Its QuickBooks and TurboTax software continue to dominate their respective markets, which does not stop the Mountain View-based group from growing its revenue by 18%, operating profit by 32%, and EPS by 34%, vs. a year earlier at the same period.
Fifteen years ago, Intuit generated $3.4bn in revenue and reported single-digit growth. It has quintupled in size since then, which has not prevented its growth rate from comfortably marching into double-digit territory.
The past decade has been excellent, with both revenue and operating profit quadrupling over the period. Meanwhile, the stock price has risen sevenfold. At current levels, the share trades right around its historical valuation average.
Similar to its British peer Sage, as we recently discussed in these columns, acquisitions of Mailchimp and Credit Karma have significantly accelerated growth. Although modestly rewarded, these deals were completed during the pandemic, i.e., at a time when multiples had contracted; more importantly, they were financed intelligently, with a large portion in stock rather than cash.
At the time, they fed a degree of skepticism from analysts, who believed these possibly overpaid external growth moves served mainly to diversify a service offering around the dominant QuickBooks and TurboTax segments, which had already reached a ceiling.
Bad call: these two segments stayed in full expansion; moreover, in the longer term, their largely captive customer base should absorb price increases well. It is also entirely natural for Intuit to diversify into new verticals, to offer individuals and small and medium-sized businesses a more complete and integrated solution.
As is customary in the US tech sector, stock-based compensation, which accounts for more than a tenth of revenue, weighs heavily on margins. Without it, Intuit would display profitability worthy of Microsoft. However, given the performance of their investment, historical shareholders have little to complain about for now.
