Intuit Inc. (INTU) Q4 2007 Earnings Report, Transcript and Summary

I would like to welcome everyone to the Intuit fourth quarter and fiscal year 2007 conference call. (Operator Instructions) I will now turn the call over to Bob Lawson, Intuit's Vice President of Investor Relations and Financial Planning and Analysis. Mr. Lawson. Bob Lawson: Thank you. Good afternoon. Welcome to the Intuit fourth quarter and fiscal year 2007 conference call. I'm here with Steve Bennett, Intuit's President and CEO; Kiran Patel, our CFO; Scott Cook, our Founder; and our Chairman, Bill Campbell. 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 2006 and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit's website at Intuit.com. We assume no obligation to update any forward-looking statement. Some of the numbers in this presentation will be presented on a non-GAAP basis. The most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to GAAP are provided in today's press release. After this call concludes, a copy of our prepared remarks and supplemental financial information will be available on our website. With that, I will turn the call over to Steve Bennett. Steve Bennett: Thanks, Bob, and thanks to everyone for joining us. I would also like to say that Brad Smith is here with us today. Let me start by saying how pleased I am with our results for both the quarter and the full year. All of our businesses performed well this year, with revenue at or above the guidance ranges we provided at the start of the year. We saw continued strength in small business with QuickBooks units up 21% in the quarter and 10% for the year. Payroll subscribers crossed the 1 million mark, and payments customers grew 22% for the year. Our financial institutions business continues to add new end users at an impressive rate with the addition of 106,000 Internet banking end users and 100,000 new bill pay end users in the fourth quarter. We wrapped up another strong season in our tax businesses with consumer tax revenue up 15% and pro tax revenue up 7% for the year. We had a great year. And we're positioned for continued success in FY '08 and beyond. We announced other big news today and Brad Smith is here with us. I will talk more about our CEO transition plans later in the call. First, here's Kiran to take you through the financial details. Kiran Patel: Thanks, Steve. We closed a great year with a strong finish in the fourth quarter. As you know, the fourth quarter is one of our seasonally slow periods, so most of my comments will focus on the full year. Revenue of $2.67 billion was up 17% year over year. Non-GAAP operating margin was 28.6%, up from last year. Non-GAAP earnings per share were $1.43, up 18% year-over-year. These results include the impact of the acquisition of Digital Insight, the sale of certain payroll assets to ADP, and the treatment of the Intuit Distribution Management Solutions business unit as a discontinued operation. Without those items, revenue growth would have been 12% for the year and non-GAAP earnings per share would have been $1.47, up 21%. Now the results of our business segments. Our QuickBooks segment finished the year with another strong quarter. Fourth quarter revenue of $139.6 million was up 12% versus the year-ago quarter. For the year, QuickBooks segment revenue was $598 million, up 11%. QuickBooks software units were up 10% year over year, with strong growth in the premier products at the upper end of the product lineup, and in Simple Start, which is designed for new-to-the-world small businesses. Note that in Q4 '07, we moved the MyCorp product line from the consumer tax segment to the QuickBooks segment. The segment revenue provided here and on the factsheet reflect this change for all periods presented. MyCorp revenue was $4.4 million in FY '06 and $7.9 million in FY '07. Our Payroll and Payments segment had revenue of $129 million in the fourth quarter, up 5% year over year. For the year, Payroll and Payments segment revenue was $517 million, up 12%. Growth in this segment was driven by 22% growth in payments customers, and 9% growth in transactions per customer. Note that these results reflect the sale of our fully outsourced payroll customers to ADP. Without that impact, Payroll and Payments revenue would have grown 16% for the year. Total small business, which combines our QuickBooks and Payroll and Payments segments, showed revenue growth of 11% for the year. Growth would have been 13% without the sale to ADP. The consumer tax group had a very strong year with revenue of $813 million, up 15% from last year. TurboTax units grew 16% on the web and 6% overall. Pro tax revenue was $292 million, up for the year, up 7% over last year. This is the best result in the last four years. Financial institutions revenue was $73 million for the fourth quarter, and $150 