INTUIT INC

Previous wording

On August 1, 2023, we reorganized certain technology functions in our Consumer and ProTax segments that support and benefit our overall platform. Additionally, certain workplace and real estate functions in our Small Business & Self-Employed segment are now managed at the corporate level. As a result of these reorganizations, costs associated with these functions are no longer included in segment operating income and are now included in other corporate expenses. For thethree and six months ended January 31, 2023, we reclassified expenses totaling$10 million and$19 million from Small Business & Self-Employed,$43 million and$83 million from Consumer, and$16 million and$31 million from ProTax to other corporate expenses, respectively. See Note 12, "Segment Information," for more information.

Current wording

On August 1, 2023, we reorganized certain technology functions in our Consumer and ProTax segments that support and benefit our overall platform. Additionally, certain workplace and real estate functions in our Small Business & Self-Employed segment are now managed at the corporate level. As a result of these reorganizations, costs associated with these functions are no longer included in segment operating income and are now included in other corporate expenses. For thethree and nine months ended April 30, 2023, we reclassified expenses totaling$18 million and$37 million from Small Business & Self-Employed,$43 million and$126 million from Consumer, and$14 million and$45 million from ProTax to other corporate expenses, respectively. See Note 12, "Segment Information," for more information.

Previous wording

Small Business & Self-Employed: This segment serves small businesses and the self-employed around the world, and the accounting professionals who assist and advise them. Our QuickBooks offerings include financial and business management online services and desktop software, payroll solutions, time tracking, merchant payment processing and bill pay solutions, checking accounts through an FDIC member bank partner, and financing for small businesses. Our Mailchimp offerings include marketing automation and customer relationship management.Consumer: This segment serves consumers and includes do-it-yourself and assisted TurboTax income tax preparation products and services sold in the U.S. and Canada. Credit Karma: This segment serves consumers with a personal finance platform that provides personalized recommendations of credit card, home, auto, and personal loan, and insurance products; online savings and checking accounts through an FDIC member bank partner; and access to their credit scores and reports, credit and identity monitoring, credit report dispute, credit building tools, and tools to help understand net worth and make financial progress. Our Mint offering is a personal finance offering which helps customers track their finances and daily financial behavior.ProTax: This segment serves professional accountants in the U.S. and Canada, who are essential to both small business success and tax preparation and filing. Our professional tax offerings include Lacerte, ProSeries, and ProConnect Tax Online in the U.S., and ProFile and ProTax Online in Canada.

Current wording

Small Business & Self-Employed: This segment serves small businesses and the self-employed around the world, and the accounting professionals who assist and advise them. Our QuickBooks offerings include financial and business management online services and desktop software, payroll solutions, time tracking, merchant payment processing and bill pay solutions, checking accounts through an FDIC member bank partner, and financing for small businesses. Our Mailchimp offerings include marketing automation and customer relationship management.Consumer: This segment serves consumers and includes do-it-yourself and assisted TurboTax income tax preparation products and services sold in the U.S. and Canada. Credit Karma: This segment serves consumers with a personal finance platform that provides personalized recommendations of credit card, home, auto, and personal loan, and insurance products; online savings and checking accounts through an FDIC member bank partner; and access to their credit scores and reports, credit and identity monitoring, credit report dispute, credit building tools, and tools to help understand net worth and make financial progress.ProTax: This segment serves professional accountants in the U.S. and Canada, who are essential to both small business success and tax preparation and filing. Our professional tax offerings include Lacerte, ProSeries, and ProConnect Tax Online in the U.S., and ProFile and ProTax Online in Canada.

Previous wording

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. We expect our total service revenue as a percentage of our total revenue to continue to grow in the future.

Current wording

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. We expect our total service revenue as a percentage of our total revenue to grow over the long term.

