Intuit Reports Q2 Earnings Beat, Acquires Credit Karma For $7.1B

Andrew Cummings
February 27, 2020

Intuit CEO Sasan Goodarzi, left, and Credit Karma founder and CEO Kenneth Lin are photographed at Intuit Headquarters on February 20, 2020 in Mountain View, Calif.

Lin's startup, Credit Karma, shifted the credit card acquisition model.

The acquisition is an obvious fit for Intuit, where it will serve two purposes.

Intuit will pay for the deal with a combination of cash and stock.

Valued at $77 billion, Intuit is eyeing a stronger foothold in the burgeoning realm of online personal finance. He has a history of acquiring new companies with great potential and running with them. On the other hand, Intuit's customer base is twice as small, as it is one of the older financial companies.

Credit Karma had been expected to pursue an initial public offering. The deal would also help Intuit expand its customer base of 84 million people, as well as offer complementary services.

Intuit has officially confirmed it is buying Credit Karma for $7.1 billion. The S&P 500 was recently trading at its most expensive level, relative to its expected earnings per share, since the dot-com bubble was deflating in 2002, according to FactSet. For example, Intuit could try to match all the tax data its TurboTax customers provide with the credit-scoring data that Credit Karma holds. The service offers free credit scores and reports from national credit bureaus TransUnion and Equifax. Credit score Karma guarantees its service "will all the time be free". The deal will give one of the most well-known makers of personal finance software a website operator that focuses on helping people monitor their credit and find loans or credit cards. These not only represented a direct competition, but a disruptive threat, as Credit Karma products became younger and were built on a "free" premise (offering the products free of charge and instead making money showing users and selling relevant related products).

Thinknum tracks companies using the information they post online - jobs, social and web traffic, product sales, and app ratings - and creates data sets that measure factors like hiring, revenue, and foot traffic. The company has almost tripled the growth of its member base over the past five years and created a marketplace comprised of more than 100 financial service providers.

A spokesperson for Credit Karma said the company does not comment on rumors or speculation.

A $500 million secondary round in 2018, at a $4 billion valuation, helped put off those plans for a while.

"Credit Karma provides the consumer a certainty of finding the right product at the right rate", Lin said.

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