10-QPeriod: Q1 FY2015

INTUIT INC. Quarterly Report for Q1 Ended Oct 31, 2014

Filed November 21, 2014For Securities:INTU

Summary

For the three months ended October 31, 2014, Intuit Inc. (INTU) reported a net loss of $84 million, or $0.29 per share, compared to a net loss of $11 million, or $0.04 per share, in the prior year period. This widened loss is primarily attributed to an increase in operating expenses, including higher costs for staffing, outside services, and share-based compensation, coupled with a change in revenue recognition for certain desktop software products. Despite the net loss, total net revenue saw an 8% increase year-over-year, reaching $672 million, driven by growth in the Small Business segment, particularly its online ecosystem. Key financial highlights include an 8% increase in total net revenue to $672 million, driven by a 5% increase in the Small Business segment. However, operating loss from continuing operations widened significantly to $114 million from $77 million in the prior year. The company ended the quarter with $1.6 billion in cash, cash equivalents, and investments, and maintained a strong liquidity position with an unused $500 million revolving credit facility. Intuit continues to focus on its growth strategy of delivering innovative product experiences, building network effect platforms, and leveraging data, with a continued emphasis on cloud-based services.

Financial Statements
Beta
Revenue$612.00M
Cost of Revenue$159.00M
Gross Profit$453.00M
R&D Expenses$189.00M
Operating Expenses$562.00M
Operating Income-$109.00M
Interest Expense$7.00M
Net Income-$84.00M
EPS (Basic)$-0.29
EPS (Diluted)$-0.29
Shares Outstanding (Basic)286.00M
Shares Outstanding (Diluted)286.00M

Key Highlights

  • 1Total net revenue increased by 8% to $672 million for the three months ended October 31, 2014, compared to $622 million in the prior year period.
  • 2Operating loss from continuing operations increased to $114 million from $77 million year-over-year, primarily due to increased operating expenses.
  • 3Net loss from continuing operations widened to $84 million ($0.29 per share) from $57 million ($0.20 per share) in the prior year.
  • 4The Small Business segment was the key driver of revenue growth, increasing 5% year-over-year, with strong customer acquisition in its online ecosystem.
  • 5The company ended the quarter with $1.6 billion in cash, cash equivalents, and investments, indicating a solid liquidity position.
  • 6Intuit repurchased $114 million of its common stock during the quarter and has $1.8 billion authorized for future repurchases.
  • 7A change in revenue recognition for future QuickBooks and Quicken desktop products and Professional Tax solutions began in fiscal 2015, with revenue recognized over service periods, impacting short-term revenue recognition.

Frequently Asked Questions

The widened net loss is primarily due to an increase in operating expenses, including higher costs for staffing, outside services, and share-based compensation. Additionally, a shift in revenue recognition for certain desktop software products, where revenue is now recognized over a longer service period, impacts the timing of revenue recognition in the current period.

The Small Business segment was the primary driver of revenue growth, increasing 5% year-over-year, bolstered by customer acquisition in its online ecosystem. The Consumer and Professional Tax segments experienced revenue increases due to the seasonality of tax-related services, but these segments typically incur operating losses in the first fiscal quarter and their performance in this quarter is not considered indicative of full-year trends.

Intuit ended the quarter with $1.6 billion in cash, cash equivalents, and investments, indicating a strong liquidity position. The company has an unused $500 million revolving credit facility available. During the quarter, Intuit repurchased $114 million of its common stock and has $1.8 billion remaining under its authorized repurchase program, demonstrating a commitment to returning capital to shareholders.

Beginning in fiscal year 2015, Intuit is recognizing revenue for future QuickBooks and Quicken desktop products, and Professional Tax solutions, as services are provided over approximately three years and the tax year, respectively. This change means that revenue that might have been recognized upfront in prior periods will now be recognized over a longer period, impacting short-term revenue figures but is expected to stabilize revenue and reflect the service delivery more accurately over time.