"Intuit had another solid quarter. We executed well and delivered on our commitment to investors, beating consensus estimates for pro forma earnings per share by three cents," said Steve Bennett, president and chief executive officer. "We're off to a solid start with our tax season, both on the desktop and on the Web. Our high growth service businesses, payroll and Quicken Loans, are gaining momentum."

Second Quarter Results
Intuit reported revenue of $457.6 million for the second quarter of fiscal 2001, an increase of 8 percent over the $425.5 million for the year-ago quarter. On a GAAP basis, Intuit reported net income for the quarter of $26.6 million, or $0.12 per share. This reflected net pre-tax losses on marketable securities and other investments of $71.9 million, due to declines in the values of certain investments and to reflect recent clarification of SEC views related to accounting for investments in publicly traded securities. In the year-ago quarter, Intuit reported net income of $57.3 million, or $0.27 per share, which included net pre-tax losses on marketable securities and other investments of $2.8 million. (See Table A)

On a pro forma basis (explained below), Intuit reported second-quarter net income of $104.2 million, or $0.48 per share, which was 9 percent better than the prior year quarter. Intuit had pro forma net income of $91.4 million, or $0.44 per share, for the second quarter of fiscal 2000. (See Table B)

Intuit continues to have a strong and attractive capital structure, with more than $1.4 billion in cash and short-term investments, or more than $6.50 per share, and essentially no debt. This continues to provide the company with the tools to grow its business.

Intuit's financial results reflect the highly seasonal nature of its businesses, particularly its tax preparation business. Intuit typically produces more than 100 percent of its annual profits in its second and third quarters combined. Intuit typically reports a loss in its first and fourth quarters when revenues from tax software are minimal, but operating expenses to develop new products and services continue at relatively consistent levels.

Annual results may provide a more meaningful way to compare Intuit's operating performance than quarter-over-quarter comparisons. The timing of product launches and promotions can vary from one year to the next, shifting revenue to different quarters within a year.

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, gain on divestiture, the cumulative effect of accounting for derivatives, and net pre-tax gains and losses related to marketable securities and other investments.

Business Highlights

Solid Start to Tax Season
Intuit is executing on the three key elements of its tax strategy: pricing for value, adding new services, and driving innovation. Although it is still too early to predict the results for the full tax season, Intuit is encouraged by initial results.

Intuit's pricing strategy is working. The company has increased prices on both desktop and Web products to reflect the value offered. On the desktop, unit sales equaled last year's levels, despite H&R Block's aggressive pricing during early January that essentially made their basic tax product free for two weeks. Equally important, Intuit's share of dollars at retail increased by 6 percentage points over last year to 82 percent as of Feb. 3, according to PC Data's weekly numbers.

The results are even better for Intuit's Web tax business. This year Intuit increased Web preparation prices by 50 percent, and early results show both revenue and unit volumes are up dramatically. More than 780,000 federal returns were completed using Quicken TurboTax for the Web through Feb. 14, more than double the returns completed as of the same time last year. This year, more than 850 financial institutions are promoting Quicken TurboTax for the Web on their sites, up 31 percent over last year.

Intuit remains the leader in electronic filing, with more than three million federal and state returns e-filed as of Feb. 10, more than double last year's levels. This growth is positive for investors as the company gets paid an average of almost $5 for each e-file. This is a profitable business for Intuit.

Intuit is also seeing good results from the second element of its tax strategy: adding new financial services. The company introduced add-on services within Quicken TurboTax to address two critical financial needs at tax time: Individual Retirement Accounts, for which taxpayers can apply online, and "quick refund" loans for people who value the benefit of getting refund money faster.

Finally, continued innovation is central to Intuit's strategy. This year, Intuit had two major breakthroughs. First, the company introduced the Live Tax Advice service, which lets Quicken TurboTax users get their individual questions answered by a live tax professional by clicking a button in the desktop or on the Web. Taxpayers have had thousands of unique questions answered this way, and Intuit gets revenue for each one. The service is available to anyone who goes to TurboTax.com.

With the introduction of the Automated Tax Return (ATR) this year, Intuit has also moved closer to the goal of revolutionizing the tax return process so taxpayers never need to enter data manually. Three leading payroll firms and seven brokers and mutual fund companies, including Fidelity InvestmentsÒ and The Vanguard Group, are actively supporting Intuit's ATR technology, providing the W-2 and 1099 data electronically directly into TurboTax. The initial response to this new capability has been tremendous.

Next year Intuit expects to roll out ATR on a much broader basis with many more partners. The ultimate goal is to convert the 40 million taxpayers who still use pencil and paper to become paying TurboTax customers.

Continued Traction in Quicken Loans and Payroll
Intuit continues to gain traction in two high-growth service businesses, Quicken Loans and payroll. Intuit acquired these businesses as a springboard to drive new growth.

