As Intuit (INTU -4.55%) transitions its financial products to the cloud, lots of new opportunities for new offerings and deepened customer relationships are presenting themselves. Highlighting one way Intuit is benefiting from these trends, Intuit's growth rates in its small business online ecosystem revenue has been accelerating -- from 26% year-over-year growth in the first fiscal quarter of fiscal 2017 to 35% in the first fiscal quarter of 2018.
Of course, Intuit isn't the only financial-technology company vying for this fast-growing market. This is why it's a good time to check in on what management is saying about some of the most important areas of its business. Here are some telling quotes from Intuit's most recent earnings call on QuickBooks Capital, QuickBooks Online, and TurboTax Live.
Intuit doesn't plan on becoming a bank
Unlike financial-technology competitor Square (SQ -5.52%), Intuit doesn't want to become a bank. When an analyst inquired whether Intuit's recent move to put some of its own capital into its QuickBooks Capital loans marked a strategic change in Intuit's practice of using third-party lenders for its small-business loans, management said it rather is a reflection of its efforts to accelerate its feedback loop on its algorithms for identifying lending customers.
Intuit CEO Brad Smith explained:
[W]e think this could be a very promising opportunity over the long term, but our use of capital was really to fuel or prime the pump. What we needed to do is get a rapid feedback loop on whether our algorithms were predicting the things that we needed, so it would make it a better tool for other lenders. And so, we at this point in time don't have plans to become a bank and we don't have plans to lean into that aggressively as opposed to using it as a way for us to tune our algorithms to make it a really good platform for other lenders to be able to provide access to capital.
Investors are likely particularly interested in Intuit's ambitions for its capital arm after Square applied for a bank charter in September. Square CEO Jack Dorsey said in its third-quarter earnings call that by becoming a bank, it will enable the company to innovate faster and create more efficiencies for lending.
Intuit's QuickBooks Online growth engine
QuickBooks Online is arguably Intuit's most important growth catalyst. Investors, therefore, have good reason to keep a close eye on how the product is faring. This is why one analyst asked about the decelerating trend in QuickBooks Online's subscriber growth in recent quarters. Intuit's year-over-year growth rate in Quickbooks Online's subscribers for its last three quarters has decelerated from 59% in the fiscal third quarter of 2017 to 56% in the fiscal first quarter of 2018.
What's the deal? Smith explained:
[T]here is no fundamental weakness in the business itself. ... It's just the reality of last year we opened up one of the biggest channels any company can hope for, which is 100 million people visiting TurboTax.com in a 100-day period and we got a nice pop of customers that were exposed to that for the first time, and so we're going to have that grow over. We don't view that as a foundational or a systemic weakening. We simply view that as a seasonality thing...
In other words, while growth rates in QuickBooks Online subscribers may decelerate in the near term, management seems to believe that this deceleration will moderate.
But investors should expect some more deceleration for now. For the full fiscal year of 2018, management expects QuickBooks Online subscribers of between 3.275 million and 3.375 million, up 37% to 42% year over year.
Intuit's opportunity with TurboTax Live
One of the biggest reasons someone might not do their taxes on their own, Intuit has said, is because filers sometimes feel like they need expert help. Intuit's Nov. 30 launch of TurboTax Live attempts to address that problem. "With the launch of TurboTax Live, Intuit has virtualized a personalized professional service that, until now, has traditionally been in-person," Intuit said in its press release about the new feature.
One analyst asked Intuit management to explain how Intuit is thinking about the opportunity with this new TurboTax product. Intuit CFO Neil Williams was bullish:
A lot of people out there have simpler taxes and they simply have a nagging question based upon a life-event change -- they had a child, they moved between states, they sold stock -- and being able to actually get a tax expert on demand to answer that question and then go on and finish your taxes, we think, is a big opportunity. I don't see this as cannibalization. We actually see this as an opportunity to extend our value further into the market that historically has not moved to the do-it-yourself category, where may actually switch from DIY to a tax pro because they lost confidence.
We think it's a great retention tool as well as an opportunity to go into a part of the market that we have underserved.
Pointing to how big the market is, Williams said that of the more than 150 million returns filed every year in the united states, nearly 90 million are filed with the help of an expert.
Overall, the earnings call reaffirmed Intuit's growth opportunities, but analysts' questions also highlighted how investors are watching Intuit's catalysts closely. If growth in QuickBooks Online subscribers decelerates too rapidly, or if new products like TurboTax Live don't prove as successful as management hopes, Intuit shares could take a hit.