Intuit (INTU) Q3 Earnings and Revenues Top Estimates, Up Y/Y

Intuit Inc. INTU reported impressive third-quarter fiscal 2019 results. Its non-GAAP earnings came in at $5.55 per share, surpassing the Zacks Consensus Estimate of $5.39. The figure also increased 15% on a year-over-year basis. Moreover, the metric exceeded management’s guided range for earnings of $5.35-$5.40 per share.

This tax preparation-related software maker’s revenues grossed $3.27 billion, up 12% from the year-ago quarter. The top line narrowly outpaced the consensus estimate of $3.26 billion. A healthy tax season was the key growth driver. Strong momentum in online ecosystem was also a tailwind.

Quarter in Detail

Segment wise, Small Business and Self-Employed Group revenues jumped 19% year over year to $887 million. This improvement was primarily driven by 32% subscriber surge for QuickBooks Online, which brought the count to more than 4.2 million at the end of the fiscal third quarter.

Online ecosystem revenues surged 38%. The U.S.-based subscribers of QuickBooks Online grew 25% to more than 3.1 million while international subscribers jumped 55% on a year-over-year basis to more than 1.1 million.

Online services witnessed slow year-over-year growth this quarter compared with the trailing four quarters. This was because of a difficult comparison due to last year’s acquisition of TSheets.

Self-Employed subscribers within QuickBooks online rose to around 970,000 from 680,000.

Solid momentum of the company’s lending product, QuickBooks Capital, is a positive.

Desktop ecosystem revenues rose 4% year over year. A 12% rise in desktop units reflected strong renewables during the quarter. QuickBooks enterprise customers within Desktop ecosystem continued to grow steadily at a double-digit pace.

For the fiscal third quarter, revenues from Consumer Group jumped 10% year over year to $2.2 billion while the same from Strategic Partners Group grew 4%.

Within the Strategic Partner group, professional tax revenues of $208 million were up 4% year over year.

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 income of $1.9 billion compared with $1.7 billion in the year-earlier quarter. Operating margin increased 8 basis points to 58.1%.

Balance Sheet and Cash Flow

Intuit exited the quarter with cash and cash equivalents of $2.95 billion compared with $1.081 billion in the previous quarter. Long-term debt was $398 million compared with $363 million in the prior quarter.

Cash used in operational activities was $2.4 billion as of Apr 30, 2019.

In the fiscal third quarter, the company repurchased $135 million worth of shares with $2.8 billion remaining under its share repurchase authorization.

Moreover, a quarterly dividend of 47 cents per share, payable Jul 18, was approved.

Outlook

The company raised guidance for fiscal 2019. Revenues are now projected in the range of $6.74-$6.76 billion, up from the previously guided range of $6.53-$6.63 billion. Non-GAAP earnings per share are anticipated between $6.67 and $6.69 compared with the earlier expected range of $6.4- $6.5.
 
Non-GAAP operating income for the fiscal year is expected to be in the range of $2.26-$2.27 billion, which is higher than the earlier guidance of $2.17-$2.22 billion.

Total subscriber growth is expected to be moderate due to greater focus on additional services, and penetration into a broader range of customers.

During fiscal 2019, QuickBook Desktop units and Desktop ecosystem revenues are expected to be flat.

Online ecosystem revenues are likely to grow more than 30% during fiscal 2019.

Within the Strategic Partner Group, professional tax revenues are expected to jump 4%.

For the fiscal fourth quarter, the company envisions revenue growth of 10-12% at the range of $948-$968 million. It expects non-GAAP loss within 16-14 cents per share.

Intuit Inc. Price, Consensus and EPS Surprise

Intuit Inc. Price, Consensus and EPS Surprise

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

Zacks Rank & Other Key Picks

Intuit currently carries a Zacks Rank #2 (Buy).

A few other stocks worth considering in the broader Computer and Technology sector are Verint Systems Inc. VRNT, eGain Corp. EGAN and Cirrus Logic, Inc. CRUS, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Verint, eGain and Cirrus is projected to be 11%, 30% and 15% respectively.

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