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Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide readers of our consolidated financial statements with the perspectives of management. This should allow the readers of this report to obtain a comprehensive understanding of our businesses, strategies, current trends, and future prospects. Our MD&A includes the following sections:
• Executive Overview: High level discussion of our operating results and some of the
trends that affect our business.
• Critical Accounting Policies and Estimates: Policies and estimates that we believe are important to understanding the assumptions and judgments underlying our financial statements.
• Results of Operations: A more detailed discussion of our revenue and expenses.
• Liquidity and Capital Resources: Discussion of key aspects of our consolidated statements of cash flows, changes in our consolidated balance sheets, and our financial commitments. You should note that this MD&A contains forward-looking statements that involve risks and uncertainties. Please see the section entitled "Forward-Looking Statements" immediately preceding Part I for important information to consider when evaluating such statements.
You should read this MD&A in conjunction with the consolidated financial
statements and related notes in Item 8 of this Annual Report.
Due to the ongoing COVID-19, pandemic we continue to conduct business with modifications to employee work locations. Nearly all of our sites are now fully open. We are transitioning to a hybrid model where our workforce will spend a portion of their time working in our offices and a portion of their time working from home. We continue to evaluate and refine our return to workplace strategy.
The
conflict have increased global economic and political uncertainty. Intuit does
not have offices or material business in
While we have not experienced significant disruptions to our operations from the COVID-19 pandemic or theRussia -Ukraine war, we are unable to predict the full impact that these events will have on our operations and future financial performance, including demand for our offerings, impact to our customers and partners, actions that may be taken by governmental authorities, impact to the overall macroeconomic environment, and other factors identified in "Risk Factors" in Item 1A of Part I of this Annual Report. InApril 2020 , Intuit was approved as a non-bankSmall Business Administration lender for the Paycheck Protection Program (PPP). The PPP was authorized under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to provide small businesses loans to pay payroll and group health costs, salaries and commissions, mortgage and rent payments, utilities, and interest on other debt which is designed to provide assistance to small businesses during the COVID-19 pandemic. OnDecember 3, 2020 , we acquired Credit Karma in a business combination, which operates as a separate reportable segment. We have included their results of operations in our consolidated results of operations from the date of acquisition. Segment operating income for Credit Karma includes all direct expenses related to selling and marketing, product development, and general and administrative, which is different from our other reportable segments where we do not fully allocate corporate expenses. Therefore, Credit Karma segment operating income is not comparable to the segment operating income of our other reportable segments. See Note 7 to the consolidated financial statements in Item 8 of this Annual Report for more information. OnNovember 1, 2021 , we acquired all of the outstanding equity ofThe Rocket Science Group LLC (Mailchimp). Mailchimp is part of our Small Business & Self-Employed segment. We have included the results of Mailchimp in our consolidated results of operations from the date of acquisition. See Note 7 to the consolidated financial statements in Item 8 of this Annual Report for more information. OnAugust 1, 2022 , to better align our personal finance strategy, our Mint offering moved from our Consumer segment to our Credit Karma segment. We have included the results of Mint in the Consumer segment in the segment results below. Revenue and operating results for Mint are not significant and the previously reported segment results have not been reclassified. EffectiveAugust 1, 2022 , the operating results for Mint will be included in the Credit Karma segment.
On
segment continues to serve professional accountants.
Intuit Fiscal 2018 Form 10-K 32
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Tables of Contents EXECUTIVE OVERVIEW This overview provides a high level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important in order to understand our financial results for fiscal 2022 as well as our future prospects. This summary is not intended to be exhaustive, nor is it a substitute for the detailed discussion and analysis provided elsewhere in this Annual Report on Form 10-K.
Industry Trends and Seasonality
Industry Trends
Artificial intelligence (AI) is transforming multiple industries, including financial technology. Disruptive start-ups, emerging ecosystems and mega-platforms are harnessing new technology to create personalized experiences, deliver data-driven insights and increase speed of service. These shifts are creating a more dynamic and highly competitive environment where customer expectations are shifting around the world as more services become digitized and the array of choices continues to increase.
Seasonality
Our Consumer and ProConnect offerings have a significant and distinct seasonal pattern as sales and revenue from our income tax preparation products and services are typically concentrated in the period from November through April. This seasonal pattern typically results in higher net revenues during our second and third quarters endingJanuary 31 andApril 30 , respectively. In fiscal 2022, theIRS began accepting returns onJanuary 24, 2022 , and the tax filing deadline wasApril 18, 2022 . However, in fiscal 2021, theIRS began accepting returns onFebruary 12, 2021 , and the tax filing deadline wasMay 17, 2021 . In fiscal 2020, theIRS began accepting returns onJanuary 27, 2020 , and the tax filing deadline wasJuly 15, 2020 . As a result of the extensions of the tax filing deadlines in 2021 and 2020, a significant amount of our fiscal 2021 and 2020 Consumer segment and ProConnect segment revenues were recognized in the fourth quarter as compared to the third quarter of fiscal 2022.
We expect the seasonality of our Consumer and ProConnect businesses to continue
to have a significant impact on our quarterly financial results in the future.
Key Challenges and Risks Our growth strategy depends upon our ability to initiate and embrace disruptive technology trends, to enter new markets, and to drive broad adoption of the products and services we develop and market. Our future growth also increasingly depends on the strength of our third-party business relationships and our ability to continue to develop, maintain, and strengthen new and existing relationships. To remain competitive and continue to grow, we are investing significant resources in our product development, marketing, and sales capabilities, and we expect to continue to do so in the future. As we offer more online services, the ongoing operation and availability of our platforms and systems and those of our external service providers is becoming increasingly important. Because we help customers manage their financial lives, we face risks associated with the hosting, collection, use, and retention of personal customer information and data. We are investing significant management attention and resources in our information technology infrastructure and in our privacy and security capabilities, and we expect to continue to do so in the future. For our consumer and professional tax offerings, we have implemented additional security measures and are continuing to work with state and federal governments to implement industry-wide security and anti-fraud measures, including sharing information regarding suspicious filings. We received ISO 27001 certification for a portion of our systems, and we continue to invest in security measures and to work with the broader industry and government to protect our customers against this type of fraud. Additionally, Credit Karma's security measures are regularly reviewed and updated.
For a complete discussion of the most significant risks and uncertainties
affecting our business, please see “Forward-Looking Statements” immediately
preceding Part I and “Risk Factors” in Item 1A of Part I of this Annual Report.
