Intuit Grows Revenue 12 Percent in Third Quarter; Raises Full Year Guidance

Intuit Inc. (Nasdaq: INTU)
announced financial results for the third quarter of fiscal 2019, which
ended April 30.

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Sasan Goodarzi is chief executive officer (CEO) of Intuit, leads the company on its mission of powering prosperity around the world. (Photo: Business Wire)

“This was a strong quarter across the company,” said Sasan
Goodarzi, Intuit’s CEO. “We are on-track to exceed the guidance we
provided at the beginning of the year.”

“We had a great tax season, growing the Do-It-Yourself (DIY) category
overall as well as our share within the category driven by our
innovation and significantly improved customer experience. We produced
our most robust free offering yet and made significant progress in our
effort to transform the assisted category.

“We continue to see momentum in our Small Business and Self-Employed
Group driven by Online Ecosystem revenue growth. We’re making progress
in solving key customer pain points and becoming the center of small
business growth around the globe,” said Goodarzi.

Financial Highlights

For the third quarter, Intuit:

• Grew total revenue to $3.3 billion, up 12 percent.
• Increased TurboTax Online
  share within the DIY category by an estimated half a point.
• Increased Small Business
  Online Ecosystem revenue by 38 percent.
• Grew Consumer Group revenue by 10 percent to $2.2 billion.
• Grew Small Business and Self-Employed Group revenue 19 percent to $887
  million.

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. Fiscal 2018
amounts have been restated for the adoption of the new accounting
standard on revenue accounting, ASC 606.

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).

Business Segment Results

Small Business and Self-Employed Group

Intuit is focused on becoming the center of small business growth by
helping customers get paid faster, pay their employees and contractors,
access capital and have total confidence that their books are done right.

• QuickBooks Capital has funded $360 million in cumulative loans in the
  last 18 months. At the end of Q3, the notes receivable balance was $96
  million.
• QuickBooks Online subscribers grew 32 percent ending the quarter with
  over 4.2 million subscribers.
• Growth remains strong across multiple geographies, with U.S.
  subscribers up 25 percent to over 3.1 million and international
  subscribers increasing 55 percent to over 1.1 million.
• Within QuickBooks Online, Self-Employed subscribers grew to
  approximately 970,000, up from roughly 680,000 one year ago.
• Approximately 440,000 QuickBooks Self-Employed customers are from the
  TurboTax Self-Employed offering, up from 330,000 last year.

Consumer and Strategic Partner Groups

Intuit is focused on expanding its share in DIY, transforming the
assisted tax preparation category and expanding beyond tax with a
consumer platform. This is in service to helping customers make ends
meet, get their largest tax refund and make smart decisions with their
money.

• TurboTax Online units grew 7 percent this season.
• Customers using TurboTax Live more than tripled year-over-year.
• The Turbo platform has over 14 million registered users, up from 5
  million last year.
• The Strategic Partner Group reported $235 million of professional tax
  revenue for the third quarter, in line with expectations.

Capital Allocation Summary

In the third quarter the company:

• Repurchased $135 million of shares, with $2.8 billion remaining on the
  company’s authorization.
• Received Board approval for a quarterly dividend of $0.47 per share,
  payable July 18, 2019. This represents a 21 percent increase compared
  to last year.

Forward-looking Guidance

“With strong performance and momentum across the company, we are raising
our revenue, operating income and earnings per share guidance for fiscal
year 2019,” said Michelle
Clatterbuck, Intuit’s chief financial officer. “We will continue to
execute against our strategy of becoming an A.I.-driven expert platform
that focuses on our customers’ common set of needs as we pursue our
mission to power prosperity around the world.”

Intuit announced guidance for the fourth quarter of fiscal year 2019,
which ends July 31. The company expects:

• Revenue growth of 10 to 12 percent,
• GAAP loss per share of $0.35 to $0.33, and
• Non-GAAP diluted loss per share of $0.16 to $0.14.

Intuit raised guidance for full fiscal year 2019. The company now
expects:

• Revenue of $6.738 billion to $6.758 billion, growth of 12 percent.
• GAAP operating income of $1.827 billion to $1.837 billion, growth of
  17 to 18 percent.
• Non-GAAP operating income of $2.258 billion to $2.268 billion, growth
  of 10 to 11 percent.
• GAAP diluted earnings per share of $5.72 to $5.74, growth of 12 to 13
  percent.
• Non-GAAP diluted earnings per share of $6.67 to $6.69, growth of 15 to
  16 percent.

