Company Reiterates Full-year Revenue and
Operating Income Outlook
Intuit Inc. (Nasdaq: INTU) announced financial results for the
second quarter of fiscal 2018, which ended Jan. 31.
“We've reached the midway point of our fiscal year. Strong
growth across our businesses during the second quarter gives us
confidence we’re on pace to deliver for the full year,” said Brad
Smith, Intuit’s chairman and chief executive officer.
“Tax season is in full swing and we're laser focused on
executing with excellence until the April 17 tax filing deadline.
In our Small Business and Self-Employed Group, subscriber growth
continues at a rapid pace and remains strong across geographies,”
said Smith.
Financial Highlights
For the second quarter, Intuit:
- Grew revenue to $1,165 million, up 15
percent.
- Grew TurboTax e-filed returns 2 percent
through Feb. 16.
- Increased Small Business and
Self-Employed Online Ecosystem revenue by 39 percent.
- Added approximately 275,000 QuickBooks
Online subscribers in the quarter, reaching more than 2.8 million
worldwide.
- Within QuickBooks Online, grew
Self-Employed subscribers to roughly 490,000, up from 425,000 last
quarter, and 180,000 one year ago.
Unless otherwise noted, all growth rates refer to the current
period versus the comparable prior-year period, and the business
metrics and associated growth rates refer to worldwide business
metrics.
Snapshot of Second-quarter Results
GAAP Non-GAAP
Q2FY18 Q2FY17
Change Q2FY18 Q2FY17
Change Revenue $1,165 $1,016 15% $1,165 $1,016
15%
Operating
Income (Loss)
$20 $22 (9)% $120 $106 13%
Earnings
(Loss) Per
Share
$(0.08) $0.05 NM $0.35 $0.26 35%
NM = Not meaningful
Dollars are in millions, except earnings per share. See “About
Non-GAAP Financial Measures” below for more information regarding
financial measures not prepared in accordance with Generally
Accepted Accounting Principles (GAAP).
On Feb. 9 the company announced a shift in quarterly outlook
citing the late opening to the tax season and reaffirmed full-year
revenue and operating income guidance. Intuit also raised full year
earnings per share guidance due to new U.S. tax legislation.
Business Segment Results
Small Business & Self-Employed
Group
- Grew total segment revenue by 19
percent.
- Increased U.S. subscribers 47 percent
to approximately 2.2 million and grew international subscribers 69
percent to approximately 630,000.
- Launched a new brand campaign
"QuickBooks: Backing You.” to raise QuickBooks brand awareness and
drive more prospective customers to Intuit.com.
Consumer and Strategic Partner
Groups
- Grew Consumer Group revenue by 12
percent.
- Introduced TurboTax Live, leveraging
one-way video technology, giving customers access to an expert so
they have the confidence they need to complete a return on their
own.
- Built an end-to-end expert platform
that enables approximately 2,000 certified public accountants and
enrolled agents to serve customers.
- Launched Turbo, providing customers
with a full view of their overall financial health by combining a
credit score, verified income data and a debt-to-income ratio to
show customers where they truly stand. Customers can transfer their
tax data into a Turbo account when they complete their return this
season.
- In the Strategic Partner Group,
professional tax revenue of $95 million.
Capital Allocation Summary
In the second quarter the company:
- Completed three acquisitions with cash
and other consideration totaling approximately $400 million.
- Repurchased $83 million of shares, with
$1.3 billion remaining on the authorization.
- Received board approval for a $0.39 per
share dividend for the second quarter of fiscal 2018, payable on
April 18, 2018, an increase of 15 percent over last year.
“When considering how to leverage the benefits from tax
legislation change, we apply our financial principles as we take a
disciplined approach to capital management,” said Michelle
Clatterbuck, Intuit's chief financial officer. “We’ll continue to
assess investment opportunities as we revisit our long-term
plan.”
Forward-looking Guidance
Intuit announced guidance for the third quarter of fiscal year
2018, which ends April 30. The company expects:
- Revenue of $2.785 billion to $2.835
billion, growth of 10 to 12 percent.
