Intuit Reports Strong Second-Quarter Results

TurboTax Online Unit Growth of 12 Percent and QuickBooks Online Subscriber Growth of 49 Percent Drive Momentum

MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)-- Intuit Inc. (Nasdaq:INTU) announced financial results for the second quarter of fiscal 2016. The company’s fiscal second quarter ended Jan. 31.

“We’re out of the gates strong in the first half of fiscal 2016. We grew revenue 23 percent in the second quarter, and exceeded our guidance across the board. We also saw record QuickBooks Online subscriber growth in this quarter, with over 80 percent of customers new to the Intuit franchise,” said Brad Smith, Intuit’s chairman and chief executive officer.

“Our tax strategy is focused on expanding the do-it-yourself software category while driving customer growth and share gains, particularly in the simple returns segment. As we shared today, TurboTax units grew 9 percent through February 20, demonstrating we’re off to a strong start. Early adoption has been driven by product innovation, as we continue on our journey to reimagine tax preparation.”

Financial Highlights

In the second quarter Intuit:

• Reported 23 percent revenue growth, which includes the impact of ratable revenue recognition for certain desktop software offerings and an extra weekend day in January versus last year for tax filers.
• Reported TurboTax Online units grew 12 percent year to date through Feb. 20, versus the comparable prior-year period. Total TurboTax units grew 9 percent.
• Increased total QuickBooks Online subscribers by 49 percent.
• Repurchased 4.8 million of its common shares for $455 million.

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, including QuickBase, Quicken and Demandforce, as discontinued operations.

Small Business

• Total Small Business segment revenue increased 7 percent.
• Small business online ecosystem revenue grew approximately 23 percent for the quarter, as online customer acquisition continues to drive growth.
  • Added nearly 100,000 QuickBooks Online subscribers in the quarter, bringing the total to 1,257,000 customers worldwide as of the end of January.
    • Grew QuickBooks Self-Employed subscribers to 50,000, up from 35,000 in the last quarter.
  • Grew QuickBooks Online users outside the U.S. by roughly 80 percent, to 230,000 paying subscribers.
  • Increased online payments customers by 5 percent, and online payments charge volume by 17 percent.
  • Grew online payroll customers by 17 percent.

Consumer and Professional Tax

• Consumer Tax revenue was up 29 percent, driven by an extra weekend day in January versus last year for tax filers. Intuit reiterated fiscal 2016 Consumer Tax revenue growth guidance of 5 percent to 7 percent.
• ProTax grew revenue to $84 million, driven by changes to desktop offerings that affected the timing of revenue recognition.

Intuit will provide a final tax unit update in April after the tax season ends.

Capital Allocation Summary

In the second quarter the company:

• Repurchased 4.8 million shares for $455 million, with $900 million remaining on its authorization as of January 31.
• Received board approval for a $0.30 per share dividend for the fiscal third quarter, payable on April 18. This represents a 20 percent increase versus last year.

Forward-looking Guidance

“I’m pleased with our performance for the first half of our fiscal year. Based on these results, we’re on pace to deliver against our full-year guidance,” Smith said. “That’s why we’ll continue to play offense, with investing for customer growth remaining our first priority. We have lots of opportunity in front of us, and we remain deeply committed to accelerating customer and revenue growth.”

Intuit announced guidance for the third quarter of fiscal year 2016, which ends April 30. The company expects:

• Revenue of $2.21 billion to $2.26 billion, growth of 4 to 6 percent. Third-quarter revenue growth guidance reflects the shift of Consumer Tax revenue into the second quarter due to an extra weekend day in January versus last year for tax filers.
• GAAP operating income of $1.20 billion to $1.22 billion, growth of 13 to 14 percent.
• Non-GAAP operating income of $1.28 billion to $1.30 billion, growth of 5 to 6 percent.
• GAAP earnings per share of $2.95 to $3.00, versus $1.78 in the year-ago quarter.
• Non-GAAP earnings per share of $3.15 to $3.20, growth of 11 to 12 percent.
• QuickBooks Online subscribers of approximately 1.38 million.

Intuit reiterated its revenue, operating income and earnings per share guidance for fiscal 2016:

• Revenue of $4.525 billion to $4.600 billion, growth of 8 to 10 percent.
• GAAP operating income of $1.115 billion to $1.145 billion, growth of 51 to 55 percent.
• Non-GAAP operating income of $1.450 billion to $1.480 billion, growth of 27 to 30 percent.
• GAAP diluted EPS of $2.55 to $2.60, versus $1.28 in fiscal 2015, which included goodwill and intangible asset impairment charges.
• Non-GAAP diluted EPS of $3.45 to $3.50, growth of 33 to 35 percent.

Intuit also narrowed its full-year guidance range for QuickBooks Online subscribers, to 1.475 million to 1.500 million.

Management Rotation Planned for May 1, 2016

Effective May 1, Dan Wernikoff, executive vice president and general manager of Intuit’s Small Business Group, will become general manager of the Consumer Tax Group. At the same time, Sasan Goodarzi, executive vice president and general manager of the Consumer Tax Group, will take over as head of the Small Business Group.

As the company accelerates its journey to becoming a single Intuit ecosystem, strengthening and developing senior talent is critical. This rotation enables Intuit’s Small Business and Consumer Tax leaders to develop deep empathy for each of the company’s core customers, as well as an understanding and appreciation of the collective products and technologies in the Intuit ecosystem.

“We’re able to make leadership moves like this from a position of strength,” said Smith. “We’ve got great momentum and a strong outlook in both Small Business and Consumer Tax, and I’m excited to watch that momentum continue.”

Conference Call Details

Intuit executives will discuss the financial results on a conference call at 1:30 p.m. Pacific time today, Feb. 25. 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/default.aspx. Prepared remarks for the call will be available on Intuit’s Investor Relations 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 1668417.

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 $4.2 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.

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 February 25, 2016 and we do not undertake any duty to update any forward-looking statement or other information in these materials.

INTUIT INC.
ABOUT NON-GAAP FINANCIAL MEASURES

The accompanying press release dated February 25, 2016 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.

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

Source: Intuit Inc.

Released February 25, 2016