Intuit Inc. (NASDAQ: INTU) today 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 40 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:
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.
All per share figures reflect Intuit's 3-for-1 stock split effective Sept. 30, 1999.
Power Point Presentation and Conference Call
A PowerPoint presentation accompanying the Intuit earnings conference call is available at www.intuit.com/corporate/investor_relations and will remain available for one week. The conference call number is 888-882-0115. Those planning to listen to the conference call should download the PowerPoint file before the call begins.