- GAAP operating income of $1.535 billion
to $1.555 billion.
- Non-GAAP operating income of $1.635
billion to $1.655 billion.
- GAAP diluted earnings per share of
$4.32 to $4.37.
- Non-GAAP diluted earnings per share of
$4.57 to $4.62.
Intuit affirmed guidance for full fiscal year 2018. The company
expects:
- Revenue of $5.640 billion to $5.740
billion, growth of 9 to 11 percent.
- GAAP operating income of $1.485 billion
to $1.535 billion, growth of 6 to 10 percent.
- Non-GAAP operating income of $1.885
billion to $1.935 billion, growth of 9 to 12 percent.
- GAAP diluted earnings per share of
$4.20 to $4.30, growth of 13 to 16 percent.
- Non-GAAP diluted earnings per share of
$5.30 to $5.40, growth of 20 to 22 percent.
- QuickBooks Online subscribers of 3.275
million to 3.375 million.
This guidance is based on a GAAP tax rate of 26 percent and a
non-GAAP tax rate of 27 percent.
Conference Call Details
Intuit executives will discuss the financial results on a
conference call at 1:30 p.m. Pacific time on Feb. 22. To hear the
call, dial 844-246-4601 in the United States or 703-639-1172 from
international locations. No reservation or access code is needed.
The conference call can also be heard live at
http://investors.intuit.com/Events/default.aspx. Prepared remarks
for the call will be available on Intuit’s website after the call
ends.
Replay Information
A replay of the conference call will be available for one week
by calling 855-859-2056, or 404-537-3406 from international
locations. The access code for this call is 3193027.
The audio webcast will remain available on Intuit’s website for
one week after the conference call.
About Intuit
Intuit’s mission is to Power Prosperity Around
the World. Our global products and platforms, including
TurboTax, QuickBooks, Mint and Turbo, are
designed to empower consumers, self-employed, and small
businesses to improve their financial lives, finding them more
money with the least amount of work, while giving them complete
confidence in their actions and decisions. Our innovative
ecosystem of financial management solutions serves 46 million
customers worldwide, unleashing the power of many for the
prosperity of one. Please visit us for the latest news and
in-depth information about Intuit and its brands and find us on
Facebook.
About Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP
financial measures. For a description of these non-GAAP financial
measures, including the reasons management uses each measure, and
reconciliations of these non-GAAP financial measures to the most
directly comparable financial measures prepared in accordance with
Generally Accepted Accounting Principles, please see the section of
the accompanying tables titled "About Non-GAAP Financial Measures"
as well as the related Table B1, Table B2, and Table E. A copy of
the press release issued by Intuit today can be found on the
investor relations page of Intuit's website.
Cautions About Forward-looking Statements
This press release contains forward-looking statements,
including forecasts of expected growth and future financial results
of Intuit and its reporting segments; Intuit’s prospects for the
business in fiscal 2018 and beyond; expectations regarding timing
and growth of revenue for each of Intuit’s reportable segments and
from current or future products and services; expectations
regarding customer growth; expectations regarding changes to our
products and their impact on Intuit’s business; expectations
regarding the amount and timing of any future dividends or share
repurchases; expectations regarding the impact of newly passed US
tax legislation on Intuit's business and its corporate tax rate;
expectations regarding availability of our offerings; expectations
regarding the impact of our strategic decisions on Intuit’s
business; and all of the statements under the heading
“Forward-looking Guidance”.
Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause our
actual results to differ materially from the expectations expressed
in the forward-looking statements. These factors include, without
limitation, the following: inherent difficulty in predicting
consumer behavior; difficulties in receiving, processing, or filing
customer tax submissions; consumers may not respond as we expected
to our advertising and promotional activities; changes in the total
number of tax filings that are submitted to government agencies due
to economic conditions or otherwise; the competitive environment;
governmental encroachment in our tax businesses or other
governmental activities or public policy affecting the preparation
and filing of tax returns; our ability to innovate and adapt to
technological change and global trends; our ability to adequately
protect our intellectual property rights; our ability to develop
and maintain brand awareness and our reputation; disruptions,
expenses and risks associated with our acquisitions and
divestitures; we may issue additional shares in an acquisition
causing our number of outstanding shares to grow; any failure to
properly use and protect personal customer or employee information
and data; a security breach could result in third-party access to
confidential customer, employee and business information; privacy
and cybersecurity concerns relating to our offerings, or online
offerings in general; any failure to process transactions
effectively or to adequately protect against potential fraudulent
activities; any loss of confidence in using our software as a
result of publicity regarding such fraudulent activity;
availability of our products and services could be impacted by
business interruption or failure of our information technology and
communication systems; our ability to develop, manage and maintain
critical third-party business relationships; our ability to
attract, retain and develop highly skilled employees; any
significant product accuracy or quality problems or delays; any
problems with implementing upgrades to our customer facing
applications and supporting information technology infrastructure;
increased risks associated with international operations; increases
in or changes to government regulation of our businesses; the cost
of, and potential adverse results in, litigation involving
intellectual property, antitrust, shareholder and other matters;
the seasonal and unpredictable nature of our revenue; unanticipated
changes in our income tax rates; adverse global economic
conditions; amortization of acquired intangible assets and
impairment charges; our use of significant amounts of debt to
finance acquisitions or other activities; any lost revenue
opportunities or cannibalization of our traditional paid franchise
due to our participation in the Free File Alliance; and changes in
the amounts or frequency of share repurchases or dividends. More
details about the risks that may impact our business are included
in our Form 10-K for fiscal 2017 and in our other SEC filings. You
can locate these reports through our website at
http://investors.intuit.com. Forward-looking statements are based
on information as of February 22, 2018, and we do not undertake any
duty to update any forward-looking statement or other information
in these materials.
TABLE A
INTUIT INC.
GAAP CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended Six Months
Ended
January 31, 2018
January 31, 2017 January 31,
2018 January 31, 2017 Net revenue:
Product $ 316 $ 299 $ 635 $ 596 Service and other 849 717
1,416 1,198 Total net revenue 1,165
1,016 2,051 1,794 Costs and expenses: Cost of
revenue: Cost of product revenue 36 37 60 66 Cost of service and
other revenue 207 166 377 317 Amortization of acquired technology 3
3 5 6 Selling and marketing 469 405 777 688 Research and
development 286 243 579 489 General and administrative 143 140 288
266 Amortization of other acquired intangible assets 1 —
2 1 Total costs and expenses [A] 1,145
994 2,088 1,833 Operating income (loss) 20 22
(37 ) (39 ) Interest expense (6 ) (11 ) (11 ) (20 ) Interest and
other income (expense), net 5 (1 ) 8 (3 ) Income
(loss) before income taxes 19 10 (40 ) (62 ) Income tax provision
(benefit) [B] 40 (3 ) (2 ) (45 ) Net income (loss) $ (21 ) $
13 $ (38 ) $ (17 ) Basic net income (loss) per share
$ (0.08 ) $ 0.05 $ (0.15 ) $ (0.07 ) Shares used in basic
per share calculations 256 257 256 257
Diluted net income (loss) per share $ (0.08 ) $ 0.05
$ (0.15 ) $ (0.07 ) Shares used in diluted per share calculations
256 260 256 257 Cash dividends
declared per common share $ 0.39 $ 0.34 $ 0.78
$ 0.68
See accompanying Notes.
INTUIT INC.
NOTES TO TABLE A
[A]
The following table summarizes the total
share-based compensation expense that we recorded in operating
income (loss) for the periods shown.
Three Months Ended Six Months
Ended (in millions)
January 31,2018
January 31,2017
January 31,2018
January 31,2017
Cost of revenue $ 13 $ 2 $ 16 $ 4 Selling and marketing 25 22 50 47
Research and development 30 29 69 65 General and administrative 26
28 56 54 Total share-based compensation
expense $ 94 $ 81 $ 191 $ 170 [B]
We compute our provision for or benefit from income taxes by
applying the estimated annual effective tax rate to income or loss
from recurring operations and adding the effects of any discrete
income tax items specific to the period.
