Intuit Reports Strong First Quarter Results and Raises Full Year Revenue Guidance Reflecting Early Momentum in the Year and the Acquisition of Mailchimp

  GAAP  

  Non-GAAP  

  Q1
FY22  

  Q1
FY21  

  Change  

  Q1
FY22  

  Q1
FY21  

  Change  

  Revenue  

$2,007

$1,323

52%

$2,007

$1,323

52%

  Operating Income  

$195

$209

(7)%

$555

$334

66%

  Earnings Per Share  

$0.82

$0.75

9%

$1.53

$0.94

63%

Dollars are in millions, except earnings per share. Note that GAAP results include a $39 million net gain on other long-term investments. See "About Non-GAAP Financial Measures" below for more information regarding financial measures not prepared in accordance with Generally Accepted Accounting Principles (GAAP).

 INTUIT INC.

GAAP CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

  Three Months Ended  

  October 31,
2021  

  October 31,
2020  

Net revenue:

Product

$

397

$

367

Service and other

1,610

956

Total net revenue

2,007

1,323

Costs and expenses:

Cost of revenue:

Cost of product revenue

15

15

Cost of service and other revenue

387

234

Amortization of acquired technology

15

7

Selling and marketing

550

362

Research and development

530

325

General and administrative

262

169

Amortization of other acquired intangible assets

53

2

Total costs and expenses [A]

1,812

1,114

Operating income

195

209

Interest expense

(7

)

(8

)

Interest and other income, net

50

9

Income before income taxes

238

210

Income tax provision [B]

10

12

Net income

$

228

$

198

Basic net income per share

$

0.84

$

0.75

Shares used in basic per share calculations

273

263

Diluted net income per share

$

0.82

$

0.75

Shares used in diluted per share calculations

277

265

Cash dividends declared per common share

$

0.68

$

0.59

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 for the periods shown.

  Three Months Ended  

  (in millions)  

  October 31,
2021  

  October 31,
2020  

Cost of revenue

$

27

$

15

Selling and marketing

64

32

Research and development

109

38

General and administrative

80

26

Total share-based compensation expense

$

280

$

111

[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.

We recognized excess tax benefits on share-based compensation of $47 million and $52 million in our provision for income taxes for the three months ended October 31, 2021 and 2020, respectively.

Our effective tax rate for the three months ended October 31, 2021 was approximately 4%. Excluding discrete tax items primarily related to share-based compensation tax benefits mentioned above, our effective tax rate was 25%. The difference from the federal statutory rate of 21% was primarily due to state income taxes and non-deductible share-based compensation, which were partially offset by the tax benefit we received from the federal research and experimentation credit.

Our effective tax rate for the three months ended October 31, 2020 was approximately 6%. Excluding discrete tax items primarily related to share-based compensation tax benefits mentioned above, our effective tax rate was 25%. The difference from the federal statutory rate of 21% was primarily due to state income taxes and non-deductible share-based compensation, which were partially offset by the tax benefit we received from the federal research and experimentation credit.

In the current global tax policy environment, the U.S. and other domestic and foreign governments continue to consider, and in some cases enact, changes in corporate tax laws. As changes occur, we account for finalized legislation in the period of enactment.

  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 2022  

  Q1  

  Q2  

  Q3  

  Q4  

  Year to Date  

  GAAP operating income (loss)  

$

195

$

—

$

—

$

—

$

195

Amortization of acquired technology

15

—

—

—

15

Amortization of other acquired intangible assets

53

—

—

—

53

Professional fees and transaction costs for business combinations

12

—

—

—

12

Share-based compensation expense

280

—

—

—

280

  Non-GAAP operating income (loss)  

$

555

$

—

$

—

$

—

$

555

  GAAP net income (loss)  

$

228

$

—

$

—

$

—

$

228

Amortization of acquired technology

15

—

—

—

15

Amortization of other acquired intangible assets

53

—

—

—

53

Professional fees and transaction costs for business combinations

12

—

—

—

12

Share-based compensation expense

280

—

—

—

280

Net (gain) loss on debt securities and other investments [A]

(42

)

—

—

—

(42

)

Income tax effects and adjustments [B]

(123

)

—

—

—

(123

)

  Non-GAAP net income (loss)  

$

423

$

—

$

—

$

—

$

423

  GAAP diluted net income (loss) per share  

$

0.82

$

—

$

—

$

—

$

0.82

Amortization of acquired technology

0.06

—

—

—

0.06

Amortization of other acquired intangible assets

0.19

—

—

—

0.19

Professional fees and transaction costs for business combinations

0.04

—

—

—

0.04

Share-based compensation expense

1.01

—

—

—

1.01

Net (gain) loss on debt securities and other investments [A]

(0.15

)

—

—

—

(0.15

)

Income tax effects and adjustments [B]

(0.44

)

—

—

—

(0.44

)

  Non-GAAP diluted net income (loss) per share  

$

1.53

$

—

$

—

$

—

$

1.53

  Shares used in GAAP diluted per share calculation  

277

—

—

—

277

  Shares used in non-GAAP diluted per share calculation  

277

—

—

—

277

[A]

During the three months ended October 31, 2021, we recognized $39 million of net gains on other long-term investments.

