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Intuit (INTU) Q4 Earnings & Revenues Top, CFO Steps Down

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Intuit Inc. (INTU - Free Report) reported stellar fourth-quarter fiscal 2017 results. The company reported non-GAAP income (excluding stock-based compensation, amortization and other one-time items) from continuing operations of 20 cents per share, surpassing the Zacks Consensus Estimate of 16 cents.

Intuit stock has gained 25.8% year over year, outperforming 22.9% rally of the industry it belongs to.



Quarter in Detail

This tax-preparation related software maker reported revenues of $842 Million, which came ahead of management’s guided range of $795-$815 million and also surpassed the Zacks Consensus Estimate of $805 million. On a year-over-year basis, revenues were up 11.7% primarily owing to better-than-expected growth in QuickBooks Online and ecosystem along with new and improved products.

Services and Other revenues climbed nearly 15.3% to $529 million while product revenues were up 6.1% to $313 million.

Segment-wise, Small Business Group recorded 14% year-over-year growth driven mainly by strong customer acquisition. Continued subscriber growth for QuickBooks Online and QuickBooks Self-Employed also acted as a catalyst.

The company recorded an increase of 58% in QuickBooks Online subscribers for the year, bringing the total global count to 2,383,000. QuickBooks Self-Employed subscribers totaled 390,000 during the quarter. Revenues from the Small Business online ecosystem increased 33% on a year-over-year basis, primarily due to online customer acquisition.

Revenues from Consumer Tax were up 9% for the full year. ProConnect professional tax revenues were up 2%.

Coming to operational metrics, Intuit reported non-GAAP gross profit of $664 million, up 12.5% year over year, backed by higher revenues. Gross margin for the quarter came in at 78.9% as compared with 78.2% reported in the year-ago quarter.

The company reported a 5.8% year-over-year increase in non-GAAP operating expenses. Also, as a percentage of revenues, non-GAAP operating expenses expanded 390 basis points (bps) to 69.6%.

The company posted non-GAAP operating income of $78.million compared with $$36 million in the year-ago quarter. Operating margins expanded 450 bps to 9.3% during the quarter.

Intuit posted non-GAAP net income from continuing operations of approximately $53 million compared with fourth-quarter fiscal 2016 net income of $20 million.

Balance Sheet and Cash Flows

Intuit exited the fiscal fourth quarter with cash and investments of $777 million compared with $1.593 billion in the previous quarter. Long-term debt was $438 million at quarter end as compared with $450 million reported in the previous quarter.

Cash from operational activities during the twelve months ended Jul 31, 2017 was $1.599 billion. During the quarter, the company repurchased more than $360 million shares, with $1.5 billion still remaining under the share repurchase authorization.

The company received an authorization to pay a dividend of 39 cents per share on Oct 18, 2017.

Outlook

Intuit provided first-quarter and fiscal 2018 guidance.

For the fiscal first quarter, the company anticipates revenues in a range of $840-$860 million. The Zacks Consensus Estimate is pegged at $846 million.

Intuit expects fiscal first quarter non-GAAP operating income in the range of $15-$25 million. The company anticipates reporting non-GAAP earnings in the band of 3-5 cents per share. The Zacks Consensus Estimate is pegged at 13 cents per share.

For fiscal 2018, the company anticipates revenues of $5.640-$5.740 billion, representing an increase of 9% to 11% year over year. The Zacks Consensus Estimate is pegged at 5.56 billion.

QuickBooks Online subscribers for fiscal 2018 are expected to be in the range of 3.275-3.375 million. Small Business segment is expected to grow in the range of 12-14%. Consumer Tax and ProConnect is anticipated to increase in the range of 7-9% and 0-2%, respectively.

Non-GAAP operating income is now expected in a range of $1.885-$1.935 billion, representing growth of 9-12%. Non-GAAP earnings per share are projected between $4.90 and $5.00, up 11-13%. The Zacks Consensus Estimate currently is pegged at $4.98 per share.

Managerial Changes

Intuit announced that its long-time Chief Financial Officer, Neil Williams is set to step down in January 2018. The company’s Senior VP of Finance for Intuit’s Consumer Tax Group, Michelle Clatterbuck it set to take over for Williams in February.

Our Take

Intuit reported encouraging fiscal fourth-quarter 2016 results. Its revenue performance improved on a year-over-year basis due to better-than-expected growth in QuickBooks Online and success in Consumer Tax and ProConnect. The company also issued encouraging revenue first-quarter and fiscal 2018 guidance.

We are positive about Intuit’s growing SMB exposure and believe that its strategic acquisitions will boost the segment. Increased adoption of its cloud-based services and products is another positive.

The company has also restructured business to focus on the QuickBooks services. It expects to continue investing in this portfolio, which might hurt near-term profitability.

Stiff competition from payroll solution providers such as Paycom Software Inc. (PAYC - Free Report) and Automatic Data Processing (ADP - Free Report) is a concern, especially considering the seasonality of Intuit’s tax business and the ongoing economic uncertainty.

Currently, Intuit carries a Zacks Rank #3 (Hold). A better-ranked stock in the technology space is NVIDIA Corporation (NVDA - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA has a long-term expected EPS growth rate of 10.3%.

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