Intuitive (NASDAQ: INTU) had a big revenue quarter in its latest report, boosted by its own growth and a few acquisitions. In this clip from “3 Minute Stocks Updates” on Motley Fool live, recorded on March 2Fool.com contributors Toby Bordelon and Brian Feroldi discuss the financial software maker’s plans to transform the business and remain attractive to investors.
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Toby Bordelon: Their second quarter, which they just announced, ended on January 31 of this year, very well. Revenue up 70% to $2.7 billion. This includes two key new acquisitions for them, Mailchimp and Credit Karma. You pull them out, revenue went up 39%, which is really good for a company that’s focused on acquisitions to be able to grow that organic revenue to that extent, it was fantastic.
Credit Karma notably achieved a turnover of 444 million dollars, which is a new quarterly record. Why do we care? Well, if you want to be successful with your acquisitions, you don’t just want to buy revenue, you then want to be able to grow that revenue beyond what the target business could have done on its own to justify the premium you have paid. .
The fact that Credit Karma continues to hit these quarterly highs is a positive sign that it’s working. I will continue to follow this. Net income up 400% to $100 million, so they’re also increasing net income in a really big way, really nice to see. Another point on this acquisition of Credit Karma. They’re starting to integrate that more tightly into their business with TurboTax.
For example, this tax filing season, they say most Credit Karma members will be able to deposit with TurboTax in the Credit Karma app. Really great. Starting to incorporate those pieces and a really nice way to look at that. They finished Mailchimp in November, so this first quarter we actually have some numbers for that that look pretty good so far.
Debt is high, they took on a lot of debt to do this 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 consumer and small business prosperity.”
Lots of buzzwords in there, but I think you can see where their market is focused on both consumers and small businesses, that’s where they grow, not really focusing on l business space, consumers and small businesses and I think they’re doing a good job with that. They are transforming this business to enter these markets and I like what I see here.
Brian Feroldi: This company is truly amazing, and it’s one of those companies that works really well and people rarely talk about it and yet it’s such an amazing company. But does this company, given what you have known, appeal to you today?
Bordeaux: I think so, Brian. To paraphrase a great slogan from a car advertisement at the time, “it’s not your grandfather’s Intuit anymore”. They are transforming this profession. It’s not just TurboTax, it’s Mailchimp, it’s Credit Karma, they’re blowing both sides of this business. They are trying to become more comprehensive financial and business services companies. They do it by acquisition. Early signs suggest it’s working.
So that’s appealing to me because I can see the potential of what they want to be, but you look at that when integrating acquisitions. Continuing to credit Karma and Mailchimp for ensuring 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 peeling off more than they can chew. There’s a lot of potential here, but there’s definitely the potential to squander shareholders’ capital with acquisitions that go wrong if they’re not careful.
Brian Feroldi has no position in the stocks mentioned. Toby Bordelon has no position in the stocks mentioned. The Motley Fool recommends Intuit. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
