Raises Earnings per Share Guidance for Fiscal 2016

MOUNTAIN VIEW, Calif.–(BUSINESS WIRE)–
Intuit Inc. (NASDAQ:INTU) announced
financial results for the first quarter of fiscal 2016. The company’s
fiscal first quarter ended Oct. 31.

“We started the fiscal year the same way we ended the last, with strong
momentum across our businesses as our intense focus on our global cloud
strategy takes shape,” said Brad Smith, Intuit’s president and chief
executive officer.

“We exceeded our subscriber and financial targets in the first quarter
and have raised our earnings per share guidance for the fiscal year
based on these initial strong results and our acceleration of share
repurchases in the quarter.”

Financial Highlights

In the first quarter Intuit:

  • Reported 17 percent revenue growth, which includes the impact of
    ratable revenue recognition for certain desktop software offerings.
  • Increased total QuickBooks Online subscribers by 57 percent.
  • More than doubled QuickBooks Online subscribers outside the U.S. to
    215,000.
  • Repurchased .3 billion of its common shares.
  • Raised GAAP and non-GAAP earnings per share guidance for fiscal 2016.

Unless otherwise noted, all growth rates refer to the current period
versus the comparable prior-year period, and the business metrics and
associated growth rates refer to worldwide business metrics.

Business Segment Results

The segment results below reflect the treatment of assets held for sale
as discontinued operations.

Small Business

  • Total Small Business segment revenue increased 5 percent.
  • The small business online ecosystem continues to build momentum, with
    revenue growth of approximately 28 percent, driven by strong customer
    acquisition.

    • Over 80 percent of QuickBooks Online customers were new to the
      Intuit franchise, raising total subscribers to 1,159,000.
    • More than doubled QuickBooks Online subscribers outside the U.S.,
      reaching 215,000 customers.
    • Reached 35,000 QuickBooks Self-Employed subscribers, up from
      25,000 in the last quarter.
  • Online payroll customers grew 17 percent.
  • Online payments customers grew 4 percent, and online payments charge
    volume grew 14 percent.

Consumer and Professional Tax

  • Consumer Tax revenue was flat in a seasonally light first quarter.
  • ProTax revenue grew more than 200 percent to 0 million, driven by
    changes to desktop offerings that affected the timing of revenue
    recognition.

Intuit will provide a tax unit update in late February, concurrent with
its second-quarter earnings release, and a final update in late April
after the tax season ends.

 

Snapshot of First-quarter Results

GAAP   Non-GAAP
    Q1

FY 16

  Q1

FY 15

  Change   Q1

FY 16

  Q1

FY 15

  Change
Revenue   3   2   17%   3   2   17%
Operating Income (Loss)   ()   (9)   NM     ()   NM
EPS   ({$content}.11)   ({$content}.29)   NM   {$content}.09   ({$content}.11)   NM

Dollars are in millions, except earnings per share (EPS). See “About
Non-GAAP Financial Measures” below for more information regarding
financial measures not prepared in accordance with Generally Accepted
Accounting Principles (GAAP). Q1 FY16 results reflect the impact of
changes to certain desktop software offerings; revenue for those
offerings is recognized as services are delivered, rather than up front.
Q1 FY16 results also reflect the treatment of assets held for sale as
discontinued operations.

Capital Allocation Summary

“Our first priority is investing for customer growth,” said Neil
Williams, chief financial officer. “This quarter we also increased our
dividend by 20 percent and repurchased .3 billion in shares.”

In the first quarter the company:

  • Ended with 4 million in cash and investments.
  • Repurchased shares at an average price of .50 per share; about .4
    billion remains on the authorization.
  • Received board approval for a {$content}.30 per share dividend for the fiscal
    second quarter, payable on Jan. 19. This represents a 20 percent
    increase versus last year.

Forward-looking Guidance

“Looking ahead, we remain focused on executing against a compelling
long-term growth opportunity in both tax and small business,” Smith
said. “We are expanding our categories and our geographies. The proof
points are evident in the momentum we are building, as the QuickBooks
Online ecosystem continues to grow at a very healthy rate.”

