Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 29, 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 October 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-20221031_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. 280,925,350 shares of Common Stock, $0.01 par value, were outstanding at November 21, 2022.


INTUIT INC.
FORM 10-Q
INDEX
Page
 
 
Intuit, QuickBooks, TurboTax, 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 Q1 Fiscal 2023 Form 10-Q
2

Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Please also see the section entitled "Risk Factors" in Item 1A of Part II of this Quarterly 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 and macroeconomic conditions 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, except as required by law, 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
(In millions, except per share amounts) October 31,
2022		 October 31
2021
Net revenue:    
Product $ 427  $ 397 
Service and other 2,170  1,610 
Total net revenue 2,597  2,007 
Costs and expenses:    
Cost of revenue:    
Cost of product revenue 15  15 
Cost of service and other revenue 620  387 
Amortization of acquired technology 41  15 
Selling and marketing 795  550 
Research and development 625  530 
General and administrative 304  262 
Amortization of other acquired intangible assets 121  53 
Total costs and expenses 2,521  1,812 
Operating income 76  195 
Interest expense (49) (7)
Interest and other income, net 5  50 
Income before income taxes 32  238 
Income tax (benefit) provision (8) 10 
Net income $ 40  $ 228 
Basic net income per share $ 0.14  $ 0.84 
Shares used in basic per share calculations 281  273 
Diluted net income per share $ 0.14  $ 0.82 
Shares used in diluted per share calculations 284  277 
Cash dividends declared per common share $ 0.78  $ 0.68 
See accompanying notes.
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INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
  Three Months Ended
(In millions) October 31,
2022		 October 31,
2021
Net income $ 40  $ 228 
Other comprehensive income (loss), net of income taxes:
Unrealized loss on available-for-sale debt securities (6) (4)
Foreign currency translation loss (21) (1)
Total other comprehensive loss, net (27) (5)
Comprehensive income $ 13  $ 223 
See accompanying notes.


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INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In millions) October 31,
2022		 July 31,
2022
ASSETS    
Current assets:    
Cash and cash equivalents $ 2,125  $ 2,796 
Investments 599  485 
Accounts receivable, net 384  446 
Notes receivable 566  509 
Income taxes receivable 88  93 
Prepaid expenses and other current assets 324  287 
Current assets before funds receivable and amounts held for customers 4,086  4,616 
Funds receivable and amounts held for customers 468  431 
Total current assets 4,554  5,047 
Long-term investments 98  98 
Property and equipment, net 926  888 
Operating lease right-of-use assets 535  549 
Goodwill 13,732  13,736 
Acquired intangible assets, net 6,899  7,061 
Long-term deferred income tax assets 10  11 
Other assets 331  344 
Total assets $ 27,085  $ 27,734 
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current liabilities:    
Short-term debt $ 499  $ 499 
Accounts payable 670  737 
Accrued compensation and related liabilities 401  576 
Deferred revenue 698  808 
Other current liabilities 589  579 
Current liabilities before funds payable and amounts due to customers 2,857  3,199 
Funds payable and amounts due to customers 468  431 
Total current liabilities 3,325  3,630 
Long-term debt 6,486  6,415 
Long-term deferred income tax liabilities 588  619 
Operating lease liabilities 530  542 
Other long-term obligations 89  87 
Total liabilities 11,018  11,293 
Commitments and contingencies
Stockholders’ equity:    
Preferred stock —  — 
Common stock and additional paid-in capital 18,082  17,725 
Treasury stock, at cost (15,324) (14,805)
Accumulated other comprehensive loss (87) (60)
Retained earnings 13,396  13,581 
Total stockholders’ equity 16,067  16,441 
Total liabilities and stockholders’ equity $ 27,085  $ 27,734 
See accompanying notes.
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.
