Intuit (NASDAQ: INTU), the owner TurboTax and Quickbooks, plans to buy US personal-finance platform Credit Karma for about $7bn – a strategy that expands its penetration into consumer finance.
Credit Karma is among the most popular platforms that offer free access to credit scores and borrowing history. It also offers credit monitoring, alerts to possible data breaches, and tax preparation and filing services. The platform makes revenue by selling credit card offers to its customers after building their credit profiles.
Credit Karma was founded in 2007 by CEO Ken Lin (pictured), Ryan Graciano and Nichole Mustard. The San Francisco-based platform is available online and on iOS and Android; the platform has almost 40 million customers.
California-based Intuit, founded in 1983, plans to pay for Credit Karma in cash and stock. The $7bn deal represents the largest in Intuit’s history.
“Intuit’s potential $7bn deal for Credit Karma would accelerate its move deeper into consumer finance but doubling down on consumer finance could raise questions about the growth trajectory of INTU’s core TurboTax and Quickbooks businesses,” said Citi analysts.
Intuit, valued at around $77bn, has been generating double-digit revenue growth over the past couple of years. The company topped revenue and earnings estimate in the last eight consecutive quarters. Its revenue in the latest quarter grew 14 per cent from the year-ago period.
“This was a strong quarter across the company. We continue to make progress on our strategy of becoming an A.I.-driven expert platform,” said Sasan Goodarzi, Intuit’s chief executive officer.
The company’s consumer group revenue soared by 11 per cent year over year to $100m in the latest quarter. Credit Karma’s acquisition would boost its consumer group revenue in the following quarters.
The company expects to generate second-quarter revenue growth in the range of 13 per cent from the past year period. The earnings per share are likely to hit $0.70 to $0.73 for the second quarter of 2020. It forecasts full-year revenue around $7.5bn excluding Credit Karma impact.