10-QPeriod: Q2 FY2008

INTUIT INC. Quarterly Report for Q2 Ended Jan 31, 2008

Filed February 29, 2008For Securities:INTU

Summary

Intuit Inc. reported solid revenue growth of 16% year-over-year for the first six months of fiscal 2008, reaching $1.28 billion, primarily driven by the acquisition of Digital Insight and growth in the Consumer Tax segment. Despite revenue increases, operating income from continuing operations saw a significant 39% decrease to $70.4 million, impacted by higher costs and expenses associated with the Digital Insight acquisition, increased R&D investments, and marketing expenses. Net income from continuing operations declined by 23% to $68.4 million, with diluted EPS from continuing operations falling to $0.20. The company also announced strategic acquisitions, including Homestead Technologies and the pending acquisition of Electronic Clearing House (ECHO), demonstrating a commitment to expanding its service offerings. Liquidity remains strong with $837.2 million in cash, cash equivalents, and investments at the end of the period, although this represents a decrease from the prior year primarily due to substantial share repurchases ($500 million in the first six months of fiscal 2008), acquisitions, and capital expenditures. The company continues to navigate seasonal business cycles, with tax-related revenues being a significant factor in revenue distribution throughout the year. Investors should note the impact of acquisitions on cost structures and the ongoing investment in R&D and marketing as key factors influencing profitability.

Key Highlights

  • 1Total net revenue increased by 16% year-over-year to $1.28 billion for the first six months of fiscal 2008.
  • 2Operating income from continuing operations decreased by 39% to $70.4 million due to higher acquisition-related costs and R&D investments.
  • 3Net income from continuing operations declined by 23% to $68.4 million, with diluted EPS from continuing operations at $0.20.
  • 4The company completed the acquisition of Homestead Technologies for approximately $170 million and entered into an agreement to acquire Electronic Clearing House (ECHO) for approximately $131 million.
  • 5Cash, cash equivalents, and investments totaled $837.2 million at January 31, 2008, but decreased by $466.5 million from July 31, 2007, largely due to $500 million in share repurchases.
  • 6The company experienced revenue deferrals in its Professional Tax segment, impacting short-term revenue recognition.
  • 7Investments in municipal auction rate securities experienced a partial auction failure, raising liquidity concerns for approximately $140 million, though the company believes it can liquidate without significant loss.

Frequently Asked Questions

Intuit reported total net revenue of $1.28 billion for the first six months of fiscal 2008, a 16% increase compared to $1.10 billion in the same period last year. This growth was significantly influenced by the acquisition of Digital Insight and growth in the Consumer Tax segment.

Profitability declined despite revenue growth. Operating income from continuing operations decreased by 39% to $70.4 million. This was primarily due to higher costs and expenses associated with the Digital Insight acquisition, increased investment in research and development, and higher selling and marketing expenses. Net income from continuing operations also decreased by 23% to $68.4 million.

Intuit acquired Homestead Technologies Inc. for approximately $170 million to bolster its QuickBooks segment. Additionally, the company entered into an agreement to acquire Electronic Clearing House (ECHO) for approximately $131 million, which will enhance its Payroll and Payments segment. These strategic moves indicate a focus on expanding market reach and service offerings.

As of January 31, 2008, Intuit had $837.2 million in cash, cash equivalents, and investments, a decrease from the previous fiscal year end, primarily due to significant share repurchases ($500 million) and acquisitions. The company has $1 billion in senior unsecured notes due to the Digital Insight acquisition and a $500 million revolving credit facility, of which none was drawn at the reporting date.