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
Three Months Ended October 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, 2022 281,932  $ 17,725  $ (14,805) $ (60) $ 13,581  $ 16,441 
Comprehensive income —  —  —  (27) 40  13 
Issuance of stock under employee stock plans, net of shares withheld for employee taxes 634  (65) —  —  —  (65)
Stock repurchases under stock repurchase programs (1,238) —  (519) —  —  (519)
Dividends and dividend rights declared ($0.78 per share)
 —  —  —  —  (225) (225)
Share-based compensation expense —  422  —  —  —  422 
Balance at October 31, 2022 281,328  $ 18,082  $ (15,324) $ (87) $ 13,396  $ 16,067 
Three Months Ended October 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, 2021 273,235  $ 10,548  $ (12,951) $ (24) $ 12,296  $ 9,869 
Comprehensive income —  —  —  (5) 228  223 
Issuance of stock under employee stock plans, net of shares withheld for employee taxes 593  (111) —  —  —  (111)
Stock repurchases under stock repurchase programs (606) —  (338) —  —  (338)
Dividends and dividend rights declared ($0.68 per share)
 —  —  —  —  (191) (191)
Share-based compensation expense —  281  —  —  —  281 
Balance at October 31, 2021 273,222  $ 10,718  $ (13,289) $ (29) $ 12,333  $ 9,733 
See accompanying notes.
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INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended
(In millions) October 31,
2022		 October 31,
2021
Cash flows from operating activities:    
Net income $ 40  $ 228 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 47  45 
Amortization of acquired intangible assets 162  69 
Non-cash operating lease cost 23  18 
Share-based compensation expense 422  280 
Deferred income taxes (28) (16)
Other 11  (35)
Total adjustments 637  361 
Changes in operating assets and liabilities:
Accounts receivable 62  (21)
Income taxes receivable 6  11 
Prepaid expenses and other assets (35) (31)
Accounts payable (71) (107)
Accrued compensation and related liabilities (175) (212)
Deferred revenue (111) (86)
Operating lease liabilities (18) (18)
Other liabilities (7) 20 
Total changes in operating assets and liabilities (349) (444)
Net cash provided by operating activities 328  145 
Cash flows from investing activities:    
Purchases of corporate and customer fund investments (256) (257)
Sales of corporate and customer fund investments 44  1,053 
Maturities of corporate and customer fund investments 90  123 
Purchases of property and equipment (77) (42)
Originations and purchases of term loans to small businesses (314) (125)
Principal repayments of term loans from small businesses 244  72 
Other 13  (28)
Net cash provided by (used in) investing activities (256) 796 
Cash flows from financing activities:    
Proceeds from borrowings under secured revolving credit facilities 70  2 
Proceeds from issuance of stock under employee stock plans 60  55 
Payments for employee taxes withheld upon vesting of restricted stock units (125) (167)
Cash paid for purchases of treasury stock (510) (335)
Dividends and dividend rights paid (222) (190)
Net change in funds receivable and funds payable and amounts due to customers (186) (151)
Net cash used in financing activities (913) (786)
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Effect of exchange rates on cash, cash equivalents, restricted cash, and restricted cash equivalents (16) (2)
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents (857) 153 
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period 2,997  2,819 
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period $ 2,140  $ 2,972 
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 $ 2,125  $ 2,864 
Restricted cash and restricted cash equivalents included in funds receivable and amounts held for customers 15  108 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period $ 2,140  $ 2,972 
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 and small businesses 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 global financial technology platform, which includes TurboTax, Credit Karma, QuickBooks and Mailchimp, is designed to help consumers and small businesses manage their finances, save money, pay off debt and do their taxes. For those customers who run small businesses, we are also focused on helping them find and keep customers, get paid faster, pay their employees, manage and get access to capital, and ensure that their books are done right. ProSeries and Lacerte are our leading tax preparation offerings for professional accountants. 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 immaterial amounts previously reported in our financial statements to conform to the current presentation.
We acquired The Rocket Science Group LLC (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.
On August 1, 2022, we renamed our ProConnect segment as the ProTax segment. This segment continues to serve professional accountants. See Note 12, "Segment Information," for more information.
