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August 26, 1999 1 FY 1999: The Year in Review August 26, 1999 This slide presentation, including any oral presentation that may accompany it, includes.

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Presentation on theme: "August 26, 1999 1 FY 1999: The Year in Review August 26, 1999 This slide presentation, including any oral presentation that may accompany it, includes."— Presentation transcript:

1 August 26, FY 1999: The Year in Review August 26, 1999 This slide presentation, including any oral presentation that may accompany it, includes “forward-looking” statements about future financial results, future products and other events that have not yet occurred. For example, statements with words like “expect”,”anticipate” or “believe” and statements about fiscal 2000 are forward-looking statements. Investors should be aware that actual results may differ materially from our expressed expectations because of risks and uncertainties about the future. We will not update the information in the presentation if any forward-looking statement later turns out to be inaccurate. Details about risks and uncertainties affecting various aspects of our business are discussed throughout this presentation. Investors should consider all of these risks carefully, and should pay particular attention to risks described on slides 15 and 16.

2 August 26, Review of FY 1999  Overview  FY 1999 Financial Performance  Investments & Balance Sheet  Core Businesses  New (Internet) Businesses  Employee Metrics  Electronic Finance

3 August 26, Fiscal 1999 Highlights u Strong Financial Performance See slide 13 for more details on Pro Forma adjustments and slides for risks and uncertainties relating to future results. NOTE: Pro Forma financial information excludes acquisition-related costs, discontinued operations, restructuring charges, material non-recurring marketing charges, and income/loss for sales of investments and marketable securities. NOTE: GAAP comparisons are favorably impacted by realized gain on the sales and revaluation of marketable securities and unfavorably impacted by acquisition-related charges for Lacerte and CRI. Without these items, EPS would have been a negative $0.39 for Q499, and a positive $1.26 for the full year.

4 August 26, Core Businesses u Quicken Continued growth: active users to over 11 million u QuickBooks Revenue up 57% and profits doubled u Supplies Consistent growth & profitability u International Changing business model in Europe u Pro Tax High renewal rates and high profitability u Personal Tax Revenue up 36% and profits up 39% Please see slides for risks and uncertainties relating to future results. Businesses Has Never Been Stronger The Total Earning Power of Our Core

5 August 26, New (Internet) Businesses $48.7 $125.3 Internet Revenue ($ Millions) $ % Growth In FY99 157% Growth In FY99 Please see slides for risks and uncertainties relating to future results.

6 August 26, Electronic Finance Connectivity (The Internet) Computers (The PC) Revolutionize How People Do Financial Work Intuit is the leader in eFinance … on the PC and on the Web

7 August 26, Total Pro Forma Revenue $593 $848 $ Millions $526 Incl. CRI & Lacerte Please see slide 13 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future results.

8 August 26, Internal Revenue Growth Rate 13.7% 12.5% 27.1% Excl. CRI & Lacerte Pro Forma Revenue, Excluding Revenue from Acquisitions (Lacerte & CRI) Internal Growth Rate Doubled In One Year Internal Growth Rate Doubled In One Year Please see slide 13 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future results.

9 August 26, Total Revenue Growth Rate 13.7% 12.5% 27.1% Excl. CRI & Lacerte Pro Forma Revenue, Including Revenue from Acquisitions (Lacerte & CRI) Internal Growth Rate Doubled In One Year Internal Growth Rate Doubled In One Year 43.0% Incl. CRI & Lacerte Please see slide 13 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future results.

10 August 26, Pro Forma Op Income Percent 8.2% 10.2% 14.2% As a Percent of Pro Forma Revenue Incl. CRI & Lacerte Please see slide 13 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future results.

11 August 26, Pro Forma Operating Income $43.2 $60.5 $120.6 Op Income Doubled In One Year Op Income Doubled In One Year $ millions Incl. CRI & Lacerte Please see slide 13 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future results.

