FOOL CONFERENCE CALL SYNOPSIS*
By Dale Wettlaufer (TMF Ralegh)

Intuit Inc.
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2535 Garcia Ave.
Mountain View, CA 94043
(415) 944-6000
http://www.intuit.com

ALEXANDRIA, VA., (May 5, 1997) /FOOLWIRE/ -- Intuit Inc. reported third quarter 1997 results on May 29, 1997. On a conference call to discuss the quarter's results were Scott Cook, Chairman of the Board; Bill Campbell, President and CEO; and James Heeger, CFO.

REVIEW OF FINANCIALS. Before starting with the his review of the quarter, Heeger reminded investors on the call that Intuit's results are impact by its regular seasonality and that results differ greatly quarter-to-quarter. Revenue for the quarter was $136.3 million, up 3% from last year. While we saw growth in most areas of the company, including strong growth in international revenues, the company's overall growth rate was tempered by declines in the consumer software business. Excluding acquisition-related charges, net income for the quarter was $7.6 million, or $0.16 per share, which was in-line with the consensus of analysts' expectations. On a GAAP (generally accepted accounting principles) basis, reported net income was $0.5 million, or $0.01 per share, including a $6.1 million charge for the write-off of in-process research & development related to the company's acquisition of Nihon Micom. That purchase closed on March 14, 1997. Our results also included additional acquisition-related charges of $4.3 million.

BILL CAMPBELL ON THE QUARTER. Eight weeks ago at our analyst meeting in Mountain View, we told you we were expecting slower growth. We felt confident, though, that as we improved our operational capabilities, that we would make our bottom-line numbers, that we would continue to improve our profitability over time, and that we would be addressing strategic opportunities in small business, the tax business, and a clear focus in the consumer area on internet activities. We made our bottom line through better operational execution and certainly better product quality and through lower cost of goods sold through a higher CD mix. We also had very high quality tax software this year and lower tech support costs for customers.

We think that we can continue to improve profitability in spite of lower growth. We will focus our business opportunities on strategic growth. Quickbooks is up about 25% year-to-date internationally. We will focus in the international arena on small business. In our five major international markets, we are strong, and hold a leading position in Japan. We view the tax business as a good opportunity with continued growth. On the consumer internet side, we are driving to accelerate the transition to our web-based businesses. One of the things we did last quarter was to move our Gault subsidiary into our 1040 development organization. We were fortunate to get 15 scientists to move out here. We've been able to relocate them and they've been working productively on our web activities.

Today I'm in Cedar Rapids because we have sold our Parsons subsidiary to BRODERBUND <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BROD)") else Response.Write("(Nasdaq: BROD)") end if %>. We've kept the Parsons tax business as it became clear in our recent strategy process that that Parsons didn't fit with our strategic direction. As the consumer focus has shifted to the internet, we believed that Parsons would serve better a company that had a broad line of consumer products.

In summary, our goals are to continue to improve profitability and shareholder value and make sure that we are focusing on the strategic opportunities for growth.

PRODUCT SEGMENTS. Our largest business, tax, appears to have had a successful season despite some aggressive competition in the personal tax business from H&R Block's tax cut. Once again, the TurboTax line of products was the clear favorite. TurboTax won all the trade awards given to tax software for the third year running. Total revenue growth year-to-date for personal tax has been in the mid-teens. We saw strong growth in direct sales, where the average selling prices and the attach rates are generally higher. We also saw an 85% increase in our business tax products, a higher-end SKU for TurboTax. As a result of higher quality, lower material costs, and a mix shift to higher average selling price (ASP) CD-ROM and business tax products, there's been a significant improvement in gross profits.