Intuit Fiscal 2022 Form 10-K 33
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Tables of Contents Overview of Financial Results The most important financial indicators that we use to assess our business are revenue growth for the company as a whole and for each reportable segment; operating income growth for the company as a whole; earnings per share; and cash flow from operations. We also track certain non-financial drivers of revenue growth and, when material, identify them in the applicable discussions of segment results below. Service offerings are a significant part of our business. Our total service and other revenue was$11.0 billion or 86% of our total revenue in fiscal 2022, and we expect our total service and other revenue to continue to grow in the future.
Key highlights for fiscal 2022 include the following:
Small Business & Self-Employed
Revenue of revenue of Consumer revenue of
$12.7 B $6.5 B $3.9 B
up 32% from fiscal 2021 up 38% from fiscal 2021 up 10% from fiscal 2021
Credit Karma revenue of ProConnect revenue of Operating income of
$1.8 B $546 M $2.6 B
up 109% from fiscal 2021(1) up 6% from fiscal 2021 up 3% from fiscal 2021
Net income of Diluted net income per share of Cash flow from operations of
$2.1 B $7.28 $3.9 B
flat compared to fiscal 2021 down 4% from fiscal 2021
up 20% from fiscal 2021
(1) Credit Karma revenue for fiscal 2021 includes the operations of Credit Karma from the acquisition date ofDecember 3, 2020 , while fiscal 2022 includes the full twelve months of operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In preparing our consolidated financial statements in accordance withU.S. generally accepted accounting principles (GAAP), we are required to make estimates, assumptions, and judgments that can have a significant impact on our net revenue, operating income or loss and net income or loss, as well as on the value of certain assets and liabilities on our consolidated balance sheets. We believe that the estimates, assumptions, and judgments involved in the following accounting policies have the greatest potential impact on our consolidated financial statements, so we consider these to be our critical accounting policies: •Revenue Recognition •Business Combinations
•Goodwill, Acquired Intangible Assets, and Other Long-Lived Assets – Impairment
Assessments
•Legal Contingencies
•Accounting for Income Taxes – Estimates of Deferred Taxes, Valuation
Allowances, and Uncertain Tax Positions
Our senior management has reviewed the development and selection of these
critical accounting policies and their disclosure in this Annual Report on Form
10-K with the
Intuit Fiscal 2022 Form 10-K 34
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Revenue Recognition
We derive our revenue primarily from the sale of online services such as tax, accounting, payroll, merchant payment processing, delivery of qualified links, e-commerce, marketing automation, customer relationship management, and packaged desktop software products and desktop software subscriptions. Our contracts with customers often include promises to transfer multiple products and services. In determining how revenue should be recognized, a five-step process is used, which requires judgment and estimates within the revenue recognition process. The primary judgments include identifying the performance obligations in the contract and determining whether the performance obligations are distinct. If any of these judgments were to change it could cause a material increase or decrease in the amount of revenue we report in a particular period. For additional information, see "Revenue Recognition" in Note 1 to the consolidated financial statements in Item 8 of this Annual Report.
Business Combinations
As described in "Description of Business and Summary of Significant Accounting Policies - Business Combinations," in Note 1 to the consolidated financial statements in Item 8 of this Annual Report, under the acquisition method of accounting we generally recognize the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in an acquiree at their fair values as of the date of acquisition. We measure goodwill as the excess of consideration transferred, which we also measure at fair value, over the net of the acquisition date fair values of the identifiable assets acquired and liabilities assumed. The acquisition method of accounting requires us to exercise judgment and make significant estimates and assumptions regarding the fair values of the elements of a business combination as of the date of acquisition, including the fair values of identifiable intangible assets, deferred tax asset valuation allowances, liabilities related to uncertain tax positions, and contingencies. This method allows us to refine these estimates over a one-year measurement period to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. If we are required to retroactively adjust provisional amounts that we have recorded for the fair values of assets and liabilities in connection with acquisitions, these adjustments could materially decrease our operating income and net income and result in lower asset values on our consolidated balance sheet. Significant estimates and assumptions that we must make in estimating the fair value of acquired technology, customer lists, and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could record impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated or slowed.
Assessments
We estimate the fair value of acquired intangible assets and other long-lived assets that have finite useful lives whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable. We test for potential impairment of goodwill and other intangible assets that have indefinite useful lives annually in our fourth fiscal quarter or whenever indicators of impairment arise. The timing of the annual test may result in charges to our consolidated statement of operations in our fourth fiscal quarter that could not have been reasonably foreseen in prior periods. As described in "Description of Business and Summary of Significant Accounting Policies -Goodwill , Acquired Intangible Assets and Other Long-Lived Assets," in Note 1 to the consolidated financial statements in Item 8 of this Annual Report, in order to estimate the fair value of goodwill we use a weighted combination of a discounted cash flow model (known as the income approach) and comparisons to publicly traded companies engaged in similar businesses (known as the market approach). The income approach requires us to use a number of assumptions, including market factors specific to the business, the amount and timing of estimated future cash flows to be generated by the business over an extended period of time, long-term growth rates for the business, and a rate of return that considers the relative risk of achieving the cash flows and the time value of money. We evaluate cash flows at the reporting unit level. Although the assumptions we use in our discounted cash flow model are consistent with the assumptions we use to generate our internal strategic plans and forecasts, significant judgment is required to estimate the amount and timing of future cash flows from each reporting unit and the relative risk of achieving those cash flows. When using the market approach, we make judgments about the comparability of publicly traded companies engaged in similar businesses. We base our judgments on factors such as size, growth rates, profitability, risk, and return on investment. We also make judgments when adjusting market multiples of revenue, operating income, and earnings for these companies to reflect their relative similarity to our own businesses. See Note 6 to the consolidated financial statements in Item 8 of this Annual Report for a summary of goodwill by reportable segment. We estimate the recoverability of acquired intangible assets and other long-lived assets that have finite useful lives by comparing the carrying amount of the asset to the future undiscounted cash flows that we expect the asset to generate. In order to estimate the fair value of those assets, we estimate the present value of future cash flows from those assets. The key assumptions that we use in our discounted cash flow model are the amount and timing of estimated future cash flows to be generated by the asset over an extended period of time and a rate of return that considers the relative risk of achieving the cash flows and the time value of money. Significant judgment is required to estimate the amount and timing of future cash flows and the relative risk of achieving those cash flows. We also make judgments about the remaining useful lives of acquired intangible assets and other long-lived assets that have finite lives. See Note 6 to the consolidated financial statements in Intuit Fiscal 2022 Form 10-K 35
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Item 8 of this Annual Report for a summary of cost, accumulated amortization and
weighted average life in years for our acquired intangible assets.