12 August 26, Review of FY 1999  Overview FY 1999 Financial Performance  FY 1999 Financial Performance   Investments & Balance Sheet  Core Businesses  New (Internet) Businesses  Employee Metrics  Electronic Finance 4

13 August 26, Notes uForward-Looking Statements This slide presentation, including any oral presentation that may accompany it, includes “forward-looking” statements about future financial results, future products and other events that have not yet occurred. For example, statements with words like “expect”, “anticipate” or “believe” and statements about fiscal 2000 are forward-looking statements. Investors should be aware that actual results may differ materially from our expressed expectations because of risks and uncertainties about the future. We will not update the information in the presentation if any forward-looking statement later turns out to be inaccurate. Details about risks affecting various aspects of our business are discussed throughout this presentation. Investors should consider all of these risks carefully, and should pay particular attention to risks described on slides 15 and 16. uPro Forma Accounting Intuit looks at its financial performance in two ways: GAAP, and Company Pro Forma. Pro Forma financial information excludes acquisition-related costs, discontinued operations, restructuring charges, material non-recurring marketing charges, and income/loss for sales of investments and marketable securities. Please note that there are significant differences between our GAAP and Pro Forma results. See our August 26, 1999 press release for details.

14 August 26, Notes uCyclical Business Cycle The seasonal nature of our desktop software products, especially our tax products, typically causes the Company to experience higher revenue in the January and April fiscal quarters. Costs to develop, market and support these products are incurred at relatively consistent levels throughout the year. Consequently, the Company generally reports a loss, or lower profits, in the October and July fiscal quarters. uPeriod-to-Period Comparisons In performing year over year comparisons, please note the following: FY98 includes only six weeks of results for our Lacerte professional tax software subsidiary, which we acquired in June FY99 includes a full year of Lacerte results. FY98 does not reflect any results for CRI, our payroll processing subsidiary, which we acquired in May FY99 includes three months of CRI results. Year over year comparisons are also impacted by the timing of major product launches. Specifically, we had QuickBooks launches in June 1998 and January 1999, which had a positive impact on FY99 results. Prior to these QuickBooks releases, we had not launched a new version of QuickBooks since December 1996.

15 August 26, Risks & Uncertainties Risks and Uncertainties Relating to Future Performance and Results Anyone who may be considering an investment in Intuit Common Stock should carefully consider the following risks and uncertainties that may affect Intuit’s future performance and financial results. More details about these issues are included in Intuit’s fiscal 1998 for Form 10k, its fiscal 1999 Form 10Qs and its other recent SEC filings. uOur revenue and earnings are highly seasonal. uOur quarterly and annual financial results fluctuate significantly. uWe face intense competition from many companies in all of our business areas, both domestically and internationally. uWe expect Microsoft to enter the personal tax preparation market in the 1999 tax year, and we may also face competition from the Internal Revenue Service and state tax agencies. uOur Internet-based products and services require us to successfully adopt, refine and operationally support a new business model. uWe must continue to maintain important distribution and other contractual relationships for our Internet-based products and services and successfully market and promote these products and services. uOur Internet businesses face risks relating to customer privacy and security and increasing regulation. uOur Internet businesses require significant research and development and marketing expenditures. uThe expansion of our Internet-based products and services has had a significant impact on our development process. uExpansion of our desktop product Internet connectivity initiatives depends to some extent on industry adoption of OFX as a connectivity standard. uIn order to succeed in the payroll business, we must continue to improve the integration of the operations of our payroll processing service provider and expand availability for our online payroll processing service. uOur tax products must follow a demanding and rigid annual development and release cycle. uOur web-based tax preparation and electronic filing services must handle extremely heavy customer demand during the peak tax season.

16 August 26, Risks & Uncertainties, cont. uProduct bugs can be expensive to fix and can cause Intuit to lose customers. uProduct returns might exceed reserves. uWe face increasing competition for access to retail distribution channels. uBusinesses that we acquire must be integrated into our business. uOur recent acquisitions have resulted in significant acquisition-related expenses. uOur recent acquisitions of Lacerte and CRI pose a number of risks that could affect our ability to achieve the anticipated benefits of those acquisitions. uWe must provide responsive customer service and technical support. uBusiness conditions in international markets can negatively impact our financial performance. uWe depend on a single source supplier of checks. uWe face intense competition for qualified employees. uOur ability to protect our proprietary technology is limited. uWe rely on third party licenses for some of our products and services. uSome of our products and services are regulated businesses under federal or state laws that do not apply to most software companies. uRegulation of encryption technology could adversely affect our international sales and services. uProblems related to the Year 2000 could have a significant adverse effect on our operations. uWe hold significant investments that have been very volatile. uThe market price of our common stock has been volatile. uWe have implemented a number of anti-takeover provisions that may adversely affect the market price of our common stock.

17 August 26, Business Divisions Internat’l 10% Internat’l 10% Consumer 16% Consumer 16% Small Business 34% Small Business 34% Tax 40% Tax 40% * General & Administrative, and other common costs not allocated to specific business divisions.