Previous wording

Key highlights for the first six months of fiscal 2024 include the following:

Current wording

Key highlights for the first nine months of fiscal 2024 include the following:

Previous wording

In preparing our condensed consolidated financial statements, we 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 condensed consolidated balance sheets. We believe that the estimates, assumptions, and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2023 have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates. There were no significant changes in those critical accounting policies and estimates during the first six months of fiscal 2024. Senior management has reviewed the development and selection of our critical accounting policies and estimates and their disclosure in this Quarterly Report on Form 10-Q with the Audit and Risk Committee of our Board of Directors.

Current wording

In preparing our condensed consolidated financial statements, we 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 condensed consolidated balance sheets. We believe that the estimates, assumptions, and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2023 have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates. There were no significant changes in those critical accounting policies and estimates during the first nine months of fiscal 2024. Senior management has reviewed the development and selection of our critical accounting policies and estimates and their disclosure in this Quarterly Report on Form 10-Q with the Audit and Risk Committee of our Board of Directors.

Previous wording

Total net revenue for the second quarter of fiscal 2024 increased $345 million, or 11%, compared with the same quarter of fiscal 2023. Our Small Business & Self-Employed segment revenue increased during the quarter, primarily due to growth in our Online Ecosystem revenue. See “Segment Results” later in this Item 2 for more information about the results for all of our reportable segments.

Current wording

Total net revenue for the third quarter of fiscal 2024 increased $719 million, or 12%, compared with the same quarter of fiscal 2023. Our Small Business & Self-Employed segment revenue increased during the quarter due to growth in our Online Ecosystem revenue. Consumer segment revenue increased due to the interrelated factors of a shift in mix to our higher-priced service offerings, such as TurboTax Live, and higher effective prices. See “Segment Results” later in this Item 2 for more information about the results for all of our reportable segments.

Previous wording

Operating income for the second quarter of fiscal 2024 increased $99 million, or 37%, compared to the same quarter of fiscal 2023. The increase in operating income was due to the increase in revenue described above, partially offset by increases in expenses. Expenses increased primarily due to staffing, marketing, share-based compensation, and outside services. See "Cost of Revenue" and “Operating Expenses” later in this Item 2 for more information.

Current wording

Operating income for the third quarter of fiscal 2024 increased $327 million, or 12%, compared to the same quarter of fiscal 2023. The increase in operating income was due to the increase in revenue described above, partially offset by increases in expenses. Expenses increased due to staffing, marketing, outside services, and share-based compensation. See "Cost of Revenue" and “Operating Expenses” later in this Item 2 for more information.

Previous wording

Net income for the second quarter of fiscal 2024 increased $185 million, or 110%, compared with the same quarter of fiscal 2023. The increase in net income was primarily due to the increase in operating income described above and a decrease in tax expense primarily due to excess tax benefits related to share-based compensation. Diluted net income per share increased to $1.25 for the second quarter of fiscal 2024 compared to $0.60 for the same quarter of fiscal 2023, in line with the increase in net income.

Current wording

Net income for the third quarter of fiscal 2024 increased $302 million, or 14%, compared with the same quarter of fiscal 2023. The increase in net income was due to the increase in operating income described above, partially offset by an increase in the associated income tax expense. Diluted net income per share increased to $8.42 for the third quarter of fiscal 2024 compared to $7.38 for the same quarter of fiscal 2023, in line with the increase in net income.

Previous wording

Total net revenue for the first six months of fiscal 2024 increased $726 million, or 13%, compared with the same period of fiscal 2023. Our Small Business & Self-Employed segment revenue increased during the period, primarily due to growth in our Online Ecosystem revenue. See “Segment Results” later in this Item 2 for more information about the results for all of our reportable segments.

Current wording

Total net revenue for the first nine months of fiscal 2024 increased $1.4 billion, or 12%, compared with the same period of fiscal 2023. Our Small Business & Self-Employed segment revenue increased during the period due to growth in our Online Ecosystem revenue. Consumer segment revenue increased due to the interrelated factors of a shift in mix to our higher-priced service offerings, such as TurboTax Live, and higher effective prices. See “Segment Results” later in this Item 2 for more information about the results for all of our reportable segments.

