Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

March 2, 2022

Documents

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Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 10-Q
☑   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended January 31, 2022
OR
☐   Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________ .
Commission File Number 0-21180
intu-20220131_g1.jpg
INTUIT INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0034661
(State or other jurisdiction of incorporation or organization)   (IRS Employer Identification No.)

2700 Coast Avenue, Mountain View, CA 94043
(Address of principal executive offices, including zip code)
(650) 944-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
  Title of each class Trading Symbol Name of each exchange on which registered
  Common Stock, $0.01 par value INTU Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting
company		 ☐ Emerging growth
company		 ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 282,812,475 shares of Common Stock, $0.01 par value, were outstanding at February 18, 2022.


INTUIT INC.
FORM 10-Q
INDEX
Page
 
 
Intuit, QuickBooks, TurboTax, Mint, Credit Karma and Mailchimp among others, are registered trademarks and/or registered service marks of Intuit Inc., or one of its subsidiaries, in the United States and other countries. Other parties’ marks are the property of their respective owners.
 Intuit Q2 Fiscal 2022 Form 10-Q
2

Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These risks and uncertainties may be amplified by the coronavirus (“COVID-19”) pandemic, which has caused significant global economic instability and uncertainty. The extent to which the COVID-19 pandemic impacts Intuit’s business, operations, financial results, and financial condition, including the duration and magnitude of such effects, will depend on numerous evolving factors, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or respond to its impact, and how quickly and to what extent normal economic and operating conditions can resume. Please also see the section entitled "Risk Factors" in Item 1A of Part II of this Report for important information to consider when evaluating these statements. All statements in this report, other than statements that are purely historical, are forward-looking statements. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “forecast,” “estimate,” “seek,” and similar expressions also identify forward-looking statements. In this report, forward-looking statements include, without limitation, the following:
•our expectations and beliefs regarding future conduct and growth of the business;
•statements regarding the impact of the COVID-19 pandemic on our business;
•our beliefs and expectations regarding seasonality, competition and other trends that affect our business;
•our expectation that we will continue to invest significant resources in our product development, marketing and sales capabilities;
•our expectation that we will continue to invest significant management attention and resources in our information technology infrastructure and in our privacy and security capabilities;
•our expectation that we will work with the broader industry and government to protect our customers from fraud;
•our expectation that we will generate significant cash from operations;
•our expectation that total service and other revenue as a percentage of our total revenue will continue to grow;
•our expectations regarding the development of future products, services, business models and technology platforms and our research and development efforts;
•our assumptions underlying our critical accounting policies and estimates, including our judgments and estimates regarding revenue recognition; the fair value of goodwill; and expected future amortization of acquired intangible assets;
•our intention not to sell our investments and our belief that it is more likely than not that we will not be required to sell them before recovery at par;
•our belief that the investments we hold are not other-than-temporarily impaired;
•our belief that we take prudent measures to mitigate investment related risks;
•our belief that our exposure to currency exchange fluctuation risk will not be significant in the future;
•our assessments and estimates that determine our effective tax rate;
•our belief that our income tax valuation allowance is sufficient;
•our belief that it is not reasonably possible that there will be a significant increase or decrease in our unrecognized tax benefits over the next 12 months;
•our belief that our cash and cash equivalents, investments and cash generated from operations will be sufficient to meet our seasonal working capital needs, capital expenditure requirements, contractual obligations, debt service requirements and other liquidity requirements associated with our operations for at least the next 12 months;
•our expectation that we will return excess cash generated by operations to our stockholders through repurchases of our common stock and the payment of cash dividends, after taking into account our operating and strategic cash needs;
•our judgments and assumptions relating to our loan portfolio;
•our belief that the credit facilities will be available to us should we choose to borrow under them
•our expectations regarding acquisitions and their impact on business and strategic priorities; and
•our assessments and beliefs regarding the future developments and outcomes of pending legal proceedings and inquiries by regulatory authorities, the liability, if any, that Intuit may incur as a result of those proceedings and inquiries, and the impact of any potential losses or expenses associated with such proceedings or inquiries on our financial statements.