In addition to strong sales in our traditional retail and direct channels, sales of State product downloads increased three-fold. We also saw 75% year-over-year growth in the number of returns filed electronically using TurboTax. Along with the introduction of a 1040 EZ online product, this clearly points to the strong potential that the internet provides for our tax business. Our professional tax group also had a good year. Revenue growth year-to-date is in the double digits. Growth has been driven by strong customer acceptance of our transition to Windows, strong growth in paper return revenues, and migration to the higher-end PowerTax bundle. Due to the highest product quality this year over past years, there have been fewer product returns.

We talked in the last call about our second-largest business segment, small business. Revenues year-to-date, including QuickBooks, its add-on products, and our financial supplies group, have grown nearly 25%. Revenue growth has come from the introduction of QuickBooks 5.0 in December and has benefited from such additional sources as TaxTable and fees for customer support, which we initiated this year.

CONSUMER-ORIENTED BUSINESS. On a year-to-date basis, our personal finance business revenues are down. Quicken remains the popular personal finance software in the market with more than 80% of retail sales in its category. For the quarter just-ended, Quicken for Windows retailing unit sell-through rose 12% versus the year-ago quarter. As we said previously, growth in direct sales of Quicken has been stronger than other channels this year. Combining the direct and retail channel, the company estimates that Quicken's strong share of sales remains essentially unchanged. Despite Quicken Windows unit sell-through growth, total personal finance revenues declined on a year-over-year basis, reflecting lower Quicken for Macintosh sales, lower ASPs, lower sales of non-Quicken software products, and higher returns of prior-year products.

Parsons' results for Q3 reflected the consumer software softness we have discussed in the last two quarters, as revenues were down slightly versus the prior year. Year-to-date, while units were up, revenue for Parsons was essentially flat.

INTERNATIONAL. International had a strong quarter, up over 40%, reflecting a rebound from last year's channel management issues in Germany, and also the results of strong growth in Japan. We also launched new products in virtually every major country this quarter. This was also the quarter where we completed the acquisition of Nihon Micom, which had established Intuit as the clear leader in the Japanese small business accounting market.

INTERNET BUSINESSES. Included in this category are interactive insurance services, NETWorth and our QFN sites with associated advertising, transaction, and partner fee revenues. While relative small in revenues to-date, these are three businesses that are fastest-growing and represent a major part of our future.

INCOME STATEMENT. Although revenues were slightly below the range of expectations, operating income of $9 million was in-line with expectations as a result of better gross margins, which increased five points. Importantly, while operating margin dropped from last year, expense growth was much slower than in the past. In addition, we continued to shift the expense mix from customer support to R&D and sales and marketing. Customer support expenses, a people-intensive aspect of our business, was actually flat versus last year. This resulted from improvements in utilization of our call centers as well as higher-quality products that generated fewer calls.

OTHER LINE ITEMS. Interest income for the year was $2.8 million, or 40% higher from last year, reflecting an increase in average cash balances. Our tax rate was unchanged, at 36%. Average sharecount was down slightly, year-over-year, due to less dilution from in-the-money options.

EARNINGS. Excluding acquisition charges, normalized net income for the quarter was $7.6 million, or $0.16 per share versus a profit of $7.7 million, or $0.15 per share last year.

NINE MONTHS. For the nine months ended April 30, 1997, net revenue grew 11%, to $504.8 million. Net revenue in the nine month period reflected net revenue from continuing operations and does not include the company's former online and bill payment transaction processing business, which was sold to CHECKFREE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CKFR)") else Response.Write("(Nasdaq: CKFR)") end if %>. For the nine months, normalized net income, excluding acquisition-related charges, grew 17%, to $45.9 million, or $0.97 per share, versus a profit of $39.5 million, or $0.83 last year.

