One H&R Block Way

Kansas City, Missouri 64105

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD SEPTEMBER 13, 2018

The annual meeting of shareholders of H&R Block, Inc., a Missouri corporation (the “Company”), will be held at the H&R Block Center located at One H&R Block Way (corner of 13^th and Main Streets), Kansas City, Missouri, on Thursday, September 13, 2018, at 8:00 a.m. Central Time. Shareholders attending the meeting are asked to park in the H&R Block Center parking garage located beneath the H&R Block Center (enter the parking garage from either Main or Walnut Street). The meeting will be held for the following purposes:

The foregoing items of business are more fully described in the proxy statement accompanying this notice. The Board of Directors has fixed the close of business on July 13, 2018 as the record date for determining shareholders of the Company entitled to receive notice of and vote at the meeting and any adjournment or postponement thereof.

WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, WE URGE YOU TO VOTE YOUR SHARES VIA THE TOLL-FREE TELEPHONE NUMBER OR OVER THE INTERNET, AS PROVIDED IN THE ENCLOSED MATERIALS. IF YOU REQUESTED A PROXY CARD BY MAIL, YOU MAY SIGN, DATE, AND MAIL THE PROXY CARD IN THE ENVELOPE PROVIDED.

By Order of the Board of Directors,

SCOTT W. ANDREASEN

Vice President and Secretary

Kansas City, Missouri

August 1, 2018

August 1, 2018

Dear Fellow Shareholder,

Fiscal year 2018 was a very good year for our Company. We served 23.3 million clients worldwide. Our strong operational performance led to outstanding financial results, with revenue increasing 4.1% from the previous year to approximately $3.2 billion and pretax income increasing 6.3% to $669 million. And we shared our success directly with you, our shareholders, by continuing to pay a strong quarterly dividend, which we recently increased by 4% to an annual $1.00 per share.

Since joining the Company last October, our new CEO, Jeff Jones, has led our senior management team in a thorough review of the Company’s enterprise strategy. As a result of these efforts, and building upon our positive fiscal year 2018 results and our strong balance sheet, we have adopted a new strategic framework, designed to strengthen our position in all aspects of the tax preparation business. The Board has been in active partnership with Jeff and his team in the development of our new framework, and we are confident that the measures we will be adopting for tax season 2019 and beyond will enhance your Company’s long term success.

As discussed in detail in this Proxy Statement, we have maintained our “pay-for-performance” compensation structure that closely aligns executive compensation with the financial interests of our shareholders. You have strongly approved this structure in prior years (with annual positive “say-on-pay” votes of more than 95%) and we hope you will continue to support our approach by voting “for” again this year.

A final note. Our colleague and friend, Tom Seip, has advised us that, after 17 years on our Board, he will not be standing for re-election at the Annual Meeting. Tom’s wisdom and judgment have proven invaluable, as the Company has navigated opportunities – and challenges – since the beginning of this century. His leadership as Chair of the Compensation and Governance and Nominating Committees has helped provide us with both a state-of-the-art compensation structure and a number of first rate board members. Perhaps most importantly, he is a terrific human being. He will be missed.

On behalf of my colleagues on the Board, I’d like to thank you for your continued support. We are optimistic about our Company’s future. As we pursue the opportunities that lie ahead, we are honored by the confidence you have shown through your ownership of our shares.

Robert A. Gerard

Chairman of the Board

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board of Directors” or “Board”) of H&R Block, Inc., a Missouri corporation (“H&R Block” or the “Company” or “we”), for use at the 2018 annual meeting of shareholders of the Company (the “Annual Meeting”) to be held on Thursday, September 13, 2018 at 8:00 a.m. Central Time, at the H&R Block Center located at One H&R Block Way (corner of 13^th and Main Streets), Kansas City, Missouri. References to the Annual Meeting in this proxy statement include any adjournment or postponement thereof. This proxy statement contains information about the matters to be voted on at the meeting and the voting process, as well as information about our directors and executive officers.

WHY DID I RECEIVE A NOTICE IN THE MAIL REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS INSTEAD OF A FULL SET OF PRINTED PROXY MATERIALS?

Pursuant to rules adopted by the Securities and Exchange Commission (“SEC”), we are making this proxy statement and our 2018 Annual Report available to shareholders electronically via the internet. Unless you have already requested to receive a printed set of proxy materials, you will receive an “Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on September 13, 2018” (the “Notice”), which contains instructions on how to access proxy materials and vote your shares via the internet or, if you prefer, to request a printed set of proxy materials at no cost to you. On or about August 1, 2018, we mailed the Notice or, for shareholders who have already requested to receive a printed set of proxy materials, this proxy statement, an accompanying proxy card, and our 2018 Annual Report, to our shareholders of record. All shareholders will be able to access this proxy statement and our 2018 Annual Report on the website referred to in the Notice or request to receive printed copies of the proxy materials.

HOW CAN I ELECTRONICALLY ACCESS THE PROXY MATERIALS?

The Notice provides you with instructions on how to view our proxy materials for the Annual Meeting on the internet. The website on which you will be able to view our proxy materials will also allow you to choose to receive future proxy materials electronically, which will save us the cost of printing and mailing documents to you. If you choose to receive future proxy materials electronically, you will receive an email next year with instructions containing a link to the proxy voting site. Your election to receive proxy materials electronically will remain in effect until you terminate it.

HOW CAN I OBTAIN A FULL SET OF PRINTED PROXY MATERIALS?

The Notice will provide you with instructions on how to request to receive printed copies of the proxy materials. You may request printed copies up until one year after the date of the meeting.

WHAT AM I VOTING ON?

You are voting on four items of business at the Annual Meeting:

WHO IS ENTITLED TO VOTE?

Shareholders of record as of the close of business on July 13, 2018 are entitled to vote at the Annual Meeting. Each share of H&R Block common stock is entitled to one vote.

WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD AND AS A BENEFICIAL OWNER?

If your shares are registered directly in your name with the Company’s transfer agent, EQ Shareowner Services (“EQ”), you are considered a “registered shareholder” and are considered, with respect to those shares, the “shareholder of record.” If you are a shareholder of record, the Notice or proxy materials were sent to you directly by the Company, and you may vote by any of the methods described below under “How Do I Vote?”.

If your shares are registered in the name of a stock brokerage account or by a broker, bank, or other nominee on your behalf (referred to as being held in “street name”) or if you hold shares through the H&R Block Retirement Savings Plan, you are considered a “beneficial owner” of shares held in street name, and the broker, bank, or other nominee forwarded the Notice or proxy materials to you. As the beneficial owner, you have the right to direct your broker, bank, or other nominee holding your shares how to vote and you are also invited to attend the Annual Meeting. However, since you are not a shareholder of record, you may not vote these shares in person at the Annual Meeting unless you bring with you a legal proxy from the shareholder of record.

WHAT ARE THE VOTING RECOMMENDATIONS OF THE BOARD OF DIRECTORS AND THE VOTING REQUIREMENTS?

Our Board of Directors recommends that you vote your shares as follows:

Broker Discretionary Voting

Brokers holding shares on behalf of beneficial owners are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions on “non-routine” proposals, resulting in so-called “broker non-votes.” Brokers may vote without instruction only on “routine” proposals. Proposal 2, the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm, is the only routine proposal on the ballot for the Annual Meeting and the only proposal on the ballot for which broker discretionary voting is permitted. All other

proposals are non-routine. If you hold your shares with a broker, your shares will not be voted on non-routine proposals unless you give voting instructions to such broker.

Voting Requirements and Effect of Abstentions and Broker Non-Votes

For each matter to be voted upon at the Annual Meeting, shareholders may vote “for,” “against,” or “abstain.”

For each of the proposals, the affirmative vote of a majority of shares present in person or represented by proxy, and entitled to vote on the matter, is necessary for election or approval. The vote on Proposal 3, the approval of the Company’s named executive officer compensation, is a non-binding advisory vote only.

Shares represented in person or by a proxy that directs that the shares abstain from voting on a matter are deemed to be represented at the meeting as to that particular matter, and have the same effect as a vote against that proposal. Broker non-votes have no impact on the proposals.

If a submitted proxy does not specify how to vote, the shares represented by that proxy will be considered to be voted FOR each of the director nominees included in Proposal 1, FOR Proposals 2 and 3, and AGAINST Proposal 4.

HOW DO I VOTE?

If you are a registered shareholder, there are four different ways you can vote:

When your proxy is properly submitted, your shares will be voted as you indicate. If you do not indicate your voting preferences, the appointed proxies (Thomas A. Gerke and Scott W. Andreasen) will vote your shares FOR each of the director nominees included in Proposal 1, FOR Proposals 2 and 3, and AGAINST Proposal 4. If your shares are owned in joint names, all joint owners must vote by the same method, and if joint owners vote by mail, all of the joint owners must sign the proxy card. The deadline for voting by telephone or via the internet, except with respect to shares held through the H&R Block Retirement Savings Plan as described below, is 11:59 p.m. Eastern Time on September 12, 2018.

If you are a beneficial owner of shares held in street name, you may vote by following the voting instructions provided by your broker, bank, or other nominee, and your broker, bank, or other nominee should vote your shares as you have directed. You must have a legal proxy from the shareholder of record in order to vote the shares in person at the Annual Meeting.

If your shares are held through the H&R Block Retirement Savings Plan, you may also vote as set forth above, except that Plan participants may not vote their Plan shares in person at the Annual Meeting. If you provide voting instructions via the internet, by telephone or by written proxy card, Fidelity Management Trust Company, the Plan’s Trustee, will vote your shares as you have directed. If you do not provide specific voting instructions, the Trustee will vote your shares in the same proportion as shares for which the Trustee has received instructions. Please note that you must submit voting instructions to the Trustee no later than September 10, 2018 at 11:59 p.m. Eastern Time in order for your shares to be voted by the Trustee at the Annual Meeting. Your voting instructions will be kept confidential by the Trustee.

MAY I ATTEND THE MEETING?

All shareholders, properly appointed proxy holders, and invited guests of the Company may attend the Annual Meeting. Shareholders who plan to attend the meeting may be required to present valid photo identification. If you hold your shares in

street name, please also bring proof of your share ownership, such as a broker’s statement showing that you beneficially owned shares of the Company on the record date of July 13, 2018, or a legal proxy from your broker, bank, or other nominee (a legal proxy is required if you hold your shares in street name and you plan to vote in person at the Annual Meeting). Shareholders of record will be verified against an official list available at the registration area. The Company reserves the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the record date.

MAY I CHANGE MY VOTE?

