Intuit (NASDAQ:INTU) Reports Bullish Q1, Stock Soars

Adam Hejl /
2021/11/18 4:20 pm EST
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Tax and accounting software provider, Intuit (NASDAQ:INTU) reported Q1 FY2022 results that beat analyst expectations, with revenue up 51.7% year on year to $2 billion, driven partly by acquisition of Credit Karma.. Intuit made a GAAP profit of $228 million, improving on its profit of $198 million, in the same quarter last year.

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Intuit (INTU) Q1 FY2022 Highlights:

  • Revenue: $2.01 billion vs analyst estimates of $1.81 billion (10.6% beat)
  • EPS (GAAP): $0.82
  • The company lifted revenue guidance for the full year, from $11.1 billion to $12.2 billion at the midpoint, a 9.95% increase
  • Free cash flow of $103 million, down 80.1% from previous quarter
  • Gross Margin (GAAP): 80.7%, in line with same quarter last year

“We are off to a strong start in fiscal year 2022, delivering on our strategy of becoming an AI-driven expert platform powering the prosperity of 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 digitization of financial processes is expected to drive the acceleration of the adoption of financial technology solutions.

Sales Growth

As you can see below, Intuit's revenue growth has been very strong over the last year, growing from quarterly revenue of $1.32 billion, to $2 billion.

Intuit Total Revenue

This was a standout quarter for Intuit with quarterly revenue up an absolutely stunning 51.7% year on year. which is above average for the company. But the revenue actually decreased again in Q1 by $554 million, compared to $1.61 billion decrease in Q4 2021. Intuit's revenue is more seasons than would be typical for a SaaS company, as it closely aligns with the tax year.

Analysts covering the company are expecting the revenues to grow 11% over the next twelve months, although estimates are likely to change post earnings.

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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 80.7% in Q1.

Intuit Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.80 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite the recent drop that is still 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 Q1 Results

With a market capitalization of $179 billion, more than $3.25 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 impressed by how strongly Intuit outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Zooming out, we think this impressive quarter should have shareholders feeling very positive. The company is up 7.03% on the results and currently trades at $675.2 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.

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The author has no position in any of the stocks mentioned.