Intuit Inc. (INTU) reported fourth quarter fiscal 2010 adjusted loss per share of 11 cents, ahead of the Zacks Consensus Estimate of a loss of 17 cents. The adjusted loss per share excludes amortization of intangible assets and acquired technology, professional fees for business combinations as well as tax gains, but includes stock-based compensation expenses.
Intuit reported revenues of $537.0 million in the fourth quarter, up 18.0% from $457.0 million in the prior-year quarter. The quarter’s result surpassed management’s guidance range of $492.0–$507.0 million and the Zacks Consensus Estimate of $503.0 million.
The growth in revenues could be attributable to the strong tax season. Moreover, strong customer growth in the Small Business group could be another reason for the uptick.
Consumer Tax, the largest segment, witnessed a 43.0% year-over-year growth in revenues, driven by the increase in total TurboTax units and TurboTax Online units. Management stated that the company gained market share in both desktop and Web-based platforms.
The Financial Services segment grew 4% year over year due to the increase in Internet banking users.
The Small Business Group revenue surged 16% year over year, driven by the strength in Financial Management Solutions and Employee Management Solutions.
Financial Management Solutions (the second largest segment) registered 18% growth from the year-ago quarter, driven by better mix and improved pricing. Employee Management Solutions (formerly referred to as Payroll) was up 25%, especially helped by share growth online. Payment Solutions posted 5% year over year growth in the quarter. Volumes per merchant were impacted by lower consumer spending.
Other businesses grew 46% from the year-ago quarter, driven by strong Quicken sales and healthy contribution from Mint.com.
Non-GAAP operating loss (including stock compensation expenses) was $45.0 million (8.4% of revenue), compared to $92.0 million (20.1% of revenue) in the year-earlier quarter.
GAAP net loss in the quarter was $48.0 million, or 15 cents per share, compared to $71.0 million, or 22 cents per share in the comparable period last year.
Excluding stock based compensation as well as other special items, net loss on a non-GAAP basis was $15.0 million, or 5 cents per share, compared to $34.0 million, or 10 cents per share in the year-earlier period.
However, including stock-based compensation, the adjusted earnings per share in the quarter were 11 cents, up from 17 cents in the year-earlier quarter.
Balance Sheet & Cash Flow
Intuit ended the quarter with cash, equivalents and investments of $1.62 billion, down from $1.35 billion in the year-ago quarter. Accounts receivable remained unchanged at $135.0 million year over year. As of July 31, 2010, long-term debt also remained flat at $998.0 million.
Intuit used up $151.0 million of operating cash in the fourth quarter, compared to $66.0 million in the prior-year quarter. Capital expenditure reduced $4.0 million from the year-earlier quarter to $30.0 million.
During the quarter, Intuit repurchased shares worth $150.0 million. The company received a new authorization from its board to buy back $2.0 billion of its common stock over the next three years, which will terminate in August 2013.
For fiscal year 2011, Intuit expects revenues to range between $3.74 billion and $3.84 billion. Operating income is expected to be in the range of $980.0 million to $1.015 billion on a GAAP basis and $1.22–$1.25 billion on a non-GAAP basis. GAAP loss per share is projected to be between $1.88 and $1.95, and non-GAAP loss per share is between $2.36 and $2.43.
On segmental basis, Intuit expects Small Business Group to grow 8% to 12% year over year in fiscal 2011. The Consumer Tax business is expected to increase 8% to 12%, Accounting Professional and Financial Services to each grow 4% to 7%, and Other businesses to rise 11% to 16% year over year.
For the first quarter of fiscal 2011, Intuit expects revenues to range between $515.0 million and $525.0 million. Operating loss is expected to be in the range of $110.0–$100.0 million on a GAAP basis and $60.0–$50.0 million on a non-GAAP basis. GAAP loss per share is projected at between 25 cents and 23 cents and non-GAAP loss per share between 13 cents and 11 cents.
Intuit is a leading provider of business and financial management solutions for small and medium-sized businesses, consumers, accounting professionals and financial institutions. Management is confident about gaining market share in its Small Business group and Consumer Tax business, aided by accelerating customer growth and improving revenue per customer.
However, we are concerned about margins going forward, given management’s strategy of bringing customers on board through a “free” program, to be subsequently transferred onto a “paid” platform. Moreover, we see limited momentum in the shares for the near term due to the disappointing guidance for the coming quarter.
Consequently, the Zacks Rank for the stock is currently #4, implying a short-term Sell recommendation.