Small Business and Self-Employed Group Revenue Grew 38 percent, 19 percent excluding Mailchimp

Intuit Inc. (Nasdaq: INTU) the global financial technology platform that makes TurboTax, Credit Karma, QuickBooks, and Mailchimp, announced financial results for the first quarter of fiscal 2023, which ended October 31.

“We had a strong first quarter as we innovated and delivered on our strategy to be the global AI-driven expert platform powering prosperity for consumers and small businesses,” said Sasan Goodarzi, Intuit's chief executive officer. “We continue to see proof that the benefits of our financial technology platform are more mission-critical than ever to our customers in an uncertain macro environment.”

“While we are pleased with first quarter results, we shared earlier this month that Credit Karma experienced continuing deterioration across all verticals in the last few weeks of the first quarter. Despite this impact to Credit Karma, we are reiterating operating income and earnings per share guidance for fiscal year 2023,” said Michelle Clatterbuck, Intuit’s chief financial officer.

Financial Highlights

For the first quarter, Intuit:

• Grew total revenue to $2.6 billion, up 29 percent, including 13 points from the addition of Mailchimp.
• Increased Small Business and Self-Employed Group revenue 38 percent to $2.0 billion. Excluding Mailchimp revenue of $264 million, Small Business and Self-Employed Group revenue grew 19 percent.
• Grew Online Ecosystem revenue 60 percent to $1.3 billion. Excluding Mailchimp, Online Ecosystem revenue grew 28 percent.
• Increased Credit Karma revenue 2 percent to $425 million.
• Grew Consumer Group revenue to $150 million, up from $120 million the prior year.
• Increased ProTax Group revenue to $34 million, up from $26 million the prior year.

Unless otherwise noted, all growth rates refer to the current period versus the comparable prior-year period, and the business metrics and associated growth rates refer to worldwide business metrics.

Snapshot of First-quarter Results

Dollars are in millions, except earnings per share. See “About Non-GAAP Financial Measures” below for more information regarding financial measures not prepared in accordance with Generally Accepted Accounting Principles (GAAP).

Business Segment Results

Small Business and Self-Employed Group

• QuickBooks Online Accounting revenue grew 29 percent in the quarter, driven primarily by customer growth, higher effective prices, and mix-shift.
• Online Services revenue grew to $681 million, up 109 percent, driven by the addition of Mailchimp, and growth in QuickBooks Online payroll and QuickBooks Online payments. Excluding Mailchimp revenue of $264 million, online services revenue grew 28 percent.
• Total international online revenue grew 172 percent on a constant currency basis, and 19 percent excluding Mailchimp.

Credit Karma

• Credit Karma revenue growth in the quarter was driven by credit cards, offset by headwinds in personal loans, home loans, auto insurance and auto loans.

Capital Allocation Summary

In the first quarter the company:

• Reported a total cash and investments balance of approximately $2.7 billion and $7.0 billion in debt as of October 31, 2022.
• Repurchased $519 million of shares, with $3.0 billion remaining on the company's share repurchase authorization.
• Received Board approval for a quarterly dividend of $0.78 per share, payable January 18, 2023. This represents a 15 percent increase compared to the same period last year.

Forward-looking Guidance

For the full fiscal year 2023, Intuit updated revenue guidance and reiterated GAAP and non-GAAP operating income and earnings per share guidance. The company now expects:

• Revenue of $14.035 billion to $14.250 billion, growth of approximately 10 to 12 percent, down from previous guidance of growth of approximately 14 to 16 percent.
• GAAP operating income of $2.794 billion to $2.899 billion, growth of approximately 9 to 13 percent.
• Non-GAAP operating income of $5.258 billion to $5.363 billion, growth of approximately 17 to 19 percent.
• GAAP diluted earnings per share of $6.92 to $7.22, a decline of approximately 5 to 1 percent.
• Non-GAAP diluted earnings per share of $13.59 to $13.89, growth of approximately 15 to 17 percent.

The company also reiterated segment revenue guidance for its Small Business and Self-Employed Group, Consumer Group, and ProTax Group, and updated segment revenue guidance for Credit Karma. For fiscal 2023, the company now expects:

• Small Business and Self-Employed Group: growth of 19 to 20 percent.
• Consumer Group: growth of 9 to 10 percent.
• ProTax Group: growth of 3 percent.
• Credit Karma: a decline of 15 to 10 percent, down from previous guidance of growth of 10 to 15 percent.

