Intuit announced Monday that it's buying rival Credit Karma for $7.1 billion. Launched in 2008, Credit Karma's primary service leverages credit report data to help consumers understand, track, and improve their credit scores.
The company gained traction as a provider of simulated credit information -- it claims to have around 100 million registered users in the US -- but over the last few years it's been repositioning itself as a personal finance company. In late 2019 the company began testing a machine learning-based service called Stories that tailors relevant offers to a person's financial situation. This is an area Intuit has focused on since 2017 when it launched Turbo.
It's under that context that Intuit's purchase of Credit Karma makes the most sense: Both companies are pivoting to personalized financial services, and both companies are working to build out a technical infrastructure for hyper-targeted recommendations.
Going forward, Intuit said the companies plan to offer "a consumer finance platform that works like a personalized financial assistant."
"There's a lot of innovation and investment in FinTech, but we don't see anyone, with our collective capabilities, pursuing a personalized financial assistant to help consumers take control of their financial lives," said Intuit CEO Sasan Goodarzi. "Together with Ken and the Credit Karma team, we're going to bring together consumers and financial institutions in innovative ways that lower costs for all those involved and level the playing field for consumers regardless of their economic status. We believe we can transform the personal finance industry and power the economy."
Intuit also announced its second quarter financial results Monday. The personal and small business financial software maker reported a Q2 net income of $240 million million, or 91 cents per share. Non-GAAP earnings were $1.16 per share on top of revenue of $1.7 billion, up 13% year over year.
Wall Street was expecting earnings of $1.03 per share with $1.68 billion in revenue.
Breaking revenue down, Intuit said small business and self-employed group revenue rose 17% to $973 million, while consumer group revenue increased 8% to $499 million.
In terms of guidance, Wall Street is expecting big third quarter results from Intuit's tax season with an earnings target of $6.17 per share and $3.59 billion in revenue. Intuit responded with a revenue growth target between 10% to 11%, and earnings between $5.90 to $5.95 a share.
On a call with analysts, Goodarzi said: "Acquiring Credit Karma expands our TAM from $29 billion to $57 million, accelerating our time to market, moving beyond tax, while also developing new ways to monetize our offerings."