Previous wording

Operating income for the first six months of fiscal 2024 increased $330 million, or 95%, compared with the same period of fiscal 2023. The increase in operating income was due to the increase in revenue described above and an increase in expenses that was at a lower rate than the increase in revenue. Expenses increased primarily due to share-based compensation, staffing, outside services, and marketing. See"Cost of Revenue" and“Operating Expenses” later in this Item 2 for more information.

Current wording

Operating income for the first nine months of fiscal 2024 increased $657 million, or 21%, compared with the same period of fiscal 2023. The increase in operating income was due to the increase in revenue described above and an increase in expenses that was at a lower rate than the increase in revenue. Expenses increased due to staffing, share-based compensation, marketing, and outside services. See"Cost of Revenue" and“Operating Expenses” later in this Item 2 for more information.

Previous wording

Net income for the first six months of fiscal 2024 increased $386 million, or 186%, compared with the same period of fiscal 2023. The increase in net income was primarily due to the increase in operating income described above, an increase in interest income due to higher average interest rates, and a decrease in tax expense primarily due to excess tax benefits related to share-based compensation. Diluted net income per share increased to $2.10 for the first six months of fiscal 2024 compared to $0.73 for the same period in fiscal 2023, in line with the increase in net income.

Current wording

Net income for the first nine months of fiscal 2024 increased $688 million, or 30%, compared with the same period of fiscal 2023. The increase in net income was due to the increase in operating income described above and an increase in interest income due to higher average interest rates. Diluted net income per share increased to $10.51 for the first nine months of fiscal 2024 compared to $8.11 for the same period in fiscal 2023, in line with the increase in net income.

Previous wording

The information below is organized in accordance with our four reportable segments. See“Executive Overview – About Intuit” earlier in this Item 2 and Note 12 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for more information. All of our segments operate and sell to customers primarily in the United States. Total international net revenue was approximately 9% and 10% of consolidated net revenue for the three and six months ended January 31, 2024, respectively. Total international net revenue was approximately 9% and 10% of consolidated net revenue for the three and six months ended January 31, 2023, respectively.

Current wording

The information below is organized in accordance with our four reportable segments. See“Executive Overview – About Intuit” earlier in this Item 2 and Note 12 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for more information. All of our segments operate and sell to customers primarily in the United States. Total international net revenue was approximately 6% and 8% of consolidated net revenue for the three and nine months ended April 30, 2024, respectively. Total international net revenue was approximately 6% and 8% of consolidated net revenue for the three and nine months ended April 30, 2023, respectively.

Previous wording

segment are now managed at the corporate level. As a result of these reorganizations, costs associated with these functions are no longer included in segment operating income and are now included in other corporate expenses. For thethree and six months ended January 31, 2023, we reclassified expenses totaling$10 million and $19 million from Small Business & Self-Employed,$43 million and$83 million from Consumer, and$16 million and $31 million from ProTax to other corporate expenses, respectively.

Current wording

segment are now managed at the corporate level. As a result of these reorganizations, costs associated with these functions are no longer included in segment operating income and are now included in other corporate expenses. For thethree and nine months ended April 30, 2023, we reclassified expenses totaling$18 million and $37 million from Small Business & Self-Employed,$43 million and$126 million from Consumer, and$14 million and $45 million from ProTax to other corporate expenses, respectively.

Previous wording

Segment operating income or loss is segment net revenue less segment cost of revenue and operating expenses. See“Executive Overview – Industry Trends and Seasonality” earlier in this Item 2 for a description of the seasonality of our business. 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 our Credit Karma reportable segment, segment expenses include certain 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, goodwill and intangible asset impairment charges, and professional fees and transaction charges related to business combinations. These unallocated corporate costs for all segments totaled $2.8 billion in the first six months of fiscal 2024 and $2.6 billion in the first six months of fiscal 2023. Unallocated corporate items increased in the fiscal 2024 period, primarily due to increases in share-based compensation expense, general and administrative expense, and corporate product development expense. See Note 12 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for reconciliations of total segment operating income or loss to consolidated operating income or loss for each fiscal period presented.

