Segment Information

9 Months Ended

Apr. 30, 2019

9. 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.

Small Business & Self-Employed: This segment targets small businesses and the self-employed around the world, and the accounting professionals who serve 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 targets 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 target consumers and help them understand and improve their financial lives by offering a view of their financial health.

Strategic Partner: This segment targets 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 less than 5% 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 Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2018 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.



	Three Months Ended						Nine Months Ended
(In millions)	April 30, 2019			April 30, 2018			April 30, 2019			April 30, 2018
Net revenue:
Small Business & Self-Employed	$	887		$	747		$	2,628		$	2,279
Consumer	2,150			1,949			2,701			2,439
Strategic Partner	235			216			461			443
Total net revenue	$	3,272		$	2,912		$	5,790		$	5,161

Operating income:
Small Business & Self-Employed	$	375		$	280		$	1,155		$	962
Consumer	1,678			1,550			1,801			1,642
Strategic Partner	195			173			341			312
Total segment operating income	2,248			2,003			3,297			2,916
Unallocated corporate items:
Share-based compensation expense	(98		)	(92		)	(303		)	(283		)
Other common expenses	(360		)	(303		)	(968		)	(859		)
Amortization of acquired technology	(5		)	(5		)	(15		)	(10		)
Amortization of other acquired intangible assets	(1		)	(2		)	(4		)	(4		)
Total unallocated corporate items	(464		)	(402		)	(1,290		)	(1,156		)
Total operating income	$	1,784		$	1,601		$	2,007		$	1,760

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



	Three Months Ended				Nine Months Ended
(In millions)	April 30, 2019		April 30, 2018		April 30, 2019		April 30, 2018
Net revenue:

QuickBooks Online Accounting	$	260	$	183	$	708	$	500
Online Services	179		135		496		365
Total Online Ecosystem	439		318		1,204		865
QuickBooks Desktop Accounting	181		163		563		559
Desktop Services and Supplies	267		266		861		855
Total Desktop Ecosystem	448		429		1,424		1,414
Small Business & Self-Employed	887		747		2,628		2,279
Consumer	2,150		1,949		2,701		2,439
Strategic Partner	235		216		461		443
Total net revenue	$	3,272	$	2,912	$	5,790	$	5,161

Revenue from our QuickBooks Desktop packaged software products was $53 million and $119 million for the three and nine months ended April 30, 2019, respectively, and $47 million and $117 million for the three and nine months ended April 30, 2018, respectively. These amounts are included in the QuickBooks Desktop Accounting revenue presented in the table above.