million for the year. This segment includes the results of Digital Insight, which was acquired on February 6, and the financial institutions business previously reported in our other business segment. The acquisition of Internet Banking end users continued to show good momentum with 15% growth in the quarter and a year-end base of 7.9 million end users. Bill pay end users have also continued to grow impressively with 27% growth in the fourth quarter versus the same quarter a year ago, and a year-end base of more than 2.1 million end users. Our other businesses segments had revenue of $303 million for the year, up 5%. Moving to the balance sheet, Intuit ended fiscal 2007 with $1.3 billion in cash and short-term investments. For the year, we generated $727 million in operating cash flow from continuing operations. In FY07 we used $507 million to purchase 17 million shares. We have $800 million in authority for future share repurchases. Before I share the outlook for fiscal 2008, let me provide just a few details about the Intuit Distribution Management Solutions business sold to Activant Solutions. As mentioned earlier, the results of this business are reflect in discontinued operations. Revenue was $49.3 million in fiscal 2006 and $52 million in fiscal 2007. GAAP net loss before taxes for this business was $6 million in FY06 and $4 million in FY07. Now let me share our guidance for fiscal 2008. We expect revenue of $3 billion to $3.05 billion, a growth of 12% to 14%. We expect the following revenue growth by segment. QuickBooks, 8% to 12%.; payroll and payments, 5% to 9%; consumer tax, 8% to 12%; professional tax, minus 1% to plus 1%; financial institutions, 100% to 107%; other businesses, 12% to 16%. We expect non-GAAP operating income of $855 million to $870 million, for year-over-year growth of 12% to 14%. That translates into margin rate of 28% to 29%. We expect non-GAAP diluted earnings per share of $1.59 to $1.61, or year-over-year growth of 11% to 13%. We expect capital expenditures of approximately $300 million in fiscal 2008. The increase in capital spending is related to investments in infrastructure, offices, and data centers to support the growth in our business. It's important to note that there are a number of one-time items affecting the projected FY08 growth rates. I'll go through the material ones now. Payroll and payments growth is impacted by the roughly $38 million of fully outsourced payroll revenue earned in FY07 prior to the sale of those customers to ADP. Excluding that sale, we would have expected segment revenue growth of 12% to 16%. We're discontinuing the ProSeries Express product for 2007, which contributed roughly $14 million of revenue in FY '07. We believe the Express product line may have been used by tax processing store fronts to facilitate refund anticipation loans, a practice we don't support. Without the decision to discontinue the product line, we would have had expected segment growth of 4% to 6%. The financial institution segments includes the financial institutions business Intuit had prior to the acquisition of Digital Insight, plus a full year of Digital Insight results in FY08. DI's core business is expected to grow in the mid-teens. Excluding these items, the expected growth rate for Intuit's total company revenue would be about 3 percentage points lower than we've guided. Expected operating income growth would be about 2 points higher than we've guided and our operating margin would be about 100 basis points higher. For the first quarter of fiscal 2008, we expect revenue of $426 million to $441 million, up 22% to 26% versus the year-ago quarter, which was prior to our acquisition of DI; non-GAAP operating loss of $67 million to $56 million, and non-GAAP earnings per share loss of $0.14 to $0.12. Before I turn the call back to Steve, let me remind you that we have included revenue and EPS guidance for all four quarters of fiscal 2008 in our press release. As in past years, revenue growth by quarter may shift due to several factors, including software revenue recognition rules, changes in consumer buying habits, and tactical marketing decisions. Steve Bennett: Thanks, Kiran. As I mentioned earlier, it was a great quarter and year. We had strong results in all of our businesses and delivered revenue growth of 17% and EPS growth of 18%. We completed the biggest acquisition in our history without missing a beat. We sharpened our focus by exiting the can't be bothered payroll segment and selling our distribution management business. We continue to follow our strategy of being in growing high-profit businesses and attractive new markets with large unmet underserved needs that we can sell well. We're positioned to grow in these markets by offering products and services that are easier to use and offer better value than