After your initial vote, you may revoke your proxy and change your vote (i) any time prior to the voting deadline via the internet or by telephone (only your latest internet or telephone proxy submitted prior to the voting deadline for the Annual Meeting will be counted), (ii) by signing and returning a new proxy card with a later date prior to the Annual Meeting, or (iii) by attending the Annual Meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting or specifically request in writing that your prior proxy be revoked. If your shares are held in street name by a broker, bank, or other nominee, you must contact that nominee to change your vote.

DO SHAREHOLDERS HAVE CUMULATIVE VOTING RIGHTS WITH RESPECT TO THE ELECTION OF DIRECTORS?

No, shareholders do not have cumulative voting rights with respect to the election of directors.

WHAT CONSTITUTES A QUORUM?

As of the record date, 205,470,404 shares of the Company’s common stock were issued and outstanding. A majority of the outstanding shares entitled to vote at the Annual Meeting, represented in person or by proxy, will constitute a quorum. Abstentions and broker non-votes will be counted as present and entitled to vote for purposes of determining a quorum.

WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE “IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON SEPTEMBER 13, 2018”?

It means your shares are held in more than one account. You should vote all of your shares.

WHAT IS HOUSEHOLDING?

As permitted by the SEC, we are delivering only one copy of this proxy statement to shareholders residing at the same address, unless the shareholders have notified us of their desire to receive multiple copies of the proxy statement. This practice is known as householding.

The Company will promptly deliver, upon request, a separate copy of the proxy statement to any shareholder residing at an address to which only one copy was mailed. Requests for additional copies for the current year or future years should be directed to the Corporate Secretary, H&R Block, Inc., One H&R Block Way, Kansas City, Missouri 64105, or by telephone at (816) 854-4288.

Shareholders of record residing at the same address and currently receiving multiple copies of the proxy statement may contact our registrar and transfer agent, EQ, to request that only a single copy of the proxy statement be mailed in the future. You can contact EQ by phone at (888) 213-0968 or (651) 450-4064, or by mail at 1110 Centre Point Curve, Suite 101, Mendota Heights, Minnesota 55120-4100.

WHO WILL BEAR THE COST OF THIS SOLICITATION AND HOW WILL PROXIES BE SOLICITED?

The Company is making this solicitation on behalf of the Company’s Board of Directors and will pay the entire cost of this proxy solicitation, including the expense of preparing the proxy solicitation materials for the Annual Meeting and mailing the Notice and, as applicable, the proxy solicitation materials for such meeting. Following the mailing of these materials, directors, officers, and employees of the Company may solicit proxies by telephone, email, or other personal contact; such individuals will not receive compensation or reimbursement for these activities. Additionally, the Company has retained Georgeson LLC to

assist in the solicitation of proxies on behalf of the Board for a fee of $30,000 plus reimbursement of reasonable expenses. Further, brokers and other custodians, nominees, and fiduciaries will be requested to forward the Notice and printed proxy materials to their principals, and the Company will reimburse them for the expense of doing so.

WHAT IS THE COMPANY’S INTERNET ADDRESS?

The Company’s internet address is www.hrblock.com. The Company’s filings with the SEC are available free of charge via the “Investor Relations” link at this website (click on the “SEC Filings” link under the “Financial Info” tab), and may also be found at the SEC’s website, www.sec.gov.

WILL ANY OTHER MATTERS BE VOTED ON?

As of the date of this proxy statement, we know of no other matter that will be presented for consideration at the Annual Meeting other than those matters discussed in this proxy statement. If any other matters properly come before the meeting and call for a vote of the shareholders, the appointed proxies may use their discretion to vote on any such matters.

PROPOSAL 1 – ELECTION OF DIRECTORS

    The Company’s Amended and Restated Articles of Incorporation (the “Articles”) and Amended and Restated Bylaws (the “Bylaws”) provide that the number of directors to constitute the Board of Directors shall not be fewer than seven nor more than 12, with the exact number to be fixed by a resolution adopted by the affirmative vote of a majority of the entire Board. The Board of Directors currently consists of 11 directors who are elected annually. Ten members of the Board are standing for re-election. As previously disclosed, Tom D. Seip informed the Board on July 9, 2018 of his decision not to stand for re-election following the completion of his term at the Annual Meeting. Pursuant to our Bylaws, the Board has set the number of directors that shall constitute the Board at ten, effective upon the commencement of the Annual Meeting.

      The Articles and Bylaws also provide that all of the directors shall be elected at each annual meeting of shareholders. Under the Bylaws, each director holds office until the earlier of the election and qualification of such director’s successor or the director’s death, resignation, retirement, disqualification, disability, or removal from office. Any vacancy on the Board may be filled by a majority of the surviving or remaining directors then in office. The Company’s Bylaws provide that any incumbent director who is not elected by a majority of shares entitled to vote on his or her election and represented in person or by proxy shall promptly tender his or her irrevocable resignation to the Company’s Board, subject only to the condition that the Board accept the resignation. The Board and the Governance and Nominating Committee must consider and act on the resignation, as more fully described under “Corporate Governance – Mandatory Director Resignation Policies,” on page 19. To be eligible to be a nominee as a director, whether nominated by the Board or a shareholder, a person must deliver to the Company a written agreement that such person will abide by this director resignation requirement.

There are ten nominees for election to the Board at the Annual Meeting. Each of the ten nominees, if elected, will hold office until the earlier of the election and qualification of such director’s successor or the director’s death, resignation, retirement, disqualification, disability, or removal from office. The Board has nominated Angela N. Archon, Paul J. Brown, Robert A. Gerard, Richard A. Johnson, Jeffrey J. Jones II, David Baker Lewis, Victoria J. Reich, Bruce C. Rohde, Matthew E. Winter, and Christianna Wood for election as directors of the Company. Each nominee has consented to be named in this proxy statement and to serve as director if elected. If any of the nominees becomes unavailable for election for any reason, the Board may provide for a lesser number of directors or designate substitute nominees, and the proxies will be voted for the remaining nominees and any substitute nominees, unless otherwise instructed by a shareholder.

DIRECTOR NOMINATION PROCESS

The entire Board of Directors is responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between annual meetings of shareholders. The Governance and Nominating Committee is responsible for identifying, screening, and recommending candidates for Board membership to the entire Board. The

Governance and Nominating Committee works with the Board to determine the appropriate characteristics, skills, and experience for the Board as a whole and its individual members. In evaluating the suitability of individual Board members, the Board takes into account many factors, which are described in further detail below. The Board evaluates each individual in the context of the Board as a whole with the objective of retaining a group of directors with diverse and relevant experience that can best perpetuate the Company’s success and represent shareholder interests through sound judgment.

The Governance and Nominating Committee may seek the input of other members of the Board or management in identifying candidates who meet the criteria outlined above. In addition, the Governance and Nominating Committee may use the services of consultants or a search firm. The Governance and Nominating Committee will consider recommendations by the Company’s shareholders of qualified director candidates for possible nomination by the Board. Shareholders may recommend qualified director candidates by writing to the Company’s Corporate Secretary at H&R Block, Inc., One H&R Block Way, Kansas City, Missouri 64105. Submissions should include information regarding a candidate’s background, qualifications, experience, and willingness to serve as a director. Based on a preliminary assessment of a candidate’s qualifications, the Governance and Nominating Committee may conduct interviews with the candidate or request additional information from the candidate. The Governance and Nominating Committee uses the same process for evaluating all candidates for nomination by the Board, including those recommended by shareholders. The Bylaws permit persons to be nominated as directors directly by shareholders under certain conditions. To do so, shareholders must comply with the advance notice requirements under the Bylaws as outlined in the “Shareholder Proposals and Nominations” section of this proxy statement. The Company did not receive notice from any shareholder prior to the deadline for submitting notice of an intention to nominate any additional persons for election as directors at the Annual Meeting.

Diversity

Both the Board and the Governance and Nominating Committee believe that diversity of skills, perspectives, and experiences among Board members, in addition to the factors discussed above, improves the Board’s oversight and evaluation of management on behalf of the shareholders and produces more creative thinking and better strategic solutions by the Board. Although we do not have a formal policy concerning diversity of director nominees, the Governance and Nominating Committee considers, though not exclusively, the distinctive skills, perspectives, and experiences that candidates who are diverse in gender, ethnic background, geographic origin, and professional experience have to offer.

SELECTING AND EVALUATING OUR NOMINEES

When evaluating potential director nominees, the Governance and Nominating Committee considers each individual’s professional experience, areas of expertise, and educational background in addition to his or her general qualifications. The Governance and Nominating Committee works with the Board to determine the appropriate mix of experiences, areas of expertise, and educational backgrounds in order to establish and maintain a Board that is strong in its collective knowledge and that has the skillsets necessary to fulfill the Board’s responsibilities, meet the future needs of the Company to perpetuate our long term success, and represent the interests of our shareholders.

The Governance and Nominating Committee regularly communicates with the Board to identify professional experiences, areas of expertise, educational backgrounds, and other qualifications that impact our business or that our business may need in the future that are particularly desirable for our directors to possess in order to help meet specific Board needs, including:

The following chart highlights each director nominee’s specific skills, knowledge, and experience that the Governance and Nominating Committee and Board relied upon when determining whether to nominate the individual for election. A particular nominee may possess other valuable skills, knowledge or experience even though they are not indicated below.

The Board believes that all the director nominees are highly qualified. As the chart shows, the director nominees have significant leadership experience, knowledge, and skills that qualify them for service on our Board, and, as a group, represent diverse views, experiences, and backgrounds. All director nominees satisfy the criteria set forth in our Corporate Governance Guidelines and possess the personal characteristics that are essential for the proper and effective functioning of the Board. Each nominee’s biography below contains additional information regarding his or her experiences, qualifications, and skills.

The number of shares of common stock, share units, and share equivalents beneficially owned by each nominee for director is listed under the heading “Security Ownership of Directors and Management” on page 72.

DIRECTOR NOMINEES

There are ten nominees for election to the Board at the Annual Meeting. As described above, the Board has set the number of directors that shall constitute the Board at ten, effective upon the commencement of the Annual Meeting. All Board members are subject to annual election. The following pages present information regarding each director nominee, including information about each nominee’s professional experience, areas of expertise, educational background, and qualifications that led the Board to nominate him or her for election. The following also includes information about all public company directorships each nominee currently holds.

