Intuit (NASDAQ:INTU) Posts Better-Than-Expected Sales In Q2, Guides For 12.1% Growth Next Year

Tax and accounting software provider, Intuit (NASDAQ:INTU) beat analysts’ expectations in Q2 CY2024, with revenue up 17.4% year on year to $3.18 billion. The company expects the full year’s revenue to be around $18.25 billion, in line with analysts’ estimates. It made a non-GAAP profit of $1.99 per share, improving from its profit of $1.65 per share in the same quarter last year.

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“We delivered very strong results for the fourth quarter and full year, and made meaningful progress with our AI-driven expert platform strategy that positions the company for durable growth in the future,” 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.

Tax Software

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 19.1% annualized revenue growth over the last three years has been mediocre, and its sales came in at $3.18 billion this quarter.

This quarter, Intuit’s quarterly revenue was once again up 17.4% year on year. However, the company’s revenue actually decreased by $3.55 billion in Q2 compared to the $3.35 billion increase in Q1 CY2024. This situation is worth monitoring as Intuit’s sales have historically followed a seasonal pattern but management is guiding for a further revenue drop in the next quarter.

For the upcoming financial year, management expects revenue to be $18.25 billion at the midpoint, growing 12.1% year on year compared to the 13.3% increase in FY2024.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Intuit has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the software sector, averaging 28.5% over the last year.

Intuit’s free cash flow clocked in at $375 million in Q2, equivalent to a 11.8% margin. The company’s cash profitability regressed as it was 17.8 percentage points lower than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

Over the next year, analysts predict Intuit’s cash conversion will improve. Their consensus estimates imply its free cash flow margin of 28.5% for the last 12 months will increase to 33.2%, giving it more money to invest.

Key Takeaways from Intuit’s Q2 Results

It was good to see Intuit beat analysts’ expectations across the board this quarter. On the other hand, its gross margin declined and its billings missed Wall Street’s estimates. Guidance was comforting with full-year revenue and EPS guidance roughly in line with expectations, showing that the company is on track. Overall, this was a solid quarter. The stock traded up 2.9% to $685.12 immediately after reporting.

So should you invest in Intuit right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.