Tax and accounting software provider, Intuit (NASDAQ:INTU) reported Q2 FY2023 results beating Wall St's expectations, with revenue up 13.8% year on year to $3.04 billion. Guidance for the full year was also close to analyst expectations with revenues guided to $14.1 billion at the midpoint. Intuit made a GAAP profit of $168 million, improving on its profit of $100 million, in the same quarter last year.
Is now the time to buy Intuit? Access our full analysis of the earnings results here, it's free.
Intuit (INTU) Q2 FY2023 Highlights:
- Revenue: $3.04 billion vs analyst estimates of $2.91 billion (4.43% beat)
- EPS (non-GAAP): $2.20 vs analyst estimates of $1.44 (52.6% beat)
- The company reconfirmed revenue guidance for the full year, at $14.1 billion at the midpoint
- Free cash flow of $229 million, roughly flat from previous quarter
- Gross Margin (GAAP): 75.9%, down from 80.4% same quarter last year
“We had a strong second quarter as we executed on our strategy to be the global AI-driven expert platform powering prosperity for consumers and small businesses,” said Sasan Goodarzi, Intuit's chief executive officer.
Created in 1983 when founder Scott Cook watched his wife struggle to reconcile the family's checkbook, Intuit provides tax and accounting software for small and medium-sized businesses.
The demand for easy to use, integrated cloud based finance software that integrates tax and accounting operations continues to rise in tandem with the difficulty workers find trying to use existing accounting tools like spreadsheets given the growing volume of finance data littered across a multitude of enterprise applications. A related demand driver is the secular increase of e-commerce and rising adoption of modern point of sales and payments platforms which easily integrate with backend financial software.
As you can see below, Intuit's revenue growth has been very strong over the last two years, growing from quarterly revenue of $1.58 billion in Q2 FY2021, to $3.04 billion.
This quarter, Intuit's quarterly revenue was once again up 13.8% year on year. We can see that the company increased revenue by $444 million quarter on quarter. That's a solid improvement on the $183 million increase in Q1 2023, so shareholders should appreciate the re-acceleration of growth.
Ahead of the earnings results the analysts covering the company were estimating sales to grow 8.26% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Intuit's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 75.9% in Q2.
That means that for every $1 in revenue the company had $0.76 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite it going down over the last year, this is still a good gross margin that allows companies like Intuit to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.
Key Takeaways from Intuit's Q2 Results
With a market capitalization of $114 billion, more than $2.07 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.
It was good to see Intuit outperform Wall St’s revenue expectations and show solid free cash flow this quarter. Zooming out, we think this was a decent quarter, showing the company is staying on target. The company is flat on the results and currently trades at $412.03 per share.
Should you invest in Intuit right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.