Intuit Inc. (INTU) reported first quarter 2013 adjusted loss per share of 14 cents, narrower than the Zacks Consensus Estimate of a loss of 17 cents per share.
Revenue
Intuit reported revenues of $647.0 million in the first quarter, up 12.5% from $575.0 million in the prior-year quarter. Reported revenue was above the management’s guidance range of $630.0 million to $640.0 million.
Product revenues increased 2.3% year over year to $227.0 million, while Services and Other revenues climbed 19.0% from the prior-year quarter to $420.0 million.
Segment-wise, Small Business Group posted an 18.0% year-over-year growth based on the strength of the group’s sub-segments. Financial Management Solutions revenue increased 20.0%, driven by higher subscription for QuickBooks Online, QuickBooks Enterprise and contribution from recently acquired (May 2012) Demandforce. Employee Management Solutions revenue was up 12.0%, led by growth in Intuit Online Payroll subscribers. Payment Solutions revenue increased 21.0%, aided by customer growth for Intuit’s GoPayment mobile payment solution.
The Consumer Tax segment posted 12.2% revenue decline due to lower tax filings. Financial Services revenue was up 4.0% from the year-ago quarter, led by higher revenue in online and mobile banking. Accounting Professionals segment revenue increased 19.0%. Other Businesses revenue grew 5.0% on the back of Intuit’s global business.
Operating Results
Reported gross margin increased 90 basis points (bps) from the year-ago quarter to 71.9%. Operating margin in the quarter was (10.7%) versus (14.6%) in the year-ago quarter. Though total operating expenses increased 8.5%, the percentage on total revenue contracted.
GAAP net loss from continuing operations was $51.0 million or 17 cents per share, compared with $58.0 million or 19 cents per share delivered in the year-ago quarter. The GAAP loss per share was wider than the company’s guided range. Excluding one-time expenses but including stock-based compensation expenses, adjusted net loss in the quarter was $42.7 million or 14 cents per share versus $49.4 million or 16 cents in the year-ago quarter.
Balance Sheet & Cash Flow
Intuit ended the quarter with cash, equivalents and investments of $558.0 million, down from $744.0 million in the previous quarter. Accounts receivables were $184.0 million compared with $183.0 million in the previous quarter. Long-term debt remained flat sequentially at $499.0 million.
Intuit used $145.0 million of operating cash in the first quarter, as against $182.0 million cash used in the prior quarter. Capital expenditure was $70.0 million. During the quarter, Intuit repurchased shares worth $100.0 million. The company paid a quarterly cash dividend of 17 cents per share valuing $50.0 million.
Outlook
For the second quarter of fiscal 2013, the company expects revenues in the range of $1.02 billion to $1.04 billion. GAAP operating income is expected in the range of $130.0 million to $150.0 million. Non-GAAP operating income is estimated in the $190.0 million to $210.0 million range. GAAP EPS is projected in the range of 27 cents to 30 cents. The company also expects non-GAAP EPS in the 40 cents to 43 cents range.
For fiscal 2013, the company expects revenues in the $4.55 billion to $4.65 billion range, representing growth of 10.0% to 12.0%. GAAP operating income is estimated between $1.315 billion and $1.345 billion, reflecting growth of 12.0% to 14.0%. Non-GAAP operating income is projected at $1.57–$1.60 billion, representing growth of 12.0% to 14.0%. GAAP diluted EPS is expected to grow in the range of 6.0–8.0% to $2.76–$2.82. Non-GAAP diluted EPS is expected between $3.32 and $3.38, indicating a growth of 12.0% to 14.0%.
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. The company delivered first quarter loss, which was expected given the fact that revenues from QuickBooks, Consumer Tax and Accounting Professional segments tend to be lowest during the period. But solid execution led the quarter’s result to surpass Zacks Consensus Estimate on the bottom line.
We are encouraged by the second quarter guidance and we believe that the main driver would be the Small Business Group.
We are positive on Intuit’s growing SMB (small & medium business) exposure and believe that the closure of the Demandforce acquisition will provide further support to the segment. But stiff competition from the leading payroll solution provider Paychex Inc. (PAYX) in the SMB arena, seasonality of Intuit’s tax business and the ongoing uncertainty in the economy concerns us.
Currently, Intuit has a Zacks #3 Rank, which translates into a short-term Hold rating.
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