Intuit (INTU -8%) is trading lower despite reporting strong Q3 (Apr) earnings last night. Intuit, known for QuickBooks, TurboTax, Mint, Credit Karma, and Mailchimp, beat expectations on EPS for the ninth consecutive quarter. Revenue grew 11.9% year-over-year to $6.74 billion. Although the revenue beat was modest, it was still solid. However, Q4 (Jul) guidance showed mixed results with upside in revenue but downside in EPS. Q3 is always crucial for Intuit due to the tax season, making it the largest revenue quarter of the year.
- Small Business and Self-Employed Group (SBSE): Revenue grew 18% to $2.4 billion, driven by QuickBooks. QuickBooks Online Accounting revenue increased 19%, thanks to customer growth, higher prices, and a shift towards higher-end offerings. Online Services revenue grew 20%. Intuit is targeting the Small Business mid-market for higher ARPC due to their complex needs and higher service usage.
- Consumer Group: This segment, which includes TurboTax, saw a 9% year-over-year revenue increase to $3.7 billion. Intuit views TurboTax Live as a significant growth opportunity, expecting customer growth of 12% and revenue growth of 17% in FY24. TurboTax Live revenue is projected to be $1.4 billion, representing 30% of segment revenue.
- Intuit expects total TurboTax units to decline by 1%, due to a loss of share among pay-nothing and lower average revenue per return customers. The company is focusing more on higher-end customers with its assisted service, moving the needle in terms of market share in assisted services for the first time. Intuit is not interested in pursuing customers who prefer free tax software.
- Credit Karma: This segment has struggled in recent quarters due to higher rates but showed an 8% year-over-year revenue increase to $443 million. This growth was driven by Credit Karma Money, credit cards, auto insurance, and personal loans. While the trend is promising, it may have been boosted by tax season. Intuit also noted that some partners remain conservative in extending credit for personal loans and credit cards.
Overall, it was a mixed quarter for Intuit. While Q3 showed strong performance, investors were disappointed with the TurboTax unit sales outlook. The company appears to be losing share among lower-end customers while focusing on higher-end ones. Credit Karma's sales improvement may be temporary, driven by tax season. Additionally, some lenders are still cautious about extending credit. Given the recent rally in Intuit's stock, any negative news was likely to cause a pullback.
