Summary

· AI lowering switching costs poses the biggest threat to QuickBooks

· Management discloses less when the numbers don’t look good

· Growth is coming from price, not customers

Intuit operates four separate segments:

1. Global Business Solutions – This segment serves small and mid-market businesses globally. The products primarily include QuickBooks, Intuit enterprise suite, and Mailchimp.

2. Credit Karma - Targets consumers looking for financial products with personalized recommendations.

3. ProTax - Serves professional accountants in the US and Canada, helping with tax preparation and filing.

4. Consumer – Serves consumers directly by helping customers get their taxes done through TurboTax products.

I’m skeptical about Intuit because I’m not sure what the landscape is going to look like in 10 years with AI now in the picture, but I decided to take a look anyway. I quickly realized QuickBooks’s competitive advantage is a bit more involved than just being the software small businesses like to use. Their advantage comes from it acting as the foundation for modern accounting in the US. The platform is taught in most universities, if not all of them, and employers expect accountants to know how to use the program. When businesses use an outside accountant, that accountant will charge the business a fee if they don’t use QuickBooks for the inconvenience of learning new software, if they choose to offer them their services at all. The professional accountants have a huge influence on the software businesses use (the same ones that were taught to use QuickBooks in school).

The nature of the business is naturally sticky. Revenue is subscription based, and businesses tend to stick with their current system once it’s set up. QuickBooks is benefiting from serious customer captivity advantages. Businesses and accountants are likely to keep using and recommending the software even if something better comes along. This was summed up on episode 385 of The Accounting Podcast: ‘no one gets fired for recommending QuickBooks’ referring to professional accountants.

Still, AI worries me because the technology is only going to lower switching costs and may eventually become frictionless. The moat isn't the software itself, it's the ecosystem built around it. Universities teach it, employers expect it, and accountants charge you for not using it. But that whole structure exists because accounting software is hard enough that switching is expensive. If AI makes migration and data mapping close to free, the accountant's objection gets weaker, and the moat erodes.

Free cash flow has been growing healthily but slowing slightly. QuickBooks’s FCF is probably slightly understated because management disclosed Mailchimp’s revenue has declined slightly the past two years instead of the slight increase in my model. I left it as is because 1. It doesn’t make a material difference, and 2. It’s additional conservatism. I’d rather undershoot the number a little than try to be precise.

GBS = Global Business Solutions

MC = Mailchimp

OI = Operating Income

SBC = Stock-based Compensation

NWC = Net Working Capital

The yellow highlighted cells for QuickBooks operating income for 2023 through 2025 are highlighted because management removed certain technology and customer success functions from segment operating income and put them in Other Corporate Expenses. As a result, those three years are obviously not comparable to the previous four, but the figures were adjusted for with my best judgment to calculate FCF.

Management attributes Global Business Solutions growth to higher overall effective prices and mix shift. They mention customer acquisition, but the numbers suggest it’s not as impactful. I would expect this growth to slow down meaningfully sometime soon because they’ll eventually hit the wall with price increases and run out of people they can convert.

The cells on the right are highlighted because 2024 is the year they stopped disclosing QBO customers. Instead, online ecosystem growth is disclosed. 2024 and 2025 reported 6% and 5% growth respectively, so I estimated that QBO was responsible for roughly half. Interesting that management decided to make customer growth opaque just as it slowed.

International revenue is growing moderately. The annual report discloses that for the years 2025, 2024, 2023, and 2022, international revenue made up 8% of total revenue. In 2021, 2020, and 2019 it was 5%, 4%, and <5%. Recently, international revenue as a percent of total revenue has stayed flat but total Intuit revenue has been compounding at double digits. Something to keep an eye on.

QuickBooks Online customer retention was disclosed in 2018, 2019, 2020 as 79%, 79%, and 77% respectively. It’s up to the reader to believe whether this omission is meaningful. I would be pessimistic. It’s been my read that management likes to talk about things that are going well and avoids the things that aren’t.

