Company Reiterates Full-year
Guidance
Intuit Inc. (NASDAQ:INTU) announced financial results for the
second quarter of fiscal 2017, which ended Jan. 31.
“Our second fiscal quarter results reflect strong momentum
across the business,” said Brad Smith, Intuit’s chairman and chief
executive officer.
“We continue to be pleased with how our long-term strategy in
Small Business is playing out, driving momentum for the QuickBooks
Online ecosystem. Our Small Business results are bolstered by
product and platform innovation, improved product market fit
outside of the U.S., and further expansion of our addressable
market by targeting the self-employed segment.
“We are also in the midst of another highly competitive tax
season. While the industry came out of the gates a bit slow, we are
confident we have a strong and winning hand that combines
innovation across the end-to-end experience, an effective marketing
campaign, and great value for taxpayers.
“Experience tells us that every tax season is different, but
there’s one thing we know for certain about the tax business:
everyone needs to file by the April 18 deadline.” Smith said.
Financial Highlights
For the second quarter, Intuit:
- Reported revenue of $1.016 billion, up
10 percent.
- Grew total QuickBooks Online
subscribers 49 percent, to more than 1.87 million subscribers.
- Grew QuickBooks Online subscribers
outside the U.S. by 61 percent, to approximately 370,000
subscribers, with growth in the U.K., Australia and Canada.
- Gained traction with QuickBooks
Self-Employed customers growing to roughly 180,000 QuickBooks
Online subscribers, up from 110,000 last quarter and 50,000 a year
ago.
- Reported TurboTax e-filed returns
declined 10 percent vs. prior year, which the company also provided
today in its first tax unit update press release.
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 Q2
FY 17
Q2
FY 16
Change Q2
FY 17
Q2
FY 16
Change Revenue $1,016 $923
10% $1,016 $923 10%
Operating
Income $22 $42 (48)% $106
$114 (7)%
Earnings Per Share $0.05
$0.09 (44)% $0.26 $0.25 4%
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. 8, the company announced that revenue and operating
income, and diluted earnings per share from its second fiscal
quarter were lower than expected due to the tax season forming more
slowly than usual.
Business Segment Results
Small Business
- Total Small Business segment revenue
increased 12 percent.
- Small Business online ecosystem revenue
growth accelerated to 30 percent, up from 26 percent in the first
quarter of fiscal 2017.
- QuickBooks Self-Employed is now
available in the U.S., Canada, the U.K., and Australia.
- Intuit’s QuickBooks Connect event is
moving into international markets; debuting in the U.K. in March,
with Australia and Canada to follow.
- There are 1,421 apps on the QuickBooks
Online platform; 453 are published in the QuickBooks Apps
Store.
Consumer Tax and
ProConnect
- Consumer Tax revenue grew to $285
million in the quarter.
- Intuit introduced TurboTax
Self-Employed this tax season. This offering includes a 12-month
subscription to the QuickBooks Self-Employed accounting solution,
connecting the market-leading QuickBooks platform to TurboTax.
- ProConnect revenue was $99 million in
the quarter.
Capital Allocation Summary
In the second quarter the company:
- Repurchased 1.7 million shares for $198
million with $2.0 billion remaining on the authorization.
- Received board approval for a $0.34 per
share dividend for the third quarter of fiscal 2017, payable on
April 18.
Forward-looking Guidance
“Our tax performance as compared to Internal Revenue Service
data through February gives us the confidence to maintain our
expectations for the business and for the company,” said Neil
Williams, Intuit’s chief financial officer. “With small business
product improvements and innovations coming to market we are on
track to meet our QuickBooks Online subscriber growth expectations
as well.”
Intuit announced guidance for the third quarter of fiscal year
2017, which ends April 30. The company expects:
- Revenue of $2.50 billion to $2.55
billion, growth of 9 to 11 percent.
- GAAP operating income of $1.42 billion
to $1.44 billion.
- Non-GAAP operating income of $1.50
billion to $1.52 billion.
- GAAP diluted earnings per share of
$3.61 to $3.66.
- Non-GAAP diluted earnings per share of
$3.85 to $3.90.
- QuickBooks Online subscribers of 2.0
million.
Intuit reiterated guidance for full fiscal year 2017. The
company expects:
- Revenue of $5 billion to $5.1 billion,
growth of 7 to 9 percent.
- GAAP operating income of $1.33 billion
to $1.38 billion, growth of 7 to 11 percent.
- Non-GAAP operating income of $1.675
billion to $1.725 billion, growth of 8 to 11 percent.