18 August 26, GAAP - Fourth Quarter $ Millions, except EPS NOTE: Q499 comparison is favorably impacted by realized gain from the sale of Excite stock and revaluation of remaining holdings in and unfavorably impacted by additional amortization of acquisition-related items. Without the impact of these items, Net Loss would have been $26 million and a negative EPS of $0.39. Please see slides for risks and uncertainties relating to future results.

19 August 26, Pro Forma - Fourth Quarter $ Millions, except EPS Please see slide 13 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future results. NOTE: Q498 includes benefit from QuickBooks 6.0 launch in June 1998.

20 August 26, Fourth Quarter Comments u 28% Revenue Growth vs Prior Year Stronger-than-expected QuickBooks sales in U.S. Strong Quicken & QuickBooks launches in Europe Higher growth in Internet-based businesses u One-Time European Expense Transition of German operations to licensing model u CRI Results Included in 4Q99 Neutral impact on Pro Forma operating income Please see slide 13 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future results.

21 August 26, GAAP - Full Year $ Millions, except EPS NOTE: FY99 comparison is favorably impacted by realized gain on sales and revaluation of marketable securities, offset somewhat by higher amortization of acquisition related costs from Lacerte & CRI. Without the impact of these items, FY99 Net Income would have been $80 million and EPS $1.26. Please see slides for risks and uncertainties relating to future results.

22 August 26, Pro Forma - Full Year $ Millions, except EPS Please see slide 13 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future results.

23 August 26, Full Year FY99 Comments u 27% Internal Growth Rate (excl. Lacerte & CRI) Strong season for personal tax -- PC, Web and e-filing QuickBooks and related revenue up 57% (two launches) Internet-based revenues up 157% vs prior year 43.0% total growth rate (including Lacerte and CRI) u Pro Forma Operating Income Doubled QuickBooks and related profit contribution doubled Personal tax profit contribution increased nearly 40% Includes strong profitability from Lacerte (not included in FY98) u FY99 Challenges Quicken: profit / Europe: business model / Insurance: slow ramp Please see slide 13 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future results.

24 August 26, Review of FY 1999  Overview  FY 1999 Financial Performance Investments & Balance Sheet  Investments & Balance Sheet  Core Businesses  New (Internet) Businesses  Employee Metrics  Electronic Finance 4 4

25 August 26, Strategic Investments Excluding Investments Without a Public or Third-Party Valuation ($ Millions) Please see slides for risks and uncertainties relating to future results. All but one up at least 70% All but one up at least 70%

26 August 26, Balance Sheet $431 $882 $1,255* Value of Cash and Marketable Securities at Fiscal Year-End ($ millions) * Does NOT include $131 million of cash held as “float” in payroll business Please see slides for risks and uncertainties relating to future results.

27 August 26, Review of FY 1999  Overview  FY 1999 Financial Performance  Investments & Balance Sheet Core Businesses  Core Businesses  New (Internet) Businesses  Employee Metrics  Electronic Finance 4 4 4

28 August 26, Quicken Customer Base Continues to Grow... Millions of Active Users* Quicken Money * Based on survey of PC-owning US households done by Genesis Research in January and August of 1999, 1998 and Moderate Growth Units: 7% vs prior year Revenue: 5% vs prior year Retail share down slightly Connectivity Over 150 FI connections Over 700 including QIF import Access to 50% of U.S.accounts Profitability Declined in FY99, but still one of Quicken’s most profitable years Strategic Role Customer acquisition Less than 10% of total revenue Please see slide for risks and uncertainties relating to future results.

29 August 26, Quicken 2000 u Six weeks early u Back on the Mac ! u And connected... Palm Pilot The Web “very powerful Internet-enabled version” -Jupiter Communication

30 August 26, QuickBooks Robust Growth … and Doubling Profits  1½ Launches Benefit of 6-month release cycle (Will not get this benefit in FY00)  Retail Unit Share From 75% to 81% to 85% (PC Data)  Revenue Up 57%  Profits Doubled 2.7 Unique Registered Users* (Millions at year-end) * Based on cumulative number of product registrations. Please see slides for risks and uncertainties relating to future results.