We caution investors that forward-looking statements are only predictions based on our current expectations about future events and are not guarantees of future performance. We encourage you to read carefully all information provided in this report and in our other filings with the Securities and Exchange Commission before deciding to invest in our stock or to maintain or change your investment. These forward-looking statements are based on information as of the filing date of this Quarterly Report, and we undertake no obligation to revise or update any forward-looking statement for any reason.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
  Three Months Ended Six Months Ended
(In millions, except per share amounts) January 31, 2022 January 31, 2021 January 31, 2022 January 31, 2021
Net revenue:    
Product $ 525  $ 495  $ 922  $ 862 
Service and other 2,148  1,081  3,758  2,037 
Total net revenue 2,673  1,576  4,680  2,899 
Costs and expenses:    
Cost of revenue:    
Cost of product revenue 20  22  35  37 
Cost of service and other revenue 503  331  890  565 
Amortization of acquired technology 42  14  57  21 
Selling and marketing 942  580  1,492  942 
Research and development 590  368  1,120  693 
General and administrative 399  250  661  419 
Amortization of other acquired intangible assets 121  36  174  38 
Total costs and expenses 2,617  1,601  4,429  2,715 
Operating income (loss) 56  (25) 251  184 
Interest expense (21) (7) (28) (15)
Interest and other income (loss), net (5) 54  45  63 
Income before income taxes 30  22  268  232 
Income tax (benefit) provision (70) 2  (60) 14 
Net income $ 100  $ 20  $ 328  $ 218 
Basic net income per share $ 0.35  $ 0.07  $ 1.18  $ 0.82 
Shares used in basic per share calculations 283  270  278  266 
Diluted net income per share $ 0.35  $ 0.07  $ 1.16  $ 0.81 
Shares used in diluted per share calculations 287  273  282  269 
Cash dividends declared per common share $ 0.68  $ 0.59  $ 1.36  $ 1.18 
See accompanying notes.
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INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
  Three Months Ended Six Months Ended
(In millions) January 31, 2022 January 31, 2021 January 31, 2022 January 31, 2021
Net income $ 100  $ 20  $ 328  $ 218 
Other comprehensive income (loss), net of income taxes:
Unrealized gain (loss) on available-for-sale debt securities (1) —  (5) (1)
Foreign currency translation gain (loss) (4) 12  (5) 10 
Total other comprehensive income (loss), net (5) 12  (10) 9 
Comprehensive income $ 95  $ 32  $ 318  $ 227 
See accompanying notes.

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INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In millions) January 31, 2022 July 31,
2021
ASSETS    
Current assets:    
Cash and cash equivalents $ 1,257  $ 2,562 
Investments 157  1,308 
Accounts receivable, net 889  391 
Income taxes receivable 241  123 
Prepaid expenses and other current assets 571  316 
Current assets before funds held for customers 3,115  4,700 
Funds held for customers 375  457 
Total current assets 3,490  5,157 
Long-term investments 90  43 
Property and equipment, net 831  780 
Operating lease right-of-use assets 439  380 
Goodwill 13,732  5,613 
Acquired intangible assets, net 7,388  3,252 
Long-term deferred income taxes 8  8 
Other assets 325  283 
Total assets $ 26,303  $ 15,516 
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current liabilities:    
Accounts payable $ 883  $ 623 
Accrued compensation and related liabilities 413  530 
Deferred revenue 822  684 
Other current liabilities 475  361 
Current liabilities before customer fund deposits 2,593  2,198 
Customer fund deposits 375  457 
Total current liabilities 2,968  2,655 
Long-term debt 6,732  2,034 
Long-term deferred income tax liabilities 506  525 
Operating lease liabilities 429  380 
Other long-term obligations 73  53 
Total liabilities 10,708  5,647 
Commitments and contingencies
Stockholders’ equity:    
Preferred stock —  — 
Common stock and additional paid-in capital 17,202  10,548 
Treasury stock, at cost (13,808) (12,951)
Accumulated other comprehensive loss (34) (24)
Retained earnings 12,235  12,296 
Total stockholders’ equity 15,595  9,869 
Total liabilities and stockholders’ equity $ 26,303  $ 15,516 
See accompanying notes
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.