Intuit announced guidance for the second quarter of fiscal year 2016,
which ends Jan. 31. The company expects:

  • Revenue of 0 million to 0 million, growth of 17 to 20 percent.
  • GAAP operating income of million to million, compared to an
    operating loss of million in the year-ago quarter.
  • Non-GAAP operating income of million to million, compared to
    an operating loss of million in the year-ago quarter.
  • GAAP earnings per share of {$content}.01 to {$content}.04, compared to a net loss per
    share of {$content}.23 in the year-ago quarter.
  • Non-GAAP earnings per share of {$content}.17 to {$content}.20, compared to a loss per
    share of {$content}.06 in the year-ago quarter.
  • QuickBooks Online subscribers of approximately 1.240 million.

For full fiscal 2016, the company now expects:

  • GAAP earnings per share of .55 to .60, versus previous guidance of
    .50 to .55.
  • Non-GAAP earnings per share of .45 to .50, versus previous
    guidance of .40 to .45.
  • Capital expenditures of 0 million to 0 million, versus previous
    guidance of 0 million to 0 million. The new guidance reflects
    the recently announced purchase of Intuit’s San Diego campus.

Intuit also reiterated its revenue and operating income guidance for
fiscal 2016.

Intuit executives will discuss the company’s financial results on a
conference call at 1:30 p.m. Pacific time on Nov. 19. To hear the call,
dial 866-348-8108 in the United States or 908-982-4619 from
international locations. No reservation or access code is needed. The
conference call can also be heard live at http://investors.intuit.com/events.cfm.
Prepared remarks for the call will be available on Intuit’s website
after the call ends.

Replay Information

A replay of the conference call will be available for one week by
calling 888-266-2081, or 703-925-2533 from international locations. The
access code for this call is 1664405.

The audio webcast will remain available on Intuit’s website for one week
after the conference call.

About Intuit

Intuit Inc. creates business and
financial management solutions that simplify the business of life for
small businesses, consumers and accounting professionals.

Its flagship products and services include QuickBooks® and
TurboTax®, which make it
easier to manage small businesses
and tax preparation and filing.
Mint.com provides a fresh, easy and
intelligent way for people to manage their money, while ProSeries®
and Lacerte® are Intuit’s
leading tax preparation offerings for professional accountants.

Founded in 1983, Intuit had revenue of .2 billion in its fiscal year
2015. The company has approximately 7,700 employees with major offices
in the United States, Canada,
the United Kingdom, India
and other locations. More information can be found at www.intuit.com.

Intuit and the Intuit logo, among others, are registered trademarks
and/or registered service marks of Intuit Inc. in the United States and
other countries.

About Non-GAAP Financial Measures

This press release and the accompanying tables include non-GAAP
financial measures. For a description of these non-GAAP financial
measures, including the reasons management uses each measure, and
reconciliations of these non-GAAP financial measures to the most
directly comparable financial measures prepared in accordance with
Generally Accepted Accounting Principles, please see the section of the
accompanying tables titled “About Non-GAAP Financial Measures” as well
as the related Table B1, Table B2, and Table E. A copy of the press
release issued by Intuit today can be found on the investor relations
page of Intuit’s Web site.

Cautions About Forward-looking Statements

This press release contains forward-looking statements, including
forecasts of expected growth and future financial results of Intuit and
its reporting segments; Intuit’s prospects for the business in fiscal
2016 and beyond; expectations regarding Intuit’s growth outside the US;
expectations regarding timing and growth of revenue for each of Intuit’s
reporting segments and from current or future products and services;
expectations regarding customer growth; expectations regarding changes
to our products and their impact on Intuit’s business; expectations
regarding the amount and timing of any future dividends or share
repurchases; expectations regarding availability of our offerings;
expectations regarding the impact of our strategic decisions on Intuit’s
business; and all of the statements under the heading “Forward-looking
Guidance”.

Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause our actual
results to differ materially from the expectations expressed in the
forward-looking statements. These factors include, without limitation,
the following: inherent difficulty in predicting consumer behavior;
difficulties in receiving, processing, or filing customer tax
submissions; consumers may not respond as we expected to our advertising
and promotional activities; product introductions and price competition
from our competitors can have unpredictable negative effects on our
revenue, profitability and market position; governmental encroachment in
our tax businesses or other governmental activities or public policy
affecting the preparation and filing of tax returns could negatively
affect our operating results and market position; we may not be able to
successfully innovate and introduce new offerings and business models to
meet our growth and profitability objectives, and current and future
offerings may not adequately address customer needs and may not achieve
broad market acceptance, which could harm our operating results and
financial condition; business interruption or failure of our information
technology and communication systems may impair the availability of our
products and services, which may damage our reputation and harm our
future financial results; as we upgrade and consolidate our customer
facing applications and supporting information technology
infrastructure, any problems with these implementations could interfere
with our ability to deliver our offerings; any failure to properly use
and protect personal customer information and data could harm our
revenue, earnings and reputation; if we are unable to develop, manage
and maintain critical third party business relationships, our business
may be adversely affected; increased government regulation of our
businesses may harm our operating results; if we fail to process
transactions effectively or fail to adequately protect against potential
fraudulent activities, our revenue and earnings may be harmed; related
publicity regarding such fraudulent activity could cause customers to
lose confidence in using our software and adversely impact our results;
any significant offering quality problems or delays in our offerings
could harm our revenue, earnings and reputation; our participation in
the Free File Alliance may result in lost revenue opportunities and
cannibalization of our traditional paid franchise; the continuing global
economic downturn may continue to impact consumer and small business
spending, financial institutions and tax filings, which could negatively
affect our revenue and profitability; year-over-year changes in the
total number of tax filings that are submitted to government agencies
due to economic conditions or otherwise may result in lost revenue
opportunities; our revenue and earnings are highly seasonal and the
timing of our revenue between quarters is difficult to predict, which
may cause significant quarterly fluctuations in our financial results;
our financial position may not make repurchasing shares advisable or we
may issue additional shares in an acquisition causing our number of
outstanding shares to grow; our inability to adequately protect our
intellectual property rights may weaken our competitive position and
reduce our revenue and earnings; our acquisition and divestiture
activities may disrupt our ongoing business, may involve increased
expenses and may present risks not contemplated at the time of the
transactions; our use of significant amounts of debt to finance
acquisitions or other activities could harm our financial condition and
results of operation; and litigation involving intellectual property,
antitrust, shareholder and other matters may increase our costs. More
details about the risks that may impact our business are included in our
Form 10-K for fiscal 2015 and in our other SEC filings. You can locate
these reports through our website at http://investors.intuit.com.
Forward-looking statements are based on information as of November 19,
2015 and we do not undertake any duty to update any forward-looking
statement or other information in these materials.

 

TABLE A

INTUIT INC.

GAAP CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

 
Three Months Ended

October 31,
2015

 

October 31,
2014

Net revenue:
Product $ 271 $ 228
Service and other 442   384  
Total net revenue 713   612  
Costs and expenses:
Cost of revenue:
Cost of product revenue 29 33
Cost of service and other revenue 131 119
Amortization of acquired technology 6 7
Selling and marketing 244 251
Research and development 213 189
General and administrative 117 119
Amortization of other acquired intangible assets 2   3  
Total costs and expenses [A] 742   721  
Operating loss from continuing operations (29 ) (109 )
Interest expense (7 ) (7 )
Interest and other income (expense), net (4 )  
Loss before income taxes (40 ) (116 )
Income tax benefit [B] (9 ) (35 )
Net loss from continuing operations (31 ) (81 )
Net loss from discontinued operations [C]   (3 )
Net loss $ (31 ) $ (84 )
 
Basic net loss per share from continuing operations $ (0.11 ) $ (0.28 )
Basic net loss per share from discontinued operations   (0.01 )
Basic net loss per share $ (0.11 ) $ (0.29 )
Shares used in basic per share calculations 272   286  
 
Diluted net loss per share from continuing operations $ (0.11 ) $ (0.28 )
Diluted net loss per share from discontinued operations   (0.01 )
Diluted net loss per share $ (0.11 ) $ (0.29 )
Shares used in diluted per share calculations 272   286  
 
Cash dividends declared per common share $ 0.30   $ 0.25  
 

See accompanying Notes.

 

INTUIT INC.

NOTES TO TABLE A

 

[A]

  The following table summarizes the total share-based compensation
expense that we recorded in operating loss from continuing
operations for the periods shown.
 
