MOUNTAIN VIEW, Calif. - Feb. 22, 2018 - Intuit Inc. (Nasdaq: INTU) announced financial results for the second quarter of fiscal 2018, which ended Jan. 31.

For the second quarter, Intuit:

Intuit executives will discuss the financial results on a conference call at 1:30 p.m. Pacific time on Feb. 22. To hear the call, dial 844-246-4601 in the United States or 703-639-1172 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 website after the call ends.

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Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017 and reduces the U.S. statutory federal corporate tax rate from 35% to 21%. The effective date of the tax rate change is January 1, 2018. With our fiscal year ending July 31, the change will result in a blended lower U.S. statutory federal rate of 26.9% for fiscal year 2018. As a result, we adjusted our annual effective tax rate for the three and six months ended January 31, 2018, as well as adjusted our U.S. net deferred tax asset balance at the lower rates.

At January 31, 2018, we have not completed our accounting for the tax effects of enactment of the Tax Act; however, we have made a reasonable estimate of the effects on our existing deferred tax balances. For deferred tax balances we recognized a provisional charge of $39 million, which is included as a component of our income tax provision for the three and six months ended January 31, 2018.

Current quarter and year to date income tax and effective tax rates

For the three and six months ended January 31, 2018, we recognized excess tax benefits on share-based compensation of $8 million and $33 million in our provision for income taxes. These amounts include the impact of the Tax Act’s U.S. statutory federal corporate tax rate reduction on the benefit that we recorded in our first quarter. For the three and six months ended January 31, 2017, we recognized excess tax benefits on share-based compensation of $7 million and $26 million in our provision for income taxes.

We recorded a tax provision of $40 million on income of $19 million for the three months ended January 31, 2018. As a result of the lower enacted tax rate, the tax provision for the three months ended January 31, 2018 includes a charge of $4 million to reduce the tax benefit recorded in the first quarter of fiscal 2018 which was calculated at the higher effective tax rate. We recorded a tax benefit of $2 million on a loss of $40 million for the six months ended January 31, 2018. Excluding the $4 million charge and the discrete tax items primarily related to the re-measurement of our net deferred tax asset balance and the share-based compensation tax benefits mentioned above, our effective tax rate for the three and six months ended January 31, 2018 was 27% and did not differ significantly from the federal statutory rate of 26.9%.

We recorded a tax benefit of $3 million on income of $10 million for the three months ended January 31, 2017. Our effective tax rate for the six months ended January 31, 2017 was approximately 72%. Excluding discrete tax items primarily related to share-based compensation tax benefits, our effective tax rate for both periods was 34% and did not differ significantly from the federal statutory rate of 35%.

 

$4 million; and professional fees for business combinations of approximately $2 million.

The accompanying press release dated February 22, 2018 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.

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.

Gains and losses on disposals of businesses and long-lived assets. We exclude from our non-GAAP financial measures gains and losses on disposals of businesses and long-lived assets because they are unrelated to our ongoing business operating results.

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. In our fiscal 2017 and the first quarter of our fiscal 2018 we used 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 excluded the income tax effects of the non-GAAP pre-tax adjustments described above, and eliminates the effects of non-recurring and period specific items which can vary in size and frequency. Based on our long-term projections at that time we used a long-term non-GAAP tax rate of 33%. This rate was consistent with the average of our normalized fiscal year tax rate over a four year period that included the past three fiscal years plus the current fiscal year forecast.

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.