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Intuit Sees Strong Growth With Acquisitions

Posted on Tuesday, Aug 24th 2010

Intuit (NASDAQ:INTU), the leading small business accounting and tax software provider, last week reported strong fourth quarter results that beat estimates. Early in the month, it acquired the assets of personal finance management application Cha-Ching. Let’s take a closer look.

Leena Rao of TechCrunch reports that Intuit purchased the Cha-Ching code and graphic assets to improve Quicken’s design and look. Cha-Ching is a personal finance management application for Macs and iPhones. Intuit acquired another personal finance service, Mint, for $170 million early this year. In its fourth quarter results last week, Intuit reported that Mint doubled its user base to 3 million, and Quicken also had double-digit growth. As it turns out, Intuit is phasing out Quicken, and new users are directed to try Mint.com.

Q4 revenue grew 18% to $537 million, beating analyst estimates of $500.7 million. Operating loss narrowed to $64 million or $0.15 per share, from loss of $118 million or $0.22 per share. Q3 analysis is available here.

For the full fiscal year 2010, Intuit reported revenue of $3.45 billion, up 11% from $3.11 billion in 2009. Operating income was $863 million or $1.77 per share, up 26% from $683 million or $1.35 per share.

Intuit reported strong growth across all segments. Following last year’s acquisition of Paycycle, which targets businesses with fewer than twenty employees, Intuit established a new reporting division, Small Business Group. Total Small Business Group revenue grew 9% for the year and 16% for the quarter, driven by strong performance in Financial Management Solutions and Employee Management Solutions. Its customer base grew 1% for the year to more than 1.1 million customers. Employee Management Solutions revenue grew 15% for the year and 25% for the quarter. Revenue from Financial Management Solutions grew 6% for 2010 and 18% for Q4 led by strong growth in QuickBooks and Intuit Websites. Payment Solutions was up 8% for 2010 and 5% for Q4.

Consumer Tax Group grew 15% for 2010 and 43% for Q4, Accounting Professionals grew 6% for the year, and Financial Services grew 7% for 2010 and 4% for Q4. Other Business revenue grew 22% for 2010 and 46% for Q4 led by double-digit growth in Quicken and Mint doubling its user base to over 3 million.

For fiscal year 2011, Intuit expects revenue growth of 8% to 11% to $3.74 to $3.84 billion, EPS of $1.88 to $1.95, and operating income of $980 million to $1.015 billion. It expects non-GAAP diluted EPS of $2.36 to $2.43, or growth of 12% to 15% versus the analyst estimate of $2.30 on revenue of $3.72 billion. It expects growth of 8% to 12% in Small Business Group, 10% to 13% in Consumer Tax, 4% to 7% in Accounting Professionals, 4% to 7% in Financial Services 4 to 7% and 11% to 16% in Other Businesses.

For the first quarter, Intuit expects revenue of $515 million to $525 million, or growth of 9% to 11%. It expects GAAP operating loss of $110 million to $100 million or $0.25 to $0.23 per share, compared to a loss of $100 million or $0.10 per share last year. Intuit repurchased $150 million of its shares in the quarter, bringing total repurchases to $900 million for fiscal 2010. Intuit’s board of directors approved a new $2 billion stock repurchase program over the next three years. The stock is trading around $42 with market cap of about $14 billion. It reached a new 52-week high of $43.73 yesterday.

Chart forIntuit Inc. (INTU)

For Intuit, I have another small acquisition to recommend: one of our 1M/1M Incubation Radar companies, Phitch. Phitch would fit perfectly in Intuit’s Small Business Group portfolio, and enhance the QB inventory management and optimization capability for customers in the retail, wholesale, and e-commerce sectors. It’s a small company and can be acquired for a reasonable investment.

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