Q1 2021 Intuit Inc Earnings Call
My name is Lucy and I will be your conference facilitator at this.
Tom I would like to welcome everyone to Intuit's first quarter fiscal year 2021 conference call.
All lines have been placed on mute to prevent any background noise.
After the speakers remarks, there will be a question and answer period. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad if youd.
Well like to withdraw your question press the pound key.
I'll now turn the call over to Kim Watkins Intuit, Vice President of Investor Relations.
Good luck and thanks Lucky.
Thanks, <unk> good afternoon, and welcome to Intuit first quarter fiscal 2021 conference call I'm here with Intuit CEO to sound, good R&D and Michelle Clutterbuck our CFO.
Before we start I'd like to remind everyone that our remarks will include forward looking statements.
There are a number of factors that could cause intuit's results to differ materially from our expectations. You can learn more about these risks in the press release, we issued earlier this afternoon, our form 10-K for fiscal 2020, and our other SEC filings.
All of these documents are available on the Investor Relations page of Intuit website at Intuit Dot com.
We assume no obligation to update any forward looking statement.
Some of the numbers in these remarks are presented on a non-GAAP basis, we've reconciled the comparable GAAP and non-GAAP numbers in today's press release.
Unless otherwise noted all growth rates refer to the current period versus the comparable prior year period, and the business metrics and associated growth rates refer to worldwide business metrics a.
A copy of our prepared remarks, and supplemental financial information will be available on our website. After this call ends and with that I'll turn the call over just Hassan.
Great. Thanks, Ken.
They're all of you for joining us today.
I hope, you're all doing well.
We had a very strong start to fiscal year 2021 first.
First quarter revenue grew 14%.
Total revenue growth was driven by 13% growth in the small business and self employed group lots consumer group and Proconnect group revenue was in line with our expectations in a seasonally small quarter.
This is a great start to the year in a challenging environment, which reinforces the resiliency of our platform.
We're going more confident in how our business is performing in the current environment, although macro uncertainty remains.
We continue to see recovering trends across our platform with many quickbooks indicators back to pre pandemic levels there.
Therefore, I'm happy to announce that we will provide guidance for fiscal year, 2021, which Michelle will cover in more detail later.
At our September Investor Day, we share the acceleration of innovation led by our <unk>, then an expert platform strategy and our five big Matt Hi.
Delighting our growth potential.
Moving to platform immersion experience, we demonstrate the progress against each big Matt.
What I'd like to do is highlight a few of the innovations and how big that number one line did accelerate innovation across our platform net foundational did you have a better.
Our second Big bet is to connect people to access.
We're solving one of the largest problems our customers face lack of confidence by connecting people to experts with turbotax lives and Cook book size.
We grew the number of Turbotax line customers on our platform and nearly 70% last season.
Greetings from excellent product recommendations for like four points the.
The team is hard at work as we prepare for the season ahead.
We're also proud of the progress we've made with what looks like which is built on the same expert platform.
We already have more than 600 experts serving customers today with some of these experts serving both taps and small business customers.
Our third big bet is to unlock smart money decisions, we expect our pending acquisition of credit karma to be more important than ever as we work to help consumers save money.
Got out of debt and have faster access to money.
Back to complete the acquisition before the end of this calendar year.
Our fourth big buttons to become the center of small business growth by helping our customers get paid back to manage capital pay employees with confidence and grow in an omni channel world.
60% of small businesses struggle with cash flow.
Quickbooks cash help small businesses managed working capital by providing visibility into their financial picture, while providing them with the ability to move money instantly and ensure their money is working for them all by leveraging the built in accounting Oklahoma.
We launched Quickbooks Commerce from September to better serve the one milligram product based businesses on our platform by providing inventory and order management tools they need to grow their businesses in an omni channel world.
We've also identified 6.4 million product based businesses in the U.S., UK, Canada, and Australia that could benefit from this solution and we will innovate with high velocity to take advantage of this market opportunity.
It's still early with both Quickbooks cash and Petrobras, but we're encouraged by what we're seeing.
Our big bet, it's a disrupt small business midmarket with Cook books online that banner.
The features that we're introducing to individually tailor the offering to the needs of small businesses with 10 to 100 employees at a disruptive price point.
We doubled our quickbooks online a dance customer to 75000 in fiscal year 2020.
And we're continuing to build on this momentum.
We continue to pursue our premium apps strategy and introduced integrations with Salesforce and Hubspot.
We only have two of the largest CRM solutions available for our customers.
And finally, our first big bet revolutionized speed the benefit enables us to put more money in our customer's pockets eliminate friction and deliver confident that every touch point by using AI and customer insights.
Last year, we increased use of AI and increased the number of models deployed across our platform by over 50%.
Tripled the speed of delivery on our modern development platform and increased mobile application deployments by 60%.
We're building on this momentum this year as we innovate rapidly solve our customers' biggest problems.
Across all of our big bets, we're building momentum and accelerating innovation, which we believe positions us well from durable growth into the future.
We also believe the current environment continues to act as an accelerant studies that.