- GAAP diluted earnings per share of
$3.47 to $3.57, versus $3.69 in fiscal 2016. Fiscal 2016 earnings
per share includes $0.65 net income per share from discontinued
operations.
- Non-GAAP diluted earnings per share of
$4.30 to $4.40, growth of 14 to 16 percent.
- QuickBooks Online subscribers of 2.2
million.
Tax Season Unit Updates
The company will provide a final tax unit update in late April
after the tax season ends.
Conference Call Details
Intuit executives will discuss the financial results on a
conference call at 1:30 p.m. Pacific time today. 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 Investor Relations
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 62883620.
The audio webcast will remain available on Intuit’s website for
one week after the conference call.
About Intuit
Intuit Inc. creates business and financial management solutions
that simplify the business of life for small businesses, consumers
and accounting professionals.
Its flagship products and services include QuickBooks® and
TurboTax®, which make it easier to manage small businesses
and tax preparation and filing. Mint.com provides a fresh,
easy and intelligent way for people to manage their money, while
Intuit's ProConnect brand portfolio includes ProConnect Tax
Online, ProSeries® and Lacerte®, the company's leading
tax preparation offerings for professional accountants.
Founded in 1983, Intuit had revenue of $4.7 billion in its
fiscal year 2016. The company has approximately 7,900 employees
with major offices in the United States, Canada, the United
Kingdom, India and other locations. More information can be found
at www.intuit.com.
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; the size of the market for
tax preparation software and the timing of when individuals will
file their tax returns; forecasts of total tax season results based
on preliminary IRS and other internal and external data points that
may, in certain cases, be based on small sample sizes; Intuit’s
prospects for the business in fiscal 2017 and beyond; expectations
regarding Intuit’s growth outside the US; 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 impact of the early adoption of the new
accounting standards update on our financial results; expectations
regarding the amount and timing of any future dividends or share
repurchases; 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; 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; availability of our products and
services could be impacted by business interruption or failure of
our information technology and communication systems; any problems
with implementing upgrades to our customer facing applications and
supporting information technology infrastructure; any failure to
properly use and protect personal customer information and data;
our ability to develop, manage and maintain critical third-party
business relationships; increases in or changes to government
regulation of our businesses; 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; any
significant product accuracy or quality problems or delays; any
lost revenue opportunities or cannibalization of our traditional
paid franchise due to our participation in the Free File Alliance;
the global economic environment may impact consumer and small
business spending, financial institutions and tax filings; changes
in the total number of tax filings that are submitted to government
agencies due to economic conditions or otherwise; the seasonal and
unpredictable nature of our revenue; our ability to attract, retain
and develop highly skilled employees; increased risks associated
with international operations; unanticipated changes in our income
tax rates; changes in the amounts or frequency of share repurchases
or dividends; we may issue additional shares in an acquisition
causing our number of outstanding shares to grow; our inability to
adequately protect our intellectual property rights may weaken our
competitive position; disruptions, expenses and risks associated
with our acquisitions and divestitures; amortization of acquired
intangible assets and impairment charges; our use of significant
amounts of debt to finance acquisitions or other activities; and
the cost of, and potential adverse results in, litigation involving
intellectual property, antitrust, shareholder and other matters.
More details about the risks that may impact our business are
included in our Form 10-K for fiscal 2016 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 23, 2017, 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 31,2017
January 31,2016
January 31,2017
January 31,2016
Net revenue: Product $ 299 $ 264 $ 596 $ 535 Service and other 717
659 1,198 1,101 Total net revenue 1,016
923 1,794 1,636 Costs and expenses:
Cost of revenue: Cost of product revenue 37 40 66 69 Cost of
service and other revenue 166 153 317 284 Amortization of acquired
technology 3 6 6 12 Selling and marketing 405 356 688 600 Research
and development 243 205 489 418 General and administrative 140 120
266 237 Amortization of other acquired intangible assets — 1
1 3 Total costs and expenses [A] 994
881 1,833 1,623 Operating income (loss) from
continuing operations 22 42 (39 ) 13 Interest expense (11 ) (9 )
(20 ) (16 ) Interest and other income (expense), net (1 ) (5 ) (3 )
(9 ) Income (loss) before income taxes 10 28 (62 ) (12 ) Income tax
provision (benefit) [B] (3 ) (1 ) (45 ) (10 ) Net income (loss)
from continuing operations 13 29 (17 ) (2 ) Net loss from
discontinued operations [C] — (5 ) — (5 ) Net income
(loss) $ 13 $ 24 $ (17 ) $ (7 ) Basic net
income (loss) per share from continuing operations $ 0.05 $ 0.11 $
(0.07 ) $ (0.01 ) Basic net loss per share from discontinued
operations — (0.02 ) — (0.02 ) Basic net income
(loss) per share $ 0.05 $ 0.09 $ (0.07 ) $ (0.03 )
Shares used in basic per share calculations 257 263
257 267 Diluted net income (loss) per share
from continuing operations $ 0.05 $ 0.11 $ (0.07 ) $ (0.01 )
Diluted net loss per share from discontinued operations —
(0.02 ) — (0.02 ) Diluted net income (loss) per share $ 0.05
$ 0.09 $ (0.07 ) $ (0.03 ) Shares used in diluted per
share calculations 260 266 257 267
Cash dividends declared per common share $ 0.34 $
0.30 $ 0.68 $ 0.60
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) from continuing operations for the periods shown.