Tax Cuts and Jobs
Act
The Tax Cuts and Jobs Act (Tax Act) was
enacted on December 22, 2017 and reduces the U.S. statutory federal
corporate tax rate from 35% to 21%. The effective date of the tax
rate change is January 1, 2018. With our fiscal year ending July
31, the change will result in a blended lower U.S. statutory
federal rate of 26.9% for fiscal year 2018. As a result, we
adjusted our annual effective tax rate for the three and six months
ended January 31, 2018, as well as adjusted our U.S. net deferred
tax asset balance at the lower rates.
At January 31, 2018, we have not completed our accounting
for the tax effects of enactment of the Tax Act; however, we have
made a reasonable estimate of the effects on our existing deferred
tax balances. For deferred tax balances we recognized a provisional
charge of $39 million, which is included as a component of our
income tax provision for the three and six months ended January 31,
2018.
Current quarter
and year to date income tax and effective tax rates
For the three and six months ended January 31, 2018, we recognized
excess tax benefits on share-based compensation of $8 million and
$33 million in our provision for income taxes. These amounts
include the impact of the Tax Act’s U.S. statutory federal
corporate tax rate reduction on the benefit that we recorded in our
first quarter. For the three and six months ended January 31, 2017,
we recognized excess tax benefits on share-based compensation of $7
million and $26 million in our provision for income taxes.
We recorded a tax provision of $40 million
on income of $19 million for the three months ended January 31,
2018. As a result of the lower enacted tax rate, the tax provision
for the three months ended January 31, 2018 includes a charge of $4
million to reduce the tax benefit recorded in the first quarter of
fiscal 2018 which was calculated at the higher effective tax rate.
We recorded a tax benefit of $2 million on a loss of $40 million
for the six months ended January 31, 2018. Excluding the $4 million
charge and the discrete tax items primarily related to the
re-measurement of our net deferred tax asset balance and the
share-based compensation tax benefits mentioned above, our
effective tax rate for the three and six months ended January 31,
2018 was 27% and did not differ significantly from the federal
statutory rate of 26.9%.
We recorded a tax benefit of $3 million on income of $10
million for the three months ended January 31, 2017. Our effective
tax rate for the six months ended January 31, 2017 was
approximately 72%. Excluding discrete tax items primarily related
to share-based compensation tax benefits, our effective tax rate
for both periods was 34% and did not differ significantly from the
federal statutory rate of 35%.
TABLE B1
INTUIT INC.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL
MEASURES
(In millions, except per share
amounts)
(Unaudited)
Fiscal 2018 Q1 Q2
Q3 Q4 Year to Date GAAP
operating income (loss) $ (57 ) $ 20 $ — $ — $ (37 )
Amortization of acquired technology 2 3 — — 5 Amortization of other
acquired intangible assets 1 1 — — 2 Professional fees for business
combinations — 2 — — 2 Share-based compensation expense 97
94 — — 191
Non-GAAP operating income
(loss) $ 43 $ 120 $ — $ — $ 163
GAAP net income (loss) $ (17 ) $ (21 ) $ — $ —
$ (38 ) Amortization of acquired technology 2 3 — — 5 Amortization
of other acquired intangible assets 1 1 — — 2 Professional fees for
business combinations — 2 — — 2 Share-based compensation expense 97
94 — — 191 Net (gain) loss on debt securities and other investments
2 2 — — 4 Tax Act [A] — 39 — — 39 Other income tax effects and
adjustments [A] (56 ) (29 ) — — (85 )
Non-GAAP net
income (loss) $ 29 $ 91 $ — $ — $
120
GAAP diluted net income (loss) per share $
(0.07 ) $ (0.08 ) $ — $ — $ (0.15 ) Amortization of acquired
technology 0.01 0.01 — — 0.02 Amortization of other acquired
intangible assets — — — — 0.01 Professional fees for business
combinations — 0.01 — — 0.01 Share-based compensation expense 0.38
0.36 — — 0.73 Net (gain) loss on debt securities and other
investments 0.01 0.01 — — 0.02 Tax Act [A] — 0.15 — — 0.15 Other
income tax effects and adjustments [A] (0.22 ) (0.11 ) — —
(0.33 )
Non-GAAP diluted net income (loss) per share
$ 0.11 $ 0.35 $ — $ — $ 0.46
Shares used in GAAP diluted per share calculation 256
256 — — 256
Shares
used in non-GAAP diluted per share calculation 259 260
— — 260 [A]
As discussed in “About Non-GAAP Financial
Measures - Income Tax Effects and Adjustments” following Table E,
our non-GAAP tax rate eliminates the effects of non-recurring and
period specific items. The Tax Act adjustment relates to the
provisional discrete tax expense for the re-measurement of net
deferred tax asset balance at the enacted lower tax rates. Other
adjustments consist primarily of the tax adjustments related to the
non-GAAP pre-tax adjustments and the excess tax benefits on
share-based compensation.