The company also updated segment revenue results. For fiscal year 2019,
the company now expects:

• Small Business and Self-Employed Group: growth of 15 percent.
• Consumer Group: growth of 10 percent.
• Strategic Partner Group: growth of 4 percent.

Conference Call Details

Intuit executives will discuss the financial results on a conference
call at 1:30 p.m. Pacific time on May 23. 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 8488901.

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 approximately 50 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 social.

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
2019 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 Intuit’s 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: our ability to compete successfully; our participation in
the Free File Alliance; governmental encroachment in our tax businesses,
our ability to adapt to technological change; our ability to predict
consumer behavior; our ability to protect our intellectual property
rights; our reliance on third party intellectual property; any harm to
our reputation; risks associated with acquisitions and divestitures;
issue of additional shares as consideration or incurring debt to fund an
acquisition; our cybersecurity incidents (including those affecting the
third parties we rely on); customer concerns about privacy and
cybersecurity incidents; fraudulent activities by third parties using
our offerings; failure to process transactions effectively; interruption
or failure of our information technology; ability to maintain critical
third party business relationships; our ability to attract and retain
talent; deficiency in quality, accuracy or timely launch of products;
difficulties in processing or filing customer tax submissions; risks
associated with international operations; changes to public policy, laws
or regulations affecting our businesses; litigation in which we are
involved; seasonal nature of our tax business; changes in tax rates and
tax reform legislation; global economic changes; exposure to credit risk
of the businesses we provide capital to; amortization of acquired
intangible assets and impairment charges; our ability to repay
outstanding debt; our ability to repurchase shares or distribute
dividends; volatility of our stock price; and our ability to
successfully market our offerings. More details about these and other
risks that may impact our business are included in our Form 10-K for
fiscal 2018 and in our other SEC filings. You can locate these reports
through our website at http://investors.intuit.com.
Fiscal 2019 guidance speaks only as of the date it was publicly issued
by Intuit. Other forward-looking statements represent the judgment of
the management of Intuit as of the date of this presentation. We do not
undertake any duty to update any forward-looking statement or other
information in this presentation.

INTUIT INC.

ABOUT NON-GAAP FINANCIAL MEASURES

The accompanying press release dated May 23, 2019 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 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 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
values 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 impair available-for-sale debt and equity securities and
other investments.

Income tax effects and adjustments. We use 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 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 which can vary in size and frequency. The long term rate includes
the effect of the reduction in the U.S. federal statutory rate to 21%,
as a result of the 2017 Tax Cuts and Jobs Act (2017 Tax Act). As the
change in the U.S. federal statutory rate, as a result of the 2017 Tax
Act, occurred in the second quarter of our fiscal 2018, the calculation
of our fiscal 2019 long-term non-GAAP rate references only our current
forecast considerations and is equal to the average of our forecasted
tax rates over our long term forecast period. Based on our current
long-term projections, we are using a long-term non-GAAP tax rate of 23%
for fiscal 2019. This long-term 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. We will evaluate this long-term
non-GAAP tax rate on an annual basis and whenever any significant events
occur which may materially affect this rate.

In the first quarter of 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 eliminated the effects of non-recurring and period-specific items
which can vary in size and frequency. 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. Based on our current long-term projections at that time we
used a long-term non-GAAP tax rate of 33%.

Starting in the second quarter of our fiscal 2018, we revised our
estimated annual non-GAAP tax rate to reflect the change in the U.S.
federal statutory rate, as a result of the 2017 Tax Act. The federal
statutory rate change to 21%, was effective January 1, 2018, and
therefore, the change resulted in a blended U.S. federal statutory rate
of 26.9% for our fiscal 2018. Because of the transitional impact of the
2017 Tax Act provisions, the fiscal 2018 non-GAAP tax rate starting with
the second quarter was based on our current year results only, without
reference to long-term forecasts. This non-GAAP tax rate similarly
excluded the income tax effects of the non-GAAP pre-tax adjustments
described above and eliminated the effects of the non-recurring and
period specific items. The full year fiscal 2018 non-GAAP tax rate was
26.2%.

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.

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