Three Months Ended

(in millions)

October 31,
2015

 

October 31,
2014

Cost of revenue $ 2 $ 1
Selling and marketing 19 16
Research and development 21 19
General and administrative 25   21
Total share-based compensation expense $ 67   $ 57
 
[B]   We compute our provision for or benefit from income taxes by
applying the estimated annual effective tax rate to income or loss
from recurring operations and adding the effects of any discrete
income tax items specific to the period. Our effective tax rate for
the three months ended October 31, 2015 was approximately 22%.
Excluding discrete tax items primarily related to share-based
compensation as well as including the effects of losses in certain
jurisdictions where we do not recognize a tax benefit, our effective
tax rate for the three months ended October 31, 2015 was
approximately 36% and did not differ significantly from the federal
statutory rate of 35%.
 
Our effective tax rate for the three months ended October 31, 2014
was approximately 31%. Excluding discrete tax items primarily
related to share-based compensation and a state tax law change as
well as including the effects of losses in certain jurisdictions
where we do not recognize a tax benefit, our effective tax rate for
the period was approximately 37% and did not differ significantly
from the federal statutory rate of 35%.
 
[C] In the fourth quarter of fiscal 2015 we determined that our
Demandforce, QuickBase, and Quicken businesses became long-lived
assets held for sale and we accounted for them as discontinued
operations.
 
We have segregated the operating results for these three businesses
in our statements of operations for all periods presented. Net
revenue from these businesses totaled million for the three
months ended October 31, 2015 and million for the three months
ended October 31, 2014. Net income or loss from discontinued
operations was not significant for any period presented.
 
We have reclassified our balance sheets for all periods presented to
reflect these businesses as discontinued operations. Because the
cash flows of these businesses were not material for any period
presented, we have not segregated them from continuing operations on
our statements of cash flows.
 
TABLE B1

INTUIT INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES

(In millions, except per share amounts)

(Unaudited)

 
Fiscal 2016
        Three Months Ended
Q1 Q2 Q3 Q4 October 31, 2015
GAAP operating income (loss) from continuing operations $ (29 ) $ $ $ $ (29 )
Amortization of acquired technology 6 6
Amortization of other acquired intangible assets 2 2
Share-based compensation expense 67         67  
Non-GAAP operating income (loss) from continuing operations $ 46   $   $   $   $ 46  
 
GAAP net income (loss) $ (31 ) $ $ $ $ (31 )
Amortization of acquired technology 6 6
Amortization of other acquired intangible assets 2 2
Share-based compensation expense 67 67
Net (gain) loss on debt securities and other investments 1 1
Income tax effects and adjustments (21 )       (21 )
Non-GAAP net income (loss) $ 24   $   $   $   $ 24  
 
GAAP diluted net income (loss) per share $ (0.11 ) $ $ $ $ (0.11 )
Amortization of acquired technology 0.02 0.02
Amortization of other acquired intangible assets 0.01 0.01
Share-based compensation expense 0.25 0.25
Net (gain) loss on debt securities and other investments
Income tax effects and adjustments (0.08 )       (0.08 )
Non-GAAP diluted net income (loss) per share $ 0.09   $   $   $   $ 0.09  
 
Shares used in diluted per share calculation 275         275  
 

See “About Non-GAAP Financial Measures” immediately following Table E
for information on these measures, the items excluded from the most
directly comparable GAAP measures in arriving at non-GAAP financial
measures, and the reasons management uses each measure and excludes the
specified amounts in arriving at each non-GAAP financial measure.

 

TABLE B2

INTUIT INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES
(In millions, except per share amounts)
(Unaudited)
 
Fiscal 2015
Q1   Q2   Q3   Q4   Full Year
GAAP operating income (loss) from continuing operations $ (109 ) $ (89 ) $ 1,066 $ (130 ) $ 738
Amortization of acquired technology 7 7 8 8 30
Amortization of other acquired intangible assets 3 3 3 3 12
Professional fees for business combinations 1 1 2
Goodwill and intangible asset impairment charges 114 34 148
Gain on sale of long-lived assets (30 ) (1 ) (31 )
Share-based compensation expense 57   56   59   70   242  
Non-GAAP operating income (loss) from continuing operations $ (42 ) $ (22 ) $ 1,221   $ (16 ) $ 1,141  
 