alternatives. We do this through an intense focus and a proven methodology to make customer experiences better on existing offerings as well as launching new offerings that solve important additional customer problems. We win by growing the categories we compete in, winning new users by converting non consumption as well as disrupting higher-priced alternatives and expanding share of wallet by selling additional products and services. We've been doing this for many years and have built large customer bases and eco systems that generate positive word of mouth, an established competitive advantage that is hard to duplicate. We're intent on continuing to get better at executing this recipe for success that makes us optimistic we'll continue to drive steady profitable growth going forward. Now let me talk for a minute about my plans to step down at the end of this year and hand the reins to Brad. For example, Intuit has a long history of success and I'm proud of the results we've delivered in my eight seasons as CEO. We've built enduring pillars of growth that will carry Intuit into the future. For example, we've evolved our strategic focus and have zeroed in on three long-term growth opportunities for the future: small business, tax, and financial institutions, and we're exploring an important new opportunity in healthcare. We're now explicitly teaching and practicing customer driven innovation as both a mind-set and methodology for product innovation with strong revenue growth in new products like QuickBooks Enterprise, Simple Start, QuickBooks Flavors, QuickBooks Point of Sale and greater ease in existing products like QuickBooks Pro and TurboTax. We have created an enduring learning culture and a leadership development program that is building the next generation of Intuit leaders. For me personally, leadership development and succession planning for Intuit's leadership team has been both a passion and a big focus area. Over the course of the last several years one leader has clearly emerged as the right candidate to lead this company into the future, Brad Smith, our Senior Vice President and General Manager of Intuit's small business division. So with those pillars in place I'm confident Brad as CEO will continue to deliver terrific results and I'm particularly pleased to have my successor be someone from within the company who is a product of the leadership development and succession planning programs we have built. Brad will take over as CEO on January 1, 2008. Between now and January 1, I will be working closely with Brad on the transition. From January 1, through the end of our fiscal year in July 2008, I will work with Brad and the leadership team on a consulting basis and I will continue to serve as an Intuit Board member. Brad's track record of success prior to joining Intuit, his experience successfully running our biggest business and his active role in shaping the Intuit strategy clearly make him the right choice for the job. Brad joined Intuit in February of 2003, leading our efforts with accountants across ProTax and QuickBooks. He quickly distinguished himself as an exceptional business leader and was promoted to run the consumer tax business in March of 2004, where he led the business to 16% revenue growth, gained 6 points of market share, and improved employee engagement. He became GM of small business in May of 2005 where he led our efforts to win versus Microsoft and create new growth categories by serving more small business needs. His experience prior to Intuit with ADP's payroll business, Advo and PepsiCo give him a broad foundation of knowledge and experience directly relevant to Intuit. In summary I've never felt better about the future of Intuit. Our prospects for continued growth, the strength of our leadership team, and the opportunities in front of us. With that, I'd like to thank all of our shareholders for their support and thanks to all Intuit employees who helped deliver another strong year. Before we get to your questions let me turn it over to Brad Smith to share a few quick thoughts. Brad Smith: Thanks, Steve. I'm thrilled and honored to assume this leadership position within Intuit and to follow in the footsteps of a great CEO like Steve Bennett. I'm ready for the challenge. I'm confident in the future of this company. We have a clear strategy, we have a strong leadership team, and we have a great portfolio of brands that are well positioned in each of the markets that we serve. So I'm excited to lead this company through the next chapter in our history and I'm looking forward to working closely with Steve to ensure we have a smooth transition. I'll also look forward to spending more time with each of you after the first of the year. With that, I'll hand it back over to Steve. Steve Bennett: With that, let's open up to your questions.

