It is tax season and initial reports suggest that there may be a slowdown in the e-filings. According to the IRS data through February 8th, the total e-filed returns fell 7.1% and assisted e-files fell 12.5% over the year. The new tax legislation and the extended partial government shutdown is expected to have impacted consumer behavior. But the slowdown has not stopped Intuit’s (NASDAQ: INTU) stock from soaring to a record high post its second quarter results announcement.
Intuit’s second quarter revenues grew 12% over the year to $1.5 billion, better than the market expectations of $1.48 billion. It recorded a net income of $189 million, or $0.72 a share compared with an income of $183 million recorded a year ago. Adjusted EPS grew 19% over the year to $1 and outpaced the Street’s forecast of $0.68.
During the quarter, Services and Other revenues grew 20% to $969 million and product revenues increased 0.8% to $533 million.
By segment, Small Business and Self-Employed Group revenues grew 17% over the year driven by 38% growth in subscribers for Quickbooks Online. Intuit ended the quarter with more than 3.9 million subscribers to the service. For the quarter, Self-Employed subscribers increased to 845,000 from 489,000. Online ecosystem revenues grew 38% over the year with US-based subscribers of QuickBooks Online growing 32% to 2.9 million. International subscribers grew 56% to more than 980,000.
For the current quarter, Intuit forecast an adjusted EPS of $5.35-$5.40 on revenues of $3.21-$3.26 billion. The market was looking for earnings of $5.39 per share on sales of $3.18 billion. Intuit expects to end the current year with revenues of $6.53-$6.63 billion with an EPS of $6.40-$6.50. The mid points were short of the market’s forecast of revenues of $6.63 billion and an EPS of $6.51.
Intuit’s Product Expansion
Intuit continued to focus on the development of its platform for both consumers and small businesses. For the consumers, it is focusing on transforming the assisted tax preparation category and expanding beyond tax to build a consumer platform. Within do-it-yourself, it has added capabilities that allow customers who file simple returns to see year-over-year data for no extra charge. In the assisted tax category, it is improving the customer experience with TurboTax Live that has a range of price points to offer customers mobile access to an expert. It has also improved the onboarding experience and tools for the 2,000 professionals that are accessible to consumers on its platform. Beyond tax, its consumer platform is helping customers make ends meet. Based on an agreement with the customer, Turbo provides them with a view of their overall financial health by combining a credit score, verified income data, and debt to income ratio so that the customers can connect with the financial products that meet their financial goals.
For the small businesses, Intuit is driving additional emphasis on online services such as getting them paid fast, managing their capital, and handling payroll. Within Payments, it has released the next business day payments that allows customers to receive their funds much faster. Within Payroll, it has introduced next-day and same-day direct deposit to help users better manage their cash flow. Within QuickBooks Capital, Intuit has now funded $277 million in cumulative loans since launching just over a year ago.
Intuit’s Platform Upgrade
More than five years ago, Intuit had stepped onto the path of transforming itself to an open platform company. Like other platform-focused companies, Intuit realized that businesses ended up using a lot more apps than the few apps that it offered them. It began to attract outside developers onto its platform to build apps that could work with their basic Intuit products. Some of the early adopters were companies like American Express that integrates with Intuit to allow small businesses to transfer their credit card transactions directly to QuickBooks online. More recently, it expanded its platform with the launch of QuickBooks Online Accountant that allows accounting professionals to manage all of their clients – even those that did not use QuickBooks – within the product. The feature will allow Intuit to become a single-stop shop for the needs of all accounting and tax professionals.
It has also been expanding the capabilities of its platform through acquisitions. In December 2017, it announced the acquisition of TSheets. Founded in 2006, TSheets had raised $15 million to provide an online time tracking and employee scheduling system. Through the acquisition, Intuit has been able to expand its platform to deliver project costing capabilities to small businesses and self-employed customers. Users have access to a simplified way to quickly and accurately track their time, send invoices, run payroll, and understand profitability by project. TSheets was generating revenues of $37 million annually and was acquired for $340 million.
Besides adding functionality to its platform, Intuit has also acquired developer-focused companies. Last year, it acquired Applatix, a Sunnyvale-based startup known for building scalable production systems with containers and Kubernetes in both public and private clouds. Intuit is leveraging the acquisition to improve its development process by adopting devops tools and practices to help build new capabilities to its services-based platform. Funding details for Applatix are not disclosed. The company is expected to be clocking $3 million in revenues annually. Terms of the deal were not disclosed.
I see a lot of potential in Intuit’s platform strategy and would like to know what are some of the most successful third party applications currently in the market that are built on it.
The results have helped the stock soar. Its stock is trading at $247.13 with a market cap of $64.8 billion. It touched a record high of $251.57 earlier this month. The stock has been climbing steadily from the year low of $162.59 that it was trading at in April last year.
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This segment is a part in the series : Cloud Stocks