Assumptions and estimates about future values and remaining useful lives are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. For example, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of one or more of our reporting units, we may be required to record future impairment charges for goodwill and acquired intangible assets. Impairment charges could materially decrease our future net income and result in lower asset values on our consolidated balance sheets. During the fourth quarters of fiscal 2022, fiscal 2021, and fiscal 2020, we performed our annual goodwill impairment tests. Using the methodology described in "Description of Business and Summary of Significant Accounting Policies -Goodwill , Acquired Intangible Assets and Other Long-Lived Assets," in Note 1 to the consolidated financial statements in Item 8 of this Annual Report, we determined that the estimated fair values of all of our reporting units substantially exceeded their carrying values and that they were not impaired.
Legal Contingencies
We are subject to certain legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. We review the status of each significant matter quarterly and assess our potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we record a liability and an expense for the estimated loss. If we determine that a loss is possible and the range of the loss can be reasonably determined, then we disclose the range of the possible loss. Significant judgment is required in the determination of whether a potential loss is probable, reasonably possible, or remote as well as in the determination of whether a potential exposure is reasonably estimable. Our accruals are based on the best information available at the time. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Potential legal liabilities and the revision of estimates of potential legal liabilities could have a material impact on our financial position and results of operations. See Note 14 to the consolidated financial statements in Item 8 of this Annual Report for more information.
Accounting for Income Taxes – Estimates of Deferred Taxes, Valuation Allowances,
and Uncertain Tax Positions
We estimate our income taxes based on the various jurisdictions where we conduct business. Significant judgment is required in determining our worldwide income tax provision. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax rules and the potential for future adjustment of our uncertain tax positions by theUnited States Internal Revenue Service or other taxing jurisdictions. We estimate our current tax liability and assess temporary differences that result from differing treatments of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which we show on our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be realized. To the extent we believe that realization is not likely, we establish a valuation allowance. When we establish a valuation allowance or increase this allowance in an accounting period, we record a corresponding tax expense in our consolidated statement of operations. We record a valuation allowance to reflect uncertainties about whether we will be able to utilize our deferred tax assets before they expire. We assess the need for an adjustment to the valuation allowance on a quarterly basis. The assessment is based on our estimates of future sources of taxable income in the jurisdictions in which we operate and the periods over which our deferred tax assets will be realizable. While we have considered future taxable income in assessing the need for a valuation allowance for the periods presented, we could in the future be required to increase the valuation allowance to take into account additional deferred tax assets that we may be unable to realize. An increase in the valuation allowance could have an adverse impact on our income tax provision and net income in the period in which we record the change. We recognize and measure benefits for uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax positions that are more likely than not of being sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Significant judgment is required to evaluate uncertain tax positions. We evaluate our uncertain tax positions on a quarterly basis. Our evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in our income tax expense in the period in which we make the change, which could have a material impact on our effective tax rate and operating results. See Note 11 to the consolidated financial statements in Item 8 of this Annual Report for more information. Intuit Fiscal 2022 Form 10-K 36
-------------------------------------------------------------------------------- Tables of Contents RESULTS OF OPERATIONS A discussion regarding our financial condition and results of operations for fiscal 2022 compared to fiscal 2021 is presented below. A discussion regarding our financial condition and results of operations for fiscal 2021 compared to fiscal 2020 can be found under Item 7 of Part II in our Annual Report on Form 10-K for the fiscal year endedJuly 31, 2021 , filed with theSEC onSeptember 8, 2021 , which is available free of charge on theSEC's website at www.sec.gov and on the Investor Relations section of our corporate website at investors.intuit.com.
Financial Overview
(Dollars in millions, except per Fiscal Fiscal Fiscal 2022-2021 2021-2020 share amounts) 2022 2021 2020 % Change % Change Total net revenue$12,726 $9,633 $7,679 32 % 25 % Operating income 2,571 2,500 2,176 3 % 15 % Net income 2,066 2,062 1,826 - % 13 % Diluted net income per share$7.28 $7.56 $6.92 (4 %) 9 % Total net revenue increased$3.1 billion or 32% in fiscal 2022 compared with fiscal 2021. Our Small Business & Self-Employed segment revenue increased 38% primarily due to growth in our Online Ecosystem revenue, which included$762 million of revenue from Mailchimp. Revenue for our Consumer segment increased 10% primarily due to a shift in mix to our higher priced offerings including TurboTax Live and our Premier offering. Revenue for our Credit Karma segment increased$940 million in fiscal 2022 compared to fiscal 2021. This increase was primarily due to the fact that our fiscal 2021 results of operations included Credit Karma from the date of acquisition, which wasDecember 3, 2020 , while our fiscal 2022 results of operations include Credit Karma for the full reporting period. Additionally, Credit Karma revenue increased year over year primarily driven by growth in our credit card and personal loan verticals. See "Segment Results" later in this Item 7 for more information. Operating income increased$71 million or 3% in fiscal 2022 compared with fiscal 2021. The increase was due to the higher revenue described above partially offset by an increase in expenses primarily for staffing, share-based compensation, marketing, and amortization of other acquired intangible assets. We also incurred a$141 million one-time charge related to our settlement with the 50 state attorneys general and theDistrict of Columbia , entered into onMay 4, 2022 . See "Operating Expenses" later in this Item 7 and Note 14 to the consolidated financial statements in Item 8 of this Annual Report for more information. Net income increased$4 million in fiscal 2022 compared with fiscal 2021 due the increase in operating income described above and a slightly lower effective tax rate, which were partially offset by an increase in interest expense from borrowing$4.7 billion on a term loan in fiscal 2022. Additionally, we recorded a$30 million gain in fiscal 2021 from the sale of a note receivable that was previously written off. Diluted net income per share decreased 4% to$7.28 for fiscal 2022 due to the increase in the weighted average shares outstanding from the shares issued as part of the acquisition of Mailchimp in the second quarter of fiscal 2022, which was partially offset by the increase in net income.