Three Months
Ended Six Months Ended (in millions)
January 31,2017
January 31,2016
January 31,2017
January 31,2016
Cost of revenue $ 2 $ 2 $ 4 $ 4 Selling and marketing 22 18 47 37
Research and development 29 21 65 42 General and administrative 28
24 54 49 Total share-based compensation
expense $ 81 $ 65 $ 170 $ 132
[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.In
December 2015 the Consolidated Appropriations Act, 2016 was signed
into law. The Act includes a permanent reinstatement of the federal
research and experimentation credit that was retroactive to January
1, 2015. We recorded a discrete tax benefit of approximately $12
million for the retroactive effect during the second quarter of
fiscal 2016.During the first quarter of fiscal 2017, we elected to
early adopt ASU 2016-09, “Compensation—Stock Compensation (Topic
718): Improvements to Employee Share-Based Payment Accounting.” As
required by ASU 2016-09, starting in fiscal 2017 we reflect excess
tax benefits recognized on stock-based compensation expense in the
condensed consolidated statements of operations as a component of
the provision for income taxes on a prospective basis.We recorded a
$3 million tax benefit 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 resulting from the adoption of ASU 2016-09, our
effective tax rate for both periods was 34% and did not differ
significantly from the federal statutory rate of 35%.We recorded a
$1 million tax benefit on income of $28 million for the three
months ended January 31, 2016. Our effective tax rate for the six
months ended January 31, 2016 was approximately 87%. Excluding
discrete tax items primarily related to the permanent reinstatement
of the federal research and experimentation credit, as well as
including the effects of losses in certain jurisdictions where we
do not recognize a tax benefit, our effective tax rate for those
periods was approximately 35% and did not differ significantly from
the federal statutory rate of 35%.
[C]
In the third quarter of fiscal 2016 we
completed the sales of our Demandforce, QuickBase, and Quicken
businesses for $463 million in cash. We recorded a pre-tax gain of
$354 million and a net gain of $173 million on the disposal of
these three businesses in fiscal 2016.We classified our
Demandforce, QuickBase, and Quicken businesses as discontinued
operations and have therefore segregated their operating results
from continuing operations in our statements of operations for all
periods presented. Net revenue from discontinued operations was $56
million and $115 million for the three and six months ended January
31, 2016. Net income from discontinued operations was not
significant for the three or six months ended January 31, 2016.
Because the cash flows of these businesses were not material for
any period presented, we have not segregated them on our statements
of cash flows.
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 2017 Q1 Q2
Q3 Q4 Year to Date GAAP
operating income (loss) from continuing operations $ (61 ) $ 22
$ — $ — $ (39 ) Amortization of acquired technology 3 3 — — 6
Amortization of other acquired intangible assets 1 — — — 1
Share-based compensation expense 89 81 — —
170
Non-GAAP operating income (loss) from
continuing operations
$ 32 $ 106 $ — $ — $ 138
GAAP net income (loss) $ (30 ) $ 13 $ — $ — $ (17 )
Amortization of acquired technology 3 3 — — 6 Amortization of other
acquired intangible assets 1 — — — 1 Share-based compensation
expense 89 81 — — 170 Net (gain) loss on debt securities and other
investments 1 6 — — 7 Income tax effects and adjustments [A] (49 )
(36 ) — — (85 )
Non-GAAP net income (loss)
$ 15 $ 67 $ — $ — $ 82
GAAP diluted net income (loss) per share $ (0.12 ) $ 0.05 $
— $ — $ (0.07 ) Amortization of acquired technology 0.01 0.01 — —
0.03 Amortization of other acquired intangible assets 0.01 — — — —
Share-based compensation expense 0.34 0.31 — — 0.65 Net (gain) loss
on debt securities and other investments 0.01 0.03 — — 0.03 Income
tax effects and adjustments [A] (0.19 ) (0.14 ) — —
(0.32 )
Non-GAAP diluted net income (loss) per share $ 0.06
$ 0.26 $ — $ — $ 0.32
Shares used in GAAP diluted per share calculation 258
260 — — 257
Shares used in
non-GAAP diluted per share calculation 261 260 —
— 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 discrete GAAP tax
benefits that we recorded related to the adoption of ASU 2016-09.