Intuit announced guidance for the second quarter of fiscal year 2023, which ends January 31. The company expects:

• Revenue to grow approximately 8 to 9 percent.
• GAAP loss per share of $0.29 to $0.23.
• Non-GAAP diluted earnings per share of $1.41 to $1.45.

Conference Call Details

Intuit executives will discuss the financial results on a conference call at 1:30 p.m. PT on November 29. The conference call can be heard live at http://investors.intuit.com/Events/default.aspx. Prepared remarks for the call will be available on Intuit’s website after the call ends.

Replay Information

A replay of the conference call will be available for one week by calling 800-770-2030, or 609-800-9909 from international locations. The passcode is 4061282. The audio webcast will remain available on Intuit’s website for one week after the conference call.

About Intuit

Intuit is the global financial technology platform that powers prosperity for the people and communities we serve. With more than 100 million customers worldwide using TurboTax, Credit Karma, QuickBooks, and Mailchimp, we believe that everyone should have the opportunity to prosper. We never stop working to find new, innovative ways to make that possible. Please visit us for the latest information about Intuit, our products and services, and find us on social.

About Non-GAAP Financial Measures

This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles, please see the section of the accompanying tables titled "About Non-GAAP Financial Measures" as well as the related Table B1, Table B2, and Table E. A copy of the press release issued by Intuit today can be found on the investor relations page of Intuit's website.

Cautions About Forward-looking Statements

This press release contains forward-looking statements, including expectations regarding: forecasts and timing of growth and future financial results of Intuit and its reporting segments; the impact of macroeconomic conditions on our business, segments and products; Intuit’s prospects for the business in fiscal 2023 and beyond; timing and growth of revenue from current or future products and services; Intuit's corporate tax rate; the amount and timing of any future dividends or share repurchases; and the impact of acquisitions and other strategic decisions on our business; as well as all of the statements under the heading “Forward-looking Guidance.”

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from the expectations expressed in the forward-looking statements. These risks and uncertainties may be amplified by the COVID-19 pandemic, which has caused significant global economic instability and uncertainty. These factors include, without limitation, the following: our ability to compete successfully; potential governmental encroachment in our tax businesses; our ability to adapt to technological change; our ability to predict consumer behavior; our reliance on third-party intellectual property; our ability to protect our intellectual property rights; any harm to our reputation; risks associated with acquisition and divestiture activity, including the integration of Credit Karma and Mailchimp; the issuance of equity or incurrence of debt to fund an acquisition; our cybersecurity incidents (including those affecting the third parties we rely on); customer concerns about privacy and cybersecurity incidents; fraudulent activities by third parties using our offerings; our failure to process transactions effectively; interruption or failure of our information technology; our ability to maintain critical third-party business relationships; our ability to attract and retain talent; any deficiency in the quality or accuracy of our products (including the advice given by experts on our platform); any delays in product launches; difficulties in processing or filing customer tax submissions; risks associated with international operations; changes to public policy, laws or regulations affecting our businesses; litigation in which we are involved; the seasonal nature of our tax business; changes in tax rates and tax reform legislation; global economic conditions (including, without limitation, inflation); exposure to credit, counterparty and other risks in providing capital to businesses; amortization of acquired intangible assets and impairment charges; our ability to repay or otherwise comply with the terms of our outstanding debt; our ability to repurchase shares or distribute dividends; volatility of our stock price; and our ability to successfully market our offerings. More details about these and other risks that may impact our business are included in our Form 10-K for fiscal 2022 and in our other SEC filings. You can locate these reports through our website at http://investors.intuit.com. Fiscal 2023 full-year and Q2 guidance speaks only as of the date it was publicly issued by Intuit. Other forward-looking statements represent the judgment of the management of Intuit as of the date of this presentation. Except as required by law, we do not undertake any duty to update any forward-looking statement or other information in this presentation.

See “About Non-GAAP Financial Measures” immediately following Table E for information on these measures, the items excluded from the most directly comparable GAAP measures in arriving at non-GAAP financial measures, and the reasons management uses each measure and excludes the specified amounts in arriving at each non-GAAP financial measure.

See “About Non-GAAP Financial Measures” immediately following Table E for information on these measures, the items excluded from the most directly comparable GAAP measures in arriving at non-GAAP financial measures, and the reasons management uses each measure and excludes the specified amounts in arriving at each non-GAAP financial measure.

See “About Non-GAAP Financial Measures” immediately following Table E for information on these measures, the items excluded from the most directly comparable GAAP measures in arriving at non-GAAP financial measures, and the reasons management uses each measure and excludes the specified amounts in arriving at each non-GAAP financial measure.

INTUIT INC.