See “About Non-GAAP Financial Measures” immediately following
Table E for information on these measures, the items excluded from
the most directly comparable GAAP measures in arriving at non-GAAP
financial measures, and the reasons management uses each measure
and excludes the specified amounts in arriving at each non-GAAP
financial measure.
TABLE B2
INTUIT INC.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL
MEASURES
(In millions, except per share
amounts)
(Unaudited)
Fiscal 2017 Q1 Q2
Q3 Q4 Full Year GAAP
operating income (loss) $ (61 ) $ 22 $ 1,444 $ (10 ) $ 1,395
Amortization of acquired technology 3 3 3 3 12 Amortization of
other acquired intangible assets 1 — 1 — 2 Share-based compensation
expense 89 81 71 85 326
Non-GAAP operating income (loss) $ 32 $ 106 $
1,519 $ 78 $ 1,735
GAAP net income
(loss) $ (30 ) $ 13 $ 964 $ 24 $ 971 Amortization of acquired
technology 3 3 3 3 12 Amortization of other acquired intangible
assets 1 — 1 — 2 Share-based compensation expense 89 81 71 85 326
Net (gain) loss on debt securities and other investments 1 6 1 1 9
Income tax effects and adjustments [A] (49 ) (36 ) (25 ) (60 ) (170
)
Non-GAAP net income (loss) $ 15 $ 67 $ 1,015
$ 53 $ 1,150
GAAP diluted net income
(loss) per share $ (0.12 ) $ 0.05 $ 3.70 $ 0.09 $ 3.72
Amortization of acquired technology 0.01 0.01 0.01 0.01 0.05
Amortization of other acquired intangible assets 0.01 — 0.01 — 0.01
Share-based compensation expense 0.34 0.31 0.27 0.33 1.25 Net
(gain) loss on debt securities and other investments 0.01 0.03 0.01
— 0.03 Income tax effects and adjustments [A] (0.19 ) (0.14 ) (0.10
) (0.23 ) (0.65 )
Non-GAAP diluted net income (loss) per
share $ 0.06 $ 0.26 $ 3.90 $ 0.20 $
4.41
Shares used in GAAP diluted per share
calculation 258 260 260 261 261
Shares used in non-GAAP diluted per share
calculation 261 260 260 261 261
[A]
As discussed in “About Non-GAAP Financial
Measures - Income Tax Effects and Adjustments” following Table E,
our long-term non-GAAP tax rate eliminates the effects of
non-recurring and period specific items. Consequently, our non-GAAP
results have been adjusted to exclude the excess tax benefits
related to share-based compensation. See note B to Table A for more
information.
See “About Non-GAAP Financial Measures” immediately following
Table E for information on these measures, the items excluded from
the most directly comparable GAAP measures in arriving at non-GAAP
financial measures, and the reasons management uses each measure
and excludes the specified amounts in arriving at each non-GAAP
financial measure.