TurboTax has enjoyed a strong market share for a long time but now they’re facing new competition. Management is open about losing on price for the most sensitive DIY filers earning less than $50,000 a year. This is an important group because they make up their next generation of paying customers. Giving that up is accepting a worse decade for better metrics today. Free filers switching software causes the average revenue per user (ARPU) to increase because nonpaying filers are still included in the denominator. In short, management can report better numbers while the business performs worse. You can see below the difference between paying ARPU growth and Total ARPU growth.

*2025 investor day slide deck

Mailchimp hasn’t been performing well recently either. After the acquisition, Intuit reported segment results both including and excluding Mailchimp’s performance and later stopped disclosing the ‘excluding Mailchimp’ numbers after the acquisition lapped.

As revenue has been regressing, the “excluded Mailchimp” segment numbers have returned. I guess so that Mailchimp doesn’t suppress the numbers too much.

Since Mailchimp’s underperformance, management stated that they are committed to turning the business around double digits. From the Q1 2026 earnings call “We continue to target double digit growth for Mailchimp exiting fiscal 2026. We’re seeing strong results from our mid-market sales team within Mailchimp, with several recent larger customer wins, as well as increasing retention rates in the mid-market segment.”

But in Q2 2026 they “now expect Mailchimp to return to double-digit growth some time beyond fiscal 2026.” I wonder what happened.

--Postscript, August 25, 2026. Intuit reported fiscal 2026 results three days after I finished this. Starting fiscal year 2027, management will stop excluding share-based compensation from non-GAAP earnings to better reflect their operating business. Not many managements would volunteer that change, especially in the same release as a guidance cut. QuickBooks online accounting revenue grew 23% but total online paying customers grew only 3% for the year. Growth is coming from price increases not customer acquisition, which is the strategy I expect will lose steam. Guidance expands on this. Fiscal 2027 revenue growth is expected to be between 9% and 10% compared to the 14% they just reported. TurboTax is expected to grow 2% to 3% with management committed to winning back price-sensitive filers by “making the entry experience more competitive and clear on price.” Mailchimp will also be reported separately from Global Business Solutions with guidance expected between -1% and 0%.

Conclusion

At the end, I decided to keep most of my attention on TurboTax and QuickBooks because they’re responsible for roughly 80% of the company’s revenue. Mailchimp, Credit Karma, and ProTax wouldn’t have changed my decision. Like I mentioned earlier, AI threatens the ecosystem QuickBooks is built on. What I can't price isn't whether that happens, it's when. Moats built on training and professional habit decay slowly and unevenly, and the difference between five years and twenty-five is most of the value at $358. I don't know which one it is, and I don't think management does either. So I'm not interested at any price.

MYRG Group is an electrical construction provider holding company operating in Canada and the United States that serves the electric utility infrastructure and commercial & industrial construction markets. They specialize in design, engineering, procurement, construction, upgrades, maintenance, and repair services, with a particular focus on construction.

They operate through two business segments:

• Transmission and Distribution, servicing electric transmission and distribution networks, and substation facilities

• Commercial and Industrial, providing electrical contracting services for commercial and industrial clients

Each segment serves different customers:

• T&D: big players in the electric utility industry, including investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners, and other contractors

• C&I: general contractors, commercial and industrial facility owners, governmental agencies, and developers

How does this business actually make money?

Jobs are awarded through a bidding process. For larger and more complicated jobs, financial strength and clients’ confidence that MYRG will remain solvent during the job are increasingly important. The company’s strong financials and low debt levels go a long way toward that and allow the company to obtain adequate surety bonds that smaller companies don’t have access to.

Competitive Advantages

I’ve identified two advantages:

1. Their financial strength. MYRG has low debt levels and recently significantly more free cash flow. This allows them to bid on more complicated and larger jobs that smaller contractors don’t have access to. They’re also able to acquire larger surety bonds, which are paramount for securing large projects.

2. They have a centralized fleet management group. This is an internal group responsible for dispatching trucks and equipment to different subsidiaries. This allows them to save on rental costs, improve asset utilization, and eliminate waste.

Although these advantages are real, financial strength and benefits of scale can be copied by successful competitors.

Industry Tailwind

The specialized electrical contracting business is a cyclical industry. Data center construction, grid spending, and transmission investment are all increasing, and the rising tide seems to be raising all boats. After researching MYRG’s competitors, I found that they all showed very similar improvements over the same timeline, and because of that, I believe these improvements are not company-specific and are a result of increased demand across the overall industry.