Current wording

Segment operating income or loss is segment net revenue less segment cost of revenue and operating expenses. See“Executive Overview – Industry Trends and Seasonality” earlier in this Item 2 for a description of the seasonality of our business. 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 our Credit Karma reportable segment, segment expenses include certain 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, goodwill and intangible asset impairment charges, and professional fees and transaction charges related to business combinations. These unallocated corporate costs for all segments totaled $4.2 billion in the first nine months of fiscal 2024 and $3.8 billion in the first nine months of fiscal 2023. Unallocated corporate items increased in the fiscal 2024 period, due to increases in share-based compensation expense, general and administrative expense, and corporate product development expense. See Note 12 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for reconciliations of total segment operating income or loss to consolidated operating income or loss for each fiscal period presented.

Previous wording

Revenue for our Small Business & Self-Employed segment increased $348 million, or 18%, in the second quarter of fiscal 2024 and $704 million, or 18%, in the first six months of fiscal 2024 compared with the same periods of fiscal 2023. The increase in both periods was primarily due to growth in Online Ecosystem revenue.

Current wording

Revenue for our Small Business & Self-Employed segment increased $366 million, or 18%, in the third quarter of fiscal 2024 and $1.1 billion, or 18%, in the first nine months of fiscal 2024 compared with the same periods of fiscal 2023. The increase in both periods was due to growth in Online Ecosystem revenue, which contributed to $286 million and $852 million of the increase for the three and nine months ended April 30, 2024, respectively.

Previous wording

Online Ecosystem revenue increased 21% in the second quarter of fiscal 2024 compared with the same period of fiscal 2023. Online Services revenue increased 24% in the second quarter of fiscal 2024, primarily due to an increase in revenue from our payroll, payments, and Mailchimp offerings. Online payroll revenue increased due to an increase in customers, higher effective prices, and a shift in mix to higher-end offerings. Online payments revenue increased due to an increase in customers, higher effective prices, and an increase in total payment volume per customer. Mailchimp revenue increased due to higher effective prices and an increase in paid customers. QuickBooks Online Accounting revenue increased 19% in the second quarter of fiscal 2024, primarily due to an increase in customers, higher effective prices, and a shift in mix to our higher-priced offerings.

Current wording

Online Ecosystem revenue increased $286 million, or 19%, in the third quarter of fiscal 2024 compared with the same period of fiscal 2023. Online Services revenue increased $149 million, or 20%, in the third quarter of fiscal 2024, due to increases in revenue from our payments offerings of $59 million, our payroll offerings of $52 million, and Mailchimp of $20 million. Revenue increases were due to the interrelated factors described below. Online payments revenue increased due to higher effective prices, customer growth, and an increase in total payment volume per customer. Online payroll revenue increased due to customer growth, higher effective prices, and a shift in mix to higher-end offerings. Mailchimp revenue increased due to higher effective prices and paid customer growth. QuickBooks Online Accounting revenue increased $137 million, or 19%, in the third quarter of fiscal 2024 due to customer growth, higher effective prices, and a shift in mix to our higher-priced offerings.

Previous wording

Online Ecosystem revenue increased 21% in the first six months of fiscal 2024 compared with the same period of fiscal 2023. Online Services revenue increased 22% in the first six months of fiscal 2024, primarily due to an increase in revenue from our payroll, Mailchimp, and payments offerings. Online payroll revenue increased due to an increase in customers, a shift in mix to higher-end offerings, and higher effective prices. Mailchimp revenue increased due to higher effective prices and an increase in paid customers. Online payments revenue increased due to an increase in customers, higher effective prices, and an increase in total payment volume per customer. QuickBooks Online Accounting revenue increased 19% in the first six months of fiscal 2024 primarily due to an increase in customers, higher effective prices, and a shift in mix to our higher-priced offerings.