TABLE C
INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
January 31,2018
July 31,2017
ASSETS Current assets: Cash and cash equivalents $ 478 $ 529
Investments 248 248 Accounts receivable, net 532 103 Income taxes
receivable 33 63 Prepaid expenses and other current assets 189
100 Current assets before funds held for customers 1,480
1,043 Funds held for customers 422 372 Total current assets
1,902 1,415 Long-term investments 28 31 Property and
equipment, net 984 1,030 Goodwill 1,615 1,295 Acquired intangible
assets, net 75 22 Long-term deferred income taxes 132 132 Other
assets 162 143 Total assets $ 4,898 $ 4,068
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Short-term debt $ 690 $ 50 Accounts payable 343 157 Accrued
compensation and related liabilities 206 300 Deferred revenue 1,120
887 Other current liabilities 251 178 Current liabilities
before customer fund deposits 2,610 1,572 Customer fund deposits
422 372 Total current liabilities 3,032 1,944
Long-term debt 413 438 Long-term deferred revenue 170 202 Other
long-term obligations 126 130 Total liabilities 3,741
2,714 Stockholders’ equity 1,157 1,354 Total
liabilities and stockholders’ equity $ 4,898 $ 4,068
TABLE D
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In millions)
(Unaudited)
Six Months Ended
January 31,2018
January 31,2017
Cash flows from operating activities: Net loss $ (38 ) $ (17
) Adjustments to reconcile net loss to net cash provided by
operating activities: Depreciation 117 101 Amortization of acquired
intangible assets 10 11 Share-based compensation expense 191 170
Deferred income taxes (1 ) (31 ) Other 7 7 Total
adjustments 324 258 Changes in operating assets and
liabilities: Accounts receivable (428 ) (413 ) Income taxes
receivable 31 (21 ) Prepaid expenses and other assets (66 ) (58 )
Accounts payable 176 93 Accrued compensation and related
liabilities (89 ) (83 ) Deferred revenue 196 250 Other liabilities
68 78 Total changes in operating assets and
liabilities (112 ) (154 )
Net cash provided by operating
activities 174 87 Cash flows
from investing activities: Purchases of corporate and customer
fund investments (137 ) (201 ) Sales of corporate and customer fund
investments 68 316 Maturities of corporate and customer fund
investments 66 79 Net change in cash and cash equivalents held to
satisfy customer fund obligations (49 ) (20 ) Net change in
customer fund deposits 49 20 Purchases of property and equipment
(77 ) (132 ) Acquisitions of businesses, net of cash acquired (362
) — Other (44 ) (19 )
Net cash provided by (used in) investing
activities (486 ) 43 Cash flows
from financing activities: Proceeds from borrowings under
revolving credit facility 800 150 Repayments on borrowings under
revolving credit facilities (160 ) — Repayment of term loan (25 ) —
Proceeds from issuance of stock under employee stock plans 150 86
Payments for employee taxes withheld upon vesting of restricted
stock units (49 ) (51 ) Cash paid for purchases of treasury stock
(253 ) (383 ) Dividends and dividend rights paid (205 ) (177 )
Net cash provided by (used in) financing activities
258 (375 ) Effect of exchange rates on
cash and cash equivalents 3 (1 )
Net decrease in cash and
cash equivalents (51 ) (246 ) Cash
and cash equivalents at beginning of period 529 638
Cash and cash equivalents at end of period $
478 $ 392
TABLE E
INTUIT INC.
RECONCILIATION OF FORWARD-LOOKING GUIDANCE
FOR NON-GAAP FINANCIAL MEASURES
TO PROJECTED GAAP REVENUE, OPERATING
INCOME, AND EPS
(In millions, except per share
amounts)
(Unaudited)
Forward-Looking Guidance
GAAPRange of Estimate
Non-GAAPRange of
Estimate
From To Adjmts From
To Three Months Ending April 30, 2018 Revenue $ 2,785
$ 2,835 $ — $
2,785
$ 2,835 Operating income $ 1,535 $ 1,555 $ 100 [a] $ 1,635 $ 1,655
Diluted earnings per share $ 4.32 $ 4.37 $ 0.25 [b] $ 4.57 $ 4.62
Twelve Months Ending July 31, 2018 Revenue $ 5,640 $
5,740 $ — $ 5,640 $ 5,740 Operating income $ 1,485 $ 1,535 $ 400
[c] $ 1,885 $ 1,935 Diluted earnings per share $ 4.20 $ 4.30 $ 1.10
[d] $ 5.30 $ 5.40
See “About Non-GAAP Financial Measures” immediately following
this Table E for information on these measures, the items excluded
from the most directly comparable GAAP measures in arriving at
non-GAAP financial measures, and the reasons management uses each
measure and excludes the specified amounts in arriving at each
non-GAAP financial measure.
