Q3 2022 Intuit Inc Earnings Call
Good afternoon, My name is Latif and I will be your conference facilitator.
At this time I would like to welcome everyone to Intuit's third quarter fiscal year 2022 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 you would like to withdraw your question press the pound key.
With that I'll now turn the call over to Kim Watkins Intuit's, Vice President of Investor Relations Ms. Watkins.
Thanks Latif.
Good afternoon, and welcome to <unk> third quarter fiscal 2022 conference call.
I'm here with Intuit CEO , Tom Good RSV and Michelle <unk> our CFO .
Before we start I'd like to remind everyone that our remarks will include forward looking statements.
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 2021, and our other SEC filings all.
All of those documents are available on the Investor Relations page of Intuit's website at Intuit Dot com.
We assume no obligation to update any forward looking statements.
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 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 to Stephane.
Thanks, Kim and thanks to all of you for joining us today.
Out of our continued momentum as we execute on our strategy to be the global AI driven expert platform powering the prosperity of consumers and small businesses.
We have nearly 300 billion dollar addressable market driven by tailwind that include a shift to virtual solutions.
Acceleration to online and omnichannel capabilities and digital money offerings.
This combined with the team's execution is contributing to the strength of our performance.
Third quarter revenue grew 35%, including six points from the addition of nature.
It was another strong quarter for our small business and self employed group with revenue up 42%, 20% organically.
Credit Karma posted another quarter with revenue at an all time high up 48%.
And I am proud of how the team executed in the consumer group and another unusual tax season, we.
We are confident in our business trajectory and are raising our total intuit revenue and non-GAAP earnings per share guidance for fiscal year 2022, we.
We expect to grow total company revenue, 31% to 32% as our platform and then demand now more than ever let.
Let me now turn to tax.
Our multiyear strategy to extend our lead in the do it yourself category and transform the assisted category with Turbotax live.
This strategy is working.
This fiscal year, we expect our share of total IRS returns to be up approximately one point and our share of the do it yourself category increased two points. We're also growing average revenue per return once again.
We expect customers in underpenetrated segments, including Latinx self employed and investors to grow double digits in total within.
Within transforming the assisted category.
Continue to make progress connecting people to experts with Turbotax live.
We anticipate achieving a significant milestone with turbotax live revenue, reaching $1 billion in fiscal year, 2022, growing approximately 30% and customers growing 20%.
Note that last year Turbotax live customer growth significantly benefited from the introduction of the free basic offer.
We're proud of the progress against our strategy.
Slower total IRS returns growth is resulting in expected consumer group revenue growth of 10% this fiscal year.
We now expect overall IRS returns to declined 3% through July 31.
The IRS returns growth of 3% to 4% the last two seasons.
This was driven by onetime stimulus filers that did not return this season and overall IRS extension up significantly year over year with the number of turbotax customers filing extensions nearly doubling.
As a reminder, every point of IRS return growth equals about one point of turbotax revenue growth.
We now expect the do it yourself category share of total IRS returns to be flat this year below our expectations. After growing an average of approximately one point per year over the last two years.
Hypothesis is that the do it yourself category performance was weaker than we expected due to the onetime stimulus filers, approximately 30% of whom are paid customers for us last season.
While the last three years were anything but normal over the period. The IRS returns grew on average one percentage per year and the do it yourself category gained an average of just over half a point of share per year consistent with long term trends.
Looking ahead, we expect more normal total IRS returns growth.
More broadly our AI driven expert platform strategy is accelerating innovation in our five big bets are solving the largest problems our customers face.
We continued to deliver strong proof points that demonstrates the success and are well positioned for durable growth in the future.
As a reminder, these big bets are revolutionize speed to benefit.
Continued connect people to experts on.
Unlock smart money decisions.
In the center of small business growth and disrupt the small business mid market.
Today I'd like to highlight examples of our recent progress across three of these big bets.
Our third big bet is to unlock smart money decisions, we continue to see strong momentum with credit Karma, a data platform more powerful network effects solving a two sided problem.
Our vision is to unlock smart money decisions by creating an autonomous financial platform that helps consumers find the right financial products put more money in their pockets and connect them to insights and advice.
And credit Karma, we continue to innovate across all verticals.
<unk> proprietary Lightbox technology allows us to better personalize and connect members to the products that are right for them.
Providing more certainty the members and partners on the platform.
We continue to see strength in credit cards and personal loans.
Combined lightbox penetration remaining very high.
Lightbox approximately doubles the average approval rate of members who apply for credit cards on credit karma versus outside of credit Karma, making it a competitive differentiator for both our members and partners.
We continue to make progress combining our capabilities to fuel the success of both turbotax and credit Karma.
