Intuit Inc. (INTU) on Q1 2021 Results - Earnings Call Transcript
Operator: Good afternoon. My name is Latif, and I will be your conference facilitator. At this time, I would like to welcome everyone to Intuit’s First Quarter Fiscal Year 2021 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. With that, I’ll now turn the call over to Kim Watkins, Intuit’s Vice President of Investor Relations. Ms. Watkins? Kim Watkins: Thanks, Latif. Good afternoon. And welcome to Intuit’s first quarter fiscal 2021 conference call. I am here with Intuit’s CEO, Sasan Goodarzi; and Michelle Clatterbuck, our CFO. Before we start, I’d like to remind everyone that our remarks will include forward-looking statements. There are a number of factors that could cause Intuit’s results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our Form 10-K for fiscal 2020 and our other SEC filings. All of these documents are available on the Investor Relations page of Intuit’s website at intuit.com. We assume no obligation to update any forward-looking statements. Some of the numbers in these remarks are presented on a non-GAAP basis. We have reconciled the comparable GAAP and non-GAAP numbers in today’s press release. Unless otherwise noted, all growth rates refer to the current period versus the comparable prior year period, and the business metrics and associated growth rates refer to worldwide business metrics. A copy of our prepared remarks and supplemental financial information will be available on our website after this call ends. And with that, I’ll turn the call over to Sasan. Sasan Goodarzi: Great. Thanks, Kim. And thanks to all of you for joining us today. I hope you are all doing well. We had a very strong start to fiscal year 2021. First quarter revenue grew 14%. Total revenue growth was driven by 13% growth in the Small Business and Self-Employed Group, while Consumer Group and ProConnect Group revenue was in line with our expectations in a seasonally small quarter. This is a great start to the year in a challenging environment, which reinforces the resiliency of our platform. We’re growing more confident in how our business is performing in the current environment, although macro uncertainty remains. We continue to see recovering trends across our platform with many QuickBooks indicators back to pre-pandemic levels. Therefore, I’m happy to announce that we will provide guidance for fiscal year 2021, which Michelle will cover in more detail later. At our September Investor Day, we shared the acceleration of innovation, driven by our AI-driven expert platform strategy and our 5 Big Bets, highlighting our growth potential. During the Platform Immersion Experience, we demonstrated progress against each Big Bet. What I’d like to do is highlight a few of the innovations and cover Big Bet number one last as it accelerates innovation across our platform and it’s foundational to the other bets. Michelle Clatterbuck: Thanks, Sasan. Good afternoon, everyone. For the first quarter of fiscal 2021: we delivered revenue of $1.3 billion; GAAP operating income of $209 million versus $10 million last year; non-GAAP operating income of $334 million versus $129 million last year; GAAP diluted earnings per share of $0.75 versus $0.22 a year ago; and non-GAAP diluted earnings per share of $0.94 versus $0.41 last year. Turning to the business segments. In the Small Business and Self-Employed Group, revenue grew 13% during the quarter. Online Ecosystem revenue was up 24% during the quarter. Growth slowed from Q4, reflecting the lagging impact of lower retention during fiscal 2020 and the lapping of price increases, which began during the middle of Q1 last year. Additionally, Q4 included 4 points of growth from nonrecurring revenue from the Paycheck Protection Program. Our strategic focus within Small Business and Self-Employed is to grow the core, connect the ecosystem and expand globally. Our longer term expectation remains 30% or greater Online Ecosystem revenue growth, driven by 10% to 20% growth in both, customers and ARPC. First, we continue to focus on growing the core. QuickBooks online accounting revenue grew 28% in fiscal Q1, driven mainly by customer growth and mix shift. We began lapping a partial quarter of a price increase last year, driving slower year-over-year growth versus last quarter. Sasan Goodarzi: Great. Thank you, Michelle. Team, I’m very proud of our organization and all that we’ve accomplished together, and I’m very optimistic about the future. So with that, let’s now open it up to your questions. Operator: The first question comes from the line of Ken Wong of Guggenheim Securities. Ken Wong: Great. Thank you for taking my question, and a really solid start to the year, guys. When looking at the guidance, specifically the SMB guidance, one might infer that you guys have removed the W and double W macro scenarios off the table. Is that the right way to think about it, or is it just purely that your business has held up much better, and the realities are we still may run into those. But if we do, it will tilt towards this new 8% to 10% lower end? Sasan Goodarzi: Yes. Hey, Ken. Good to hear from you. I think, the best way I would describe it is, one, we’re actually seeing how resilient our platform is and how small businesses are using our platform in this pandemic. I think to -- because of that, it just gives us confidence, as we look ahead in terms of how small businesses are going to be able to maneuver through this current environment. So, we’re primarily going off of the key indicators that we see that are both,, leading and lagging, and that is really what has given us confidence to provide the guidance that we’ve given. Of course, we’ll have to wait and see how things play out with the health crisis and the impact of the economic crisis. But given just what we’re seeing in our business, that’s really what’s informed our guidance that we shared today. Ken Wong: Got it. And if I could squeeze one in for Michelle. You mentioned the EBIT guidance is -- it looks like the margin expansion will be, give or take, 100, 110 basis points. And you did previously mention seeing more leverage going forward. Is this the right level of margin expansion that we should be expecting as we look ahead? Michelle Clatterbuck: Hi, Ken. Thanks. Going to our financial principles, that really is the long-term commitment that we have and that includes growing revenue double digits and growing operating income faster than revenue. And so, we -- as I mentioned, yes, we do expect to see 110 basis points of expansion, excluding Credit Karma. As I shared at Investor Day, though, as we continue to evolve to more of an AI-driven expert platform, we do see opportunities for margin expansion across the P&L. And those opportunities can be in the areas of technology, where we’re increasing the velocity of development on our actual technology platform so we can deliver faster and also using products and services across the company. We also see that in customer success, where we’re scaling a common customer success platform, that drives efficiency and effectiveness serving across all products. And then, also in go-to-market, we’re able to leverage a common infrastructure so that we can more effectively target customers and manage our sales and marketing processes. So, we do continue to see opportunities for us to expand margin going forward. Operator: Thank you. Our next question comes from Keith Weiss of Morgan Stanley. Keith Weiss: Excellent. First question I was hoping to ask, I’m not sure if you guys are going to comment on this, was just a current status update on your expectations on timing for Credit Karma, number one. And number two, whether all the sort of constituent pieces of Credit Karma are expected to come along because there was some speculation in the press that they might be selling off their tax business. Any chance you could comment on either of those? Sasan Goodarzi: Yes. Sure, Keith. Good to hear from you. First of all, we do have pretty high confidence that we will close Credit Karma by the end of calendar year. So, that’s the first point. I think, the second point is, as you know, we don’t comment on rumors. But, it’s important to reinforce that the whole premise behind the Credit Karma acquisition was what we could do together to create a consumer finance platform, and it wasn’t for the tax business. And so, I think, I will just leave it at that. But nevertheless, we’re really excited and can’t wait to close this, so we can start doing amazing things together for consumers. Keith Weiss: Got it. If I could maybe sneak one last one since that last one is like half of the answer. In the broader platform within SMB, when you’re going into stuff like cash, when you’re trying to do more of the commerce back-end, how is this changing your competitive environment? Have you seen a significant sort of change in kind of who you’re going up against or sort of how you have to position the solutions for these newer solutions? Sasan Goodarzi: Yes. Hey Keith, thanks for calling me out, buddy. In terms of your question, it’s interesting timing. We had QuickBooks Connect yesterday, which is where we have thousands of small businesses and accountants and partners together. And of course, this one was far, far bigger than it ever has been because it was all virtual. And we rolled out a lot of our innovation. But particularly, to answer your question, we also rolled out QuickBooks Commerce and QuickBooks Cash to our customer base or at least gave visibility and awareness. And the feedback was just through the roof. Because if I start with accountants, accountants were very excited because now they can recommend QuickBooks to product-based businesses, and they love how QuickBooks Commerce works for product-based businesses, and they love the fact that they can, in essence, help a small business run their business through the platform. And two small businesses that were product-based businesses, they love Commerce, and by the way, we got raving reviews on QuickBooks Cash, and it’s just a simple app where you can send and receive money to be able to run your business. And so, I would say from a positioning standpoint, we’re not doing anything differently in terms of going up against others. What we’re really focused on is the customer problem and how we’re raising awareness. And in fact, our team has done some great work in the months and the year ahead, what you’ll see is we’ll be, in essence, going to market with digital assets that helps small businesses understand that we can truly be the source of truth for their entire business versus the source of truth for their books and from an accounting lens. And so, it’s more about what we’re doing to raise awareness and shape the market versus doing anything differently, given who we’re going up against because it’s, frankly no different than what it’s been in the past. Operator: Thank you. Our next question comes from Michael Turrin of WF Securities. Michael Turrin: On guidance and the decision to bring that back, obviously, the bigger focus now is on Small Business. But looking ahead to tax, I mean, you’ve previously mentioned tough comps from the strong top-of-funnel activity you saw last year, still guiding for 9% to 10% growth as a starting point there this year. Can you just help maybe frame out the base case there and maybe your confidence around ability to further monetize that uptick you saw this past year? Sasan Goodarzi: Yes. Sure, Michael. Very good to hear from you. First of all, as we talked about last quarter, our biggest uncertainty was around the macro environment and the impact to small businesses and how our platform would perform in the times of uncertainty. So, we’ve just learned a ton. One, all the credit to small businesses in terms of just their passion to do whatever it takes to survive; but then two, us better understanding how they use the platform to be able to deliver for customers. And so, given that and given that we started experiencing businesses opening across the Company and our confidence is at an improved level than it was a quarter ago. With that said, to your question around tax, we’re bullish about our strategy, and we’ve continued to be bullish based on the results that we’re seeing. And particularly, it’s driven by two primary areas. One, it’s who we focus on; and then, the second is the how. So, who we focus on is, we’ve doubled down several years ago on serving investors, serving self-employed and serving the Latinx market, all of which we are underpenetrated. And then, two, really going after the market, the assisted market, and those that are looking for more confidence with TurboTax Live. And so, although our comps compared to last year are tough comps, we do have confidence in our execution, our trajectory. And that’s really what informed the guidance that we provided. Michael Turrin: Got it. That’s all clear. Certainly a nice start to the year. Thank you. Sasan Goodarzi: All right. Thank you very much. Operator: Thank you. Our next question comes from Jennifer Lowe of UBS. Jennifer Lowe: I wanted to drill down on the international growth because of the 51% was a pretty impressive number. And I think at Analyst Day, you exited fiscal ‘20 with around 14% growth in subs. Obviously pricing has been a pretty strong lever. So, can you just maybe break down or sort of decompose the components of that 51% growth? How much of that is potentially an improvement in the subscriber count that you’re seeing there versus just continued success on pricing initiatives? Sasan Goodarzi: Yes. Hi, Jennifer. Good to hear from you. It’s both. Very consistent with what we shared at Investor Day. We continue to see strength in the UK and Canada. And we’re seeing some of the emerging markets that we’re focused on, like Brazil and France, really start their acceleration even in this current environment. And so, really, it’s a combination of being very-focused on who we pursue with what products we pursue and then also really intentional about pricing, and frankly, a lot less discounting, especially in places like Canada and UK, where we created a network effect with small businesses using us, recommending us, with accountants using us and recommending us. And so, we don’t have to discount as much to get our name known. So, it’s very similar to what we talked about, which is it’s a combination of customer growth and ARPC growth. And the ARPC growth is a lot to do with what we’re selling and a lot less discounting. Jennifer Lowe: Great. And maybe just one more for me. So, a little while ago over the summer as the world was changing with COVID-19, you, like many other companies, took some actions to sort of deemphasize some of the less growthy businesses and then plan to bring back the head count over time in some of the growthier parts of the business. I’m just curious where you are in that process at this point. And maybe specific to the margin guidance, what’s the assumption on the pace of getting back into the hiring groove on your business and cost structure? Sasan Goodarzi: Yes, sure. Just for a quick context, there are a couple of areas where we felt like we needed to double down in context of the bets that we’ve declared. It’s the type of talent that we’re pursuing, both in creating a modern operations and our customer success, but also the type of experts that we want to bring into customer success. And then, in technology, it was more systems engineers, infrastructure engineers, cloud engineers that have lots of experience in building complex systems in the cloud. And we are aggressively hiring in those areas because they ultimately are very important in serving the bets that I talked about earlier and a lot of our innovation, we’ve been talking about like commerce, cash advance, et cetera. So, we feel good about our hiring ramp. And I think, I would just really focus on the guidance that Michelle talked about, which includes about 110 basis points of margin expansion. And all of our approach to hiring is all embedded in the guidance that we provided. Operator: Our next question comes from the line of Sterling Auty of JP Morgan. Sterling Auty: Just one question from my side. You talked about the headwind from renewal rates from previous quarter impacted this quarter’s revenue. Can you just give us an update, what did you see in terms of renewal rates through this quarter in the Small Business franchise? Sasan Goodarzi: Yes. They’re actually the tailwinds -- or the headwinds are in three buckets. One is, overall, as we shared at Investor Day, our retention dropped by a couple of points based on what we saw in the March, April, May timeframe. That, along with lapping a price increase and actually not taking price action deliberately, plus the impact from acquisitions in those same months, is really what impacted our growth rate for the quarter that you see here. And our view is, effective the second quarter will be probably the lowest point of the year for the Small Business Group for the same exact reasons that I just mentioned. As you know, we don’t break out quarterly attrition and retention rates. We share once a year at Investor Day. So, those are the main drivers of it. Operator: Thank you. Our next question comes from Brent Thill of Jefferies. Brent Thill: Sasan, if you could just talk about the shape of the recovery in SMB that you’re seeing and the conviction level you have that that continues. Can you just give us a sense of how you’re seeing that progress? And then, I just had a quick follow-up. You were showing the TurboTax full opportunity set on your website. You removed it. It seems really interesting in terms of the opportunity to outsource everything to you. Can you just walk through your intentions for that solution this year? Thanks. Sasan Goodarzi: Yes. Sure, Brent. Good to hear from you. In terms of the shape of the recovery, it’s actually quite consistent with what we shared at Investor Day. May -- most of our indicators are back to pre-pandemic levels, but charge volume is still several points lower. The number of companies running payroll is still several points lower. So although things have recovered, the reality is things are still below pre-pandemic levels. I think, where we have more confidence, Brent, is now we are actually seeing how our platform is -- really how resilient it is and how it’s delivering benefits for customers in these very tough times, plus the innovation that we have across the platform. So, just seeing how our platform is playing out and seeing the impact of our innovation is actually what gives us even more confidence. And from a recovery standpoint, not much has changed in the last six weeks and what we shared at Investor Day. To turn to your second question, we’re actually -- when you think about transforming the assisted segment and really helping customers do their taxes with confidence, there are those that choose to do it themselves. But, at one point in time, they may want to hit a button and get an expert to come, talk to them, review their return to gain confidence. So, those that from the beginning may choose to have help along the way and pick TurboTax Live as an actual offering right off the bat. And then, there are those that may start and decide, you know what, I just want you to do my taxes for me, which is a lot of what we were testing in the last several months. And our plan is to actually launch the platform with all of those capabilities come -- this coming tax season, which by the way is right around the corner. Operator: Our next question comes from Siti Panigrahi of Mizuho. Siti Panigrahi: I just want to ask about trends you are seeing in terms of new customer acquisition. Because we saw this recent Q3 data, census data, there’s a record number of small business creation, in Q3, I think, 1.6 million versus average of 800,000. So, I guess most of these could be potentially QuickBooks customer. So, how should we think about this opportunity and the current trend of this new customer acquisition? Sasan Goodarzi: Yes. Siti, good to hear from you, and a really good question. As I mentioned, there are a few of our key metrics that have recovered quite nicely, but they’re still below the pre-COVID levels like charge volume and payroll. Acquisition is one that’s actually rebounded quite nicely, and we’re actually benefiting from some of what you shared, which is more new business formation. So, that’s probably a metric above and beyond all of them that is probably more in the green, and we’re benefiting from some of that recovery. Operator: Our next question comes from Brad Zelnick of Credit Suisse. Yaoxian Chew: Hi, everyone. This is Yao on for Brad. Thanks for my taking my question. It’s a little bit specific but also philosophical here, and it’s around QuickBooks Commerce and the specific topic of discounting. I understand it’s a new solution, and you want mass market adoption, but when I go to the website, it shows 92% of monthly list price for the first 12 months of service. I’ve never seen anything like that in software before. I guess, what’s the thought process here, especially as it sounds like you’re being more thoughtful around optimizing for discounts in other areas of your business? Sasan