2
Cautions About Forward-Looking StatementsThis presentation includes "forward-looking statements" which are subject to safe harbors created under the U.S. federal securities laws. All statements included in this presentation that address activities, events or developments that Intuit expects, believes or anticipates will or may occur in the future are forward looking statements, including: our expected market and growth opportunities and strategies to grow our business; our expected recurring revenue; our expected future financial results for fiscal 2007 and beyond; and future market trends. 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: product introductions and price competition from our competitors can have unpredictable negative effects on our revenue, profitability and market position; governmental encroachment in our tax businesses or other governmental activities regulating the filing of tax returns could negatively effect our operating results and market position; we may not be able to successfully introduce new products and services to meet our growth and profitability objectives, and current and future products and services may not adequately address customer needs and may not achieve broad market acceptance, which could harm our operating results and financial condition; any failure to maintain reliable and responsive service levels for our offerings could cause us to lose customers and negatively impact our revenues and profitability; any significant product quality problems or delays in our products could harm our revenue, earnings and reputation; our participation in the Free File Alliance may result in lost revenue opportunities and cannibalization of our traditional paid franchise; any failure to properly use and protect personal customer information could harm our revenue, earnings and reputation; our acquisition activities may be disruptive to Intuit and may not result in expected benefits; our use of significant amounts of debt to finance acquisitions or other activities could harm our financial condition and results of operations; our revenue and earnings are highly seasonal and the timing of our revenue between quarters is difficult to predict, which may cause significant quarterly fluctuations in our financial results; predicting tax-related revenues is challenging due to the heavy concentration of activity in a short time period; we have implemented, and are continuing to upgrade, new information systems and any problems with these new systems could interfere with our ability to ship and deliver products and gather information to effectively manage our business; our financial position may not make repurchasing shares advisable or we may issue additional shares in an acquisition causing our number of outstanding shares to grow; and litigation involving intellectual property, antitrust, shareholder and other matters may increase our costs.. More details about these and other risks that may impact our business are included in our Form 10-K for fiscal 2006 and in our other SEC filings, available through our website at www.intuit.com. Forward-looking statements represent the judgment of the management of Intuit as of the date of this presentation, and we do not undertake any duty to update any forward-looking statement or other information in this presentation.
3
Q3 and Year-to-Date Financial Highlights
*These are non-GAAP financial measures. See attached reconciliation of non-GAAP measures to GAAP.
($ Millions except EPS) FY06 % Chg Q307 % Chg FY07 % Chg
Revenue $2,342 15% $1,154 21% $2,685 - $2,700 15%
Operating Income(Non-GAAP)*
$654 18% $623 24% $740 - $751 13% - 15%
Operating Margin(Non-GAAP)*
28% +62 bps 54% +116 bps 27% - 28% NA
Diluted EPS(Non-GAAP)*
$1.21 20% $1.13 27% $1.38 - $1.40 14% - 16%
Guidance
• Strong Q3 for Tax and Small Business
• Full year expected to be another year of double-digit growth for revenue and earnings.
4
Consumer Tax Highlights through Q307
Consumer Tax revenue up 15% year-to-date- Total units up 6%- Web units up 17%
Competed effectively across entire market segment- Free Edition for new filers with simplest needs- Have additional functionality for filers with more
complicated returns
5
Small Business Highlights through Q307
QuickBooks:
Revenue growth of 10% year-to-date
Software unit growth of 8%- 25% growth for Premier- 36% growth for Online Edition
QuickBooks 2007 rated 5/5 stars by PC Magazine: “strongly-recommended upgrade”
Payroll and Payments:
Revenue growth of 14% year-to-date- would be 16% w/o asset sale to ADP
Payments customers growing 23% over year-ago-period with rising transaction volume per customer
Payroll focusing on do-it-yourself and do-it-with-assistance customers
6
Revenue Growth and Margin Leverage
FY01 FY02 FY03 FY04 FY05 FY060.0
0.5
1.0
1.5
2.0
$2.5B
0
5
10
15
20
25
30%
Revenue(CAGR 16%)
Operating Margin*Operating
Margin*
*This is a non-GAAP financial measure. See attached reconciliation of non-GAAP measures to GAAP.