[B]

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. Income tax adjustments consist primarily of the tax impact of the non-GAAP pre-tax adjustments and the excess tax benefits on share-based compensation.

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 2021  

  Q1  

  Q2  

  Q3  

  Q4  

  Full Year  

  GAAP operating income (loss)  

$

209

$

(25

)

$

1,914

$

402

$

2,500

Amortization of acquired technology

7

14

14

15

50

Amortization of other acquired intangible assets

2

36

54

54

146

Professional fees for business combinations

5

30

1

—

36

Share-based compensation expense

111

180

218

244

753

  Non-GAAP operating income (loss)  

$

334

$

235

$

2,201

$

715

$

3,485

  GAAP net income (loss)  

$

198

$

20

$

1,464

$

380

$

2,062

Amortization of acquired technology

7

14

14

15

50

Amortization of other acquired intangible assets

2

36

54

54

146

Professional fees for business combinations

5

30

1

—

36

Share-based compensation expense

111

180

218

244

753

Net (gain) loss on debt securities and other investments

(7

)

(8

)

—

—

(15

)

Other income from divested businesses [A]

—

(30

)

—

—

(30

)

Income tax effects and adjustments [B]

(66

)

(57

)

(73

)

(149

)

(345

)

  Non-GAAP net income (loss)  

$

250

$

185

$

1,678

$

544

$

2,657

  GAAP diluted net income (loss) per share  

$

0.75

$

0.07

$

5.30

$

1.37

$

7.56

Amortization of acquired technology

0.03

0.05

0.05

0.06

0.18

Amortization of other acquired intangible assets

—

0.14

0.19

0.20

0.53

Professional fees for business combinations

0.02

0.11

—

—

0.13

Share-based compensation expense

0.42

0.66

0.79

0.88

2.76

Net (gain) loss on debt securities and other investments

(0.03

)

(0.03

)

—

—

(0.05

)

Other income from divested businesses [A]

—

(0.11

)

—

—

(0.11

)

Income tax effects and adjustments [B]

(0.25

)

(0.21

)

(0.26

)

(0.54

)

(1.26

)

  Non-GAAP diluted net income (loss) per share  

$

0.94

$

0.68

$

6.07

$

1.97

$

9.74

  Shares used in GAAP diluted per share calculation  

265

273

276

277

273

  Shares used in non-GAAP diluted per share calculation  

265

273

276

277

273

[A]

During the three months ended January 31, 2021, we recorded a $30 million gain from the sale of a note receivable that was previously written off.

[B]

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. Income tax adjustments consist primarily of the tax impact of the non-GAAP pre-tax adjustments and the excess tax benefits on share-based compensation.

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)

  October 31,
2021  

  July 31,  
2021  

ASSETS

Current assets:

Cash and cash equivalents

$

2,864

$

2,562

Investments

386

1,308

Accounts receivable, net

411

391

Income taxes receivable

111

123

Prepaid expenses and other current assets

409

316

Current assets before funds held for customers

4,181

4,700

Funds held for customers

306

457

Total current assets

4,487

5,157

Long-term investments

84

43

Property and equipment, net

789

780

Operating lease right-of-use assets

405

380

Goodwill

5,613

5,613

Acquired intangible assets, net

3,195

3,252

Long-term deferred income taxes

8

8

Other assets

289

283

Total assets

$

14,870

$

15,516

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

531

$

623

Accrued compensation and related liabilities

316

530

Deferred revenue

600

684

Other current liabilities

385

361

Current liabilities before customer fund deposits

1,832

2,198

Customer fund deposits

306

457

Total current liabilities

2,138

2,655

Long-term debt

2,037

2,034

Long-term deferred income tax liabilities

508

525

Operating lease liabilities

403

380

Other long-term obligations

51

53

Total liabilities

5,137

5,647

Stockholders' equity

9,733

9,869

Total liabilities and stockholders' equity

$

14,870

$

15,516

  TABLE D  

 INTUIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

  Three Months Ended  

  October 31,
2021  

  October 31,
2020  

  Cash flows from operating activities:  