Segment Results
The information below is organized in accordance with our four reportable segments. All of our segments operate primarily inthe United States and sell primarily to customers inthe United States . Total international net revenue was approximately 8%, 5%, and 4% of consolidated total net revenue for the twelve months endedJuly 31, 2022 , 2021 and 2020. OnDecember 3, 2020 , we acquired Credit Karma in a business combination and it operates as a separate reportable segment. We have included the results of operations of Credit Karma in our consolidated statements of operations from the date of acquisition. See Note 7 to the consolidated financial statements in Item 8 of this Annual Report for more information. Segment operating income for Credit Karma includes all direct expenses, which is different from our other reportable segments where we do not fully allocate corporate expenses. OnNovember 1, 2021 , we acquired Mailchimp in a business combination. Mailchimp is part of our Small Business & Self-Employed segment. We have included the results of operations of Mailchimp in our consolidated results of operations from the date of acquisition. OnAugust 1, 2022 , to better align our personal finance strategy, our Mint offering moved from our Consumer segment to our Credit Karma segment. We have included the results of Mint in the Consumer segment in the segment results below. Revenue and operating results for Mint are not significant, and the previously reported segment results have not been reclassified. EffectiveAugust 1, 2022 , the operating results for Mint will be included in the Credit Karma segment.
On
segment continues to serve professional accountants.
Intuit Fiscal 2022 Form 10-K 37
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Segment operating income is segment net revenue less segment cost of revenue and operating expenses. We include expenses such as corporate selling and marketing, product development, general and administrative, and non-employment related legal and litigation settlement costs, which are not allocated to specific segments, in unallocated corporate items as part of other corporate expenses. For Credit Karma, segment expenses include all direct expenses related to selling and marketing, product development, and general and administrative. Unallocated corporate items for all segments include share-based compensation, amortization of acquired technology, amortization of other acquired intangible assets, and goodwill and intangible asset impairment charges. These unallocated costs for all segments totaled$4.3 billion in fiscal 2022,$2.9 billion in fiscal 2021, and$2.3 billion in fiscal 2020. Unallocated costs increased in fiscal 2022 compared with fiscal 2021 due to increases in share-based compensation expense, general and administrative expense, amortization of other acquired intangible assets, amortization of acquired technology, product development, and selling and marketing expense. See Note 15 to the consolidated financial statements in Item 8 of this Annual Report for reconciliations of total segment operating income to consolidated operating income for each fiscal year presented. Intuit Fiscal 2022 Form 10-K 38
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Small Business & Self-Employed
[[Image Removed: intu-20220731_g3.jpg]] Small Business & Self-Employed segment revenue includes both Online Ecosystem and Desktop Ecosystem revenue. Our Online Ecosystem includes revenue from: •QuickBooks Online, QuickBooks Live, QuickBooks Online Advanced and QuickBooks Self-Employed financial and business management offerings; •Small business payroll services, including QuickBooks Online Payroll, Intuit Online Payroll, Intuit Full Service Payroll; •Merchant payment processing services for small businesses who use online offerings; •Mailchimp's e-commerce, marketing automation, and customer relationship management offerings; •QuickBooks Commerce, QuickBooks Checking, and financing for small businesses. Our Desktop Ecosystem includes revenue from: •QuickBooks Desktop software subscriptions (QuickBooks Desktop Pro Plus, QuickBooks Desktop Premier Plus, and QuickBooks Enterprise, and ProAdvisor Program memberships for the accounting professionals who serve small businesses); •QuickBooks Desktop packaged software products (Desktop Pro, Desktop for Mac, Desktop Premier, andQuickBooks Point of Sale); •Desktop payroll products (QuickBooks Basic Payroll, QuickBooks Assisted Payroll and QuickBooks Enhanced Payroll); •Merchant payment processing services for small businesses who use desktop offerings; •Financial supplies; and •Financing for small businesses. Segment product revenue is primarily derived from revenue related to delivery of software licenses and the related updates, including version protection, for our QuickBooks Desktop subscriptions and desktop payroll offerings which are part of our Desktop Ecosystem. Segment service and other revenue is primarily derived from our Online Ecosystem revenue and revenue from the services and support that are provided as part of our QuickBooks Desktop subscription and desktop payroll offerings as well as merchant payment processing services. Fiscal Fiscal Fiscal 2022-2021 2021-2020 (Dollars in millions) 2022 2021 2020 % Change % Change Product revenue$ 1,113 $ 1,085 $ 1,032 Service and other revenue 5,347 3,603 3,018 Total segment revenue$ 6,460 $ 4,688 $ 4,050 38 % 16 % % of total revenue 51 % 49 % 53 % Segment operating income$ 3,499 $ 2,590 $ 2,091 35 % 24 % % of related revenue 54 % 55 % 52 % Intuit Fiscal 2022 Form 10-K 39
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Revenue classified by significant product and service offerings was as follows:
Fiscal Fiscal Fiscal 2022-2021 2021-2020
(Dollars in millions) 2022 2021 2020 % Change % Change
Net revenue:
QuickBooks Online Accounting $ 2,267 $ 1,699 $ 1,354 33 % 25 %
Online Services 2,171 1,051 828 107 % 27 %
Total Online Ecosystem 4,438 2,750 2,182 61 % 26 %
QuickBooks Desktop Accounting 851 789 755 8 % 5 %
Desktop Services and Supplies 1,171 1,149 1,113 2 % 3 %
Total Desktop Ecosystem 2,022 1,938 1,868 4 % 4 %
Total Small Business & Self-Employed $ 6,460 $ 4,688 $ 4,050 38 % 16 %
Revenue for our Small Business & Self-Employed segment increased $1.8 billion or
38% in fiscal 2022 compared with fiscal 2021. The increase was primarily due to
growth in Online Ecosystem revenue, which included $762 million of revenue from
Mailchimp.
Online Ecosystem
Online Ecosystem revenue increased $1.7 billion or 61% in fiscal 2022 compared
with fiscal 2021. QuickBooks Online Accounting revenue increased 33% in fiscal
2022 compared with fiscal 2021 primarily due to higher effective prices, an
increase in customers, and a shift in mix to our higher priced offerings. Online
Services revenue increased 107% in fiscal 2022 compared with fiscal 2021
primarily due to additional revenue from the Mailchimp offerings and an increase
in revenue from our payroll and payments offerings. Online payroll revenue
increased due to an increase in customers and a shift in mix to our full service
offering. Online payments revenue increased due to an increase in charge volume
per customer and an increase in customers.
