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Intuit CEO Discusses F4Q2010 Earnings - Call Transcript

Intuit CEO Discusses F4Q2010 Earnings - Call Transcript

Intuit Inc. (INTU)

Q4 2010 Earnings Call

August 19, 2010 4:30 pm ET


Matt Rhodes - Director, IR

Brad Smith - President and CEO

Neil Williams - SVP and CFO

Jerry Natoli - VP, Finance


Brian Bedell - ISI Group

Adam Holt - Morgan Stanley

Brent Thill - UBS

Sarah Friar - Goldman Sachs

Scott Schneeberger - Oppenheimer

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Ross MacMillan - Jefferies

Brad Sills - Barclays Capital



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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 fourth quarter and fiscal year 2010 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's 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. Rodes.

Matt Rhodes

Thanks Patty. Good afternoon and welcome to Intuit's fourth quarter and fiscal year 2010 conference call. I am 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 would 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 2009 and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit's website at We assume no obligation to update any forward-looking statements. 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.

Note also that our Real Estate Solutions business which we sold in January 2010 is accounted for as a discontinued operation. The net operating results of this business appear on the discontinued operations line. These results are excluded from the operational results, operational guidance figures and non-GAAP EPS for all periods presented. GAAP EPS includes the gain on the sale of our Real Estate Solutions business. A copy of our prepared remarks and supplemental financial information will be available on our website after this call ends. With that, I'll turn the call over to Brad Smith.

Brad Smith

Thanks Matt. Welcome to the speaking team. I want to thank all of you for joining us this afternoon as well. We just completed another strong quarter and it capped off a great fiscal year. Our results continue to demonstrate that our strategy is working and our execution is on track. In fiscal 2010, we delivered 11% revenue growth and 15% non-GAAP EPS growth in what remains a challenging macro environment.

We expanded our non-GAAP operating margin by 190 basis points and for the first time generated more than $1 billion in annual non-GAAP operating income. We are pleased with our financial performance and we build positive momentum as we are heading into fiscal 2011.

Let me begin by sharing my perspective on the fourth quarter and the fiscal year. Over the past several years we've been on a journey to become a world class Connected Services Company. We made significant progress in many areas, but there have been some bumps along the way. Some of our customers were affected by datacenter outages in the past two months. These outages are simply not acceptable for a company of our caliber and our ambition. They inconvenienced our customers and frankly they embarrassed Intuit in my leadership team. We take this very seriously and we have taken great strides to support our customers, regain their trust and make them whole for the downtime. While the financial impact to Intuit isn't material, the potential impact on customer confidence is not. We've learned from these outages and the work to the store customer confidence continues. But I don't want us to lose sight of an important fact.

Intuit has been delivering connected services for many, many years and we know what it takes to deliver highly available and robust online solutions. Our online banking business and our tax e-filing capabilities are already highly available and we are working to get all of our applications up to the standard, our customers expect and deserve. We are accelerating investments in areas like product developments and infrastructure to provide the highest quality experience for our customers, and we are consolidating our datacenters to move all of our connecting services into state-of-the-art facilities. Look, we know what to do, we know how to do it, we simply need to get it done and it will.

Now let me turn to our financial performance, as I've said earlier, the results we are sharing today demonstrate excellent execution against our three-point strategy, which is first, driving growth in our core business. Second, building adjacent businesses and entering new geographies and third, accelerating our transition to connect these services and here are some highlights in each of the areas.

First in driving growth in our core business. We had an excellent year in consumer tax. We continue to grow the software and online category and we improved our share for the TurboTax Desktop and TurboTax Online. We are winning by delivering superior ease-of-use at a better value than any other alternative.

Our leadership position and the digital do-it-yourself category is in the sweet spot for future tax preparation growth. Now with that said we have plenty of things we can do to take our gains at the next level. We will provide more insights into what we learned this past tax season and about the specific actions we are putting in place for the upcoming tax year at our Investor Day in September, but let me say this, we expect another strong year in fiscal year '11.

In small business we delivered double-digit revenue growth in the back half of fiscal 2010 and revenue growth of 9% for the full year. New QuickBooks customers grew double digit year-over-year in fiscal 2010 and we continue to acquire new customers through the new front doors like online payroll, payment and website. And we are also growing revenue per customer in QuickBooks.

In our financial services business, we grew our user base and we have continued to build momentum. In the fourth quarter, we completed the conversion of one of the largest financial institutions that we have ever signed and we are pleased with the continued growth of our core business. The second focus area of our strategy building adjacent businesses and entering new geographies is also building up same. The Intuit website's customer base grew 80% in the fourth quarter.

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