Long-term shareholders of Intuit (NASDAQ: INTU) probably won't be surprised to learn that the company's fiscal first quarter of 2018 earnings were propelled by the continuing surge in new QuickBooks Online (QBO) subscribers. Let's begin our review of this traditional tune-up quarter to tax season by scanning the summary numbers:
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Intuit: The raw numbers
|Metric||Q1 2018||Q1 2017||Year-Over-Year Change|
|Revenue||$886 million||$778 million||13.9%|
|Net income (loss)||($17 million)||($30 million)||N/A|
|Diluted earnings (loss) per share||($0.07)||($0.12)||N/A|
What happened with Intuit this quarter?
The company's first-quarter 2018 top-line advance of 14% over the first quarter of 2017 represented accelerated comparable growth, as last year's revenue result marked a 9% improvement over the first quarter of 2016.
Year-over-year expansion in QBO subscribers hit 56% during the quarter, just 2 percentage points below the full-year fiscal 2017 growth rate.
Non-U.S. based QBO additions continued to rise sharply, gaining 70% to end at a base of 550,000 subscribers.
Intuit added 35,000 new QuickBooks Self-Employed subscribers, a slight sequential uptick versus the 30,000 additions reported in the fourth quarter of 2017. The organization now boasts 425,000 Self-Employed users, a total that's nearly quadruple the 110,000 users it claimed just a year ago.
The company typically posts a small loss in the first quarter of the fiscal year as it gears up for tax seasons in quarters two and three. However, higher revenue, cost control, and lower interest expense led to a significantly smaller net loss and diluted earnings per share (EPS) loss versus the comparable fiscal 2017 quarter.
This was the first quarter under Intuit's new reporting structure. The small-business and self-employed segment expanded revenue 17%, to $694 million. The consumer segment, which is comprised primarily of TurboTax sales in U.S. and Canada, increased sales approximately 7%, to $78 million. The company's strategic-partner segment, which caters to professional tax preparers, saw a less than 2% increase in revenue, to $114 million.
Intuit launched its new TurboTax Live feature during the quarter, using the 2017 extended tax-return deadline in October as a dry run before tax season begins in earnest. The service allows those preparing their own returns in TurboTax to instantly chat with, or speak to, a tax expert during the filing process. It's meant to diminish the attrition of users leaving the TurboTax platform for a professional tax preparer due to a more complex tax return versus the prior year.
Intuit also announced that its personal finance "Turbo" platform, which we'll discuss in greater detail below, will launch in a few months.
The company's board approved a new quarterly dividend payment of $0.39 per share, beginning with the January 2018 payment. This represents an annualized increase of 15%.
What management had to say
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One of the most interesting portions of Intuit's earnings call with analysts focused on the upcoming launch of "Turbo," a platform that integrates TurboTax with Intuit's personal-finance program Mint. The platform gathers a user's IRS-verified income, combines it with credit score data obtained through Mint, and with permission, forwards summary data in an anonymized format to various lending and finance partners.
For the consumer, the Turbo platform can potentially result in attractive offers from finance companies for both revolving loans like credit cards, and long-term auto and mortgage loans. For Intuit, it opens up a deeper relationship with TurboTax customers. CEO Brad Smith made the following comments about Turbo during the company's earnings conference call:
Turbo [is] the first step toward expanding beyond a tax offering to a consumer platform. This platform will improve the overall financial health of the end-user. Turbo goes beyond a credit score and unleashes the power of verified IRS-filed income, the credit score and the debt-to-income ratio to show customers who give consent where they truly stand. We announced an exciting slate of initial partners who will use the platform to provide offerings for participating customers starting early in calendar 2018.
Smith also pointed out that the company typically has two interactions with TurboTax customers a year versus 112 interactions for the typical Mint customer. If successful, the platform could create new revenue opportunities for Intuit through much higher engagement with tax customers.
Despite promising earnings at the outset of the year, Intuit didn't raise its full-year fiscal 2018 earnings guidance. This is because the organization expects some moderation of its small business ecosystem growth in the back half of the year. Last tax season, Intuit benefited from a popular bundling of QuickBooks Self-Employed with TurboTax, which will make comparisons a bit more difficult in 2018.
Looking ahead to next quarter, Intuit is forecasting revenue growth of between 14% and 16% for a total top-line range of $1.160 billion to $1.180 billion, and projecting that diluted earnings per share will land between $0.08 and $0.11. Shareholders may remember that tax season started quite slowly for Intuit last year -- apparently, management is expecting the opposite for 2018.
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