Reven
ue
7
Predictable or Recurring Revenue
Subscriptions Payroll Payments QuickBooks Online QuickBooks subscriptions Financial Institutions revenue
Tax Renewals Consumer Tax Professional Tax
Upgrades & Consumables QuickBooks Quicken Financial Supplies
Intuit Revenue0
20
40
60
80
100%
Predictable or
Recurring Revenue
Other Revenue
8
Delivering “right for me” products and services that solve important problems and make it dramatically
easier & better value than other alternatives
Self Directed Self Directed with Assistance
Can’t BeBothered
Intuit’s Core Competency… Customer Driven InnovationIntuit’s Core Competency… Customer Driven Innovation
Making Existing Solutions BetterMaking Existing Solutions Better
Creating Innovative New OfferingsCreating Innovative New Offerings
Convert non-consumption or disrupt higher priced alternatives
Delivering wow experiences through an end to end delivery system
Be in growth businesses, high profit businesses, and attractive new
markets with large unmet / underserved needs we can solve well
…To build large user bases and durable advantage that translates into sustained revenue and profit growth
Intuit’s Strategy for Growth
9
Healthcare
Tax
Tax
Financial Institutions
Intuit’s Markets and Opportunities
Small Business:
QuickBooks
plus
Payroll & Payments
Small Business:
QuickBooks
plus
Payroll & Payments
10
Market Overview
Estimated 26M small-medium businesses (SMB’s) in the US
22M Home and My Business
3.2M Main Street
0.6M Mid-Market
6M new businesses formed each year (net 0.3-0.5M)
Small Business Market
Source: Intuit estimates
Financial Management Methods
Competitors
Intuit Software
(QuickBooks& Quicken)
Non-Consumers
(Manual,Spreadsheet,
Online Banking)
SMB's
25.8M
0%
20%
40%
60%
80%
100%
11
OnlineBanking
PeachTree
Quicken
Accountant
Spreadsheet
QuickBooks
0% 20% 40%
Small Business Customer Segments
Accountant
OnlineBanking
Quicken
QuickBooks
Spreadsheet
Manual
0% 20% 40%
GreatPlains
MAS90
PeachTree
Excel
Custom
QuickBooks
0% 20% 40%
Home & My Business (22
million SMB’s)
Main Street(3.2 million SMB’s)
Mid-Market(0.6 million SMB’s)
Non-Consumption Intuit Products Direct Competitors Higher-Priced AlternativesOther methods: Home & My Business 19% (MS Money, MS Word, various software, other); Main Street 21% (manual, MS Word, various software, other); Mid-Market 31% (vertical solutions, horizontal solutions, MS products, other). Source: Intuit estimates.
12
Small Business Payroll Market: Big Opportunity
-40%
-20%
0%
20%
40%
60%
80%9.6M
Firms < 50 Employees
2.0M
4.1M
2.6M
HigherPriced
AlternativeMethods
SoftwareCompetitors
Intuit – 1M
NonConsumption
Source: Intuit estimates
Self-Directed(SD)
Self-Directed with Assistance
(SDA)
Can’t Be Bothered(CBB)
CustomerSegments
Estimated #
Of Firms
3.0M
3.5M
3.1M
6.6MFirms *
* 75% are non-QB
13
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
1990 1992 1994 1996 1998 2000 2002
2004 2006 2008 2010
Favorable Payments Market Trends
EstimatesActual
E-check
Stored Value
Debit Cards
Credit Cards
Cash
Bank Trans.
Check
Source: The Nilson Report, 2004
CAGRs
Cons. ACH
Stored Value
Debit Card
Credit Card
Checks
90-04
25%
50%
32%
17%
6%
04-10
130%
21%
18%
9%
-5%
14
Payroll & Payments Opportunity
Payroll Payments Payroll Payments Payroll Payments0%
20%
40%
60%
80%
100%
Home & My Business
Main Street Mid-Market
Intuit Payroll/Payments Users
Have Payroll/Payments Needs
Source: Intuit estimates.