Current wording

Online Ecosystem revenue increased $852 million, or 20%, in the first nine months of fiscal 2024 compared with the same period of fiscal 2023. Online Services revenue increased $455 million, or 21%, in the first nine months of fiscal 2024, due to increases in revenue from our payroll offerings of $161 million, our payments offerings of $143 million, and Mailchimp of $107 million. Revenue increases were due to the interrelated factors described below. Online payroll revenue increased due to customer growth, a shift in mix to higher-end offerings, and higher effective prices. Online payments revenue increased due to customer growth, higher effective prices, and an increase in total payment volume per customer. Mailchimp revenue increased due to higher effective prices and paid customer growth. QuickBooks Online Accounting revenue increased $397 million, or 19%, in the first nine months of fiscal 2024 due to customer growth, higher effective prices, and a shift in mix to our higher-priced offerings.

Previous wording

Desktop Ecosystem revenue increased 10% in the second quarter of fiscal 2024 and 12% in the first six months of fiscal 2024 compared with the same periods of fiscal 2023. The increase in both periods was primarily due to customer growth and price increases in our QuickBooks Desktop and Enterprise subscription offerings.

Current wording

Desktop Ecosystem revenue increased $218 million, or 13%, in the first nine months of fiscal 2024 compared with the same period of fiscal 2023, due to the interrelated factors of customer growth and price increases in our QuickBooks Desktop and Enterprise subscription offerings.

Previous wording

Small Business & Self-Employed segment operating income increased 28% in the second quarter of fiscal 2024 compared with the same period of fiscal 2023, primarily due to the increase in revenue described above, which was partially offset by higher expenses for marketing and outside services.

Current wording

Small Business & Self-Employed segment operating income increased $311 million, or 27%, in the third quarter of fiscal 2024 compared with the same period of fiscal 2023, due to the increase in revenue described above, which was partially offset by increases in staffing expenses of $17 million, outside services expenses of $14 million, and sales-related expenses of $6 million.

Previous wording

Small Business & Self-Employed segment operating income increased 27% in the first six months of fiscal 2024 compared with the same period of fiscal 2023, primarily due to the increase in revenue described above, which was partially offset by higher expenses for outside services, staffing, and sales-related expenses.

Current wording

Small Business & Self-Employed segment operating income increased $907 million, or 27%, in the first nine months of fiscal 2024 compared with the same period of fiscal 2023, due to the increase in revenue described above, which was partially offset by increases in outside services expenses of $41 million, staffing expenses of $36 million, and sales-related expenses of $21 million.

Previous wording

In August 2023, we reorganized certain workplace and real estate functions that are now managed at the corporate level. As a result, these costs are no longer included in segment operating income and are now included in other corporate expenses. For the three and six months ended January 31, 2023, we reclassified $10 million and $19 million, respectively, from Small Business & Self-Employed to other corporate expenses.

Current wording

In August 2023, we reorganized certain workplace and real estate functions that are now managed at the corporate level. As a result, these costs are no longer included in segment operating income and are now included in other corporate expenses. For the three and nine months ended April 30, 2023, we reclassified $18 million and $37 million, respectively, from Small Business & Self-Employed to other corporate expenses.

Previous wording

In August 2023, we reorganized certain technology functions that support and benefit our overall platform. As a result, these costs are no longer included in segment operating income and are now included in other corporate expenses. For the three and six months ended January 31, 2023, we reclassified $43 million and $83 million, respectively, from Consumer to other corporate expenses.

