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Intuit Inc. (INTU)

F1Q2011 Earnings Call Transcript

November 18, 2010 4:30 pm ET


Matt Rhodes – IR

Brad Smith – President & CEO

Neil Williams – SVP & CFO

Scott Cook – Chairman

Jerry Natoli – VP, IR


Adam Holt – Morgan Stanley

Brad Sills – Barclays Capital

Peter Goldmacher – Cowen and Company

Nick Setyan – Wedbush Securities

Jim Macdonald – First Analysis Corp

Heather Bellini – ISI Group

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Sarah Friar – Goldman Sachs

Bryan Keane – Credit Suisse

Sterling Auty – JPMorgan

Ross MacMillan – Jefferies

Michael Millman – Millman Research Associates

Scott Schneeberger – Oppenheimer

Brendan Barnicle – Pacific Crest Securities

Justin Furby – William Blair & Company



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Good afternoon. My name is Patty, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Intuit first quarter fiscal 2011 conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator instructions)

With that, I’ll now turn the call over to Matt Rhodes, Intuit’s Director of Investor Relations. Mr. Rhodes?

Matt Rhodes

Thanks, Patty. Good afternoon, and welcome to Intuit’s first quarter 2011 conference call. I’m here with Brad Smith, our President and CEO; Neil Williams, our CFO; Scott Cook, our Founder; and Jerry Natoli, our VP of Finance.

Before we get started, I’d like to remind everyone that our remarks will include forward-looking statements. There are a number of factors that could cause Intuit’s results to differ materially from our expectations.

You can learn more about these risks in the press release we issued earlier this afternoon, our Form 10-K for fiscal 2010, and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit’s Web site at We assume no obligation to update any forward-looking statement.

Some of the numbers in this report are presented on a non-GAAP basis. We’ve reconciled the comparable GAAP and non-GAAP numbers in today’s press release. A copy of our prepared remarks and supplemental financial information will be available on our Web site after this call ends.

With that, I’ll turn the call over to Brad Smith.

Brad Smith

Thank you, Matt, thanks all of you for joining us this afternoon. As you can see from the results we just released, we’re off to a good start to fiscal 2011. Our base quarters still lie ahead of us and the macroeconomic environment remain challenging, but we’re executing well against our ‘connected service’ strategy and that’s driving forward financial performance.

First quarter revenue was $532 million, up 12% versus last year. Most of the growth came from our small business group, which has now posted three straight quarters of double-digit revenue growth.

We also had strong performance in our other businesses segment, with contributions from Quicken and Mint, Intuit Health, and small business in Canada and the U.K.

Our first quarter results are in line with what we anticipated, so we’re reaffirming our guidance for the year. That means we still expect fiscal year revenue growth of 8% to 11%, non-GAAP operating income growth of 11% to 14% and non-GAAP earnings per share growth of 12% to 15%.

As you know, our earnings are highly seasonal, and we typically report a loss in the first quarter of the year. Our first quarter loss was in line with our expectations and slightly higher than prior year primarily due to the acquisitions of Medfusion and Mint.

We’re also pulling marketing investments forward into the first half relative to fiscal 2010, which will have an impact on our second quarter profitability as well. These results reflect our continued focus on our three-point strategy; the first, to drive growth in our core businesses. Second, build adjacent businesses and enter new geographies. Third to accelerate Intuit’s transition to ‘connected services.’

Here are some highlights to demonstrate how we’re performing in each area. First, driving growth in our core businesses; we generated double-digit revenue growth in the small business group in Q1 led by a strong quarter in Financial Management Solutions, which grew 15% as well as Employee Management Solutions, which posted 11% growth year-over-year.

The collective small business franchise is doing well and we’ve introduced several compelling new offerings into the market this year. These include QuickBooks 2011, three new tiers of service and pricing for our QuickBooks online offering, and several mobile application and services. Just one of these is GoPayment, a solution that seamlessly integrates with QuickBooks and helps small businesses process credit payments on the go using a mobile phone.

Early reviews of QuickBooks 2011 have been very positive. We’ve seen strong recommendations including those generated by the accountants that we rely on to grow the business.

While it’s still very early, we’re also excited about the new QuickBooks desktop subscription bundle that is designed to keep customers on the current version of the software. This subscription bundle enables us to deliver new value to the desktop customers while also increasing the predictable and stable revenue streams in our small business franchise.

As you can tell, this year’s QuickBooks is far more than desktop software, and we believe that ongoing transformation will make Financial Management Solutions a strong growth business for years to come.

Shifting to our tax business, we’ve been talking for sometime about the secular shifts in the market that are driving the software and online category growth faster than other tax preparation methods. A proposed acquisition by one of our competitors has validated the importance of the secular shift and reinforced the strength of tax software as a value proposition versus tax stores and manual preparation.

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