Estimated penetration of current QuickBooks customer base: Payroll 40%, Payments 10%
15
ProfessionalPrepared
Tax Store
Software -Other
Software -TurboTax
Manual
134M Returns $19B Revenue
0%
20%
40%
60%
80%
100%
Market Overview
~134M individual federal 2005 tax returns filed in the US
~1% average annual growth in returns filed
Estimated 5M new filers enter market, 3.5M leave each year
Consumer Tax Prep Market
Returns by Prep Method
Source: IRS data and Intuit estimates
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Consumer Tax Prep Market Trends
Manual & TeleFile
Software & Web
Tax Store
Pro Prep
FY01 FY02 FY03 FY04 FY05 FY060M
50M
100M
150M
1%
5 YR CAGR
(14% )
10%
1%
3%
*Note: Tax Store & Pro Prep per survey. Software & Web reflects Intuit’s average revenue per paid customer.Source: IRS data and Intuit estimates
Tax Returns Filed
-39
46
16
39
$0
$55
$160
$230
Customer Price* Net Promoter
17
Small Businesses
Online Banking: Attractive Growth Market
00 02 04 06 08 100
25
50
75
100
125M
(Forecast)
Consumers (Households)
Online banking is growing, yet penetration remains low, especially at the smaller financial institutions Digital Insight
serves
21M
5M
18M
8M
2004 2006
26M 26M
0%
20%
40%
60%
80%
100%
Online Banking
Users(CAGR: 26%)
Non-Consumption
Online Banking
Households
Online Households
All Households
18
Unmet Needs: Small Businesses
Primary Financial Mgmt Method Primary Solution – Small & Simple
Online Banking ManualSoftware
Managing Payroll
97%
8
29
11
11
3
7
14
38
17
25
36
38
38
24
0 20 40 60 80 100
% of small and simple firms
Tracking expenses
Checking unpaid payments you owe
Issuing invoices
Checking unpaid pymts owed to you
Making payments
Recording sales
89%
92%
96%
92%
92%
92%
Combining online banking and financial management software to address unmet needs of small businesses is the biggest
opportunity
3.2M Main
Street Firms
22M Small & Simple Firms
19
Online Banking Bill Pay
19%
30%
55%
5%
15%
30%
0%
20%
40%
60%
80%
100%
Consumer End-User Penetration (%)
Digital Insight
US Average
Leading Banks
Unmet Needs: Consumers
Limitations of Today’s Offerings
Many solutions allow consumers only to perform basic tasks – check balances & view transactions
Generally not designed for ease of use
Typically “backward-looking”
Significant opportunity to accelerate end-user adoption of consumer online banking solutions
20
Access to large user base (7MM SBs & 12M consumers)
Best-in-class software applications… content
Leading consumer and small business brands
Expertise in financial management
Extensive consumer & small business marketing expertise
Access to large user base (38M potential end-users)
Leading on-demand platform… distribution
Leading online banking brand with financial institutions
Expertise in online banking and bill payment
Strong distribution & reach with banks, core processors
Intuit & Digital Insight Already Leaders
21
Strategy and Execution for Growth
Robust business model– Sustained double-digit revenue growth– Operating margin leverage– Increased cash generation
Lots of growth opportunities– In existing businesses– Create new businesses
Disciplined approach to managing capital– M&A– Returning excess cash to shareholders
22
About Non-GAAP Financial MeasuresThe accompanying presentation contains non-GAAP financial measures. The table on page 23 reconciles the non-GAAP financial measures in the accompanying presentation 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) and related operating margin as a percentage of revenue, 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 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 assessing the performance of the organization, our operating segments or our senior management. Segment managers are not held accountable for share-based compensation expenses, acquisition-related costs, or the other excluded items that may impact their business units’ operating income (loss) and, accordingly, we exclude these amounts from our measures of segment performance. We also exclude these amounts from our budget and planning process. We believe that our non-GAAP financial measures also facilitate the comparison of results for current periods and guidance for future periods with results for past periods. We exclude the following items from our non-GAAP financial measures:
Share-based compensation expenses. Our non-GAAP financial measures exclude share-based compensation expenses, which consist of expenses for stock options, restricted stock, restricted stock units and purchases of common stock under our Employee Stock Purchase Plan. Segment managers are not held accountable for share-based compensation expenses impacting their business units’ operating income (loss) and, accordingly, we exclude share-based compensation expenses from our measures of segment performance. While share-based compensation is a significant expense affecting our results of operations, management excludes share-based compensation from our budget and planning process. We exclude share-based compensation expenses from our non-GAAP financial measures for these reasons and the other reasons stated above. We compute weighted average dilutive shares using the method required by SFAS 123(R) for both GAAP and non-GAAP diluted net income per share.