[a] Reflects estimated adjustments for share-based
compensation expense of approximately $94 million; amortization of
acquired technology of approximately $5 million; and amortization
of other acquired intangible assets of approximately $1 million.
[b] Reflects the estimated adjustments in item [a], income
taxes related to these adjustments, and other income tax effects
related to the use of the non-GAAP tax rate. [c]
Reflects estimated adjustments for
share-based compensation expense of approximately $379 million;
amortization of acquired technology of approximately $15 million;
amortization of other acquired intangible assets of approximately
$4 million; and professional fees for business combinations of
approximately $2 million.
[d]
Reflects the estimated adjustments in item
[c], income taxes related to these adjustments, and other income
tax effects related to the use of the non-GAAP tax rate. Includes
provisional tax charge for the re-measurement of our net deferred
tax asset balance at the enacted lower tax rates.
INTUIT INC.
ABOUT NON-GAAP FINANCIAL MEASURES
The accompanying press release dated February 22, 2018
contains non-GAAP financial measures. Table B1, Table B2 and Table
E reconcile the non-GAAP financial measures in that press release
to the most directly comparable financial measures prepared in
accordance with Generally Accepted Accounting Principles (GAAP).
These non-GAAP financial measures include non-GAAP operating income
(loss), non-GAAP net income (loss) and non-GAAP net income (loss)
per share.
Non-GAAP financial measures should not be considered as a
substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP. These non-GAAP financial measures
do not reflect a comprehensive system of accounting, differ from
GAAP measures with the same names, and may differ from non-GAAP
financial measures with the same or similar names that are used by
other companies.
We compute non-GAAP financial measures using the same consistent
method from quarter to quarter and year to year. We may consider
whether other significant items that arise in the future should be
excluded from our non-GAAP financial measures.
We exclude the following items from all of our non-GAAP
financial measures:
- Share-based compensation expense
- Amortization of acquired
technology
- Amortization of other acquired
intangible assets
- Goodwill and intangible asset
impairment charges
- Gains and losses on disposals of
businesses and long-lived assets
- Professional fees for business
combinations
We also exclude the following items from non-GAAP net income
(loss) and diluted net income (loss) per share:
- Gains and losses on debt and equity
securities and other investments
- Income tax effects and adjustments
- Discontinued operations
We believe that these non-GAAP financial measures provide
meaningful supplemental information regarding Intuit’s operating
results primarily because they exclude amounts that we do not
consider part of ongoing operating results when planning and
forecasting and when assessing the performance of the organization,
our individual operating segments, or our senior management.
Segment managers are not held accountable for share-based
compensation expense, amortization, or the other excluded items
and, accordingly, we exclude these amounts from our measures of
segment performance. We believe that our non-GAAP financial
measures also facilitate the comparison by management and investors
of results for current periods and guidance for future periods with
results for past periods.
The following are descriptions of the items we exclude from our
non-GAAP financial measures.
Share-based compensation expenses. These consist of non-cash
expenses for stock options, restricted stock units, and our
Employee Stock Purchase Plan. When considering the impact of equity
awards, we place greater emphasis on overall shareholder dilution
rather than the accounting charges associated with those
awards.
Amortization of acquired technology and amortization of other
acquired intangible assets. When we acquire an entity, we are
required by GAAP to record the fair values of the intangible assets
of the entity and amortize them over their useful lives.