BALANCE SHEET. Many of our balance sheet changes quarter-to-quarter are due to the seasonal nature of our business. Cash equivalents and short-term investments were $326 million at quarter end, which is the seasonal high. Cash also includes the proceeds of the two million shares of CheckFree we sold in February. Short-term marketable securities of $147 million reflect the market value of the 10.6 million shares of CheckFree that we own, representing a 19.6% stake in CheckFree. Net accounts receivable were at $68 million at quarter-end, down significantly from the second quarter due to seasonal factors as well as better collections. Other accrued liabilities of $116 million includes several categories of reserves. This quarter's balance decreased $23 million from our most recent quarter and was up $38 million over last year. Approximately $20 million of that change is a reserve resulting from the sale of Intuit Services Corp. to CheckFree. The main change from the prior year is in-line with higher sell-throughs, new warranties, and contract support reserves resulting from higher sales. Deferred revenue balance of $24 million was $5 million lower from the previous quarter and $11 million higher than last year. The decrease was attributed to final shipments of 1040 products and seasonal sales, offset by an increase in deferred maintenance fees in Japan. The increase from last year is due to the growth in TaxTable revenues, which are amortized over 12-24 months and deferred maintenance fees in Japan. Finally, a notes payable balance of $34 million is $30 million higher than the previous quarter, reflecting a loan we took out for the purchase of Nihon Micom in Japan at a favorable loan rate in Japan.

PARSONS. While we are not disclosing the terms of the Parsons deal yet, we do want to discuss the impact of the sale on Intuit's numbers. On a pro-forma basis, FY 1997 revenues will be reduced by roughly $90 million and would reduce EPS by roughly $0.10. Going forward, we expect the Parsons tax business to contribute over $10 million in revenue and a few cents in EPS next year. After the consolidation, we expect that these numbers will grow in subsequent years.

Q4 OUTLOOK. As we discussed last quarter, we continue to see softness in consumer software sales in both Quicken and Parsons product lines. As a result of the decline in personal finance software we saw this quarter, we do expect overall revenue growth for the rest of the year at or perhaps below the low-end of the $600-620 million range we discussed last quarter. In light of the slow revenue growth, we need to continue to improve operating efficiencies to deliver our bottom line performance.

SCOTT COOK, CHAIR AND CEO. In our largest business, tax, the price cut did not impair improved profit performance. We produced growth in both units and ASPs during this tax season. Looking forward, we think the move with Parsons, and combining the Parsons tax product with ours, will eliminate costs in software engineering and duplicate marketing. Turning to the internet, it will over time enable us to increase add-on sales and further lower costs. Turning to small business, I can't underestimate how important our small business operation is. It is now our second-largest business and is growing as a percentage of our company. This reflects a tremendous world-wide opportunity, given that every business in every country must keep books. The vast majority of businesses are small businesses where the unique QuickBooks engine is the superior accounting in the world. You can see that, in our toughest market, which is the US, with the most competition, QuickBooks continues to pull even farther ahead of the competition. Just one measure is the record share of retail sales with the newest release of QuickBooks.

Moving to Canada, we've gotten tremendous improvements in volume, revenue, and share in the newest release of QuickBooks. The Japan acquisition is important, too, because the PC market is exploding right now in Japan. Accounting software is benefiting dramatically, and we are now the largest factor there even before bringing QuickBooks technology to Japan.

In consumer brands, there's the internet and Quicken components of the business. In the Quicken part, we are holding our strong market position in a software category that is admittedly down. Holding that strong position is both gratifying and important. It's important in at least two ways: 1. It will benefit us with the increasing effort that we're making in getting profit from this large installed base of over nine million Quicken households. 2. The Quicken base also enables us to drive the success and launch of new internet businesses. One example: We're determined that Quicken users have a far higher close-rate than general users in the Quicken insuremarket website. It's just a fact that Quicken users are better online commerce customers, and significantly so, than general internet users for us.