Unless otherwise instructed, the appointed proxies will vote the shares represented by the proxy cards received by them for each of the nominees named above. All nominees have consented to serve if elected. The Board of Directors has no reason to believe that any of the nominees would be unable to accept the office of director if elected. If any of the nominees becomes unavailable for election for any reason, the Board may provide for a lesser number of directors or designate substitute nominees, and proxies will be voted for the remaining nominees and any substitute nominees, unless otherwise instructed by the shareholder.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE TEN NOMINEES FOR DIRECTOR IN THIS PROPOSAL 1.

ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS

BOARD OF DIRECTORS’ MEETINGS AND COMMITTEES

The Board of Directors is responsible for overseeing and providing policy guidance on the Company’s business and affairs. The Board reviews significant developments affecting the Company and acts on matters requiring Board approval. During the 2018 fiscal year, the Board of Directors held 11 meetings. During the 2018 fiscal year, each of the incumbent directors attended at least 75% of the aggregate total number of meetings of the Board of Directors and Board committees of which he or she was a member (or portion of the fiscal year during which he or she served as a director or committee member). On average, our incumbent directors attended over 96% of the Board of Directors meetings and applicable Board committee meetings held during the 2018 fiscal year (or portion of the fiscal year during which he or she served as a director or committee member).

The standing committees of the Board are the Audit Committee, the Compensation Committee, the Governance and Nominating Committee, and the Finance Committee. The Company’s Corporate Governance Guidelines, Code of Business Ethics and Conduct, the Board of Directors Independence Standards (the “Independence Standards”), and charters for each of the standing committees may be accessed on the Company’s website at www.hrblock.com by clicking the “Investor Relations” link and then clicking the “Corporate Governance” link under the “Company” tab. These documents are also available in print to shareholders upon written request to the Corporate Secretary, H&R Block, Inc., One H&R Block Way, Kansas City, Missouri 64105.

Set forth below is a description of the primary duties of each of the standing committees of the Board and its members as of the date of this proxy statement.

DIRECTOR COMPENSATION

The Board considers and determines non-employee director compensation each year, taking into account recommendations from the Governance and Nominating Committee. The Governance and Nominating Committee formulates its recommendation based on its review of director compensation practices at a specific group of peer companies, based on publicly disclosed information (more discussion of our process for determining our peer group of companies can be found beginning on page 47). The Governance and Nominating Committee may delegate its authority to such subcommittees as it deems appropriate in the best interests of the Company and our shareholders. Management, in consultation with the Compensation Committee’s independent compensation consultant, assists the Governance and Nominating Committee in its review by accumulating and summarizing market data pertaining to director compensation levels and practices at our peer group of companies, reviewing external survey sources, and conducting its own custom research.

In June 2017, based on a review of our Peer Group of companies and consultation with the Company’s independent compensation consultant, the Governance and Nominating Committee recommended and the Board approved (i) an increase in the Board’s annual retainer to $70,000 from $60,000 and (ii) an increase in the value of the annual grants of deferred stock units (“DSUs”) to $150,000 from $145,000, both to be effective in fiscal year 2018 following the 2017 annual meeting.

The following chart describes the compensation elements for our non-employee directors in effect in fiscal year 2018 until the 2017 annual meeting, and effective following the 2017 annual meeting:

In addition, in consideration of emerging corporate governance best practices the Governance and Nominating Committee recommended, and in July 2017 our Board approved, a limit of $750,000 on the amount of equity and cash compensation that can be paid to a non-employee director of the Company in a calendar year. The limit does not apply to incremental compensation paid to a director solely in his or her capacity as non-executive Chairman of the Board, provided that such non-executive Chairman does not participate in the decision to award such additional compensation. The non-employee director compensation limit is set forth in the H&R Block, Inc. 2018 Long Term Incentive Plan (the “2018 Plan”), which was approved by our shareholders at the 2017 annual meeting. In setting the non-employee director compensation limit, the Governance and Nominating Committee and the Board reviewed survey data provided by the Compensation Committee’s independent compensation consultant.

In fiscal year 2018, DSUs were granted to non-employee directors under the H&R Block, Inc. 2013 Long Term Incentive Plan (the “2013 Plan”). In addition, DSUs were granted in fiscal year 2018 to Mr. Winter under the 2018 Plan, as he began service on the Board following the effectiveness of the 2018 Plan. The number of DSUs credited to a non-employee director’s account

pursuant to an award under the 2013 Plan was, and the 2018 Plan is, determined by dividing the dollar amount of the award by the average current market value per share of the Company’s common stock for the ten consecutive trading days ending on the date the DSUs are granted. The current market value per share generally is the closing sales price of a share of our common stock as reported on the NYSE.

DSU awards are fully vested on the grant date and are not subject to forfeiture. Vested DSUs are held in a deferred compensation account and become payable to each non-employee director, in shares of common stock, on the six-month anniversary date of termination of service as a director. However, if a non-employee director dies prior to the payment in full of all amounts due such non-employee director, the balance of the non-employee director’s DSU account becomes payable to the non-employee director’s beneficiary, in shares of common stock, within ninety days following the non-employee director’s death. There are no dividends paid on outstanding DSUs prior to the DSUs becoming payable, but dividend equivalents on the number of outstanding DSUs accumulate. When the DSUs become payable, in addition to receiving the applicable number of shares of common stock, the director will receive additional shares of common stock equal in value to the total dividends that would have been paid on such shares.

On September 14, 2017, DSUs approximately equal in value to $150,000 were granted to each of the Company’s incumbent non-employee directors for the one-year period of service on the Board beginning September 14, 2017. In addition, DSUs approximately equal in value to $200,000 were granted to Mr. Gerard for serving as the non-executive Chairman of the Board for the one-year period beginning September 14, 2017. On November 3, 2017, DSUs approximately equal in value to $129,452 were granted to Mr. Winter for his pro-rata service on the Board from his appointment on November 3, 2017 through September 12, 2018.

The Company provides to its non-employee directors free business travel insurance in connection with Company-related travel and, consistent with the benefit provided to our full-time employees, the opportunity to use our tax preparation services for no charge. In addition, the H&R Block Foundation will match gifts by non-employee directors to any qualified not-for-profit organization on a dollar-for-dollar basis up to an annual aggregate limit of $5,000 per director per calendar year.

The Board has adopted stock ownership guidelines regarding stock ownership by non-employee directors. The non-employee director ownership guidelines require non-employee directors to own a level of qualifying equity securities with an aggregate value of at least five times the annual cash retainer paid to them. Our stock ownership guidelines provide that, until a non-employee director satisfies the applicable holding requirement, he or she is required to retain any covered shares (which include shares owned directly or indirectly by such non-employee director, the after-tax value of vested stock option awards, if any, and share equivalents the non-employee director holds in the Company’s benefit plans) owned as of the date on which he or she becomes subject to the guidelines or acquired thereafter.

DIRECTOR COMPENSATION TABLE

The following table sets forth total director compensation for non-employee directors for fiscal year 2018.

CORPORATE GOVERNANCE

Corporate Governance Guidelines

Our Board of Directors operates under Corporate Governance Guidelines (the “Governance Guidelines”) to assist the Board in exercising its responsibilities. The Governance Guidelines reflect the Board’s commitment to monitoring the effectiveness of policy and decision-making both at the Board level and the management level, with a view to enhancing shareholder value over the long term. The Governance Guidelines also ensure that the Board will have the necessary authority and practices in place to review and evaluate the Company’s business operations as needed and to make decisions that are independent of the Company’s management. The Governance Guidelines are not intended to be a static statement of the Company’s policies, principles, and guidelines, but are subject to regular assessment and refinement as the Board may determine advisable or necessary in line with the best interests of the Company and our shareholders.

Pursuant to the Governance Guidelines, the Board evaluates its performance on an annual basis through an evaluation process administered by the Governance and Nominating Committee. To protect the directors’ anonymity and the integrity of the process, the evaluations are conducted in separate interviews by an independent third party who compiles the responses into a report for the Governance and Nominating Committee. In addition to Board performance, the annual interview includes questions regarding the performance of the individual Board members and the committees of the Board. Results of all evaluations are discussed at appropriate Committee meetings and with the full Board.

Director Service on Other Boards

The Governance Guidelines provide that directors should not serve on more than three other boards of public companies in addition to the Company’s Board. Furthermore, before serving on the board of another public company, directors are required to give prior notice to the Board. A permanent Chief Executive Officer of the Company is not permitted to serve on more than one other board of a public company in addition to the Company’s Board and must obtain Board approval prior to serving on the board of any public company. Currently, all director nominees are in compliance with these guidelines.

Mandatory Director Resignation Policies

The Company’s Bylaws provide that any incumbent director who is not elected by a majority of shares entitled to vote on their election and represented in person or by proxy shall promptly tender his or her irrevocable resignation from the Board to the Company’s Board, subject only to the condition that it is accepted by the Board, for consideration by the Governance and Nominating Committee. The Governance and Nominating Committee will make a recommendation to the Board as to whether to accept or reject the resignation. The Board will then act on the tendered resignation, taking into account the recommendation of the Governance and Nominating Committee, and publicly disclose its decision regarding the tendered resignation and the rationale behind the decision within ninety days from the date of the certification of the election results. The Governance and Nominating Committee in making its recommendation, and the Board in making its decision, may consider any factors or other information that it considers appropriate and relevant. The director who tenders his or her resignation is not permitted to participate in the proceedings of the Governance and Nominating Committee or the decision of the Board with respect to his or her resignation. If the Board accepts a director’s resignation, or if a non-incumbent nominee for director is not elected, then the Board may fill the vacant position or decrease the size of the Board in accordance with the Company’s Bylaws.

In addition, the Governance Guidelines provide that any director whose principal employment or major responsibilities materially change shall tender his or her resignation from the Board for consideration by the Governance and Nominating Committee. The Governance and Nominating Committee will then make a recommendation to the Board as to whether to accept or reject the resignation. The Board will then act on the tendered resignation, taking into account the recommendation of the Governance and Nominating Committee.

To be eligible to be a nominee for election as a director, whether nominated by the Board or a shareholder, a person must deliver to the Company a written agreement that such person will abide by these director resignation requirements.

Independent Chairman

The Company’s Articles and the Governance Guidelines require that the Chairman of the Board be an independent director who has not previously served as an executive officer of the Company. As Chairman, Mr. Gerard leads all meetings of the Board, including executive sessions of the non-employee directors held at each regular meeting of the Board.

A Substantial Majority of the Board is Independent

As further described in the Governance Guidelines, the Board believes that a substantial majority of the Board should consist of directors who are independent under NYSE listing standards. As described below, ten of the Board’s 11 current directors are independent directors within the meaning of the NYSE listing standards and Independence Standards. Mr. Jones is not an independent director under the NYSE listing standards or Independence Standards due to his position as our President and Chief Executive Officer. Assuming all ten director nominees are elected at the Annual Meeting, all of the directors, other than Mr. Jones, will be independent directors within the meaning of the NYSE listing standards and Independence Standards.