Current wording

In August 2023, we reorganized certain technology functions that support and benefit our overall platform. As a result, these costs are no longer included in segment operating income and are now included in other corporate expenses. For the three and nine months ended April 30, 2023, we reclassified $43 million and $126 million, respectively, from Consumer to other corporate expenses.

Previous wording

Credit Karma segment revenue is primarily 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; 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; and Credit Karma Money. Credit Karma also includes revenue from our Mint offering.

Current wording

Credit Karma segment revenue is primarily 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; 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; and Credit Karma Money.

Previous wording

Revenue for our Credit Karma segment decreased $20 million, or 3%, in the first six months of fiscal 2024 compared to the same period of fiscal 2023, primarily due to decreases in personal loan, auto insurance, home loan, and auto loan verticals, partially offset by increases in our credit card vertical and Credit Karma Money. Economic uncertainty continues to influence the lending behaviors of our partners.

Current wording

Revenue for our Credit Karma segment increased $13 million, or 1%, in the first nine months of fiscal 2024 compared to the same period of fiscal 2023, due to increases in revenue from our credit card vertical of $23 million and Credit Karma Money of $17 million, partially offset by decreases in revenue from our personal loan vertical of $18 million and our home loan vertical of $7 million. Economic uncertainty continues to influence the lending behaviors of our partners.

Previous wording

Revenue for our ProTax segment increased $29 million, or 10%, in the first six months of fiscal 2024 compared with the same period of fiscal 2023, primarily due to earlier forms availability compared to the prior year and higher average revenue per customer.

Current wording

Revenue for our ProTax segment increased $37 million, or 7%, in the first nine months of fiscal 2024 compared with the same period of fiscal 2023 due to higher average revenue per customer.

Previous wording

Segment operating income increased $25 million, or 11%, in the first six months of fiscal 2024 compared with the same period of fiscal 2023, primarily due to the increase in revenue described above. Expenses were relatively flat for both periods.

Current wording

Segment operating income increased $33 million, or 7%, in the first nine months of fiscal 2024 compared with the same period of fiscal 2023, due to the increase in revenue described above. Expenses were relatively flat in the first nine months of fiscal 2024 compared to the same period of fiscal 2023.

Previous wording

In August 2023, we reorganized certain technology functions that support and benefit our overall platform. As a result, these costs are no longer included in segment operating income and are now included in other corporate expenses. For the three and six months ended January 31, 2023, we reclassified $16 million and $31 million, respectively, from ProTax to other corporate expenses.

Current wording

In August 2023, we reorganized certain technology functions that support and benefit our overall platform. As a result, these costs are no longer included in segment operating income and are now included in other corporate expenses. For the three and nine months ended April 30, 2023, we reclassified $14 million and $45 million, respectively, from ProTax to other corporate expenses.

Previous wording

Our cost of revenue has three components: (1) cost of service 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, ongoing production support costs, 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; (2) cost of product and other revenue, which includes the direct costs of manufacturing and shipping or electronically downloading our desktop software products; and (3) amortization of acquired technology, which represents the cost of amortizing developed technologies that we have obtained through acquisitions, over their useful lives.

Current wording

Our cost of revenue has three components: (1) cost of service 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, ongoing production support costs, 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; (2) cost of product and other revenue, which includes the direct costs of manufacturing and shipping or electronically downloading our desktop software and financial supplies products; and (3) amortization of acquired technology, which represents the cost of amortizing developed technologies that we have obtained through acquisitions, over their useful lives.

Previous wording

Cost of service revenue as a percentage of service revenue was consistent in both the second quarter and first six months of fiscal 2024 compared with the same periods of fiscal 2023.

Current wording

Cost of service revenue as a percentage of service revenue was relatively consistent in both the third quarter and first nine months of fiscal 2024 compared with the same periods of fiscal 2023.

Previous wording

Cost of product and other revenue as a percentage of product and other revenue was relatively consistent in both the second quarter and first six months of fiscal 2024 compared with the same periods of fiscal 2023. Costs of product and other revenue are expensed as incurred, and we do not defer any of these costs when product and other revenue is deferred.