On August 1, 2022, to better align our personal finance strategy, our Mint offering moved from our Consumer segment to our Credit Karma segment. See Note 12, "Segment Information," 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, 2022. Results for the three months ended October 31, 2022 do not necessarily indicate the results we expect for the fiscal year ending July 31, 2023 or any other future period.
Seasonality
Our Consumer and ProTax offerings have a significant and distinct seasonal pattern as sales and revenue from our income tax preparation products and services are typically concentrated in the period from November through April. This seasonal pattern results in higher net revenues during our second and third quarters ending January 31 and April 30, respectively.
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, 2022. There have been no changes to our significant accounting policies during the first three months of fiscal 2023.
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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, reserves for losses, 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.
Computation of Net Income 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
(In millions, except per share amounts) October 31,
2022		 October 31,
2021
Numerator:    
Net income $ 40  $ 228 
Denominator:    
Shares used in basic per share amounts:    
Weighted average common shares outstanding 281  273 
Shares used in diluted per share amounts:
Weighted average common shares outstanding 281  273 
Dilutive common equivalent shares from stock options
and restricted stock awards 3  4 
Dilutive weighted average common shares outstanding 284  277 
Basic and diluted net income per share:    
Basic net income per share $ 0.14  $ 0.84 
Diluted net income per share $ 0.14  $ 0.82 
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 3  — 
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 months ended October 31, 2022, we recognized revenue of $535 million, that was included in deferred revenue at July 31, 2022. During the three months ended October 31, 2021, we recognized revenue of $421 million, that was included in deferred revenue at July 31, 2021.
Our performance obligations are generally satisfied within 12 months of the initial contract date. As of October 31, 2022 and July 31, 2022, the deferred revenue balance related to performance obligations that will be satisfied after 12 months was $5 million and $6 million, respectively, and is included in other long-term obligations on our condensed consolidated balance sheets.
Concentration of Credit Risk and Significant Customers
No customer accounted for 10% or more of total net revenue in the three months ended October 31, 2022 or October 31, 2021. No customer accounted for 10% or more of gross accounts receivable at October 31, 2022 or July 31, 2022.
Accounting Standards Not Yet Adopted
We do not expect that any 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.
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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.
October 31, 2022 July 31, 2022
(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 $ 1,117  $ —  $ 1,117  $ 1,835  $ —  $ 1,835 
Available-for-sale debt securities:            
Municipal bonds —  —  —  —  —  — 
Corporate notes —  684  684  —  589  589 
U.S. agency securities —  115  115  —  96  96 
Total available-for-sale debt securities —  799  799  —  685  685 
Total assets measured at fair value on a recurring basis $ 1,117  $ 799  $ 1,916  $ 1,835  $ 685  $ 2,520 
Liabilities:
Senior unsecured notes(1)
$ —  $ 1,745  $ 1,745  $ —  $ 1,838  $ 1,838 
(1) Carrying value on our condensed consolidated balance sheets at October 31, 2022 and July 31, 2022 was $1.99 billion. See Note 6, “Debt,” for more information.

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.
October 31, 2022 July 31, 2022
(In millions) Level 1 Level 2 Total
Fair Value		 Level 1 Level 2 Total
Fair Value
Cash equivalents:            
In cash and cash equivalents $ 1,117  $ —  $ 1,117  $ 1,835  $ —  $ 1,835 
In funds receivable and amounts held for customers —  —  —  —  —  — 
Total cash equivalents $ 1,117  $ —  $ 1,117  $ 1,835  $ —  $ 1,835 
Available-for-sale debt securities:            
In investments $ —  $ 599  $ 599  $ —  $ 485  $ 485 
In funds receivable and amounts held for customers —  200  200  —  200  200 
Total available-for-sale debt securities $ —  $ 799  $ 799  $ —  $ 685  $ 685 
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
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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 6, “Debt,” 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 three months ended October 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 of these investments using a valuation method based on observable transaction price changes at the transaction date. We recognized no upward adjustments during the three months ended October 31, 2022. We recognized $46 million of upward adjustments during the three months ended October 31, 2021. Impairments recognized during the three months ended October 31, 2022 and October 31, 2021 were immaterial. Cumulative upward adjustments were $71 million, and cumulative impairments were immaterial through October 31, 2022 for measurement alternative investments held as of October 31, 2022. The carrying value of long-term investments on our condensed consolidated balance sheets was $98 million at both October 31, 2022 and July 31, 2022.
