By Eric J. Savitz
Intuit posted better-than-expected profits for its fiscal second quarter ended Jan. 31, as the U.S. moves into tax season, always the most important part of the company’s year.
The parent of TurboTax, Credit Karma, QuickBooks and Mailchip posted revenue for the quarter of $3.4 billion, up 11%, and about even with Street consensus estimates as tracked by FactSet. The company’s guidance had been for growth of 11% to 12%.
Adjusted profits were $2.63 a share, well ahead of both the guidance range of $2.25 to $2.31 a share and the Street consensus forecast at $2.30 a share. Under generally accepted accounting principles, the company earned $1.25 a share, above guidance at 62 to 68 cents.
CEO Sasan Goodarzi said in an interview with Barron’s that the better-than-expected profitability reflected both “strong topline” performance and improving margins, rather than any specific unusual factors.
Revenue in Intuit’s “small business and self-employed” segment was $2.2 billion, up 18%, and in line with Street estimates. Consumer segment revenue was $492 million, down 5% from a year ago and below Street consensus at $539; the company said the weaker numbers reflected the fact that the IRS didn’t begin accepting tax returns this year until Jan. 29, compared with Jan. 23 a year earlier.
Credit Karma revenue was $375 million, flat versus a year ago, while the company’s “ProTax” group had revenue of $274 million, up 8%.
Goodarzi says the company’s progress in developing AI tools for tax, marketing and other applications is “going really well,” and will impact financial results materially down the road, but not yet.
He envisions small businesses using AI chatbots for applications like developing new marketing campaigns and driving improved customer cash flow. For consumers, he expects AI to both help people prepare income tax returns and to interact with CreditKarma about their credit scores. For Intuit, he says, AI is “a 5- to 10-year play.”
As for progress on tax season, he notes that every year more filers choose to wait until closer to the deadline to file, and he says the same pattern has been true this year, with fewer overall filers so far than at the same point last year.
Meanwhile, Goodarzi says software and service tools could entice filers who have historically used accountants or other tax preparers to switch to Intuit’s “full service” filing offering, in which the company fills out their tax forms for them. He also sees an opportunity to win tax filing customers from the company’s nearly 45 million monthly active users for CreditKarma.
For the April quarter — generally about 40% of annual revenue — the company sees revenue up 10% to 11%, slightly ahead of the Street at 9.8%, with adjusted profits of $9.31 to $9.38 a share, falling short of the Street at $9.70.
The company reiterated its previous guidance for revenue for the October 2024 fiscal year of $15.89 billion to $16.11 billion, up 11% to 12%, with adjusted profits of $16.17 to $16.47 a share.
Asked about the decision to keep full year guidance in place despite the January quarter earnings beat, Goodarzi says that as a matter of policy, the company does not generally adjust annual guidance ahead of tax season. “We’re just being prudent,” he says.
Write to Eric J. Savitz at eric.savitz@barrons.com