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
Three Months Ended January 31, 2022
(In millions, except shares in thousands) Shares of
Common
Stock		 Common
Stock and
Additional
Paid-In Capital		 Treasury
Stock		 Accumulated
Other
Comprehensive
Loss		 Retained
Earnings		 Total
Stockholders'
Equity
Balance at October 31, 2021 273,222  $ 10,718  $ (13,289) $ (29) $ 12,333  $ 9,733 
Comprehensive income —  —  —  (5) 100  95 
Issuance of stock under employee stock plans, net of shares withheld for employee taxes 498  (168) —  —  —  (168)
Stock repurchases (810) —  (519) —  —  (519)
Dividends and dividend rights declared ($0.68 per share)
 —  —  —  —  (198) (198)
Share-based compensation expense —  336  —  —  —  336 
Issuance of stock in business combination 10,090  6,316  —  —  —  6,316 
Balance at January 31, 2022 283,000  $ 17,202  $ (13,808) $ (34) $ 12,235  $ 15,595 
Six Months Ended January 31, 2022
(In millions, except shares in thousands) Shares of
Common
Stock		 Common
Stock and
Additional
Paid-In Capital		 Treasury
Stock		 Accumulated
Other
Comprehensive
Loss		 Retained
Earnings		 Total
Stockholders'
Equity
Balance at July 31, 2021 273,235  $ 10,548  $ (12,951) $ (24) $ 12,296  $ 9,869 
Comprehensive income —  —  —  (10) 328  318 
Issuance of stock under employee stock plans, net of shares withheld for employee taxes 1,091  (279) —  —  —  (279)
Stock repurchases (1,416) —  (857) —  —  (857)
Dividends and dividend rights declared ($1.36 per share)
 —  —  —  —  (389) (389)
Share-based compensation expense —  617  —  —  —  617 
Issuance of stock in business combination 10,090  6,316  —  —  —  6,316 
Balance at January 31, 2022 283,000  $ 17,202  $ (13,808) $ (34) $ 12,235  $ 15,595 
See accompanying notes.
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INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
Three Months Ended January 31, 2021
(In millions, except shares in thousands) Shares of
Common
Stock		 Common
Stock and
Additional
Paid-In Capital		 Treasury
Stock		 Accumulated
Other
Comprehensive
Loss		 Retained
Earnings		 Total
Stockholders'
Equity
Balance at October 31, 2020 262,707  $ 6,283  $ (11,929) $ (35) $ 10,926  $ 5,245 
Comprehensive income —  —  —  12  20  32 
Issuance of stock under employee stock plans, net of shares withheld for employee taxes 400  (49) —  —  —  (49)
Stock repurchases under stock repurchase programs (470) —  (175) —  —  (175)
Dividends and dividend rights declared ($0.59 per share)
 —  —  —  —  (163) (163)
Share-based compensation expense —  180  —  —  —  180 
Issuance of stock in business combination 11,324  3,798  —  —  —  3,798 
Balance at January 31, 2021 273,961  $ 10,212  $ (12,104) $ (23) $ 10,783  $ 8,868 

Six Months Ended January 31, 2021
(In millions, except shares in thousands) Shares of
Common
Stock		 Common
Stock and
Additional
Paid-In Capital		 Treasury
Stock		 Accumulated
Other
Comprehensive
Loss		 Retained
Earnings		 Total
Stockholders'
Equity
Balance at July 31, 2020 261,740  $ 6,182  $ (11,929) $ (32) $ 10,885  $ 5,106 
Comprehensive income —  —  —  9  218  227 
Issuance of stock under employee stock plans, net of shares withheld for employee taxes 1,367  (60) —  —  —  (60)
Stock repurchases under stock repurchase programs (470) —  (175) —  —  (175)
Dividends and dividend rights declared ($1.18 per share)
 —  —  —  —  (320) (320)
Share-based compensation expense —  292  —  —  —  292 
Issuance of stock in business combination 11,324  3,798  —  —  —  3,798 
Balance at January 31, 2021 273,961  $ 10,212  $ (12,104) $ (23) $ 10,783  $ 8,868 
See accompanying notes.