Goodarzi: Yes. Sure, Yao, good to hear from me and very good question. Two things I would say. One is, we are actually very intentionally qualifying customers on top of the funnel to ensure that we only bring in customers that we can deliver against their expectations, given just we literally just launched the platform. Interesting enough, one thing that we’re seeing is customers want to use it so bad, they go back to the top of the funnel and change their answers, so they can qualify for it. So, the demand is quite high. I think, you may have fallen into one of our test cells. There’s a lot of different things that we’re testing, different business models, different pricing. So, I don’t know exactly what you fell into, but it sounds like you fell into a test cell. Yaoxian Chew: Got it. The other bit I guess around the 9% to 10% -- I’m sorry, the QuickBooks and Small Business growth scenario there. Just thinking about exogenous factors that may result in upside or downside, does -- a hypothetical government stimulus package, how does that help churn or business creation and how to think about that flowing through to your model? Sasan Goodarzi: Yes. The stimulus, I would say, no pun intended, is not really going to be a big stimulus for small businesses. It’s not going to make a difference between them going out of business or not. I’ll hit on one element of your question, which is the range of the guidance. The low end of the guidance is really driven from how restrictive the states becomes, how restrictive the country becomes beyond what we’re all seeing, which is you now no longer -- although every x state is a little different, you no longer can go into a fitness center, it’s only if it’s outside. You can’t go eat inside at all. Now schools like the New York public schools just closed again. So, everybody has to go from home. That has implications to the local economy. So, the low end of the guidance is more how restrictive things get and then the impact on small businesses, because we feel quite confident in our execution. And of course, the high end is the -- I would say the trends that we’re experiencing and seeing right now. That’s how we thought about it. Operator: Our next question comes from the line of Arvind Ramnani of Piper Sandler. Arvind Ramnani: I just wanted to -- one of the tone changes I picked up at your recent Analyst Day was kind of really focusing on increasing revenue per customer. I just want to see if that was kind of something that you are looking to do to really increase revenue per customer, and how you’re planning to approach it over the next couple of years. Sasan Goodarzi: Sure. Arvind, good to hear from you. Let me just play back to your question because you were cutting in and out. I want to make sure I’m answering the question that you’re asking. I think, your question was, we talked about revenue per customer increasing at Investor Day, and you were just wondering how we plan to achieve that. Did I play that back correctly? Arvind Ramnani: Yes. Sasan Goodarzi: Great. I would say a couple of uber messages. The first one is, it’s because of the incredible innovation and the acceleration of the innovation from the team that’s really going after delivering benefits that that customers care about most. So, if I decompose that with a couple of examples, what I would share is, QuickBooks Live is -- has the potential to increase revenue per customer. The volume is not, of course, at the same rate, but the revenue per customer is. When you look at QuickBooks Advanced, which comes with it serving much larger customers, that has an opportunity and does move the needle when it comes to revenue per customer. And then, there’s the services, the services that go with QuickBooks Live, the services that go with QuickBooks Advanced. And then, within all the services that we provide, payments, payroll, TSheets and now with the integration of TSheets and Payroll Full Service, these services and the innovation and the impact themselves also deliver more revenue per customer. So, when you put all of those together, those are the biggest drivers of increased revenue per customer, which is just driven by the innovation that the team is delivering for customers. Arvind Ramnani: Great, terrific. And just a quick second question for me. How transformative is your relatively new integrated CRM solution? Should we expect this to be a big revenue growth driver, or is it just another proof point of differentiated offering? Sasan Goodarzi: I think, it’s just another important innovation and benefit for customers on our QuickBooks Advanced platform. Again, when you think about these customers -- because I’m assuming you’re talking about like HubSpot and Salesforce. And these customers that are between 10 to 100 employees, and even larger than that. They are looking for CRM solutions. So, we invested quite a bit of time with, I’ll use HubSpot as an example, to really deeply integrate. In fact, I was reviewing the demo several days ago, and it’s a really cool experience for our customers. So, this is -- it just positions us and allows us to not only serve our existing customers with QuickBooks Advanced, but also penetrate and get new customers. Operator: Thank you. Our next question comes from the line of Scott Schneeberger of Oppenheimer. Scott Schneeberger: I was hoping, Sasan or Michelle, if you could elaborate please on the mix shift driving in QuickBooks Online accounting. If you could delve in a little deeper, primary drivers and sustainability you foresee there. Thanks. Sasan Goodarzi: Sure, Scott. I’ll jump in, and if there’s anything Michelle wants that she can jump in. It’s very similar to what I just shared with Arvind. First of all, I’ll start with the headline that it’s very sustainable. We’re just getting started. And when you look at the mix that gets driven by the platform with QuickBooks Live, it gets -- another one is QuickBooks Advanced. And both of these come with them services, like payments and payroll and TSheets, and then apps like HubSpot, as an example, that allows us to drive a mix shift. And so, those are just examples. And then, QuickBooks Commerce, which really gives us the opportunity to serve product-based businesses that we served for years in desktop, the million product-based services that we have on desktop. Now we have an opportunity to serve these customers with QuickBooks Commerce. So, those are the drivers. And then, the last one I would say is countries where we get the product market fit, like Canada and UK, we have an opportunity to expand the services that we provide and at higher prices and don’t have to discount as much because our names are out there, the experience goes viral, and therefore, more customers want to use it. So, those are the drivers of the mix shift and the ARPC shift, and that’s quite durable. Scott Schneeberger: And then, as a follow-up, I’m just curious, just from view points on Small Business failures. Obviously, you feel confident enough to give guidance and we’ve heard a lot of good things in discussion of stimulus as well. But, just anecdotally, what are some of the things that you’re seeing, and do you feel that the economy is around the corner, to the extent you can speak for that? Sasan Goodarzi: Sure. Two things I would say. I think, the most important lever for small businesses is we got to lead thoughtfully through this health crisis, because leading thoughtfully through the health crisis will enable the country and the globe to actually bring jobs back and reduce unemployment. Those are the two largest levers that will impact Small Business failures. And as we talked about at Investor Day, our retention dropped a couple of points because of the failures that we experienced. I think, those two levers that I mentioned, plus a fiscal stimulus, not just more stimulus money but a fiscal stimulus, along with getting out of this health crisis, and ultimately, getting back to lower unemployment is going to really drive the long-term health of small businesses. Operator: Our next question comes from Kirk Materne of Evercore. Kirk Materne: Sasan, I was wondering if you could dive a little bit deeper into the sort of announcement today of HubSpot. And maybe just your view on whether or not small businesses are now looking a little bit more for a one-stop shop. I mean, you guys obviously have financials, you added commerce, and this obviously expands you into CRM and marketing with them. So, is the feedback that you’ve been getting that this is, look we want to only to let one vendor to really help us manage our business from customer acquisition through finances, through commerce. I mean, because that’s what it sort of seems like. And do you think the market is moving there in a faster way due to COVID? Thanks. Sasan Goodarzi: Yes. You’re very welcome. I would focus more on the customer pain that we are after. One of the things that we’re really focused on is, one, to help our customers grow; and two, to be able to serve product-based businesses. Because even in service-based businesses, traditionally, we’ve not solved the problem of helping them grow and get more customers well. And so, this integration with HubSpot, with Salesforce is really an example of solving the problem of -- with our platform, we can help you grow your business. We can help you get paid. We can help you do payroll. We can give you access to capital. We can help you with time tracking. Of course, now we can help you set up on multiple different channels and be able to run your product-based business. So, we’re really focused on the customer problem. And one of the things, I preach probably more than that ward wants to hear it at Intuit is, let’s not focus on just creating a one-stop shop because that’s not how a customer think. The customer thinks, I need to solve my problem. Can you solve it for me? With that said, we are seeing more and more customers begin to use our platform to be able to run their business. And we’re seeing more and more customers tell us, hey, can you do some integrations with the following applications to be able to help me grow my business? So, those are the -- it’s very customer-back-driven. And it’s now several years of us being in the cloud where we’re building out the platform to the point where you don’t need to go anywhere else. You can run your entire business on our platform, which is exactly the same thing we’re looking to do on the consumer side. We want a consumer platform where you can do your taxes, get early access to your paycheck, connect the financial products that are right for you and truly reach financial freedom. And so, it really is -- it’s consistent with what we’re trying to do across the Company for customers. Operator: Our next question comes from Kartik Mehta of Northcoast Research. Kartik Mehta: Sasan, you’ve talked about QuickBooks business and not raising prices, obviously considering the economic environment we’re in. Do you think that same philosophy will apply to the tax business, or is the tax business different? And do you think there’s some different leverage points and price would be available for the upcoming season? Sasan Goodarzi: Yes. Kartik, good to hear from you. I would think about this in a couple of dimensions. Both, and small businesses, we actually now have offerings that are disruptive, and they disrupt higher-priced alternatives. So, when you look at QuickBooks Live, the price that customers have to pay with QuickBooks Live is actually a lot less than what they pay with if they have to go directly and find their own bookkeeper or enrolled agent. And you look at QuickBooks Advanced, we are actually at a disruptive price but yet have a lot of opportunity in terms of what we can do with pricing. Same thing goes for TurboTax Live, where a much lower cost alternative than going to somebody’s home or store to get your taxes done. So, I think the way I would think about it is, there are segments of customers we may intentionally, given the environment, not do price increases, but then there are certain segments of the customers where we will because we’re actually very disruptive and far lower price alternative. So, that’s the way we approach it and think about it internally. Operator: Our next question comes from Chris Merwin of Goldman Sachs. Chris Merwin: I think, you all talked about the Online Ecosystem getting back to 30% growth over time. And I guess, if we look at the ‘21 guidance for the segment as a whole and we assume desktop is flat, I think, it wouldn’t buy that QuickBooks Online would be maybe high-teens growth for this coming year. It sounds like the trends are very much getting back on track for QuickBooks Online. So, just curious how we think about the progression back towards 30%-plus growth over time for that segment. Thanks. Sasan Goodarzi: Yes. Sure, Chris. First of all, as you heard Michelle mention, we have every intention over time to get to back to 30%-plus online revenue growth. And that will happen really by two levers. One is, our continued innovation to deliver value and the portfolio we now have; and two, it’s the recovery of small businesses. Although our platform has demonstrated to be resilient, it’s important to know that we’re not out of this pandemic. And we need to make sure that we get through this health crisis and get unemployment back down and get to a more healthy economy. And I think, the combination of our innovation and getting to a better place in terms of the economy will allow us to get back to that 30%. And a lot of that is what informs the guidance that we provided. Chris Merwin: Okay, great. Thank you. And then, maybe one just quick follow-up. I wanted to ask about QuickBooks Advanced just in terms of how that’s doing relative to your expectations in the current environment. Are you seeing customers holding back on some of the larger system upgrades, say, relative to SMB? I mean -- or is that not the case? Just curious how you’d characterize the strength you’re seeing in that business right now. Sasan Goodarzi: Yes. I would say it’s actually doing well. At Investor Day, if you recall, we talked about now we have 75,000 