Integrated credit Karma money into turbotax filing experience more than tripling the number of turbotax online customers, who the positive their refunds into their credit Karma money account this year.
This gave them the ability to receive their refund up to five days earlier with direct deposit.
These turbotax customers drive credit Karma member growth and like other credit Karma members get access to personalized products across the platform, which accelerates engagement over time.
Our fourth Big bet is to become the center of small business growth by helping our customers get customers get paid fast manage capital pay employees with confidence and grow in an omnichannel world.
60% of small businesses struggled with cash flow and we continue to innovate to help customers overcome this challenge.
In payments, we offer a single place where small businesses can get paid pay others manage money and access capital.
We're seeing more customers accessing loans through quickbooks capital with loan volume at record level more than tripling year over year in April .
We have increased discover ability and expanded eligibility and the product.
This is driven by our rich data and proprietary risk models, which allows us to use our customers' data on their behalf and with their permission to offer access to loans.
In addition to cash flow getting an engaging customers remains a significant pain point for small and mid market businesses.
With <unk>, we are well on our way to becoming the source of truth for our customers to help them grow and run their business.
We have three acceleration priorities with mail chimp.
First delivering on our vision of an end to end customer growth platform.
Second disrupting the mid market by developing a full marketing automation CRM and E Commerce suite and third accelerating global growth with a holistic go to market approach.
Continue moving with speed as we focus on product innovation marketing and improving conversion.
First we launched a customers and leads tab within Quickbooks online, which allows new and existing customers to send revenue and customer data from TVO to mail chimp in real time, where small businesses can segment customers and automate marketing campaigns based on Quickbooks data.
We're also saving customers time by bringing in their contacts lift into mail chimp from other partners and platforms.
Second we continue to invest in marketing we are seeing early signs that the recent investments in paid media are driving growth in customer sign ups across large markets like the U S. We are.
Expect us to take time for it to translate into financial results, but we are excited about the potential.
And third we're focused on opportunities to improve conversion as we look at the top of the funnel traffic. So how we deliver benefits in the product for our customers. This includes highlighting product benefits as soon as customers enter the product improving the checkout page experience and streamlining in product navigation.
Our fifth Big bet is to disrupt the small business mid market with Quickbooks online advanced.
During the quarter, we launched in Canada, the first market outside of the U S. Expanding the geographic reach of this offering.
Accelerating innovation and executing our strategy starts with our employees.
I am proud to share that we were fortunate as 100 best companies to work for list for the 21st year in a row. This year, probably ranking number 11.
We remain focused on creating an environment, where our employees can bring their wholesale to work and do the best work of their lives, which is reflected in our employee retention rate that is above our peers.
Wrapping up we feel confident in our long term business strategy, our strong business fundamentals, including our balance sheet, our speed of innovation and the demand for our platform continues to put into it in a position of strength.
In the current macro environment the benefits of our platform are more important than ever.
Proud to be the platform of choice for over 100 million customers around the world who rely on intuit's Prosper now let.
Hand, it over to Michelle.
Okay.
Thanks Hassan.
For the third quarter of fiscal 2022, we delivered revenue of $5 6 billion up 35%, including six from the addition of mail Chimp GAAP operating income of $2 4 billion versus $1 $9 billion last year.
non-GAAP operating income of $2 9 billion versus $2 $2 billion last year.
GAAP diluted earnings per share of $6 28 versus $5 30, a year ago and.
non-GAAP diluted earnings per share of $7 65 versus $6 seven last year.
On may 4th we entered into a settlement agreement with the state attorneys general regarding our advertising practices related to free tax preparation.
This resulted in a $141 million one time charge in our fiscal third quarter.
Under the terms of the settlement we had mentioned no wrongdoing. We are pleased to put this issue behind us. So we can continue to focus on delivering innovative solutions for our customers.
Excluding the settlement charge, our fiscal third quarter, GAAP and non-GAAP operating margin would have been 250 basis points higher and GAAP and non-GAAP earnings per share would have been 37%.
38% higher respectively.
Turning to the business segments consumer group revenue was $3 2 billion up 32%, reflecting the earlier IRS tax filing deadline this year.
Im proud of our execution. This season, as we expect to gain share and grow our average revenue per return.
There are four primary drivers of our consumer business.
This data reflects our expectations through July 31, 2022 versus the prior year through July 31 2021.
The first is the total number of returns filed with the IRS. We now expect total returns to declined 3% this year below our original expectations.
Every point of IRS returns growth equals about one point of turbotax revenue growth.
The second is the percentage of those returns filed using do it yourself software.
We expect the DIY category share of total IRS returns to be flat by the end of the year also below our expectations.