3. Cash and Cash Equivalents, Investments, and Funds Receivable and Amounts 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 receivable and amounts held for customers represents funds receivable from third-party payment processors for customer transactions and 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.
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The following table summarizes our cash and cash equivalents, investments, and funds receivable and amounts held for customers by balance sheet classification at the dates indicated.
  October 31, 2022 July 31, 2022
(In millions) Amortized
Cost		 Fair Value Amortized
Cost		 Fair Value
Classification on condensed consolidated balance sheets:        
Cash and cash equivalents $ 2,125  $ 2,125  $ 2,796  $ 2,796 
Investments 608  599  490  485 
Funds receivable and amounts held for customers 476  468  435  431 
Total cash and cash equivalents, investments, and funds receivable and amounts held for customers $ 3,209  $ 3,192  $ 3,721  $ 3,712 
The following table summarizes our cash and cash equivalents, investments, and relevant portion of funds receivable and amounts held for customers by investment category at the dates indicated. As of October 31, 2022 and July 31, 2022, this excludes $253 million and $30 million, respectively, of funds receivable included on our condensed consolidated balance sheets in funds receivable and amounts held for customers not measured and recorded at fair value.
  October 31, 2022 July 31, 2022
(In millions) Amortized
Cost		 Fair Value Amortized
Cost		 Fair Value
Type of issue:        
Total cash, cash equivalents, restricted cash,
and restricted cash equivalents		 $ 2,140  $ 2,140  $ 2,997  $ 2,997 
Available-for-sale debt securities:
Municipal bonds —  —  —  — 
Corporate notes 697  684  597  589 
U.S. agency securities 119  115  97  96 
Total available-for-sale debt securities 816  799  694  685 
Total cash, cash equivalents, restricted cash, restricted cash equivalents, and investments $ 2,956  $ 2,939  $ 3,691  $ 3,682 
We use the specific identification method to compute gains and losses on investments. We include realized gains and losses on our available-for-sale debt securities in interest and other income on our condensed consolidated statements of operations. Gross realized gains and losses on our available-for-sale debt securities for the three months ended October 31, 2022 and October 31, 2021 were not significant.
We accumulate unrealized gains and losses on our available-for-sale debt securities, net of tax, in accumulated other comprehensive income or loss in the stockholders’ equity section of our condensed consolidated balance sheets, except for certain unrealized losses described below. Gross unrealized gains and losses on our available-for-sale debt securities at October 31, 2022 and July 31, 2022 were not significant.
For available-for sale debt securities in an unrealized loss position, we determine whether a credit loss exists. The estimate of the credit loss is determined by considering available information relevant to the collectibility of the security and information about past events, current conditions, and reasonable and supportable forecasts. The allowance for credit loss is recorded to interest and other income on our condensed consolidated statement of operations, not to exceed the amount of the unrealized loss. Any excess unrealized loss greater than the credit loss at a security level is recognized in accumulated other comprehensive income or loss in the stockholders' equity section of our condensed consolidated balance sheets. We determined there were no credit losses related to available-for-sale debt securities as of October 31, 2022. Unrealized losses on available-for-sale debt securities at October 31, 2022 were not significant. We do not intend to sell these investments. In addition, it is more likely than not that we will not be required to sell them before recovery of the amortized cost basis, which may be at maturity.
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The following table summarizes our available-for-sale debt securities, included in investments and relevant portion of funds receivable and amounts held for customers, classified by the stated maturity date of the security at the dates indicated.