NYSE listing standards provide that a director does not qualify as independent unless the Board affirmatively determines that the director has no material relationship with the Company. The listing standards permit the Board to adopt and disclose standards to assist the Board in making determinations of independence. Accordingly, the Board has adopted the Independence Standards to assist the Board in determining whether a director has a material relationship with the Company.

Evaluation of Director Independence

In June 2018, the Board conducted an evaluation of director independence regarding the current directors and nominees for director based on the NYSE listing standards and Independence Standards. In addition, the Board also conducted an evaluation of the independence of each of the members of the Audit, Compensation, and Governance and Nominating Committees in accordance with the requirements of the NYSE listing standards. In connection with this evaluation, the Board considered the responses provided by the directors in their annual director questionnaires and reviewed commercial, charitable, consulting, familial, and other relationships between each director or immediate family member and the Company, its subsidiaries, and their employees. As a result of its evaluation, the Board affirmatively determined that Messrs. Brown, Gerard, Johnson, Lewis, Rohde, Seip, and Winter and Mses. Archon, Reich, and Wood are independent. In addition, the Board affirmatively determined that each member of the Audit, Compensation, and Governance and Nominating Committees is independent.

Code of Ethics

All directors, officers, and employees of the Company must act ethically and in accordance with the policies set forth in the H&R Block Code of Business Ethics and Conduct (the “Code”). The Code includes guidelines relating to the ethical handling of actual or potential conflicts of interest, compliance with domestic and foreign laws, accurate financial reporting, and procedures for promoting compliance with, and reporting violations of, the Code. In support of the Code, we have established a number of channels for reporting potential ethics violations or similar concerns or for guidance on ethics matters, such as via email, telephone, or in-person communications. All individuals have the ability to report concerns or discuss ethics-related matters anonymously. The Audit Committee has also established procedures for the receipt, retention, and treatment of reports received by us regarding accounting, internal accounting controls, or audit matters, including reports made to the Corporate Secretary by phone at (816) 854-4288 or by email to corporatesecretary@hrblock.com. The Code is overseen by the Company’s Chief Ethics Officer, who is appointed by the Audit Committee. To help ensure the Audit Committee’s effective oversight of our ethics and compliance program, the Audit Committee regularly receives reports from the Chief Ethics Officer and reviews matters related to the Company’s ethics and compliance program. The Company will post any amendments to or waivers of the Code, to the extent applicable to any of the Company’s executive officers or directors as required under applicable rules, on our website.

The Code can be accessed on the Company’s website at www.hrblock.com by clicking the “Investor Relations” link and then clicking the “Corporate Governance” link under the “Company” tab. The Code is also available in print to shareholders upon written request to the Corporate Secretary, H&R Block, Inc., One H&R Block Way, Kansas City, Missouri 64105.

Succession Planning

The Board recognizes the importance of effective executive leadership to the Company’s success. The Company’s Board is actively engaged and involved in succession planning. The Board discusses the talent pipeline for specific critical roles, and high-potential leaders are given exposure and visibility to Board members through formal presentations and informal events. More broadly, the Board is regularly updated on key talent indicators for the overall workforce, including economic environment, diversity, recruiting, and development programs.

BOARD LEADERSHIP STRUCTURE AND ACCOUNTABILITY

The Company’s Articles, Bylaws, and the Governance Guidelines require that the Chairman of the Board (i) be an independent director pursuant to NYSE listing standards, (ii) not simultaneously be Chief Executive Officer or President of the Company, and (iii) not have previously served as an executive officer of the Company. As such, the Board is led by an independent Chairman, currently Mr. Gerard, who has also been designated as the Board’s Senior Independent Director.

We believe that our current Board structure creates a positive balance in leadership and accountability, as the functions of Chief Executive Officer and Board Chairman are significantly different. In addition to balancing responsibilities, we believe that our current structure enhances the accountability of the Chief Executive Officer to the Board and strengthens the Board’s independence from management. Separating the roles of Board Chairman and Chief Executive Officer also allows the Chief Executive Officer to focus his or her efforts on running our business and managing the Company in the best interests of our shareholders. At the same time, our non-executive Chairman handles the separate responsibilities of Board and committee scheduling, Board agendas, and other Board organizational tasks, as well as leading the Board in discussions concerning CEO employment and performance evaluation and speaking on behalf of the Board and the Company regarding corporate governance- and investor relations-related issues.

COMMUNICATIONS WITH THE BOARD

Shareholders and other interested parties wishing to communicate with the Board of Directors, the non-employee directors, or an individual Board member concerning the Company may do so by writing to the Board, to the non-employee directors, or to the particular Board member, and mailing the correspondence to the Corporate Secretary, H&R Block, Inc., One H&R Block Way, Kansas City, Missouri 64105 or by emailing the correspondence to corporatesecretary@hrblock.com. Please indicate on the envelope whether the communication is from a shareholder or other interested party. The Board has instructed the Corporate Secretary and other relevant members of management to examine incoming communications and forward to the Board or individual directors as appropriate, communication he or she deems relevant to the Board’s roles and responsibilities. The Board has requested that certain types of communications not be forwarded, and redirected if appropriate, such as: spam, business solicitations or advertisements, resumes or employment inquiries, service complaints or inquiries, surveys, or any threatening or hostile materials. In addition, our non-executive Chairman and other Board members have made and may in the future make themselves available for consultation and direct communication with significant shareholders.

DIRECTOR ATTENDANCE AT ANNUAL MEETINGS OF SHAREHOLDERS

Although the Company has no specific policy regarding director attendance at the Company’s annual meeting of shareholders, all directors are encouraged to attend. All of the Company’s current directors attended last year’s annual meeting, with the exception of Mr. Winter, who was not yet a Board member at that time.

BOARD’S ROLE IN RISK OVERSIGHT

Our Board has oversight responsibility for managing risk, directly and through its various Committees, and management is responsible for the Company’s day-to-day enterprise risk management activities. The Company has established a management Risk Committee to support senior management in fulfilling its day-to-day enterprise risk management responsibilities and to support the Board in fulfilling its oversight responsibility for risk management. The Company’s Vice President and Treasurer oversees the activities of the Risk Committee, which is made up of key members of the Company’s management. The Company’s management Risk Committee assists the Board in its oversight of enterprise risk management by creating and

facilitating a process to identify, prioritize, monitor, and report on risks and mitigation strategies, overseeing regular reporting of risks to the Board and its committees, identifying additional risk mitigation strategies as appropriate, and monitoring emerging risks.

In fulfilling its oversight role, the Board generally focuses on the adequacy of the Company’s risk management and mitigation processes. The Board works with the Company’s Chief Executive Officer, Chief Financial Officer, General Counsel, and Vice President and Treasurer to determine the Company’s risk tolerance, and works to ensure that management identifies, evaluates, and properly manages the overall risk profile of the Company.

In addition to the discussion of risk at the Board of Directors level, the Board’s standing committees also focus on risk exposure as part of their ongoing responsibilities:

Each of the committee chairs regularly reports to the full Board concerning the activities of the applicable committee, the significant issues it has discussed, and the actions taken by that committee.

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

CEO Transition

In May 2017, the Company announced Mr. Cobb’s retirement from his positions as President and Chief Executive Officer (“CEO”) and as a member of the Board, effective as of July 31, 2017. Mr. Cobb’s term of employment was scheduled to expire on September 1, 2018 under his employment agreement. In connection with this event, Mr. Cobb received the benefits to which he was entitled under the terms and conditions of his applicable plans and agreements, as described in more detail beginning on page 58, which did not include any cash severance payments. As determined by the Compensation Committee under the terms of the H&R Block, Inc. Executive Performance Plan, Mr. Cobb received pro-rated annual short term incentive (“STI”) compensation for fiscal year 2018 based upon the portion of the fiscal year he served, to the same extent that annual STI compensation was paid to the other named executive officers, as described in more detail beginning on page 35. In light of the timing of his exit, Mr. Cobb did not receive a fiscal year 2018 long term incentive (“LTI”) award.

Following the announcement of Mr. Cobb’s retirement, in May 2017 the Board appointed Mr. Gerke as President and CEO (in an interim capacity) (“Interim CEO”) to serve until a permanent President and CEO was appointed. To reflect his enhanced duties during the period of transition, the Compensation Committee approved increases in Mr. Gerke’s compensation, which remained heavily weighted to long term and performance-based compensation. Additional detail regarding Mr. Gerke’s fiscal year 2018 compensation can be found beginning on page 33.

On August 22, 2017, the Company announced the Board’s appointment of Mr. Jones as President and CEO-Designate. Effective October 9, 2017, Mr. Jones became President and CEO and Mr. Gerke resumed his role as General Counsel and Chief Administrative Officer. In addition, the Board elected Mr. Jones to the Board, effective October 9, 2017, and has agreed that it will nominate him for re-election as a member of the Board during the term of his employment unless prohibited from doing so by legal or regulatory requirements.

The processes undertaken to foster a successful CEO transition were well executed and effective in helping the Company achieve strong financial and operational results in fiscal year 2018. See “Fiscal Year 2018 Results” on page 26 for a summary of our fiscal year 2018 accomplishments.

Our New CEO’s Employment Agreement

Mr. Jones was selected by the Board as our next CEO following an extensive internal and external CEO search conducted by a CEO Search Committee of independent directors that was led by the Chairman of our Board over a period of several months. Mr. Jones brings to the Company 27 years of executive management, creative leadership, and operational excellence, having held key roles at top companies in the retail, consumer products, agency, and technology industries. Importantly, the Board viewed Mr. Jones as having the potential to be a transformational leader who deeply understands today’s consumer and knows how to drive results in large-scale companies such as ours. Given his proven record of success in innovation and change management, the Board determined that Mr. Jones was the right person to evolve and grow our business in the years ahead.

Recognizing that Mr. Jones’s diversity of experience made him a highly sought-after candidate by companies in many other industries, the Compensation Committee, in consultation with our independent compensation consultant, determined that it was necessary to provide a market competitive compensation package that adequately motivated and incentivized Mr. Jones to choose employment with the Company, while simultaneously ensuring an appropriate and ongoing linkage between Mr. Jones’s compensation and the Company’s performance. Accordingly, the Company entered into an employment agreement with Mr. Jones dated August 21, 2017 (the “Jones Agreement”) that was designed to induce Mr. Jones to accept our offer to become President and CEO of the Company, to provide leadership stability to the Company by providing Mr. Jones with long term incentives to remain as President and CEO for an extended period of time, and to align his interests with our shareholders’ interests by establishing that a substantial majority of his compensation will be performance based.