The third driver is our share we expect our share of total IRS returns to expand approximately a point this year and our share of the DIY category to be up two points, excluding users of the turbotax free file offering and prior year periods.
Before this average revenue per return, which we expect to increase this year driven by a mix shift to turbotax live and our premier offering used by investors as well as fewer free customers.
As a result of the weaker IRS returns, we now expect total customer growth of 1%, including turbotax online paying customer growth of 8% this year.
We expect the base of customers paying us nothing in our commercial free offering to decline, 11%. This year to just over $13 million from over $14 million last year.
This was driven by onetime stimulus filers that did not return this season.
Maybe 30% of whom were paying customers.
We now expect consumer group revenue growth of approximately 10% in fiscal 2022 versus our prior guidance of 10% to 11%, reflecting the decline of total IRS returns I mentioned earlier.
We continue to expect consumer group revenue growth of 8% to 12% long term.
Turning to the pro connect group revenue grew 10% in Q3, reflecting a shift in the timing of the IRS tax filing window year over year for.
For the full year, we now expect pro connect group revenue growth of 4% to 5%.
And the small business and self employed group revenue grew 42% during the quarter or 20% on an organic basis, excluding $257 million in revenue from the all channel.
Online ecosystem revenue grew 67% or 31% excluding mail chimp.
With the aim of being the source of truth for small businesses, our strategic focus within the small business and self employed group is threefold grow the core connect the ecosystem and expand globally.
First we continue to focus on growing the core.
Books online accounting revenue grew 32% in fiscal Q3, driven mainly by higher effective prices customer growth and mix shift.
Second we continue to focus on connecting the ecosystem.
Online services revenue, which includes mail chimp payroll payments capital and time tracking grew 121% in fiscal Q3, excluding mail chimp online services revenue grew 28%.
Mail Chimp revenue recorded in online services with $257 million in the quarter and this was in line with our expectations.
Within payroll revenue growth in the quarter reflects growth in payroll customers and a mix shift to our full service offerings.
Within payments revenue growth reflects an increase in charge volume per customer and ongoing customer growth.
Third we continue to make progress expanding globally total international online ecosystem revenue grew 221% in fiscal Q3 on a constant currency basis, and 29% on an organic basis, excluding mail chimp.
We believe the best measure of the health and success of our strategy is online ecosystem revenue growth, which we expect to grow better than 30% organically over time.
This is driven by 10% to 20% expected growth in both customers and RPC.
Desktop ecosystem revenue grew 3% in the third quarter.
Quickbooks desktop enterprise revenue grew mid teens, driven by strong customer growth and price increases.
Longer term, we don't expect the desktop business to be a growth driver for the small business and self employed group.
Moving on to credit Karma revenue grew 48% to $468 million in Q3, another record revenue quarter, driven primarily by growth in average revenue per monthly active user.
On a product basis revenue growth was driven primarily by personal loans and credit cards and to a lesser extent out of 11.
We are developing the emerging verticals by focusing on innovation with credit Karma money, which we believe is key to growing the frequency of visits overtime.
<unk> shared earlier, we saw and more than tripling in the number of turbotax online customers to deposit their refund into their credit Karma money account. This year, we remain excited about the opportunities ahead.
Turning to our financial principles, we remain committed to growing organic revenue double digits and growing operating income dollars faster than revenue.
As we shared before as we lean into our platform strategy, we see the opportunity for margin expansion overtime.
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 reallocate resources to top priorities with an emphasis on being an AI driven expert platform. These principles guide our decisions and remain our long term commitment.
Our first priority for the cash we generate is investing in the business to drive customer and revenue growth, we consider acquisitions to accelerate our growth and fill out our product roadmap.
We return excess cash that we can't invest profitably in the business to shareholders via both share repurchases and dividends.
We finished the quarter with approximately $3 9 billion in cash and investments on our balance sheet.
We repurchased $489 million of stock during the third quarter.
Depending on market conditions and other factors our aim is to be in the market each quarter.
The board approved a quarterly dividend of <unk> 68 per share payable July 18th 2022. This represents a 15% increase versus last year.
Moving on to guidance, we are raising our full year fiscal 2022 revenue and non-GAAP earnings per share guidance to reflect the momentum we've seen throughout the year and the small business and self employed group and credit Karma.
Our updated fiscal 2022 guidance includes revenue of $12 $63 billion to $12 67 4 billion.
Growth of 31%, 32%, including mail chimp as of November 1st and a full year of credit Karma up from prior guidance of 26% to 28% growth.
Excluding $765 million to $770 million and mail chimp revenue growth of 23% to 24% up from prior guidance of 18% to 20% growth.
GAAP earnings per share of $6 95 to $7 and <unk>.
