Written by: Jay Yi, MBA; Edited by: Chris Thompson, CFA, MBA, P.Eng
eResearch | Intuit Inc. (NASDAQ: INTU; LSE: 0JCT), the developer of TurboTax, one of the most used income tax preparation platforms, has grown to a US$69 billion company with US$6.7 billion in revenue and has outperformed the S&P 500 Index by over 150% in the past 5 years. The Company has consistent fundamentals as it has reported double-digit growth rates for revenue and net profit margins every year for the past 10 years.
Intuit is a FinTech company with proprietary software focused on delivering financial management and compliance products for three business segments: (1) Consumers, (2) Small Business & Self-Employed (“SBE”), and (3) Professional accountants. The Company generates 90% of its revenue from Consumers and SBEs through its proprietary products TurboTax and QuickBooks.
TurboTax is the consumer-focused product used for income tax preparation and is free for those with salaries less than US$66,000, and QuickBooks is the SBE-focused product used for accounting applications related to management of payments and payroll. Intuit’s applications operate mainly in the U.S. with international revenues accounting for only 5% of total sales.
2019 Intuit Financial Highlights
Revenue increased to US$6.7 billion, a 12% increase year-over-year with a CAGR of 10% over the past 5 years; revenue segmentation includes 52% from SBEs, 41% from Consumers, and 7% from Professional accountants.- Main operating expenses include sales & marketing costs and R&D costs at US$1.9 billion and US$1.2 billion, respectively.
- Net income increased to US$1.6 billion, a 17% increase year-over-year with a CAGR of 33% over the past 5 years.
- EBITDA increased to US$2 billion, a 14% increase year-over-year with a CAGR of 13% over the past 5 years.
- Cash balance of US$2.7 billion
Intuit’s growth in 2019 is mainly attributed to the 35% increase in revenue from the SBE segment, which grew revenue by three times the Consumer’s segment, mainly due to the Company launching next business-day payment services enabling customers to receive funds significantly faster than the previous wait time of 2-5 business days.
Companies such as Intuit can be a core portfolio investments as they focus on “sticky” software solutions, such as accounting, that are used every day, and are leveraging innovative technologies to disrupt processes most likely to be around for the near term.
According to Transparency Market Research, the global tax software market is expected to reach US$19.2 billion by 2026 with a CAGR of 10.5% between 2018 and 2026, attributed to the growing adoption of tax software and e-accounting solutions across various industries.
Some of the companies trying to compete within the tax and accounting solutions software business include:
GoDaddy Inc. (NYSE: GDDY)
- GoDaddy is a domain registrar and web hosting company with 18.5 million customers worldwide.
- In 2019, GoDaddy introduced a bookkeeping application catered to e-commerce companies with simple accounting dashboards for management of sales, expenses, profits, liabilities, and taxes.
- GoDaddy is currently trading at US$66.31 per share with a market capitalization of US$11.8 billion.
H&R Block, Inc. (NYSE: HRB; LSE: 0HOB)
- H&R Block is a tax preparation company that operates through 12,000 retail tax offices run by tax professionals.
- On June 11, 2019, H&R Block announced acquisition of Wave Financial for C$537 million as part of its strategy to support the small business
marketthrough Wave’s accounting, invoicing, payroll, and payments software solutions. - H&R Block is currently trading at US$24.05 per share with a market capitalization of US$4.8 billion.
Blucora Inc. (NASDAQ: BCOR)
- Blucora owns TaxAct Holdings, Inc., a leading tax preparation software company in the U.S. and a member of the Free File Alliance, a partnership
between the IRS and a group of private sector tax software companies. - In 2018, Curtis Campbell, a former executive at Intuit, joined TaxAct as President of the company
- Blucora currently trades at US$22.22 per share with a market capitalization of US$1.09 billion.
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Intuit Inc. (NASDAQ: INTU; LSE: 0JCT)
- Headquartered in California, U.S., Intuit is an enterprise software business that develops accounting and tax solutions products for consumers, businesses, and tax professionals, with 95% of its revenues coming from the U.S.
- Intuit is currently trading at US$268.27 per share with a market capitalization of US$69.7 billion.
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