Our first question comes from Heather Bellini - UBS. Heather Bellini - UBS: I had a question about Digital Insight and was wondering if you could share with us if you had any impact on your growth forecast for this year related to what's going on with the sub-prime mortgage mess that might be impacting banks? Steve Bennett: Not really, Heather. I think the sub-prime has not affected online bill payment and online banking, which as we've seen is kind of a secular movement continuing to grow. We just finished the strong fourth quarter, and we have a strong pipeline going forward. So we feel good about the growth prospects in Digital Insight. One thing I would say is that the core online banking and the bill pay is growing strongly. We have a couple businesses in Digital Insight that are not core, that are not performing as well and dragging down the overall growth rate, Jeff's people on the team are dealing with those. So we feel good about the core of Digital Insight but we're not being impacted by the sub-prime market and I wouldn't expect this to be going forward, either.

Our next question comes from Scott Schneeberger - CIBC World Markets. Scott Schneeberger - CIBC World Markets: Could you address the Fiserve Check Free acquisition, any impact on Digital Insights going forward? Just your assessment there. Steve Bennett: We've continued to be a strong partner for Check Free, one of their biggest customers. And we've also been a strong partner with if Fiserv, both as a competitor and a collaborator, depending on what the financial institutions wanted to do. So we see the opportunity here for us to continue to work with and have a lot of discussions with Fiserv. I've met with Jeff Yabuki, myself with Jeff Stiefler, so I think there's a lot that will sort out as we go forward, but we feel really good about the opportunity to work closely with them to help both of us win, better serving financial institutions and ultimately the small businesses and consumers that bank with those financial institutions. Scott Schneeberger - CIBC World Markets: Your decision to exit in pro tax completely gets you out of that element all together now. Would you just discuss that strategy a little bit? Steve Bennett: Very clear. About five, six years ago, it became apparent to me that refund anticipation loans and things like payday loans were non-consumer friendly and were not consistent with Intuit's brand and reputation for doing right by customers. We exited, shut down a $2 million or $3 million rental business in TurboTax five or six years ago just because it was the wrong thing to do. We're making the same decision now by eliminating the Express product which had been used by people that were serving this market and so we made the decision just to exit that business, the same thing that we did five or six years ago with Consumer Tax. I think it's not particularly consumer friendly, and it's not very politically friendly, and we think that's an important long-term move for us to stay on the high ground in terms of being a consumer advocate. Scott Schneeberger - CIBC World Markets: Thanks. On the tax team, we saw the guidance. Any discussion on the price volume breakout in TurboTax? Steve Bennett: No, I think every season turns out to be a little bit different unless we go in with a theory, and this year we were pretty close to what we thought. Price was a little higher than we thought and units was a little bit lower. The other year units and price were both stronger than we thought. So we feel very good. We learned some really incredible things this year in Consumer Tax with offering the experimentation with free, which we think was a very, very significant positive learning that it was minimal cannibalization when we offered free, and so I think we got some great learning on that that will factor into our plans. We did some things early in the season. We saw some other people do things early in the season that impacted us and we won the season late. I think we learned a lot that are going to help us. We've regenerated our focus on making TurboTax even easier to use, both on the web and the desktop. So I think we have a lot of positive learnings and a lot of positive momentum going into the next tax season. We're quite bullish from the learning and the opportunity there. We still think Consumer Tax is a great growth opportunity for the company. Scott Schneeberger - CIBC World Markets: Could you update us on timing of healthcare and any other guidance associated with that? Thanks. Steve Bennett: Yes, I don't think you'll see any guidance on healthcare, as we've talked about for the next few years. We'll cover that more in September; September 22 is our investor day. I would say no material revenue impact in '08 that you should even be thinking about. This is clearly a high beta, longer term. As we've talked about, there is a big consumer unmet, underserved opportunity. We have to prove that we can solve it well, and we're just getting ready to go to beta with our first customer. So this is a three to five-year horizon, no big impact in this year at all. As I said, high beta.

