The pressure will be on when financial software company Intuit (NASDAQ:INTU) reports its fiscal second-quarter results on Feb. 21. Shares are up 19% year to date -- and that's on top of a 25% gain last year. The stock's run-up reflects investors' bullishness toward the company's fast-growing online ecosystem revenue and its improving profitability.
Can Intuit keep impressing investors when it reports results later this week? Ahead of the company's fiscal second-quarter update, here's a preview of some key areas they will want to check on.
For the entire fiscal year of 2018, which ended on July 21 of last year, Intuit saw its revenue growth accelerate. Revenue during the period increased 15% year over year -- up from 10% growth in fiscal 2017. But the company's year-over-year revenue growth decelerated in its first quarter of fiscal 2019, rising 12% (down from 17% year-over-year growth in the company's fourth quarter of fiscal 2018).
Investors should look to see if Intuit was able to stop this trend of decelerating growth in its fiscal second quarter. But pulling this off will require revenue to come in above management's guidance for fiscal second-quarter revenue between $1.47 billion and $1.49 billion. Revenue at these levels implies 10% to 11% year-over-year growth.
Non-GAAP earnings per share
Management expects its trend of rapidly improving profitability to persist in its fiscal second quarter. The company guided for non-GAAP earnings per share between $0.85 and $0.88, up from $0.35 in the year-ago period.
Online ecosystem revenue growth
Intuit's online ecosystem revenue, which encapsulates revenue from the company's online small-business and self-employed group offerings, has been on a tear. Online ecosystem revenue increased by 43% and 42% in Intuit's fourth quarter of fiscal 2018 and first quarter of fiscal 2019, respectively.
Management has been telling investors that it believes its online ecosystem revenue is "the best measure of the health and success of our strategy going forward ..."
Over the long haul, management says it expects online ecosystem revenue growth to continue at a rate above 30%. But given how strong the growth from the revenue category has been recently, investors should expect growth closer to 40% in Q4.
Investors also shouldn't overlook revenue from Intuit's consumer products. Its consumer revenue, which is primarily driven by its do-it-yourself TurboTax income tax preparation service, increased 22% year over year in the company's first quarter of fiscal 2019. The segment also includes revenue from Mint and Turbo -- two online products aimed at helping consumers improve their financial health.
Investors should look for 15% to 25% year-over-year growth in consumer revenue in Q2.
TurboTax unit sales
While investors should look for a similar growth rate from the segment in fiscal Q2, they'll want to pay particularly close attention to the company's first of two tax-season updates on its consumer tax offerings -- an update Intuit plans to release alongside its fourth-quarter update. In this update, investors will see how many TurboTax units the company sold during the beginning of the tax season.
Last year, Intuit announced a 1% year-over-year increase in TurboTax unit sales, consisting of a 5% decline in TurboTax desktop units and a 3% increase in TurboTax online units. Given the company's efforts to ramp up its TurboTax Live offering, investors should look for an acceleration in TurboTax online unit sales growth.