Segment Information

3 Months Ended

Oct. 31, 2020

Segment Reporting [Abstract]

Segment Information

11. Segment Information

We have defined our three reportable segments, described below, based on factors such as how we manage our operations and how our chief operating decision maker views results. We define the chief operating decision maker as our Chief Executive Officer and our Chief Financial Officer. Our chief operating decision maker organizes and manages our business primarily on the basis of product and service offerings.

In August 2020, we reorganized certain technology and customer success functions that support and benefit our overall platform. Additionally, certain legal, facility and employee service costs 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 common expenses. For the three months ended October 31, 2019, we reclassified $43 million from Small Business & Self-Employed, $25 million from Consumer, and $3 million from ProConnect to other common expenses. In August 2020, we also renamed our Strategic Partner segment as the ProConnect segment. This segment continues to serve professional accountants.

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 offerings include QuickBooks financial and business management online services and desktop software, payroll solutions, merchant payment processing solutions, and financing for small businesses.

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. Our Mint and Turbo offerings serve consumers and help them understand and improve their financial lives by offering a view of their financial health.

ProConnect: 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, ProFile, and ProConnect Tax Online.

All of our segments operate primarily in the United States and sell primarily to customers in the United States. International total net revenue was approximately 6% of consolidated total net revenue for all periods presented.

We include expenses such as corporate selling and marketing, product development, general and administrative, and share-based compensation, which are not allocated to specific segments, in unallocated corporate items. Unallocated corporate items also include amortization of acquired technology, amortization of other acquired intangible assets, and goodwill and intangible asset impairment charges.

The accounting policies of our reportable segments are the same as those described in the summary of significant accounting policies in Note 1 to the financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2020 and in Note 1, "Description of Business and Summary of Significant Accounting Policies – Significant Accounting Policies" in this Quarterly Report on Form 10-Q. Except for goodwill and purchased intangible assets, we do not generally track assets by reportable segment and, consequently, we do not disclose total assets by reportable segment.

The following table shows our financial results by reportable segment for the periods indicated. Segment results for fiscal 2020 have been reclassified to conform to the fiscal 2021 segment presentation, as described earlier in this footnote.

	Three Months Ended
(In millions)	October 31, 2020		October 31, 2019
Net revenue:
Small Business & Self-Employed	$	1,181	$	1,046
Consumer	119		100
ProConnect	23		19
Total net revenue	$	1,323	$	1,165
Operating income (loss):
Small Business & Self-Employed	$	767	$	593
Consumer	4		(20)
ProConnect	(10)		(18)
Total segment operating income	761		555
Unallocated corporate items:
Share-based compensation expense	(111)		(111)
Other common expenses	(432)		(426)
Amortization of acquired technology	(7)		(6)
Amortization of other acquired intangible assets	(2)		(2)
Total unallocated corporate items	(552)		(545)
Total operating income	$	209	$	10

Revenue classified by significant product and service offerings was as follows:

	Three Months Ended
(In millions)	October 31, 2020		October 31, 2019
Net revenue:
QuickBooks Online Accounting	$	392	$	306
Online Services	229		195
Total Online Ecosystem	621		501
QuickBooks Desktop Accounting	241		239
Desktop Services and Supplies	319		306
Total Desktop Ecosystem	560		545
Small Business & Self-Employed	1,181		1,046
Consumer	119		100
ProConnect	23		19
Total net revenue	$	1,323	$	1,165

Revenue from our QuickBooks Desktop packaged software products was $20 million for the three months ended October 31, 2020, and $27 million for the three months ended October 31, 2019. These amounts are included in the QuickBooks Desktop Accounting revenue presented in the table above.