Intuit Reports Third Quarter Results; Profits Increase on Strong Revenue - Company Financial Information

Edge: Work-Group Computing Report, May 29, 2000

Intuit Inc. (Nasdaq:INTU) Tuesday announced strong gains in both revenue and net income for its third fiscal quarter ended April 30, 2000.

"Intuit had a great third quarter," said Steve Bennett, president and chief executive officer. "We had three objectives for our tax season and we aced all three. We beat Microsoft, won decisively on the Web and grew our profits. We also continued our strong Internet momentum and had great performance from other parts of our portfolio, such as international."

Intuit reported third quarter revenue of $329.1 million, an increase of 26 percent over the same quarter a year ago. This revenue growth resulted primarily from:

--  A strong tax season on both the desktop and Web
--  Continued growth in Internet revenue
--  Strong growth in international revenue

On a GAAP basis, net income for the third quarter was $297.1 million, or $1.39 per share, and included a pre-tax gain of $422.2 million from the sale of marketable securities, as well as significantly higher interest income. Net income for the same fiscal quarter last year was $75.4 million, or $0.37 per share, and included a pre-tax gain of $58.6 million from the sale of marketable securities. (See Table A.)

On a pro forma basis (explained below), the company reported third fiscal quarter net income of $76.3 million, or $0.36 per share, up 44 percent from the prior year. Pro forma net income for the third fiscal quarter last year was $50.0 million, or $0.25 per share. (See Table B)

The GAAP financial results are prepared in accordance with generally accepted accounting principles and are shown in Table A. Pro forma financial information shown in Table B excludes acquisition-related charges, reorganization costs, and gains and losses related to marketable securities.

Intuit ended the third quarter with $1.5 billion, or $7.10 per share, in cash and short term investments. "Intuit's strong cash position, resulting from both the solid performance of our businesses and the recent sales of marketable securities, provides another strategic edge for the company. It gives us significant financial flexibility to execute our business plans and the financial resources to take advantage of market opportunities," said Greg Santora, chief financial officer.

"To sum up, Intuit posted strong revenue growth and even stronger profit growth during the third quarter," said Bennett. "The company's performance positions us to end the year on track to meet our stated revenue and pro forma profit goals."

Intuit Posts Another Record Tax Season

Intuit had a tremendous tax season. This is important because tax represents about 35 percent of the company's revenue and is the largest profit generator. Intuit achieved all three of its key objectives for the tax season:

-- Beat Microsoft -- Despite the Microsoft entry and its net to zero rebate program, Intuit's unit sales of Quicken TurboTax desktop products were up 17 percent to almost 5 million units, and unit share at retail was in the high 60s, virtually unchanged from last year. This was accomplished with only a small decline in average selling price. After one season Microsoft has exited the desktop personal tax market.

-- Win on the Web -- Intuit's e-tax business took off this year. Quicken TurboTax for the Web units grew a dramatic 470 percent to a record total of 2.2 million federal and state returns. Intuit has become the clear leader on the Web with an estimated greater than 70 percent share of Web tax preparation. More than 6.9 million returns were filed electronically through Intuit during the tax season, 73 percent higher than last year. At the same time, Intuit accounted for nearly 80 percent of all federal returns prepared and electronically filed by individual taxpayers.

-- Grow profits -- Intuit had a record profit year in tax. The company delivered record high unit volume, record high revenues and record high profits.

Internet Businesses Strong

Third-quarter Internet revenues exceeded $117 million, or more than 35 percent of total revenue, up more than 100 percent from the same quarter in fiscal 1999. Year to date, Internet revenues are more than $242 million, up 129 percent and 26 percent of total revenues.

Another very significant positive for Intuit is having three Internet businesses that will be profitable this year:

-- In its third year of operations, Quicken TurboTax for the Web is profitable.

-- Because of the surge in electronic filing and the scalability of this business model, e-filing is also a profitable business for Intuit.

-- In addition, the company has created an entirely new source of revenue and profits through its QuickBooks Internet Gateway, announced last October. This business will be profitable in its first full year.

Small Business Momentum Continues

Intuit has two objectives in small business. One is to acquire new customers that expand its installed user base. The second is to add new services to drive more revenue and profit per customer. Intuit continues to make progress against both objectives: