Intuit Inc. (INTU) reported first quarter 2011 adjusted loss per share (EPS) of 19 cents, in line with the Zacks Consensus Estimate. The adjusted EPS excludes amortization of intangible assets and tax gains, but includes stock-based compensation expenses.
Historically, Intuit has reported losses in its first and fourth quarters, when revenue from the tax business is minimal and operating expense remain unchanged.
Revenue
Intuit reported revenues of $532.0 million in the fourth quarter, up 12.2% from $474.0 million in the prior-year quarter. The quarter’s result also surpassed management’s guidance range of $515.0–$525.0 million and the Zacks Consensus Estimate of $521.0 million.
Product revenues increased 5.4% year over year to $216.0 million, while Services and Other revenues surged 17.5% from the prior-year quarter to $316.0 million.
Overall growth in revenues could be attributable to the strong customer growth in the Small Business Group and prove to be another reason for the uptick.
Consumer Tax, the largest segment, witnessed a 314.3% year-over-year growth in revenues, driven by the increase in total TurboTax units and TurboTax Online units.
The Financial Services segment grew 1% year over year due to the increase in Internet banking and bill-pay users.
Revenues from the Accounting Professionals segment surged 15% compared to the year-ago quarter.
The Small Business Group revenue surged 12% year over year, driven by the double digit revenue growth in Financial Management Solutions and Employee Management Solutions.
Financial Management Solutions (the second largest segment) registered 15% growth from the year-ago quarter, driven by growth in Intuit’s Websites’ customer base and higher QuickBooks Online subscriptions. Employee Management Solutions (formerly referred to as Payroll) was up 11%, especially helped by share growth online.
Payment Solutions posted 7% year over year growth in the quarter based on a 15% merchant growth. However, transaction volumes per merchant suffered a bit due to lower consumer spending.
Other businesses grew 27% from the year-ago quarter, driven by strong Quicken sales and healthy contribution from Small Business units in Canada and the U.K.
Operating Results
GAAP operating loss was $104.0 million, compared to a loss of $100.0 million in the year-earlier quarter. Excluding special items, non-GAAP operating loss was $53.0 million, compared to $40.0 million in the year-earlier quarter.
GAAP net loss in the quarter was $70.0 million, or 22 cents per share, compared to a loss of $68.0 million, or 21 cents in the comparable period last year. Excluding stock based compensation as well as other special items, net loss on a non-GAAP basis was $39.0 million, or 12 cents per share, compared to $32.0 million, or 10 cents per share in the year-earlier period. The results were hurt by higher overall costs and operating expenses and lower revenue due to seasonality.
However, including stock-based compensation, the adjusted loss per share in the quarter was 19 cents.
Balance Sheet & Cash Flow
Intuit ended the quarter with cash, equivalents and investments of $1.17 billion, down from $1.62 billion in the previous quarter. Accounts receivable was $147.0 million, compared to $135.0 million in the previous quarter. As of October 31, 2010, long-term debt also remained flat at $998.0 million.
Intuit used up $211.0 million of operating cash in the first quarter, compared to $140.0 million in the prior-year quarter. Capital expenditure increased $19.0 million from the year-earlier quarter to $51.0 million.
During the quarter, Intuit repurchased shares worth $330.0 million and had $1.67 billion remaining on its current share repurchase authorization at quarter-end. During the fourth quarter, the company received a new authorization from its board to buy back $2.0 billion of its common stock over the next three years, which will terminate in August 2013.
Outlook
For fiscal year 2011, Intuit expects revenues to range between $3.74 billion and $3.84 billion. Operating income is expected to be in the range of $980.0 million to $1.015 billion on a GAAP basis and $1.22–$1.25 billion on a non-GAAP basis. GAAP loss per share is projected to be within $1.88–$1.95, and non-GAAP loss per share is between $2.36 and $2.43.
On segmental basis, Intuit expects the Small Business Group to grow 8% to 12% year over year in fiscal 2011. The Consumer Tax business is expected to increase 8% to 12%, Accounting, Professional and Financial Services each to grow 4% to 7%, and Other businesses to grow 11% to 16% year over year.
For the second quarter of fiscal 2011, Intuit expects revenues to range between $920.0 million and $940.0 million. Operating income is expected to be in the range of $135.0–$155.0 million on a GAAP basis and $190.0–$210.0 million on a non-GAAP basis. GAAP EPS is projected to be within 24 cents and 28 cents and non-GAAP EPS between 36 cents and 40 cents.
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.
Though Intuit’s top line beat the Zacks Consensus Estimate, its bottom line was in line. This keeps us cautious on the stock.
Currently, Intuit has a short-term Hold recommendation, as indicated by the Zacks #3 Rank.
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