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INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended
(In millions) January 31, 2022 January 31, 2021
Cash flows from operating activities:    
Net income $ 328  $ 218 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 96  77 
Amortization of acquired intangible assets 233  60 
Non-cash operating lease cost 40  28 
Share-based compensation expense 616  291 
Deferred income taxes (12) 11 
Other (29) (48)
Total adjustments 944  419 
Originations of loans held for sale —  (41)
Sale and principal payments of loans held for sale —  143 
Changes in operating assets and liabilities:
Accounts receivable (472) (178)
Income taxes receivable (117) (82)
Prepaid expenses and other assets (133) (63)
Accounts payable 84  87 
Accrued compensation and related liabilities (523) (269)
Deferred revenue 83  90 
Operating lease liabilities (41) (27)
Other liabilities 77  27 
Total changes in operating assets and liabilities (1,042) (415)
Net cash provided by operating activities 230  324 
Cash flows from investing activities:    
Purchases of corporate and customer fund investments (318) (535)
Sales of corporate and customer fund investments 1,429  89 
Maturities of corporate and customer fund investments 154  265 
Purchases of property and equipment (107) (71)
Acquisitions of businesses, net of cash acquired (5,682) (3,045)
Originations of term loans to small businesses (317) (70)
Principal repayments of term loans from small businesses 175  53 
Other (16) 48 
Net cash used in investing activities (4,682) (3,266)
Cash flows from financing activities:    
Proceeds from issuance of long-term debt 4,700  — 
Repayments on borrowings under unsecured revolving credit facility —  (1,000)
Proceeds from borrowings under secured revolving credit facility 2  — 
Repayment of debt —  (13)
Proceeds from issuance of stock under employee stock plans 75  108 
Payments for employee taxes withheld upon vesting of restricted stock units (355) (168)
Cash paid for purchases of treasury stock (874) (164)
Dividends and dividend rights paid (385) (321)
Net change in customer fund deposits (82) (29)
Other (9) — 
Net cash provided by (used in) financing activities 3,072  (1,587)
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Effect of exchange rates on cash, cash equivalents, restricted cash, and restricted cash equivalents (6) 10 
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents (1,386) (4,519)
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period 2,819  6,697 
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period $ 1,433  $ 2,178 
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents reported within the condensed consolidated balance sheets to the total amounts reported on the condensed consolidated statements of cash flows
Cash and cash equivalents $ 1,257  $ 1,952 
Restricted cash and restricted cash equivalents included in funds held for customers 176  226 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period $ 1,433  $ 2,178 
Supplemental schedule of non-cash investing activities:
Issuance of common stock in business combinations $ 6,316  $ 3,798 
See accompanying notes.
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INTUIT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Intuit helps consumers, small businesses, and the self-employed prosper by delivering financial management and compliance products and services. We also provide specialized tax products to accounting professionals, who are key partners that help us serve small business customers.
Our flagship brands, TurboTax, QuickBooks and Mint help customers run their small businesses, pay employees and send invoices, separate business and personal expenses, track their money, and file income taxes. Credit Karma is a consumer technology platform that enables us to provide personalized financial offers to members including credit cards, loans, insurance, and savings and checking accounts through an FDIC member bank partner. ProSeries and Lacerte are our leading tax preparation offerings for professional accountants. On November 1, 2021 we acquired The Rocket Science Group LLC (Mailchimp), a global customer engagement and marketing platform for growing small and mid-market businesses. Incorporated in 1984 and headquartered in Mountain View, California, we sell our products and services primarily in the United States.
Basis of Presentation
These condensed consolidated financial statements include the financial statements of Intuit and its wholly owned subsidiaries. We have eliminated all significant intercompany balances and transactions in consolidation. We have included all adjustments, consisting only of normal recurring items, which we considered necessary for a fair presentation of our financial results for the interim periods presented. We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation, including amounts related to reportable segments.
We acquired Credit Karma, Inc. (Credit Karma) on December 3, 2020. We have included the results of operations for Credit Karma in our condensed consolidated statements of operations from the date of acquisition. We have completed the purchase price allocation for the Credit Karma acquisition as of January 31, 2022 with no material adjustments from those disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2021. Credit Karma operates as a separate reportable segment. See Note 12, "Segment Information," for more information.
We acquired Mailchimp on November 1, 2021. We have included the results of operations for Mailchimp in our condensed consolidated statements of operations from the date of acquisition. Mailchimp is part of our Small Business & Self-Employed segment. See Note 5, "Business Combinations," for more information.
These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2021. Results for the six months ended January 31, 2022 do not necessarily indicate the results we expect for the fiscal year ending July 31, 2022 or any other future period.
Seasonality
Our Consumer and ProConnect offerings have a significant and distinct seasonal pattern as sales and revenue from our income tax preparation products and services are heavily concentrated in the period from November through April. Typically, returns are accepted by the IRS starting in January and the tax filing deadline is in April. This seasonal pattern results in higher net revenues during our second and third quarters ending January 31 and April 30, respectively. In fiscal 2022 the IRS began accepting returns on January 24, 2022 and the tax filing deadline is April 18, 2022. However, in fiscal 2021 the IRS began accepting returns on February 12, 2021 and the tax filing deadline was extended to May 17, 2021. These changes to the fiscal 2021 tax filing season impacted our second and third quarter financial results for that year.
Significant Accounting Policies
We describe our significant accounting policies in Note 1 to the financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2021. There have been no changes to our significant accounting policies during the first six months of fiscal 2022.
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Use of Estimates
In preparing our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP), we make certain judgments, estimates, and assumptions that affect the amounts reported in our financial statements and the disclosures made in the accompanying notes. For example, we use judgments and estimates in determining how revenue should be recognized. These judgments and estimates include identifying performance obligations, determining if the performance obligations are distinct, determining the standalone sales price (SSP) and timing of revenue recognition for each distinct performance obligation, and estimating variable consideration to be included in the transaction price. We use estimates in determining the collectibility of accounts receivable and notes receivable, the appropriate levels of various accruals including accruals for litigation contingencies, the discount rate used to calculate lease liabilities, the amount of our worldwide tax provision, the realizability of deferred tax assets, the credit losses of available-for-sale debt securities, and the fair value of assets acquired and liabilities assumed for business combinations. We also use estimates in determining the remaining economic lives and fair values of acquired intangible assets, property and equipment, and other long-lived assets. In addition, we use assumptions to estimate the fair value of reporting units and share-based compensation. Despite our intention to establish accurate estimates and use reasonable assumptions, actual results may differ from our estimates. Additionally, in the context of the ongoing global COVID-19 pandemic, while there has been no material impact on our estimates to date, in future periods, facts and circumstances could change and impact our estimates.
Computation of Net Income (Loss) Per Share
We compute basic net income or loss per share using the weighted average number of common shares outstanding during the period. We compute diluted net income per share using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares consist of the shares issuable upon the exercise of stock options and upon the vesting of restricted stock units (RSUs) under the treasury stock method.
We include stock options with combined exercise prices and unrecognized compensation expense that are less than the average market price for our common stock, and RSUs with unrecognized compensation expense that is less than the average market price for our common stock, in the calculation of diluted net income per share. We exclude stock options with combined exercise prices and unrecognized compensation expense that are greater than the average market price for our common stock, and RSUs with unrecognized compensation expense that is greater than the average market price for our common stock, from the calculation of diluted net income per share because their effect is anti-dilutive. Under the treasury stock method, the amount that must be paid to exercise stock options and the amount of compensation expense for future service that we have not yet recognized for stock options and RSUs are assumed to be used to repurchase shares.
All of the RSUs we grant have dividend rights. Dividend rights are accumulated and paid when the underlying RSUs vest. Since the dividend rights are subject to the same vesting requirements as the underlying equity awards they are considered a contingent transfer of value. Consequently, the RSUs are not considered participating securities and we do not present them separately in earnings per share.
In loss periods, basic net loss per share and diluted net loss per share are the same since the effect of potential common shares is anti-dilutive and therefore excluded.
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The following table presents the composition of shares used in the computation of basic and diluted net income per share for the periods indicated.
  Three Months Ended Six Months Ended
(In millions, except per share amounts) January 31, 2022 January 31, 2021 January 31, 2022 January 31, 2021
Numerator:        
Net income $ 100  $ 20  $ 328  $ 218 
Denominator:        
Shares used in basic per share amounts:        
Weighted average common shares outstanding 283  270  278  266 
Shares used in diluted per share amounts:
Weighted average common shares outstanding 283  270  278  266 
Dilutive common equivalent shares from stock options
and restricted stock awards 4  3  4  3 
Dilutive weighted average common shares outstanding 287  273  282  269 
Basic and diluted net income per share:        
Basic net income per share $ 0.35  $ 0.07  $ 1.18  $ 0.82 
Diluted net income per share $ 0.35  $ 0.07  $ 1.16  $ 0.81 
Shares excluded from diluted net income per share:
Weighted average stock options and restricted stock units that have been excluded from dilutive common equivalent shares outstanding due to their anti-dilutive effect —  1  —  1 
Deferred Revenue
We record deferred revenue when we have entered into a contract with a customer and cash payments are received or due prior to transfer of control or satisfaction of the related performance obligation. During the three and six months ended January 31, 2022, we recognized revenue of $157 million and $578 million, respectively, that was included in deferred revenue at July 31, 2021. During the three and six months ended January 31, 2021, we recognized revenue of $144 million and $543 million, respectively, that was included in deferred revenue at July 31, 2020.
