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Intuit (NASDAQ:INTU) Exceeds Q3 Expectations, Provides Optimistic Full Year Guidance


Kayode Omotosho /
2022/05/24 4:09 pm EDT
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Tax and accounting software provider, Intuit (NASDAQ:INTU) announced better-than-expected results in the Q3 FY2022 quarter, with revenue up 34.9% year on year to $5.63 billion. Intuit made a GAAP profit of $1.79 billion, improving on its profit of $1.46 billion, 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) Q3 FY2022 Highlights:

  • Revenue: $5.63 billion vs analyst estimates of $2.5 billion (2.16% beat)
  • EPS (non-GAAP): $7.65 vs analyst estimates of $7.58 (small beat)
  • Free cash flow of $3.25 billion, up from $20 million in previous quarter
  • Gross Margin (GAAP): 86.1%, in line with same quarter last year
  • Full year revenue guidance at $12.633 billion to $12.674 billion

“We are confident in our strategy and execution across the company as we become the global AI-driven expert platform powering the prosperity of consumers and small businesses,” said Sasan Goodarzi, Intuit's chief executive officer. “We had another strong quarter, and we are raising Intuit’s revenue and operating income guidance for fiscal year 2022.”

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.

Sales Growth

As you can see below, Intuit's revenue growth has been impressive over the last year, growing from quarterly revenue of $4.17 billion, to $5.63 billion.

Intuit Total Revenue

And unsurprisingly, this was another great quarter for Intuit with revenue up 34.9% year on year. On top of that, revenue increased $2.95 billion quarter on quarter, a very strong improvement on the $666 million increase in Q2 2022, and a sign of re-acceleration of growth.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 8.11% 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.

Profitability

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 86.1% in Q3.

Intuit Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.86 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is a great 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 Q3 Results

With a market capitalization of $105 billion, more than $3.9 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.

We were very impressed by the strong improvements in Intuit’s gross margin this quarter. And we were also excited to see the really strong revenue growth. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The company is up 3.26% on the results and currently trades at $371.5 per share.

Intuit may have had a good quarter, so should you invest 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.