Most everyone is looking for virtual solutions small businesses are accelerating the shift to online and omni channel commerce.
And to both consumers and small businesses are looking for ways to put more money in their pocket.
So to wrap up I'm excited about the opportunity. We have ahead of us and now let me turn it over to Michelle.
Thanks to fine good afternoon, everyone for the first quarter of fiscal 2021, we delivered revenue of $1.3 billion GAAP operating income of $209 million versus $10 million last year.
Non-GAAP operating income of $334 million versus $129 million last year.
GAAP diluted earnings per share of 75 cents versus 22 cents, a year ago and non-GAAP diluted earnings per share of 94 cents versus 41 cents last year.
Turning to the business segments in the small business and self employed group revenue grew 13% during the quarter.
On line ecosystem revenue was up 24% during the quarter.
Gross floor slowed up from Q4, reflecting the lagging impact of lower retention during fiscal 2020, and the lapping of price increases which began during the middle of Q1 last year.
Additionally, Q4 included four points of growth from non recurring revenue from the Paycheck protection program.
Our strategic focus within small business and self employed is to grow the core connect the ecosystem and expand globally our.
Our longer term expectation remains 30% or greater on line ecosystem revenue growth driven by 10% to 20% growth in both customers and a RPC.
First we continue to focus on growing the core.
My accounting they grew 20 per cent fiscal Q1.
Mainly by customer growth and mix shift.
We begin lapping a partial or a price increase last year right.
Flow or your growth versus last quarter.
Second we continue to focus on connecting the ecosystem.
On line services revenue, which includes payments payroll time tracking and capital grew 17% in fiscal Q1.
Within payment revenue growth reflects continued customer growth along with an increase in charge volume per customer.
Within payroll, we continued to see revenue tailwind during the quarter from a mix shift to our full service offerings and growth in payroll customers.
Third our progress expanding globally added to the growth of online ecosystem revenue during fiscal Q1 total.
Total international on line revenue grew 51%.
[noise] desktop ecosystem revenue grew 3% in the first quarter well.
Well Quickbooks desktop enterprise revenue grew mid single digits.
Desktop ecosystem revenue growth also reflects the benefit of additional revenues from license updates and Tailwinds from previously announced price increases in various products not fully reflected in the year ago quarter. We do not expect these tailwinds to recur in future quarters.
Consumer group revenue grew 19% in Q1.
Looking ahead to the upcoming tax season, we continue to focus on our strategy to expand our lead and D. I Y transformed me assisted segment with Turbotax lives and disrupt consumer finance.
Turning to the Proconnect group revenue grew 21% in Q1 in line with our expectations.
Let me turn to our acquisition of credit Karma.
I'm looking forward to welcoming the credit Karma team to Intuit and we're excited about the unprecedented benefits we can deliver for customers.
I want to remind you that we continue to expect the acquisition to be accretive overtime.
However, credit Karmas business was negatively impacted over the last seven months as lenders tightened access to credit due to economic uncertainty related to the pandemic.
The business continues to recover after reaching a low point in June with monthly revenue in October close to free coded levels.
Therefore, we expect the acquisition to be modestly dilutive from non-GAAP earnings per share in fiscal 2021.
And neutral to modestly dilutive to non-GAAP earnings per share in the first full fiscal year after close in fiscal 2022, we're.
We're looking forward to all the innovation that we can deliver together for customers.
Turning to our financial principles, we remain committed to growing organic revenue double digits and growing operating income dollars faster than revenue.
We take a disciplined approach to capital management investing the cash we generate in opportunities that yield an expected return on investment greater than 15%.
We continue to focus on reallocating resources to top priorities with an emphasis on becoming an AI driven export platform.
These principles remain our long term commitment, but we recognize that we may not be able to achieve them in the current environment or directly following the close of the credit Karma transaction.
Our first priority for the cash we generate even investing in the business to drive customer and revenue growth, we consider acquisitions to accelerate our growth and fill out our product road map.
We returned excess cash that we can't invest profitably in the business to shareholders via both share repurchases and dividends.
We finished the quarter with approximate $5.8 billion in cash and investments on our balance sheet.
We expect to use approximately $3.6 billion of cash to fund part of the consideration for the credit Karma acquisition.
We did not repurchase any stock during the first quarter as we temporarily suspended share purchases in conjunction with the credit Karma acquisition.
Approximately $2.4 billion remaining on our authorization and we expect to be in the market in the future.
The board approved a quarterly dividend of 59 cents per share payable January 19, 2021. This represents an 11% increase versus last year.
As you May have seen we reached an agreement to settle the class action litigation regarding the IRS free fall program.
We have agreed to pay $40 million to put this matter behind us.
By entering into this settlement, which is subject to court approval, we're not admitting any wrongdoing.
Also as I shared at Investor Day, Intuit is the target of a law firm. He standard approach seems to involve making a demand that companies pay a settlement amount to the loss from instead of paying.
Fees associated with arbitration.
An increasing number of companies are facing similar attacks by the same law firm.
We recorded approximately $10 million in arbitration fees for Q1 fiscal 2021, and 14 million in fiscal 2020.
