Analysis of Intuit’s Mailchimp Acquisition

Tax software provider Intuit (NASDAQ: INTU) recently announced its fourth-quarter earnings that surpassed market expectations. But the big news this quarter was Intuit’s entry into the email marketing space with the acquisition of Mailchimp, a bootstrapped jewel.

Intuit’s Financials

Revenues for the fourth quarter increased 41% to $2.6 billion, surpassing the market’s expectations of $2.32 billion. Non GAAP EPS of $1.97 surged past the market’s forecast of $0.59.

Small Business and Self-Employed Group revenue grew 19% to $1.3 billion. Small Business Online Ecosystem revenue grew 30% and Consumer Group revenue grew from $710 million a year ago to $852 million.

For the fiscal year, Intuit’s revenues grew 25% to $9.63 billion and EPS was $7.56.

Intuit expects to end the first quarter with revenue growth of 36%-38% and non GAAP EPS of $0.94-$0.99. Intuit expects to end the current year with revenues of $11.05-$11.2 billion and non GAAP EPS of $11.05-$11.25. The market was looking for revenues of $1.76 billion and an EPS of $1.10 for the quarter and revenues of $10.85 billion and an EPS of $10.89 for the fiscal year.  

Intuit’s Mailchimp Acquisition

During the quarter, Intuit announced the acquisition of Atlanta-based Mailchimp for an estimated $12 billion. Founded in 2001 by Ben Chestnut and Dan Kurzius, Mailchimp’s services are utilized for sending marketing emails, automated messages, creating targeted campaigns, facilitating reporting and analytics, and selling online. It has an impressive portfolio with a global customer reach of 13 million total users, 2.4 million monthly active users, and 800,000 paid customers. Almost half of its customers are based outside of the US.

The companies plan to integrate customer data from Mailchimp with QuickBooks’ purchase data to get actionable insights needed to grow and run their businesses. The acquisition will help SMB businesses get their business online, market products and services, manage customer relationships, leverage data insights and analytics, access capital, and leverage the cash flow, and optimizing cash flow while ensuring compliance.  

Founder-owned Mailchimp has been a bootstrapped success story that had gone on to earn $600 million in revenues in 2018. The company itself has been growing through acquisitions. Earlier this year, it had announced the acquisition of Seattle-based Chatitive for an undisclosed sum. Chatitive is a two-way SMS marketing platform that uses context to deliver highly personalized and conversational mobile messages directly to consumers. Mailchimp was leveraging Chatitive’s capabilities to deliver an all-in-one marketing and commerce platform offering focused on their SMB customers.

This is an interesting acquisition by Intuit. Prior to the acquisition, it wasn’t a particularly well-known player in the email marketing space. Intuit is confident that this is a good buy for it as it will help it expand the range of services it offers to the SMB segment. It claims that the acquisition will allow Intuit to accelerate two of its previously-shared goals –  to become the center of small business growth and to disrupt the small business mid-market.

Meanwhile, Intuit’s stock is trading at $545.01 with a market cap of $149.4 billion. It had soared to a high of $582.96 in September but had fallen to a year low of $312.05 in October last year.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.

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