Amortization of purchased intangible assets and acquisition-related charges . In accordance with GAAP, amortization of purchased intangible assets in cost of revenue includes amortization of software and other technology assets related to acquisitions and acquisition-related charges in operating expenses includes amortization of other purchased intangible assets such as customer lists, covenants not to compete and trade names. Acquisition activities are managed on a corporate-wide basis and segment managers are not held accountable for the acquisition-related costs impacting their business units’ operating income (loss). We exclude these amounts from our measures of segment performance and from our budget and planning process. We exclude these items from our non-GAAP financial measures for these reasons, the other reasons stated above and because we believe that excluding these items facilitates comparisons to the results of other companies in our industry, which have their own unique acquisition histories.
Gains and losses on disposals of businesses and assets. We exclude these amounts from our non-GAAP financial measures for the reasons stated above and because they are unrelated to our ongoing business operating results.
Gains and losses on marketable equity securities and other investments . We exclude these amounts from our non-GAAP financial measures for the reasons stated above and because they are unrelated to our ongoing business operating results.
Income tax effects of excluded items. Our non-GAAP financial measures exclude the income tax effects of the adjustments described above that relate to the current period as well as adjustments for similar items that relate to prior periods. We exclude the impact of these tax items for the reasons stated above and because management believes that they are not indicative of our ongoing business operations.
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 for the reasons stated above and because they are unrelated to our ongoing business operations.
23
About Non-GAAP Financial MeasuresThe following describes each non-GAAP financial measure, the items excluded from the most directly comparable GAAP measure in arriving at each non-GAAP financial measure, and the reasons management uses each measure and excludes the specified amounts in arriving at each non-GAAP financial measure.
(Operating income (loss) and related operating margin as a percentage of revenue. We exclude share-based compensation expenses, amortization of purchased intangible assets and acquisition-related charges from our GAAP operating income (loss) from continuing operations and related operating margin in arriving at our non-GAAP operating income (loss) and related operating margin primarily because we do not consider them part of ongoing operating results when assessing the performance of the organization, our operating segments and senior management or when undertaking our budget and planning process. We believe that the exclusion of these expenses from our non-GAAP financial measures also facilitates the comparison of results for current periods and guidance for future periods with results for prior periods. In addition, we exclude amortization of purchased intangible assets and acquisition-related charges from non-GAAP operating income (loss) and operating margin because we believe that excluding these items facilitates comparisons to the results of other companies in our industry, which have their own unique acquisition histories.
(Net income (loss) and net income (loss) per share (or earnings per share). We exclude share-based compensation expenses, amortization of purchased intangible assets, acquisition-related charges, net gains on marketable equity securities and other investments, gains and losses on disposals of businesses, certain tax items as described above, and amounts related to discontinued operations from our GAAP net income (loss) and net income (loss) per share in arriving at our non-GAAP net income (loss) and net income (loss) per share. We exclude all of these items from our non-GAAP net income (loss) and net income (loss) per share primarily because we do not consider them part of ongoing operating results when assessing the performance of the organization, our operating segments and senior management or when undertaking our budget and planning process. We believe that the exclusion of these items from our non-GAAP financial measures also facilitates the comparison of results for current periods and guidance for future periods with results for prior periods.
In addition, we exclude amortization of purchased intangible assets and acquisition-related charges from our non-GAAP net income (loss) and net income (loss) per share because we believe that excluding these items facilitates comparisons to the results of other companies in our industry, which have their own unique acquisition histories. We exclude gains on marketable equity securities and other investments, net from our non-GAAP net income (loss) and net income (loss) per share because they are unrelated to our ongoing business operating results. Our non-GAAP financial measures exclude the income tax effects of the adjustments described above that relate to the current period as well as adjustments for similar items that relate to prior periods. We exclude the impact of these tax items because management believes that they are not indicative of our ongoing business operations. The effective tax rates used to calculate non-GAAP net income (loss) and net income (loss) per share were as follows: 34% for fiscal 2000 and 2001; 33% for fiscal 2002 and 2003; 34% for fiscal 2004; 35% for fiscal 2005; 37% for full fiscal 2006; 36% for the third quarter of fiscal 2007 and for fiscal 2007 guidance.Finally, we exclude amounts related to discontinued operations from our non-GAAP net income (loss) and net income (loss) per share because they are unrelated to our ongoing business operations.
We refer to these non-GAAP financial measures in assessing the performance of Intuit’s ongoing operations and for planning and forecasting in future periods. These non-GAAP financial measures also facilitate our internal comparisons to Intuit’s historical operating results. We have historically reported similar non-GAAP financial measures and believe that the inclusion of comparative numbers provides consistency in our financial reporting. We compute non-GAAP financial measures using the same consistent method from quarter to quarter and year to year.