Desktop Ecosystem
Desktop Ecosystem revenue increased$84 million or 4% in fiscal 2022 compared with fiscal 2021 primarily due to growth in our QuickBooks Desktop and Enterprise subscription offerings which was partially offset by a decrease in Desktop unit sales. In the first quarter of fiscal 2022, we discontinued our QuickBooks Desktop packaged software products and now sell predominantly on a subscription basis. Additionally, during fiscal 2022, there was an increase in revenue from our Desktop Payroll and Desktop Payments offerings. Small Business & Self-Employed segment operating income increased$909 million or 35% in fiscal 2022 compared with fiscal 2021 primarily due to the increase in revenue described above, partially offset by higher expenses. We incurred higher expenses for staffing, marketing, and outside services. Intuit Fiscal 2022 Form 10-K 40
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Consumer
[[Image Removed: intu-20220731_g4.jpg]]
Consumer segment product revenue is derived primarily from TurboTax desktop tax
return preparation software and related form updates.
Consumer segment service and other revenue is derived primarily from TurboTax
Online and TurboTax Live offerings, electronic tax filing services and connected
services, and also from our Mint offering.
Fiscal Fiscal Fiscal 2022-2021 2021-2020
(Dollars in millions) 2022 2021 2020 % Change % Change
Product revenue $ 208 $ 201 $ 203
Service and other revenue 3,707 3,362 2,933
Total segment revenue $ 3,915 $ 3,563 $ 3,136 10 % 14 %
% of total revenue 31 % 37 % 41 %
Segment operating income $ 2,483 $ 2,237 $ 2,063 11 % 8 %
% of related revenue 63 % 63 % 66 %
Revenue for our Consumer segment increased $352 million or 10% in fiscal 2022
compared with fiscal 2021 primarily due to a shift in mix to our higher priced
product offerings including TurboTax Live and our Premier offering.
Consumer segment operating income increased $246 million or 11% in fiscal 2022
compared with fiscal 2021 due to the higher revenue described above, which was
partially offset by higher expenses for marketing and staffing.
Effective
Intuit Fiscal 2022 Form 10-K 41
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Credit Karma
[[Image Removed: intu-20220731_g5.jpg]]
Credit Karma revenue is derived from cost-per-action transactions, which include
the delivery of qualified links that result in completed actions such as credit
card issuances and personal loan funding; and cost-per-click and cost-per-lead
transactions, which include user clicks on advertisements or advertisements that
allow for the generation of leads, and primarily relate to mortgage and
insurance businesses.
Fiscal Fiscal Fiscal 2022-2021 2021-2020
(Dollars in millions) 2022 2021 2020 % Change % Change
Product revenue $ - $ - $ -
Service and other revenue 1,805 865 -
Total segment revenue $ 1,805 $ 865 $ - 109 % N/A
% of total revenue 14 % 9 % - %
Segment operating income $ 531 $ 182 $ - 192 % N/A
% of related revenue 29 % 21 % N/A
We acquired Credit Karma on
the operations of Credit Karma beginning on the date of acquisition.
Revenue for our Credit Karma segment increased$940 million in fiscal 2022 compared with fiscal 2021. Our fiscal 2021 results of operations include Credit Karma from the date of acquisition, which wasDecember 3, 2020 , and our fiscal 2022 results of operations include Credit Karma for the full fiscal year. Credit Karma revenue also increased in fiscal 2022 primarily driven by growth in our credit card and personal loan verticals.
Credit Karma segment operating income increased
compared with fiscal 2021, primarily due to the increase in revenue described
above, which was partially offset by higher expenses for staffing and marketing.
Effective
Intuit Fiscal 2022 Form 10-K 42
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ProConnect
[[Image Removed: intu-20220731_g6.jpg]]
ProConnect segment product revenue is derived primarily from Lacerte, ProSeries,
and ProFile desktop tax preparation software products and related form updates.
ProConnect segment service and other revenue is derived primarily from
ProConnect Tax Online tax products, electronic tax filing service, connected
services, and bank products.
Fiscal Fiscal Fiscal 2022-2021 2021-2020
(Dollars in millions) 2022 2021 2020 % Change % Change
Product revenue $ 426 $ 412 $ 400
Service and other revenue 120 105 93
Total segment revenue
6 % 5 % % of total revenue 4 % 5 % 6 % Segment operating income$ 383 $ 372 $ 346 3 % 8 % % of related revenue 70 % 72 % 70 % Revenue for our ProConnect segment increased$29 million or 6% in fiscal 2022 compared with fiscal 2021 primarily due to a higher average revenue per customer and a shift in mix. ProConnect segment operating income increased$11 million or 3% in fiscal 2022 compared with fiscal 2021 primarily due to the higher revenue described above, which was partially offset by higher expenses for staffing.
In
segment continues to serve professional accountants.
Intuit Fiscal 2022 Form 10-K 43
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Cost of Revenue
% of % of % of
Fiscal Related Fiscal Related Fiscal Related
(Dollars in millions) 2022 Revenue 2021 Revenue 2020 Revenue
Cost of product revenue $ 69 4 % $ 69 4 % $ 72 4 %
Cost of service and other revenue 2,197 20 % 1,564
20 % 1,284 21 % Amortization of acquired technology 140 n/a 50 n/a 22 n/a Total cost of revenue$ 2,406 19 %$ 1,683 17 %$ 1,378 18 % Our cost of revenue has three components: (1) cost of product revenue, which includes the direct costs of manufacturing and shipping or electronically downloading our desktop software products; (2) cost of service and other revenue, which includes the direct costs associated with our online and service offerings, such as costs for data processing and storage capabilities from cloud providers, customer support costs, costs for the tax and bookkeeping experts that support our TurboTax Live and QuickBooks Live offerings, and costs related to credit score providers; and (3) amortization of acquired technology, which represents the cost of amortizing developed technologies that we have obtained through acquisitions over their useful lives. Cost of product revenue as a percentage of product revenue was relatively consistent in fiscal 2022 compared with fiscal 2021. We expense costs of product revenue as they are incurred for delivered software, and we do not defer any of these costs when product revenue is deferred.
Cost of service and other revenue as a percentage of service and other revenue
was relatively consistent in fiscal 2022 compared with fiscal 2021.
Operating Expenses
% of % of % of
Total Total Total
Fiscal Net Fiscal Net Fiscal Net
(Dollars in millions) 2022 Revenue 2021 Revenue 2020 Revenue
Selling and marketing $ 3,526 29 % $ 2,644 28 % $ 2,048 27 %
Research and development 2,347 18 % 1,678 17 % 1,392 18 %
General and administrative 1,460 11 % 982 10 % 679 9 %
Amortization of other acquired
intangible assets 416 3 % 146 2 % 6 - %
Total operating expenses $ 7,749 61 % $ 5,450 57 % $ 4,125 54 %
Total operating expenses as a percentage of total net revenue increased in
fiscal 2022 compared to fiscal 2021. Total net revenue increased $3.1 billion or
32% and total operating expenses increased $2.3 billion or 42%. Total staffing
increased $585 million ; total share-based compensation expense increased $478
million ; total marketing increased $434 million ; and total amortization of other
acquired intangible assets increased $270 million , which was primarily related
to Mailchimp and Credit Karma. We also incurred a $141 million one-time charge
related to the company's settlement with the 50 state attorneys general and the
District of Columbia , entered into on May 4, 2022 .