This quarter, we added the Debt Reduction Planner to the site, which won awards. We launched BankNOW, an internet-based banking system, which is a one-screen design that makes it far faster and easier to do banking. Let me say that the bigger news, which we discussed at our analysts' day in March, is the re-focus of our resources from disk-based products to internet products. Parsons is clearly an example of that thinking. We are not now planning any new products on disk format. There will be upgrades, which will continue profitably, yet there will be movement of existing products and the expansion of the capability of existing products, such as the multi-user version of QuickBooks available next fiscal year. The new technology development efforts are all currently focused on the internet. That resource shift that we talked about in March is underway, but it will be in the second half of calendar 1997 that you will see the initial fruits of these efforts.

QUESTION AND ANSWER SESSION

The overall growth rate for small business segment was impacted by the inclusion of supplies revenue in the line item. QuickBooks was a little bit higher and supplies growth was around 20%.

International revenues were up over 40%. Without the revenues from the Nihon Micom acquisition, revenues would have grown at least 35%.

We're currently expect to see slower growth in revenues for 1998 than we've seen historically -- what we've seen this year has confirmed that. We intend to see earnings grow faster next year than revenues.

As for the internet revenues, predicting the timing and size of revenues in new businesses is quite difficult. We are creating advertising dollars on two of our website efforts and we expect that to be one of the growing sources of revenue in our web efforts.

The number of Quicken users on the web now is sizable. About half of the internet users from home in the US are Quicken users, according to our estimates. That's a sizable and important aspect to the relationship we have with the almost-10 million Quicken households. As internet users age, we find that young users surf more while older users tend to find a site or two or three and go back just to those sites. That's important here because financial assets and buying power tend to go up as a household ages into the 40s and 50s, where you tend to see the loyalty patterns become all the more valuable.

As the Quicken segment flattens out in its growth, the company will target profitability. We have a lot of users and we want to make sure that we get a lot of profit improvement on that base. One of the things you do there is too focus R&D efforts on features that have known upgrader appeal to grow the upgrade numbers. Another way to grow that business is through the internet, though those services are not exclusive to Quicken users, as they're aimed at the broad audience. The size of the personal finance business has led us to test a lot of ideas, all of which have pointed to growth and opportunities on the internet. That allows us to do things for people's finances that a stand-alone disk-based product cannot do.

The cash from the Parsons sale adds to the company's opportunities in the strategic areas already outlined. We're confident that those funds will not just sit there; an acquisition is something that would not be surprising. Beyond the internet, there are opportunities, as we've not been shy about making acquisitions. We've been fairly aggressive in that area and we look for opportunities in segments that we've been interested in -- some segments of the small business and consumer markets appear most appropriate right now.

Development of multi-user QuickBooks is going very well. There were a number of technical challenges in taking a single-user software package and formatting that for a multi-user environment. This will be, all told, a 2.5 year development effort, the first year of which was used just to test out the architecture. The goods news is that has worked great. Continuing development is focusing on the implementation of the architecture, which we now know works. We're delighted by the prospect of expanding the functionality of Quickbooks to larger businesses than we've been able to get so far, and at higher average selling prices.

We are seeing different trends than we were expecting two months ago. The consumer Quicken area is actually down but we're not seeing that at all in tax software, where growth was quite strong. Small business was also quite strong, but none of the growth rates are as strong now as they were 3-4 years ago. What we're finding in small business is that each new version of software blows away the market and brings the market to new higher levels of size. To the best we can estimate, that will continue when we release multi-user. When we added job costing, job estimating, time and billing into the QuickBooks Pro product over a year ago, the market expanded. We're seeing the market expand again, driven by our latest release of QuickBooks, which came in December. We would not predict a change in that sort of market action.

We're not abandoning the retail channel at all with out internet focus and we're not giving up shelf space. Because of derivative versions of products like multi-user QuickBooks, we're adding SKUs. Retail remains, and we expect it to remain, a tremendous channel. We expect to be growing retail revenues and profitability for ourselves and our retail partners.

We will continue to bundle Quicken Family Lawyer with our products. Home Inventory functionality is Intuit-developed and is a feature of Quicken Deluxe and that will stay with Intuit.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.