Intuit Inc. (NASDAQ: INTU), the maker of TurboTax, QuickBooks and Mint, announced financial results for the third quarter of fiscal 2020, which ended April 30. Financial software maker Intuit on 21st May topped Wall Street’s earnings-per-share target for its fiscal third quarter. The Intuit earnings news pushed INTU stock lower in extended trading.
The maker of QuickBooks and TurboTax software earned an adjusted $4.49 a share. Sales came in at $3 billion for the quarter ended April 30. Analysts expected Intuit earnings of $4.48 a share on sales of $3 billion, according to S&P Global Market Intelligence. On a year-over-year basis, Intuit earnings fell 19% while sales dropped 8%.
Intuit had earlier warned that revenue and earnings in the third quarter were lower than expected. It blamed the negative impact of the Covid-19 pandemic on its small business customers and the extension of the IRS tax filing deadline to July 15. The Mountain View, Calif.-based company also withdrew its previously provided fiscal 2020 guidance, citing uncertainty in current small business trends.
For the third quarter, Intuit reported:
- Total revenue of $3.0 billion, down 8 percent.
- Small Business and Self-Employed Group revenue up 11 percent to $1.0 billion.
- Small Business Online Ecosystem revenue grew 28 percent.
- Consumer Group revenue declined 15 percent to $1.8 billion.
Snapshot of Third-quarter Results
Business Segment Details
Consumer and Strategic Partner Groups
Consumer Group revenue for the third quarter was $1.8 billion, down by 15 percent, reflecting a shift of a significant portion of tax filings and related revenue out of the third quarter and into the fourth quarter.
DIY category grew by 2.2% year over year.
The company expects more of its customers with complex returns to file later in the extended season. TurboTax Online share and average revenue per customer remain on track for the season.
Professional tax revenue in the Strategic Partner Group for the third quarter stood at $193 million, down by 18 percent, reflecting the impact of the extended deadline on the timing of consumer tax filings completed by accountants.
Small Business and Self-Employed Group
For the third fiscal quarter, QuickBooks online accounting revenue grew 36 percent in the quarter, driven primarily by customer growth, higher effective prices and, to a lesser extent, mix-shift. Online Services revenue increased by 16 percent, driven by QuickBooks Online payroll and QuickBooks Online payments.
During the second half of the quarter, majority of Intuit’s customers, which are service-based businesses, were negatively impacted by shelter-in-place.
Small Business and Self-Employed Group revenues jumped 11% year over year to $982 million. This rise was primarily driven by solid growth in customers for QuickBooks Online and higher effective prices.
Total Online Ecosystem revenues rose 28% year over year to $560 million. QuickBooks Online Accounting revenues were up 36% year-over-year to $353 million. Online Services revenue, which includes payroll, payments, time tracking and capital, grew 16% year over year to $207 million.
Future Growth Strategy
Intuit believes the health crisis will drive changes across several industries and alter the way people get loans, manage their businesses and do their taxes going forward. The company is seeing an accelerated shift to a virtual world with more people wanting to do their taxes themselves and wanting to get assistance while at home without hassles.
Intuit believes that it is well-positioned to take advantage of this opportunity with its digital platform. During the third quarter, the Do-It-Yourself category performed notably well compared to the assisted category.
The company’s strategy focuses on investments in innovation and during this downturn, it plans on investing in its biggest opportunities for the future.
Fast Services for Small Businesses
The first opportunity involves using artificial intelligence to provide services to customers in a fast and seamless way. The Intuit Aid Assist solution helps small businesses connect to the correct relief funding programs based on eligibility. Intuit also used QuickBooks Capital to help in simplifying and automating the Paycheck Protection Program loan application process. Thereby improving access for very small businesses to this program.
Connecting People to Experts
The second one involves connecting people who want to do their taxes themselves with experts who can offer them help if needed. Intuit is using its TurboTax Live and QuickBooks Live solutions to expand its customer base, increase engagement and grow average revenue per customer.
Smart Money Decisions
The third one revolves around providing financial tools to customers that help them increase their income. The company is seeing nearly double active use for Turbo.
Center of business growth
To increase online presence going forward, Intuit aims to help customers improve their omni-channel capabilities and manage capital and payments. The Cash Flow Planner tool uses AI to predict small business customers’ cash needs by evaluating their financial history and possible income and expenses. The Instant Deposit tool helps manage payments efficiently and has led to a doubling in payments volumes.
Disrupt the mid-market
Intuit aims at attracting new mid-market customers and retaining larger customers. The company’s QuickBooks Online Advanced offering is aimed at providing customers with customized solutions at an optimal price and a faster rate.