May 23, 2023 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

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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 April 30, 2023


☐						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

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. 280,059,722 shares of Common Stock, $0.01 par value, were outstanding at May 16, 2023.


INTUIT INC. FORM 10-Q INDEX


			Page
PART I - FINANCIAL INFORMATION

ITEM 1: Financial Statements (Unaudited)

Condensed Consolidated Statements of Operations for the three and nine months ended April 30, 2023 and 2022			4

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended April 30, 2023 and 2022			5

Condensed Consolidated Balance Sheets at April 30, 2023 and July 31, 2022			6

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended April 30, 2023 and 2022			7

Condensed Consolidated Statements of Cash Flows for the nine months ended April 30, 2023 and 2022			9

Notes to Condensed Consolidated Financial Statements			11

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			28

ITEM 3: Quantitative and Qualitative Disclosures about Market Risk			45

ITEM 4: Controls and Procedures			45

PART II - OTHER INFORMATION

ITEM 1: Legal Proceedings			46

ITEM 1A: Risk Factors			46

ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds			60

ITEM 6: Exhibits			60

Signatures			61

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 Q3 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 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, commitments, 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;

•statements regarding the impact of the COVID-19 pandemic on our business; 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.



			Intuit Q3 Fiscal 2023 Form 10-Q			3

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PART I - FINANCIAL INFORMATION


ITEM 1 - FINANCIAL STATEMENTS


INTUIT INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

	Three Months Ended				Nine Months Ended
(In millions, except per share amounts)	April 30, 2023		April 30, 2022		April 30, 2023		April 30, 2022
Net revenue:
Product	$	583	$	554	$	1,617	$	1,476
Service and other	5,435		5,078		10,039		8,836
Total net revenue	6,018		5,632		11,656		10,312
Costs and expenses:
Cost of revenue:
Cost of product revenue	17		18		55		53
Cost of service and other revenue	924		764		2,253		1,654
Amortization of acquired technology	40		42		122		99
Selling and marketing	1,203		1,227		2,922		2,719
Research and development	604		600		1,859		1,720
General and administrative	332		465		959		1,126
Amortization of other acquired intangible assets	120		121		362		295

Total costs and expenses	3,240		3,237		8,532		7,666
Operating income	2,778		2,395		3,124		2,646
Interest expense	(66)		(21)		(180)		(49)
Interest and other income (loss), net	22		(1)		50		44
Income before income taxes	2,734		2,373		2,994		2,641
Income tax provision	647		579		699		519


Net income	$	2,087	$	1,794	$	2,295	$	2,122



Basic net income per share	$	7.44	$	6.35	$	8.17	$	7.60
Shares used in basic per share calculations	281		282		281		279



Diluted net income per share	$	7.38	$	6.28	$	8.11	$	7.48
Shares used in diluted per share calculations	283		286		283		284

See accompanying notes.



			Intuit Q3 Fiscal 2023 Form 10-Q			4

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INTUIT INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

	Three Months Ended				Nine Months Ended
(In millions)	April 30, 2023		April 30, 2022		April 30, 2023		April 30, 2022

Net income	$	2,087	$	1,794	$	2,295	$	2,122
Other comprehensive income (loss), net of income taxes:
Unrealized gain (loss) on available-for-sale debt securities	1		(5)		1		(10)

Foreign currency translation gain (loss)	1		(14)		(2)		(19)
Total other comprehensive income (loss), net	2		(19)		(1)		(29)
Comprehensive income	$	2,089	$	1,775	$	2,294	$	2,093

See accompanying notes.



			Intuit Q3 Fiscal 2023 Form 10-Q			5

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INTUIT INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(In millions)	April 30, 2023		July 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	3,745	$	2,796
Investments	523		485
Accounts receivable, net	717		446
Notes receivable	700		509
Income taxes receivable	2		93
Prepaid expenses and other current assets	574		287
Current assets before funds receivable and amounts held for customers	6,261		4,616
Funds receivable and amounts held for customers	388		431
Total current assets	6,649		5,047
Long-term investments	102		98
Property and equipment, net	938		888
Operating lease right-of-use assets	485		549
Goodwill	13,778		13,736
Acquired intangible assets, net	6,580		7,061
Long-term deferred income tax assets	13		11
Other assets	376		344
Total assets	$	28,921	$	27,734

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	501	$	499
Accounts payable	921		737
Accrued compensation and related liabilities	625		576
Deferred revenue	829		808
Income taxes payable	653		8
Other current liabilities	498		571
Current liabilities before funds payable and amounts due to customers	4,027		3,199
Funds payable and amounts due to customers	388		431
Total current liabilities	4,415		3,630
Long-term debt	6,109		6,415

Long-term deferred income tax liabilities	190		619
Operating lease liabilities	499		542
Other long-term obligations	116		87
Total liabilities	11,329		11,293
Commitments and contingencies
Stockholders’ equity:
Preferred stock	—		—
Common stock and additional paid-in capital	18,760		17,725
Treasury stock, at cost	(16,307)		(14,805)
Accumulated other comprehensive loss	(61)		(60)
Retained earnings	15,200		13,581
Total stockholders’ equity	17,592		16,441
Total liabilities and stockholders’ equity	$	28,921	$	27,734

See accompanying notes.



