Tax and accounting software provider, Intuit (NASDAQ:INTU) reported Q4 FY2022 results beating Wall St's expectations, with revenue down 5.73% year on year to $2.41 billion. Intuit made a GAAP loss of $56 million, down on its profit of $380 million, in the same quarter last year.
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Intuit (INTU) Q4 FY2022 Highlights:
- Revenue: $2.41 billion vs analyst estimates of $2.32 billion (3.61% beat)
- EPS (non-GAAP): $1.10 vs analyst estimates of $0.98 (12.4% beat)
- Management's revenue guidance for upcoming financial year 2023 is $14.5 billion at the midpoint, in line with analyst expectations and predicting 14.6% growth (vs 37.6% in FY2022)
- Free cash flow of $278 million, down 91.4% from previous quarter
- Gross Margin (GAAP): 76.8%, down from 82.4% same quarter last year
"We had a very strong fourth quarter, ending the year with momentum. We're more confident than ever in our long-term business strategy as we power prosperity around the world," 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 weak over the last year, decelerating from quarterly revenue of $2.56 billion, to $2.41 billion.
For the upcoming financial year management expects revenue to be $14.5 billion at the midpoint, growing 14.6% compared to 37.6% increase in FY2022.
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 76.8% in Q4.
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 Q4 Results
Sporting a market capitalization of $125 billion, more than $3.28 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.
It was good to see Intuit outperform Wall St’s revenue expectations this quarter. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, the revenue guidance for next year indicates a significant slowdown and the revenue growth was quite weak. Overall, this quarter's results could have been better. The company is up 3.92% on the results and currently trades at $467 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.