直覺電腦 (INTU) 2008 Q2 法說會逐字稿

Good afternoon.

I will be your conference facilitator today.

At this time, I would like to welcome everyone to the Intuit second quarter 2008 conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there there be a question and answer period.

(OPERATOR INSTRUCTIONS) With now I will now turn the call over the Bob Lawson, Intuit's Vice President of Investor Relations and Financial Planning and Analysis.

Mr.

Lawson?

Thanks, and good afternoon, everybody.

Welcome to Intuit's second quarter 2008 conference call.

I am here with Brad Smith, Intuit's President and CEO; Neil Williams, our CFO; and Scott Cook, our Founder.

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 2007, 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 Brad Smith.

Thanks, Bob, and thanks to everyone for joining us.

As you read in our press release, Intuit delivered a solid second quarter with revenue of $835 million and non-GAAP EPS of $0.40.

We believe revenue would have been $8 million to $12 million higher without the delays in the finalization of some tax forms and the access into the e-file returns by the IRS.

Highlights include 12% unit growth in consumer tax through February 16, driven by TurboTax online and continued strong double digit growth in the payroll and payment segment after adjusting for the sale of certain assets to ADP.

We are experiencing some lower unit growth in our QuickBooks segment than we expected, but overall we are pleased with results for the quarter and first half and look forward to another year of strong financial performance.

With that I will turn the call over to Neil to walk us through the financial details.

Thanks, Brad.

Let me start with a summary of the second quarter's results.

Revenue of $835 million was up 11% year-over-year.

Non-GAAP earnings were $0.40 per share.

On a year-over-year basis, non-GAAP EPS was down $0.04 per share driven by the deferral of $23 million of Protax revenue from the second to the third quarter.

The deferral was driven by changes to our offering that resulted in revenue being recognized as e-file services are delivered primarily in Q3.

On a GAAP basis we earned $0.34 per share versus $0.40 last year.

The second quarter 2008 results include revenue and earnings from Digital Insight which was acquired in February 2007 and exclude approximately $23 million of Protax revenue that is deferred to the third quarter.

Results for 2007 include revenue and earnings related to certain assets sold to ADP in the third quarter of 2007.

Adjusted for those items, revenue would have grown approximately 9% in the second quarter and non-GAAP EPS would have been $0.47 per share, up 7% from last year.

That EPS growth rate is lower than the revenue growth rate because revenue is shifting to later in the year while costs remain relatively evenly balanced throughout the year.

Consumer tax second quarter revenue of $248 million was up 11% over the year ago period.

Total consumer tax units were up 12% through February 16, driven by growth in TurboTax online.

We are pleased with the results of our early season marketing efforts and with TurboTax unit growth overall.

As expected, all the growth in the category is coming from the web.

That said, the desktop market is still substantial.

We are executing well and we have gained roughly 3 points of share at retail compared with the second quarter of last year.

Our unit share of retail is now 85%.

We will issue our next tax unit sales update in March and another in April at the end of the tax season.

Professional Tax revenue of $105 million was in line with expectations.

The results reflect a deferral of $23 million of revenue from the second quarter to the third quarter compared with last year.

The results also reflect the decision to discontinue our Pro Series Express product which generated $4 million of revenue in the second quarter of last year.

Total small business revenue grew 3% in the second quarter and 5% for the first half.

Adjusted for the sale of certain payroll assets to ADP, small business growth was 10% for the second quarter and 11% for the first half.

Within small business, QuickBooks revenue of $175 million was up 5% over the year ago period.

On a year to date basis, QuickBooks revenue was up 7%, 1 point more than first half 2007.

Though we are showing growth in the quarter and first half, we have seen a 4 point year-over-year decline in the financial accounting software in retail fiscal year to date.

Our share is up 2 points at retail and we are continuing to grow our online business but unit growth has been less than expected and we are adjusting guidance for the QuickBooks segment to reflect current market conditions.

