This summary is based on the first quarter fiscal 2009 earnings call conducted by Intuit Inc. (INTU) on November 19, 2008.
Management:
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President, Chief Executive Officer, Director: Brad D. Smith
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Chief Financial Officer, Senior Vice President: R. Neil Williams
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Chairman of the Executive Committee, Director: Scott D. Cook
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Vice President, Investor Relations, Treasurer: Jerry Natoli
Key Investors Issues
- Revenue rose 8% to $481 million from $444.9 million in 2007.
- The firm realised a loss of $52 million or 16 cents, from a loss of $20.8 million or 14 cents a share in the previous year.
- Stock repurchase amounted to $165 million or 6 million shares.
First Quarter Highlights
Revenue was $481 million, up 8% year-over-year from $444.9 million in the prior year, driven by growth in services and other revenues.
- The firm realised a loss of $52 million or 16 cents, from a loss of $20.8 million or 14 cents a share in the previous year because of a mismatch between revenue realisations and cost spread.
- The loss deteriorated due to interest expenses and a negative tax benefit despite revenue increasing in less-seasonal categories such as Payroll and Payments and the firm controlled its spending.
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Total Small Business revenue grew 11% year-over-year to $152 million as QuickBooks revenue grew 6% and Payroll and Payments revenue grew 16%.
- QuickBooks share is up about a point of share in retail while QuickBooks Enterprise revenue and the Web services customers continue to grow strongly.
- The customer base growth has held steady in Payroll at 3% and the Payments customer base growth is still strong at 18%.
- The firm has a QuickBooks product update planned for December that will further enhance the online banking functionality for accountants and upgraders.
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Tax revenue was $14 million, up 7% as TurboTax goes on sale in retail stores on November 28 and the season begins in earnest in January.
- Financial Institutions revenue grew 3% year-over-year as planned to $75 million, as active online banking users grew 8%.
- New internet banking users continue to be added at about the same rate as prior quarters, but financial institutions are scrubbing their user bases and the firm we had a relatively high number of internet banking users taken off the active list.
- Bill pay users, which generate about four times the incremental revenue per user as online banking users, grew 18%.
The firm ended the period with $747 million in cash and investments and has a $500 million revolving line of credit that it has not accessed.
- Capital expenditures were $67 million and the firm returned about $165 million of excess cash to shareholders by repurchasing 6 million shares of Intuit stock.
- It now has $435 million remaining in the current repurchase program, but will scale back on the buybacks.
Strategic Thoughts:
- Firm will continue to focus on delivering easy-to-use connected services to solve important customer problems by saving money and making money in an increasingly social, mobile and global world.
- However, a new plan will entail continued focus on acquiring customers and monetize them over time while growing revenue faster than expenses.
- It also made some decisions to re-allocate investment to higher-yield opportunities, and will be looking for assets in the market that will further strengthen its position and help execute the growth strategy.
Operational Insights:
- Growth in new merchants plus growth in transaction volume per merchant has been driving Payments revenue growth over the past couple of years.
- Growth in transaction volume per merchant began slowing in the third quarter of last year and was flat in the fourth quarter, as consumers reduce their spending.
New merchant acquisition is still strong at 18% but it’s not strong enough to compensate for the lower-than-expected transaction volume per merchant.
- As for QuickBooks, paid new users, which make up about a third of paid units in any given year, are running below expectations, with a lot of Free Simple Start registrations, which should result in higher Small Business ecosystem revenue in the future.
- The Other Businesses segment, which consists of the Canadian and U.K. businesses, Real Estate Solutions and Quicken, is being impacted by a stronger U.S. dollar and tough conditions for new license sales.
Fiscal 2009 Outlook:
- Full year guidance updated to reflect declines in merchant transaction volume in Payroll and Payments segment; fewer new QuickBooks users; and adverse conditions in the Other Businesses segment.
- Fiscal 2009 revenue is now expected to grow 6% to 10% or $3.26 billion to $3.38 billion, instead of the 9% to 12% as originally guided.
- The firm now expects full-year QuickBooks revenue to grow 5% to 9%, about three points less than originally estimated.
The firm now expects full-year Payroll and Payments revenue to grow 10% to 14%, four points less than originally estimated.