Current wording

Cost of product and other revenue as a percentage of product and other revenue was relatively consistent in both the third quarter and first nine months of fiscal 2024 compared with the same periods of fiscal 2023. Costs of product and other revenue are expensed as incurred, and we do not defer any of these costs when product and other revenue is deferred.

Previous wording

Total operating expenses as a percentage of total net revenue decreased in the second quarter of fiscal 2024 compared to the same period of fiscal 2023. Total net revenue for the second quarter of fiscal 2024 increased $345 million, or 11%, while total operating expenses for the quarter increased $164 million, or 8%. The increase in total operating expenses was primarily due to increases of $70 million for marketing expenses, $49 million for staffing due to higher headcount, and $42 million for share-based compensation.

Current wording

Total operating expenses as a percentage of total net revenue was flat in the third quarter of fiscal 2024 compared to the same period of fiscal 2023. Total net revenue for the third quarter of fiscal 2024 increased $719 million, or 12%, while total operating expenses for the quarter increased $306 million, or 14%. The increase in total operating expenses was due to increases of $104 million for marketing expenses, $99 million for staffing due to higher headcount, and $48 million for share-based compensation.

Previous wording

Total operating expenses as a percentage of total net revenue decreased in the first six months of fiscal 2024 compared to the same period of fiscal 2023. Total net revenue for the first six months of fiscal 2024 increased $726 million, or 13%, while total operating expenses for the period increased $230 million, or 6%. The increase in total operating expenses was primarily due to increases of $100 million for share-based compensation, $86 million for staffing due to higher headcount, and $27 million for outside services.

Current wording

Total operating expenses as a percentage of total net revenue decreased in the first nine months of fiscal 2024 compared to the same period of fiscal 2023. Total net revenue for the first nine months of fiscal 2024 increased $1.4 billion, or 12%, while total operating expenses for the period increased $536 million, or 9%. The increase in total operating expenses was due to increases of $182 million for staffing due to higher headcount, $148 million for share-based compensation, and $127 million for marketing expenses.

Previous wording

Interest expense of $122 million and $114 million for the first six months of fiscal 2024 and 2023, respectively, consisted primarily of interest on our senior unsecured notes, unsecured term loan, and secured revolving credit facilities. Interest expense for the first six months of fiscal 2024 increased compared to the same period of fiscal 2023, primarily due to higher interest rates.

Current wording

Interest expense of $182 million and $180 million for the first nine months of fiscal 2024 and 2023, respectively, consisted of interest on our senior unsecured notes, unsecured term loan, and secured revolving credit facilities.

Previous wording

(1) Interest income in the second quarter and first six months of fiscal 2024 increased compared to the same periods of fiscal 2023, primarily due to higher average interest rates.

Current wording

(1) Interest income for the three and nine months ended April 30, 2024 increased compared to the same periods of fiscal 2023 due to higher average interest rates.

Previous wording

For the three and six months ended January 31, 2024, we recognized excess tax benefits on share-based compensation of $56 million and $83 million, respectively, in our provision for income taxes. For the three and six months ended January 31, 2023, we recognized tax shortfalls on share-based compensation of $9 million and $2 million, respectively, in our provision for income taxes.

Current wording

For the three and nine months ended April 30, 2024, we recognized excess tax benefits on share-based compensation of $40 million and $123 million, respectively, in our provision for income taxes. For the three and nine months ended April 30, 2023, we recognized excess tax benefits on share-based compensation of $17 million and $15 million, respectively, in our provision for income taxes.

Previous wording

Our effective tax rates for the three and six months ended January 31, 2023 were approximately 26% and 20%, respectively. Excluding discrete tax items primarily related to share-based compensation, our effective tax rate for both periods was approximately 24%. The difference from the federal statutory rate of 21% was primarily due to state income taxes and non-deductible share-based compensation, which were partially offset by the tax benefit we received from the federal research and experimentation credit.