31 August 26, Financial Supplies Group Revenue ($ Millions) $97.6 $87.0 $79.6 Consistent Growth FY 99: Systems uDirect-To-Plate: 50% to 90% uTurn-around time cut in halfProcesses uStatus Calls: 25% to 8% uWeb Ordering: 5% to 19% … Profits Please see slides for risks and uncertainties relating to future results.

32 August 26, Small but leading retail sales in its category International u Focusing Efforts on Small Business u Revenue up 12% in FY99 Swung from small loss to small profit u Canada Strong Across the Board: Quicken, QuickBooks & QuickTax u Japan Revenue flat: traditional businesses mature QuickBooks-J launched u Europe Uneconomic business models: transitioning to partnerships Established relationship with Haufe in Germany

33 August 26, Tax Division $81.0 $155.2 $61.1 Please see slide 13 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future results. Pro Forma Contribution ($ Millions) Pers. 53% Pers. 53% Pro 47% Pro 47% FY99 Pro Forma Contribution Mix by Personal and Professional Groups

34 August 26, TurboTax TurboTax & MacInTax Federal Units (Millions) 4.1 million Record Sales Volumes NOTE: Microsoft Entering Personal Tax Market in FY 2000 NOTE: Microsoft Entering Personal Tax Market in FY 2000 Please see slides for risks and uncertainties relating to future results.

35 August 26, % Lacerte Pro Tax Renewal Rate (excluding pay-per-return customers) 92% 89% 85% 82% Reliable Recurring Revenues Reliable Recurring Revenues PRO TAX ProSeries Please see slides for risks and uncertainties relating to future results.

36 August 26, America’s Choice income tax returns in the United States is prepared on Intuit software* * Based on company estimates: Unit sales times number of returns filed per unit sold, as reported by users on survey questionnaires. 1 5 OUT OF EVERY

37 August 26, Review of FY 1999  Overview  FY 1999 Financial Performance  Investments & Balance Sheet  Core Businesses New (Internet) Businesses  New (Internet) Businesses  Employee Metrics  Electronic Finance

38 August 26, New (Internet) Businesses u Online Tax Filing u Online Tax Prep u Online Payroll u Online Business Services u Online Investments u Online Mortgage u Online Insurance u Online Billing & Payment u Online Orders & Downloads TOTHEWEB Multiple New Internet-Based Businesses Are Ramping 15% of Intuit’s Revenue from the Internet in FY99 “Internet Revenue” is the sum of “Internet Product and Service” revenue (products and services performed and delivered using the Internet) and “Internet Commerce” revenue (software or other products sold and/or downloaded via the Internet).

39 August 26, Internet Revenue as a Percent of Total Revenue Internet Revenue 20% 11% 12% 6% Please see slides for risks and uncertainties relating to future results.

40 August 26, Internet Revenue $ Millions FY99 FY98 Internet businesses span all business divisions, and are not a separate division or segment. Please see slides for risks and uncertainties relating to future results.

41 August 26, Electronic Filing Personal Federal Returns (000s) Plus, Another Million+ Pro Federal Returns 2.4x 1.7x 2.9x 2.3x DOUBLINGEVERYYEAR Please see slides for risks and uncertainties relating to future results.

42 August 26, WebTurboTax Usage Up Ten-Fold from FY98 WebTurboTax Full Desktop Capability … On the Web! On the Web!

43 August 26, ,000 subscribers Payroll Services Payroll Tax Table Service Subscribers (000s) STEP ONE Payroll Tax Table Service Payroll Tax Table Service (NOT predominantly Internet-delivered) Please see slides for risks and uncertainties relating to future results.

44 August 26, $267 million More customers in first year than Paychex got in first six years Payroll Services Gross Payroll Dollars Processed Through Online Payroll Service, Excl. CRI STEP TWO Online Payroll Service Online Payroll Service NOTE: Early-Stage Effort Fast Growth, But Small Base NOTE: Early-Stage Effort Fast Growth, But Small Base $ Millions Please see slides for risks and uncertainties relating to future results.

45 August 26, Millions of Page Views Per Month Almost 4 Million Unique Visitors Per Month Quicken.com u Page Views Up 78% u Ad Revenue Doubled Please see slides for risks and uncertainties relating to future results. Page Views and Reach Soft in Late Spring Page Views and Reach Soft in Late Spring

46 August 26, Insuremarket Policy Applications Life Insurance: 100% U.S. Coverage Rapid Application Growth Small Revenue Please see slides for risks and uncertainties relating to future results.