We'll be disclosing in our.
Our 10-Q that intuit could incur arbitration fees of approximately $400 million related to those claims in future periods.
We're in the process of defeating these fees and we believe this is an abuse of the arbitration system.
If the court approves the settlement that I mentioned earlier, we believe it may significantly reduce exposure today.
Arbitration claims being brought against us.
Moving on to guidance, while macro uncertainty remains we are growing more confident in how our business is performing in the current environment.
Our guidance for fiscal 2021 include revenue growth of 8% to 10%.
GAAP earnings per share of $7 to $7.15 and non-GAAP earnings per share of $8.40 to $8.55.
Our fiscal 2021 guidance includes 110 basis points of operating margin expansion as we're starting to see the leverage of our platform, which I shared at Investor day.
We expect a GAAP tax rate of 23% and a non-GAAP tax rate of 24% for fiscal 2021.
This compares to a GAAP tax rate of 17% and a non-GAAP tax rate of 23% for fiscal 2020.
These increases are driven primarily by state and IRS changes to the R&D tax credit and expected decrease to our excess tax benefits per share based compensation.
This equates to an impact of 53 cents to our GAAP earnings per share and 11 cents to our non-GAAP earnings per share guidance for the higher tax rate.
Our Q2 fiscal 2021 guidance includes revenue growth of 8% to 9% GAAP.
GAAP earnings per share of 89 cents to 92 cents and.
Non-GAAP earnings per share of one dollar and 31 cents to one dollar and 34 cents.
You can find our full Q2 and fiscal 2021 guidance details in our press release and on our factsheet.
One final note on Q2, we're lapping a full quarter of a price increase in Q2, which we expect to negatively impact small business and self employed revenue growth by a couple of points.
I am also shortly after we close the credit Karma acquisition, we will hold a call to discuss our revised guidance.
And with that I'll turn it back over to song.
Great. Thank you Michelle.
I'm very proud of our organization and all that we've accomplished together and I'm very optimistic about the future. So with that let's now open it up to your questions.
Okay.
Thank you again to ask a question. Please press star one on your Touchtone telephone again that star wondering if thats from telephone to ask a question to withdraw your question press the pound key please stand by while we compile procurement roster.
First question comes from the line of Ken Wong of Guggenheim Securities. Your line is open.
Great. Thank you for taking my question and then a really solid start to the year GAAP.
When looking at the guidance specifically be SMB guidance.
One might infer that you guys have removed the W and double W. macro scenario is off the table is that the right way to think about it or is it just purely that your business has held up much better and the.
The reality is are we still may run into those but if we do at all it will tilt towards this this new 8% to 10% lower end.
Yeah, Hey, Ken I'm going to hear from you know I think the best way I would describe it is one we're actually seeing how resilient our platform is and how small businesses are using our platform. In this pandemic I think to be positive that it just gives us confidence.
As we look ahead in terms of how small businesses are going to be able to maneuver through this occurred in buyer net so were you know primarily.
Primarily going off of that the key indicators that we see that are both leading and lagging.
And that is really what has given us confidence to provide the guidance that we've given you know of course, well have to wait and see how things play out with the health crisis and the impact of the economic crisis, but.
But given just what we're seeing in our business that's really what's informing the.
Our guidance that we share today.
Got it and if I could squeeze one in from Michelle Yes, you mentioned that the EBIT guidance is looks like the margin expansion will be give or take 100 110 basis points.
And you did previously mentioned seeing more leverage going forward is this the right level of margin expansion that we should be expecting.
As we look ahead.
Hi, Ken Thanks.
Good day to our financial principles that really is the long term commitment that we have and that includes growing revenue double digits and growing operating income faster than revenue and so we as I mentioned, yes, we do expect to see 110 basis points of expansion you know I'm, excluding credit Karma.
As I shared at Investor day, though as we continuously ball from more of an average driven expert platform, we do see opportunities for margin expansion across across APEA now and those opportunities can be in the areas of technology, where we're increasing the velocity of develop.
It meant on our actual technology platform that we can deliver faster and also using products and services across the company. We also see that in customer success, where we're scaling a common customer success platform that drives efficiency and effectiveness serving across all products.
And then also in go to market, we're able to leverage a common infrastructure. So that we can more effectively target customers and manage our sales and marketing processes. So we do continue to see opportunities for us to expand margin going forward.
Great. Thanks, a lot guys.
Thanks, Ken.
Yes.
Thank you. Our next question comes from Keith Weiss of Morgan Stanley. Your question. Please.
Excellent.
First question I was hoping to ask I'm not sure. If you guys are going to comment on this was just the current status update on your expectations on timing per credit Karma and number one and number two.
Whether all the sort of constituent pieces or credit Karma are expected to come along because there was some some speculation in the press that they might be selling off their tax business any chance you could comment on either of those.
Yes sure Keith good to hear from you you know first of all we do have pretty high confidence that we will close credit card Matt.
By the end of calendar year assets. The first point I think the second one is as you know we don't comment on.