Amortization of acquired technology in cost of revenue includes
amortization of software and other technology assets of acquired
entities. Amortization of other acquired intangible assets in
operating expenses includes amortization of assets such as customer
lists, covenants not to compete, and trade names.
Goodwill and intangible asset impairment charges. We exclude
from our non-GAAP financial measures non-cash charges to adjust the
carrying value of goodwill and other acquired intangible assets to
their estimated fair values.
Gains and losses on disposals of businesses and long-lived
assets. We exclude from our non-GAAP financial measures gains and
losses on disposals of businesses and long-lived assets because
they are unrelated to our ongoing business operating results.
Professional fees for business combinations. We exclude from our
non-GAAP financial measures the professional fees we incur to
complete business combinations. These include investment banking,
legal, and accounting fees.
Gains and losses on debt and equity securities and other
investments. We exclude from our non-GAAP financial measures gains
and losses that we record when we sell or impair available-for-sale
debt and equity securities and other investments.
Income tax effects and adjustments. In our fiscal 2017 and the
first quarter of our fiscal 2018 we used a long-term non-GAAP tax
rate for evaluating operating results and for planning,
forecasting, and analyzing future periods. This long-term non-GAAP
tax rate excluded the income tax effects of the non-GAAP pre-tax
adjustments described above, and eliminates the effects of
non-recurring and period specific items which can vary in size and
frequency. Based on our long-term projections at that time we used
a long-term non-GAAP tax rate of 33%. This rate was consistent with
the average of our normalized fiscal year tax rate over a four year
period that included the past three fiscal years plus the current
fiscal year forecast.
In the second quarter of our fiscal 2018, we revised our
estimated annual effective non-GAAP tax rate to reflect a change in
the U.S. federal statutory rate, as a result of the 2017 Tax Cuts
and Jobs Act (the “Tax Act”). The federal statutory rate change, to
21%, is effective January 1, 2018, and therefore, the change will
result in a blended U.S. federal statutory rate of 26.9% for our
fiscal year 2018. Effective in the second quarter of fiscal 2018,
we have applied an effective non-GAAP tax rate of 27% to our year
to date pre-tax income, after the elimination of the effects of the
non-GAAP adjustments to our operating results described above.
Because of the transitional impact of the Tax Act provisions, the
fiscal 2018 non-GAAP tax rate is based on our current year forecast
only, without reference to long-term forecasts. This non-GAAP tax
rate excludes the income tax effects of the non-GAAP pre-tax
adjustments described above, and eliminates the effects of
non-recurring and period specific items.
We will fully benefit from the U.S. federal statutory rate
change in our fiscal year 2019. We expect to use the long-term
non-GAAP tax rate for fiscal 2019, once the Tax Act’s provisions
are in full effect and consistent for the periods included in the
long-term forecast.
We evaluate the non-GAAP tax rate on an annual basis and
whenever any significant events occur which may materially affect
this rate. This non-GAAP tax rate could be subject to change for
various reasons including significant changes in our geographic
earnings mix or fundamental tax law changes in major jurisdictions
in which we operate.
Operating results and gains and losses on the sale of
discontinued operations. From time to time, we sell or otherwise
dispose of selected operations as we adjust our portfolio of
businesses to meet our strategic goals. In accordance with GAAP, we
segregate the operating results of discontinued operations as well
as gains and losses on the sale of these discontinued operations
from continuing operations on our GAAP statements of operations but
continue to include them in GAAP net income or loss and net income
or loss per share. We exclude these amounts from our non-GAAP
financial measures.
The reconciliations of the forward-looking non-GAAP financial
measures to the most directly comparable GAAP financial measures in
Table E include all information reasonably available to Intuit at
the date of this press release. These tables include adjustments
that we can reasonably predict. Events that could cause the
reconciliation to change include acquisitions and divestitures of
businesses, goodwill and other asset impairments, sales of
available-for-sale debt securities and other investments, and
disposals of businesses and long-lived assets.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180222006379/en/
Intuit Inc.InvestorsKim Watkins,
650-944-3324kim_watkins@intuit.comorMediaDiane Carlini,
650-944-6251diane_carlini@intuit.com
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