Tax and accounting software provider, Intuit (NASDAQ:INTU) fell short of analyst expectations in Q3 FY2023 quarter, with revenue up 6.85% year on year to $6.02 billion. Intuit made a GAAP profit of $2.09 billion, improving on its profit of $1.79 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 FY2023 Highlights:
- Revenue: $6.02 billion vs analyst estimates of $6.09 billion (1.23% miss)
- EPS (non-GAAP): $8.92 vs analyst estimates of $8.49 (5.01% beat)
- The company lifted revenue guidance for the full year, from $14.1 billion to $14.3 billion at the midpoint, a 1.1% increase
- Free cash flow of $3.16 billion, up from $229 million in previous quarter
- Gross Margin (GAAP): 84.4%, down from 86.1% same quarter last year
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 strong over the last two years, growing from quarterly revenue of $4.17 billion in Q3 FY2021, to $6.02 billion.
Intuit's quarterly revenue was only up 6.85% year on year, which might disappoint some shareholders. We can see that the company increased revenue by $2.98 billion quarter on quarter re-accelerating up on $444 million in Q2 2023.
Ahead of the earnings results the analysts covering the company were estimating sales to grow 9.8% 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 84.4% in Q3.
That means that for every $1 in revenue the company had $0.84 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
Sporting a market capitalization of $127 billion, more than $4.27 billion in cash and with positive free cash flow over the last twelve months, we're confident that Intuit has the resources it needs to pursue a high growth business strategy.
We like that Intuit raised its full year guidance for revenue, non-GAAP operating profit and EPS, all of which were above expectations. We also liked that EPS beat this quarter and gross margins improved. On the other hand, it was unfortunate to see that Intuit missed analysts' revenue expectations. Overall, it seems to us that this was a mixed but overall good quarter for Intuit. The company is flat on the results and currently trades at $448 per share.
Intuit may have had a tough quarter, but does that actually create an opportunity to 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.