Intuit Inc. (INTU) reported adjusted loss per share from continuing operations of 18 cents in the first quarter of 2014, narrower than the Zacks Consensus Estimate of a loss of 20 cents per share.
Quarter Details
Intuit’s revenues of $622.0 million not only increased 10.7% on a year-over-year basis, but also bettered the Zacks Consensus Estimate of $603.0 million. Moreover, the reported revenues surpassed management’s guided range of $595.0 million to $605.0 million. The year-over-year improvement was mainly due to broad-based strength in all the segmental revenues.
Product revenues increased 0.9% year over year to $229.0 million, while Services and Other revenues jumped 17.3% from the year-ago quarter to $393.0 million.
Segment-wise, the Small Business Group posted 11.0% year-over-year growth due to higher adoption rate of Intuit’s cloud-based solutions. Small Business Financial Solutions (SBFS) increased 9.00%, driven by higher subscription for QuickBooks Online (up 29.0% year over year) and QuickBooks Enterprise (up 21.0% year over year). Employee Management Solutions revenues were up 21.0%, led by growth in Intuit Online Payroll subscribers. Payment Solutions revenues increased 8.0%, aided by higher volumes in the total card transactions and changes in the fees.
Moreover, Small Business Management Solutions (SBMS) revenues grew 15%, primarily driven by 12.0% revenue increase in Employee Management Solutions revenues. Additionally, Online Payroll customers grew 18% and Demandforce subscribers increased 36% on a year-over-year basis.
The company’s Consumer Tax revenues also increased 11.0% year over year, while revenues from the Professional Tax increased 16% on a year-over-year basis. Revenues from Consumer Tax were driven by higher number of late-season tax filers and additional attached services, while Professional Tax revenues were positively impacted by customer acquisitions and renewals for the forthcoming tax season.
Intuit reported a loss of $67 million from continuing operations (including share-based compensation but excluding amortization expenses) which widened from the year-ago loss of $62 million. During the same period of time, the company’s total expenses increased 10.4% on a year-over-year basis.
Intuit’s net loss from continuing operations (including share-based compensation but excluding amortization expenses) came in at $51.5 million or 18 cents per share which was wider than the loss of $40.7 million or 14 cents reported in the year-ago period.
Intuit ended the quarter with cash, equivalents and investments of $1.12 billion versus $1.7 billion in the previous quarter. Accounts receivables were $137.0 million compared with $130.0 million in the previous quarter. Long-term debt remained flat sequentially at $499.0 million.
Intuit used $190.0 million cash from operating activities. Intuit has announced an accelerated repurchase agreement worth $1.4 billion in addition to the authorized $2.0 billion share repurchase program announced in August.
Outlook
The company has reiterated the fiscal 2014 outlook. For fiscal 2014, the company expects revenues in the range of $4.440 billion to $4.525 billion, representing 6.0% to 8.0% growth. Non-GAAP operating income is projected in the range of $1.58 billion–$1.61 billion, representing 7.0% to 10.0% growth. Non-GAAP earnings per share are expected between $3.52 and $3.60, reflecting growth of 10.0% to 13.0%.
Moreover, the company provided revenue and earnings guidance for the second, third and fourth quarters as well. For the second quarter, Intuit expects revenues in the range of $890 million–$910 million and non-GAAP earnings in the range of 25 cents–27 cents. The company also expects non-GAAP operating income to range between $110 million and $120 million.
Intuit expects the third-quarter revenues to be between $2.245 billion and $2.290 billion, while earnings are expected between $3.25 and $3.30 reflecting seasonally strong third-quarter guidance. Fourth-quarter revenues are forecasted in the range of $710 million to $720 million and earnings are expected to range within 11 cents–13 cents.
Our Take
Intuit is a leading provider of business and financial management solutions to small and medium-sized businesses (SMB), consumers, accounting professionals and financial institutions. The company’s recent realignment of its operations is expected to yield long-term positive results.
We are positive on Intuit’s growing SMB exposure and believe that the strategic acquisitions will continue to support the segment. The higher adoption rate of its cloud-based services and products is another positive factor. Moreover, the company’s accelerated share buyback program would aid the bottom line.
However, stiff competition from the leading payroll solution provider, Paychex Inc. (PAYX), and Automatic Data Processing (ADP), seasonality of Intuit’s tax business and the ongoing uncertainty in the economy concern us.
Currently, Intuit has a Zacks Rank #3 (Hold). Investors may instead consider SanDisk Corp (SNDK), which sports a Zacks Rank #1 (Strong Buy).
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