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Intuit (INTU) Q4 Loss Lower than Expected, Revenues Top

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Intuit Inc. (INTU - Free Report) reported adjusted loss (including stock-based compensation but excluding amortization and other one-time items) from continuing operations of 13 cents per share for the fourth quarter of fiscal 2016, which fared better than the Zacks Consensus Estimate of a loss of 23 cents per share.

On a GAAP basis, loss from continuing operations came in at 16 cents per share, compared with the year-ago loss of 37 cents per share.

Quarter in Detail

This tax-preparation related software maker reported revenues of $754 million, which came above management’s guided range of $720 million to $740 million and surpassed the Zacks Consensus Estimate of $724 million as well. On a year-over-year basis too, revenues were up 8.3% mainly on the back of higher demand resulting from the U.S. tax season.

Services and Other revenues climbed nearly 10.6% to $459 million while product revenues were up 4.9% to $295 million.

Segment-wise, Small Business Group recorded 10% year-over-year growth driven mainly by strong customer acquisition, along with continuous subscriber growth for QuickBooks Online and QuickBooks Self-Employed.

The company recorded the addition of 41% QuickBooks Online subscribers for the year, bringing the total global count to 1,513,000. QuickBooks Self-Employed subscribers totaled 85,000 at the year end. On the other hand, revenues from the Small Business online ecosystem increased 25% for the year, primarily due to online customer acquisition.

Revenues from Consumer Tax grew 10% year over year. ProConnect professional tax revenues were roughly $428 million for the year.

Coming to operational metrics, Intuit reported adjusted gross profit of $588 million, up 11.4% year over year, mainly backed by higher revenues. Also, gross margin expanded 210 basis points (bps) to 78%.

The company reported a 3.1% year-over-year increase in adjusted operating expenses. However, as a percentage of revenues, adjusted operating expenses contracted 430 bps to 83.9%, primarily due to efficient cost management.

The company posted adjusted operating loss of $45 million compared with an adjusted loss of $86 million reported in the year-ago quarter.

Intuit posted adjusted net loss from continuing operations of $32.9 million compared with fourth-quarter fiscal 2015 loss of $67.2 million.

Balance Sheet and Cash Flows

Intuit exited the fiscal fourth quarter with cash and investments of $1.080 billion compared with $1.613 billion in the previous quarter. Long-term debt was $488 million at the quarter end.

Intuit generated $1.401 billion of cash from operational activities during the twelve months ended Jul 31, 2016. During the same time frame, the company also repurchased shares worth $2.3 billion and paid dividends worth $318 million.

Also, the company authorized an additional share repurchase program of $2 billion during fiscal 2016. For the first quarter of fiscal 2017, the company received an authorization to increase its dividend by 13% on a year-over-year basis to 34 cents per share.

Outlook

Intuit provided fiscal 2017 guidance and issued outlook for the fiscal first quarter.

The company anticipates revenues of $5 billion to $5.1 billion in fiscal 2017, up 7% to 9% year over year. The Zacks Consensus Estimate is pegged at $5.087 billion.

Non-GAAP operating income is expected in the range of $1.675 billion to $1.725 billion, representing growth of 8%-11%. Non-GAAP earnings per share are projected between $4.30 and $4.40 (an increase of 14-16%). The Zacks Consensus Estimate currently stands at $3.02.

For the first quarter, the company anticipates revenues in the range of $740 million to $760 million, lower than the Zacks Consensus Estimate of $780 million.

It expects non-GAAP operating income to be in the range of $10 million to $20 million. While the company expects to report non-GAAP earnings in the range of 1 cent to 3 cents per share in the first quarter, the Zacks Consensus Estimate stands at a loss of 6 cents.
 

INTUIT INC Price, Consensus and EPS Surprise

 

INTUIT INC Price, Consensus and EPS Surprise | INTUIT INC Quote

Our Take

Intuit reported better-than-expected fiscal fourth-quarter 2016 results. Its performance also improved on a year-over-year basis. Though the company posted a loss in the quarter, it fared better than the Zacks Consensus Estimate. Also revenues surpassed the same. The company however issued a tepid revenue guidance for the forthcoming quarter.

Nonetheless, 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.

Intuit has also restructured its business to focus on the QuickBooks services. It expects to continue investing in this portfolio, which is likely to hurt its near-term profitability.

Moreover, rising 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 has a Zacks Rank #3 (Hold). A stock worth considering in the technology sector is Facebook, Inc. , which sports a Zacks Rank #1 (Strong Buy).

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