan to maintain some/all digital banking habits adopted during the pandemic

Plan to maintain new mobile habits (44% will keep all of them)

Source: PMNTS and Feedzai.

H&R Block is well-positionedin financial products

M

~67%

$9B

8

H&R Block customers

Block customers likely

Dollars deposited

who are underbanked

to open a bank account

annually to

with Block if offered

Emerald Card

Customer-first,mobile-centric,year-round

Source: H&R Block data; HRB Financial Products Survey, October 2020.

What to expect in the next

12 months

1

Adding mobile-wallet capabilities to Emerald Card

2

Further developing the digital experience

3

Refining customer acquisition and engagement strategy

I M P E R A T I V E # 3

Block Experience

Julius Lai

Chief Product and

Experience Officer

Heather Watts

Senior Vice President, DIY Tax

Reimagine our experience for customers and tax pros in a digital-first world

by blending technology and data with human expertise and care

We've already made significant progress toward a faster, easier tax prep experience

Use of Digital Services

Customers who engaged with a tax pro or approved return online doubled in

Tax Season '20

Customer

Satisfaction

'Intent to return' increased as much as 8

percentage points in Tax Season '20 among these customers

Total Clients

Total returns up more than 5% since 2017

due to improvements in service and experience

Block Experience is

how we are reimagining tax

Unique position

More ways to get

across digital, human expertise people and

locations

More convenience and care via AI-driven personalization

Easier and faster tax filing

All drive higher growth in the business

Leading the tax industry to a converged model

Historical

1

DIY

2

ASSISTED

Today/Future

A customer who starts digitally may get online assist or Tax Pro review

An on-location customer may complete process

digitally, or start digitally and come in to sign & file

Near-term target: 50% of Assisted clients using at least one digital tool

MyBlock is the hub

for customer engagement

Bold 1:1 Design		Integrated		Virtual Tools		Video Call/Chat
	Service Selection

Growing DIY remains a focus

Net promoter scores up more than 10 percentage points in last two years

Customer retention up more than 2 percentage points in last two years

Delivering live help for DIY customers in <3 minutes with Online Assist

>50% yoy growth in DIY customers taking live Tax Pro help

What to expect in the next

12 months

1

Launch new MyBlock as mobile portal to connect tax pros and customers

2

Determine new machine learning models that will further streamline tax prep and reduce time to complete

3

Test new labor models to understand opportunity for efficiencies

Financial

Principles &

Outlook

Tony Bowen

Chief Financial Officer

F I N A N C I A L P R I N C I P L E # 1

Our financial goals are tied to our strategic vision to drive growth

Small Business

Financial Products

Block Experience

3-6%

Targeted total annual revenue growth

Note: Does not apply to fiscal years 2021 and 2022 due to the financial impact of the pandemic.

F I N A N C I A L P R I N C I P L E # 2

Tremendous operating leverage helps increase the impact of our investments

EPS

CAGR

EBITDA

CAGR

6%

5%

4%

2%3%

~2.5x ~1.5x

Illustrative revenue growth

Note: EBITDA is a non-GAAP financial measure. Specific quantifications of the amounts that would be required to reconcile the company's EBITDA outlook for FY21 are not available. Because of the variability of these and other items as well as the impact of future events on these items, management is unable to reconcile without unreasonable effort the expected range of EBITDA for future periods to a comparable GAAP range.

F I N A N C I A L P R I N C I P L E # 3

We have multi-year expense reduction goals to focus our teams on driving efficiencies

Footprint		Labor Model		Technology		Disciplined
			Expense
Optimization		Efficiencies		Roadmap
			Management

Goal of $150 million in savings by 2025 to fuel investment for growth

To track our progress,

we will be sharing key metrics going forward

Total Company Financials

Revenue

EBITDA

EPS

Small Business

Total small business tax customers

Financial Products

Customers who reload

Revenue / customer

Block Experience

Total consumer tax customers

Revenue / customer

% of Assisted customers using digital tools

F I N A N C I A L P R I N C I P L E # 4

Our strong liquidity and balance sheet provide the flexibility to invest for growth

Maintain investment-grade metrics

Adequate access to liquidity through line of credit and recent debt financing

Target adjusted debt to EBITDA ratio of 2.5-3x

F I N A N C I A L P R I N C I P L E # 5

And we will return capital by continuing our dividend and opportunistic share repurchases

Balanced return of capital

Dividends	Dividend	Current
	+30% increase since	~6% dividend
	FY16	yield*

Share	Share	Shares outstanding
Repurchases
$150M repurchases	19% repurchased
	Q2 FY21	FY17-Q2 FY21

*As of market close on Dec. 2, 2020.

Our fiscal year 2021 outlook

marks the beginning of our journey

Revenue

EBITDA

Effective Tax Rate

Depreciation & Amortization

Interest Expense

$3.5B - $3.6B $950M - $1B 18% - 20% $155M - $165M $105M - $115M

Note: EBITDA is a non-GAAP financial measure. Specific quantifications of the amounts that would be required to reconcile the company's EBITDA outlook for FY21 are not available. Because of the variability of these and other items as well as the impact of future events on these items, management is unable to reconcile without unreasonable effort the expected range of EBITDA for FY21 to a comparable GAAP range.

These five principles will drive shareholder value

1	Sustainable annual revenue
growth of 3 to 6%

EBITDA and EPS growing

1. at a faster rate than revenue Redeploying cost savings
2. to highest ROI opportunities Maintaining a strong balance
3. sheet and liquidity position Continuing to return capital
4. via dividends and buybacks

Jeff Jones

President and Chief Executive Officer

Block Horizons is

the next step in our transformation

Strengthened		Leveraging
	data and AI	Solving
our foundation	Created a
in new ways
	problems for

culture of	consumers and
experimentation
small business

Q&A