			Intuit Q3 Fiscal 2023 Form 10-Q			6

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INTUIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)


	Three Months Ended April 30, 2023
(In millions, except per share amount and 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 January 31, 2023	280,668	$	18,392	$	(15,824)	$	(63)	$	13,337	$	15,842
Comprehensive income	—	—		—		2		2,087		2,089
Issuance of stock under employee stock plans, net of shares withheld for employee taxes	743	(51)		—		—		—		(51)
Stock repurchases under stock repurchase programs	(1,144)	—		(483)		—		—		(483)
Dividends and dividend rights declared ($0.78 per share)	—	—		—		—		(224)		(224)
Share-based compensation expense	—	419		—		—		—		419

Balance at April 30, 2023	280,267	$	18,760	$	(16,307)	$	(61)	$	15,200	$	17,592



	Nine Months Ended April 30, 2023
(In millions, except per share amount and 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	—	—		—		(1)		2,295		2,294
Issuance of stock under employee stock plans, net of shares withheld for employee taxes	1,993	(229)		—		—		—		(229)
Stock repurchases	(3,658)	—		(1,502)		—		—		(1,502)
Dividends and dividend rights declared ($2.34 per share)	—	—		—		—		(676)		(676)
Share-based compensation expense	—	1,264		—		—		—		1,264

Balance at April 30, 2023	280,267	$	18,760	$	(16,307)	$	(61)	$	15,200	$	17,592

See accompanying notes.



			Intuit Q3 Fiscal 2023 Form 10-Q			7

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INTUIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)


	Three Months Ended April 30, 2022
(In millions, except per share amount and 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 January 31, 2022	283,000	$	17,202	$	(13,808)	$	(34)	$	12,235	$	15,595
Comprehensive income	—	—		—		(19)		1,794		1,775
Issuance of stock under employee stock plans, net of shares withheld for employee taxes	502	(69)		—		—		—		(69)
Stock repurchases under stock repurchase programs	(1,029)	—		(489)		—		—		(489)
Dividends and dividend rights declared ($0.68 per share)	—	—		—		—		(197)		(197)
Share-based compensation expense	—	346		—		—		—		346

Balance at April 30, 2022	282,473	$	17,479	$	(14,297)	$	(53)	$	13,832	$	16,961



	Nine Months Ended April 30, 2022
(In millions, except per share amount and 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	—	—		—		(29)		2,122		2,093
Issuance of stock under employee stock plans, net of shares withheld for employee taxes	1,593	(348)		—		—		—		(348)
Stock repurchases under stock repurchase programs	(2,445)	—		(1,346)		—		—		(1,346)
Dividends and dividend rights declared ($2.04 per share)	—	—		—		—		(586)		(586)
Share-based compensation expense	—	963		—		—		—		963
Issuance of stock in a business combination	10,090	6,316		—		—		—		6,316
Balance at April 30, 2022	282,473	$	17,479	$	(14,297)	$	(53)	$	13,832	$	16,961

See accompanying notes.



			Intuit Q3 Fiscal 2023 Form 10-Q			8

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INTUIT INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	Nine Months Ended
(In millions)	April 30, 2023		April 30, 2022
Cash flows from operating activities:
Net income	$	2,295	$	2,122
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	127		142
Amortization of acquired intangible assets	484		396
Non-cash operating lease cost	68		62

Share-based compensation expense	1,264		962

Deferred income taxes	(389)		106


Other	48		(21)
Total adjustments	1,602		1,647


Changes in operating assets and liabilities:
Accounts receivable	(269)		(323)
Income taxes receivable	91		117
Prepaid expenses and other assets	(286)		(88)
Accounts payable	212		86
Accrued compensation and related liabilities	45		(392)
Deferred revenue	18		(2)
Income taxes payable	646		195
Operating lease liabilities	(59)		(62)
Other liabilities	(91)		250
Total changes in operating assets and liabilities	307		(219)
Net cash provided by operating activities	4,204		3,550
Cash flows from investing activities:
Purchases of corporate and customer fund investments	(566)		(583)
Sales of corporate and customer fund investments	196		1,448
Maturities of corporate and customer fund investments	335		177
Purchases of property and equipment	(220)		(168)
Acquisitions of businesses, net of cash acquired	(33)		(5,682)

Originations and purchases of loans	(1,600)		(613)
Principal repayments of loans	1,365		320
Other	(26)		(9)
Net cash used in investing activities	(549)		(5,110)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	—		4,700
Repayment of debt	(509)		—
Proceeds from borrowings under secured revolving credit facilities	212		122
Repayments on borrowings under secured revolving credit facilities	(22)		—
Proceeds from issuance of stock under employee stock plans	150		116
Payments for employee taxes withheld upon vesting of restricted stock units	(376)		(465)
Cash paid for purchases of treasury stock	(1,495)		(1,337)
Dividends and dividend rights paid	(667)		(580)
Net change in funds receivable and funds payable and amounts due to customers	(196)		82

Other	(1)		(9)
Net cash provided by (used in) financing activities	(2,904)		2,629



			Intuit Q3 Fiscal 2023 Form 10-Q			9

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Effect of exchange rates on cash, cash equivalents, restricted cash, and restricted cash equivalents	2		(18)
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	753		1,051
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	$	3,750	$	3,870

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	$	3,745	$	3,531
Restricted cash and restricted cash equivalents included in funds receivable and amounts held for customers	5		339
Total cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	3,750	$	3,870

Supplemental schedule of non-cash investing activities:
Issuance of common stock in a business combination	$	—	$	6,316

See accompanying notes.