Winners, but it's important to reinforce that that the whole premise behind the credit Karma acquisition was what we could do together to create a consumer finance platform and it wasnt for.
The tops business and so I think I will just leave it at that but nevertheless, we are really excited and can't wait to close this up so we can start doing amazing things together for consumers.
Got it if I could let me sneak in one last one since that lessons like half of an answer.
Yeah.
In me the broader platform within SMB, and when you're going into stuff like cash when you're trying to do more of that the commerce backend.
How does this change in your competitive environment and is have you seen a significant sort of change in kind of who you're going up against or sort of how you have to position that the solutions for.
These new these newer solutions.
Yeah, Hey, Thanks for calling me alphabetic [laughter] aren't you.
In terms of that in terms of your question you know its interesting timing and are we had quickbooks connect yesterday, which which is where we had thousands of small businesses and accounts like partners together and of course. This one was.
Far far bigger than it ever has been because it was all virtual and we rolled out a lot of our innovation, but particularly to answer. Your question. We also rolled out quickbooks Palmer with adequate cash to our to our customer base at least gave visibility and awareness and.
The feedback was just through the roof, because you know if I start with accounts accounts, we're very excited because now they can recommend cookbooks the product based businesses and they love how cookbooks Thomas works for product based businesses and they love. The fact that they can in essence, helping small business run their business through that.
The platform and to small businesses that were product based businesses, They love Palmer and by the way. They we got a raving reviews on Quickbooks cash that it's just that simple app, where you can send and receive money to be able to run your business and I would say from a positioning standpoint, we're not doing anything differently.
And in terms of going up against others. What we're really focused on is the customer problem and how we're raising awareness and impact our team has done some great work and the months in the year ahead, what you'll see as you know will be you know.
And that's it is going to market with digital assets that helps.
Small businesses understand that we can truly be the source of truth for their entire business versus the sorts of transfer their books and from an accounting lens and so it's more about what we're doing to raise awareness and shape the market versus doing anything differently, given who are going up against because it's frankly, it's no different than what it's been in the past.
Okay.
Got it thank you very much.
Hi, Thank you.
Thank you. Our next question comes from Michael turn.
W.F. Securities Your line is open.
Hey, there thanks for taking the question appreciate it.
On guidance and the decision to bring that back obviously the bigger focus now is on small business, but looking ahead to tax I mean, you previously mentioned tough comps from the strong top of funnel activity you saw last year still guiding for 9% to 10% growth as a starting point. There. This year can you just help maybe frame.
But the base case, there and maybe your confidence around our ability to to further monetize that uptick you saw this past year.
Yes, sure Michael a very good to hear from you you know first of all as as we talked about last quarter. You know are are.
Our biggest uncertainty was around the macro from by environment and the impact of small businesses and that you know how our platform what would perform and the times of uncertainty. So we've just learned a ton a one all the credit for small businesses in terms of just there.
Their passion to do whatever it takes to survive, but then too you know us better understanding how they use the platform.
To be able to deliver for customers and so given that and given that.
We started experiencing businesses opening across the company and our confidence in as an improved.
Improved level than it was a quarter ago with that said add to your question around tax.
No we're bullish about our strategy and you know we've we've continued to be bullish based on the results that we're seeing in particularly it's driven by two primary areas. One is who we focus on and then the second is how the who we focus on is you know our we've doubled down several years ago on serving investors.
Serving self employed and sort of the Latina ex market all of which we are underpenetrated and then to really going after the market the assisted market and those that are looking for more confidence with turbotax lives.
So, although our comps compared to last year, our tough comps, we do have confidence in our execution, our trajectory and that's really what informed the the guidance that we provided.
Got it that's all clear certainly a nice start to the year. Thank you all.
All right. Thank you very much.
Thank you. Our next question comes from Jennifer Lowe of VBS. Your line is open.
Great. Thank you I wanted to drill down on the international growth because of the 51% with a pretty impressive number and I think at analyst day.
You know you exited fiscal 20 with around 14% growth in subs I was obviously pricing has been a pretty strong level or so can you just maybe break down or sort of decompose the components of that 51% growth how much of that is potentially an improvement in the subscriber count that you're seeing there versus just continued success on pricing initiative.
Yes.
Yeah, Hi, Jennifer good good to hear from you you know, it's it's both very consistent with what we shared at Investor day.
We continued to see strength in the UK and Canada.
And where we're seeing some of the emerging markets that we're focused on like Brazil and France.
Really start they're acceleration even in this current environment and so really it's a combination of being very focused on who we pursue with what products. We pursue and then also really intentional about pricing and frankly, a lot less discounting, especially in places like.
<unk>, Canada, UK, where we created a network in fact with small businesses using our is recommending oxylate accounts using Watson recommending us and so we you know we don't have the discount as much to get our names loans. So it is very similar to what we talked about which is a combination of customer growth and a RPC growth from the RPC growth as you know.
A lot to do with what we're selling and and a lot less discounting.
Great and maybe just one more from me.