Our next question comes from Phil Rueppel - Wachovia Securities. Phil Rueppel - Wachovia Securities: A question on QuickBooks as we look into 2008. Looks like you're looking for consistent growth expectations. Have you thought about changes to pricing, marketing, advertising? Last year you were able to raise prices and increase demand at the same time. Steve Bennett: I think, Phil, every year we again, like TurboTax, every year we learn a lot of things about the market and we try a lot of new things. We did a lot of advertising last year, a national ad for the first time. We learned a bunch of things about the success and effect of that. We also constantly monitor the different things and what the competitive environment is, and this trend toward more aggressive free, both in tax and small business. So I think what you will see us do is evolve our product and our value propositions to be very competitive with the different offerings and customers we're targeting, and I think we'll continue to experiment with moving all different elements of the marketing mix, channels and prices and things like that. So every year we learn a lot, and we'll fine-tune our plans and we feel really good about our position in small business as witnessed by payroll, payments, growth, and QuickBooks growth. A few years ago everybody said you guys can't grow QuickBooks units and we're up another 10% on units this year. We're growing at the high end, we're growing at the low end, and we're getting better and better at attaching payroll and payments and other add-ons. So our whole ecosystem in small business performed very, very well this year and we learned a lot that will help us continue to grow in the future. Phil Rueppel - Wachovia Securities: Finally, as Kiran expands his role and responsibility, any news on the CFO position and has the CEO transition slowed that search down at all? Could you just kind of give us an update there? Steve Bennett: Not at all, because the candidates didn't know we were going to have a CEO transition. You're finding out at the same time they might be. I have a couple interviews on my schedule next week for CFO candidates, so we are proceeding along. We're seeing a lot of interest in the job and we're seeing some very, very capable and well qualified individual. The candidate has big shoes to fill. We're also looking at internal candidates so we expect to get a very, very strong CFO and we expect to have this done, I would say before the end of the year.

Our next question comes from Brent Thill - Citigroup. Analyst for Brent Thill – Citigroup: I had a quick question actually on the Quick Base business. I wonder if you could tell us a little bit about the number of paid subscribers that you have? I believe it's also a product that you're using internally. If you could just give us a little more detail on the rollout of that product and where you see it going, and specific guidance on that business. Steve Bennett: Well, it's about a $10 million business, so I wouldn't expect us to spend a lot of time on it and that's why we don't talk a lot about it. We're excited about it. I would refer to you Computer World. They just did an article that was published today that has a lot of that data. We're quite excited about what we've learned from that. We've been in the business for seven years and it's about a $10 million, growing to maybe $15 million, so it's not material to the performance of the company. We do think there's a big opportunity but we've stopped talking about smaller things like that a few years ago because the discussion is not material to the performance of the company, and so that's why we stay focused on small business tax and financial institutions. I like the Quick Base business. We use it internally. I use it myself. But it's not going to be material to the company's performance unless we can start growing it a lot faster, which we have a new leader that's trying to do. When we think it's material enough to tell you, Katrina, we'll share that information. Analyst for Brent Thill – Citigroup: One more question on the payroll and payments business. I mean, honestly, it looks like the performance came in at what would have been the low end of the original guidance, even before the spun-out customers to ADP. So I'm wondering if you could give a little bit more detail on the number of actual customers that have transitioned over to ADP, and where that plays out in your guidance for '08 as well? Steve Bennett: I think your assertion is not right. We had 16% which we would have grown, exactly at the high end of the range before the disposition. The total impact of that will be $38 million this year, and what was it Bob, last year it was like 22? So it's a total $60 million that we're eating year-over-year because it was not a discontinued operation. So that's having a unusually depressing impact on our year-over-year growth rates. But the 16% growth would have been at the high end. What was our growth? 12% to 16% and so we would have done 16%. We continue to grow well in payroll and payments, although in payroll again this year we will have $38 million of overhang, so we're very bullish that next year's payroll growth will be very strong. Analyst for Brent Thill – Citigroup: Just to clarify, that's what I was referring to as well, that you actually came in at 12% growth, which would have been in line with your original guidance. But then also, on the $38 million for '08, is there any change in that number, or is that number still $38 million? Steve Bennett: Let me go back. The 12% to 16% was before the disposition. Analyst for Brent Thill – Citigroup: Right. Steve Bennett: The $38 million is our best assumption of what the revenue would have been for the customers we sold to ADP. That's turned out to be pretty close to what our assumption has been so far that we're about, what, six months into the sale? Brad Smith: Yes. Steve Bennett: That will be the negative impact on year-over-year compare that in segment for '08.

Our next question comes from Jim Macdonald - First Analysis. Jim Macdonald - First Analysis: Financial institutions looked pretty strong. Is there anything behind that, or any seasonality there? Steve Bennett: No, I think the thing we talked about earlier, we're very excited about this business. The good news is there's a lot of really positive things happening in growing the core and online banking and bill pay, as I mentioned earlier, a couple parts of their business that are not performing well and actually not growing and hurting the overall performance of that business and Jeff Stiefler and the team are dealing with those quite aggressively. We still see a big opportunity. What we saw is that after the acquisition, there's about a six-month cycle to get people signed up and have them come on board. Things went into neutral a little bit, but our pipeline is nice now, and people are building. We also have Finance Works, our new product, it's a little bit delayed. I am going to give you the positive stuff. It's a little delayed but the market demand for Finance Works has still been great. That's going to roll out a little later than what we had hoped for but that won't have a material financial impact in '08. Jim Macdonald - First Analysis: I'm guessing maybe you're talking on the problem issues, the loan side of the business. What are you thinking about doing there? If you divest it is that critical to the rest of the business? Steve Bennett: I think these were add-on acquisitions that they made a couple years ago that are not material to the core online banking and bill pay functionality, and so I think over time it would be logical for you to see us focus back on our core much as you've seen us do at Intuit. Jim Macdonald - First Analysis: So just to be clear, you might divest some of those businesses or shut them down? Steve Bennett: I think that's a safe assumption.

Our next question comes from Josh Golden - JP Morgan. Josh Golden - JP Morgan: My question really centers around financial policy. When you issued the debt, obviously Kiran was the CFO. Given that there will be a new CFO and the new senior leadership, and CEO, has there been any change in financial policy? Will there be any change going forward in terms of quantity of share repurchases, or the treatment of the balance sheet or credit ratings? Steve Bennett: Absolutely not. This transition, Josh, shouldn't make any impact. Remember, we have a very strong board and audit committee that is very involved in all of this kind of activity with the company, so we're very comfortable with the strategy. It's very thoughtful, and I wouldn't expect any change going forward with the new CFO or with Brad Smith taking over as the new CEO.

Our next question comes from Laura Lederman - William Blair. Laura Lederman - William Blair: Can you talk about what you've learned in terms of Digital Insight versus what you thought when you bought it? Secondarily, can you talk a little bit about QuickBooks online edition? The processing issues you had in the tax season, any thoughts on what you are hearing out in the market and anything you think you need to do to make sure that doesn't have an impact this year? Steve Bennett: Good questions, Laura. Let me start with the last one first. In terms of the tax processing, the efile issue we had, the feedback we got has actually been enormously positive that we stepped in and did the right thing and gave everybody a credit, even the people that didn't after bad experience took the hit to do the right thing. On the consumer side, the feedback has been very positive. That's not to say there won't be some impact next year. On the Pro side what we did we gave people an efiling guarantee for next season. So we responded proactively. I wish we wouldn't have had had the problem. We will eliminate it for next year. But I feel good about the position and I don't expect any material impacts on that during the next season because of the way we stepped in and did the right thing for consumers. QuickBooks online edition, we continue to grow well. We have over 100,000 customers growing nicely. It's been a business we've been in for five or six years. We believe we have more online accounting customers than everybody else put together times some multiple bigger than like five or ten, and so it's a business we're excited about. We continue to improve it. We think we want to be ubiquitous for customers and offer them choice to have the best desktop product and the best online product. With respect to DI, I think the big thing we learned is that there's a lot of demand in the market for Finance Works and the new solutions that we're building and that the combination of the two companies has gone very, very well. The integration has gone well, so we're excited about the market opportunity. What we learned it's going to take us a little longer. We tried to do a little bit more all at the same time on an execution basis than maybe we were ready to do, and so that's the big learning, and we're working closely with Jeff and the team to improve their bandwidth and capacity to execute on a bunch of new programs at the same time. I think we've learned that that was a little too much, too fast, because we weren't going to compromise quality, so we pushed the cycles a little bit. Laura Lederman - William Blair: On the QuickBooks online edition, you have 100,000 subscribers. What type of growth are you seeing? Can you give us a feel for how much the business is actually growing? Steve Bennett: It's up about 50, Brad, go ahead. Brad Smith: It's up over 50%. What's interesting about it, is two years ago we celebrated a major milestone of 25,000 customers. And then in the last 24 months we've now exceeded 100,000. So we like the growth rate. We like the quality of the customer experience. We're getting ready good feedback, from both customers as well as the industry and it's just picking up momentum.

Our next question comes from Terry Babe - ThinkEquity Partners. Terry Babe - ThinkEquity Partners: Question on TurboTax, can you talk about the retention that you experienced for the '07 tax season? Kiran Patel: In our desktop business retention was in the mid-70s, and flat against the previous year; on the web, the retention percentage is in the low 70s, and was also flat year over year. But this is also a big opportunity for us as we learn to get better at understanding why customers leave year over year, we think we have a number of opportunities to improve the experience so that we do get higher retention. It's a great source of new customers the following year. Terry Babe - ThinkEquity Partners: Can you just speak to pricing leverage going into next season by channel? Kiran Patel: At this stage, we haven't set all of our pricing strategies, but as Steve mentioned earlier, our guidance of 8% to 12% assumes that units and revenue will grow about in line with one another, and will continue to evaluate that as we get closer to season if there are opportunities on pricing. Terry Babe - ThinkEquity Partners: Then just turning to financial institutions for a moment, as it relates to the Fiserve Check Free acquisition is there a specific contract period that's up for renewal with Check Free or does that change now that the acquisition is in place? Steve Bennett: The answer is yes, we have a contract with Check Free. It's actually something we've had with all of our major suppliers, and that's not impacted at all by the acquisition.