47 August 26, Insuremarket Auto Insurance: 70% U.S. Coverage Rapid Quote Growth Thousands of QuotesPolicy Applications Life Insurance: 100% U.S. Coverage Rapid Application Growth Small Revenue Minimal Revenue Please see slides for risks and uncertainties relating to future results.

48 August 26, % in % in 1998 Online Mortgages 10% in % in 2003 Forrester Research Percentage of Total Mortgage Market Originated Online Rapid Growth Projected for Online Mortgages Please see slides for risks and uncertainties relating to future results. Small Revenue But Fast Growth Over $1.2 Billion Loans Originated in FY 1999

49 August 26, Number of Loans Closed*, as an Index versus E-Loan Quicken Mortgage Calendar Quarters Index vs E-Loan * Partially based on Intuit estimates Please see slides for risks and uncertainties relating to future results.

50 August 26, % More Than E-Loan Number of Loans Closed*, as an Index versus E-Loan Quicken Mortgage Calendar Quarters Index vs E-Loan NOTE: $ Loans & Revenues Lower than E-Loan Interest Rate Increases Reduce Volumes NOTE: $ Loans & Revenues Lower than E-Loan Interest Rate Increases Reduce Volumes * Partially based on Intuit estimates Please see slides for risks and uncertainties relating to future results.

51 August 26, Review of FY 1999  Overview  FY 1999 Financial Performance  Investments & Balance Sheet  Core Businesses  New (Internet) Businesses Employee Metrics  Employee Metrics  Electronic Finance

52 August 26, Employee Survey Results Average of 46 “Quality of Work Environment” Questions - Top-Two-Box Scores 65% 67% 69% Employee Satisfaction: FY99 is Highest Measured Employee Satisfaction: FY99 is Highest Measured Average of All 46 Questions Please see slides for risks and uncertainties relating to future results.

53 August 26, Total company turnover down from 22% to 19% to 18% (excluding recent acquisitions) Turnover Rate Intuit’s Personnel in the Silicon Valley 22% 18% 13% Radford reports average turnover for comparable Northern California companies to be 27% for calendar year Intuit’s Silicon Valley turnover cut by 60% Intuit’s Silicon Valley turnover cut by 60% Please see slides for risks and uncertainties relating to future results.

54 August 26, Employee Productivity $154 $172 $209 Pro Forma Revenue per Employee ($ Thousands) Please see slides for risks and uncertainties relating to future results.

55 August 26, Summary of FY 1999 u Internal revenue growth rate has doubled u Pro Forma operating income up four points u Cash & securities increased to $1.2 billion u Core businesses are flourishing u Multiple new Internet businesses ramping u Employee satisfaction highest measured u Retention rates & employee productivity up Please see slide 13 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future results.

56 August 26, Ongoing Challenges u Execution Peak season capacity and customer service quality Reliability and security in transactional businesses Overseas business models u Competition Loss-laden Internet start-ups, fueled by VCs and IPOs Increasing pressure in personal tax business u Transition to the Internet Human resources: hiring and retention Financial balance: profitability versus Internet investment Culture: speed and agility Please see slides for risks and uncertainties relating to future results.

57 August 26, Thoughts on FY 2000 u Enter The Year in Strong Position Products, customers, employees, financial resources u Revenue Growth Rate Likely to Slow Europe moving to royalty-based business model Microsoft entry into the personal tax market No benefit from one-and-a-half QuickBooks launches Internet businesses face intensifying competition u Financial Goals Target: 15% revenue growth and 20% op income growth* Target: reinvest any upside in the Internet * Pro Forma. See slide 13 for a description of Pro Forma adjustments.

58 August 26, Review of FY 1999  Overview  FY 1999 Financial Performance  Investments & Balance Sheet  Core Businesses  New (Internet) Businesses  Employee Metrics Electronic Finance  Electronic Finance

59 August 26, Small Business eFinance Governments Accountants Suppliers Web Stores Customers Banks Employees Data Store Connecting Small Business Finances to the Net QuickBooks

60 August 26, Electronic Finance is... ¶ Immense in Size · Sticky Recurring Revenue ¸ Competitive Advantage ¹ High Return on Investment (With Scale) º Multiplicative Please see slide 15 for a description of Pro Forma adjustments and slides for risks and uncertainties relating to future financial results.

61 August 26, Intuit is Electronic Finance Examples of Companies Offering Electronic Finance Capabilities

62 August 26, Thanks for joining us.


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