<unk>, a little while ago over the summer you know is as the world is changing with COVID-19, you like many other companies took some actions to to sort of de emphasize some of the less growth. The businesses and then no plan to bring back that head count over time and some of the growth your parts of the business I'm just curious.
Where you are in that process at this point and maybe specific to the margin guidance, what's the assumption of the pace of getting back into the hiring group on your business and cost structure.
Yeah sure you know it just for a quick contact now there are a couple of areas, where we felt like we needed the double down in context of the bets that said that Weve declared you know it's the type of talent that we are pursuing both in creating a modern operations in our customer success, but also.
The type of experts so we want to bring into customer success, and then and you know in technology. It was more systems engineers infrastructure engineers.
Cloud engineer that have lots of experience in building complex systems in the cloud and we are aggressively hiring in those areas because they ultimately are very important and serving the.
That's that's all that I talked about earlier in a lot of our innovation, we've been talking about like calmness cash advance I et cetera. So.
We feel good about you know the our hiring ramp and I think I would just really focused on that guidance that Michelle talked about which includes about a 110 basis points of margin expansion and all of our approach to hiring is all embedded in the guidance that we provided.
Great. Thank you.
Thank you Johnson.
Thank you. Our next question comes from the line of Sterling Auty of JP Morgan Your line is open.
Just one question from my side, you talked about the headwind from renewal rates from previous quarter impacted this quarter's revenue.
Can you just give us an update what did you see in terms of renewal rates through this quarter in the small business franchise.
Yeah, they're actually the sell.
Sell wins or the headwinds are in three buckets. One is overall reported on Investor day, our retention drops by a couple of points based on what we saw in March April may timeframe.
GAAP, along with lapping a price increase I'm actually not taking price action deliberately.
Plus the impact from acquisitions and those same month is really what impacted our our growth rates.
For the quarter that you see here our view is the strength of the second quarter I will be probably the lowest point of the year for the small business group for the same exact reasons that I just non Jim as you know, we don't breakout quarterly attrition and retention rates, we share a once a day once a year at Investor day. So those are the main drivers of it.
That makes sense. Thank you guys.
You're very welcome.
Thank you. Our next question comes from Brent Thill of Jefferies. Your line is open.
Thanks Hassan if you could just talk about the shape of the recovery in SMB that you've seen in the conviction level. You have that that continues can you just give us a sense of how are you seeing that progress and then I just had a quick follow up you were showing the turbotax full opportunity set your website you removed.
It seems really interesting you know in terms of the opportunity to outsource everything to to you.
Can you just walk through your and your intentions for that that solution. This year. Thanks.
Yeah sure Brian Good to hear from you in terms of the shape of the recovery is actually quite consistent with what we shared at Investor day.
You know may most of our indicators are back to a.
Pre pandemic levels, but charge volume is still as you know several points lower the number of companies running payroll is still several points lower so although things have recovered from the reality is things are still below pre pandemic levels, I think where we have more confidence our branches now we are actually seeing how our platform.
Is.
Really how resilient that isn't how delivering benefits for customers and he is very tough times plus the innovation that we have across the platform. So just seeing how our platform is playing out and seeing the impact of our innovation is actually what gives us even more confidence and from a recovery standpoint, not much has changed Neil in the last six weeks.
And what we shared at Investor day, it's.
So turning to your second question you know, we're actually when you think about transforming the assistant segment.
And really helping customers do their taxes no what confidence.
You know there are those that choose to do it themselves, but a one point in time, they may want to hit a button and get an extra day come talk to them review their return to gain confidence to those that from the beginning on may choose to have help along the way and pick turbotax line as an actual offering right off the bat and then.
There are those that may start and decide you know what I just want you to do my taxes for me, which is a lot of while we were testing in the a in the last several months and our plan is to actually launched a platform with all of those capabilities.
This coming tax season, which by the way is right around the corner.
Thank you.
Yeah. Thanks, Brian.
Thank you. Your next question comes from Citi. Your line of grade of Mizuho. Your line is open.
Thanks for taking my question.
I just wanted to ask about.
Since you are seeing in terms of new customer acquisition, because we saw this recent Q3 adjusted census data those record number of small business creation.
In Q3, I think 1.6 million versus average of 800000. So I guess most of these could be put instead he cook book customer. So how should we think about this opportunity and the current trend of this new customer acquisition.
Yes. It is good to hear from you in a really good question you know as I mentioned there are a few of our key metrics that have recovered quite nicely, but they're still below.
The pre kogas levels like charge volume and payroll acquisition is one that's actually rebounded quite nicely and and we're actually benefiting from some of what you are shared which is a more new business formation so that.
Probably a metric above and beyond all of them that is probably more in the green and we're benefiting from some of that recovery.
Great. Thank you.
You're very welcome.
Thank you. Our next question income from Brad Zelnick of Credit Suisse go ahead.
Hi, everyone. This is Joe on for Brad Thanks for taking my question.
It's a little bit specific but also philosophical here.
It's around Quickbooks Commerce and.
