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Intuit’s Performance May Point to Bright Spots in Economy

Posted on Thursday, Jun 7th 2012

Economic indicators, such as the number of jobs this past month, may not look very promising for the U.S. right now. However, the country’s small and medium-sized businesses are performing extremely well, recording both revenue and employment growth rates. Intuit’s Small Business Employment Index improved by 0.2% for May, as small businesses added 40,000 jobs in the month. In April, retail, professional services and other services saw minor improvements in the revenue index. At least for the SMB sector, analysts are hopeful that recovery is truly on the way.

Intuit’s Financials
SMB-focused Intuit (Nasdaq:INTU) turned in an impressive performance. Q3 revenues grew 5.2% over the year to $1.95 billion, with growth driven by Services and Other revenues, which increased 8% to $1.35 billion. Product revenues for the quarter fell 0.7% to $0.60 billion. The Street was looking for revenues of $1.96 billion. EPS of $2.51 was ahead of the previous year’s $2.33 and beat the market’s expectations of $2.48. During the quarter, Intuit bought back stock worth $207 million.

Previous quarter performance was driven by improving sales in the SMB segment where revenues grew 11% over the year. Consumer tax software segment saw revenues grow 3% over the year.

With the tax season having ended, current quarter revenues will decline sequentially. Intuit projects current quarter revenues at $647 million-$662 million, with EPS of $0.05-$0.07, in line with the market’s projections of $652.4 million revenues and EPS of $0.06. The company expects to end the year with revenues of $4.205 million-$4.220 billion and EPS of $2.92-$2.97. The Street is expecting revenues of $4.220 billion, with EPS of $2.93.

Intuit’s Tax Focus

Year to date, the consumer tax software segment for Intuit saw a growth of 11% over the year. Their reports suggest that overall tax returns filed during the year grew 2% over the year. They also estimate that of the return filers, there are over 40 million who have their taxes prepared with help, but will be willing to file their own taxes digitally. Intuit plans to attract this category of return filers. They are working on attracting this segment by increasing investment in marketing and customer care. During the quarter, investment in these areas for the segment grew 16% over the year. They are now offering free tax assistance as part of this investment and believe that the offering helped them increase their acquisition of first-time tax filers. First time tax filers for the year grew an impressive 34% this year.

Intuit Acquires Demandforce
Withing the SMB segment, Intuit continued their growth through acquisitions and recently added customer communications software-as-a-service provider Demandforce to their portfolio. San Francisco–based Demandforce was founded in 2003. They provide SaaS solutions for marketing and customer relationship management, including tools that help businesses interact with customers through Facebook and Twitter. They focus on the SMB segment, and their customer list includes service providers like dental clinics, auto repair shops, spas, and salons. Analysts believe that the $423.5 million acquisition price may have been a bit excessive considering that Demandforce generates $60 million in annual revenues. Intuit, though, is hopeful that they will be able to expand their SMB reach and cross-sell their products to Demandforce’s customers.

Intuit’s stock is trading at $54.80, with a market capitalization of $16.09 billion. It touched a 52-week high of $62.33 earlier this year.

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