The key compensation elements contained in the Jones Agreement are as follows:

The stock options and restricted share units are scheduled to vest in three equal annual installments beginning on the first anniversary of the employment date. Following vesting, the delivery of vested shares underlying the inducement equity awards are subject to mandatory deferral until after the termination of Mr. Jones’s employment to further align Mr. Jones’s compensation with the interests of our shareholders.

The inducement equity awards were intended to encourage Mr. Jones to accept our offer of employment and create an immediate, performance-based tie to changes in shareholder value, thereby fostering commonality of interest between Mr. Jones and shareholders. The Compensation Committee’s independent compensation consultant and the search consultants retained to assist in identifying potential candidates indicated the value of these equity inducement awards was reasonable in relation to typical market practice. Since the Company’s share price has fallen since Mr. Jones’s hire date, the intrinsic value of the stock options is currently zero and the value of the restricted stock units has been reduced commensurate with the change in shareholder value.

Excluding the inducement equity awards, Mr. Jones’s target total direct compensation opportunity falls between the lower quartile and median of our Peer Group and consistent with CEO compensation opportunities provided over the prior three years. The total compensation package inclusive of the cash sign-on bonus and annualized value of the inducement equity

awards (based on the fair value at grant spread over the three-year vesting period) is within range of the Peer Group median (see beginning on page 47 for more information on our Peer Group). In light of all the above factors, the total cost of hiring Mr. Jones was reasonable when benchmarked against typical CEO external new hires for a company of our size and complexity.

The Jones Agreement is more fully described under the heading “Jeffrey J. Jones II Employment Agreement” beginning on page 58.

Overall Executive Compensation Philosophy

Our executive compensation decisions are influenced by a variety of factors, with the primary goals being to align management’s and shareholders’ interests and to link pay with performance. We evaluate performance over both short term and multi-year periods based on (i) the Company’s financial, operational, and strategic performance, including results for certain key performance metrics and (ii) the Company’s total return to shareholders over time, both on an absolute basis and relative to other companies in the S&P 500 index.

We view our executive compensation practices as an avenue to communicate our goals and standards of conduct and as a means to reward executives for their achievements. We believe our executive compensation program is reasonable, competitive, and appropriately balances the objectives of recruiting, retaining, and motivating our executives. To ensure management’s interests are aligned with those of our shareholders and to motivate and reward individual initiative and effort, a substantial portion of our executives’ compensation is at-risk and will vary above or below target levels commensurate with Company performance. We emphasize performance-based compensation to motivate our executives to deliver financial, operational, and strategic results that meet or exceed pre-established goals through our STI and LTI programs. Additionally, we aim to further align the interests of our executives with those of shareholders and the long term interests of the Company through stock ownership requirements and utilizing equity-based awards under our LTI program.

Our Pay for Performance Philosophy

To align the interests of our executives with those of our shareholders, the Compensation Committee has designed our executive compensation program with a substantial emphasis on variable compensation, which ties the earned compensation of our executives to the annual and long term performance of the Company as measured by financial and strategic accomplishments as well as changes in shareholder value.

Fiscal Year 2018 Compensation Decisions

In light of the Company’s generally strong performance in fiscal year 2017 and in recognition of challenges that can occur during periods of transition, the Compensation Committee took actions designed to appropriately recruit, retain, and motivate executives. In addition, the Compensation Committee approved compensation designed to ensure that executive pay would continue to be aligned with Company performance and with an enhanced focus on market share. Additional discussion of fiscal year 2018 compensation decisions can be found beginning on page 33.

Fiscal Year 2018 Results and Impact on Fiscal Year 2019 Compensation Decisions

Fiscal Year 2018 Results

In fiscal year 2018, we improved the client trajectory in the assisted segment as a result of stronger client retention, and our do-it-yourself (“DIY”) segment returns increased 7.8% compared to the prior year due to product enhancements and more effective marketing. We also delivered strong financial results in fiscal year 2018, including the following highlights:

In addition, we continued our record of making quarterly dividend payments, which, along with the Board’s approval in the first quarter of fiscal year 2019 of a 4% increase in the quarterly dividend to $0.25 per share, was consistent with our strong history of allocating capital to our shareholders.

Fiscal Year 2018 Performance-Based Compensation

In June 2017, the Compensation Committee established our NEOs’ (other than Mr. Jones) compensation for fiscal year 2018, including performance-based STI and LTI awards. Mr. Jones’s performance-based STI and LTI awards for fiscal year 2018 were pro-rated given his August 2017 appointment. Consistent with prior years, the Compensation Committee selected Revenue from Continuing Operations and Pre-Tax Earnings as Step Two STI metrics in order to balance a top- and bottom-line focus. For fiscal year 2018 STI awards, the Compensation Committee determined that the market share element, added in fiscal year 2017 as a multiplicative modifier, should be enhanced to become a third weighted Step Two metric for fiscal year 2018. This approach furthered the Company’s desired focus on improving the client trajectory.

The Company’s results for fiscal year 2018 were above target performance goals related to Pre-Tax Earnings from Continuing Operations, Revenues from Continuing Operations, and Market Share. In June 2018, the Compensation Committee reviewed the Company’s performance as compared to the pre-determined performance objectives and approved an overall payout for our NEOs of 109.2% of their targets. Additional discussion of fiscal year 2018 STI compensation decisions can be found beginning on page 35.

The charts below illustrate the mix of fiscal year 2018 total direct compensation, using target LTI amounts and actual base salaries and STI amounts, for Mr. Jones as our CEO (exclusive of one-time sign-on compensation) and, on average, for our other NEOs who were serving as executive officers on April 30, 2018.

The specific components of Mr. Jones’s total direct compensation for fiscal year 2018 (exclusive of one-time sign-on compensation) are illustrated by the chart on the left below, which shows that 73% of his fiscal year 2018 total direct compensation was at-risk, with target performance-based equity comprising 80% of his LTI compensation and actual performance-based STI compensation comprising 57% of his total cash compensation. The chart on the right below illustrates the specific components of average total direct compensation for fiscal year 2018 for our other NEOs who were serving as executive officers on April 30, 2018. The chart shows that an average of 67% of their fiscal year 2018 compensation was at-risk, with target performance-based equity comprising 80% of their LTI compensation and actual performance-based STI compensation comprising 51% of their total cash compensation. The components depicted below are more fully described beginning on page 32.

The variance between our CEO’s compensation and our other NEOs’ compensation reflects the difference in responsibilities and overall accountability to shareholders. Our CEO’s at-risk compensation is higher than the other NEOs because the CEO bears a greater level of responsibility for the Company’s performance, as he is directly responsible for leading the development and execution of the Company’s strategy and for selecting, retaining, and managing the executive team.

We have included charts and tables in this Compensation Discussion and Analysis to enhance our shareholders’ understanding of the compensation of our NEOs. These tables and charts are meant to be in addition to, and not an alternative to, the charts and tables provided under the heading “Executive Compensation” beginning on page 54.

Fiscal Year 2019 Strategy and Compensation

Commencing in fiscal year 2019, we adopted a new strategic framework designed to guide us toward long term sustainable growth, driven by the following five strategic pillars:

For fiscal year 2019, we are implementing a number of initiatives as we begin executing this new enterprise growth strategy, including (i) modernizing our key technology platforms to, among other things, enable more innovation; (ii) enhancing cross-channel client experiences; (iii) improving service quality and consistency in our offices; (iv) strengthening our value proposition; and (v) building brand differentiation. We expect these changes to position us for long term growth, but they will require investments in the short term, resulting in lower expected revenues, EBITDA, and EBITDA margin in fiscal year 2019.

Therefore, in light of the Company’s generally strong performance in fiscal year 2018 and new strategy beginning in fiscal year 2019, the Compensation Committee took actions designed to appropriately compensate, retain, and motivate executives, while taking into account the strategic investments required in fiscal year 2019 under our new strategic framework. The Compensation Committee’s determinations regarding our NEOs’ base salaries and STI and LTI opportunities for fiscal year 2019 are summarized in the following chart, and additional discussion of these compensation decisions can be found beginning on page 34.

The Company and the Board regularly evaluate our compensation policies and practices to ensure they are meeting our objectives and take into account executive compensation best practices. As part of that process, the Compensation Committee and the Board consider feedback received from shareholders, including the results of our shareholder advisory vote on executive compensation (commonly known as a “say-on-pay” vote). The Board welcomes communications from the Company’s shareholders, and it is the policy of the Company to facilitate communication from shareholders. Management routinely seeks feedback from shareholders on a variety of matters, including the Company’s executive compensation practices. The Compensation Committee and the Board believe that the annual say-on-pay vote is a very important component of our communication with shareholders regarding executive compensation. At our 2017 annual meeting of shareholders held on September 14, 2017, our shareholders approved the compensation awarded to our NEOs, as disclosed in our 2017 proxy statement, with approximately 97% of the votes cast in favor of the proposal. In fact, in each of the last five years our shareholders have approved the compensation awarded to our NEOs with over 96% of the votes cast in favor of each proposal, which is above the median support level for S&P 500 companies the past few years. We view this overwhelming and long-standing level of support as a clear message from our shareholders that they believe our compensation levels are appropriately aligned with our performance and that they approve of our executive compensation practices generally. We also believe that the approval is tied to the fact that our executive compensation does fluctuate based on performance factors, with STI payouts ranging from 0% to 121.8% over the past three years, and LTI payouts for market stock units ranging from 75.3% to 85.7% and for performance share units ranging from 18.1% to 69.2% over the past three years. We value the opinions of our shareholders and consider the outcome of say-on-pay votes and other feedback received from our shareholders when making compensation decisions for our NEOs.

As described above, a primary goal of our executive compensation program is to directly link a significant portion of executive pay to Company performance. Consistent with our shareholders’ support, the Compensation Committee decided to retain the core design features of our executive compensation program in fiscal year 2019. In structuring fiscal year 2019 compensation, the Compensation Committee aimed to continue to closely align executive pay with Company performance by:

Additional discussion of fiscal year 2019 compensation decisions can be found beginning on page 33.

EXECUTIVE COMPENSATION PRACTICES

The table below highlights our current compensation practices, including the practices we have implemented because we believe they drive performance and the practices we have not implemented because we do not believe they would serve our shareholders’ long term interests.