The reconciliations of the forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures on page 24 of this presentation 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 marketable equity securities and other investments.
Accretion and dilution calculated on a non-GAAP basis
In estimating future accretion and dilution on a non-GAAP basis, Intuit excludes share-based compensation expenses, amortization of purchased intangible assets, acquisition-related charges, net gains on marketable equity securities and other investments, gains and losses on disposals of businesses and assets, certain discrete tax items and amounts related to discontinued operations from its GAAP earnings per share.
24
Non-GAAP Reconciliation: FY00-Q307Q3
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
2007 2006 2005 2004 2003 2002 2001 2000
GAAP operating income (loss) from
continuing operations 578,765$ 559,544$ 524,098$ 419,483$ 338,620$ 50,702$ (81,358)$ 12,414$
Amortization of purchased intangible assets 13,817 9,902 10,251 10,186 11,357 12,378 14,949 7,003
Acquisition-related charges 9,660 13,337 16,545 23,435 32,712 181,289 247,806 150,208
Charge for purchased research and development - - - - 1,070 2,151 238 1,312
Share-based compensation expense 20,585 71,361 5,489 6,232 2,714 2,534 2,531 1,266
Loss on impairment of long-lived asset - - - - - 27,000 - -
Non-GAAP operating income 622,827$ 654,144$ 556,383$ 459,336$ 386,473$ 276,054$ 184,166$ 172,203$
GAAP net income (loss) 367,211$ 416,963$ 381,627$ 317,030$ 343,034$ 140,160$ (82,793)$ 305,661$
Amortization of purchased intangible assets 13,817 9,902 10,251 10,186 11,357 12,378 14,949 7,003
Acquisition-related charges 9,660 13,337 16,545 23,435 32,712 181,289 247,806 150,208
Charge for purchased research and development - - - - 1,070 2,151 238 1,312
Share-based compensation expense 20,585 71,361 5,489 6,232 2,714 2,534 2,531 1,266
Loss on impairment of long-lived asset - - - - - 27,000 - -
Pre-tax gain on disposal of businesses (406) (2,364) - - - (8,308) 15,315 -
Gains on marketable equity securities (347) (7,629) (5,225) (1,729) (10,912) 15,535 98,053 (481,130)
Income taxes related to non-GAAP items (15,699) (32,179) (9,200) (12,962) (12,191) (76,751) (128,823) 109,256
Discrete GAAP tax items and other 3,121 7,417 (13,817) (25,258) (219) (6,335) 34,148 32,188
Discontinued operations 1,140 (39,533) (6,644) 6,292 (82,879) (86,421) (27,549) 20,030
Cumulative effect of accounting change - - - - - - (14,314) -
Non-GAAP net income 399,082$ 437,275$ 379,026$ 323,226$ 284,686$ 203,232$ 159,560$ 145,794$
GAAP diluted net income (loss) per share 1.04$ 1.16$ 1.01$ 0.79$ 0.81$ 0.32$ (0.20)$ 0.72$
Non-GAAP diluted net income per share 1.13$ 1.21$ 1.01$ 0.81$ 0.67$ 0.47$ 0.37$ 0.35$
Shares used in diluted per share amounts 351,686 360,471 376,796 400,162 421,910 435,794 430,710 422,542
25
Non-GAAP Reconciliation: FY07 Guidance
From To Adjustments From ToTwelve Months EndingJuly 31, 2007
Revenue 2,685,000$ 2,700,000$ -$ 2,685,000$ 2,700,000$ Operating income 600,000$ 611,000$ 140,000$ [a] 740,000$ 751,000$ Operating margin 22% 23% 5% [a] 27% 28%Diluted earnings per share 1.15$ 1.17$ 0.23$ [b] 1.38$ 1.40$ Shares 355,000 357,000 355,000 357,000
of purchased intangible assets of approximately $34 million; and acquisition-related charges of approximately $26 million.[b] Reflects the estimated adjustments in item [a]; an adjustment for net gains on marketable equity securities and other investments of approximately $2 million; an adjustment for an expected pretax gain on the sale of certain assets related to our Complete Payroll and Premier Payroll Service businesses of approximately $14 million; an adjustment for net loss from discontinued operations of $1 million; and income taxes related to these adjustments.
[a] Reflects estimated adjustments for share-based compensation expense of approximately $80 million; amortization
Forward-Looking Guidance GAAP Non-GAAP
Range of Estimate Range of Estimate