MYRG's ROIC before 2020 was never higher than 9%. Since then, it’s averaged 15% and has reached as high as 19%.

IES Holdings is a similar story. Prior to 2020, ROIC was in the mid-teens on average and has recently reached levels of 45%.

Comfort Systems USA, prior to 2020, had an average ROIC of roughly 20% and has since reached 61%.

Margins throughout the decade have stayed roughly flat. I interpret this to mean that the industry is benefiting from higher demand, and businesses are enjoying higher asset utilization of their equipment, leading to higher returns on capital.

Capital Allocation

In the past decade, MYRG has spent $264 million on acquisitions. Net income increased from $21 million to $118 million. Revenue increased from $1.1 billion to $3.6 billion, and goodwill grew from $46 million to $115 million. They’ve done all of this while keeping shares outstanding roughly flat. The amount of revenue growth relative to acquisition spending suggests that the majority of growth has been organic.

Financial Characteristics

Revenue is growing healthily. The company has more than tripled its revenue over the past decade with a 10-year CAGR of 12%, and an 8.8% 5-year CAGR. MYRG has also realized an increase in free cash flow; however, it is less consistent than I would like to see. The upward trend is driven by three very strong years from 2020 to 2022 and 2025 as an exceptionally strong year, while the other six years generated low or negative cash flow. Overall, the business looks like it’s improving, but likely because of improving industry conditions.

Gross margins have been stable at around 10%.

Debt levels are conservative. For the past five years, total debt to shareholders’ equity has been less than 20% on average, and total debt to EBIT has fluctuated between 50% and 60%.

Risks

The primary risks I’ve realized are:

1. Competition

2. Weakening demand

3. Skilled labor supply

I haven’t found evidence that MYRG is gaining market share, and besides expertise and capital, there isn’t anything keeping outsiders from competing with MYRG. As we’ve seen, the business seems to be benefiting from a booming industry, but I wouldn’t be confident that this elevated financial performance will sustain as new competitors enter the market.

If spending on technological infrastructure, data centers, utilities, industrial construction, and other electrical-related contracting work decreases, then MYRG and similar companies must suffer.

If MYRG must expand significantly to meet new industry demand, skilled labor may become a serious bottleneck.

Conclusion

MYRG seems to be a good business that benefits from a booming industry. The company’s scale advantage allows it to utilize its assets more efficiently and bid jobs at more competitive and accurate rates.

What keeps me from investing more time in researching this business is that I haven't been able to identify a strong moat competitors can’t copy. Also, before the increase in demand, returns on capital stayed below 10%, suggesting the business lacks the pricing power or competitive advantages necessary to generate meaningful returns.

What would change my mind is if I learned that large projects were being concentrated in a small group of contractors, MYRG being one of them, or the only one, with a sustained high ROIC above historical levels after the industry growth normalizes.

For now, this is a pass for me.

Casey’s General Store is a convenience store with self-serve gas stations that specializes in small towns across the Midwest. Casey’s has built a distribution and operating model that allows it to profitably serve communities that are too small to attract larger competitors. Casey’s stores differentiate themselves by offering fuel and a wide selection, including groceries, auto parts, and fresh food. Close to 81% of their stores are in towns with fewer than 20,000 people, with 56% in towns with fewer than 5,000 people.

Casey’s primary advantage is their logistical infrastructure. Casey’s owns three distribution centers and their own fleet, which allows it to stay profitable while serving smaller towns.

The business appears to benefit from favorable working capital dynamics, with a substantial portion of inventory financed through supplier credit. Inventory has been steadily increasing over the past decade, and the accounts payable-to-inventory ratio has averaged roughly 1.27, while operating working capital has remained close to zero or negative. This is a significant advantage because they can fund operations with minimal cash investment.

The 5 and 10-year CAGRs for revenue are 12% and 7%, respectively. Most of that growth comes from acquisitions and new construction, as they acquired 235 stores and built 35, while same-store sales grow only a little each year.

