Intuit Inc. (INTU) reported third quarter 2011 adjusted income per share (EPS) of $2.23, surpassing the Zacks Consensus Estimate of $2.19. The adjusted EPS excludes amortization of acquired technology and intangible assets and tax adjustments, but includes stock-based compensation expenses.
Revenue
Intuit reported revenues of $1.85 billion in the third quarter, up 15.0% from $1.61 billion in the prior-year quarter. The quarter’s results surpassed management’s guidance range of $1.76–$1.83 billion and the Zacks Consensus Estimate of $1.82 billion.
Product revenues increased 6.7% year over year to $602.0 million and Services and Other revenues surged 19.5% from the prior-year quarter to $1.25 million.
Consumer Tax witnessed a year-over-year revenue growth of 18.0%, which is attributed to growth in both TurboTax and TurboTax online units. SnapTax and TurboTax applications for iPhone and Android mobile users gained much appreciation during the quarter.
Financial Services revenue grew 5% year over year on a 9% increase in Internet banking and a 23% increase in bill-pay users.
Revenues from the Accounting Professionals unit increased 10% from the year-ago quarter. Management stated that they are slated to unveil new solutions for accounting professionals.
Small Business Group revenue surged 13% year over year, driven by the double-digit revenue growth in Financial Management Solutions, Employee Management Solutions and Payment Solutions.
Financial Management Solutions registered 11% growth from the year-ago quarter, driven by expansion in the customer base of Intuit’s websites and increased QuickBooks Online subscriptions. Employee Management Solutions (formerly referred to as Payroll) was up 12% aided by online share growth.
Payment Solutions posted 17% year-over-year growth in the quarter based on 12% merchant growth. Transaction volumes per merchant grew marginally from the prior-year quarter.
Other businesses grew 17% from the year-ago quarter, driven by government health contracts.
Operating Results
GAAP operating income was $1.06 billion compared to $888.0 million in the year-earlier quarter. Excluding special items, non-GAAP operating income was $1.12 billion compared to $938.0 million in the year-earlier quarter.
GAAP net income in the quarter was $688.0 million, or $2.20 per share, compared to $576.0 million, or $1.78 in the comparable quarter last year. The adjusted net income in the quarter was $699.1 million or $2.23, compared to $586.4 million or $1.82 in the year-ago quarter.
Balance Sheet & Cash Flow
Intuit ended the quarter with cash, equivalents and investments of $1.83 billion, up from $892.0 million in the previous quarter. Accounts receivable were $266.0 million, compared to $481.0 million in the previous quarter. As of April 30, 2011, long-term debt also remained flat at $998.0 million.
Intuit generated $1.14 billion of operating cash in the third quarter, compared to $258.0 million in the prior quarter. Capital expenditure decreased $53.0 million from the previous quarter to $31.0 million. During the quarter, Intuit repurchased shares worth $250.0 million and had $890.0 million remaining on its current share repurchase authorization at quarter-end.
Outlook
For the fourth quarter of fiscal 2011, Intuit expects revenues to range between $567.0 million and $587.0 million. GAAP operating loss is projected in the range of $48.0–$58.0 million and non-GAAP operating income is projected in the range of $15.0–$25.0 million.
GAAP loss per share is projected at between 12 cents and 16 cents and non-GAAP EPS between negative 2 cents and positive 2 cents.
Intuit narrowed its revenue and operating income guidance for fiscal 2011. The company expects revenues to range between $3.83 billion and $3.85 billion (previously $3.74 billion and $3.84 billion). GAAP operating income growth is expected to be between 17% and 18%, narrowed from the previous range of 14% to 18%.
Non-GAAP operating income growth is expected to be 13% to 14%, narrowed from the previous range of 11% to 14%. GAAP loss per share is now projected within the $2.00–$2.05 range, which is higher than the previous expectation of $1.93–$2.00. Non-GAAP loss per share is expected to be between $2.45 and $2.50 versus the previous expectation of $2.41 and $2.48.
On a segmental basis, Intuit expects the Small Business Group to grow 10% to 12% year over year in fiscal 2011, up from the previous expectation of 8% to 12%. The projected year-over-year growth rate is 13% (previously 10% to 13%) for the Consumer Tax business, 4% to 7% (reiterated) for Accounting Professional, roughly 7% (reiterated) for Financial Services and 11% to 16% (reiterated) for Other businesses.
Our Take
Intuit is a leading provider of business and financial management solutions to small and medium-sized businesses, consumers, accounting professionals and financial institutions. Management is confident about gaining market share in its Small Business group and Consumer Tax business, aided by accelerating customer growth and improving revenue per customer. Stiff competition from H&R Block Inc. (HRB) is a concern.
Currently, Intuit has a short-term Buy rating, as indicated by the Zacks #2 Rank .
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