  October 31, 2022 July 31, 2022
(In millions) Amortized
Cost		 Fair Value Amortized
Cost		 Fair Value
Due within one year $ 458  $ 453  $ 316  $ 313 
Due within two years 263  254  298  293 
Due within three years 95  92  79  78 
Due after three years —  —  1  1 
Total available-for-sale debt securities $ 816  $ 799  $ 694  $ 685 

The following table summarizes our funds receivable and amounts held for customers by asset category at the dates indicated.
(In millions) October 31, 2022 July 31,
2022
Restricted cash and restricted cash equivalents $ 15  $ 201 
Restricted available-for-sale debt securities and funds receivable 453  230 
Total funds receivable and amounts held for customers $ 468  $ 431 
(In millions) October 31, 2021 July 31,
2021
Restricted cash and restricted cash equivalents $ 108  $ 257 
Restricted available-for-sale debt securities and funds receivable 198  200 
Total funds receivable and amounts held for customers $ 306  $ 457 
4. Notes Receivable and Allowances for Loan Losses
Notes receivable consist primarily of term loans to small businesses. 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 a pooled basis due to its composition of small, homogeneous loans with similar general credit risk and characteristics and apply a loss rate at the time of loan origination. The loss rate and underlying model are updated periodically to reflect actual loan performance and changes to 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. As of October 31, 2022 and July 31, 2022, the net notes receivable balance was $601 million and $540 million, respectively. The current portion is included in notes receivable and the long-term portion is included in other assets on our condensed consolidated balance sheets. As of October 31, 2022 and July 31, 2022, the allowances for loan losses were not material.
We consider a loan to be delinquent when the payments are one day past due. We place delinquent loans on nonaccrual status and stop accruing interest revenue. Loans are returned to accrual status if they are brought current or have performed in accordance with the contractual terms for a reasonable period of time and, in our judgment, will continue to make periodic principal and interest payments as per contractual terms. Past due amounts are not material for all periods presented.
Interest revenue is earned on loans originated and held to maturity in accordance with the specified period of time and defined interest rate noted in the loan contract. Interest revenue is recorded net of amortized direct origination costs and is included in service and other revenue on our condensed consolidated statements of operations. Interest revenue was not material for all periods presented.
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5. Acquired Intangible Assets
The following table shows the cost, accumulated amortization and weighted average life in years for our acquired intangible assets at the dates indicated. The weighted average lives are calculated for assets that are not fully amortized.
(Dollars in millions) Customer
Lists / User Relationships		 Purchased
Technology		 Trade
Names
and Logos		 Covenants
Not to
Compete
or Sue		 Total
At October 31, 2022:          
Cost $ 6,197  $ 1,612  $ 680  $ 42  $ 8,531 
Accumulated amortization (855) (634) (101) (42) (1,632)
Acquired intangible assets, net $ 5,342  $ 978  $ 579  $ —  $ 6,899 
Weighted average life in years 14 8 13 0 13
At July 31, 2022:          
Cost $ 6,197  $ 1,612  $ 680  $ 42  $ 8,531 
Accumulated amortization (748) (593) (87) (42) (1,470)
Acquired intangible assets, net $ 5,449  $ 1,019  $ 593  $ —  $ 7,061 
Weighted average life in years 14 8 13 0 13
The following table shows the expected future amortization expense for our acquired intangible assets at October 31, 2022. Amortization of purchased technology is charged to amortization of acquired technology in our condensed consolidated statements of operations. Amortization of other acquired intangible assets such as customer lists is charged to amortization of other acquired intangible assets in our condensed consolidated statements of operations. If impairment events occur, they could accelerate the timing of acquired intangible asset charges.
