Intuit Reveals Whether Revised Strategies Are Working

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Analysts were watching Intuit a bit more closely than usual this week as the SME accounting service provider undergoes a few changes. The QuickBooks maker released its FQ1 2016 figures yesterday (Nov. 19). Did the company make the cut?

It depends who you ask, but one thing is certain: Intuit did better than expected. While the company is known for enduring losses in the tax off-season (its TurboTax product often gives a boost to profits), the company reported $880 million to $900 million in adjusted earnings for the current quarter, surpassing the $824 million expected by Thomson Reuters, according to reports. Revenue hit $713 million, beating out the forecasted $670 million.

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Overall, the company posted a $31 million quarterly loss, down from the $84 million in losses it posted the same period one year prior. Intuit also posted an adjusted $0.09 profit per share, while Thomson Reuters anticipated an adjusted $0.04 loss per share.

The figures were announced after the closing bell Thursday, followed by a share price rally as Intuit stocks jumped 7.8 percent in after-hours trading, according to reports. Intuit also raised its earnings expectations for the full year in response to the figures.

In a statement, Intuit President and Chief Executive Officer Brad Smith said the company “started the fiscal year the same way we ended the last, with strong momentum across our businesses as our intense focus on our global cloud strategy takes shape.”

The Breakdown

In a statement following its conference call, Intuit posted a breakdown of its performance.

Revenue from its small business operations saw a 5 percent increase compared with the same period last year, with about 28 percent revenue growth, largely driven by new customer acquisition to QuickBooks Online. The company now has more than 1.1 million users, 80 percent of which were new customers in the quarter, according to the firm. Overall, QuickBooks Online saw a 57 percent increase in subscribers.

Non-U.S. QuickBooks users also new hit a new high of 215,000, more than double what it had been the same period last year. Meanwhile, its SME payroll service saw a 17 percent increase in users.

Its online SME payments services saw a 4 percent increase in customer base, while the volume of payments charged over the platform increased by 14 percent.

Adjusted Strategy

While TurboTax may be a big boost for Intuit, the company has made recent changes that could account for why its performance beat out expectations as the company looks to other sources of revenue, including efforts to beef up its SME accounting and financing services.

Perhaps the most drastic show of this effort has been Intuit’s selloff of three original products: Quicken, QuickBase and Demandforce. At the same time, Intuit decided to revamp QuickBooks to QuickBooks Online, a massive push to get SMEs into the cloud with accounting and treasury management processes.

QuickBooks Online, which officially rolled out in August, can integrate with other popular small business payments services, like PayPal and Square, to streamline data aggregation and analysis for company finances.

But another part of Intuit’s strategy has been to enhance its lending services for existing small business clients. The company has struck new partnerships with alternative lenders, most recently with Fundbox, a deal that uses the small business financial data already in the QuickBooks system to assess risk for SMEs in need of invoice financing.

And just hours before releasing its quarterly results, Intuit also announced a collaboration with Kiva Zip to connect SMEs on the QuickBooks Financing Platform to working capital.

The efforts suggest that Intuit, while consolidating, is revamping its SME-facing efforts to provide more than just accounting software or tax services. Its president and CEO told investors that more changes are underway.

“Looking ahead, we remain focused on executing against a compelling long-term growth opportunity in both tax and small business,” Smith added in his statement. “We are expanding our categories and our geographies. The proof points are evident in the momentum we are building, as the QuickBooks Online ecosystem continues to grow at a very healthy rate.”