Intuit's Two-Toned Success Is Both Acquisitions and Organic – The Motley Fool

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Intuit ( INTU 4.60% ) enjoyed a big revenue quarter in its most recent report spurred by its own growth and a few acquisitions. In this clip from “3 Minute Stocks Updates” on Motley Fool Live, recorded on March 2, contributors Toby Bordelon and Brian Feroldi discuss the financial software company’s plans to transform the business and stay appealing to investors. 

Toby Bordelon: Their second quarter they just reported ended Jan. 31 of this year, very nice. Revenue up 70% to $2.7 billion. That includes two new key acquisitions for them, Mailchimp and Credit Karma. You pull those out, revenue was up 39%, which is really good to me for a company that’s focusing on acquisitions to be able to grow that organic revenue that much was fantastic.
Credit Karma particularly had revenue of $444 million, which is a new quarterly record. Why do we care about that? Well, if you’re going to be successful in acquisitions, you don’t just want to buy revenue, you want to be able to then grow that revenue beyond what the target company could have done on its own to justify the premium you paid.
The fact that Credit Karma continues to hit these quarterly records is a positive sign that this is working out. I’m going to keep following that. Net income up 400% to $100 million, so they’re growing the bottom line too in a really big way, really good to see. Another point on that Credit Karma acquisition. They’re starting to integrate that in their business more closely with TurboTax.
For instance, this tax filing season, they say most Credit Karma members will be able to file with TurboTax within the Credit Karma app. Really awesome. Starting to get those pieces integrated and a really nice way to see that. They did complete Mailchimp in November, so this the first quarter we actually have numbers for that looking pretty good so far.
The debt is high, they took out a lot of debt to do that Mailchimp acquisition, so you need to keep an eye on that. But they say their goal is to become a “global AI-driven platform, powering the prosperity of consumers and small business.”
A lot of buzzwords in there, but I think you can see where their market focus is on both consumers and small businesses, that’s where they are growing, not really focusing on the enterprise space, consumers and small businesses and I think they’re doing a good job with that. They are transforming this company to move into those markets and I like what I see here.
Brian Feroldi: This company is just incredible really, and it’s one of those companies that just executes very well and people rarely talk about it and yet it’s been such an amazing business. But is this company, given what you’ve known, attractive to you today?
Bordelon: I think it is, Brian. To paraphrase a great slogan from a car commercial back in the day, “this ain’t your grandfather’s Intuit anymore.” They are transforming this business. This is not just TurboTax, this is Mailchimp, it’s Credit Karma, they are blowing out both parts of that business. They’re trying to become more fulsome financial and business service companies doing this. They are doing it by acquisition. The early signs are suggested it’s working.
So, it is attractive to me because I can see the potential in what they want to be, but you watch this at acquisition integration. Keeping on Credit Karma and Mailchimp to make sure they continue to grow under this new umbrella. I would be skeptical if they suddenly announce a major acquisition before these are integrated, I don’t want them to take off more than they can chew. There’s a lot of potential here, but there is certainly the potential to waste shareholder capital with acquisitions gone wrong if they aren’t careful.
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