The specific topic of discounting I understand it's a new solution and you want mass market adoption, but when I go to the website shows 92% off monthly list price for the first 12 months of service I've never seen anything like that in software before I guess, what's the thought process share, especially as it sounds like you're being more thoughtful from often.
I'm asking for discounts in other areas of your business.
Yeah sure Yeah I'm good to hear from you and day. Good question, just two things I would say a one is.
We are actually very intentionally qualifying customers on top of the funnel add to ensure that we only bring in customers that weekend and deliver against our expectations. Given just we literally just launched that the platform interesting enough one things that were seeing as customer one eight customers want to use it so bad they go back to the top of the funnel and change their answers so they can.
Qualify for us or the demand is quite high I think you may have fallen into one of our test cells. There's a lot of different things that we're testing different business models different pricing. So I don't exactly know what you fell into but that sounds like you fell into a tough sell.
Got it. Thank you the other bit I guess around the 9% to 10% I'm, sorry, the quickbooks and small business growth scenario there.
Just thinking about exogenous factors that may result in upside or downside does.
A hypothetical government stimulus package.
How does that help turn a business creation, how to think about that flowing through to your model.
Yeah, you know that the stimulus I would say no pun intended is not really going to be a big stimulus for small businesses its not going to make a difference between them going out of business or not I will hit on one element of your question net which is the the range of the guidance you know the low end of the guidance is.
It's really driven from a you know how restricted the state's becomes how restricted the country becomes Ah you know beyond what we're all seeing which as you now know longer. Although every ex state is a little different you no longer can go into a fitness center. It's only if it's outside you can't go eat inside at all.
Now schools like the New York Public School, just closed against everybody has to go work from home that has implications for the local economy. So that the low end of the guidance is more how restricted things yet and then the impact on on small businesses, because we feel quite confident in our execution and of course. The high end is you know the I would say that the.
The trends that were experiencing and seeing right now that's how we thought about it.
Got it very helpful. Thank you.
Yeah very welcome.
Thank you. Our next question comes from the line of Arvind Ramnani Piper Sandler Your line is open.
Hi, Thanks, Thanks for taking my thanks for taking my questions.
Just wanted to yeah, we're not one of the tone changes I picked up a day or recent analyst.
Analysts day.
Because I'm kind.
Kind of really focusing on increasing revenue per customer.
I just wanted to see if there was a you know kind of something something that they're looking to do to really increase or revenue per customer and and.
Oh, you are planning to approach it over the next couple of years.
Sure our army I'm good to hear from you. Let me just play back your question because you were cutting in and out I want to make sure I'm answering the question that you're asking I think your question was we talked about the revenue per customer.
Increasing at Investor Day, and you're just wondering you know how we plan to achieve that I played out that correctly, yes, yes right.
You know I would say a couple of Hoover messages. The first one is it because of the incredible innovation and the acceleration of the innovation a from the team that's really going after delivering benefits that that customers care about most certified decompose not just with a couple of examples you know what I would share is.
Look books live is you know has the potential to increase revenue per customer. The volume is not of course at the same rate, but the revenue per customer is when you look at Quickbooks advance, which.
Tom as well that serving a much larger customers and that has an opportunity and does move the needle when it comes to revenue per customer and then there's the services. The services that go with Cook book side, the services that go with I Cook.
Cookbooks advance and then within all the services that we provide payments payroll Ci sheets and now with the integration of T. sheets, and payroll and payroll full service these services and the innovation and the impact themselves also deliver more revenue per per customer so.
When you put all of those together.
Those are the biggest drivers of increased revenue per customer, which is just driven by the innovation that the team is delivering for customers.
Terrific and just a quick.
Second question from me how current from it was it is a relatively new integrated CLM solution should.
Should we expect this to be a big revenue growth driver or is it just another proof point of a differentiated offering.
I think it's just another important innovation and benefit for customers on our Quickbooks advance platform and when you think about these customers is I'm, assuming you're talking about like Hubspot and Salesforce and and you know these customers that are between 10 to 100 employees and even larger than that they are.
Looking for for CRM solution, So we invested.
Quite a bit of a time with all use hubspot as an example, the really deeply integrated in fact I was giving the demo several days ago. When it's a really cool experience for our customers. So this is it just positions us and allows us.
So not only serve our existing customers will cook books at mass, but also penetrating net new customers.
Great. Thank you very much.
Youre welcome.
Thank you. Our next question comes from the line of Scott Schneeberger of Oppenheimer. Your question. Please.
Oh, Thanks, good afternoon.
I was hoping no sign or Michelle if you can elaborate please on the the mix shift driving in a in a quick books on non accounting if you could delve in a little deeper primary drivers and sustainability you foresee there. Thanks.
I sure Scott I'll jump and then if there is anything Michelle wants that's you can jump in you know, it's very similar to what I just shared with all of them first of all I'll start with the headline that it's very sustainable we're just getting started.
And when you when you look at the the mix it gets driven by the platform with cookbooks line. It gets a another one is cookbooks advance on both of these com world with them services like payments and payable and on T. sheets, and then apps like Hubspot as an example.
That allows us to drive.