Net income

$

228

$

198

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

45

37

Amortization of acquired intangible assets

69

9

Non-cash operating lease cost

18

13

Share-based compensation expense

280

111

Deferred income taxes

(16

)

17

Other

(35

)

(16

)

Total adjustments

361

171

Originations of loans held for sale

—

(43

)

Sale and principal payments of loans held for sale

—

147

Changes in operating assets and liabilities:

Accounts receivable

(21

)

47

Income taxes receivable

11

(17

)

Prepaid expenses and other assets

(31

)

(38

)

Accounts payable

(107

)

(58

)

Accrued compensation and related liabilities

(212

)

(248

)

Deferred revenue

(86

)

(85

)

Operating lease liabilities

(18

)

(12

)

Other liabilities

20

(17

)

Total changes in operating assets and liabilities

(444

)

(428

)

  Net cash provided by operating activities  

  145  

  45  

  Cash flows from investing activities:  

Purchases of corporate and customer fund investments

(257

)

(198

)

Sales of corporate and customer fund investments

1,053

30

Maturities of corporate and customer fund investments

123

156

Purchases of property and equipment

(42

)

(38

)

Acquisitions of businesses, net of cash acquired

—

(85

)

Originations of term loans to small businesses

(125

)

(11

)

Principal repayments of term loans from small businesses

72

29

Other

(28

)

(13

)

  Net cash provided by (used in) investing activities  

  796  

  (130  

  )  

  Cash flows from financing activities:  

Repayments on borrowings under unsecured revolving credit facility

—

(1,000

)

Proceeds from borrowings under secured revolving credit facility

2

—

Repayment of debt

—

(13

)

Proceeds from issuance of stock under employee stock plans

55

88

Payments for employee taxes withheld upon vesting of restricted stock units

(167

)

(99

)

Cash paid for purchases of treasury stock

(335

)

—

Dividends and dividend rights paid

(190

)

(158

)

Net change in customer fund deposits

(151

)

29

  Net cash used in financing activities  

  (786  

  )  

  (1,153  

  )  

Effect of exchange rates on cash, cash equivalents, restricted cash, and restricted cash equivalents

(2

)

(1

)

  Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents  

  153  

  (1,239  

  )  

Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period

2,819

6,697

  Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period  

  $  

  2,972  

  $  

  5,458  

Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents reported within the condensed consolidated balance sheets to the total amounts reported on the condensed consolidated statements of cash flows

Cash and cash equivalents

$

2,864

$

5,174

Restricted cash and restricted cash equivalents included in funds held for customers [A]

108

284

  Total cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period  

  $  

  2,972  

  $  

  5,458  

[A]

See quarterly reports filed on Form 10-Q for reconciliation of funds held for customers by investment category.

  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  

  GAAP
Range of Estimate  

  Non-GAAP
Range of Estimate  

  From  

  To  

  Adjmts  

  From  

  To  

  Three Months Ending January 31, 2022  

Revenue

$

2,719

$

2,749

$

—

$

2,719

$

2,749

Operating income

$

173

$

188

$

544

[a]

$

717

$

732

Diluted earnings per share

$

0.55

$

0.59

$

1.29

[b]

$

1.84

$

1.88

  Twelve Months Ending July 31, 2022  

Revenue

$

12,165

$

12,300

$

—

$

12,165

$

12,300

Operating income

$

2,441

$

2,501

$

1,929

[c]

$

4,370

$

4,430

Diluted earnings per share

$

7.00

$

7.16

$

4.48

[d]

$

11.48

$

11.64

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.

[a]

Reflects estimated adjustments for share-based compensation expense of approximately $336 million; professional fees for business combinations of approximately $50 million; amortization of acquired technology of approximately $39 million; and amortization of other acquired intangible assets of approximately $119 million.

[b]

Reflects estimated adjustments in item [a], income taxes related to these adjustments, and other income tax effects related to the use of the non-GAAP tax rate.

[c]

Reflects estimated adjustments for share-based compensation expense of approximately $1.3 billion; professional fees for business combinations of approximately $62 million; amortization of acquired technology of approximately $131 million; and amortization of other acquired intangibles of approximately $410 million. The estimated amortization adjustments were calculated based on existing intangible assets as of October 31, 2021 and a preliminary valuation for the Mailchimp acquisition.

[d]

Reflects estimated adjustments in item [c], income taxes related to these adjustments, and other income tax effects related to the use of the non-GAAP tax rate, and $39 million of net gains on other long-term investments.