Our performance obligations are generally satisfied within 12 months of the initial contract date. As of January 31, 2022 and July 31, 2021, the deferred revenue balance related to performance obligations that will be satisfied after 12 months was $5 million and $8 million, respectively, and is included in other long-term obligations on our condensed consolidated balance sheets.
Notes Receivable and Allowances for Loan Losses
Notes receivable held for investment consist of term loans to small businesses and are included in prepaid expenses and other current assets and other assets on our condensed consolidated balance sheets. As of January 31, 2022 and July 31, 2021, the notes receivable balances were $283 million and $139 million, respectively, and the allowances for loan losses were not material. The term loans are not secured and are recorded at amortized cost, net of allowances for loan losses. We maintain an allowance for loan losses to reserve for potentially uncollectible notes receivable. We evaluate the creditworthiness of our term loan portfolio on an individual loan basis, based on a data analytics risk model that evaluates trends related to revenue, debt payments and negative events in the previous 12 months and applies a loss rate at the time of loan origination. The average is then applied against the outstanding portfolio. The loss rate and underlying model are updated periodically to reflect actual loan performance and changes in assumptions. We make judgments about the known and inherent risks in the loan portfolio, adverse situations that may affect borrowers’ ability to repay and current and future economic conditions. When we determine that amounts are uncollectible, we write them off against the allowance.
Concentration of Credit Risk and Significant Customers
No customer accounted for 10% or more of total net revenue in the three or six months ended January 31, 2022 or January 31, 2021. No customer accounted for 10% or more of gross accounts receivable at January 31, 2022 or July 31, 2021.
Accounting Standards Recently Adopted
Business Combinations - In October 2021 the FASB issued ASU 2021-08, “Business Combinations—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805).” This standard requires an acquirer in a business
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combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under Accounting Standards Codification Topic 606 in order to align the recognition of a contract liability with the definition of a performance obligation. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. We elected to early adopt this standard in the second quarter of our fiscal year that began August 1, 2021. The adoption of ASU 2021-08 did not have a material impact on our consolidated financial statements.
We do not expect that any other recently issued accounting pronouncements will have a significant effect on our financial statements.
2. Fair Value Measurements
Fair Value Hierarchy
The authoritative guidance defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, we consider the principal or most advantageous market for an asset or liability and assumptions that market participants would use when pricing the asset or liability. In addition, we consider and use all valuation methods that are appropriate in estimating the fair value of an asset or liability.
The authoritative guidance establishes a fair value hierarchy that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities. In general, the authoritative guidance requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the measurement of its fair value. The three levels of input defined by the authoritative guidance are as follows:
•Level 1 uses unadjusted quoted prices that are available in active markets for identical assets or liabilities.
•Level 2 uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data for substantially the full term of the assets or liabilities.
•Level 3 uses one or more unobservable inputs that are supported by little or no market activity and that are significant to the determination of fair value. Level 3 assets and liabilities include those whose fair values are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes financial assets and financial liabilities that we measured at fair value on a recurring basis at the dates indicated, classified in accordance with the fair value hierarchy described above.
January 31, 2022 July 31, 2021
(In millions) Level 1 Level 2 Total
Fair Value		 Level 1 Level 2 Total
Fair Value
Assets:            
Cash equivalents, primarily money market funds and time deposits $ 264  $ —  $ 264  $ 1,660  $ —  $ 1,660 
Available-for-sale debt securities:            
Municipal bonds —  —  —  —  38  38 
Corporate notes —  324  324  —  1,400  1,400 
U.S. agency securities —  32  32  —  70  70 
Total available-for-sale debt securities —  356  356  —  1,508  1,508 
Total assets measured at fair value on a recurring basis $ 264  $ 356  $ 620  $ 1,660  $ 1,508  $ 3,168 
Liabilities:
Senior unsecured notes(1)
$ —  $ 1,926  $ 1,926  $ —  $ 1,986  $ 1,986 
(1) Carrying value on our balance sheets at January 31, 2022 and July 31, 2021 was $1.99 billion. See Note 7, “Long-Term Obligations and Commitments,” for more information.