Drive that mix shift and so those are just examples I'm cookbooks, commerce, which really gives us the opportunity to serve product based businesses that that we've served for years in desktop million product based businesses that we have on desktop now we have an opportunity to serve these customers with cookbooks. Tom are so those are the.
The drivers and then the last one I would say its countries, where we get the product market fit like Canada, UK and we have an opportunity to expand the services that we provide.
And at a high at higher prices and don't have to discount as much because our names are out there the experience. It goes viral and therefore more customers want to use it. So those are the drivers of the mix shift and day RPC chefs and that's quite durable.
Thanks for that and then as a follow up I'm just curious just from viewpoints on small business failures. Obviously, you feel confident enough to give guidance and we've heard a lot of good things in discussion stimulus as well, but just anecdotally what are some of the things that you're seeing and do you feel that you know the.
The economy is around the corner to the extent you can speak to that thanks.
Sure you know two things I would say I think the most important lover.
For small businesses as we gotta lead thoughtfully through this health crisis, because leading thoughtfully through the half health crisis, I will enable the country and the globe to actually bring jobs back and reduce unemployment those are the two largest levers that will impact a small business failures.
And as we talked about at Investor Day, our we are retention dropped a couple of points because of the failures. You know that we that we experienced I think those two levers that I mentioned plus at fiscal stimulus not just more stimulus money, but a fiscal stimulus along with getting out of those health crisis.
And ultimately getting back to lower unemployment is going to really drive the long term health of that small businesses.
Yes.
You're welcome.
Thank you. Our next question comes from Kurt return of Evercore. Your line is open.
Oh, yeah. Thanks, very much let's Hassan I was wondering if you could dive a little bit deeper into the sort of announcement today with Hubspot and maybe just your view on whether or not you know small businesses are now looking a little bit more from a one stop shop from you guys. Obviously have financials. Your EPS commerce and this obviously your experience you into CRM and marketing with them. So.
Is the feedback that you've been getting that this is like we want only deal with one vendor to really help us manage our business from customer acquisition through her or financing through commerce, I mean that because that's where it sort of seems like and do you think the markets moving there in a faster way due to curve it. Thanks.
Yeah, you are very welcome you know the I would I would focus more on the customer pain that we are after you know one of the things that we're really focused on is one to help our customers grow and to to be able to serve product based businesses because even in service based business as you know traditionally we've.
Not solve the problem of helping them grow and get more customers well and so this integration you know with Hubspot you know with sales force is really an example of solving the problem solved with our platform. We can help you grow your business. We can help you get paid we can help you do payroll we can give you access to cap.
At all we can help you with time tracking of course now we can help you set up on multiple different channels and be able to run your product base business. So we're really focused on the customer problem and one of the thing I teach probably more than that word wants to hear it at Intuit is lets not focus on just from.
Adding a one stop shop, because that's not how a customer thinks the customer things I need. This all my problem can you solve it for me with that said, we are seeing more and more customers began to use our platform to be able to run their business and we're seeing more and more customers tell US Hey, you know can you do some integrations with the the falling applications to be able to help me gross.
All my business. So those are that it's very customer back driven and you know it's it's now you know several years of us being in the cloud where we're building out the platform to the point, where you don't need to go anywhere else you can run your entire business on our platform, which is exactly the same thing were looking to do on the consumer side, we want to consumer platform or you can do.
Your taxes get early access to your paycheck connect the financial products that are right for you and truly reach a financial freedom.
And so it really is it's consistent with what we're trying to do across the company for customers.
That's great. Thank you very much.
You're very welcome.
Thank you. Our next question comes from Kartik Mehta of Northcoast Research. Your line is open.
Michelle how are you.
[laughter].
Brian you've talked about quickbooks business and not raising price is obviously considering the economic environment. We're in do you think that same philosophy will apply to the tax reserves or is the tax burden is different and do think there are some different leverage points and price would be available for the upcoming season.
Yep Carter good to hear from you you know I I wouldn't think about this in a couple of dimensions Bose.
Gross and small businesses, we actually now have offerings that are disruptive on day. This up higher price alternative. So when you look at Quickbooks lives. The the price that customers have to pay with cookbooks lives.
Actually a lot less than one day pay with if they have to go directly and find their own.
Bookkeeper enrolled agent.
And you look in Quickbooks advanced we are.
We're actually at a disruptive price, but yet have a lot of opportunity in terms of what we can do with pricing same thing goes for Turbotax line. You know were a much lower cost alternative than going to you know.
Somebody's home more store to get your taxes done. So I think the way I would I would think about it is there are segments of customers. We may intentionally given the environment and not do price increases, but then there are certain segments of the customers, where we will because we'll actually very disruptive and far lower price alternatives. So that's the way we approach it and think about it internally.
Thanks Hassan I really appreciate it.
Yeah. Thank you.
Thank you. Our next question comes from Chris Merwin of Goldman Sachs. Your question. Please.
Okay. Thanks, very much for taking my question I.
I think you all talked about the online ecosystem to getting back to 30% growth over time and I guess, if we if you look at the 21 guidance for for the segment as a whole and we assume desktop is flat I think it would imply that quickbooks online would be maybe high teens growth for per for this coming year.