			Intuit Q3 Fiscal 2023 Form 10-Q			10

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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 amounts previously reported in our financial statements that were not material 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. We have completed the purchase price allocation for the Mailchimp acquisition as of January 31, 2023, with no material adjustments from those disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022. Our Mailchimp offerings are 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 nine months ended April 30, 2023 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 nine months of fiscal 2023.



			Intuit Q3 Fiscal 2023 Form 10-Q			11

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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.



			Intuit Q3 Fiscal 2023 Form 10-Q			12

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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				Nine Months Ended
(In millions, except per share amounts)	April 30, 2023		April 30, 2022		April 30, 2023		April 30, 2022
Numerator:


Net income	$	2,087	$	1,794	$	2,295	$	2,122

Denominator:
Shares used in basic per share amounts:
Weighted-average common shares outstanding	281		282		281		279

Shares used in diluted per share amounts:
Weighted-average common shares outstanding	281		282		281		279
Dilutive common equivalent shares from stock options
and restricted stock awards	2		4		2		5
Dilutive weighted-average common shares outstanding	283		286		283		284

Basic and diluted net income per share:


Basic net income per share	$	7.44	$	6.35	$	8.17	$	7.60



Diluted net income per share	$	7.38	$	6.28	$	8.11	$	7.48

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	2		2		2		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 nine months ended April 30, 2023, we recognized revenue of $85 million and $778 million, respectively, that was included in deferred revenue at July 31, 2022. During the three and nine months ended April 30, 2022, we recognized revenue of $78 million and $657 million, respectively, 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 April 30, 2023 and July 31, 2022, the deferred revenue balance related to performance obligations that will be satisfied after 12 months was $4 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 or nine months ended April 30, 2023 or April 30, 2022. No customer accounted for 10% or more of gross accounts receivable at April 30, 2023 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.


	April 30, 2023				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	$	3,051	$	—	$	3,051	$	1,835	$	—	$	1,835
Available-for-sale debt securities:

Corporate notes	—		591		591		—		589		589
U.S. agency securities	—		132		132		—		96		96
Total available-for-sale debt securities	—		723		723		—		685		685
Total assets measured at fair value on a recurring basis	$	3,051	$	723	$	3,774	$	1,835	$	685	$	2,520
Liabilities:
Senior unsecured notes(1)	$	—	$	1,817	$	1,817	$	—	$	1,838	$	1,838

(1) Carrying value on our condensed consolidated balance sheets at April 30, 2023 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.


	April 30, 2023				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	$	3,051	$	—	$	3,051	$	1,835	$	—	$	1,835
In funds receivable and amounts held for customers	—		—		—		—		—		—
Total cash equivalents	$	3,051	$	—	$	3,051	$	1,835	$	—	$	1,835


Available-for-sale debt securities:
In investments	$	—	$	523	$	523	$	—	$	485	$	485
In funds receivable and amounts held for customers	—		200		200		—		200		200

Total available-for-sale debt securities	$	—	$	723	$	723	$	—	$	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 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



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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 nine months ended April 30, 2023.


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 and nine months ended April 30, 2023. We recognized $8 million and $54 million of upward adjustments during the three and nine months ended April 30, 2022, respectively. Impairments recognized during the three and nine months ended April 30, 2023 and April 30, 2022 were not material. Cumulative upward adjustments were $71 million, and cumulative impairments were not material through April 30, 2023 for measurement alternative investments held as of April 30, 2023. The carrying value of long-term investments on our condensed consolidated balance sheets was $102 million and $98 million at April 30, 2023 and July 31, 2022, respectively.


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.

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.


	April 30, 2023				July 31, 2022
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Classification on condensed consolidated balance sheets:
Cash and cash equivalents	$	3,745	$	3,745	$	2,796	$	2,796
Investments	526		523		490		485
Funds receivable and amounts held for customers	391		388		435		431

Total cash and cash equivalents, investments, and funds receivable and amounts held for customers	$	4,662	$	4,656	$	3,721	$	3,712



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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 April 30, 2023 and July 31, 2022, this excludes $183 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.


	April 30, 2023				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	$	3,750	$	3,750	$	2,997	$	2,997

Available-for-sale debt securities:

Corporate notes	596		591		597		589
U.S. agency securities	133		132		97		96

Total available-for-sale debt securities	729		723		694		685

Total cash, cash equivalents, restricted cash, restricted cash equivalents, and investments	$	4,479	$	4,473	$	3,691	$

Form: 10-Q

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