The payroll and payment segment has continued to deliver excellent growth with revenue of $138 million for the quarter.

Adjusted for the impact of the ADP sale, that's up 16% year over year.

The revenue growth was driven by 20% growth in payments customers and 4% growth in transaction volume per customer.

Financial institutions revenue for the second quarter was $72 million.

The calculated growth rate for this segment is not meaningful because the acquisition of Digital Insight was completed in February 2007.

BIs core Internet banking business grew slightly more than 9% in the second quarter, Internet banking end users grew 11% and bill pay end users grew 20%.

The growth rate for DIs core Internet banking business is slightly lower than it has been due to lower growth in active end users through the first half.

Our projection of Internet banking end user adds for the second half looks strong.

Our other businesses segment revenue of $96 million was up 12% over the year driven by strong results in our Quicken and real estate solutions businesses.

Moving to the balance sheet, Intuit ended the second quarter with $837 million in cash and investments.

Cash flow from operations was $199 million, capital expenditures were $57 million during the second quarter.

This is up from $24 million in the same quarter a year ago.

The increase is driven by investments in a new data center and expansion of office capacity to support our growth.

We used $250 million to repurchase 8.2 million shares of Intuit's stock during the quarter.

As of February 1, we have $300 million in authority for future share repurchases and have a 10b5-1 plan in place to allow us to consistently repurchase stock throughout the year.

The previously announced acquisition of Homestead Technologies Inc.

closed on December 18, 2007 and is reported as part of the QuickBooks segment as of the second quarter.

Homestead is a leader in website and web store solutions for small businesses.

On December 19, 2007, we announced we had signed a definitive agreement to acquire Electronic Clearinghouse Inc.

or ECHO.

ECHO is a leading provider of electronic payment processing solutions including check, debit card, and credit card processing, as well as check verification, collection, and guarantee services, and automated clearinghouse capabilities or ACH.

Under the terms of the agreement, Intuit will pay $17 per share in cash in exchange for each share of ECHO common stock, including shares issuable upon exercise of options.

The total purchase price is approximately $131 million on a fully diluted basis.

The acquisition is subject to ECHO shareholder approval and other customary closing conditions.

It is expected to close in the first quarter of calendar 2008.

Moving to fiscal 2008 guidance, guidance for 2008 total company revenue is unchanged.

Operating income and EPS guidance has changed slightly driven by the following two items.

As disclosed in the press release announcing the acquisition of Homestead, the purchase will be slightly dilutive to GAAP and non-GAAP earnings per share for 2008, including Homestead results will reduce 2008 GAAP earnings per share by $0.03 and 2008 non-GAAP earnings per share by $0.02.

Our prior guidance also assumed the renewal of the R&D tax credit.

It now appears that tax credit will not be renewed in our fiscal year and so our effective tax rate will change from 35.5% to 36%.

This decreases our non-GAAP EPS by approximately $0.01 for the year.

Therefore, fiscal 2008 guidance is now revenue unchanged at $3.0 billion to $3.05 billion which is annual growth of 12% to 14%, non-GAAP diluted EPS of $1.56 to $1.58 which is annual growth of 9% to 10%, GAAP diluted EPS of $1.38 to $1.40, which is annual growth of 11% to 13%.

We have also changed our QuickBooks segment revenue guidance from 8% to 12% growth to 5% to 7% growth to reflect current market conditions.

That includes roughly $15 million of revenue from the Homestead acquisition.

The change to QuickBooks revenue guidance is not significant enough to affect total Company revenue guidance for the year.

We are reaffirming our previous Intuit third and fourth quarter revenue guidance and providing additional operating income guidance for those quarters.

For the fiscal third quarter which ends April 30, we expect the following.

Revenue of $1.268 billion to $1.293 billion or year-over-year growth of 11% to 14%.

Non-GAAP operating income of 700 million to $710 million or year-over-year growth of 13% to 14%.

GAAP operating income of $644 million to $654 million or year-over-year growth of 11% to 13%.

