While Intuit’s second-quarter results contained few financial surprises, the tax software company reported dramatic growth in QuickBooks Online customers.
During the quarter, it added more than 100,000 new subscriptions. That brings the total to 841,000 subscribers worldwide. U.S. growth reached 50% (compared with 43% in the first quarter); international adoption exploded by 170%.
What’s more, almost 80% of the customers signed during the second quarter were either new to Intuit or to the tax software category as a whole, said Intuit CEO Brad Smith. If the company maintains the current pace of growth, it could hit 975,000 to 1 million subscribers by the end of this fiscal year. For perspective, approximately 4 million customers use Intuit’s desktop QuickBooks application. Sales for that version slipped 10% in the quarter.
“By and large, our cloud momentum is building,” Smith said in a conversation shortly after the company’s earnings call Thursday night. Some of the fastest growing regions for cloud adoption during the first half: Canada, the United Kingdom, Australia, and India.
Intuit’s long-term goal calls for 2 million QuickBooks Online subscribers by the end of its 2017 fiscal year.
Like many legacy business software companies, Intuit is undergoing a painful business model transition as it introduces cloud-hosted versions of its software applications.
By the end of its 2017 fiscal year, it wants 73% of its revenue from recurring subscriptions. Aside from introducing new cloud services for tax, payroll and other accounting-related processes, Intuit now recognizes revenue for its desktop software differently: instead of counting each license upfront, it spreads that revenue over three years, Smith said.
This is the big transition year. Translation: Intuit anticipates single-digit growth over fiscal 2015 rather than the double-digital expansion it has typically reported. For the second quarter ended Jan. 31, revenue grew by just 3% to $808 million. Its GAAP operating loss almost doubled to $98 million.
Intuit’s full-year guidance remains essentially unchanged: it anticipates revenue of $4.3 billion to $4.4 billion, off 3% to 5%.
This item first appeared in the Feb. 20 edition of Data Sheet, Fortune’s daily newsletter on the business of technology. Sign up here.