customers, and that’s 100% growth year-over-year. And we’re seeing both, customers upgrade to QuickBooks Advanced that are existing customers, and we’re actually seeing new customers come in that have been using a bunch of different apps and manual processes. And they use QuickBooks Advanced, and they see it as an advantage to be able to grow their business. So, we’re actually -- and because it’s disruptive in terms of price versus alternatives, we are not seeing any holdbacks. And we’re actually seeing the benefit of what a platform can do that’s a disruptor, especially those small businesses that are deciding, you know what, me manually running my business is no longer going to work. I need to move to the cloud, especially because of the COVID environment. And QuickBooks Advanced becomes an accelerant. Operator: Our next question comes from Michael Millman of Millman Research. Michael Millman: So, if I’ve done the numbers roughly correct, there’s about 100 million taxpayers who pay about $0.25 trillion, that’s -- was a T like TurboTax dollars, for no or zero return. Just kind of wondering with this kind of opportunity maybe for you, what if anything you’re doing now to get some of this money funneled into something that’s earning or Karma Credit -- Credit Karma doing anything? Does the IRS kind of stand up there and say, don’t you dare fool with all this money? Maybe you can help us think about this. Sasan Goodarzi: Sure, Michael. Let me take a shot at this to see if this addresses your question. First of all, we do see a very large opportunity. But, the way we look at it is that there are about 86 million people that go to somebody else to have their taxes done. And they spend about $20 billion or more to get those taxes done. We just see a huge opportunity to be able to serve those customers with a digital platform where we can bring the help to their place of home or office at their convenience at a much lower price and provide them the confidence that they need to get the maximum refund. So, we do see the same opportunity that you do. Our figures are a bit different than what you were articulating, but that’s really what we are pursuing with our Live platform. Michael Millman: I was actually kind of thinking of no refund. Don’t pay more than you need to. Invest that money. Sasan Goodarzi: Oh, got you. I think, I understand what you’re asking. The whole purpose of our vision of what we want to do to create a consumer finance platform is to give consumers choice. It’s to give them choice to connect to financial products like loans and insurance and credit cards that are right for them. It’s to be able to give them choice when they get their tax refund, if they want to put it in a high-yield savings account, if they want early access to their tax refund, and so actually want early access to their paycheck. To give them more choice because we have the ability with using their data with their permission to give them insights that otherwise they wouldn’t get. Plus, by the way, if they wanted an expert to help them, will provide some advice, we can also help them with that. That’s our vision of what we want to -- what we want to do with our Big Bet three, which is unlock smart money decisions. And of course, that’s where Credit Karma comes in and can really fuel that vision. And we’re excited about it. Michael Millman: So, you’re thinking more of after tax payers get a refund, rather than saying you shouldn’t -- there shouldn’t be a refund. You should be using that money more productively than lending it to the IRS? Sasan Goodarzi: Yes. Well, the refund of the consumers’ money. So, what we’re -- it’s money that’s theirs and they earned it and they should get their refund. It’s about how we help the consumer with what they can do with their refund is really our mission. Michael Millman: I see. Okay. And just quickly, the guidance you gave that is before Credit Karma, or does that include Credit Karma? Sasan Goodarzi: Yes. That is excluding Credit Karma, because we have not yet closed Credit Karma. And as Michelle mentioned, once we do close Credit Karma, we will actually have another call. And we will update our guidance and it will include Credit Karma. Operator: Ladies and gentlemen, I’m not showing any further questions. Would you like to close with any additional remarks? Sasan Goodarzi: Yes. I’ll be brief. Thank you everyone for your questions. And wish everyone that celebrates Thanksgiving a wonderful and safe Thanksgiving. And we’ll speak to you very soon. And enjoy your holidays. Thank you. Operator: Ladies and gentlemen, thank you for participating. This concludes today’s conference call.
Intuit Inc. (NASDAQ:INTU) Surpasses Earnings and Revenue Estimates
- Intuit Inc. (NASDAQ:INTU) reported an EPS of $2.50, beating the estimated $2.35 and showcasing a 5.93% surprise over expectations.
- The company's revenue reached $3.28 billion, surpassing estimates and indicating a 10.2% year-over-year growth.
- Despite strong financial performance, Intuit's stock fell by 6% in extended trading due to a disappointing forecast for the current quarter.
Intuit Inc. (NASDAQ:INTU) is a leading financial software company known for its flagship products like TurboTax, QuickBooks, and Credit Karma. These tools help individuals and businesses manage their finances efficiently. Intuit operates in a competitive market, with rivals such as H&R Block and Sage Group. Despite the competition, Intuit continues to demonstrate strong financial performance.
On November 21, 2024, Intuit reported earnings per share (EPS) of $2.50, surpassing the estimated $2.35. This marks a 5.93% surprise over the expected figures, as highlighted by Zacks. The EPS also showed a slight increase from $2.47 in the same quarter last year, indicating steady growth. This performance reflects Intuit's ability to consistently exceed market expectations.
Intuit's revenue for the quarter ending in October 2024 reached $3.28 billion, exceeding the estimated $3.14 billion by 4.58%. This represents a 10.2% increase compared to the same period last year. The company has consistently outperformed consensus revenue estimates over the past four quarters, showcasing its strong market position and effective business strategies.
Despite the positive earnings report, Intuit's stock fell by 6% in extended trading due to a disappointing forecast for the current quarter. The company expects revenue between $3.81 billion and $3.85 billion and EPS of 84 cents to 90 cents, falling short of the $1.50 EPS anticipated by analysts. This outlook has impacted investor sentiment, despite the company's strong past performance.
Intuit's financial metrics reveal a high market valuation, with a price-to-earnings (P/E) ratio of approximately 64.14 and a price-to-sales ratio of about 11.68. The enterprise value to sales ratio is around 11.86, reflecting the company's valuation in relation to its revenue. Despite a relatively low debt-to-equity ratio of 0.33, indicating a conservative capital structure, the company's stock is trading at a premium relative to its cash flow generation.
