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Intuit (INTU -5%) is trading lower despite reporting upside for its Q1 (Oct) earnings report last night. INTU focuses on small businesses and consumers (QuickBooks, TurboTax, Credit Karma, Mailchimp). Note: INTU recently shut down its Mint offering and said users should migrate to Credit Karma. INTU beat on EPS, its 11th consecutive double-digit EPS beat. Revenue grew a healthy 10.2% yr/yr to $3.28 bln, which was better than analyst expectations.

• The main problem was the Q2 (Jan) EPS and revenue guidance, both of which were well below analyst expectations. The stock initially dropped on the guidance, but Intuit's explanation on the call seems to have calmed nerves a bit. Basically, it sounds more like a timing issue. Intuit expects a single digit decline in Consumer Group revenue due to some promotional changes in retail channels largely related to its desktop offering. This only impacts revenue timing and does not impact overall unit or revenue expectations. And that was borne out with Intuit reaffirming full year guidance.
• Its largest segment is its Global Business Solutions Group (formerly known as Small Business and Self-Employed Group), which is mostly QuickBooks. GBSG revenue grew 9% yr/yr to $2.54 bln, which is its first sub-18% quarter since the start of FY23. Growth was driven by Online Ecosystem revenue growth of +20% yr/yr, up from +18% yr/yr in Q4. QuickBooks Online Accounting revs grew 21%, driven by customer growth, higher prices and mix shift as INTU focuses more on the mid-market.
• The main problem in GBSG was a -17% yr/yr decline in Desktop Ecosystem revenue, reflecting desktop offering changes made in early FY24. Intuit cautioned about this on the Q4 call, so it was not a big surprise. Another issue was MailChimp. Intuit is seeing good progress serving mid-market customers with Mailchimp, but is also seeing higher churn from smaller customers. In response, Intuit is making product enhancements to improve first-time use and customer retention.
• Its Credit Karma segment was a laggard in FY23, but recovered nicely in FY24 and continues in FY25 with progressively improving yr/yr revenue growth each quarter: -5% in Q1, flat in Q2, +8% in Q3, +14% in Q4, and now +29% in Q1 to $524 mln. Credit Karma saw strength in personal loans, auto insurance, and credit cards. Its vision is to create one consumer platform, with seamless integration between TurboTax and Credit Karma products.
• Consumer Group segment (TurboTax, both DIY and assisted) revenue declined 6% yr/yr to $176 mln while ProTax segment revs declined 7% to $39 mln. Both segments were lapping a year ago period that included an extended tax filing deadline for most California filers. Unfortunately, analysts did not ask Intuit about the election and the possibility of a free tax filing app, but they do expect an improved SMB environment in 2025 due to interest rates, jobs, the regulatory environment.

Overall, this was a decent quarter for Intuit with Credit Karma really turning itself around. The guidance could be explained as more of a timing issue as Intuit reaffirmed its full year outlook. However, that seems to be impacting the stock. Also, a lot of analysts were asking about the MailChimp churn, so that seems to be weighing on shares. Not getting a clear answer on the impact from the election and possible free tax filing app was a letdown as well.