EXECUTIVE COMPENSATION PROGRAM SUMMARY

The pay packages for our NEOs contain a mix of elements that vary based on the factors described on page 47. Executive officer pay is also based on the Company’s performance against specific pre-established annual and multi-year financial, operational, and strategic performance goals, and the Company’s total return to shareholders over time, both on an absolute basis and relative to other companies in the S&P 500 index.

For awards that are based on the Company’s performance, our specific decisions regarding the setting of performance goals focus on certain metrics that relate to our business plan and strategic priorities and that we believe are the most critical value drivers of the business, such as revenue from continuing operations, pre-tax earnings from continuing operations, earnings from continuing operations before interest, taxes, depreciation, and amortization, or EBITDA, earnings from continuing operations before interest and taxes, or EBIT, market share, and average return on invested capital. Actual performance goals, as well as strategic priorities, vary from year to year based on the business environment and the Compensation Committee’s determination of goals that it believes are important for a particular year.

Unlike target incentive compensation levels, which are set by the Compensation Committee near the beginning of each fiscal year, actual incentive compensation is a function of the Company’s financial, operational, strategic, and absolute and relative stock performance, as reflected through STI payouts, payouts of LTI performance share units and market stock units, and the value of all LTI awards. A substantial portion of our executives’ actual compensation is at-risk and varies above or below target levels commensurate with Company performance.

The chart below summarizes the elements and objectives of our fiscal year 2018 compensation program for our NEOs. Each of the following compensation components fulfills one or more of our objectives of recruiting, retaining, and motivating a high-performing executive team.

EXECUTIVE COMPENSATION PROGRAM COMPONENTS

Each of our compensation components fulfills one or more of our objectives of recruiting, retaining, and motivating a high-performing executive team, and the Compensation Committee annually reviews tally sheets of all such components for each of our executive officers. As a part of this process, the Compensation Committee also reviews the total value of all stock-denominated compensation held by each executive and the potential termination costs for each of our executive officers, including potential payments upon termination in connection with a “change in control.” The Compensation Committee evaluates these elements and, under its charter, has authority to approve certain matters and make recommendations to the Board regarding matters requiring Board approval (such as certain actions related to severance or change in control provisions).

Except as otherwise noted under “Executive Evaluation Process,” the Compensation Committee’s executive compensation determinations are the result of the Committee’s business judgment, which is informed by the experiences of the Committee members, input from the Committee’s independent compensation consultant, and the CEO’s evaluation of performance.

Base Salary

The Compensation Committee establishes base salaries at levels designed to enable us to recruit and retain talented executives and to motivate consistent high performance over a sustained time period. The Compensation Committee determines executive base salaries based on the executive’s experience, role and responsibilities, individual performance, and the other factors described below under “Compensation Philosophy and Benchmarking” beginning on page 47. Annual merit increases for our NEOs, other than the CEO, are based on evaluation of their performance by the CEO and the Compensation Committee, as well as the Company’s performance and outlook for the upcoming fiscal year. Annual merit increases are not automatic or guaranteed from year to year; adjustments, if any, take into account the factors described below under “Compensation Philosophy and Benchmarking” beginning on page 47.

For fiscal year 2018, base salaries for our NEOs were as follows:

As described above, the Company announced in May 2017 that Mr. Gerke was appointed as Interim CEO. As additional compensation to reflect his enhanced duties during the period of transition, the Compensation Committee approved an increase in Mr. Gerke’s base salary to an amount that would equal $950,000 annually, with such increase effective beginning June 1, 2017 and continuing through the later of (i) the end of the duration of his appointment as Interim CEO and (ii) December 1, 2017. In November 2017, in connection with his return to his role as General Counsel and Chief Administrative Officer, the Compensation Committee approved a base salary for Mr. Gerke of $600,000 beginning December 1, 2017. The increase from Mr. Gerke’s fiscal year 2017 base salary was intended to recognize his contributions to the Company’s financial and operational performance, his specific roles and responsibilities at the Company, and his individual performance during fiscal year 2017 and fiscal year 2018 while serving as Interim CEO. Additional information regarding Mr. Gerke’s fiscal year 2018 compensation can be found on page 58.

The fiscal year 2018 salary increases for Mr. Bowen and Mses. Collins and Logerwell were intended to recognize their contributions to the Company’s financial and operational performance, their specific roles and responsibilities at the Company, and their individual performance in fiscal year 2017. The salary increases for Mr. Bowen and Ms. Logerwell were also intended to take into account market data for comparable positions within our Peer Group and the general market environment.

Mr. Cobb’s base salary remained at $995,000 annually in fiscal year 2018 pro-rated to July 31, 2017. Additional information regarding Mr. Cobb’s retirement and fiscal year 2018 compensation can be found on page 58.

In August 2017, the Compensation Committee approved an annual base salary for Mr. Jones of $995,000. Additional information regarding Mr. Jones’s fiscal year 2018 compensation can be found on pages 24 and 58.

In June 2018, the Compensation Committee approved the fiscal year 2019 base salaries shown in the table below for our NEOs who served as executive officers at that time.

Mr. Jones continues to receive a base salary of $995,000 annually in fiscal year 2019 pursuant to the Jones Agreement. Additional information regarding the Jones Agreement and Mr. Jones’s fiscal year 2019 compensation can be found on pages 24 and 58. The fiscal year 2019 salary increases for Mr. Bowen and Ms. Logerwell were intended to recognize their contributions to the Company’s fiscal year 2018 financial and operational performance, their specific roles and responsibilities at the Company, and their individual performance in fiscal year 2018. The salary increases for Mr. Bowen and Ms. Logerwell also took into account market data for comparable positions within our Peer Group and the general market environment.

Short Term Incentive Compensation

STI compensation is performance-based and at-risk compensation intended to motivate executives to attain goals that are measured over annual time horizons. Our executive STI compensation program under the H&R Block Executive Performance Plan (“Executive Performance Plan”) approved by our shareholders is designed to compensate executives primarily for achieving pre-established annual financial, operational, or strategic performance objectives that relate to our fiscal year business plan. STI compensation for our executive officers is determined under a two-step approach. The two-step approach was initially designed with the intent to qualify the STI awards under the Executive Performance Plan as “performance-based compensation” for purposes of meeting the performance-based exemption under Internal Revenue Code (“IRC”) Section 162(m) and to enable the Company to deduct the amount of the STI awards to the greatest extent permitted under IRC Section 162(m) as in effect when such awards were granted. As discussed in more detail beginning on page 51 below, the Tax Legislation repealed the performance-based exemption under Section 162(m) effective for tax years beginning after December 31, 2017, other than with respect to certain compensation that qualifies for transition relief applicable to certain grandfathered arrangements that were in place as of November 2, 2017. The Compensation Committee determined to retain the two-step structure for fiscal year 2019 STI because it believes that the structure still provides an appropriate and flexible framework for determining STI compensation.

Under Step One of the methodology, the Compensation Committee approves a specific STI “initial funding performance target,” or threshold level of performance, within ninety days after the beginning of the fiscal year. In setting the initial funding performance target, the Compensation Committee uses one or more of the specific performance criteria identified in the Executive Performance Plan. Under Step Two of the methodology, the CEO, in consultation with other senior executives, proposes separate performance objectives that are then reviewed by the Compensation Committee in consultation with its independent compensation consultant. These separate performance objectives are generally based on our fiscal year business

plan. After the Compensation Committee makes any changes to these performance objectives that it considers appropriate, the Compensation Committee approves the objectives for use with respect to our executive officers.

Following the end of the fiscal year, the Compensation Committee reviews the Company’s performance measured against the initial funding performance target set in Step One and the separate performance objectives set in Step Two. Failure to achieve the initial funding performance target for the applicable objective set in Step One would result in no payouts being made under the Executive Performance Plan. Achievement of the initial funding performance target set in Step One results in potential funding of the STI payments for the applicable executive officers at the maximum payout level. In such event, under the Executive Performance Plan, the Compensation Committee may exercise negative discretion to reduce the potential funding amount to the actual amounts to be paid to each executive, if any, based primarily on performance against the separate performance objectives applicable to each executive officer set in Step Two. The Compensation Committee may use this negative discretion to reduce the actual payout, as it deems appropriate, based on the Company’s performance relative to these pre-determined Step Two performance objectives and on the Compensation Committee’s evaluation of financial, operational, strategic, and individual performance.

Maximum and threshold Step Two performance objectives are set above and below the target objectives to establish an appropriate relationship between actual Company performance and the executives’ STI compensation. Because they are subject to the Company’s attainment of performance objectives, STI target opportunities for our NEOs are intended to place a significant portion of our NEOs’ annual cash compensation at risk, thereby aligning their compensation with shareholders’ interests. These target opportunities are also intended to provide competitive total cash compensation opportunities within our pay positioning context discussed below. Performance criteria and objectives are subject to adjustment as is necessary to prevent reduction or enlargement of an award based on various events occurring during the course of the applicable performance period that distort the criteria applicable to any performance objective. Such events generally include the following:

Under the Executive Performance Plan, ultimate STI payouts can range from 0% to 200% of each NEO’s target STI opportunity, subject to certain limitations contained in the Executive Performance Plan and, for Mr. Jones, limitations contained in the Jones Agreement. The terms of the Jones Agreement are set forth below under the heading “Jeffrey J. Jones II Employment Agreement” beginning on page 58. As discussed below under “Actions Pertaining to Fiscal Year 2019 STI Compensation,” for fiscal year 2019, STI payouts are capped at 150% of the target STI opportunity.

Each year, the Compensation Committee approves a target opportunity for STI compensation for each of our executive officers that is a percentage of such executive officer’s base salary. The target opportunities applicable to our NEOs for fiscal years 2018 and 2019 are set forth below under “Targeted vs. Actual STI Awards” and “Actions Pertaining to Fiscal Year 2019 STI Compensation,” respectively. The variance between our CEO’s STI target opportunity and other NEOs’ opportunities reflects the difference in responsibilities and overall accountability to shareholders. Also, to ensure alignment with shareholders’ interests, a larger portion of our CEO’s annual cash opportunity is at risk.

Actions Pertaining to Fiscal Year 2018 STI Compensation

In June 2017, the Compensation Committee approved the use of EBIT from continuing operations in the amount of $577.8 million as the initial funding performance target for fiscal year 2018 STI compensation for our executive officers. In June 2017, the Compensation Committee also approved the separate fiscal year 2018 STI performance Step Two criteria and objectives applicable to our executive officers. In August 2017, the Compensation Committee approved fiscal year 2018 STI

compensation for Mr. Jones with the same terms provided to our other NEOs, except that the initial funding performance target was set as EBIT from continuing operations in the amount of $622.4 million for the eleven-month period of June 1, 2017 to April 30, 2018. The eleven-month period was selected for Mr. Jones with the intent to qualify Mr. Jones’s fiscal year 2018 STI compensation as “performance-based compensation” under IRC Section 162(m).

