Financial software company Intuit (INTU 0.89%) reported strong second-quarter results last week, maintaining double-digit revenue growth even with a one-week delay in the opening of tax season. Revenue increased 15% year over year while adjusted earnings per share climbed 35%. Further, Intuit's QuickBooks Online subscribers continued to soar higher, rising 51% year over year.
But there was much more to the quarter for investors to mull over than these headline figures. During Intuit's second-quarter earnings call, management shared more insight into TurboTax Live, QuickBooks Online subscriber growth, and its online ecosystem revenue.
QuickBooks Online. Image source: Intuit.
A $20 billion opportunity
With tax season in full swing, TurboTax is ready to tap into the market for assisted tax filings like never before. After launching TurboTax Live, a service that lets tax professionals assist TurboTax filers online, Intuit says it has opened itself up to a $20 billion opportunity.
When asked during Intuit's second-quarter earnings call whether management is putting more focus on growing average revenue per user than it is growing customer count now that the company is expanding into assisted tax filings, Intuit CEO Brad Smith responded:
There's $20 billion worth of spend in the assisted tax prep method. We believe now with a platform that has 2,000 experts answering questions, we can also go after share of dollars, not just share of market.
Don't overlook this catalyst
QuickBooks Online subscriber growth has been decelerating, falling from 59% year over year in the third quarter of fiscal 2017 to 51% growth in Intuit's just-ended quarter. And management expects this trend to continue, guiding for 37% to 42% year-over-year growth in QuickBooks Online subscribers for the full fiscal year of 2018.
But this deceleration should be expected, as Intuit benefited from a surge in new QuickBooks Online customers during a 100-day period last tax season, when Intuit offered a bundled package for TurboTax customers to get access to Quickbooks Online Self-Employed.
But some investors may wonder what growth in Quickbooks Online subscribers would look like if year-over-year changes in its Quickbooks Online Self-Employed subscribers were backed out. With this adjustment, is the underlying QuickBooks Online segment still seeing strong growth?
Absolutely.
"[W]e see QBO core without Self-Employed continuing to grow at an accelerating rate," Smith said, "and then Self-Employed for us is just a green field opportunity that's just icing on the cake."
A look at online ecosystem revenue
One highlight in Intuit's second quarter was its accelerating growth in online ecosystem revenue. Revenue in the segment increased 39% year over year, up from 35% growth in Q1. Since this is above management's guidance for "online ecosystem revenue to grow better than 30%" in fiscal 2018, analysts were curious about the drivers behind this growth. Fortunately, this strong growth doesn't appear to be driven by any one-time events.
Though Intuit did say online accounting was the primary driver for online ecosystem revenue, management also said payroll and payments were drivers.
Importantly, Smith said Intuit remains focused on delivering strong results in this segment:
Now, we would tell you that we remain focused on trying to accelerate those results. There are lots of things our teams are working on inside, but there is no new news in terms of payroll and payments besides what we shared with you in the fall.
QuickBooks Online. Image source: Intuit.
Overall, the quarter continued to highlight a company well positioned for strong growth over the long haul.