ABOUT NON-GAAP FINANCIAL MEASURES

The accompanying press release dated November 29, 2022 contains non-GAAP financial measures. Table B1, Table B2, and Table E reconcile the non-GAAP financial measures in that press release to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures include non-GAAP operating income (loss), non-GAAP net income (loss), and non-GAAP net income (loss) per share.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies.

We compute non-GAAP financial measures using the same consistent method from quarter to quarter and year to year. We may consider whether other significant items that arise in the future should be excluded from our non-GAAP financial measures.

We exclude the following items from all of our non-GAAP financial measures:

• Share-based compensation expense
• Amortization of acquired technology
• Amortization of other acquired intangible assets
• Goodwill and intangible asset impairment charges
• Gains and losses on disposals of businesses and long-lived assets
• Professional fees and transaction costs for business combinations

We also exclude the following items from non-GAAP net income (loss) and diluted net income (loss) per share:

• Gains and losses on debt and equity securities and other investments
• Income tax effects and adjustments
• Discontinued operations

We believe these non-GAAP financial measures provide meaningful supplemental information regarding Intuit’s operating results primarily because they exclude amounts that we do not consider part of ongoing operating results when planning and forecasting and when assessing the performance of the organization, our individual operating segments, or our senior management. Segment managers are not held accountable for share-based compensation expense, amortization, or the other excluded items and, accordingly, we exclude these amounts from our measures of segment performance. We believe our non-GAAP financial measures also facilitate the comparison by management and investors of results for current periods and guidance for future periods with results for past periods.

The following are descriptions of the items we exclude from our non-GAAP financial measures.

Share-based compensation expenses. These consist of non-cash expenses for stock options, restricted stock units, and our Employee Stock Purchase Plan. When considering the impact of equity awards, we place greater emphasis on overall shareholder dilution rather than the accounting charges associated with those awards.

Amortization of acquired technology and amortization of other acquired intangible assets. When we acquire a business in a business combination, we are required by GAAP to record the fair values of the intangible assets of the business and amortize them over their useful lives. Amortization of acquired technology in cost of revenue includes amortization of software and other technology assets of acquired businesses. Amortization of other acquired intangible assets in operating expenses includes amortization of assets such as customer lists, covenants not to compete, and trade names.

Goodwill and intangible asset impairment charges. We exclude from our non-GAAP financial measures non-cash charges to adjust the carrying values of goodwill and other acquired intangible assets to their estimated fair values.

Gains and losses on disposals of businesses and long-lived assets. We exclude from our non-GAAP financial measures gains and losses on disposals of businesses and long-lived assets because they are unrelated to our ongoing business operating results.

Professional fees and transaction costs for business combinations. We exclude from our non-GAAP financial measures the professional fees we incur to complete business combinations. These include investment banking, legal, and accounting fees.

Gains and losses on debt securities and other investments. We exclude from our non-GAAP financial measures credit losses on available-for-sale debt securities and gains and losses on other investments.

Income tax effects and adjustments. We use a long-term non-GAAP tax rate for evaluating operating results and for planning, forecasting, and analyzing future periods. This long-term non-GAAP tax rate excludes the income tax effects of the non-GAAP pre-tax adjustments described above, and eliminates the effects of non-recurring and period specific items which can vary in size and frequency. Based on our current long-term projections, we are using a long-term non-GAAP tax rate of 24% for fiscal 2022 and fiscal 2023. This long-term non-GAAP tax rate could be subject to change for various reasons including significant acquisitions, changes in our geographic earnings mix or fundamental tax law changes in major jurisdictions in which we operate. We will evaluate this long-term non-GAAP tax rate on an annual basis and whenever any significant events occur which may materially affect this rate.

Operating results and gains and losses on the sale of discontinued operations. From time to time, we sell or otherwise dispose of selected operations as we adjust our portfolio of businesses to meet our strategic goals. In accordance with GAAP, we segregate the operating results of discontinued operations as well as gains and losses on the sale of these discontinued operations from continuing operations on our GAAP statements of operations but continue to include them in GAAP net income or loss and net income or loss per share. We exclude these amounts from our non-GAAP financial measures.

The reconciliations of the forward-looking non-GAAP financial measure to the most directly comparable GAAP financial measures in Table E include all information reasonably available to Intuit at the date of this press release. These tables include adjustments that we can reasonably predict. Events that could cause the reconciliation to change include acquisitions and divestitures of businesses, goodwill and other asset impairments, sales of available-for-sale debt securities and other investments, and disposals of business and long-lived assets.

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