(In millions) Expected
Future
Amortization
Expense
Twelve months ending July 31,  
2023 (excluding the three months ended October 31, 2022) $ 484 
2024 624 
2025 622 
2026 620 
2027 594 
Thereafter 3,955 
Total expected future amortization expense $ 6,899 
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6. Debt
The carrying value of our debt was as follows at the dates indicated:
(In millions) October 31,
2022		 July 31,
2022		 Effective
Interest Rate
Senior unsecured notes issued June 2020:
0.650% notes due July 2023
 $ 500  $ 500  0.837%
0.950% notes due July 2025
 500  500  1.127%
1.350% notes due July 2027
 500  500  1.486%
1.650% notes due July 2030
 500  500  1.767%
Term loan 4,700  4,700 
Secured revolving credit facilities 300  230 
Total principal balance of long-term debt 7,000  6,930 
Unamortized discount and debt issuance costs (15) (16)
Net carrying value of long-term debt $ 6,985  $ 6,914 
Short-term debt $ 499  $ 499 
Long-term debt $ 6,486  $ 6,415 
Future principal payments for long-term debt at October 31, 2022 were as shown in the table below.
(In millions)
Fiscal year ending July 31,  
2023 (excluding the three months ended October 31, 2022) $ 500 
2024 — 
2025 5,200 
2026 300 
2027 500 
Thereafter 500 
Total future principal payments for long-term debt $ 7,000 
Senior Unsecured Notes
In June 2020, we issued four series of senior unsecured notes (together, the Notes) pursuant to a public debt offering. The proceeds from the issuance were $1.98 billion, net of debt discount of $2 million and debt issuance costs of $15 million.
Interest is payable semiannually on January 15 and July 15 of each year. The discount and debt issuance costs are amortized to interest expense over the term of the Notes under the effective interest method. We paid no interest on the Notes during each of the three months ended October 31, 2022 and 2021.
The Notes are senior unsecured obligations of Intuit and rank equally with all existing and future unsecured and unsubordinated indebtedness of Intuit and are redeemable by us at any time, subject to a make-whole premium. Upon the occurrence of change of control transactions that are accompanied by certain downgrades in the credit ratings of the Notes, we will be required to repurchase the Notes at a repurchase price equal to 101% of the aggregate outstanding principal plus any accrued and unpaid interest to but not including the date of repurchase. The indenture governing the Notes requires us to comply with certain covenants. For example, the Notes limit our ability to create certain liens and enter into sale and leaseback transactions. As of October 31, 2022, we were compliant with all covenants governing the Notes.
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Unsecured Credit Facility
On November 1, 2021, we terminated our amended and restated credit agreement dated May 2, 2019 (2019 Credit Facility), and entered into a credit agreement with certain institutional lenders with an aggregate principal amount of $5.7 billion, which includes a $4.7 billion unsecured term loan that matures on November 1, 2024, and a $1 billion unsecured revolving credit facility that matures on November 1, 2026 (2021 Credit Facility).
The 2021 Credit Facility includes customary affirmative and negative covenants, including financial covenants that require us to maintain a ratio of total gross debt to annual earnings before interest, taxes, depreciation and amortization (EBITDA) of not greater than 3.25 to 1.00 and a ratio of annual EBITDA to annual interest expense of not less than 3.00 to 1.00 as of the last day of each fiscal quarter. As of October 31, 2022, we were compliant with all required covenants.
Term Loan. On November 1, 2021, we borrowed the full $4.7 billion under the unsecured term loan to fund a portion of the cash consideration for the acquisition of Mailchimp. Under this agreement we may, subject to certain customary conditions, on one or more occasions increase commitments under the term loan in an amount not to exceed $400 million in the aggregate. The term loan accrues interest at rates that are equal to, at our election, either (i) the alternate base rate plus a margin that ranges from 0.0% to 0.125% or (ii) the Secured Overnight Finance Rate (SOFR) plus a margin that ranges from 0.625% to 1.125%. Actual margins under either election will be based on our senior debt credit ratings. Interest on the term loan is payable monthly. At October 31, 2022, $4.7 billion was outstanding under the term loan. The carrying value of the term loan is net of debt issuance costs of $