Sounds like the trends are very much getting back on track for for Quickbooks online to just curious how you think about the progression back towards 30% plus growth overtime for that segment. Thanks.
Yes, sure Chris you know first of all as you heard Michelle mentioned, our we have every intention over time to get to back to a 30% plus online revenue growth and ER and that will happen, but then really by two levels. One is our continued innovation to deliver value and the per.
Portfolio, we now have been too it's a recovery of small businesses. Although you know our platform has demonstrated to be resilient. It's important to know that we're not out of this pandemic and a and when we need to make sure that we get through this health crisis, and you know get unemployment back back down and get to a more healthy economy and I think the comment.
Nation of our innovation and getting to a better place in terms of the economy will allow us to get back to that 30% and ER and a lot of that is what informs the guidance that we are that we provided.
Okay, great. Thank you and then maybe one just quick follow up I wanted to ask about Quickbooks advance just in terms of how that's doing relative to your expectations in the current environment or are you seeing customers holding back on some of the larger system upgrades I'm say relative to SMB, I mean or or is that not the case just just curious how you would characterize the this free.
Interesting in that business right now.
Yeah, I would say, it's actually doing well you know at an Investor day. If you recall, we talked about this and now we have 75000 customers and that's 100% growth year over year.
And then we're seeing both customers upgrade at to Cook ex advance that our existing customers and we're actually seeing new customers come in that.
That has been you know using a bunch of different apps and manual processes and and they use cook is advancing they see it as an advantage to be able to grow their business. So we're actually and because its disruptive in terms of price versus alternatives.
We are not seeing any hold backs and that we're actually seeing the benefit of what a platform can do that's a disruptor, especially those small businesses that are you know.
Deciding you know, let me manually running my business is no longer going to work I need to move to the cloud, especially because of the cobot environment and Cook puts advance becomes an accelerant.
Okay, great. Thanks, so much.
Very welcome.
Thank you. Our next question comes from Michael Millman of Millman Research Your question. Please.
Okay. So if I send the numbers are roughly correct, there's about 100 million taxpayers, who pay about a quarter of a trillion census was.
As a team like Turbotax day.
Well there's.
Oh for zero return just kind of wondering how.
End of <unk>.
Opportunity maybe for you what.
What if anything you're doing now to get some of this money funneled into something that's happening.
Oh hi.
Our cash.
Hi, Alex granite, Greg calmer doing anything.
Does the IRS kind of stand up there and say don't you Dare food with all this money maybe you could help us think about this.
As share Michael Yeah, you know, let me let me take a shot at this to see if this addresses your question first of all we do see a very large opportunity, but the way we look.
Look at it is that there are about 86 million people that go to somebody else to have their taxes done and and they spend about $20 billion or more to get those taxes done. We just see a huge opportunity to be able to serve those customers with a digital platform, where we can bring that helps to there.
You know plays of home or office I had their convenience at a much lower price and provide them the confidence that they need to get the maximum refund. So we do see the same opportunity that that that you do our figures are a bit different than what you were articulating, but that's a that's really what we're pursuing with our lives on the platform.
I was actually kind of thinking of no refund.
Don't pay more than you need to.
Invest that money.
Okay got you I I think I understand what you're asking you know that the whole purpose of.
Our vision of what were what we want to do to create a consumer finance platform is to give customers consumers choice, it's to give them choice to connect to financial products like loans and insurance and credit cards that are right for them is to be able to give them choice when they get their tax refund if they want to put it in a high yield savings account I'd say.
One early access or their tax refund ex actually want early access to their to their paycheck I to give them more choice because you know we have the ability with using their data with their permission.
To give them insights that otherwise they wouldn't get plus by the way if they wanted an expert to help them who will provide some advice. We can also help them, but that's our vision of what we want to add what we want to do with our big Matt three which is unlike smart money decisions when of course, that's where credit Karma comes in and can really feel that that vision and we're excited about it so.
You're thinking more after.
After the after tax payers get.
The refund rather than saying.
You shouldn't there shouldn't be a refund you should be.
Using that money more productively.
Lending into the IRS yeah.
Yeah, well the refund and the consumers money. So what were the money that's theirs and they earned it and when they should get a refund it's about how we help the consumer with what they can do with our refund is really our our mission has interest quickly.
The guidance you gave that is before credit Karma how does that include.
Net income.
Yes that is excluding the credit card not because we have not yet closed credit Karma and as Michelle mentioned once we do close credit Karma, we will actually have another call and we will update our guidance and it will include credit Karma. Okay. Great. Thank you very much you're very welcome be safe.
Thank you you too.
Ladies and gentlemen, I'm not showing any further questions would you like to close with any additional remarks.
Yes, I'll be brief. Thank you every one for your question and I wish everyone that celebrates Thanksgiving, a wonderful and safe Thanksgiving and that will speak to you very soon and enjoy your holidays. Thank you.
Ladies and gentlemen, thank you for participating this concludes today's conference call.
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