Non-GAAP diluted EPS of $1.31 to $1.34 or year-over-year growth of 16% to 19%.

GAAP diluted EPS of $1.23 to $1.26 or year-over-year growth of 18% to 21%.

For the fiscal fourth quarter, we expect revenue of $466 million to $471 million or year-over-year growth of 8% to 9%.

Non-GAAP loss per share of $0.05 to $0.03.

A GAAP loss per share of $0.14 to $0.12.

With that, I will turn the call back over the Brad.

Thanks, Neil.

Before we get to your questions, I would like to provide some perspective on the second quarter and the remainder of 2008 and then share how I feel about our long term prospects.

Let me start with 2008.

In tax we are off to a good start.

Our focus on ease of use continues to pay off and the improvements we made in our marketing programs and our execution have us positioned for another successful season.

We said before the year that we wanted to win at every phase throughout the season playing whistle to whistle.

Winning was free and succeeding on the web.

It is still early in the season but we are pleased with our results.

We have gained share in retail and more importantly we are winning online, where we believe future growth will come from.

In small business the year is playing out a little differently than we expected.

QuickBooks units are growing slower than expected as is the financial management software category.

It is hard to say definitively what is impacting category growth but we believe two factors are playing a role.

First, the macro economic environment is tougher on small businesses than it has been for some time.

Second, category growth is affected by the marketing efforts of the main players in the category.

We have seen less activity this year from other players and our own marketing programs are designed to be peaking in the third quarter.

What's important to note is we are not seeing any competitive or structural changes in the market.

On the competitive front, we are gaining share in retail and we are executing online to bring new users into the franchise.

As for the overall market the facts remain there are 26 million small businesses in the U.S., with 6 million new businesses starting each year.

60% of those small businesses still have not adopted financial management software.

We're confident those dynamics will continue to create an attractive long term growth opportunity for us.

And small business is about more than QuickBooks software.

As we've shared before, we view the small business space as an ecosystem play that leverages standalone software and related services.

While the standalone software segment is growing slower than expected year to date, the services component of the small business ecosystem continues to perform well, led by the payroll and payment segment.

The total small business revenue adjusted for the ADO sale is still growing double digits despite the current market conditions.

Moving to our financial institutions business, we are now coming up on our one-year anniversary since the acquisition of Digital Insight.

With four quarters under our belt, the strategic rationale for this acquisition is as compelling as ever.

However, it's clear that we underestimated the complexity of taking DIs offering to the level where we want it to be.

We recognize this fact, we are on the right track, we have the right team in place to make the progress that is needed moving forward.

We are also seeing good growth in our other businesses and that is why I am confident that we will deliver another good year.

Now let me talk about my longer term perspectives starting with our people.

We filled several key positions and now have a fully staffed and strong leadership team in place.

Our leaders and all of our employees are energized and focused as we begin the next chapter for Intuit.

They are continuing to deliver for customers and they have us on track to deliver another good year.

And looking beyond this year, one of the questions I often get asked is how our future strategy will differ from what Intuit has done up until now.

Well, I was a part of developing that strategy and I believe in it.

So a lot of what you see will be the same.

However, we do recognize it's increasingly becoming a services world, many of which are delivered online and we continue to nurture our growth engines, you're going to see us apply even more focus on services which are already nearly half of the Company's revenue and are highly profitable.

We also recognize that the world is a dynamic one.

It is a world where customer behaviors continue to change.

Where and how we get work done is changing and where the geographic boundaries that have confined us in the past are coming down.

We will be ready for this change.

We are already embracing it today.

Social technologies are fueling the way our ecosystem interacts.

They're enabling our customers to connect with other customers.

Accountants with other accountants.

Third party developers with other developers and end users and all with the level of speed and ease that we have not seen before.

We are helping to facilitate that dialogue.

We are also observing the evolution of the workplace and the computer.

Mobility is evolving from a workplace luxury to a business necessity and the computers moving from the tops of our desk to the palms of our hands.

Our leaders and more importantly our engineers are actively assessing the implications and opportunities of this trend for our customers.

And finally we are seeing the borders of the traditional business landscape come down, whether it is employing great talents across the globe as evidenced by our own recent expansion of our R&D team in Bangalore, India, or the fact that many of our customers are already are doing business across the world, new opportunities are emerging in other markets.

And we will find new ways to embrace them.

I'm excited about what lies ahead for all of us and I look forward to sharing our plans to win in this changing world as the future unfolds.

But I would like to close by bringing us back to why I am excited about today.

We have three strong growth engines and we are as confident as ever about the growth that we see in them.

Our categories remain underpenetrated and we will continue to grow by offering better ease and value than alternative solutions.

I feel good about this year and about the excellent foundation we have in place and I see opportunity all around us if we execute well.

Thank you for your support and thanks to all of Intuit's employees who are so focused on delighting our customers.

Now with that, I'll turn it back for questions.

(OPERATOR INSTRUCTIONS)

Our first question comes from Heather Bellini of UBS.

I was wondering if you could comment a little bit the type of weakness you are seeing in the QuickBooks market and in particular what your view is.

What is it the result of?

Is it the lack of new businesses starting up because maybe they can't get financing or is there something else that is just causing people -- is it just a general freeze in the market?

Yes.

Thanks, Heather.

It is actually tough to nail down definitively.

What I would say is the press that you see is the same press we see.

Small businesses are out there competing in this market and the small business customers we serve are very much like consumers.

A lot of small businesses today will operate their business with lines of credit, credit cards, home equity loans, and we know the condition there.

But I also want to be careful because we are not able to prove any causality with the economy.

There's other things at play.

The category is down 4 points.

We are the category leader.

I would say that in addition to the fact that we know that some of our marketing efforts are more back end loaded.

The other thing is this year as we released our product we put a lot of effort into making sure we were Vista compatible and quite frankly, in hindsight that has not played out the way we had hoped.

I think when you put a combination of variables together, the economy is definitely one piece of that.

It is showing up in small business testimony.

But once again, we are a product that is affordably priced, and it's a mission critical app, so I think it is a combination of things playing into the QuickBooks segment for this point in the year.

Okay.

Thank you.

Our next question comes from Fred Thill of Citi.

Thanks.

Just on the consumer and Protax, are there any hurdles left in some of these certain tax forms that need to be uploaded to now e-file or are those constraints now removed from the process?

Hi, Fred, this is Brad.

No, actually those constraints have now been removed from the process.

As you can see from the results that we have reported we think there are somewhere between 8 million and $12 million of revenue that shifted from Q2 into Q3.

By and large, all the delays that we have seen have already been resolved and now it is just up to the taxpayers to get their tax returns filed.

Okay.

So you don't expect anything as it relates to any other hurdles through the rest of the tax season?

No, we don't.

We know that 140 million returns will need to be filed sometime between now and April 15.

Just a quick follow-up on the financial institutions business, the last three quarters have been sequentially flat.

Can you just walk through what you are doing to help reinvigorate the growth rate as it relates to the financial institution business?

Sure.

I said a couple things about financial institution business.

As we shared before, we think this is a great strategic asset for us.

We also continue to see record sales in our pipeline and record retention levels.

But we also acknowledge that we have some lumpiness right now as evidenced in the second quarter.

If you look at what we see coming up, we do have a forecast that has guidance that says we will have more active users in the back half of the year as the pipeline starts to get implemented.

What you see now is the process of us having acquisition, having the market get comfortable and being able to integrate the business into it.

Thanks.

Our next question comes from Aaron Schwartz of JP Morgan.

Good afternoon.

I had a question on the consumer tax business.

In terms of the timing of filers, I don;t know if you have this data historically, but when you have seen a consumer-led recession, has there been any impact on the timing of filers, whether people looked to file earlier for a chance to get a rebate?

We have not seen anything to that effect.

What we do know is that filers are going to have to get their returns filed by April 15.

There has been a natural move closer towards the back end of the filing season over the last several years, but nothing that I have seen correlates to the situation in the economy.

Okay.

Thank you.

And just a quick follow-up on the QuickBooks business.

I know you talked about the units being a little below where you expected, but with the sales that you did see in the quarter, have you seen any increases in ASP's there?

Do you have any commentary on that?

No.

In fact what we do in the small business space is we manage it for lifetime value.

What we are seeing is still healthy growth with our payroll and payments business, which is a part of that small business ecosystem, and in terms of ASP we've seen nothing that has jumped out surprisingly.

Okay.

Thanks for taking my questions.

Okay.

Thank you.

Our next question comes from Vikram Churamani of Lehman Brothers.

Hi, guys.

Just a couple of quick questions.

First on tax, pretty solid unit growth there .

Did you find any bulk deals this quarter which you guys passed on last

You know, Vik, thank you.

We actually are feeling good about the results as well.

In terms of the bulk deals, as we said, we were going to aggressively go after those deals this year.

We had lost two deals last year.

The team did just that.

They got into the competitive bidding process.

I was very pleased with the way we interacted in that process.

At the end of the day, the pricing got to a level where we didn't made economic sense, and so we did not get those two deals back.

But the better news is that despite not getting those two deals, you can see the healthy growth which reflects pure consumer demand and great execution on the part of [Keiran Patel] and the team.

Okay.

Great.

And on just on the QuickBooks side, I see a new metric you guys put on your fax sheet, which is free simple start activations.

I don't believe it was there before.

Do you expect that number to accelerate?

And what is your assumptions in terms of unit growth based off of that number, because when you kind of back that in, your number is about 3% growth for the simple start category?

You know, Vik, we are early in the game and learning about how [free] is going to play in the small business space, much like we are with tax.

That is the new number, that is the number of people who downloaded a free application and registered.

We are liking what we see right now, in terms of the free downloads and the [attach] rate, but we have not provided any guidance in terms of what we expect with that particular program going forward.

Okay.

Great.

Thank you.

Our next question comes from Scott Schneeberger of Oppenheimer.

Thanks.

Good afternoon.

If I could start on QuickBooks, I think Brad you said something about the marketing spend peaks in the third quarter, and it was my understanding historically that second quarter has been the strongest quarter.

Could you clarify just the timing of the marketing spend on that, and what trends you are seeing into the current quarter?

Yes, Scott, you are correct.

Typically there is a fall launch period, and we have marketing activities, which we did have last year and we did again this year.

But in terms of TV and radio and some other incremental advertising efforts, we actually have those scheduled more for the third quarter this year.

If you take a look at last year, we came out of the gates actually about a point below where we are at this time here today.

But we had a pretty strong back half, somewhere in the neighborhood of 20%-plus in third quarter and I think 12% in second.

So we knew we had a pretty strong grow-over, and we put some powder in the back half to try to make sure that we were able to some strong results in Q3.

So that's really what the decision was this year, going into the year.

Okay.

Thanks.

Kind of on is same topic but going over to TurboTax.

I believe - it might have been in the press release, you might have had it in the prepared remarks, but I think I heard that there was some increased marketing spend, I guess towards the beginning of the season.

Could you speak to the -- basically the timing of the marketing budget this year for TurboTax?

Yes, Scott, we learned last year that we had played back in the first half, we had held back and we came out in the back half of the season.

This year we decided we were going to play, as I referred to it, whistle to whistle; from the moment we blew the whistle and started the season until the end of the game.

And so what we did is we put our marketing efforts across the entire season, not just the back half, and you can see that some of those results are showing up right now year-to-date.

So the incremental investment that you see is compared to prior years.

Thanks and as far as the marketing line item, you know, for you guys for the full year, do you imagine that will trend with revenue as I think you've said in the past, or might we see an increase this year?

We expect it, Scott - we expect it to trend as we said at the beginning of the year.

Okay.

Thanks and I believe you said R&D should trend a little bit higher.

Just some background on what you guys are looking into and where you are spending those dollars, thanks.

Yes.

This is Brad.

We continue to invest in our core code bases to ensure they are fresh and we are able to keep a productive engineering group and release new products that help small businesses and consumers solve important problems.

We are investing in R&D efforts to make sure that our infrastructure is in place.

So you will see us continue to invest in R&D to make sure that we can be competitive in the market, and also be the most productive we can be internally with our engineering groups.

Thanks very much.

Thank you.

Our next question comes from Phillip Rueppel with Wachovia Securities.

Great, thanks very much.

Back to consumer tax.

Now that you have fully deployed the free version, can you talk about sort of trends in the mix for consumer tax versus basic, premier, pro, et cetera?

Is that about as you had expected, or was there any difference that you saw in the quarter?

And sort of the price realized per consumer, is that trending where you thought it would?

Thanks for the question, Phil.

We don't release the mix on the free versus the different SKUs.

I will tell you that we are excited with the program we have in place.

We do believe that managing the lifetime value of a customer in tax makes a lot of sense, and right now we are very happy with the results.

Vis-a-vis pricing, any change compared with your competitors?

Are you seeing greater price pressure in the consumer tax segment or less this tax season?

No, we are not.

We are seeing exactly what we had heard at the first of the season and what we expected to play out.

Okay.

Great.

Thank you very much.

Our next question comes from Laura Lederman of William Blair.

Hi, thanks for taking my question.

Just a few additional thoughts.

One is, in the past you guys have said that during economic downturns, your QuickBooks business was not impacted.

What do you think is different this time versus past economic downturns?

And separately, how is the on-demand business doing?

Is that any healthier, or has that slowed down as well?

And then I have another question.

Thanks, Laura.

First on the economic side, we do see over the long term that we are resilient to the economic up-and-downs.

What typically happens is, when the economy gets tough, larger businesses end up laying off employees and many of them start small businesses.

I think that is going to continue to play out in this situation as well.

That is why it is very hard for us to say that the economy is the only factor impacting QuickBooks.

What feels like it might be a little different this time is this is more of a consumer-led economic downturn, and many of these businesses are live consumers, and they finance the small businesses on a credit card or a home equity loan.

So while we do not have any data right now that I can point to that says there is causality, there is enough of a feel here in terms of what we are hearing and seeing in the market to say it certainly plays a role in this overall picture.

The long term, I would tell you I believe the viability of the small business market in economic upturns and downturns is a great place to be in the market, and we are well positioned.

On the second piece on the on-demand business, we are excited with what we're seeing in on-demand.

We are getting very aggressive there.

We have had a great offering in the market for many years.

We are growing that customer base.

It continues to grow at very healthy double-digit rates and I think that you will continue to see that well into the future.

Has that business been slower than you expected, too, or is it really too small to date to really get a sense of trends?

It is small relative to our overall portfolio; it's large relative to the competitive alternatives, significantly larger than any other player in the market, and it is performing as we had hoped, and we are going to continue to invest in it to grow.

More of a longer-term oriented questions, you mentioned that you are going to focus more on services going forward.

Can you give us a little bit of a sense of what you mean by that?

I sure can, Laura.

So if you think about the small business ecosystem, you clearly see that in this past year payroll and payment now are roughly the same size and QuickBooks software.

They are actually growing about three times the rate on a compounded annual growth rate.

So we like those kinds of businesses.

We also see that our software and service product lines, whether the QuickBooks Online Edition or even TurboTax Online, continue to grow at a healthy clip, and we have a new pipeline of products coming out, like our standalone payroll product we really this past fall, or the acquisition of Homestead Technologies.

Those are the types of businesses that we believe, as long as they are solving important customer problems, are great businesses for us, and we are going to continue to invest in those businesses as the customer begins to adopt those types of services.

Would that be internal growth in acquisition or more internal growth?

A combination of all the above.

Thank you.

Our next comes from Jim MacDonald of First Analysis.

Hi.

Two questions on financial institutions.

The user base seems to be growing more quickly than revenues.

Can you talk to that?

Also, could you give us maybe a revised timeline on the development of the new Finance Works products there?

Yes, Jim, this is Neil Williams.

You know, you are right that the revenue has been a little bit slower in DI.

We are still doing very well in terms of adding end users.

As Brad mentioned earlier, the process of implementation and conversion is taking a little bit longer than we thought.

We feel very good about the pricing.

The margin compression is up where we thought it would be when DI joined into it.

But the implementations have been slower than we thought.

So we are very focused on that, and we've got a great team on the ground there, and we do have a good pipeline of net adds to end users scheduled for the last half of the year.

As you know, this has a lot to do with bank conversions, so there can be things in the minds and in the businesses of our customers that can affect those implementation schedules.

But we are doing everything on our side to be sure we can implement those as quickly as they come along and as quickly as our customers request.

Jim, to the second part of your question around Finance Works product, we are continuing to make good progress there.

Clearly we are not on the schedule that we had originally anticipated.

We are still in tests with three of the financial institutions.

We are getting really good feedback from the beta users, but we have not announced at this point any dates for broad deployment.

We are continuing to work towards making sure that we have the learning we need to roll out a product that we are going be proud of in the market.

Okay.

Thanks.

Our next question comes from Ross Macmillan of Jefferies.

Thanks.

Just going back to QuickBooks.

Brad, can you talk about linearity.

As you went through month by month, did the numbers gradually get further away from plan or was it more consistent through the month?

Thanks.

You know, Ross, it is interesting we came out of the first quarter of the year, as you may recall, looking pretty healthy.

And then we got into the early months in the second quarter and we saw a pretty significant shift in the run rate of the business.

We've had some weeks that have responded well and we have had weeks that haven't, so there has not been linearity here.

What we do know is the overall category is down about four points.

We see it as part of our responsibility to grow that category.

The good news is, despite the down category we picked up two points a share.

So there is not anything I can point to in terms of linearity.

I think it's just a matter of trying to get our finger on the right levers and try to fight through any short-term market conditions if they're having an impact, and making sure we also learn lessons from our own decisions that we have made, so that we come out of the gates strong heading into next year.

And just on financial services, the comment that Neil made around something things - customers have things on their minds that can impact timing.

Is any of that related just to what is going on within, you know, the credit markets and the banking sector overall, or is it very specific to particular customers', you know, internal issues away from that?

It is hard to draw a straight line between an event on our side and an event on our customer's side.

We do know, in the conversations with all these financial institutions, that they're clearly focused very much on their cost structure, they're focused on credit quality and they have an agenda that maybe is a little different than it was 6 months or 12 months ago, when we signed an agreement and established an implementation date.

That said, that means the implementation date may slip a bit, but we still have a strong commitment from those, and we still have a very strong pipeline going forward.

So we can't point to anything definitively on the banking side, other than we know that they have a lot of other things going on now that maybe were not there when we signed the contracts and scheduled the implementation initially.

That makes sense, thanks.

And one very last one, Neil.

On closing Eco, can we expect - I think you mentioned that would also be slightly dilutive.

So is that still to come into the numbers?

In other words, we could still have a few pennies of dilution from Eco when it closes?

That is still to come, that's correct.

It's not in the numbers that we gave you today.

Thank you.

Gentlemen, I am not showing any further questions.

Would you like to proceed with any additional remarks?

Thanks, Denise.

Thanks to everybody else.

I once again just want to reiterate, we feel good about where we are right now at this point in the season; in fact, we feel good about where we are as a company for the full year.

I appreciate your support and am looking forward to seeing you the next time.

Ladies and gentlemen, thank you for participating in today's conference call.

This concludes the program.

You may now disconnect.