Monday, February 13, 2017

TurboTax is not happy Americans are dragging their feet filing taxes

FROM http://www.usatoday.com

Americans are apparently dragging their feet on tax filing this year.

A sluggish start to tax season undermined TurboTax owner Intuit's earnings. The online filing software company warned Wednesday morning that "tax season is forming more slowly than usual," which will translate into a worse-than-expected performance for the fiscal second quarter ended Jan. 31.

Whether it's unseasonably warm weather that's encouraging people to get out of the house or a national hangover from a dreadfully polarizing election, the reasoning isn't clear.

But the impact on Intuit is concrete: The company lowered its outlook for quarterly revenue, operating income and earnings. In the long run, the company expects full-year earnings to achieve its targets.

"Data points to the tax category forming slowly for all prep methods," said Dan Wernikoff, executive vice president and general manager of Intuit’s TurboTax business, in a statement. "We believe we have a strong and winning hand that combines innovation across the end-to-end experience, an effective go-to-market campaign and great value for taxpayers. One thing we know about the tax business is that everyone needs to file by April 18. We are looking forward to a strong finish to the season."

Revenue is now expected to range from $1.01 billion to $1.02 billion, down from a previous projection of $1.05 billion to $1.07 billion. Operating income is projected at $15 million to $20 million, down from a previous prediction of $60 million to $70 million.

And the company is now expected to barely eek out a profit for the quarter, with earnings of 4 to 5 cents per share, down from an earlier expectation of 12 to 15 cents.


The good news for Intuit is it still expects to meet its goals for the full year, suggesting that customer spending is simply shifting to the next fiscal quarter.

The company declined to comment beyond Wednesday's statement.

Intuit shares fell several percentage points in early trading but pared those losses and was down only 0.7% at 12:46 p.m.

The revision stems from the IRS reporting that total returns processed through Jan. 27 tumbled 33%, compared to a year earlier.

Intuit said it had processed 29% fewer consumer returns during that period.

TurboTax controlled 65% of the do-it-yourself market for tax software, according to UBS analysts, after three years of market share gains.

Several competitors have popped up in recent years, potentially presenting a threat. But the company has gained momentum with a free option that "converts" into paid subscriptions over time, UBS analyst Brent Thill said in a recent analyst report.

One wild card for the company is the possibility of a dramatically simplified tax code, which President Trump and Republicans have identified as a key priority.

But Intuit CEO Brad Smith has identified a simplified tax code as an advantage to TurboTax because it would theoretically encourage more people to relinquish professional tax preparers in favor of do-it-yourself software.