GAAP net income (loss) $ (84 ) $ (66 ) $ 501 $ 14 $ 365
Amortization of acquired technology 7 7 8 8 30
Amortization of other acquired intangible assets 3 3 3 3 12
Professional fees for business combinations 1 1 2
Goodwill and intangible asset impairment charges 114 34 148
Gain on sale of long-lived assets (30 ) (1 ) (31 )
Share-based compensation expense 57 56 59 70 242
Net (gain) loss on debt securities and other investments 1 3 2 6
Income tax effects and adjustments (19 ) (25 ) (10 ) (29 ) (83 )
Net (income) loss from discontinued operations 3   6   155   (116 ) 48  
Non-GAAP net income (loss) $ (32 ) $ (18 ) $ 804   $ (15 ) $ 739  
 
GAAP diluted net income (loss) per share $ (0.29 ) $ (0.23 ) $ 1.78 $ 0.05 $ 1.28
Amortization of acquired technology 0.02 0.02 0.03 0.03 0.10
Amortization of other acquired intangible assets 0.01 0.01 0.01 0.01 0.04
Professional fees for business combinations 0.01
Goodwill and intangible asset impairment charges 0.40 0.12 0.52
Gain on sale of long-lived assets (0.11 ) (0.11 )
Share-based compensation expense 0.20 0.20 0.21 0.25 0.85
Net (gain) loss on debt securities and other investments 0.01 0.01 0.02
Income tax effects and adjustments (0.06 ) (0.08 ) (0.03 ) (0.10 ) (0.29 )
Net (income) loss from discontinued operations 0.01   0.02   0.55   (0.42 ) 0.17  
Non-GAAP diluted net income (loss) per share $ (0.11 ) $ (0.06 ) $ 2.85   $ (0.05 ) $ 2.59  
 
Shares used in diluted per share calculation 286   285   282   277   286  
 

See “About Non-GAAP Financial Measures” immediately following Table E
for information on these measures, the items excluded from the most
directly comparable GAAP measures in arriving at non-GAAP financial
measures, and the reasons management uses each measure and excludes the
specified amounts in arriving at each non-GAAP financial measure.

   

TABLE C

INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
 

October 31,
2015

July 31,
2015

ASSETS
Current assets:
Cash and cash equivalents $ 474 $ 808
Investments 889
Accounts receivable, net 124 91
Income taxes receivable 100 84
Deferred income taxes 244 231
Prepaid expenses and other current assets 121 94
Current assets of discontinued operations 17   26
Current assets before funds held for customers 1,080 2,223
Funds held for customers 347   337
Total current assets 1,427 2,560
 
Long-term investments 28 27
Property and equipment, net 701 682
Goodwill 1,274 1,266
Acquired intangible assets, net 77 87
Other assets

107

111
Long-term assets of discontinued operations

219

  235
Total assets $ 3,833   $ 4,968
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Borrowings under credit facility $ 350 $
Accounts payable 178 190
Accrued compensation and related liabilities 139 283
Deferred revenue 635 691
Other current liabilities

165

150
Current liabilities of discontinued operations

73

  93
Current liabilities before customer fund deposits 1,540 1,407
Customer fund deposits 347   337
Total current liabilities 1,887 1,744
 
Long-term debt 500 500
Long-term deferred revenue 157 152
Other long-term obligations 184 172
Long-term obligations of discontinued operations 54   68
Total liabilities 2,782   2,636
 
Stockholders’ equity 1,051   2,332
Total liabilities and stockholders’ equity $ 3,833   $ 4,968
 

TABLE D

INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Three Months Ended

October 31,
2015

 

October 31,
2014

Cash flows from operating activities:
Net loss $ (31 ) $ (84 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 45 36
Amortization of acquired intangible assets 10 18
Share-based compensation expense 69 61
Deferred income taxes (2 ) (6 )
Tax benefit from share-based compensation plans 9 18
Excess tax benefit from share-based compensation plans (9 ) (18 )
Other 10   12  
Total adjustments 132   121  
Changes in operating assets and liabilities:
Accounts receivable (28 ) (4 )
Income taxes receivable (17 ) (56 )
Prepaid expenses and other assets (29 ) (3 )
Accounts payable (6 ) 32
Accrued compensation and related liabilities (145 ) (139 )
Deferred revenue (54 ) 28
Other liabilities (19 ) (13 )
Total changes in operating assets and liabilities (298 ) (155 )
Net cash used in operating activities (197 ) (118 )
Cash flows from investing activities:
Purchases of available-for-sale debt securities (117 ) (365 )
Sales of available-for-sale debt securities 940 147
Maturities of available-for-sale debt securities 64 229

