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Intuit Drops After Tax Season Sales Fall Short of Estimates

(Bloomberg) -- Intuit Inc. declined in extended trading after reporting tax season revenue that fell just short of estimates on fewer-than-anticipated filings.

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The company, however, gave a better-than-expected sales and profit forecast in the current quarter and raised its annual outlook.

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Fiscal third-quarter revenue increased 7% to $6.02 billion, the company said Tuesday in a statement. Analysts, on average, estimated $6.09 billion, according to data compiled by Bloomberg. The period that ended April 30 — including tax season — is the most critical for the maker of TurboTax and other finance software. Profit, excluding some items, was $8.92 a share, while analysts expected $8.45.

Intuit said the number of federal tax returns will decline about 2% by the end of the fiscal year and the market share among customers doing their own taxes will fall about three-quarters of a point.

“This was driven by taxpayers who filed in order to receive pandemic-era stimulus and tax credits during the past several years but did not file taxes this season,” Intuit said in the statement.

The decrease in the expected number of tax filers “equates to approximately $200 million of negative impact to revenue per TurboTax, versus our original expectations,” Chief Executive Officer Sasan Goodarzi said on a conference call after the results.

The shares fell about 5.5% in extended trading after closing at $449.80 in New York. The stock has gained 16% this year.

Revenue from the consumer group, including TurboTax, gained 3% to $3.3 billion in the quarter, short of analysts’ estimates of $3.53 billion. The IRS said last week that it will test a free agency-run online tax-filing tool, following an infusion of money from the Biden administration. Wall Street analysts still say it’s a remote possibility that a government-run system would disrupt TurboTax.

Goodarzi, in an interview, dismissed the potential effect of the government’s program. The IRS “and their partners don’t know how to build software at scale — this is the government,” Goodarzi said.

Intuit’s has been steering users toward a live, full-service version of the TurboTax service this year, in an attempt to compete with traditional accountants. “Our future is TurboTax live,” Goodarzi said. “Especially with AI capability, we can really disrupt the assisted segment.”

Goodarzi added that TurboTax already uses artificial intelligence to communicate with customers. The company had about 740 million digital interactions with customers this year, including through automated chat bots, compared with 24 million human interactions, he said.

Intuit said sales in the current quarter will increase 9% to 10%, raising its fiscal year revenue forecast to as much as $14.3 billion. Analysts, on average, estimated of $14.2 billion. Annual earnings, excluding some items, will be $14.20 to $14.25 a share. Analysts’ projected $13.81.

Read More: Free IRS TurboTax Competitor Is Closer After Biden Funding

In the fiscal third quarter, the small business segment grew 21% to $2 billion. Credit Karma sales dropped 12% to $410 million, compared with $379.3 million projected by analysts. The performance of Credit Karma and Mailchimp remain major investor concerns, Jordan Klein, an analyst at Mizuho, wrote in a note ahead of the results.

--With assistance from Naomi Jagoda.

(Updates with comments from CEO beginning in the sixth paragraph.)

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