Intuit: First Look

Estimated reading time: 6 minutes

Intuit Inc (INTU) runs a number of interesting businesses including TurboTax, QuickBooks, Mailchimp, and Credit Karma. I first started thinking about INTU a few weeks ago. In this post I examine top-level fundamentals of the company to get a better idea of whether or not to invest. The main question is "Are they top quality?"

Intuit Overview

This is straight from their latest 10-K and accurately summarizes the gist of the company. (Bold mine)

Intuit helps consumers and small businesses prosper by delivering financial management, compliance, and marketing products and services. We also provide specialized tax products to accounting professionals, who are key partners that help us serve small business customers.

These things are great. Let's put a pin in these three things. One of the main questions to ask here is "How effective are they?" Sure, INTU might be a great investment, but they aren't a great company if they are not effective at their self-selected mission(s):

Our mission is to power prosperity around the world. Across our platform, we use the power of technology to deliver three core benefits to our customers: helping put more money in their pockets, saving them time by eliminating work so they can focus on what matters to them, and ensuring that they have complete confidence in every financial decision they make.

I like this. We are honing on what makes INTU special, but when I see a blanket statement like "The power of technology" I wince a little bit. This is fine for general overarching companies like INTU, but I'm already defensive. Further on in the post it may benefit INTU to specifically address why they are better than the competition, and what moat they have.

Technology is great, but it's anybody's game. A 100x engineer can run circles around established public companies, especially in this new age of AI and LLMs. Is INTU attracting this kind of talent?

All of our customers have a common set of needs. Our global financial technology platform, which includes TurboTax, Credit Karma, QuickBooks, and Mailchimp, is designed to help consumers and small businesses manage their finances, get and retain customers, save money, pay off debt, and do their taxes with ease and confidence so they receive the maximum refund they deserve. For those customers who have made the bold decision to become entrepreneurs and go into business for themselves, we are focused on helping them find and keep customers, get paid faster, pay their employees, manage and get access to capital, and ensure their books are done right. We serve 100 million customers and generated revenue of $14.4 billion in our fiscal year ended July 31, 2023.

Excellent. Here's how they are leveraging AI:

The continuing evolution of artificial intelligence (AI) is fundamentally reshaping our world — and Intuit is taking advantage of this technological revolution to find new ways to improve the customer experience and deliver on our mission. Intuit is uniquely positioned for the next wave of transformation with generative AI given our rich data platform and established AI foundation.

Let's see how they measure up.

Business Segments

Their biggest segment is QuickBooks. This business is quite large and brings in the most revenue, and in my opinion, has the best runway for future growth. Many businesses use QuickBooks for their bookkeeping software, and Intuit is positioned to offer outstanding value to customers.

Here is their Small business & Self-Employed segment which encompasses QuickBooks and Mailchimp (from the 10-k):

Their next segment is called "Consumer". It encompasses TurboTax:

Credit Karma is self-explanatory:

Their latest decline has to do with combining Mint and Credit Karma into one app. We'll see how it plays out.

ProTax is a professional offering from INTU for tax professionals:

I like these segments. Consistent revenue and good market share in each category.

Strategy

Intuit is pretty clear about their strategy. From their website:

Here's the five bets:

1. Revolutionize speed to benefit

Emerging tech is great, but a little too overarching. I'd like to see a bridge in the gap between strategy and tactics.

2. Connect people to experts

3. Unlock smart money decisions

4. Be the center of small business growth

5. Disrupt the small business mid-market

Overall, I think this strategy is slightly above average. It helps that the strategy leans on Intuit's position in the market. They have a history of innovation, which I think is their #1 edge. They are executing in an amazing way.

    Poor Practices

    Intuit Inc. recently came under legal fire from the FTC:

    In the complaint, FTC staff alleged that the company’s ubiquitous advertisements touting their supposedly “free” products—some of which have consisted almost entirely of the word “free” spoken repeatedly—misled consumers into believing that they can file their taxes for free with TurboTax. In fact, most tax filers can’t use the company’s “free” service because it is not available to millions of taxpayers, such as those who get a 1099 form for work in the gig economy, or those who earn farm income. In 2020, for example, approximately two-thirds of tax filers could not use TurboTax’s free product.

    Administrative Law Judge Issues Initial Decision in FTC’s Case Against Intuit Inc. | Federal Trade Commission

    Not great, Bob.

    There's more:

    Intuit raised as an affirmative defense that the FTC case is moot because “Intuit has discontinued the purportedly unfair and deceptive advertising campaigns . . . .”  The company’s argument rested, in part, on a May 2022 settlement with Attorneys General from 50 states and the District of Columbia, resolving an investigation into the company’s marketing of online tax preparation products. That settlement, Intuit urged, effectively enjoins any recurrence of the violation alleged in the Complaint. You’ll want to read the Initial Decision for details, but here’s the key conclusion:  “[T]he facts do not demonstrate either that Respondent has voluntarily ceased all the conduct found to be unlawful herein or that the State Settlement will prevent Respondent from engaging in such unlawful conduct in the future. Accordingly, Respondent’s mootness defense is rejected.”

    Nine takeaways from the Initial Decision in the Intuit TurboTax action | Federal Trade Commission (ftc.gov)

    This is terrible. It's one thing to get your butt handed to you, it's another thing entirely to run from owning the mistake and consequently overhauling the culture.

    Conclusion

    Here's what I think about Intuit:

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