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

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

Customer acquisition -- QuickBooks has added over 400,000 new users year to date, or over 1500 new users a day. QuickBooks also has held retail unit share in the high 80s.

Adding new services

-- The QuickBooks Internet Gateway, which provides e-service offerings from within the core accounting functionality of QuickBooks 2000, has really taken off. Launched in January, Intuit just announced six additional third-party alliances for a total of 14.

-- Intuit's online payroll business, another small business service, continued to ramp in the third quarter. Online payroll revenue was up 270 percent over the prior year. The number of online payroll customers was up more than 243 percent from third quarter last year and up 35 percent from the second quarter of the current fiscal year. Note that the online payroll revenue and customer base are modest and the company continues to focus on streamlining the activation process.

To provide perspective on the unusual pattern of quarterly revenues for QuickBooks this year, note that Intuit aggressively encouraged owners of older versions of QuickBooks to upgrade prior to January 2000. In addition, the company gave more than 350,000 online customers free upgrades to bring them into Y2K compliance. As previously reported, these actions resulted in very strong first-half revenue growth while producing a decline in customer upgrades and resulting revenue for the third and fourth quarters.

Other Highlights

On a year-to-date basis, Quicken is having a tremendous year, although revenues were relatively flat in the third quarter. For the total year, Quicken is headed for record revenue, record units sold, record profits and higher retail market share.

International revenue was up 67 percent over the third quarter of the prior year. Growth in small business accounting software sales in Japan and a strong tax season in Canada contributed to this growth.

Additional Information

All periods presented include the results of Rock Financial, which was acquired in December 1999 and is accounted for as a pooling of interests. In addition, results from CRI, the payroll processing company acquired in the fourth quarter of fiscal 1999, were included in the third quarter of fiscal 2000 but not in the third quarter of fiscal 1999.

Intuit's financial results reflect the highly seasonal nature of its businesses, particularly its tax preparation products. Historically, revenue and profitability are higher in Intuit's January and April quarters, which reflects the short season and intensity of tax product sales. The company experiences significantly lower revenue in the July and October quarters, while operating expenses to develop new products and services continue at relatively consistent levels during these periods. As a result, Intuit typically produces more than 100 percent of its annual profits in the January and April quarters combined. Therefore, annual results may provide a more meaningful comparison of operating results than quarter-over-quarter comparisons.