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 B2
INTUIT INC.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL
MEASURES
(In millions, except per share
amounts)
(Unaudited)
Fiscal 2016 Q1 Q2
Q3 Q4 Full Year GAAP
operating income (loss) from continuing operations $ (29 ) $ 42
$ 1,285 $ (56 ) $ 1,242 Amortization of acquired technology 6 6 5 5
22 Amortization of other acquired intangible assets 2 1 3 6 12
(Gain) loss on sale of long-lived assets — — 1 — 1 Share-based
compensation expense 67 65 65 81 278
Non-GAAP operating income (loss) from continuing
operations $ 46 $ 114 $ 1,359 $ 36
$ 1,555
GAAP net income (loss) $ (31 ) $ 24 $
1,026 $ (40 ) $ 979 Amortization of acquired technology 6 6 5 5 22
Amortization of other acquired intangible assets 2 1 3 6 12 (Gain)
loss on sale of long-lived assets — — 1 — 1 Share-based
compensation expense 67 65 65 81 278 Net (gain) loss on debt
securities and other investments 1 1 2 1 5 Income tax effects and
adjustments [A] (21 ) (35 ) (31 ) (33 ) (120 ) Net (income) loss
from discontinued operations — 5 (178 ) — (173
)
Non-GAAP net income (loss) $ 24 $ 67 $ 893
$ 20 $ 1,004
GAAP diluted net income
(loss) per share $ (0.11 ) $ 0.09 $ 3.94 $ (0.16 ) $ 3.69
Amortization of acquired technology 0.02 0.02 0.02 0.02 0.08
Amortization of other acquired intangible assets 0.01 — 0.01 0.02
0.04 (Gain) loss on sale of long-lived assets — — — — — Share-based
compensation expense 0.25 0.25 0.25 0.32 1.05 Net (gain) loss on
debt securities and other investments — — 0.01 — 0.02 Income tax
effects and adjustments [A] (0.08 ) (0.13 ) (0.12 ) (0.12 ) (0.45 )
Net (income) loss from discontinued operations — 0.02
(0.68 ) — (0.65 )
Non-GAAP diluted net income (loss) per
share $ 0.09 $ 0.25 $ 3.43 $ 0.08 $
3.78
Shares used in GAAP diluted per share
calculation 272 266 260 257 265
Shares used in non-GAAP diluted per share
calculation 275 266 260 260 265
[A]
As discussed in “About Non-GAAP Financial
Measures - Income Tax Effects and Adjustments” following Table E,
our long-term non-GAAP tax rate assumes the federal research and
experimentation credit is continuously in effect and eliminates the
effects of non-recurring and period specific items. Consequently,
our non-GAAP results for the second quarter of fiscal 2016 have
been adjusted to exclude the $12 million discrete GAAP tax benefit
that we recorded for the retroactive reinstatement of the research
and experimentation credit. 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 31,2017
July 31,2016
ASSETS Current assets: Cash and cash equivalents $ 392 $ 638
Investments 245 442 Accounts receivable, net 521 108 Income taxes
receivable 41 20 Prepaid expenses and other current assets 156
102 Current assets before funds held for customers 1,355
1,310 Funds held for customers 324 304 Total current assets
1,679 1,614 Long-term investments 28 28 Property and
equipment, net 1,047 1,031 Goodwill 1,293 1,282 Acquired intangible
assets, net 34 44 Long-term deferred income taxes 172 139 Other
assets 120 112 Total assets $ 4,373 $ 4,250
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Short-term debt $ 687 $ 512 Accounts payable 258 184 Accrued
compensation and related liabilities 204 289 Deferred revenue 1,076
801 Other current liabilities 254 161 Current liabilities
before customer fund deposits 2,479 1,947 Customer fund deposits
324 304 Total current liabilities 2,803 2,251
Long-term debt 463 488 Long-term deferred revenue 178 204 Other
long-term obligations 144 146 Total liabilities 3,588
3,089 Stockholders’ equity 785 1,161 Total
liabilities and stockholders’ equity $ 4,373 $ 4,250
TABLE D
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In millions)
(Unaudited)
Six Months Ended
January 31,2017
January 31,2016
Cash flows from operating activities: Net loss $ (17 ) $ (7
) Adjustments to reconcile net loss to net cash provided by
operating activities: Depreciation 101 94 Amortization of acquired
intangible assets 11 19 Share-based compensation expense 170 137
Deferred income taxes (31 ) (11 ) Tax benefit from share-based
compensation plans — 20 Other 7 10 Total adjustments
258 269 Changes in operating assets and liabilities:
Accounts receivable (413 ) (431 ) Income taxes receivable (21 ) (26
) Prepaid expenses and other assets (58 ) (18 ) Accounts payable 93
