Overview: HR Block Inc reports a revenue of $179.07 million for QQ2 2025, essentially flat versus the prior year (YoY -0.01%) but down 7.61% QoQ. The quarter delivered a material gross loss of $135.14 million, producing a gross margin of -75.47%. EBITDA was negative at -$261.35 million and operating income stood at -$293.29 million, yielding a net loss of -$243.42 million and diluted EPS of -$1.80. The quarter ends with precarious liquidity and structural leverage: cash balance of $341.5 million, net debt of $2.339 billion, and negative shareholders’ equity of -$872.46 million. Operating cash flow was deeply negative at -$567.06 million, with free cash flow at -$597.44 million. On the balance sheet, total assets of $2.712 billion are overshadowed by total liabilities of $3.585 billion, resulting in a solvency profile that raises meaningful investor risk. Relative to peers within Consumer Cyclicals and the personal products/services space, HR Block’s profitability and balance sheet metrics lag notably. While revenue shows no dramatic YoY growth, the margin deterioration and heavy indebtedness dominate the risk/reward assessment. Management commentary from the earnings call is not captured in the provided transcript data, limiting the ability to quote guidance or qualitative color. Given the current trajectory, the prudent investment stance focuses on deleveraging, cost optimization, and reaccelerating high-margin, digitally scalable services to restore operating leverage.
Key Performance Indicators
Revenue
179.07M
QoQ: -7.61% | YoY:-0.01%
Gross Profit
-135.14M
-75.47% margin
QoQ: -78.35% | YoY:-11.92%
Operating Income
-293.29M
QoQ: -28.45% | YoY:-9.67%
Net Income
-243.42M
QoQ: -41.05% | YoY:-28.28%
EPS
-1.80
QoQ: -46.34% | YoY:-35.34%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $179.07 million in QQ2 2025; YoY change of -0.01%; QoQ change of -7.61% indicating a modest sequential slow-down and flat annual top-line trajectory.
Gross Profit: -$135.14 million; gross margin -75.47% (cost of revenue $314.21 million vs revenue $179.07 million). Large negative margin signals structural cost pressures or misalignment in product/service mix and potential charges impacting gross profitability.
EBITDA: -$261.35 million; EBITDA margin approximately -146% of revenue (EBITDARatio -1.459).
Operating Income: -$293.29 million; operating margin approximately -164% of revenue (operatingIncomeRatio -1.638).
Net Income: -$243.42 million; net margin approximately -136% of revenue (netIncomeRatio -1.359).
Financial Highlights
Revenue and profitability
- Revenue: $179.07 million in QQ2 2025; YoY change of -0.01%; QoQ change of -7.61% indicating a modest sequential slow-down and flat annual top-line trajectory.
- Gross Profit: -$135.14 million; gross margin -75.47% (cost of revenue $314.21 million vs revenue $179.07 million). Large negative margin signals structural cost pressures or misalignment in product/service mix and potential charges impacting gross profitability.
- EBITDA: -$261.35 million; EBITDA margin approximately -146% of revenue (EBITDARatio -1.459).
- Operating Income: -$293.29 million; operating margin approximately -164% of revenue (operatingIncomeRatio -1.638).
- Net Income: -$243.42 million; net margin approximately -136% of revenue (netIncomeRatio -1.359).
- Earnings Per Share (diluted): -$1.80.
Cash flow and liquidity
- Operating cash flow: -$567.06 million; significant cash burn from operations.
- Capital expenditure: -$30.38 million; free cash flow: -$597.44 million.
- Cash and cash equivalents at period end: $341.52 million.
- Net change in cash: -$97.49 million; financing activities provided $543.05 million, which helped fund the cash burn but did not reverse the negative operating performance.
Balance sheet and leverage
- Total assets: $2.712 billion; Total liabilities: $3.585 billion; Shareholders’ equity: -$872.46 million (negative equity).
- Debt profile: Total debt $2.681 billion; Net debt $2.339 billion.