These separate fiscal year 2018 STI performance criteria and objectives, shown below, continue our focus on driving revenue and earnings growth to enhance the ultimate performance of the Company as a whole. In addition, market share was added as a weighted Step Two objective for fiscal year 2018, rather than serving as a multiplicative modifier as in fiscal year 2017. This approach furthered the Company’s desired focus on continuing to improve the client trajectory. In addition, to ensure a balanced focus on all metrics, the payout for each of the Step Two metrics is limited to 125% of target opportunity, unless the Company achieves at least a 75% payout for each of the other Step Two metrics. These criteria and objectives are disclosed in the limited context of our executive compensation program, and should not be deemed to apply in other contexts.

The Compensation Committee selected these criteria because it determined that they represented key business drivers of shareholder value over the shorter term. The Compensation Committee set the targets following the Board’s review and approval of our fiscal year 2018 operating plan. The performance targets were set to motivate strong management performance, and, as indicated above, balance top-line metrics (Revenue from Continuing Operations), bottom-line metrics (Pre-Tax Earnings from Continuing Operations), and further our focus on improving the client trajectory (Market Share). The Compensation Committee believes such a balance drives the appropriate amount of focus on propelling growth through revenue and clients, without detracting from the ultimate performance of the Company as a whole. Each fiscal year the Compensation Committee examines the target levels for each performance metric, with the goal of establishing target levels with an appropriate level of difficulty considering the industry and competitive environment and the Company’s strategic priorities and operating plan for the fiscal year.

Though the target levels for the performance metrics may vary from year-to-year and from the prior year’s actual performance, the Committee believes that the performance metrics for fiscal year 2018 were set at appropriate levels of difficulty to motivate the executives and appropriately compensate for strong management performance, and further reflect the Company’s strategic focus on market share and improving the client trajectory. The Compensation Committee believes that the fiscal year 2018 target levels described above are appropriately rigorous, given that they were set in line with our fiscal year 2018 operating plan, and also because: (i) targets were set at or above actual fiscal year 2017 performance; (ii) average payout is 77% as a percentage of target over the last three years; and (iii) as discussed below, the financial performance achieved resulting in the above-target payouts were all improvements over fiscal year 2017 results.

The table below shows the change in target STI opportunity for our NEOs from fiscal year 2017 to fiscal year 2018, as a percentage of base salary:

Mr. Cobb’s fiscal year 2018 target opportunity of 125% of his base salary was set under the terms of his employment agreement, and was pro-rated for his service through July 31, 2017. The increase in target opportunity for Mr. Gerke was in recognition of his individual performance in fiscal year 2017 and as incentive to perform his enhanced duties while serving as Interim CEO. The increases in target opportunities for Mr. Bowen and Mses. Collins and Logerwell for fiscal year 2018 were in recognition of their individual performance in fiscal year 2017, their specific roles and responsibilities, and their overall contributions to the strategic direction of the Company. Mr. Bowen’s and Ms. Logerwell’s increases in target opportunity were also after taking into account market data regarding their respective positions within our Peer Group and the general market environment.

Mr. Jones’s fiscal year 2018 target opportunity of 125% of his base salary was set under the Jones Agreement and was pro-rated to an amount equal to $862,106 based on the period from the date he commenced employment through the last day of fiscal year 2018. In determining Mr. Jones’s STI opportunity, the Committee considered Mr. Jones’s experience and new role and responsibilities, the STI levels for other Company executives, and market data for President and Chief Executive Officer positions within our Peer Group.

Targeted vs. Actual STI Awards

The following formula was used to calculate the payout awarded for fiscal year 2018 STI compensation for our executive officers:

Our NEOs received fiscal year 2018 STI compensation of 109.2% of their target opportunities. In determining the level of achievement of the performance goals, the calculations of the results for the performance criteria were adjusted pursuant to the types of adjustments that the Compensation Committee approved at the time it set the 2018 STI performance goals and objectives. As discussed above, management delivered generally strong performance in fiscal year 2018. The Company’s results for fiscal year 2018 were above target performance goals related to Pre-Tax Earnings from Continuing Operations, Revenues from Continuing Operations, and Market Share. Pre-tax Earnings from Continuing Operations increased 6% from $629 million in fiscal year 2017 to $669 million in fiscal year 2018, primarily due to increased revenues. Revenues from Continuing Operations for fiscal year 2018 increased $124 million, or 4%, compared to fiscal year 2017 to approximately $3.2 billion, primarily due to increased tax preparation fees resulting from increased return volumes in DIY and favorable net average charge. The Company’s market share for fiscal year 2018 was 13.10%, an increase from 13.00% in fiscal year 2017, which resulted in a 104.0% outcome for the Market Share weighted performance criteria described above.

The table below shows the target opportunities and actual awards under our fiscal year 2018 STI program for each of our NEOs:

Actions Pertaining to Fiscal Year 2019 STI Compensation

In June 2018, the Compensation Committee approved fiscal year 2019 target STI opportunities for our NEOs who served as executive officers at that time as follows:

Mr. Jones’s fiscal year 2019 target opportunity of 125% of his base salary was set under the terms of the Jones Agreement. The target opportunity for Mr. Gerke was set at the same percentage as fiscal year 2017, consistent with the level applicable prior to his service as Interim CEO. The increase in target opportunity for Ms. Logerwell is in recognition of her individual performance in fiscal year 2018 and her specific role and responsibility, and after taking into account market data regarding total direct compensation for her position within our Peer Group and the general market environment. Consistent with its approach in prior years, the Compensation Committee maintained complete discretion to pay less than the target amounts described above.

For fiscal year 2019, the Compensation Committee again utilized the two-step approach described above for determining the design of STI compensation applicable to our executive officers. In June 2018, the Compensation Committee approved a specified level of the Company’s EBIT from continuing operations as the specific STI initial funding performance target. As discussed above, the two-step approach was initially designed with the intent to qualify the STI awards under the Executive Performance Plan as “performance-based compensation” for purposes of meeting the performance-based exemption under IRC Section 162(m), and the Compensation Committee determined to retain the two-step structure for fiscal year 2019 STI because it believes that the structure still provides an appropriate and flexible framework for determining STI compensation. In June 2018, the Compensation Committee set the separate performance objectives applicable to our executive officers for fiscal year 2019, as well as the permitted types of adjustments. The Compensation Committee again selected Revenue from Continuing Operations, Pre-Tax Earnings from Continuing Operations, and Market Share as Step Two objectives. This approach

continued the balance among the top- and bottom-line metrics, as well as the Company’s desired focus on continuing to improve the client trajectory. The levels for each Step Two metric were set by the Compensation Committee consistent with the Company’s fiscal year 2019 operating plan; however, the specific levels of each metric are not disclosed at this time given their competitive sensitivity. Given the planned strategic investments for fiscal year 2019 included in the operating plan, the Compensation Committee determined that the maximum amount each executive can earn is 150% of target for each metric, and 150% of target in the aggregate (reduced from the 200% maximum under the Executive Performance Plan). In addition, the Compensation Committee determined that any amounts earned over target opportunity would be paid to the executives in restricted share units, to be granted under the 2018 Plan in June 2019 if applicable, with vesting to occur ratably over two years. Given these limitations, the fiscal year 2019 STI structure no longer limits the payout for each of the Step Two metrics to 125% of target opportunity unless the Company achieves at least a 75% payout for each of the other Step Two metrics.

Long Term Incentive Compensation

We believe that a significant portion of each NEO’s compensation should depend on the amount of long term value we create for our shareholders. Our LTI compensation is equity-based and is designed to support multiple objectives, including (i) aligning management’s interests with those of our shareholders, (ii) tying compensation to the attainment of long term financial and operating goals and strategic objectives, thereby mitigating incentives for management to pursue short term objectives at the expense of long term value creation, (iii) ensuring that realized compensation reflects changes in shareholder value over the long term, and (iv) recruiting, retaining, and motivating highly skilled executives.

Historically, the Company has awarded equity-based compensation on an annual basis, within ninety days of the beginning of each fiscal year, in order to align awards with our performance and achievement of business goals. The value of these equity award opportunities that is ultimately realized by our executives is determined by the Company’s performance over the vesting period, tying the value our executives earn with shareholder value, all as described in more detail below. From time to time, the Company also awards equity-based compensation as part of an employment offer or promotion or, in certain limited instances, as a special award. The amount of equity-based compensation awarded in these circumstances is based on the executive’s role and responsibilities, long term potential, or individual or Company performance. The award amount is also guided by market data for positions of similar scope and responsibility.

Actions Pertaining to Fiscal Year 2018 LTI Compensation

For fiscal year 2018, exclusive of Mr. Jones’s inducement equity awards pursuant to the Jones Agreement (as discussed below), our NEOs received a mix of equity-based incentive awards consisting of approximately 50% of value in performance share units, 30% of value in market stock units, and 20% of value in time-based restricted share units, each of which are explained below. The Compensation Committee weighted the mix of equity-based compensation so that our NEOs received a greater portion of LTI compensation in performance-based equity vehicles, such as performance share units and market stock units, as compared to time-based equity vehicles, such as restricted share units. As a result, a substantial portion of our NEOs’ equity-based compensation is at-risk and aligned with shareholders’ interests. The portion delivered in time-based restricted share units is intended to serve as an ongoing retention tool and a continuing link to shareholder value, given that the value of the restricted share units increases only to the extent that the Company’s stock price increases. Additional detail regarding the forms of LTI compensation utilized as part of fiscal year 2018 annual LTI compensation is provided below.

Performance Share Units

For fiscal year 2018, our NEOs received 50% of their annual LTI compensation in the form of performance share units. We believe the performance share units appropriately reflect our compensation philosophy by establishing a clear connection between the compensation of our NEOs and the achievement of performance goals that are important for long term value creation.