Our next question comes from Michael Millman - Soleil Securities. Michael Millman - Soleil Securities: Just following up on that last question regarding TurboTax growth, where I think you said you expect unit volume to equal revenue, and yet you have I think 8% to 12% outlook, where as when I calculate the digital do it yourself growth last year, it was just a touch over 5%. There seems to be a discontinuity there between the market growth and what you're looking for. Maybe you can talk to that. Steve Bennett: Michael, if you look over the last six or seven years you'd see that the market growth is more in the 10% unit growth. So we think last year for a wide variety of reasons was a little bit of an anomaly for the market. We expect that we're going to continue to focus on making the product simpler and easier to use, so we can attract new users like we've been doing for the last seven or eight years, and so we feel very comfortable about the 8$ to 12% guidance for that business, based on what we learned and all the good new things Kiran and the team are working on for next season. Michael Millman - Soleil Securities: Maybe it's an anomaly, but just to comment on over the last several years that number has been boosted by the decline in the Telefile. So I wonder if, in fact, the 5% isn't the underlying base. Steve Bennett: We'll talk more about that at investor day and answer your questions on that. What we can do is share the facts looking retrospectively. I think at the end of the day we have a view of the future, and you guys will have a view of the future. We give you our best view, and you will interpret that in the way that makes sense for you, and next year at this time we'll sit back and see who was right. Michael Millman - Soleil Securities: Regarding the Finance Works, is that your killer app? Steve Bennett: I don't know if I'd call it a killer app, but Finance Works for small business is a solution suite of small business functionality, integrated with online banking that we think will be quite unique in the marketplace because there's really no online banking solutions targeted for small businesses today. When we get that out into the market, the early demand and response to that has been very good. We have to execute now and get in the market and get the learning, and we'll continue to improve it. We won't get a grand slam home run on the initial launch. We'll launch, we'll make it better, but we know that online banking and online banking for small businesses is a big growth business, and we're pleased that we're in that market, and we feel very optimistic about the long-term growth prospects there. I guess time will tell if it's a killer app or not, but the need is there, and we feel good about the progress we're making to get Finance Works into the market. Michael Millman - Soleil Securities: Is this meant to drive nonusers of online banking to become users, or is it meant to drive online banking users to become users of QuickBooks and that suite of properties? Steve Bennett: Yes. Michael Millman - Soleil Securities: Both? Steve Bennett: Yes, it's both. It's to add online hosted applications, like QuickBooks online edition, online payroll to existing online banking customers and it's also to acquire with a more compelling offering for small businesses new small business to use online banking that aren't currently using online banking. So I think absolutely we think we'll get growth out of both of those two ways. Michael Millman - Soleil Securities: Just on the EPS guidance, what's the share assumption? Kiran Patel: Michael, it's on the fact sheet, but the number is, let me give it to you; 345 million to 348 million diluted share count.

Our final question comes from Daniel Cummins - Banc of America. Daniel Cummins - Banc of America: Curious if the delay in product development and around Finance Works is related to, for example, the introduction of a small business suite, including some content by the likes of Banc of America? I think they were out with an announcement in the last week. Second, Steve, I think you had given us an idea recently to watch this space around the idea of Intuit going more enterprise, going more international, maybe taking incremental steps in that direction. So I'm curious if either of those strategies around expansion, if they're largely covered under products you currently have such as the healthcare initiative with respect to enterprise, or if it still points to perhaps more M&A for Intuit. Thanks. Steve Bennett: So, Daniel, the first question, to be honest, I'm missing a little bit of the connection between what B of A is doing and what we're doing. There's really no connection between what we're doing with Finance Works and what B of A is doing, although B of A in many cases is a competitor to the customer that we're serving through Digital Insight. So those are kind of unrelated, and the answer is, this is our own in-house kind of execution opportunity, not driven by anything externally. With respect to global, I think Brad Smith will talk more about this. We don't see that in the healthcare area at all. First we have to prove we can solve a problem in the U.S. As we talk about previously, tax, Consumer Tax, we'd love to export the U.S. tax system to the rest of the world and create a big business opportunity for us but the rest of the world is too smart to take our tax system so that's not a big opportunity. The real opportunity for us to be global is in small business. Brad Smith talked about that at last year's investor session, and mostly with web services, not packaged software. So let's leave it at that. We think we would need to have continued new applications which we're working on, and we'd have to be able to make QuickBooks multicurrency and multilingual, which we're working on, so there's a bunch of things we have to do to make our existing products more global, and there's maybe some things we'll work on to come up with true global products. So stay tuned for investor day and we'll talk a little bit more about at least what our thinking is. Brad will share his thinking on that.

Gentlemen, I'm not showing any further questions. Would you like to proceed with any additional remarks? Steve Bennett: I'd just like to say thanks everybody for their support. I'll be actively in the saddle through the end of the year and work closely with Brad to transition so I'm sure I will see many of you at investor day. Thanks for your support. We're looking forward to another great year. Take care.