- Liquidity ratios: Current ratio 0.734; Quick ratio 0.734; Cash ratio 0.302, indicating tight liquidity.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
179.07M
-0.01%
-7.61%
Gross Profit
-135.14M
-11.92%
-78.35%
Operating Income
-293.29M
-9.67%
-28.45%
Net Income
-243.42M
-28.28%
-41.05%
EPS
-1.80
-35.34%
-46.34%
Key Financial Ratios
currentRatio
0.73
grossProfitMargin
-75.5%
operatingProfitMargin
-163.8%
netProfitMargin
-135.9%
returnOnAssets
-8.97%
returnOnEquity
27.9%
debtEquityRatio
-3.07
operatingCashFlowPerShare
$-4.18
freeCashFlowPerShare
$-4.41
dividendPayoutRatio
-21.5%
priceToBookRatio
-8.21
priceEarningsRatio
-7.36
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript or management quotes were provided in the data. As a result, no transcript highlights or thematic quotes can be pulled from management commentary for QQ2 2025. Investors should seek the official earnings call transcript or press release for management color on strategic initiatives, cost actions, and realizable margin improvements.
N/A
— N/A
N/A
— N/A
Forward Guidance
Forward guidance is not included in the provided data. Given the current results, the reasonable baseline expectation is caution pending management communication on path to profitability and deleveraging. Investors should monitor: (1) any explicit guidance on cost-reduction programs and gross-margin recovery, (2) debt maturity schedules and refinanced terms to reduce interest burden, (3) initiatives to scale higher-margin digital/self-serve offerings, and (4) seasonal tax-volume dynamics as the core revenue driver. Achievability will hinge on successful deleveraging, stabilization of working capital, and a material improvement in gross margin through product/mix optimization and efficiency gains. Key factors to watch include the cadence of cash burn reduction, the pace of debt reduction, and any announced strategic pivots toward profitability and sustainable free cash flow generation.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0HOB.L Focus
-75.47%
-1.64%
27.90%
-7.36%
0I0H.L
3.18%
0.12%
0.03%
908.98%
0JXD.L
42.30%
4.36%
3.49%
7.37%
0IJO.L
97.20%
43.40%
10.70%
7.28%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall investment stance remains highly conditional. If HR Block can de-risk the balance sheet through accelerated deleveraging, restore profitability via gross-margin expansion and cost controls, and demonstrate positive free cash flow generation, the stock could transition from its current distressed stance. Absent tangible deleveraging progress or a credible plan to restore profitability, downside risks driven by liquidity constraints and negative equity outweigh potential upside. Monitoring a credible plan for debt maturities, reduction of operating cash burn, and progress toward margin stabilization will be critical in evaluating the investment thesis going forward.
Key Investment Factors
Growth Potential
Growth potential centers on improving gross margins through cost optimization and expanding digital tax-prep offerings, where scalable margin improvement is possible. Potential international expansion (Canada, Australia) and cross-selling of Refund Transfers, prepaid products, and Identity Shield services could broaden the revenue mix as the US tax season cycles through its peak.
Profitability Risk
Key risks include sustained negative profitability (negative gross margin and operating margin), heavy leverage with net debt of $2.339B, and negative shareholders’ equity, creating solvency and refinancing risk. Liquidity is tight given a current ratio of 0.734 and reliance on financing activities to fund losses. Dependency on a seasonal tax cycle and ongoing regulatory/commercial competition pressure (including low-cost/free tax software) add further risk.
Financial Position
Financial position is stressed: negative equity, high long-term debt ($2.161B) versus relatively modest cash ($341.5M). Operating cash flow is deeply negative, raising concerns about sustainability without material cost reforms or strategic deleveraging. Valuation metrics reflect negative earnings and cash flow, with price-to-book and enterprise-value multiples distorted by negative equity and debt levels.
SWOT Analysis
Strengths
Established brand presence in tax preparation and related services with a broad retail footprint.