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Intuit (INTU) Q4 Earnings and Revenues Surpass Estimates

Zacks Equity Research

Intuit Inc. INTU reported fourth-quarter fiscal 2019 results. Its non-GAAP loss was 9 cents per share, narrower than the Zacks Consensus Estimate of loss of 14 cents. Moreover, the figure was narrower than management’s guided range for a loss of 16-14 cents per share. The bottom line improved 800% on a year-over-year basis, as adjusted for the adoption of ASU 2014-09 in August last year. However, without the adjustment, the metric declined significantly from prior-year quarter’s earnings of 32 cents per share.

This tax preparation-related software maker’s revenues grossed $994 million, up 15% from the year-ago quarter’s adjusted revenues, and 1% without adjustment. The top line outpaced the consensus estimate of $961 million. Strong momentum in Online ecosystem revenues and growth in the Consumer business drove the top line.

Quarter in Detail

Segment wise, Small Business and Self-Employed Group revenues jumped 16% year over year to $905 million. This rise was primarily driven by 33% subscriber surge for QuickBooks Online, which brought the count to more than 4.5 million at the end of the fiscal fourth quarter.

Online ecosystem revenues surged 35% to $459 million. The U.S.-based subscribers of QuickBooks Online grew 25% to more than 3.2 million while international subscribers jumped 58% on a year-over-year basis to more than 1.3 million.

Within QuickBooks Online, Self-Employed subscribers increased to more than 1 million, up approximately 39% year over year. Online Services revenues grew 28%.

Intuit Inc. Price, Consensus and EPS Surprise

Intuit Inc. Price, Consensus and EPS Surprise

Intuit Inc. price-consensus-eps-surprise-chart | Intuit Inc. Quote

Intuit’s online payments business continued to be strong. Its next business-day payments service is witnessing increased adoption among customers. QuickBooks Online Accounting revenues grew 39.4% year over year.

Growing adoption of full-service payroll offering was also a positive.

Improved mobile capability of TSheets offering with new features such as GPS time-tracking was encouraging.

A solid momentum in the company’s lending product QuickBooks Capital was a positive as well. Additionally, the company’s QuickBooks Online Advanced solution, which is targeting the midmarket, seems promising.

Desktop ecosystem revenues rose 1% year over year to $446 million during the quarter. QuickBooks enterprise customers within Desktop ecosystem continued to grow steadily at a double-digit pace.

In the fiscal fourth quarter, revenues from Consumer Group jumped 7% year over year to $74 million, while the same from Strategic Partners Group grew 15% to $15 million.

TurboTax Online units grew 7% year over year while overall units increased 5%.

TurboTax Live’s customers tripled year over year, and it is likely to be accretive to the company’s Consumer business, going ahead.

Operating Results

The company posted non-GAAP operating loss of $47 million compared with a loss of $15 million in the year-earlier quarter, as adjusted to accommodate the new accounting standards.

However, excluding the adjustment, operating income was $312 million for the quarter, up 11% year over year. Operating margin expansion was maintained in the range of 20-40 basis points at 31%.

Balance Sheet and Cash Flow

Intuit exited the quarter with cash and cash equivalents of $2.12 billion compared with $2.95 billion in the previous quarter. Long-term debt was $386 million compared with $398 million in the prior quarter.

Cash used in operational activities was $2.32 billion as of Jul 31, 2019.

Full Fiscal-Year Highlights

For the full fiscal year, the company reported revenues of $6.8 billion, up 13% year over year.

Non-GAAP earnings per share of $6.75 increased 17% year over year.

In fiscal 2019, the company repurchased $561 million worth of shares with $2.7 billion remaining under its share repurchase authorization.

Moreover, a quarterly dividend of 53 cents per share, payable Oct 18, was approved.

Outlook

The company provided guidance for fiscal 2020. Revenues are projected in the range of $7.44-$7.54 billion. Non-GAAP earnings per share are anticipated between $7.5 and $7.6.
 
Non-GAAP operating income for the fiscal year is expected to be in the range of $2.52-$2.57 billion.

For the full fiscal year, Small Business and Self-Employed group is expected to grow 12-14% year over year, whereas the Consumer Group is expected to increase 9-10%. Strategic Partner Group is predicted to grow 1-2%.

For the first quarter of fiscal 2020, the company envisions revenue growth of 10-12% in the range of $1.12-$1.13 billion. It expects non-GAAP earnings within 23-25 cents per share.

Intuit expects Online Ecosystem revenues to grow more than 30% in the forthcoming quarters.

However, the company expects total QuickBooks Online subscriber growth to moderate in the near term as it continues to focus on additional services.

Zacks Rank & Key Picks

Intuit currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader Computer and Technology sector are Anixter International AXE, LogMeIn LOGM and Perficient PRFT, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
    
Long-term earnings growth rate for Anixter, LogMeIn and Perficient is currently projected to be 8%, 5% and 10.8%, respectively.

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