Net change in money market funds and other cash equivalents

held to satisfy customer fund obligations

(10 ) (69 )
Net change in customer fund deposits 10 69
Purchases of property and equipment (70 ) (55 )
Acquisitions of businesses, net of cash acquired (9 )
Other (1 ) (8 )
Net cash provided by (used in) investing activities 816   (61 )
Cash flows from financing activities:
Proceeds from borrowings under credit facility 350
Net proceeds from issuance of stock under employee stock plans 24 47
Cash paid for purchases of treasury stock (1,253 ) (114 )
Dividends and dividend rights paid (82 ) (74 )
Excess tax benefit from share-based compensation plans 9   18  
Net cash used in financing activities (952 ) (123 )
Effect of exchange rates on cash and cash equivalents (1 ) (5 )
Net decrease in cash and cash equivalents (334 ) (307 )
Cash and cash equivalents at beginning of period 808   849  
Cash and cash equivalents at end of period $ 474   $ 542  
 

TABLE E

INTUIT INC.
RECONCILIATION OF FORWARD-LOOKING GUIDANCE FOR NON-GAAP FINANCIAL
MEASURES
TO PROJECTED GAAP REVENUE, OPERATING INCOME (LOSS), AND EPS
(In millions, except per share amounts)
(Unaudited)
 
Forward-Looking Guidance

GAAP
Range of Estimate

     

Non-GAAP
Range of Estimate

From   To Adjmts From   To
Three Months Ending January 31, 2016
Revenue $ 880 $ 900 $ $ 880 $ 900

Operating income

$ 15 $ 25 $ 70 [a] $ 85 $ 95

Diluted earnings per share

$ 0.01 $ 0.04 $ 0.16 [b] $ 0.17 $ 0.20
 
Twelve Months Ending July 31, 2016
Revenue $ 4,525 $ 4,600 $ $ 4,525 $ 4,600
Operating income $ 1,115 $ 1,145 $ 335 [c] $ 1,450 $ 1,480
Diluted earnings per share $ 2.55 $ 2.60 $ 0.90 [d] $ 3.45 $ 3.50
 

See “About Non-GAAP Financial Measures” immediately following this Table
E for information on these measures, the items excluded from the most
directly comparable GAAP measures in arriving at non-GAAP financial
measures, and the reasons management uses each measure and excludes the
specified amounts in arriving at each non-GAAP financial measure.

 
[a] Reflects estimated adjustments for share-based compensation expense
of approximately million; amortization of acquired technology of
approximately million; and amortization of other acquired
intangible assets of approximately million.
 
[b] Reflects the estimated adjustments in item [a], income taxes related
to these adjustments, and other income tax effects related to the
use of the long-term non-GAAP tax rate.
 
[c] Reflects estimated adjustments for share-based compensation expense
of approximately 3 million; amortization of acquired technology
of approximately million; and amortization of other acquired
intangible assets of approximately million.
 
[d] Reflects the estimated adjustments in item [c], income taxes related
to these adjustments, and other income tax effects related to the
use of the long-term non-GAAP tax rate.
 

INTUIT INC.

ABOUT NON-GAAP FINANCIAL MEASURES

 

The accompanying press release dated November 19, 2015 contains non-GAAP
financial measures. Table B1, Table B2 and Table E reconcile the
non-GAAP financial measures in that press release to the most directly
comparable financial measures prepared in accordance with Generally
Accepted Accounting Principles (GAAP). These non-GAAP financial measures
include non-GAAP operating income (loss), non-GAAP net income (loss) and
non-GAAP net income (loss) per share.

Non-GAAP financial measures should not be considered as a substitute
for, or superior to, measures of financial performance prepared in
accordance with GAAP. These non-GAAP financial measures do not reflect a
comprehensive system of accounting, differ from GAAP measures with the
same names and may differ from non-GAAP financial measures with the same
or similar names that are used by other companies.

We compute non-GAAP financial measures using the same consistent method
from quarter to quarter and year to year. We may consider whether other
significant items that arise in the future should be excluded from our
non-GAAP financial measures.