Intuit Inc. (NASDAQ:INTU) Quarterly Earnings Preview and Financial Analysis
- Earnings per share (EPS) is estimated at $2.35 for the upcoming quarterly earnings, with a slight upward revision of 0.1% over the past 30 days.
- Despite a projected 4.5% decline in EPS year-over-year, revenue is expected to rise by 5.4%, showcasing Intuit's strong market position.
- Intuit's price-to-earnings (P/E) ratio stands at approximately 60.87, indicating a high valuation by the market despite its robust 80% gross margins and 18% net profit margins.
Intuit Inc. (NASDAQ:INTU) is a leading financial software company known for its popular products like TurboTax, QuickBooks, Mailchimp, and Credit Karma. These products cater to both consumers and small businesses, driving significant growth in these segments. Intuit's integration of embedded fintech and artificial intelligence further enhances its offerings, positioning it well in the competitive financial software market.
As Intuit prepares to release its quarterly earnings on November 21, 2024, Wall Street analysts estimate an earnings per share (EPS) of $2.35, with projected revenue of approximately $3.14 billion. Despite a 4.5% decline in EPS compared to the same period last year, revenues are expected to rise by 5.4%, reflecting the company's strong market position and growth potential. Over the past 30 days, the consensus EPS estimate has been slightly revised upward by 0.1%, indicating a positive reassessment by analysts.
Intuit's financials are robust, with impressive 80% gross margins and 18% net profit margins. However, the stock is considered expensive, with a price-to-earnings (P/E) ratio of approximately 60.87. This high valuation suggests that investors are willing to pay over 60 times the company's earnings over the past twelve months. The price-to-sales ratio stands at about 11.09, indicating that the market values the company at over 11 times its annual sales.
Despite its quality and growth potential, Intuit's stock holds a 'hold' rating, as it is expected to perform in line with the broader market. Management's guidance for fiscal 2025 suggests continued growth, but analysts anticipate a decline in profits. An upgrade in the stock rating is unlikely unless the company's results significantly exceed expectations. Intuit's enterprise value to operating cash flow ratio is approximately 37.57, showing how the company's valuation compares to its cash flow from operations.
Intuit faces significant cybersecurity risks due to its handling of sensitive financial data, making it a prime target for cyberattacks. The company's debt-to-equity ratio is 0.33, suggesting a relatively low level of debt compared to equity, while the current ratio is approximately 1.29, indicating a good level of short-term liquidity to cover its current liabilities. These financial metrics highlight Intuit's strong financial position, despite the challenges it faces.
Intuit's Fiscal Fourth-Quarter Earnings Beat and Stock Market Reaction
- Intuit's adjusted earnings per share of $1.99 surpassed Wall Street predictions of $1.85.
- Despite positive earnings, Intuit became the S&P 500's worst performer on the announcement day.
- The stock market's reaction to earnings reports can be influenced by various factors beyond the earnings themselves.
Intuit, known for its financial software like Turbo Tax, recently announced its fiscal fourth-quarter adjusted earnings, which stood at $1.99 per share. This figure exceeded the expectations set by Wall Street, which had predicted earnings of $1.85 per share. Despite outperforming analysts' forecasts, Intuit's stock (NASDAQ:INTU) did not fare well in the market following the announcement. On the day the earnings were published, Intuit became the S&P 500's worst performer.
This scenario highlights a curious case where a company's financial performance does not directly translate to stock market success. Typically, when a company reports earnings that surpass Wall Street's expectations, its stock price is expected to rise. Investors often view such earnings beats as indicators of a company's strong financial health and future growth potential. However, Intuit's experience demonstrates that market reactions can be unpredictable and influenced by factors beyond just earnings figures.
Several reasons could explain why Intuit's stock underperformed despite the positive earnings report. Market expectations, broader economic conditions, and investor sentiment play crucial roles in determining how stock prices move after earnings announcements. It's possible that investors were anticipating even higher earnings from Intuit or had concerns about the company's future growth prospects. Additionally, external market conditions or shifts in investor priorities could have contributed to the stock's performance on that day.
Understanding the dynamics between earnings reports and stock market performance is essential for investors. While earnings beats like Intuit's are generally seen as positive, the stock market's reaction can vary based on a multitude of factors. This case serves as a reminder of the complex interplay between a company's financial results and its stock price movements.
Intuit Stock Started With Outperform Rating at RBC Capital
RBC Capital analysts initiated coverage on Intuit (NASDAQ:INTU) stock with an Outperform rating and a price target of $760.
The analysts highlighted Intuit's strong market leadership, successful transition to a subscription model, and potential growth from generative AI (GenAI) as key factors for the positive rating. Additionally, margin expansion is expected to further support the company's growth. Intuit, known for its tax and accounting software, serves over 100 million customers, including more than 10 million small and medium-sized businesses (SMBs) and over 90 million consumers.
Intuit Shares Drop 6% Despite Strong Q3 Results & Outlook
Intuit raised its full-year guidance after reporting fiscal third-quarter results that exceeded expectations. Despite this, Intuit (NASDAQ:INTU) saw its stock drop by over 6% in pre-market today.
The company reported earnings per share of $9.88 on revenue of $6.74 billion, significantly surpassing analyst estimates of $9.38 EPS on $6.65 billion in revenue.
CEO Sasan Goodarzi highlighted the transformative impact of AI, stating that Intuit's strategy to become a global AI-driven expert platform is delivering significant benefits for customers and strong company-wide results.
For the future, Intuit updated its guidance, expecting adjusted earnings between $16.79 and $16.84, representing about 17% growth, up from the previous forecast of 12% to 14% growth. Revenue is projected to range from $16.16 billion to $16.2 billion, indicating approximately 13% growth, up from the prior guidance of 11% to 12% growth.