Non-Operating Income and Expenses
Interest Expense
Interest expense of$81 million in fiscal 2022 consisted primarily of interest on our unsecured term loan, senior unsecured notes, and secured revolving credit facility. Interest expense of$29 million in fiscal 2021 consisted primarily of interest on our senior unsecured notes, secured revolving credit facility, unsecured term loan, and unsecured revolving credit facility. See Note 8 to the consolidated financial statements in Item 8 of this Annual Report for more information. Intuit Fiscal 2022 Form 10-K 44
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Interest and Other Income, Net
(In millions) Fiscal 2022 Fiscal 2021 Fiscal 2020 Interest income (1) $ 15 $ 11 $ 39 Net gain (loss) on executive deferred compensation plan assets (2) (12) 28 5 Other (3) 49 46 (8) Total interest and other income, net $ 52 $ 85 $ 36
(1) Interest income increased in fiscal 2022 compared to fiscal 2021 due to
higher average interest rates.
(2) In accordance with authoritative guidance, we record gains and losses associated with executive deferred compensation plan assets in interest and other income and gains and losses associated with the related liabilities in operating expenses. The total amounts recorded in operating expenses for each period are approximately equal to the total amounts recorded in interest and other income in those periods. (3) In fiscal 2022, we recorded$47 million of net gains on other long-term investments. In fiscal 2021, we recorded a$30 million gain from the sale of a note receivable that was previously written off and net gains on other long-term investments of$17 million . Income Taxes Our effective tax rates for fiscal 2022 and fiscal 2021 were approximately 19% for both periods. Excluding the tax benefits related to share-based compensation, our effective tax rates for fiscal 2022 and fiscal 2021 were approximately 24%. This rate differed from the federal statutory rate of 21% primarily due to state income taxes and non-deductible share-based compensation, which were partially offset by the benefit we received from the federal research and experimentation credit. See Note 11 to the consolidated financial statements in Item 8 of this Annual Report for more information about our effective tax rates. AtJuly 31, 2022 , we had net deferred tax liabilities of$608 million which included a valuation allowance for state research and experimentation tax credit carryforwards, foreign loss carryforwards, foreign intangible deferred tax assets and state operating loss carryforwards. See "Critical Accounting Policies and Estimates" earlier in this Item 7 and Note 11 to the consolidated financial statements in Item 8 of this Annual Report for more information. A provision enacted as part of the 2017 Tax Cuts & Jobs Act requires companies to capitalize research and experimental expenditures for tax purposes in tax years beginning afterDecember 31, 2021 . This provision is applicable to us for our fiscal 2023. If this provision is not repealed or deferred, we expect our fiscal 2023 cash tax payments to increase significantly compared to our fiscal 2022. The Inflation Reduction Act was enacted onAugust 16, 2022 . This law, among other provisions, provides a corporate alternative minimum tax on adjusted financial statement income, which is effective for us beginning in fiscal 2024, and an excise tax on corporate stock repurchases, which is effective for our share repurchases afterDecember 31, 2022 . We are continuing to evaluate the impact it may have on our financial position and results of operations. In the current global tax policy environment, theU.S. and other domestic and foreign governments continue to consider, and in some cases enact, changes in corporate tax laws. As changes occur, we account for finalized legislation in the period of enactment. Intuit Fiscal 2022 Form 10-K 45
-------------------------------------------------------------------------------- Tables of Contents LIQUIDITY AND CAPITAL RESOURCES
Overview
AtJuly 31, 2022 , our cash, cash equivalents and investments totaled$3.3 billion , a decrease of$589 million fromJuly 31, 2021 , due to the factors described in "Statements of Cash Flows" below. Our primary sources of liquidity have been cash from operations, which includes the collection of accounts receivable for products and services, the issuance of senior unsecured notes, and borrowings under our credit facilities. Our primary uses of cash have been for research and development programs, selling and marketing activities, acquisitions of businesses, repurchases of our common stock under our stock repurchase programs, the payment of cash dividends, debt service costs and debt repayment, and capital projects. As discussed in "Executive Overview - Industry Trends and Seasonality" earlier in this Item 7, our business is subject to significant seasonality. The balance of our cash, cash equivalents and investments generally fluctuates with that seasonal pattern. We believe the seasonality of our business is likely to continue in the future.
The following table summarizes selected measures of our liquidity and capital
resources at the dates indicated:
July 31, July 31, $ %
(Dollars in millions) 2022 2021 Change Change
Cash, cash equivalents and investments $ 3,281 $ 3,870 $ (589) (15) %
Long-term investments 98 43 55 128 %
Short-term debt 499 - 499 NM
Long-term debt 6,415 2,034 4,381 215 %
Working capital 1,417 2,502 (1,085) (43) %
Ratio of current assets to current liabilities 1.4 : 1 1.9 : 1
NM – Not meaningful
We have historically generated significant cash from operations, and we expect
to continue to do so during fiscal 2023. Our cash, cash equivalents, and
investments totaled
restricted, and approximately 90% of those funds were located in the
OnNovember 1, 2021 , we terminated our amended and restated credit agreement datedMay 2, 2019 , and entered into a credit agreement with certain institutional lenders with an aggregate principal amount of$5.7 billion , which includes a$1 billion unsecured revolving credit facility that matures onNovember 1, 2026 , and a$4.7 billion unsecured term loan that matures onNovember 1, 2024 . OnNovember 1, 2021 , we borrowed the full$4.7 billion under the unsecured term loan to fund a portion of the cash consideration for the acquisition of Mailchimp. The$1 billion unsecured revolving credit facility is available to us for general corporate purposes and serves as a source of liquidity. See Note 8 to the consolidated financial statements in Item 8 of this Annual Report for more information.
Our secured revolving credit facility is available to fund a portion of our
loans to qualified small businesses. At
outstanding under the secured revolving credit facility. See “Credit Facilities”
later in this Item 7 for more information.