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The following table summarizes our cash equivalents and available-for-sale debt securities by balance sheet classification and level in the fair value hierarchy at the dates indicated.
January 31, 2022 July 31, 2021
(In millions) Level 1 Level 2 Total
Fair Value		 Level 1 Level 2 Total
Fair Value
Cash equivalents:            
In cash and cash equivalents $ 219  $ —  $ 219  $ 1,660  $ —  $ 1,660 
In funds held for customers 45  —  45  —  —  — 
Total cash equivalents $ 264  $ —  $ 264  $ 1,660  $ —  $ 1,660 
Available-for-sale debt securities:            
In investments $ —  $ 157  $ 157  $ —  $ 1,308  $ 1,308 
In funds held for customers —  199  199  —  200  200 
Total available-for-sale debt securities $ —  $ 356  $ 356  $ —  $ 1,508  $ 1,508 
We value our Level 1 assets, consisting primarily of money market funds and time deposits, using quoted prices in active markets for identical instruments.
Financial assets whose fair values we measure on a recurring basis using Level 2 inputs consist of municipal bonds, corporate notes, and U.S. agency securities. We measure the fair values of these assets with the help of a pricing service that either provides quoted market prices in active markets for identical or similar securities or uses observable inputs for their pricing without applying significant adjustments. Our fair value processes include controls designed to ensure that we record appropriate fair values for our Level 2 investments. These controls include comparison to pricing provided by a secondary pricing service or investment manager, validation of pricing sources and models, review of key model inputs, analysis of period-over-period price fluctuations, and independent recalculation of prices where appropriate.
Financial liabilities whose fair values we measure using Level 2 inputs consist of senior unsecured notes. See Note 7, “Long-Term Obligations and Commitments,” for more information. We measure the fair value of our senior unsecured notes based on their trading prices and the interest rates we could obtain for other borrowings with similar terms.
There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended January 31, 2022.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
Long-term investments represent non-marketable equity securities in privately held companies that do not have a readily determinable fair value. They are accounted for at cost and adjusted based on observable price changes from orderly transactions for identical or similar investments of the same issuer or impairment. These investments are classified as Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold. We recognized no upward adjustments during the three months ended January 31, 2022 and $46 million of upward adjustments during the six months ended January 31, 2022. We recognized $9 million and $17 million of upward adjustments during the three and six months ended January 31, 2021, respectively. Impairments recognized during the three and six months ended January 31, 2022 and January 31, 2021 were immaterial. Cumulative upward adjustments were $63 million and cumulative impairments were immaterial through January 31, 2022 for measurement alternative investments held as of January 31, 2022. As of January 31, 2022 and July 31, 2021, the carrying value of long-term investments was $90 million and $43 million, respectively.
3. Cash and Cash Equivalents, Investments, and Funds Held for Customers
We consider highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. In all periods presented, cash equivalents consist primarily of money market funds and time deposits. Investments consist primarily of investment-grade available-for-sale debt securities. Funds held for customers represent cash held on behalf of our customers that is invested in cash and cash equivalents and investment-grade available-for-sale securities, restricted for use solely for the purpose of satisfying amounts we owe on behalf of our customers. Except for direct obligations of the United States government, securities issued by agencies of the United States government, and money market funds, we diversify our investments in debt securities by limiting our holdings with any individual issuer.
 Intuit Q2 Fiscal 2022 Form 10-Q
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The following table summarizes our cash and cash equivalents, investments, and funds held for customers by balance sheet classification at the dates indicated.
  January 31, 2022 July 31, 2021
(In millions) Amortized
Cost		 Fair Value Amortized
Cost		 Fair Value
Classification on condensed consolidated balance sheets:        
Cash and cash equivalents $ 1,257  $ 1,257  $ 2,562  $ 2,562 
Investments 158  157  1,305  1,308 
Funds held for customers 378  375  456  457 
Total cash and cash equivalents, investments, and funds
held for customers		 $ 1,793  $ 1,789  $ 4,323  $ 4,327 
The following table summarizes our cash and cash equivalents, investments, and funds held for customers by investment category at the dates indicated.
  January 31, 2022 July 31, 2021