Intuit's Net strategy pays off

The personal finance software firm reported that 20 percent of its revenues for the three months ending April 30 were derived from Internet operations. That's more than twice the percentage one year earlier.

Intuit reported roughly $50 million in Internet revenues in the quarter, up from about $20 million a year ago, said Jim Heeger, senior vice president of Intuit's small-business division. However, he said that for the fiscal year, Internet revenues would remain at about 10 percent overall.

"Internet revenues were strong as expected--they're just trying to talk down expectations," said Scott Appleby, who follows the stock for BancBoston Robertson Stephens. "That's the sizzle of this company. It is electronic finance--you need to own this company because of its position in e-finance."

Appleby estimates that about $32 million to $33 million of the Internet revenues were related to Net-based financial services, including tax preparation and filing, insurance sales, and mortgages. The remainder comes from software products ordered over the Net.

Genni Combes, an analyst for Hambrecht & Quist, said that for the first time, those Net-based financial services were significant. In the past, Net revenues have been largely ad banners on Quicken.com, its personal finance site.

"If you look at the Internet business historically, it's been largely ad-driven," Combes said. "This is the first quarter where transaction-driven Internet sales were approximately equal to the advertising."

Intuit earned 73 cents a share, beating Wall Street expectations for the quarter, as reported by First Call, by three cents a share. Appleby termed the results "good but not spectacular."

Revenue for the third quarter was $239.7 million, an increase of 69 percent, but that included revenue from its acquisition of Lacerte, which markets tax-preparation software for professionals. Without the revenue from Lacerte, which was acquired in June 1998, total revenue increased a healthy 48 percent from the year earlier.

"We had our best tax season ever and we're seeing gains in all of our businesses, including the small business area," said Heeger. In the fall, Quicken launched a payroll service for small companies, and the number of customers doubled in the last quarter. Intuit also purchased its payroll service provider in March.

The company's Web TurboTax service, which allows taxpayers to prepare tax returns and file from Intuit's Web site, had 385,000 filers, a tenfold increase over the year earlier, though only 250,000 were paying customers. The remainder filed for free because they had incomes of under $20,000, a practice designed to hook college students on using Web TurboTax, then collect fees when their incomes rise.

Heeger said the free-filing program will probably continue next year, though perhaps in a modified form.

"There's a good chance that the Web TurboTax business is highly profitable," he said, declining to say whether Intuit's overall Internet operations are profitable but noting that the company is making heavy investments in Net services.

Yesterday Intuit and CheckFree, of which Intuit owns about 20 percent, had settled a contract dispute over bill presentment services and which firm markets them to Web portals. Bill presentment lets consumers view and pay their bills online. Last week Intuit said it had begun testing bill presentment on its Web site, with plans to go live in July.