"Intuit delivered an outstanding quarter," said Steve Bennett, Intuit's president and chief executive officer. "Revenue was $547.2 million, up 20 percent over last year's second quarter. Our pro forma operating income was $192.7 million, a year-over-year increase of 36 percent, exceeding pro forma consensus earnings per share estimates by 4 cents. As a result of the solid quarter and our confidence in the fundamentals driving our growth, we're raising our guidance for pro forma operating income for fiscal 2002 by $20 million to the $300 million to $310 million range. This is on top of the $5 million annual guidance increase we announced last quarter."

On a GAAP basis (see Table A), Intuit reported net income of $119.9 million, or $0.55 per share. This was up 351 percent from net income of $26.6 million, or $0.12 per share, in the year-ago quarter, reflecting a 29 percent increase in operating income. This year's quarter also reflected a $19 million increase in acquisition-related charges compared to last year's quarter. Included in this quarter's acquisition-related charges was an impairment charge of $17 million related to Intuit's Internet-based advertising revenue business. Last year's second-quarter results included a net pre-tax loss on marketable securities and other investments of $71.9 million, compared to a $1.6 million gain this quarter.

On the same pro forma basis Intuit has consistently followed for a number of years (explained below), the company reported second-quarter net income of $134.8 million, or $0.61 per share, $0.04 per share better than consensus estimates. Intuit reported pro forma net income of $104.2 million, or $0.48 per share, for the second quarter of fiscal 2001. (See Table B1.) The improvement in pro forma profitability was primarily attributable to the company's professional tax and Quicken Loans businesses, with each contributing about 40 percent of the pro forma profit growth.

Solid Start to Tax Season
Intuit is off to a solid start in its tax season. Revenue from Intuit's professional tax business increased 28 percent over last year's second quarter. About half of the quarter's growth in pro tax resulted from the company's acquisition of TAASC in April 2001.

"As expected, consumer tax revenue is only slightly above last year's level," said Bennett. "This is because we continue to see an increasing portion of our tax growth coming in our third quarter. More customers are using our Web-based tax solutions, which historically have revenue peaks later in the season." Positive early indicators include:

• TurboTax for the Web revenue was up 158 percent in the second quarter over the prior-year quarter. TurboTax for the Web revenue is expected to represent about 10-15 percent of total consumer tax revenue for the full fiscal year 2002.
• Electronic filing units for federal tax returns were up more than 35 percent over last year through Feb. 8.

Although Intuit is encouraged by these early indicators, it is too early to predict results for the full tax season.

Executing "Right for my Business" Strategy
Intuit is executing on its strategy to provide small business owners with "Right for My Business" solutions. As the company expected, small business revenue was slightly above year-ago levels, with total QuickBooks revenue flat year-over-year. There were two key reasons for the flat comparison:

• Continued weakness in end-of-life sales for QuickBooks 2001.
• Lower channel inventory -- In a tougher economic environment, retailers are carrying less inventory. As a result, 80,000 fewer QuickBooks 2002 units were shipped in the second quarter, resulting in approximately $7 million less revenue.

However, the company has seen several early positive indicators related to its new QuickBooks 2002 products:

• End-user purchases of QuickBooks 2002 products were up more than 20 percent in units and more than 45 percent in dollars when compared to QuickBooks 2001 products for the equivalent launch-to-date period ended Jan. 31.
• End-user purchases of the higher-end QuickBooks Premier and QuickBooks Accountants editions represented nearly 7 percent of the unit mix and nearly 15 percent of the dollar mix for QuickBooks 2002.

Service Businesses Continue to Grow in the Second Quarter

• Quicken Loans revenue of $57 million was up 181 percent. Intuit expects year-over-year revenue growth for Quicken Loans to be lower in the third and fourth quarters, though it continues to expect 45 percent to 55 percent revenue growth for the full fiscal year.
• Revenue from Intuit's total payroll business increased 32 percent to $40 million. On a full-year basis, Intuit expects total payroll revenue growth between 25 percent and 30 percent. However, QuickBooks-branded Basic and Deluxe offerings are each expected to grow between 30 percent and 40 percent.

Pro Forma Operating Income Guidance Increasing for Fiscal 2002
Intuit is raising its guidance for pro forma operating income for fiscal 2002, which ends July 31, 2002, by $20 million to the $300 million to $310 million range. The strong second-quarter revenue performance also raises the low end of Intuit's revenue growth guidance from 15 percent to 17 percent, resulting in a range of 17 percent to 20 percent growth for the fiscal year, or $1.476 billion to $1.510 billion. The company's policy is to not confirm, update or otherwise comment on its financial projections except in compliance with Regulation FD.

The accompanying fact sheet has more details on Intuit's historical performance and financial projections. The projections in the guidance given above are forward-looking statements and are subject to a number of risks and uncertainties as described below under the heading "Cautions about Forward-Looking Statements."

Information About Intuit's Seasonality and Financial Reporting
Intuit's financial results reflect the highly seasonal nature of its businesses, particularly its tax preparation and small business products and services. 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 revenue from seasonal businesses is relatively lower, but operating expenses to develop new products and services continue at relatively consistent levels.

Because of this seasonality, annual results may provide a more meaningful way to compare Intuit's operating performance than quarter-over-quarter comparisons. In addition, the timing of product launches and customer buying patterns 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 information, shown in Table B1, is presented using the same consistent standards from quarter to quarter and year to year. Table B2 describes the specific items excluded from pro forma results and the impact of those exclusions.

PowerPoint 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/company/investors and will remain available for one week. The conference call begins at 1:30 p.m. Pacific time today and the phone number is 800-615-5585 (706-679-0331 from international locations). No reservation or access code is needed. Those planning to listen to the conference call should download the PowerPoint file before the call begins. A replay of the audio call will be available for one week by calling 800-642-1687 (706-645-9291 from international locations). The reservation number is 3122228.