Current wording

Our effective tax rates for the three and nine months ended April 30, 2024 were approximately 22% and 19%, respectively. Excluding discrete tax items primarily related to share-based compensation, our effective tax rate for both periods was approximately 24%. The difference from the federal statutory rate of 21% was primarily due to state income taxes and non-deductible share-based compensation, which were partially offset by the tax benefit we received from the federal research and experimentation credit.

Previous wording

We recorded $1 million in tax expense on pretax income of $354 million for the three months ended January 31, 2024. Our effective tax rate for the six months ended January 31, 2024 was approximately 4%. Excluding discrete tax items primarily related to share-based compensation, our effective tax rate for both periods was approximately 24%. The difference from the federal statutory rate of 21% was primarily due to state income taxes and non-deductible share-based compensation, which were partially offset by the tax benefit we received from the federal research and experimentation credit.

Current wording

Our effective tax rates for the three and nine months ended April 30, 2023 were approximately 24% and 23%, respectively. Excluding discrete tax items primarily related to share-based compensation, our effective tax rate for both periods was approximately 24%. The difference from the federal statutory rate of 21% was primarily due to state income taxes and non-deductible share-based compensation, which were partially offset by the tax benefit we received from the federal research and experimentation credit.

Previous wording

At January 31, 2024, our cash, cash equivalents, and investments totaled $1.5 billion, a decrease of $2.2 billion from July 31, 2023 due to the factors discussed under“Statements of Cash Flows” below. Our primary sources of liquidity have been cash from operations, which entails 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, capital projects, acquisitions of businesses, debt service costs and debt repayment, repurchases of our common stock under our stock repurchase programs, and the payment of cash dividends. As discussed in“Executive Overview – Industry Trends and Seasonality” earlier in this Item 2, 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.

Current wording

At April 30, 2024, our cash, cash equivalents, and investments totaled $4.7 billion, an increase of $1.0 billion from July 31, 2023 due to the factors discussed under“Statements of Cash Flows” below. Our primary sources of liquidity have been cash from operations, which entails 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, capital projects, acquisitions of businesses, debt service costs and debt repayment, repurchases of our common stock under our stock repurchase programs, and the payment of cash dividends. As discussed in“Executive Overview – Industry Trends and Seasonality” earlier in this Item 2, 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.

Previous wording

We have historically generated significant cash from operations, and we expect to continue to do so in the future. Our cash, cash equivalents, and investments totaled $1.5 billion at January 31, 2024. None of those funds were restricted and approximately 80% of those funds were located in the U.S.

Current wording

We have historically generated significant cash from operations, and we expect to continue to do so in the future. Our cash, cash equivalents, and investments totaled $4.7 billion at April 30, 2024. None of those funds were restricted and approximately 93% of those funds were located in the U.S.

Previous wording

On February 5, 2024, the existing unsecured credit facility described in"Credit Facilities - Unsecured Revolving Credit Facility and Term Loan" below was terminated and we entered into an unsecured credit agreement with certain lending providers for a $1.5 billion unsecured revolving credit facility that will expire on February 5, 2029. See Note 13 to the financial statements in Part I, Item 1 of this Quarterly Report for more information. Our unsecured revolving credit facility is available to us for general corporate purposes. At January 31, 2024, no amounts were outstanding under the unsecured revolving credit facility.

Current wording

On February 5, 2024, we terminated our amended and restated credit agreement dated November 1, 2021, and entered into an unsecured credit agreement with certain lenders providing for a $1.5 billion unsecured revolving credit facility that expires on February 5, 2029. Our unsecured revolving credit facility is available to us for general corporate purposes. At April 30, 2024, no amounts were outstanding under the unsecured revolving credit facility. See Note 6 to the financial statements in Part I, Item 1 of this Quarterly Report for more information.