Tax preparation company H&R Block (NYSE: HRB) announced better-than-expected revenue in Q1 CY2025, with sales up 4.2% year on year to $2.28 billion. The company expects the full year’s revenue to be around $3.72 billion, close to analysts’ estimates. Its non-GAAP profit of $5.38 per share was 4.1% above analysts’ consensus estimates.
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H&R Block (HRB) Q1 CY2025 Highlights:
- Revenue: $2.28 billion vs analyst estimates of $2.25 billion (4.2% year-on-year growth, 1.3% beat)
- Adjusted EPS: $5.38 vs analyst estimates of $5.17 (4.1% beat)
- Adjusted EBITDA: $1.01 billion vs analyst estimates of $984.2 million (44.4% margin, 2.8% beat)
- The company reconfirmed its revenue guidance for the full year of $3.72 billion at the midpoint
- Management reiterated its full-year Adjusted EPS guidance of $5.25 at the midpoint
- EBITDA guidance for the full year is $997.5 million at the midpoint, in line with analyst expectations
- Operating Margin: 42.1%, in line with the same quarter last year
- Free Cash Flow Margin: 57.2%, down from 61.4% in the same quarter last year
- Market Capitalization: $8.19 billion
"Today we are reaffirming our FY25 outlook," said Jeff Jones, president and CEO.
Company Overview
Founded in 1955 by brothers Henry W. Bloch and Richard A. Bloch, H&R Block (NYSE: HRB) is a tax preparation company offering professional tax assistance and financial solutions to individuals and small businesses.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, H&R Block grew its sales at an incredible 30.5% compounded annual growth rate. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers, a helpful starting point for our analysis. We note H&R Block is a seasonal business because it generates most of its revenue during tax season, so the charts in our report will look a bit lumpy.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. H&R Block’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 3.1% over the last two years was well below its five-year trend. 
We can better understand the company’s revenue dynamics by analyzing its three most important segments: Tax Preparation, Financial Services, and Wave Financial, which are 93.8%, 2.4%, and 1.2% of revenue. Over the last two years, H&R Block’s Tax Preparation (DIY, assisted, add-on services) and Wave Financial (business software) revenues averaged year-on-year growth of 3.4% and 9%. On the other hand, its Financial Services revenue (Emerald Card, Spruce, interest income) averaged 10.4% declines.
This quarter, H&R Block reported modest year-on-year revenue growth of 4.2% but beat Wall Street’s estimates by 1.3%.
Looking ahead, sell-side analysts expect revenue to grow 1.8% over the next 12 months, similar to its two-year rate. This projection is underwhelming and indicates its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
H&R Block’s operating margin has been trending down over the last 12 months, but it still averaged 22.2% over the last two years, elite for a consumer discretionary business. This shows it’s an well-run company with an efficient cost structure, and its elite historical revenue growth also suggests its margin dropped because it ramped up investments to capture market share, a strategy that seems to have paid off so far.
This quarter, H&R Block generated an operating profit margin of 42.1%, in line with the same quarter last year. Because H&R Block is a seasonal business, we prefer to analyze longer-term performance rather than one quarter.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
H&R Block’s EPS grew at an astounding 41.5% compounded annual growth rate over the last five years, higher than its 30.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
In Q1, H&R Block reported EPS at $5.38, up from $4.94 in the same quarter last year. This print beat analysts’ estimates by 4.1%. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.
Key Takeaways from H&R Block’s Q1 Results
It was good to see H&R Block narrowly top analysts’ revenue expectations this quarter despite underperforming in the Tax Preparation segment. We were also happy its EPS and EBITDA topped Wall Street’s estimates. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The stock traded up 1.3% to $62.45 immediately following the results.
Is H&R Block an attractive investment opportunity right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
