Segment Information

12 Months Ended

Jul. 31, 2021

Segment Reporting [Abstract]

Segment Information

14. Segment Information

We have defined four 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 corporate expenses. For the twelve months ended July 31, 2020 and 2019, we reclassified $180 million and $172 million from Small Business & Self-Employed, $121 million and $78 million from Consumer, and $13 million and $12 million from ProConnect to other corporate expenses. In August 2020, we also renamed our Strategic Partner segment as the ProConnect segment. This segment continues to serve professional accountants.

In December 2020 we acquired Credit Karma in a business combination and it operates as a separate reportable segment. We have included the results of operations of Credit Karma in our consolidated statements of operations from the date of acquisition. See Note 6, "Business Combinations," for more information. Segment operating income for Credit Karma includes all direct expenses, which is different from our other reportable segments where we do not fully allocate corporate expenses.

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 offering is a personal finance offering which helps customers track their finances and daily financial behaviors.

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, and data-driven resources.

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, and ProConnect Tax Online in the U.S., and ProFile and ProTax Online in Canada.

All of our segments operate primarily in the United States and sell primarily to customers in the United States. Total international net revenue was less than 5% of consolidated total net revenue for the twelve months ended July 31, 2021, 2020 and 2019.

For our Small Business & Self-Employed, Consumer, and ProConnect reportable segments, we include expenses such as corporate selling and marketing, product development and general and administrative, 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 all direct expenses related to selling and marketing, product development, and general and administrative. Unallocated corporate items for all segments include share-based compensation, amortization of acquired technology, amortization of other acquired intangible assets, and goodwill and intangible asset impairment charges.

The accounting policies of our reportable segments are the same as those described in the summary of significant accounting policies in Note 1. 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. See Note 5, “Goodwill and Acquired Intangible Assets,” for goodwill by reportable segment.

The following table shows our financial results by reportable segment for the periods indicated.

	Twelve Months Ended July 31,
(In millions)	2021		2020		2019
Net revenue:
Small Business & Self-Employed	$	4,688	$	4,050	$	3,533
Consumer	3,563		3,136		2,775
Credit Karma	865		—		—
ProConnect	517		493		476
Total net revenue	$	9,633	$	7,679	$	6,784
Operating income:
Small Business & Self-Employed	$	2,590	$	2,091	$	1,722
Consumer	2,237		2,063		1,820
Credit Karma	182		—		—
ProConnect	372		346		330
Total segment operating income	5,381		4,500		3,872
Unallocated corporate items:
Share-based compensation expense	(753)		(435)		(401)
Other corporate expenses	(1,932)		(1,861)		(1,591)
Amortization of acquired technology	(50)		(22)		(20)
Amortization of other acquired intangible assets	(146)		(6)		(6)
Total unallocated corporate items	(2,881)		(2,324)		(2,018)
Total operating income	$	2,500	$	2,176	$	1,854

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

	Twelve Months Ended July 31,
(In millions)	2021		2020		2019
Net revenue:
QuickBooks Online Accounting	$	1,699	$	1,354	$	980
Online Services	1,051		828		683
Total Online Ecosystem	2,750		2,182		1,663
QuickBooks Desktop Accounting	789		755		732
Desktop Services and Supplies	1,149		1,113		1,138
Total Desktop Ecosystem	1,938		1,868		1,870
Small Business & Self-Employed	4,688		4,050		3,533
Consumer	3,563		3,136		2,775
Credit Karma	865		—		—
ProConnect	517		493		476
Total net revenue	$	9,633	$	7,679	$	6,784

Revenue from our QuickBooks Desktop packaged software products was $133 million, $147 million, and $167 million for the twelve months ended July 31, 2021, 2020, and 2019, respectively. These amounts are included in the QuickBooks Desktop Accounting revenue presented in the table above.

Credit Karma revenue is primarily generated from cost-per-action transactions which are related to credit card issuances and personal loan funding.