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Intuit Reports Fourth Quarter and Fiscal 1998 Results Annual Pro Forma Profits Up 38%
Business Wire - August 27, 1998 16:16
MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)--Aug. 27, 1998--Intuit Inc. (NASDAQ:INTU) today announced the financial results for its fiscal year ended July 31, 1998. The Company reported pro forma net income of $46.7 million, 38% higher than the prior year. Pro forma earnings per share were $0.90 on a diluted basis. Intuit also reported annual net revenue of $592.7 million, an increase of 13% from the prior year pro forma results.
On a GAAP basis, Intuit reported a net loss of $12.2 million, or $0.24 per share, for the year, which included fourth quarter purchased research and development charges of $53.8 million, or $0.64 per share, related to the acquisition of Lacerte Software Corporation completed on June 22, 1998.
Complete financial results prepared on a generally accepted accounting principles and a pro forma basis are set forth on Tables A and B, respectively.
Fourth Quarter Results
For the fourth fiscal quarter ended July 31, 1998, Intuit reported pro forma net income of $1.6 million, or $0.03 per share, compared to a loss of $9.1 million, or $0.19 per share, in the prior year fourth quarter. The Company reported fourth quarter net revenue of $117.3 million, up 48%, over prior year fourth quarter pro forma net revenue. The launch of QuickBooks 6.0 in June primarily accounted for these increases.
Fourth quarter pro forma net earnings from Intuit operations were $0.02 per share. In addition, there were non-operating, investment earnings from the Company's recent public stock offering which accounted for approximately $0.02 in earnings per share. Partially offsetting the incremental interest income were expenses related to Lacerte operations acquired on June 22, 1998 accounting for approximately ($0.01) per share.
On a GAAP basis, the Company reported a fourth quarter net loss of $39.0 million, or $0.70 per share, which included purchased research and development charges of $53.8 million, or $0.59 per share, associated with the acquisition of Lacerte. The fourth quarter loss, excluding the purchased research and development charges, was $6.3 million, as compared to a loss of $19.8 million for the fourth quarter of fiscal 1997.
Business Highlights
Bill Harris, President and CEO, commented, "We entered the year with a clear goal to improve our operating performance and increase pro forma profitability and we have achieved these goals. For the year, our pro forma operating profit was 10.2% of revenue, up 2 full points from last year. Moreover, our Quicken product had the most profitable season in its fifteen year history. " Intuit Chairman, Bill Campbell said, "Our focus on reducing cost and improving our operational discipline is paying off as planned."
"At the same time," added Scott Cook, Chairman of the Executive Committee of the Board of Directors, "we have invested heavily in building Internet-based products and services and the infrastructure to support them. A year ago we had little on the Web. Today, our Quicken.com site is the fastest growing major financial Web site, according to Media Metrix, and the leader in breadth of offerings."
Intuit Increases Pro Forma Profits
During fiscal 1998, the Company significantly increased its pro forma profitability while at the same time investing in Internet development and infrastructure. Intuit aggressively reduced manufacturing and support costs as a percent of revenue. The Company also improved its pro forma operating profitability by converting customers to higher-end offerings.
Intuit successfully implemented several cost cutting programs in fiscal 1998, growing operating profit as a percentage of revenue to 10.2%. For its consumer software products, Intuit was able to reduce production costs by converting to CD based products.
In its tax business, the Company accelerated the release of its final TurboTax product, thereby eliminating the additional costs associated with its HeadStart, pre-release version. For fiscal 1998, TurboTax share of dollars at retail in the personal tax software category was 84%, consistent with the previous year according to PC Data.
To drive demand for more profitable products, Intuit included a rich set of Internet features in its higher-end consumer finance software offerings. During fiscal 1998, over 70% of the Company's consumer finance customers selected Quicken Deluxe or Quicken Home and Business, compared to 51% in the prior year. In addition, Quicken continues to lead the personal finance software category with over 80% share of dollars at retail for fiscal 1998, according to PC Data.
QuickBooks Adds to Increased Profitability in Fourth Quarter
Fourth quarter revenue growth for the small business division led strong profit increases for the division and the Company as a whole. In June, the Company launched its QuickBooks 6.0 product line that included a multi-user capability in its higher-end Pro versions. Fourth quarter revenue for QuickBooks was up 174%, compared to the same quarter a year ago, which did not include a new release of QuickBooks. QuickBooks 6.0 also received solid endorsement from the press and major computer publications. However, it is too soon to assess the long-term outlook for this product. QuickBooks held over 80% share of dollars at retail in the small business accounting category for fiscal 1998 according to PC Data.
Quicken.com Attains Leadership in Breadth
During fiscal 1998, Intuit drove Internet initiatives across all its businesses.
Throughout the year, the Company added major new capabilities and breadth to Quicken.com, utilizing its superior software technology and expertise in consumer finance, tax and small business. For example, in November, Intuit introduced QuickenMortgage, which provides online mortgage applications from eleven of the nation's leading lenders. In February, our Web TurboTax service, previously TurboTax Online, was launched. Fully electronic quoting and sale of auto insurance on Quicken InsureMarket also debuted in February and now covers ten states. In May, Quicken.com added 38 new investment features providing consumers access to sophisticated stock, mutual fund, and portfolio management tools.
Quicken.com's popularity has grown quickly. For July, page views per month were 90 million, up more than 450% from 16 million recorded one year earlier. Household reach, as measured by Media Metrix, rose from 2.4 in July 1997 to 4.2 in July 1998, faster than any other major finance site. Throughout fiscal 1998, Intuit built traffic alliances with major Internet companies such as Excite, CNNfn, Yahoo, and AOL.
The Internet is an integral part of the Company's business strategy. It covers all the markets Intuit addresses and provides both an efficient distribution channel, as well as means to offer new products and services. Internet product and service revenue incorporates activities where the customer realizes the value of the goods or services directly on the Internet or an Intuit server and includes revenue from such sources as advertising, transaction-based fees, online tax preparation and filing, and future services such as Internet-enabled payroll. Revenue from Internet Commerce includes Internet product and service revenue plus revenue from electronic order taking or delivery of the Company's traditional software products and financial supplies.
While the Internet presents many opportunities, fiscal 1998 Internet Commerce revenue was less than 10% of overall revenue. We remind investors that potential Internet-related revenue and profits may be difficult to predict or achieve and may be impacted by many factors including seasonal trends.
Financial Information
As the Company has previously discussed, Intuit's quarterly revenue pattern within any given year varies from year to year. Therefore, annual results may provide a more meaningful comparison of operating results than quarter-over-quarter comparisons.
In addition, Intuit's financial results reflect the highly seasonal nature of its businesses. Historically, revenue and profitability are highest in the January quarter. The Company experiences significantly lower revenue levels in the April, July, and October quarters, while operating expenses to develop new products and services continue during these periods. As a result, Intuit typically produces more than 100% of its annual profits in the January and April quarters.
The GAAP financial results are prepared in accordance with generally accepted accounting principles and are shown in Table A. Pro forma financial information shown in Table B excludes discontinued operations, acquisition-related charges, restructuring costs, the Parsons business sold in August 1997 and other charges. Pro forma results measure the performance of Intuit's core business because they include current business operations and exclude the charges noted above.
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