Intuit’s earnings are so good it’s a scandal
Good morning, and welcome to Protocol Fintech. This Wednesday: Intuit’s strong earnings, Adam Neumann’s fintech second act, and hotel rooms as NFTs.
Maybe the scandal is how well Intuit’s doing
The biggest stories about Intuit lately haven’t been good for its image — among consumers or employees. State attorneys general settled with Intuit over charges that it offered a free version of TurboTax, which Intuit advertised prominently but made difficult to find online. The company coughed up $141 million in a settlement to 4.4 million taxpayers while admitting no wrongdoing. And its acquisition of Mailchimp — which struck many as having an unclear strategic rationale — was marred by Mailchimp employees’ fury at being left out of the $12 billion windfall. A round of pay raises in April reportedly didn’t lift morale.
In yesterday’s earnings call, Intuit delivered some good news for another constituency: its investors. The company’s fiscal third quarter is tax season, always a boom time for Intuit. Revenues of $5.6 billion were up 35% year-over-year (29% without Mailchimp), and at least $100 million over analysts’ expectations. Operating income was also up 25%.
Wall Street doesn’t seem worried about the free-filing crackdown. There was barely any mention of the free-filing scandal or the risk of the IRS developing its own online-filing tools.
GAAP earnings per share were $6.28, with the settlement expected to reduce the current quarter’s earnings by 37 cents. “We are pleased to put this issue behind us,” said CFO Michelle Clatterbuck.
The Mailchimp acquisition turbocharged the company’s small-business services division, helping diversify its tax-heavy revenue picture.
Investors were concerned about what’s to come. The uncertain markets dominated the Q&A session.
However, CEO Sasan Goodarzi seemed unconcerned. “We are the best-positioned to serve consumers and small businesses in tough times,” he said.
He has a point: Intuit seems to have a recession-resistant business model. In 2008, the company outperformed the broad stock market, and Intuit has since diversified into services, which customers need in good times and bad.
It nudged up its guidance for growth in the current fiscal year, though an earlier tax filing means its current quarter will see revenue fall.
The free-filing scandal still haunts the company. Despite the state settlement, an FTC case against Intuit is still active.
Intuit said the FTC’s claims were “simply not credible” and has also argued that the 50-state settlement makes the FTC case pointless, because it has already agreed to change its practices.
In a technical move, Intuit moved to have the case withdrawn from adjudication, and the commission agreed. The relevant rule requires the commission to consider now whether further litigation is in the public interest.
The recession is probably a bigger worry. A growing number of analysts and bankers are issuing doom-and-gloom forecasts, but it’s not a sure thing. Goodarzi told analysts Tuesday that Intuit is “the best projector of the overall economy because of all the data that we see.” If that’s the case, then maybe Intuit’s bullish earnings can be taken as a rare moment of optimism for all of us.
Protocol link: https://www.protocol.com/newsletters/protocol-fintech/intuit-free-file-earnings