For the second quarter in a row, Quicken Loans had strong year over year growth in both revenue and operating profits. Total Quicken Loans revenue was $20 million, up 27 percent from last year. On the Web, revenue is up a strong 44 percent. Quicken Loans had more than a $9 million improvement in pre-tax profitability over last year's second quarter. At the same time, the process efficiencies and infrastructure improvements made over the past 12 months are allowing Quicken Loans to capitalize on the current interest rate environment. Intuit expects strong performance from Quicken Loans in the second half of fiscal 2001, with total year revenue growth of more than 50 percent.

Payroll is another high-growth service business that is growing even faster than expected. Total payroll revenue for the second quarter was up 57 percent from a year ago to $30.2 million. The payroll business also had a more than $9 million improvement in pre-tax operating profits from the year ago quarter. Not only is the business ahead of plan, but Intuit expects continued strong performance for the rest of the year.

Revenue from Intuit's largest payroll business, its Basic payroll service, grew almost 100 percent year over year. Basic payroll provides up-to-date tax calculation tables that small business owners use to prepare their own payrolls. In addition, Intuit had nearly 550,000 users of this service at the end of the second quarter, up almost 30 percent over a year ago.

The Deluxe, or online payroll business, also continued its momentum. Second quarter revenue was up more than 150 percent over a year ago, and the customer base grew to nearly 17,800, up 128 percent from a year ago.

In summary, both Quicken Loans and payroll are delivering strong growth. Intuit expects to grow revenues for these two businesses at least 50 percent year over year for fiscal 2001.

QuickBooks Upgrade Levels Down Due to Y2K
Sales of QuickBooks have been slower than expected during the second quarter and first half of fiscal 2001. In order to understand the root cause, Intuit has carefully reviewed a number of issues. First, what the issue is not:

This is not a retail share or a pricing issue. According to January PC Data numbers, at retail, unit share, at roughly 85 percent, and share of dollars, at roughly 86 percent, for QuickBooks are nearly flat with last year.
It's not an issue of acquiring new users. Intuit continues to see strong growth in new QuickBooks users with more than 120,000 added in the second quarter and is on track with historical levels of about 500,000 per year.

• This is not a retail share or a pricing issue. According to January PC Data numbers, at retail, unit share, at roughly 85 percent, and share of dollars, at roughly 86 percent, for QuickBooks are nearly flat with last year.
• It's not an issue of acquiring new users. Intuit continues to see strong growth in new QuickBooks users with more than 120,000 added in the second quarter and is on track with historical levels of about 500,000 per year.
• It's not the product. Market feedback on QuickBooks 2001 is very positive and the new features are compelling.
• It's not an issue of cannibalization by the Web. Intuit is seeing virtually no defection from the desktop, either to its own or competitors' Web products.

With the price increase, continued new user acquisition and an upgrade rate in the high teens, Intuit continues to have a growing and profitable QuickBooks business.

Investing in Emerging Growth Businesses
Intuit continues to invest in emerging businesses to drive future revenue and profit growth. The company has invested about $50 million year to date - double last year's level -- mostly focused in the small business area.

In December, Intuit launched QuickBase, a Web-based tool that lets small business owners create, manage and share data from any browser. It's a powerful tool and early customer enthusiasm is tremendous.

Last week, the company launched the Intuit Developer Network, a new initiative that will enable third-party developers to distribute applications that integrate with several of our small business solutions. The company has released the APIs for our Site Solutions and QuickBase products, as well as a draft API specification for QuickBooks.

Intuit sees solid potential for growth in QuickBase, the Intuit Developer Network, its EmployeeMatters acquisition, QuickBooks for the Web and Deluxe Payroll. All are part of a strategy to offer more tools to small business owners -- tools that are drop dead simple and work together.

Targets for Fiscal 2001
Intuit is maintaining the range for pro forma operating income between $205 million to $213 million, which represents growth of at least 32 percent year over year. The company has also maintained its target range for fiscal year revenue of $1.32 billion to $1.34 billion. The accompanying fact sheet has more details on Intuit's targets for the third quarter and fiscal 2001.

The company does not provide confirmation or update of its targets except through public announcements.

Power Point Presentation and Conference Call
A PowerPoint presentation accompanying the Intuit earnings conference call and a live audio Web-cast of the call is available at www.intuit.com/corporate/investor_relations and will remain available for two weeks. The conference call number is 888-849-9221 (212-676-5406 from international locations). Those planning to listen to the conference call should download the PowerPoint file before the call begins. A replay for the call will be available for two weeks at www.intuit.com/corporate/investor_relations or by calling 800-633-8284 (858-812-6440 for international locations). The reservation number is 17891344.