The 5-year ROIC is 12%, and incremental ROIC is just 7.2%, which may indicate diminishing reinvestment opportunities, but additional research would be required to be sure about what’s causing the decrease, whether it’s temporary investment spending, acquisition integration, or simply weaker investing opportunities.

Free cash flow has substantially improved in the past 5 years, and the free cash flow conversion has been between 0.8 and 1.5.

Risks:

What concerns me is the industry’s highly competitive nature. It’s difficult to differentiate outside of location, operational efficiency, and scale. If Casey’s logistics advantage shrinks or competitors improve their economics in smaller markets, returns on future investment could diminish.

Conclusion:

Casey’s seems to be a good business with meaningful competitive advantages. Its logistics infrastructure and favorable working capital dynamics allow it to serve smaller communities profitably. However, growth is primarily acquisition-driven, and incremental returns on capital are not high enough to justify further research at this time. I’m going to put Casey’s on a watchlist, keep an eye out for improving returns, and reassess if the time comes.

At the time, American Express was trading around $230-$250 during a period of economic stress around tariffs. What initially caught my attention was Amex’s primary revenue source: discount revenue. American Express makes money by charging a percentage of the total sale value to merchants every time a consumer swipes their card. I really liked this because, regardless of what happened during the tariff scare, people are still going to spend money and continue using their credit cards. In my mind, if prices increased, American Express could benefit because if the average transaction value increased, then Amex would make more money off every swipe, assuming transaction volume stayed the same, but I was betting volume would eventually rebound if there was an initial pullback.

One of their competitive advantages is how Amex is positioned in consumers’ minds. Their brand is built on their customer relationships and having a strong reputation for putting their customers first.

Another advantage that Amex enjoys is its closed-loop network. Building a payment network is difficult, and a closed-loop network is even harder. Even if a competitor spent massive amounts of capital trying to create their own payment network, it would still be a heavy lift.

American Express has a top-tier customer base, composed of high-income, creditworthy individuals. Until recently, they were primarily focused on older, higher-net-worth clients, but they’ve expanded into the younger generations, while still maintaining strong credit standards, to capture a higher lifetime value. This told me that the company still has a lot of room to grow without sacrificing the quality of its lending.

American Express focuses very heavily on travel, so I was surprised to see that during COVID, when effectively the whole world was shut down and nobody was traveling or vacationing, they still managed to show a net income of $3 billion. During that time, I would have expected a massive decline in total active cards, but that’s not what happened. Between 2019 and 2020, total cards in force only declined about 2% from 114 million to 112 million, which I thought was negligible considering the circumstances. To further the point, the only time in the past 20 years that American Express experienced a decline in total cards in force was in the years 2009, 2016, and 2020, with an average increase of cards outstanding of 4% annually.

Before I made my initial investment last April at an average price of roughly $243 per share, I performed a discounted cash flow analysis with these assumptions: Discount rate 6.5%, Revenue growth 3%, Expenses growth 2%, Terminal value 1%. My model gave me a net present value of roughly $242.

I thought there was a reasonably high probability of achieving an attractive return over the following year. My reasoning was based on my belief that the overall condition of the business did not deteriorate because of the tariff scare, and if consumer prices were going to increase dramatically because of tariffs, I believed American Express would be in a stronger position long term.

Reflecting on that choice, I think I was generally moving in the right direction, but I also missed some very important points:

1. I focused too heavily on net income, and I didn’t spend enough time analyzing free cash flow and what Buffett calls “owner’s earnings.”

2. I didn’t incorporate a margin of safety.

3. My discount rate was too aggressive. I believed Amex carried less risk than most other banks but the discount rate was still too low.

4. I didn’t spend enough time analyzing how management was allocating capital, and I wasn’t paying attention to return on retained earnings.

5. I did not clearly define what would have to go wrong for the investment thesis to fail. At the time, I mainly thought risk would involve damaging the brand or lending to lower-quality customers, but I didn’t think deeply enough about broader structural risks to the consumer credit industry itself, such as changes in regulation and potential caps on interest rates.

Looking back, I think I made a good choice with the information that I had available at the time, but I’d say I got a little lucky considering the mistakes I made and the information I overlooked. Overall, it was a good first experience investing my own money, and I’m going to carry over the lessons I learned this time into the next one.