Intuit’s Acquisitions Pay Off

Intuit (NASDAQ:INTU), the leading small business accounting and tax software provider with annual revenue of $3.45 billion, last week reported better than expected revenue as it continued to reap the benefits of its recent acquisition spree. Let’s take a closer look.

First quarter revenue grew 12% y-o-y to $532 million, beating analyst estimates of $521 million and the company’s earlier guidance of $515 million to $525 million. Operating loss increased slightly over the year to $104 million or $0.22 per share, from loss of $100 million or $0.21 per share in Q1 of fiscal year 2010. Intuit typically posts a seasonal loss in its fourth and first quarters, when there is little revenue from its tax businesses but operating expenses remain relatively consistent.

The revenue increase was driven by strong customer growth in its Small Business Group. Last year, Intuit acquired PayCycle, which targets businesses with fewer than twenty employees. That acquisition is paying off: Total Small Business Group revenue increased 9% for the fiscal year 2010 and 12% in the quarter, driven by 15% and 11% revenue growth in Financial Management Solutions and Employee Management Solutions, respectively. In August, Intuit launched Intuit GoPayment, which provides an all-in-one mobile payments solution that allows small businesses to easily swipe and process credit card payments via the Apple iPhone. Payment Solutions grew 7% in the quarter driven by 15% merchant growth.

Consumer Tax revenue was $29 million in the quarter, up $7 million. Accounting Professionals revenue grew 15% y-o-y and Financial Services revenue grew 1% y-o-y in the quarter. Revenue from Other Business grew 27% y-o-y with contributions from Quicken and Mint, Intuit Health through its Medfusion acquisition, and small business in Canada and the U.K. The company recently launched a new version of Quicken that brings together the best of Quicken and Mint. The new version brings together all accounts, including bank, credit card, investment, and retirement.

During the earnings call, CEO Brad Smith discussed Intuit’s three-point strategy:

“[F]irst, to drive growth in our core businesses. Second, [to] build adjacent businesses and enter new geographies. Third, to accelerate Intuit’s transition to ‘connected services.’”

The recession has seen a rise in online do-it-yourself tax-filing preparation and Intuit expects digital or connected growth to drive future growth. The company currently generates about 60% of the revenue from connected services and its goal is to increase the mix to 75% of total revenue over the next three years to five years. As a result of investment in this area, QuickBooks Online subscribers grew 46% y-o-y in the first quarter.

For the second quarter, Intuit expects revenue of $920 million to $940 million, or growth of 10% to 12%. It expects GAAP operating income of $135 million to $155 million or GAAP diluted EPS of $0.24 to $0.28, compared to operating income of $139 million or $0.10 per share last year. Intuit repurchased $330 million of its shares in the quarter and has $1.67 billion left in its share purchase authorization. It ended the quarter with cash, equivalents, and investments of $1.17 billion.

Intuit also reiterated its full-year fiscal 2011 guidance. For fiscal year 2011, Intuit expects revenue growth of 8% to 11% to $3.74 billion to $3.84 billion, EPS of $1.88 to $1.95, and operating income of $980 million to $1.015 billion. It expects non-GAAP diluted EPS of $2.36 to $2.43, or growth of 12% to 15% versus analyst estimates of $2.30 on revenue of $3.72 billion. Finally, Intuit expects growth of 8% to 12% in Small Business Group, 10% to 13% in Consumer Tax, 4% to 7% in Accounting Professionals, 4% to 7% in Financial Services 4 to 7% and 11% to 16% in Other Businesses.

Last week, Intuit also named CeCe Morken vice president and general manager of its financial services division. Shee succeeds Sasan Goodarzi, who is leaving to become CEO of a privately held clean energy company called Nexant. The stock is trading around $45 with market cap of about $14 billion. It reached a new 52-week high of $48.31 on October 29.