Earlier this week, Intuit’s (Nasdaq: INTU) CEO Brad Smith announced plans to step down after eleven years at the helm. He will exit by the end of the year. During his tenure, Brad has turned around the company from a desktop software provider to a leading cloud-based accounting and taxation subscription service provider. Last quarter results were no different as the company outpaced all market expectations.

Intuit’s Financials

Intuit’s fourth quarter revenues grew 17% to $988 million, significantly better than its guidance of $940-$960 million and the market expectations of $953 million. Non-GAAP EPS also surged 60% to $0.32 and outpaced the Street’s forecast of $0.23. This was the fourth consecutive quarter that Intuit’s earnings outpaced market expectations.

During the quarter, Services and Other revenues grew 25.9% to $666 million, and product revenues increased 2.9% to $322 million.

By segment, Small Business and Self-Employed Group revenues grew 20% to $805 million driven by 43% growth in subscribers for Quickbooks Online. Intuit ended the quarter with more than 3.4 million subscribers to the service. For the quarter, Self-Employed subscribers increased to 720,000 from 390,000 a year ago. Among other metrics, Desktop ecosystem revenues grew 7%, while desktop units fell 7% in the quarter.

By region, the US-based subscribers of QuickBooks Online grew 38% to 2.6 million, and international subscribers increased 62% over the year to 800,000.

Intuit ended the year with revenues growing 15% to $5.96 billion. It recorded an operating income of $1.21 billion, or $4.64 per share.

For the current quarter, Intuit expects revenue of $955-$975 million, falling short of the Street’s expectations of $983 million. But the miss in revenues is attributed to a change in the accounting standards being adopted by Intuit. It expects non-GAAP operating income at $30-$40 million and an EPS of $0.09-$0.11.

For the current year, Intuit forecast revenues of $6.53-$6.63 billion with a Non-GAAP EPS of $6.40-$6.50. The Street was looking for revenues of $6.56 billion.

Intuit announced significant leadership changes at the end of the quarter. Its CEO Brad Smith is stepping down and will be replaced by Sasan Goodarzi, who is currently leading Intuit’s group focused on self-employed workers and small businesses. Intuit also announced that its CTO Tayloe Stansbury will step down by the end of the year. He will be replaced by another Intuit leader Marianna Tessel.

Intuit’s Expansion Plan

Intuit is focusing its efforts on multi-service accounting firms that do books and taxes. The move is expected to help Intuit expand in the Small Business Ecosystem. As part of this initiative, it announced the launch of an Accountant Apps Program that will help accounting professionals save time and work more efficiently when provisioning, purchasing, and managing apps for their clients. Intuit-selected apps are fully compatible with QuickBooks Online and support single sign-on via QuickBooks Online Accountant.

Additionally, the company is also expanding its payroll service offerings. The enhancements of the service include Contractor Direct Deposit and Same Day Direct Deposit. Contractor Direct Deposit will allow businesses to pay their independent contractors through direct deposits, similar to how they pay their employees. It also introduced Same Day Deposit that will accelerate the speed at which small businesses pay employees. Additional enhancements to the payroll solution released earlier this year include an easier preparation of 1099s for both small business owners and independent contractors.

Quickbooks Financing – One of Intuit’s MOST Promising Long-Term Growth Opportunities

Last year, Intuit launched Quickbooks Capital to allow small businesses to get access to loans of up to $35,000 for a six-month term – through their bookkeeping software. Intuit did not divulge the metrics for this new segment.

The small business credit area is a gaping hole for small denomination unsecured working capital loans. Most banks don’t like to lend to small businesses unless VCs are involved. This puts bootstrapped small businesses at a disadvantage. Using their knowledge of small business financials data through QB Online, Intuit can cost-effectively evaluate loan eligibility.

If Intuit can figure out how to lend, say, $100,000 to a million credit-worthy small businesses, at a 7% loan charge, that would be $7 billion in revenue. Alternately or additionally, if Intuit can figure out how to lend, say, $1 million to 100,000 credit-worthy small businesses, at a 7% loan charge, that would be also $7 billion in revenue. In either case, this would dramatically improve the growth potential of cash-strapped small businesses and have a massive impact on the economy.

When I first started 1Mby1M with the mission of helping a million entrepreneurs reach a million dollars and beyond in annual revenue, it was clear to me that a million businesses cannot be venture funded. In the last eight years of our work with entrepreneurs, I have been continuously stunned by how pervasive the myth of Entrepreneurship = Venture Capital is in our industry.

I have thought a LOT about this subject and have concluded that the myth is a result of lack of knowledge about financing options coupled with the acute pain of not having enough working capital. Entrepreneurs need money to grow. They believe venture capital is their only option, not realizing that VCs only fund a certain class of companies: those that have hyper-growth, hyper large TAM (total available market). In reality, most of these businesses should be credit-financed, not equity-financed.

As such, I see any and all attempts from various players at alleviating working capital shortage of these cash-strapped businesses as beneficial.

With that lens, Quickbooks Financing is one of Intuit’s MOST promising long-term growth opportunities. Intuit has the unfair advantage of having transaction-level data about millions of small businesses. This data allows them to judge which businesses are credit-worthy. Most importantly, they can do this economically, which most banks are unable to do for small denomination loans.

Plugging the working capital shortage in creditworthy small companies would go a long way in building a fortune in the middle of the economic pyramid. Whereas VCs focus on scaling companies to hundreds of millions in revenues within 5-10 years, the bulk of the economic activity happens in small businesses that grow slowly to a million, two million, five million or ten million in 5-10 years.

Intuit is one of the very few companies that have an unfair advantage in addressing this problem and stands poised to build a gigantic business doing so. Quickbooks Financing may, in time, become a much bigger business for Intuit than its entire current software business.

It will be interesting to see how Intuit manages its future under the new leadership. The company not only has to deal with the promised simplification of tax codes but also rising competition. The newest player to make its presence felt in the industry is Credit Karma, which is offering a free tax filing service. Credit Karma originally offers a credit monitoring service to more than 70 million users. It plans to leverage that user base to its Tax service. It currently supports nearly all tax forms and has attracted over a million users within the first year of its launch.

Additionally, the changes in the laws announced this year will go into effect next season and will streamline the way taxes are filed by consumers. Intuit believes that the simplification will lead to more users coming its way as they do their own taxes instead of reaching out to the CPAs. But some also believe that users may ultimately file taxes on their own, without the help of a software.

I would like to know how many of you readers are looking to change the way you file taxes in view of the changing codes? Is Intuit going to do it for you, or will you stick with your CPA?

The results have helped the stock soar. Its stock is trading at $217.90 with a market cap of $55.9 billion. It had touched a record high of $219.46 earlier this week. The stock has been climbing steadily from the 52-week low of $137.76 that it was trading at a year ago.

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