Intuit Inc. Surpasses Market Expectations in Q3 Earnings
- Intuit Inc. reported a significant earnings beat with an EPS of $9.88 against the estimated $9.38 and revenue of $6.74 billion, surpassing forecasts.
- The company's strategic focus on AI technology has been pivotal in enhancing its product offerings and driving financial performance.
- Intuit's financial health is underscored by strong metrics, including a P/E ratio of approximately 60.36 and a P/S ratio of about 11.73.
Intuit Inc. (NASDAQ:INTU), a prominent player in the financial technology sector, recently reported its earnings for the third quarter of fiscal year 2024. The company, known for its comprehensive suite of products including TurboTax, QuickBooks, and Credit Karma, has consistently demonstrated its ability to exceed market expectations. On May 23, 2024, Intuit announced earnings per share (EPS) of $9.88, surpassing the estimated EPS of $9.38, and reported revenue of $6.74 billion, beating the forecasted revenue of approximately $6.65 billion. This performance underscores Intuit's strong financial health and its successful execution of strategic initiatives.
During the earnings call, as detailed by Seeking Alpha, Intuit's leadership, including CEO Sasan Goodarzi and CFO Sandeep Aujla, discussed the company's financial results and strategic direction. The call was attended by analysts from leading financial institutions, highlighting the significant interest in Intuit's performance. This interest is a testament to Intuit's market position and its potential for future growth. The company's focus on leveraging AI technology has been particularly noteworthy, with Goodarzi emphasizing its transformative impact on Intuit's offerings and its contribution to the company's robust financial outcomes.
Intuit's ability to consistently surpass consensus EPS estimates for the last four quarters is a clear indicator of its operational excellence and market foresight. The company reported a significant improvement in its quarterly earnings, with a 5.78% earnings surprise, and demonstrated revenue growth across its Consumer group, small business, and Small Business and Self-Employed Group. This growth is reflective of Intuit's effective implementation of its AI-driven strategy, which has not only enhanced its product offerings but also delivered substantial value to its customers.
The company's financial metrics further illustrate its strong market position and investor confidence. With a price-to-earnings (P/E) ratio of approximately 60.36 and a price-to-sales (P/S) ratio of about 11.73, Intuit is valued highly by the market, indicative of its premium offerings and expected future growth. The enterprise value to sales (EV/Sales) and enterprise value to operating cash flow (EV/OCF) ratios further highlight the market's optimistic outlook on Intuit's revenue stream and cash flow generation capabilities. Additionally, Intuit's balanced approach to financing, as shown by its debt-to-equity (D/E) ratio of about 0.35, and a healthy current ratio of 1.5, positions the company well for sustainable growth.
In conclusion, Intuit's recent earnings report and the insights shared during its earnings call reflect the company's strong financial performance and strategic direction. The interest from analysts and the company's focus on AI technology are indicative of Intuit's potential for continued success. With robust financial metrics and a clear strategic vision, Intuit is well-positioned to maintain its leadership in the financial technology sector and deliver value to its customers and investors alike.
Intuit Inc. Fiscal Q3 2024 Earnings Preview
- Intuit Inc. is set to release its fiscal third-quarter 2024 earnings with an EPS expectation of 9.34 and revenue estimates around $6.65 billion.
- The company projects year-over-year revenue growth of 10% to 11%, closely aligning with the Zacks Consensus Estimate for a 10.25% increase.
- Intuit has consistently outperformed the Zacks Consensus Estimate in the past four quarters, with an average earnings surprise of 16.18%.
Intuit Inc. (NASDAQ:INTU), a leading provider of financial management software for consumers, small businesses, and accountants, is gearing up to release its fiscal third-quarter 2024 earnings report on Thursday, May 23, 2024, after the market closes. The company, known for its flagship products, TurboTax and QuickBooks, plays a pivotal role in the financial software sector, competing with other tech giants in providing innovative financial solutions. Wall Street has set its sights on earnings per share (EPS) of 9.34, with revenue estimates for the quarter hovering around $6.65 billion.
The anticipation surrounding Intuit's earnings report is high, with expectations of showcasing the company's robust performance. Analysts predict significant year-over-year growth, largely driven by the strength in Online Ecosystem revenues, especially following the introduction of QuickBooks Solopreneur. Intuit has projected its revenues to increase by 10% to 11% year-over-year, aiming for a range between $6.605 billion and $6.655 billion. This projection closely matches the Zacks Consensus Estimate for revenues, which is pegged at $6.63 billion, indicating a year-over-year growth of 10.25%.
On a non-GAAP basis, Intuit's earnings per share are expected to fall within the range of $9.31 to $9.38, aligning with the consensus mark of $9.34 per share. This suggests a year-over-year rise of 4.71%. Notably, Intuit has a track record of exceeding the Zacks Consensus Estimate in its earnings over the last four quarters, with an average surprise of 16.18%. Such consistent performance highlights the company's operational efficiency and its ability to surpass market expectations.
The fiscal third-quarter performance is anticipated to benefit from a steady recovery in the Small Business segment, further bolstered by the strategic launch of QuickBooks Solopreneur. This period is crucial for Intuit, as it reflects the company's ability to adapt and thrive amidst evolving market demands. The focus will also be on the management's discussion of business conditions during the earnings call, as it will play a crucial role in shaping future earnings expectations and the stock's immediate price movement.
Analysts have revised their earnings estimates upwards by 0.2% over the past 30 days, indicating a positive reassessment of Intuit's financial outlook. This adjustment in earnings estimates is significant, as empirical research has shown a strong correlation between trends in earnings estimate revisions and the short-term price performance of a stock. Therefore, the recent upward revision in Intuit's earnings estimates could be a positive indicator for investors, suggesting potential favorable reactions in the stock's price following the earnings announcement.