The TSR modifier increases or decreases the initial payout by up to 25% of the initial payout amount (for a modifier ranging from 75% to 125% of the initial payout amount, as shown in the chart above). However, notwithstanding the result of that calculation, the maximum earned amount is capped at 200%. The following formula is used to calculate the final number of earned performance share units, subject to the overall 200% cap:

For performance share units granted in fiscal year 2018, performance is measured over a three-year period beginning on May 1, 2017 and ending on April 30, 2020 and the applicable performance metric is the Company’s year-over-year growth in EBITDA from continuing operations (“Annual EBITDA Growth”). The calculated payout percentages for each of the three individual years are averaged for the three-year period to determine the number of performance share units that ultimately vest. The Compensation Committee selected Annual EBITDA Growth as the performance metric beginning in fiscal year 2017, because it believes EBITDA from continuing operations is a critical driver of sustained value creation over the longer term, and the Compensation Committee desired to add a focus on year-over-year improvement; however, the specific levels of EBITDA growth are not disclosed at this time given their competitive sensitivity. At the end of the performance period, the Compensation Committee will certify the performance results and percentage payout, as well as the resulting final number of performance share units earned by each executive officer. There are no dividends paid on outstanding performance share units during the vesting period, but dividend equivalents accumulate during the vesting period. Upon vesting of the performance share units, in addition to receiving the number of shares of common stock determined according to the payout calculation, the executive will receive additional shares of common stock equal in value to the total dividends that would have been paid on the number of shares of common stock that ultimately vest. Performance share units do not carry voting rights.

Beginning with performance share units granted in fiscal year 2018, a mandatory post-vesting holding requirement was added, which requires that the executive hold at least 50% of the gross shares earned upon vesting of the performance share units for a period of one year after the vesting date.

Market Stock Units

For fiscal year 2018, our NEOs received 30% of their annual LTI compensation in the form of market stock units. If certain performance thresholds are met, a participating executive has the opportunity to earn a payout between 50% and 200% of his or her target number of market stock units based on the ratio of the average of the Company’s stock price for the fifteen consecutive trading days prior to the grant date (“Grant Date Price”) and the average of the Company’s stock price for the fifteen consecutive trading days beginning on the date the Company’s Annual Report on Form 10-K is filed with the SEC for the last fiscal year within the performance period, which is fiscal year 2020 (“Ending Date Price”).

Performance is measured over a three-year performance period beginning on May 1, 2017 and ending on April 30, 2020, with the applicable performance metrics established within ninety days of the beginning of the performance period and the cumulative results for the three-year period determining whether any shares of common stock are payable upon vesting of the market stock units following the end of the three-year period.

The vesting of market stock units is subject to two thresholds, both of which must be satisfied for any payout to occur. First, the Ending Date Price must be greater than or equal to 50% of the Grant Date Price. Second, the Company’s average return on invested capital based on after-tax net operating profit from continuing operations and average invested capital during the three-year performance period, each as defined in the award agreement, must be greater than or equal to 14%. The Compensation Committee determined to utilize average return on invested capital as the second of these thresholds for market stock units, as it believes the investment community considers this metric to be an effective measure of capital efficiency.

Failure to attain either of these thresholds would result in forfeiture of the entire market stock unit award. The total number of market stock units earned by participating executives, if any, is equal to the number of market stock units granted on the grant date multiplied by the ratio of the Ending Date Price to the Grant Date Price. The following formula is used to calculate the final number of earned market stock units:

At the end of the performance period, the Compensation Committee will certify the performance results and percentage payout, as well as the resulting number of market stock units earned by each executive officer. There are no dividends paid on outstanding market stock units during the vesting period, but dividend equivalents accumulate during the vesting period. Upon vesting of the market stock units, in addition to receiving the number of shares of common stock determined according to the payout calculation, the executive will receive additional shares of common stock equal in value to the total dividends that would have been paid on the number of shares of common stock that ultimately vest. Market stock units do not carry voting rights.

Restricted Share Units

For fiscal year 2018, our NEOs received 20% of their annual LTI compensation in the form of restricted share units. There are no dividends paid on outstanding restricted share units during the vesting period, but dividend equivalents accumulate during the vesting period. Upon vesting of the restricted share units, in addition to receiving the applicable number of shares of common stock, the executive will receive additional shares of common stock equal in value to the total dividends that would have been paid on such shares. Restricted share units do not carry voting rights.

Fiscal Year 2018 LTI Vesting Provisions

Performance share units and market stock units generally vest, if at all, on the third anniversary of the grant date. Restricted share units generally vest in one-third annual increments beginning on the first anniversary of the grant date. However, certain special grants may have a different vesting schedule. For fiscal year 2018 performance share units, market stock units, and

restricted share units granted to Mr. Jones, the grant date of the awards was August 21, 2017, but the awards retained the standard June 30 vesting schedule, to align vesting of Mr. Jones’s fiscal year 2018 awards with the annual grants to our other employees.

An executive generally will forfeit his or her equity award upon voluntary termination of employment or termination for cause prior to the vesting date, but will be entitled to pro-rata vesting of his or her awards (as determined based upon the attainment of performance goals, when applicable) in the event of the executive’s retirement more than one year following the grant date, and will be entitled to a full vesting of his or her awards (as determined based upon the attainment of performance goals, when applicable) in the event of the executive’s death or disability more than one year following the grant date. For performance share units and market stock units, an executive will be entitled to receive pro-rata vesting of the awards, as determined based upon the attainment of applicable performance goals, in the event of the executive’s involuntary termination without cause more than one year following the grant date. Unvested restricted share units are forfeited upon an executive’s involuntary termination without cause.

In the event of a change in control, the Compensation Committee may in its discretion waive the performance goals that apply to performance-based awards. If it does, the units generally will vest as a result of the executive’s continued employment through the third anniversary of the grant date and the executive will be entitled to receive all or a pro-rata portion of the award in the event of certain forms of termination that occur in connection with or following the change in control. For restricted share units, the executive will be entitled to receive full vesting in the event of certain forms of termination (as set forth in the award agreement governing the grant) in connection with a change in control.

Mr. Gerke’s fiscal year 2018 equity-based compensation awards contain modified vesting provisions providing that his voluntary retirement will not result in the forfeiture of any of the equity awards outstanding for more than one year prior to such retirement; rather, the entire equity awards will continue to vest on the stated vesting dates set forth in the applicable award agreement and with performance adjustments (if any) made under such agreement as if he remained employed through such stated vesting dates.

Fiscal Year 2018 LTI Compensation Awards

For fiscal year 2018, the Company awarded our NEOs (other than Mr. Cobb) performance share units, market stock units, and restricted share units in the following amounts:

The fiscal year 2018 performance share units and market stock units will vest, if at all, on June 30, 2020 and the fiscal year 2018 restricted share units will vest, if at all, in one-third annual increments beginning on June 30, 2018. In connection with his retirement effective July 31, 2017, the Company and Mr. Cobb agreed that he would not receive a fiscal year 2018 LTI award. Additional information regarding Mr. Cobb’s retirement and fiscal year 2018 compensation can be found on page 58.

CEO Inducement Equity Awards

The Compensation Committee considered it important to the future of the Company to design a compensation package for Mr. Jones that was heavily weighted on long term incentives providing immediate and long term shareholder alignment. Please see the “Executive Summary” beginning on page 24 for a detailed discussion of the Compensation Committee’s determination of Mr. Jones’s compensation. As such, in addition to the fiscal year 2018 LTI awards described above, pursuant to the Jones Agreement, Mr. Jones was granted the following inducement equity awards on August 21, 2017:

The Inducement Awards will vest in three equal annual installments beginning on the first anniversary of the grant date and will vest in full if Mr. Jones is terminated without Cause (see page 59), resigns for Good Reason (see page 59), upon Mr. Jones’s death, or due to his disability. Delivery of any vested shares under the Inducement RSUs will be deferred until after the termination of Mr. Jones’s employment to further align Mr. Jones’s compensation with the interests of our shareholders. The Inducement Awards are one-time sign-on awards for Mr. Jones, which were not provided in fiscal year 2019 and are not intended to recur in the future. Additional information regarding the Inducement Awards and the Jones Agreement can be found on page 24.

Actions Pertaining to Fiscal Year 2019 LTI Compensation

At the beginning of fiscal year 2019, the Compensation Committee considered the mix of equity-based compensation for executive officers and determined that the current equity mix continues to strike the appropriate balance among recruiting, retaining, and motivating our executives. The Committee determined that this equity mix properly motivates our executives to work towards achieving our long term objectives and new strategic framework and further aligns their interests with the interests of our shareholders. As a result, our NEOs received 50% of their annual LTI compensation for fiscal year 2019 in performance share units, 30% in market stock units, and 20% in time-based restricted share units. The payment structures, vesting schedules, terms and conditions of the fiscal year 2019 equity-based compensation are substantially similar to those of the fiscal year 2018 equity-based compensation described above under the heading “Actions Pertaining to Fiscal Year 2018 LTI Compensation” beginning on page 39. The following changes were made to the fiscal year 2019 performance share units in order to further align our executives’ compensation with our multi-year strategic framework and the interests of our shareholders:

All of the fiscal year 2019 award agreements are filed as exhibits to the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2018.

Mr. Gerke’s fiscal year 2019 equity-based compensation awards contain the same modified vesting provisions as his fiscal year 2018 equity-based awards, as described above under “Fiscal Year 2018 LTI Vesting Provisions.”

Fiscal Year 2019 LTI Compensation Awards

In June 2018, the Company awarded annual LTI compensation for fiscal year 2019 to NEOs who served as executive officers at that time as set forth in the chart below.

The target opportunity for Mr. Gerke was set at the same level as fiscal year 2017, consistent with the level applicable prior to his service as Interim CEO.

Vesting and Performance-based Payouts of Fiscal Year 2016 Performance Share Units and Market Stock Units

As previously disclosed, our executive officers, including certain of our NEOs, received performance share units and market stock units in fiscal year 2016. Performance for these performance share units and market stock units was based on a three-year period beginning on May 1, 2015 and ending on April 30, 2018. This performance was certified, and the overall payout was approved, by the Compensation Committee in July 2018.

Under the terms of the award agreements for fiscal year 2016 performance share units, a participating executive had the opportunity to earn an initial performance share unit payout, ranging from 0% to 200% of his or her target award, based upon the Company’s performance against pre-established performance metrics. The Committee selected cumulative EBITDA from continuing operations as the performance metric for the three-year performance period beginning in fiscal year 2016. This initial payout was then modified based on the Company’s TSR relative to the S&P 500 index over the period beginning with the fifteen consecutive trading days prior to the grant date and ending on the fifteen consecutive trading days beginning on the date the Company’s Annual Report on Form 10-K was filed with the SEC for the last fiscal year within the performance period. The TSR modifier could increase or decrease the payout by up to 25% of the initial payout amount. As a result of the TSR modifier, a participating executive could receive a maximum final payout of up to 250% of the performance share units initially granted to such executive. The performance metric and objective (in millions) for the performance period was as follows: