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Intuit (NASDAQ:INTU)

F1Q07 Earnings Call

November 16, 2006 4:30 pm ET

Executives:

Stephen M. Bennett, President, Chief Executive Officer, Director

Kiran M. Patel, Chief Financial Officer, Senior Vice President

Bob Lawson, Vice President, Investor Relations

Analysts:

Laura Lederman, William Blair

Brent Thill, Citigroup

Michael Millman, Soleil Securities

Scott Schneeberger, CIBC World Markets

Heather Bellini, UBS

Phil Rueppel, Wachovia Securities

George Godfrey, BMG

Dan Cummins, Banc of America Securities

Adam Holt, JP Morgan

David Joseph, Morgan Stanley

Jim Macdonald, First Analysis

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Operator

Good afternoon. My name is Patty and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Intuit First Quarter 2007 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer period. If you would like to ask a question during this time, simply press the number 1 on your telephone keypad. If you would like to withdraw your question, please press the # key.

With that, I will now turn the call over to Bob Lawson, Intuit’s Vice President of Investor Relations and Financial Planning and Analysis. Mr. Lawson.

Bob Lawson, Vice President, Investor Relations

Good afternoon everyone, welcome to the Intuit First Quarter 2007 Conference Call. I am here with Steve Bennett, Intuit’s president and CEO; Kiran Patel, 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 2006, and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit’s website at intuit.com. We assume no obligation to update any forward-looking statement.

Some of the numbers in this presentation will be presented on a non-GAAP basis. The most directly comparable GAAP financial measures and the reconciliation of the non-GAAP financial measures to GAAP are provided in today’s press release.

After this call concludes, a copy of our prepared remarks and supplemental financial information will be available on our website.

As you know, Intuit typically reports a seasonal loss in our first quarter when revenue from the tax business is low and expenses are relatively fixed across borders.

With that, I will turn the call over to Steve Bennett.

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Stephen M. Bennett, President, Chief Executive Officer, Director

Thanks Bob. Hopefully, we finally got everybody dialing into the right number here today, sorry for that confusion. Thanks to everybody for joining us.

As you read in our press release, Intuit just delivered another terrific quarter with revenue up 19% year-over-year led by strong Small Business performance in both the QuickBooks segment as well as the Payroll & Payment segment. Non-GAAP EPS was a loss of $0.12, pretty much in line with our expectations.

I’m pleased with our position as we move into the next two quarters, traditionally our busiest. We’re seeing positive early results with QuickBooks 2007 and are pleased with our Small Business momentum. In addition, we have a great new lineup of TurboTax products that will be available in retail stores starting November 21st and we expect another solid year in consumer tax.

Now, let me turn it over to Kiran who will walk us through the quarter in more detail.

Kiran M. Patel, Chief Financial Officer, Senior Vice President

Thanks, Steve. Let me start with the summary of the first quarter’s results.

Revenue of $362 million was up 19% year-over-year. Non-GAAP loss of $0.12 per share was $0.01 better than last year’s first quarter loss of $0.13 per share. On a GAAP basis we had a loss of $0.17 per share.

Turning to the business segment results, QuickBooks had an outstanding quarter with revenue of $134 million or growth of 28%. We estimate that about $20 million of revenue shifted from second quarter into the first quarter because of the timing of QuickBooks 2007 launch, without which revenue would have drawn about 9%.

QuickBooks unit sales during the quarter were 280,000 or year-over-year growth of 8%. Note that QuickBooks revenue growth during the quarter was driven in part by sell-in while our reported unit sales reflect sell-through.

Included in this total we saw continued growth in total new QuickBooks online edition and QuickBooks desktop subscriptions. At the end of the quarter, we had 85,000 QuickBooks online subscribers, up 52% versus a year ago and 160,000 QuickBooks desktop subscribers.

We also had strong growth in our Payroll & Payments business with revenues of $126 million, up 21% year-over-year. Revenue from our Payments business grew 48% driven by 26% growth in customers and 14% growth in transaction volume for customer.

Revenue from our Payroll business grew 12%, driven by a 7% increase in customers and favorable mix as more customers chose Enhanced and Assisted Payroll.

Our consumer tax, professional tax, and other business segments reported revenues of $13 million, $10 million, and $80 million respectively.

Non-GAAP operating expenses increased $60 million or 16% compared to the first quarter of fiscal 2006. We continue to invest in research and development related both to core small business and consumer tax products and to new initiatives including healthcare.

We also saw increased general and administrative expenses, some of which was due to one-time events during the quarter.

Moving to the balance sheet, Intuit ended the first quarter with $1.1 billion in cash and short-term investments. Capital expenditures were $29 million during the first quarter. We did not repurchase any stock during the first quarter. As you know, we currently have 507 million authorized for further stock repurchases and we continue to view stock buyback as an efficient means of returning excess cash to our shareholders.

We are considering implementing a 10b-51 plan to allow us to repurchase our stock more consistently over time.

We are reaffirming our previous revenue and earnings per share guidance and providing initial operating income guidance for our fiscal second quarter which ends January 31, 2007.

We expect the following: revenue of $743 million to $760 million or a year-over-year growth of 0% to 2%, non-GAAP operating income of $211 million to $230 million, GAAP operating income of $185 million to $204 million, non-GAAP diluted EPS of $0.39 to $0.42, GAAP diluted EPS of $0.34 to $0.37.

As we have previously discussed, we expect revenue growth in the second quarter to be affected by several timing related factors including the launch of QuickBooks 2007 in the first quarter, the introduction of new bundled offerings in our professional tax business, which is expected to cause some revenue to be deferred until the third quarter, and expect that continuing rapid growth in TurboTax online would generate revenue primarily in the third quarter instead of the second quarter.

We are also reaffirming guidance for our fiscal third quarter, fourth quarter, and full year which you can find in the fax sheet available on our website.

This season we are planning to change the frequency of our updates on TurboTax unit sales in order to strike a balance between transparency and relevance. Our new plan beginning next quarter is to issue three updates through the season. We expect to include the first update with our second quarter earnings in February followed by a further update in March and a final update following the April 15th filing deadline.

With that, I’ll turn the call back over to Steve.

Stephen M. Bennett, President, Chief Executive Officer, Director

Thanks, Kiran. Before we get to your questions I’d like to provide some (inaudible). We continually improve our existing offerings as well create new offerings that solve additional customer pain points.

This is the same strategy we’ve been executing for the last quarter (inaudible). Our recent partnership with Google broadens our relationship with our Small Business customers helping them on their most important task of acquiring new customers, and we’re excited about the growth we’ve seen in Payroll & Payments, particularly 27% customer growth in our Assisted Payroll customer base.

In consumer tax we have our strongest product lineup ever with a more differentiated right-for-me product line and greater ease of use. We expect to continue to enjoy the tailwind of software being the fastest growing tax preparation method. We’re entering the second year of a four-year free file agreement and are pleased that the FFA is placing more emphasis on the historic philotrophic intent of the program.

While we are confident in our ability to grow our core businesses, we continue to look for important new problems that we can solve well in the areas of healthcare and with financial institutions so we can accelerate our long-term growth rate.

Thanks to all the Intuit employees who delivered a great quarter and to our shareholders for your support.

Now, let’s open it up for your questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, if you would like to ask a question please press the number 1 on your telephone keypad. If you would like to withdraw your question please press the # key. One moment for our first question. Our first question comes from Jeff Houston of William Blair.

Laura Lederman, William Blair

Hi, it’s Laura Lederman, a few quick questions. One, can you give us a few high level thoughts or strategic thoughts on healthcare. When I was visiting investors over the last weekend, every single person brought up the healthcare initiative, if you could just talk about it in the high level a strategic term. Two other things on that level is, one, you had discussed or at least said on the conference that you guys might be interested in international and had a little discussion about it, and also future type of acquisitions that you would make. Thank you.

Stephen M. Bennett, President, Chief Executive Officer, Director

Wow, I’ll try but I want to be short and brief because this is really an earnings call and not a strategy review. Healthcare at a very high level, as the world moves to more consumer driven healthcare, we believe that consumers are going to need tools to help them both manage the financial aspects and manage the care aspects, and we’ve been working with partners to create some new solutions that we think will help solve these important customer problems. We expect to launch sometime in the next year and stay tuned. When we have more to say we’ll tell you more about that. In international, I think people way overreacted to what we said. What we said is 37% of QuickBooks customers located in the U.S., actually serve companies that do business outside the U.S. and what we need to do is first make sure all of our existing products are supporting our existing customers located in the U.S. to support their customers, 37% which do business outside the U.S. So, I think there’s no more news on that other than meeting the needs of our existing customers. With regard to acquisitions, there is no new news there. Anything that we would be doing would be in the big market opportunities that we’ve talked about, but it wouldn’t be in healthcare because we need to get our products in the market and solve an important problem well before we would figure out where to go strategically in healthcare. So, that’s really the quick update on that.

Laura Lederman, William Blair

And one quick one for Kiran, can you talk a little bit about cash flow kind of a range that would seem reasonable for ’07?

Kiran M. Patel, Chief Financial Officer, Senior Vice President

Yes Laura, as we have said in the past, our cash flow really tracks with our operating income and we’ve given your guidance for operating income, and so we should see cash flow again in line with that.

Laura Lederman, William Blair

Thank you.

Operator

Our next question comes from Brent Thill of Citigroup.

Brent Thill, Citigroup

Hi, good afternoon. You mentioned you pulled the QuickBooks shipment forward by about 30 days. For the tax shipment, are there any changes this year relative to last year that you’re making in terms of the go-to market this season?

Stephen M. Bennett, President, Chief Executive Officer, Director

No.

Brent Thill, Citigroup

Okay, maybe if you could talk a little bit about the pricing environment for the upcoming launch.

Stephen M. Bennett, President, Chief Executive Officer, Director

Well, we’re going to announce the pricing in the future on the web product. I think the answer is the pricing is already in the market and we think that self-prep software is by far the best value way for people to do their taxes, and we think that’s why it’s the fastest growing tax prep method over the last five years, growing on a compounded average double digits every year. So, I think the answer is it’s the best value and I think the industry is looking at how to price for the value we deliver, but also we might want to balance the sensitivity to raising prices in the short term versus the long-term profitability of acquiring customers and maximizing their lifetime value. So, we’re always making that trade off and I feel comfortable. We’re at the sweet spot appropriately solving for short-term revenue while at the same time acquiring new customers that really help us grow on a sustained basis over the long term. So that’s a juggling act every year and I’m pleased with where we are this year and the moves we’ve made to even get better at what we’ve been in the past.

Brent Thill, Citigroup

And just a quick followup for Kiran on the 10d plan, do you expect to implement that in the second quarter or is that a second half fiscal year event?

Kiran M. Patel, Chief Financial Officer, Senior Vice President

I don’t know yet. We are considering implementing one. We’ll let you know when we have the exact timing.

Brent Thill, Citigroup

Thank you very much.

Operator

Our next question comes from Michael Millman of Soleil Securities.

Michael Millman, Soleil Securities

Thank you. I’ve got a couple of questions. Can you read anything into QuickBooks being picked up I guess by the stores early? Secondly, R&D expenses look like they were up about 1% but in fact the marketing expenses look like they were down by about 5.5% and considering you were talking about increasing marketing for QuickBooks, maybe you can discuss that as well.

Stephen M. Bennett, President, Chief Executive Officer, Director

As we said consistently for the last year, we are increasing our spending in R&D because we believe that’s great products and services that are solving important customer problems, is how we’re going to drive our long-term growth. So, there’s no new news there. I think in this quarter marketing expenses were down a little bit. The advertising for QuickBooks starts at the end of the second quarter. So, I think we were talking about it on a full-year basis, but we didn’t spend a lot of money in marketing on a relative basis. Remember last year we had a new entrant in QuickBooks and we spent more money on marketing in the first quarter of last year, and that was successful for us so we didn’t feel like we had to repeat that this year. We’re going to spend our money in marketing and QuickBooks starting in the second quarter. I think the other think is we launched 30 days because retailers wanted the product earlier. They had an interesting window right after back to school and they wanted us to actually launch earlier so they could get set up and running and organized before TurboTax hit and before we got into the holiday season. So, we thought that made sense and we’re getting all sorts of operational benefits out of doing that. What we’ve also learned though is it hasn’t made a big difference in the customer buying pattern. Just because we shipped it earlier, it didn’t mean a lot more customers decided they were going to buy it 30 days earlier. So, we were pleased; I mean we had a lot of thoughts about not being able to do very well against last year’s first quarter comparison on QuickBooks, and I think these numbers prove that that was not accurate that with 8% sell through growth after a very strong first quarter on units last year plus the positive mix we think we had a great first quarter in QuickBooks.

Michael Millman, Soleil Securities

So, are you suggesting that the shipments that you made weren’t really to answer any of the buzz or demand possibly created by all the publicity from the Google deal and much more of a logistic help to retailers?

Stephen M. Bennett, President, Chief Executive Officer, Director

We decided when we were going to sell QuickBooks a year ago. You have to imagine when you build a product you pick the launch date well in advance. We haven’t changed the date for at least 9-12 months. We picked this date of launch to meet retailers’ requests and we think from an operational basis it helps us a lot too. So, the Google thing had absolutely nothing to do with the timing launch for QuickBooks. It actually was something that we built in to QuickBooks because our engineering team did a spectacular job of delivering a great functionality for our customers within the schedule that we had originally planned.

Michael Millman, Soleil Securities

What’s the schedule for next year?

Stephen M. Bennett, President, Chief Executive Officer, Director

In the same range that what it was this year.

Michael Millman, Soleil Securities

Thank you.

Operator

Our next question comes from Scott Schneeberger of CIBC World Markets.

Scott Schneeberger, CIBC World Markets

Hey guys, good afternoon. On Google, just to follow up on that, and you could probably track how that relationship is developing, any early insight you can help us out with?

Stephen M. Bennett, President, Chief Executive Officer, Director

You know, it was so early to comment. We’re seeing initial take up on maps and ad words, but I’d rather not give any quantum. It’s going to take a while for people to buy the product, get it installed, get it up and running, figure out the functions and features. So, I think it would be better Scott to give you a little bit of an insight. My guess is it will ramp up slower. This isn’t going to be all of a sudden a million people are using it the second day. That’s not the just the nature of the Small Business market, it’s more slow and steady, the same as when we launch a new product. As we’ve seen over the last 10 years, they consistently grow on nice learning curves and nice growth curves. I think we’ll see the same thing with Google, and we’re getting a lot of learning. Remember this is just a version 1. There are probably a lot of things we can do to make it easier for customers. So, we got it in the market, it’s been well received, and we’re learning a lot, and that’s really what you want out of version 1. We’re quite excited about the prospects and the opportunities and how well those relationships are working between the two companies.

Scott Schneeberger, CIBC World Markets

Great thanks. I guess a question for Kiran; no share repurchase in the fiscal first quarter, any thought process behind that or anything you guys care to share on why that strategy?

Kiran M. Patel, Chief Financial Officer, Senior Vice President

We continue to believe that buying back share is an effective way to return cash to shareholders. As you look at our share count guidance for the year you can see that we’re planning to use the authority that we have from the board and we’re considering implementing the 10d-51 plan which allows to be in the market more consistently. Other than that we don’t comment on any specific time to go in or out of the market.

Stephen M. Bennett, President, Chief Executive Officer, Director

I’ll just add a couple of thoughts, Scott, and we still think stock is a good value at this price. That’s why as Kiran said, in the share count guidance we’ve given we expect sometime during the year to get back in the market, and second we’re pleased that the stock has had a nice run up over the last six months and we haven’t been in the market buying our shares. So, we think there’s some positive demand and we think that’s a good sign. So, I’d expect us to be back in the market buying our shares sometime during the year and that’s why the share count reflects what it does.

Scott Schneeberger, CIBC World Markets

Okay, sounds good thanks, nice work.

Operator

Our next question comes from Heather Bellini of UBS.

Heather Bellini, UBS

Hi, thank you. I was wondering, Kiran or Steve, if you could talk a little bit about what type of impact you expect the launch of Vista to have on your QuickBooks business this year. And I guess the followup question would be on the tax business. We saw the price increase for the web products. Could you share with us, we saw a price for the desktop but should we expect a similar uptick in pricing for the web products this year?

Stephen M. Bennett, President, Chief Executive Officer, Director

Let’s take the last one first Heather. I think more and more we’re seeing that these are different markets, that the desktop market is a different market than the web market. And I think if you recall what Brad Hensky went through; I think he did a very nice job at investor day or talking about a web-based product lineup that had more differentiation in it, more right for me. So, I think what we’ll end up seeing is higher price points for more value and lower price points for less value, and that’s why we’re excited about the lineup on the web. I think that will play out more on the web than in the desktop. So, let’s see how that works out, but it’s more about mix than price on the web in my opinion. With regards to Vista, I might add Scott for his thoughts on this too, but we don’t really know. I know that some accounting publications are telling their members to delay Vista upgrades for a year. So, I think that will result in accountants telling their small business clients that it might make sense to wait for a year. QuickBooks 2007 is Vista ready, it will run Vista. So, it’s hard to know. Scott, I don’t know if you have any thought on will it be an accelerant?

Scott Cook, Founder and Chairman, Executive Committee

I think Steve’s conclusion is where I come out, it’s hard to know. There’s nothing obvious that QuickBooks has improved by or hurt by with Vista nor is there anything that would obviously affect any of our rivals. So, we’re not prepared for any impact on our business with Vista. I’m sure we’ll see some higher support calls and we’re prepared for that. But on the revenues side, if there is an upside that would be just pure bonus, it’s not something with mine.

Stephen M. Bennett, President, Chief Executive Officer, Director

Yeah, one thought I would add Heather. QuickBooks prior to 2007 will not be Vista compliant. So, if a QuickBooks user buys a new Vista computer and they are using QuickBooks 2006 it will not run on their new machine. So, that could force them to upgrade but that will be something that we will have to see play out.

Heather Bellini, UBS

So, is that a bigger benefit then for you potentially next year?

Stephen M. Bennett, President, Chief Executive Officer, Director

I think the hardest thing for us is to trying to really get what the end-market demand is for Vista and how much upgrading there’s going to be. So, it does take a lot of resources for a company like ours to run our applications on a new operating system from Microsoft. So, let’s see what happens. I don’t see much downside if any to Scott’s point and I could see some potential upside, but I think it’s really hard to call at that point. Let’s get it in the market I guess at the end of January and let’s see what happens; maybe we’ll have more insight in February when we talk then.

Heather Bellini, UBS

Thank you.

Operator

Our next question comes from Philip Rueppel of Wachovia Securities.

Phil Rueppel, Wachovia Securities

Thanks and good afternoon. A couple of questions; first, is there is any flavor you can give us on sort of the verticals and QuickBooks, any outperforming or underperforming there? Second of all, your assessment as we get closer, any changes in the competitive environment on the tax front either from your major competitor or any of the smaller competitors starting to become more prevalent?

Stephen M. Bennett, President, Chief Executive Officer, Director

Phil, on the second one, I don’t see anything dramatically different in the consumer tax competitive playing field from last year at all. So, I just see it’s pretty much the same thing. I know we’re dramatically strengthened our position. I’m sure other people have made some progress too, but we go into the season feeling on a relative competitive basis. I’d be surprised if we didn’t improve greater than or at least equal to any of our competitors in terms of the new product lineup and the great progress we’ve made on marketing. So, we’ll see but we go in feeling pretty good about the season and the great work the consumer tax team and Brad Hensky and the team has done. What was the first question again?

Phil Rueppel, Wachovia Securities

Color on the vertical flavors of QuickBooks.

Stephen M. Bennett, President, Chief Executive Officer, Director

They are doing very well, and the proof point on that is that while units were up 8% revenue was up 28% on QuickBooks. So, a lot of that was because of mix driven by more premier units. So, the premier product in QuickBooks continues to perform very well, and that’s where most of the flavors show up Phil.

Phil Rueppel, Wachovia Securities

Okay great, thanks very much.

Operator

Our next question comes from George Godfrey of BMG.

George Godfrey, BMG

Thanks. Just a question, did you include a balance sheet and cash flow statement in the release?

Stephen M. Bennett, President, Chief Executive Officer, Director

Yes.

George Godfrey, BMG

Okay, I must have missed it, thanks.

Stephen M. Bennett, President, Chief Executive Officer, Director

Did anybody else get one…oh I guess I can’t about it to anybody else. Okay, the next questioner will ask if they got it.

Operator

Our next question comes from Daniel Cummins of Banc of America Securities.

Dan Cummins, Banc of America Securities

Thank you. Just a couple of questions about the tax fees, are you assuming that the multiyear trend of delayed filing continues, is that reflected in the guidance? And then just a question about the sales and marketing spend around the tax fees. My impression last year was it was a big year for the TV spend, do you think this year it’s similar or greater in magnitude relative to your competitors who also spent pretty heavily on TV last year?

Stephen M. Bennett, President, Chief Executive Officer, Director

Yeah, I wouldn’t see a big change in the pattern on the ad spend. I don’t know what they’re planning to spend, but I think we’re going to be aggressive again with a little bit greater than or equal to levels of last year because we’ve been testing this now for four or five years and the paybacks have been good for us.

Dan Cummins, Banc of America Securities

And we’ll see the refund card again?

Stephen M. Bennett, President, Chief Executive Officer, Director

Yeah, refund card will be in and I think we’re going to execute it better this year, and we thought for the customers that used it last year we got very high marks and we learned a lot in version 1 on how to make it better. So, it’s in the product again and we’ll see how it does in year two. With respect to delayed filing, the key thought there is people haven’t changed their filing patterns as much. It’s just that the revenue from the web all comes in the third quarter. So the more people that use the web the more revenue grows year-over-year. So, I think it’s actually partly due to people maybe filing later, but partly due to when the revenue shows up between the second quarter and third quarter mix based on the web service model of QuickBooks online where we only get paid when they file, versus the desktop where we book part of the part when they buy the product and part when they file. So, I think the pattern continues in the same kind of gradual evolution that we’ve seen recently. Again, it’s like Heather’s question about Vista impact, it’s really hard for us to tell you with any degree of preciseness. What we know for sure is that there will be about 135 Federal 1040s filed in the U.S. and we know that is a fact, and how that moves between the second and third quarter is harder to predict sometimes.

Dan Cummins, Banc of America Securities

Thank you.

Operator

Our next question comes from Adam Holt of JP Morgan.

Adam Holt, JP Morgan

Hi Kiran, hi Steve, I did get a balance sheet and cash flow.

Stephen M. Bennett, President, Chief Executive Officer, Director

You did?

Adam Holt, JP Morgan

I did.

Stephen M. Bennett, President, Chief Executive Officer, Director

Okay, well we tried to withhold that from you but somehow you outfoxed us again.

Adam Holt, JP Morgan

I had a couple of questions, the first is just a followup on the tax pricing understanding obviously we’re just starting to look at the season now, but historically you’ve said that units are going to track relatively closely with your revenue guidance and I wanted to get your sense. What was the sort of the logic behind the increase in deluxe and premier, and secondly does your thinking change at all about the balance between units and pricing given that price increase?

Stephen M. Bennett, President, Chief Executive Officer, Director

No, actually our logic is pretty much the same as last year. We think for the whole season we expect units and revenue to grow about in the same range. Remember, desktop units sold at retail this year will be somewhere in the neighborhood of only 20% of the total consumer tax revenue, so I wouldn’t overplay that price move. That will have an impact in retail, but I don’t think it will have a big impact on 80% of the revenue in that business. And I think it’s important to realize that we are thinking about these differently. So to the other question, just because we did something with one product or in one channel it doesn’t mean we would carry that behavior across the board in a peanut butter style. We’re trying to be really thoughtful about how to maximize current period and long-term revenue and profits and customer base, and that means sometimes we do different things in different channels based on our assessment of what’s the competitive environment and what’s the right thing to do.

Adam Holt, JP Morgan

Great, and if I could, turning to the guidance for the second quarter for a minute, I apologize if this is a nickel and dime question. But, it looks like you called out $20 million from QuickBooks and you obviously beat the higher end of your range of guidance for this quarter by quite a large margin, but it looked like you reiterated the 0% to 2% growth for the second quarter on the top line. I guess my question is, were you expecting that pull forward revenue and did you have some assumption around what that would have been in the first quarter, and what does that mean relative to the second quarter numbers?

Stephen M. Bennett, President, Chief Executive Officer, Director

It’s a great question. We actually expected as we said earlier. We plan to sell the QuickBooks product or launch it 30 days earlier. QuickBooks performed above expectations. The pull-in impact was $20 million, but it performed better than we thought, and then as we looked at our current view of the second quarter…remember we gave quarterly guidance so we gave it…early on the year as always there’s been some puts and takes and ins and outs and the bottom line is from where we see today we think the guidance we have for the second quarter is still the right guidance even though we did beat by a nice amount in the first quarter.

Adam Holt, JP Morgan

And just lastly on the OpEx, maybe a question for Kiran, it looked like there was a spike up in G&A, and I actually might have thought we’d see a penny or more of additional upside given the revenue performance in the quarter, was there anything unusual from a one-time perspective in that G&A number or is there a reason it spiked up?

Kiran M. Patel, Chief Financial Officer, Senior Vice President

Yes Adam there were several discretionary and one-time events that we did take in the first quarter. Our expectation is that for the full year G&A growth will still be less than our revenue growth, so we still continue to expect to get leverage of G&A expenses for the year.

Adam Holt, JP Morgan

And would those be expenses that you would typically incur in subsequent quarters to the first and you might have pulled forward into the first quarter?

Kiran M. Patel, Chief Financial Officer, Senior Vice President

No, there were just some discretionary decisions and some one-time events, so it’s not necessarily a pull forward.

Adam Holt, JP Morgan

Great, thanks for the help.

Operator

Our next question comes from David Joseph of Morgan Stanley.

David Joseph, Morgan Stanley

Hi guys. I think most of the questions have been answered. I just have a quick question on QuickBooks. To date with just the initial signs that you’re seeing, are you seeing these as mainly upgrades right now or you think you’re getting increased penetration or acquiring new customers? Also, I guess the same would be for Payroll & Payments, are these mainly attaches or are you seeing sales to your existing QuickBooks base or you think you’re able to acquire customers through those services?

Stephen M. Bennett, President, Chief Executive Officer, Director

I think the key to our continued growth is our ability to get better at both, acquiring new users, and you’ve seen that we’ve done a nice job in the last couple of years of ramping up new user growth. We’ve also done a better job of attach or penetration of our existing QuickBooks customers for things like Payroll & Payments where we still have big opportunities. I think what we’re seeing is continued improvement on both fronts, and I think it’s important to say that we didn’t see a big rush in upgraders by launching the product earlier, because people didn’t change their buying behavior just because we shipped the product. So, that would have ben mostly upgraders versus new users. So, let’s see what happens as now we’re back on the same kind of schedule as last year and so the comparisons will kind of normalize, so we’ll have better insight about that in the February call after the end of the second quarter.

David Joseph, Morgan Stanley

Great, thanks.

Operator

Our final question comes from Jim Macdonald of First Analysis.

Jim Macdonald, First Analysis

Yeah, two quick questions. Could you give us some thoughts that now you’ve broken some of the psychological price point barriers on the tax in terms of the $40 barrier for delux and whether that relates to your kind of new web and retail strategy? And then second question is, Payroll seemed to reaccelerate in several areas this quarter and I was wondering if there is anything behind that?

Stephen M. Bennett, President, Chief Executive Officer, Director

First, on psychological barriers, we’ll see how that works out as the world evolves and I think we always work every year with our retailers to make sure we’re delivering great value to their customers but also giving them advertising price points they can hit, but also driving unit volume growth which they care about. So, I think we all work together to come up with a strategy this year and we’ll see how it plays out. I feel particularly good about our relationships with retail this year and how well our sales team has worked with our retail partners, especially after last year where we did not perform as well in retail as we thought. We still gained shared and held share but the category didn’t grow as fast. I think that was a jolt to our retail team and our retail partners, so we have to do some new creative and innovative things, which we’re doing this year so let’s see how that works. Momentum in Payroll, you know we mad one business, we put a leader in charge, we have a strategy. I think it’s just fundamentally better execution. I think that we’ve figured the strategy out. We’ve been talking about this now and so I think it’s just fundamental execution and I would expect our Payroll strength to continue in terms of us getting better. We’ll see how the numbers all come out at the end of the year in terms of revenue and profit growth, but in both our Payroll & Payments business we have strong leaders, strong teams, and we’re getting better at executing. So, I’m quite optimistic about the prospects in both of those big attached businesses, and it feels like we’ve got a lot of room to grow still within both of those businesses.

Scott Cook, Founder and Chairman, Executive Committee

This is Scott speaking, and I would add that in our Payroll business while we’ve combined it into one organization there are two Payroll businesses, the big Payroll business and that includes our traditional do-it-yourself Payroll and Assisted Payroll and that’s doing quite well, and you saw the numbers Steve described that our Assisted Payroll business has 27% customer growth over a year ago. The small Payroll business which was the result of an acquisition a few years ago is not growing as well. So, it’s not financially nice but it’s not growing as well. So within that Payroll business that distinction is important.

Stephen M. Bennett, President, Chief Executive Officer, Director

That will be the full outsourced product that Scott is referring to and we’ve talked about that in the past.

Jim Macdonald, First Analysis

Thanks very much.

Operator

Gentlemen, I’m not showing any further questions, would you like to proceed with any further remarks?

Stephen M. Bennett, President, Chief Executive Officer, Director

Thanks everybody for your support. It feels like we just finished the preseason. We’re all suited up now and ready to play the super bowl again this year, so we go into the year feeling pretty good about the momentum we have going into season. Our competitors will be tough, but we’re ready and tested and let’s see what happens. We’re looking forward to the second quarter and reporting how we’re doing in February and giving you a first look at how TurboTax is doing. So, thanks for your support and we’ll talk to you soon.

Operator

Ladies and gentlemen, thank you for participating in today’s conference call. This concludes the call, everyone have a great day.

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