103 Accrued compensation and related liabilities (83 ) (100 )
Deferred revenue 250 296 Other liabilities 78 43
Total changes in operating assets and liabilities (154 ) (133 )
Net cash provided by operating activities 87
129 Cash flows from investing activities:
Purchases of corporate and customer fund
investments
(201 ) (181 ) Sales of corporate and customer fund investments 316
942 Maturities of corporate and customer fund investments 79 126
Net change in cash and cash equivalents held to satisfy customer
fund obligations (20 ) (35 ) Net change in customer fund deposits
20 35 Purchases of property and equipment (132 ) (394 ) Other (19 )
—
Net cash provided by investing activities 43
493 Cash flows from financing
activities: Proceeds from borrowings under revolving credit
facilities 150 745 Proceeds from issuance of stock under employee
stock plans 86 85 Payments for employee taxes withheld upon vesting
of restricted stock units (51 ) (29 ) Cash paid for purchases of
treasury stock (383 ) (1,725 ) Dividends and dividend rights paid
(177 ) (161 )
Net cash used in financing activities
(375 ) (1,085 ) Effect of exchange
rates on cash and cash equivalents (1 ) (11 )
Net decrease in
cash and cash equivalents (246 ) (474
) Cash and cash equivalents at beginning of period 638
808
Cash and cash equivalents at end of period
$ 392 $ 334
During the first quarter of fiscal 2017,
we elected to early adopt ASU 2016-09, “Compensation—Stock
Compensation (Topic 718): Improvements to Employee Share-Based
Payment Accounting.” As required by ASU 2016-09, starting in fiscal
2017 we reflect excess tax benefits recognized on stock-based
compensation expense in the condensed consolidated statements of
operations as a component of the provision for income taxes on a
prospective basis. Excess tax benefits are classified as an
operating activity in our condensed consolidated statements of cash
flows and we have applied this provision on a retrospective
basis.
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, 2017 Revenue $ 2,500
$ 2,550 $ — $ 2,500 $ 2,550 Operating income $ 1,420 $ 1,440 $ 80
[a] $ 1,500 $ 1,520 Diluted earnings per share $ 3.61 $ 3.66 $ 0.24
[b] $ 3.85 $ 3.90
Twelve Months Ending July 31, 2017
Revenue $ 5,000 $ 5,100 $ — $ 5,000 $ 5,100 Operating income $
1,330 $ 1,380 $ 345 [c] $ 1,675 $ 1,725 Diluted earnings per share
$ 3.47 $ 3.57 $ 0.83 [d] $ 4.30 $ 4.40 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 $77 million and
amortization of acquired technology of approximately $3
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 long-term non-GAAP tax
rate.
[c]
Reflects estimated adjustments for
share-based compensation expense of approximately $332 million;
amortization of acquired technology of approximately $12 million;
and amortization of other acquired intangible assets of
approximately $1 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 long-term non-GAAP tax
rate.
INTUIT INC.ABOUT NON-GAAP FINANCIAL
MEASURES
The accompanying press release dated February 23, 2017
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
- 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.
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. 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, assumes the federal research
and experimentation credit is continuously in effect, and
eliminates the effects of non-recurring and period specific items
which can vary in size and frequency. Based on our current
long-term projections, we are using a long-term non-GAAP tax rate
of 34% for fiscal 2016 and 33% for fiscal 2017. These rates are
consistent with the average of our normalized fiscal year tax rate
over a four year period that includes the past three fiscal years
plus the current fiscal year forecast. 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 long-term
rate. 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.
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, and sales of
available-for-sale debt securities and other investments.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170223006501/en/
InvestorsIntuit Inc.Kim Watkins,
650-944-3324kim_watkins@intuit.comorMediaIntuit Inc.Diane
Carlini, 650-944-6251diane_carlini@intuit.com
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