We exclude the following items from all of our non-GAAP financial
measures:

  • Share-based compensation expense
  • Amortization of acquired technology
  • Amortization of other acquired intangible assets
  • Goodwill and intangible asset impairment charges
  • Professional fees for business combinations

We also exclude the following items from non-GAAP net income (loss) and
diluted net income (loss) per share:

  • Gains and losses on debt and equity securities and other investments
  • Income tax effects and adjustments
  • Discontinued operations

We believe that these non-GAAP financial measures provide meaningful
supplemental information regarding Intuit’s operating results primarily
because they exclude amounts that we do not consider part of ongoing
operating results when planning and forecasting and when assessing the
performance of the organization, our individual operating segments or
our senior management. Segment managers are not held accountable for
share-based compensation expense, amortization, or the other excluded
items and, accordingly, we exclude these amounts from our measures of
segment performance. We believe that our non-GAAP financial measures
also facilitate the comparison by management and investors of results
for current periods and guidance for future periods with results for
past periods.

The following are descriptions of the items we exclude from our non-GAAP
financial measures.

Share-based compensation expenses. These consist of non-cash
expenses for stock options, restricted stock units and our Employee
Stock Purchase Plan. When considering the impact of equity awards, we
place greater emphasis on overall shareholder dilution rather than the
accounting charges associated with those awards.

Amortization of acquired technology and amortization of other
acquired intangible assets
. When we acquire an entity, we are
required by GAAP to record the fair values of the intangible assets of
the entity and amortize them over their useful lives. Amortization of
acquired technology in cost of revenue includes amortization of software
and other technology assets of acquired entities. Amortization of other
acquired intangible assets in operating expenses includes amortization
of assets such as customer lists, covenants not to compete and trade
names.

Goodwill and intangible asset impairment charges. We exclude from
our non-GAAP financial measures non-cash charges to adjust the carrying
value of goodwill and other acquired intangible assets to their
estimated fair values.

Professional fees for business combinations. We exclude from our
non-GAAP financial measures the professional fees we incur to complete
business combinations. These include investment banking, legal and
accounting fees.

Gains and losses on debt and equity securities and other investments.
We exclude from our non-GAAP financial measures gains and losses that we
record when we sell or impair available-for-sale debt and equity
securities and other investments.

Income tax effects and adjustments. We use a long-term non-GAAP
tax rate for evaluating operating results and for planning, forecasting,
and analyzing future periods. This long-term non-GAAP tax rate excludes
the income tax effects of the non-GAAP pre-tax adjustments described
above, assumes the federal research and experimentation credit is
continuously in effect, and eliminates the effects of non-recurring and
period specific items which can vary in size and frequency. Based on our
current long-term projections, we are using a long-term non-GAAP tax
rate of 34% which is consistent with the average of our normalized
fiscal year tax rate over a four year period that includes the past
three fiscal years plus the current fiscal year forecast. We will
evaluate this long-term non-GAAP tax rate on an annual basis and
whenever any significant events occur which may materially affect this
long-term rate. This long-term non-GAAP tax rate could be subject to
change for various reasons including significant changes in our
geographic earnings mix or fundamental tax law changes in major
jurisdictions in which we operate.

Operating results and gains and losses on the sale of discontinued
operations
. From time to time, we sell or otherwise dispose of
selected operations as we adjust our portfolio of businesses to meet our
strategic goals. In accordance with GAAP, we segregate the operating
results of discontinued operations as well as gains and losses on the
sale of these discontinued operations from continuing operations on our
GAAP statements of operations but continue to include them in GAAP net
income or loss and net income or loss per share. We exclude these
amounts from our non-GAAP financial measures.

The reconciliations of the forward-looking non-GAAP financial measures
to the most directly comparable GAAP financial measures in Table E
include all information reasonably available to Intuit at the date of
this press release. These tables include adjustments that we can
reasonably predict. Events that could cause the reconciliation to change
include acquisitions and divestitures of businesses, goodwill and other
asset impairments, and sales of available-for-sale debt securities and
other investments.

Source: Intuit Inc.

Investors
Intuit Inc.
Matt Rhodes, 650-944-2536
matthew_rhodes@intuit.com
or
Media
Intuit
Inc.
Diane Carlini, 650-944-6251
diane_carlini@intuit.com