Intuit Inc. — Q3 Fiscal 2024 Form 10-Q
Reporting period: Quarter ended April 30, 2024; year-to-date (YTD) figures cover the nine months ended that date. Comparisons are with the corresponding 2023 periods. Intuit provides financial, tax, credit and marketing products and services, including QuickBooks, TurboTax, Credit Karma and Mailchimp. Tax revenue is seasonal, typically concentrated from November through April.
Financial performance
| Metric | Q3 FY24 | Q3 FY23 | YTD FY24 | YTD FY23 |
|---|---|---|---|---|
| Revenue | $6.737B (+12%) | $6.018B | $13.101B (+12%) | $11.656B |
| Operating income | $3.105B (+12%) | $2.778B | $3.781B (+21%) | $3.124B |
| Net income | $2.389B (+14%) | $2.087B | $2.983B (+30%) | $2.295B |
| Diluted EPS | $8.42 (+14%) | $7.38 | $10.51 (+30%) | $8.11 |
Q3 operating and net margins were approximately 46.1% and 35.5%, respectively, versus 46.2% and 34.7% a year earlier. YTD margins were approximately 28.9% and 22.8%, versus 26.8% and 19.7%. Q3 service revenue was $6.048B and product and other revenue was $689M.
Segments
- Small Business & Self-Employed: Q3 revenue $2.387B (+18%); operating income $1.451B (+27%). Online Ecosystem revenue grew 19%, led by QuickBooks Online Accounting and Online Services.
- Consumer: Q3 revenue $3.653B (+9%); operating income $2.728B. Management attributed revenue growth to higher effective prices and mix shift toward higher-priced services such as TurboTax Live.
- Credit Karma: Q3 revenue $443M (+8%); operating income $110M (down 1%). YTD revenue rose 1%, while operating income declined 7%; management cited economic uncertainty affecting lending partners and higher marketing expense.
- ProTax: Q3 revenue $254M (+3%); operating income $225M (+4%). YTD revenue and operating income each grew 7%.
Cash flow, liquidity and debt
- YTD operating cash flow was $4.467B, versus $4.204B. Investing activities provided $25M, compared with $549M used in the prior-year period; financing activities used $851M, versus $2.904B.
- Cash, cash equivalents and investments totaled $4.678B at April 30, up $1.016B from July 31, 2023. Working capital was $3.073B; the current ratio was 1.5:1. The company reported that approximately 93% of these funds were in the U.S. and none were restricted.
- Balance-sheet cash and cash equivalents were $4.215B. A further $2.722B of funds receivable and amounts held for customers had a matching $2.722B liability; these customer-related balances should not be treated as freely available corporate liquidity.
- Net carrying value of long-term debt was $5.952B, down from $6.120B; total debt principal was $6.0B. In September 2023, Intuit issued $4B of fixed-rate notes, using the proceeds and operating cash to repay its term loan. It had $500M outstanding under subsidiary secured facilities and nothing drawn on its $1.5B unsecured revolving facility.
- YTD capital returns included $1.7B of share repurchases and $780M of dividends declared. The board declared a further $0.90-per-share dividend payable July 18, 2024.
Changes, outlook and risks
- YTD growth in operating income exceeded revenue growth, as expenses rose more slowly than revenue. Q3 operating expenses grew 14% against revenue growth of 12%; staffing, marketing and share-based compensation were notable expense increases.
- Intuit attributed YTD net income growth partly to higher interest income. YTD effective tax rate was approximately 19%, versus 23% a year earlier; excluding discrete items, both periods were approximately 24%.
- The company expects cash, investments and operating cash flow to cover seasonal working capital, capital spending, commitments, debt service and other needs for at least the next 12 months. Management expects to continue returning excess cash through repurchases and dividends, subject to business needs and board discretion. The filing provides no specific full-year revenue or earnings guidance.
- Management’s strategy emphasizes an AI-driven expert platform and continued investment in product development, marketing, sales, technology infrastructure, privacy and security. Principal risks include intense competition, macroeconomic conditions, cybersecurity and fraud, service interruptions, dependence on partners, evolving AI and privacy regulation, and seasonality.
- Legal matter: The FTC’s marketing-practices order became effective March 23, 2024 and contains no monetary penalty. Intuit appealed, and review is pending. The company says defense or resolution could involve significant costs but cannot estimate a reasonably possible loss for the remaining proceedings. A separate 2022 settlement with state attorneys general involved a $141M payment, already paid, and marketing commitments.
- Other notable items: Intuit changed its treatment of certain payroll and payments funds in customer agreements, recognizing obligations through settlement in customer accounts; this contributed to substantial increases in customer funds balances and cash-flow financing activity. The company also moved certain technology and workplace costs from segment results to corporate expenses, with prior periods reclassified.
Investor facts to verify
- Whether QuickBooks Online and other Small Business & Self-Employed growth sustains its pace, and how much growth reflects pricing versus customers and usage.
- Whether Credit Karma’s lending-related revenue and operating performance improve as partner activity and economic conditions evolve.
- Cash generation and liquidity after separating customer funds from corporate cash, and the implications of the $6.0B debt principal and fixed-rate notes.
- Effects of continued marketing, staffing, share-based compensation and AI investment on margins and cash returns.
- Developments in the FTC appeal and other legal or regulatory proceedings, as well as cybersecurity, fraud and tax-season operational risks.
- Seasonal variability: Q3 and YTD results are not necessarily indicative of full-year performance.