Based on past performance and current expectations, we believe that our cash and cash equivalents, investments, and cash generated from operations will be sufficient to meet anticipated seasonal working capital needs, capital expenditure requirements, contractual obligations, commitments, debt service requirements, and other liquidity requirements associated with our operations for at least the next 12 months.
We expect to return excess cash generated by operations to our stockholders
through payment of cash dividends, after taking into account our operating and
strategic cash needs.
OnDecember 3, 2020 , we acquired Credit Karma. The fair value of the purchase consideration totaled$7.2 billion and included$3.4 billion in cash, 10.6 million shares of Intuit common stock with a fair value of$3.8 billion and assumed equity awards for services rendered through the acquisition date of$47 million . See "Business Combinations" below for more information. OnNovember 1, 2021 , we acquired all of the outstanding equity of Mailchimp for total consideration of$12.0 billion , which included$5.7 billion in cash and 10.1 million shares of Intuit common stock with a value of approximately$6.3 billion . See Note 7 to the consolidated financial statements in Item 8 of this Annual Report for more information. We evaluate, on an ongoing basis, the merits of acquiring technology or businesses, or establishing strategic relationships with and investing in other companies. Our strong liquidity profile enables us to quickly respond to these types of opportunities. Intuit Fiscal 2022 Form 10-K 46
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Statements of Cash Flows
The following table summarizes selected items from our consolidated statements
of cash flows for fiscal 2022, fiscal 2021, and fiscal 2020. See the
consolidated financial statements in Item 8 of this Annual Report for complete
consolidated statements of cash flows for those periods.
Fiscal Fiscal Fiscal
(Dollars in millions) 2022 2021 2020
Net cash provided by (used in):
Operating activities $ 3,889 $ 3,250 $ 2,414
Investing activities (5,421) (3,965) (97)
Financing activities 1,732 (3,176) 2,034
Effect of exchange rates on cash, cash equivalents,
restricted cash, and restricted cash equivalents
(22) 13 (6)
Net increase (decrease) in cash, cash equivalents,
restricted cash, and restricted cash equivalents
$ 178
During fiscal 2022, we generated$3.9 billion in cash from operations. We also received$4.7 billion from borrowings under our term loan,$928 million for the net sales and maturities of investments, and$162 million from the issuance of common stock under employee stock plans. During the same period, we used$5.7 billion for the acquisition of a business,$1.9 billion for the repurchase of shares of our common stock under our stock repurchase programs,$774 million for the payment of cash dividends,$611 million for payments for employee taxes withheld upon vesting of restricted stock units,$414 million for net originations of term loans, and$229 million for capital expenditures. During fiscal 2021, we generated$3.3 billion in cash from operations and$196 million from the issuance of common stock under employee stock plans. During the same period, we used$3.1 billion for the acquisitions of businesses,$1.3 billion for the repayment of debt,$1.0 billion for the repurchase of shares of our common stock under our stock repurchase programs,$710 million for the net purchases of investments,$646 million for the payment of cash dividends,$383 million for payments for employee taxes withheld upon vesting of restricted stock units,$125 million for capital expenditures, and$96 million for net originations of term loans.
Stock Repurchase Programs and Dividends on Common Stock
As described in Note 12 to the financial statements in Item 8 of this Annual Report, during fiscal 2022 and fiscal 2021, we continued to repurchase shares of our common stock under a series of repurchase programs that our Board of Directors has authorized. AtJuly 31, 2022 , we had authorization from our Board of Directors to expend up to an additional$1.5 billion for stock repurchases. OnAugust 19, 2022 , our Board approved an increased authorization to purchase up to an additional$2 billion of our common stock under the existing stock repurchase program. We currently expect to continue repurchasing our common stock on a quarterly basis; however, future stock repurchases under the current program are at the discretion of management, and authorization of future stock repurchase programs is subject to the final determination of our Board of Directors. We have continued to pay quarterly cash dividends on shares of our outstanding common stock. During fiscal 2022, we declared cash dividends that totaled$2.72 per share of outstanding common stock or approximately$781 million . InAugust 2022 , our Board of Directors declared a quarterly cash dividend of$0.78 per share of outstanding common stock payable onOctober 18, 2022 to stockholders of records at the close of business onOctober 10, 2022 . We currently expect to continue paying comparable cash dividends on a quarterly basis; however, future declarations of dividends and the establishment of future record dates and payment dates are subject to the final determination of our Board of Directors. Business Combinations Mailchimp OnNovember 1, 2021 , we acquired all of the outstanding equity of Mailchimp for total consideration of$12.0 billion , which included$5.7 billion in cash and 10.1 million shares of Intuit common stock with a value of approximately$6.3 billion . The fair value of the stock consideration is based on theOctober 29, 2021 closing price of Intuit common stock of$625.99 . Pursuant to the equity purchase agreement, we also issued approximately 583,000 restricted stock units (RSUs) in substitution of outstanding equity incentive awards. These RSUs have a grant date fair value of approximately$355 million and will be expensed over three years. Additionally, we issued approximately 325,000 RSUs with a total grant date fair value of approximately$211 million to Mailchimp employees, of which$151 million will be expensed over four years and$60 million was expensed during the first six months following the acquisition date.
Mailchimp is part of our Small Business & Self-Employed segment. We have
included the financial results of Mailchimp in the consolidated financial
statements from the date of acquisition.
Intuit Fiscal 2022 Form 10-K 47
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Credit Karma
On
to a revest provision.
The fair value of the purchase consideration totaled$7.2 billion and included$3.4 billion in cash, 10.6 million shares of Intuit common stock with a fair value of$3.8 billion and assumed equity awards for services rendered through the acquisition date of$47 million . We also issued shares of common stock with a fair value of$275 million which are restricted due to a revest provision and will be expensed over a service period of three years. The share-based compensation expense related to these restricted shares is non-deductible for income tax purposes. Additionally, we assumed equity awards for future services with a fair value of$663 million that are being charged to expense over the remaining service periods, which average approximately three years.
The fair value of the stock consideration is based on the
closing price of Intuit common stock of
As part of the merger agreement, following the close of the transaction, we issued approximately$300 million of restricted stock units to the employees of Credit Karma, which will be charged to expense over a service period of four years. Credit Karma operates as a separate reportable segment. We have included the financial results of Credit Karma in the consolidated financial statements from the date of acquisition. See Note 7 to the consolidated financial statements in Item 8 of this Annual Report for more information.
Commitments for Senior Unsecured Notes
In
following:
•$500 million of 0.650% notes due
•$500 million of 0.950% notes due
•$500 million of 1.350% notes due
•$500 million of 1.650% notes due
Interest is payable semiannually on
The Notes are senior unsecured obligations of Intuit and rank equally with all existing and future unsecured and unsubordinated indebtedness of Intuit and are redeemable by us at any time, subject to a make-whole premium. Upon the occurrence of change of control transactions that are accompanied by certain downgrades in the credit ratings of the Notes, we will be required to repurchase the Notes at a repurchase price equal to 101% of the aggregate outstanding principal plus any accrued and unpaid interest to but not including the date of repurchase. The indenture governing the Notes requires us to comply with certain covenants. For example, the Notes limit our ability to create certain liens and enter into sale and leaseback transactions. As ofJuly 31, 2022 , we were compliant with all covenants governing the Notes. See Note 8 to the consolidated financial statements in Item 8 of this Annual Report for more information.
Credit Facilities
Unsecured Revolving Credit Facility and Term Loan
OnNovember 1, 2021 , we terminated our amended and restated credit agreement datedMay 2, 2019 (2019 Credit Facility), and entered into a credit agreement with certain institutional lenders with an aggregate principal amount of$5.7 billion , which includes a$4.7 billion unsecured term loan that matures onNovember 1, 2024 , and a$1 billion unsecured revolving credit facility that matures onNovember 1, 2026 (2021 Credit Facility). Under the 2021 Credit Facility we may, subject to certain customary conditions including lender approval, on one or more occasions increase commitments under the unsecured revolving credit facility in an amount not to exceed$250 million in the aggregate and may extend the maturity date up to two times. Advances under the unsecured revolving credit facility accrue interest at rates that are equal to, at our election, either (i) the alternate base rate plus a margin that ranges from 0.0% to 0.1%, or (ii) the Secured Overnight Finance Rate (SOFR) plus a margin that ranges from 0.69% to 1.1%. Actual margins under either election will be based on our senior debt credit ratings. AtJuly 31, 2022 , no amounts were outstanding under the unsecured revolving credit facility. We monitor counterparty risk associated with the institutional lenders that are providing the credit facility. OnNovember 1, 2021 , we borrowed the full$4.7 billion under the unsecured term loan to fund a portion of the cash consideration for the acquisition of Mailchimp. Under this agreement we may, subject to certain customary conditions, on one or more occasions increase commitments under the term loan in an amount not to exceed$400 million in the aggregate. The term loan accrues interest at rates that are equal to, at our election, either (i) the alternate base rate plus a margin that ranges from 0.0% to 0.125% or SOFR plus a margin that ranges from 0.625% to 1.125%. Actual margins under either election are based on our senior debt credit ratings. AtJuly 31, 2022 ,$4.7 billion was outstanding under the term loan. Intuit Fiscal 2022 Form 10-K 48
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The 2021 Credit Facility includes customary affirmative and negative covenants, including financial covenants that require us to maintain a ratio of total gross debt to annual earnings before interest, taxes, depreciation and amortization (EBITDA) of not greater than 3.25 to 1.00 and a ratio of annual EBITDA to annual interest expense of not less than 3.00 to 1.00 as of the last day of each fiscal quarter. As ofJuly 31, 2022 , we were compliant with all required covenants.
Secured Revolving Credit Facility
OnFebruary 19, 2019 , a subsidiary of Intuit entered into a secured revolving credit facility with a lender to fund a portion of our loans to qualified small businesses. The revolving credit facility is secured by cash and receivables of the subsidiary and is non-recourse toIntuit Inc. We have entered into several amendments to the secured revolving credit facility, most recently onJuly 18, 2022 , primarily to increase the facility limit, extend the commitment term and maturity date and update the benchmark interest rate. Under the amended agreement, the facility limit is$500 million , of which$300 million is committed and$200 million is uncommitted. Advances accrue interest at adjusted simple SOFR plus 1.5%. Unused portions of the committed credit facility accrue interest at a rate ranging from 0.25% to 0.75%, depending on the total unused committed balance. The commitment term is throughJuly 18, 2025 , and the final maturity date isJuly 20, 2026 . The agreement includes certain affirmative and negative covenants, including financial covenants that require the subsidiary to maintain specified financial ratios. As ofJuly 31, 2022 , we were compliant with all required covenants. AtJuly 31, 2022 ,$230 million was outstanding under this facility and the weighted-average interest rate was 3.96%, which includes the interest on any unused committed portion. The outstanding balance is secured by cash and receivables of the subsidiary totaling$615 million .
Cash Held by Foreign Subsidiaries
Our cash, cash equivalents and investments totaled$3.3 billion atJuly 31, 2022 . Approximately 10% of those funds were held by our foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were located primarily inCanada , theUnited Kingdom , andIndia . We do not expect to pay incrementalU.S. taxes on repatriation. We have recorded income tax expense forCanada ,India , andIsrael withholding taxes on earnings that are not permanently reinvested. In the event that funds from foreign operations are repatriated tothe United States , we would pay withholding taxes at that time.
CONTRACTUAL OBLIGATIONS
The following table summarizes our known contractual obligations to make future payments atJuly 31, 2022 : Payments Due by Period Less than 1-3 3-5 More than (In millions) 1 year years years 5 years Total Amounts due under executive deferred compensation plan$ 147 $ - $ - $ -$ 147 Senior unsecured notes 500 500 500 500 2,000 Unsecured term loan - 4,700 - - 4,700 Secured revolving credit facility - - 230 - 230 Interest and fees due on debt 161 227 37 25 450 Operating leases (1) 64 198 143 323 728 Purchase obligations (2) 673 904 261 468 2,306 Total contractual obligations (3)$ 1,545 $
6,529
(1)Includes operating leases for facilities and equipment. Amounts do not include$31 million of future sublease income. We had no significant finance leases atJuly 31, 2022 . See Note 10 to the consolidated financial statements in Item 8 of this Annual Report for more information. (2)Represents agreements to purchase products and services that are enforceable, legally binding and specify terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the payments. (3)Other long-term obligations on our consolidated balance sheet atJuly 31, 2022 , included long-term income tax liabilities of$44 million which related primarily to unrecognized tax benefits. We have not included this amount in the table above because we cannot make a reasonably reliable estimate regarding the timing of settlements with taxing authorities, if any.
RECENT ACCOUNTING PRONOUNCEMENTS
For a description of recent accounting pronouncements and the potential impact
of these pronouncements on our consolidated financial statements, see Note 1 to
the financial statements in Item 8 of this Annual Report.
Intuit Fiscal 2022 Form 10-K 49
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