Down from prior guidance of $7 to $7 17 excuse.
Excuse me $7 16.
We now expect a GAAP tax rate of approximately 20% this year.
18% previously.
non-GAAP earnings per share of $11 68 to $11.74 up from prior guidance of $11 48 to $11 64.
Our fiscal 2022 guidance includes the impact of the $141 million, one time charge related to the state Attorney General settlement.
Excluding this charge our expected GAAP and non-GAAP operating margin.
Would be approximately 110 basis points higher than fiscal 2022 above our prior guidance.
Expecting fiscal 2022, GAAP and non-GAAP earnings per share would be approximately 37, and 38% higher respectively.
Our guidance for the fourth quarter of fiscal 2022 includes a revenue decline of 8% to 9%, reflecting the earlier tax filing deadline this year versus last year.
GAAP loss per share of <unk> 53 to <unk> 47.
And non-GAAP earnings per share of <unk> 94 to $1.
You can find our full Q4 and fiscal 2022 guidance details in our press release and on our fact sheet.
With that I'll turn it back over to Stephane.
Great. Thank you Michelle and before closing I wanted to mentioned the leadership changes in our consumer group that we shared in our earnings release today.
<unk> May 31, Greg Johnson General manager of the consumer group will step down as the leader of Intuit's consumer business to become CEO of Mcafee.
Maroon Krishna senior Vice President and general manager of Turbotax growth products will succeed Greg is the general manager of the consumer group.
Greg has done a tremendous job driving growth for our consumer business and I couldn't be happier for this next chapter for him.
Intuit is well known for developing World class leaders and Greg is no exception Mcafee is lucky to have him.
At the same time I couldnt be more excited to welcome grown as the consumer groups next general manager.
With over seven years of experience, leading commercial and product innovation for Turbotax Braun is perfectly suited for leading consumer groups next phase of growth.
We are seeing continued momentum across the entire company given our strategy of being an AI driven expert platform that is powering prosperity for consumers and small businesses.
I'm proud of the team and how we've delivered for our customers. So far this year and with that let's now open up to your questions.
Thank you, ladies and gentlemen, if you would like to ask a question. Please press Star then the number one on your telephone keypad. If you would like to withdraw your question press the pound key.
Our first question comes from the line of kind of growing Mizuho. Your line is open.
Thank you thanks for taking my question.
It's very impressive to see.
Momentum in credit Karma, as well as small business and how you raised guidance.
I'm wondering given this geopolitical uncertainty and some concern about any macro slowdown how does credit come up with you soon.
In terms of growth and also small business segment.
Yes sure. Thank you for the question.
I'll break down your question sort of in three parts given that we are a platform company with sort of.
<unk> profile of businesses I'll start with tax I know that was not part of your question, but important to start there which is.
Taxes sort of very resilient.
Any type of an environment and that's more than 30% of the company's revenue when you look at both turbotax and our pro tax business.
In small business there is a flight to digitization to manage your cash flow and I would remind us that we are now.
The mentally a growth in money center platform for small businesses and so there is a slight to be able to manage your cash flow on our platform in the.
The piece, that's what I would use that are very recent and sort of the here and now one our loan business had a record high volume in April it was <unk> <unk> higher than it's been year over year and our charge volume continues to be strong.
As of last month and even in this last week, our charge volume has been growing north of 30% and I use those a couple.
A couple of stats just more proof points in terms of the importance of our platform.
In these unique times and when it comes to credit Karma first of all on the demand side I would say that when you get into tougher recessionary times the demand for the.
The products on our credit Karma platform actually grows.
Now the discussion is about the supply side and in fact with our partners. There is a flight to quality. This is where the power of the data that we have on our customers behalf and light box that I've been talking about over the last couple of years come into play because with our partners and the flight to quality putting their credit.
Car models on our platform they are actually able to really get the kind of quality customers that they need and so it is just sort of a perfect match between members and partners, which is by the way why we saw the strength.
This past quarter of 48% growth and why.
The platform continues to be very resilient in these times. So those would be I would say that the headlines I would share with you about our platform being in need probably some very unique times, where our customers need us most.
Thanks for covering the tax, but just a quick follow up on Turbotax live full service. This is the second year, what sort of plan you have seen do you see more share gain from the assisted category or your own customer now moving more into full service kind of.
Product.
Yes, Great question I would just start with.
86 million customers that are in the assisted category.
The Tam is over $20 billion and we hit a major milestone this year of delivering $1 billion of revenue.
With Turbotax live growing at 30%. So we are in the very early stages of what's possible in growth and penetration in the assisted category and that is really.
The long terms really bright spot and future growth for turbotax, which we are very excited about.
Thank you.
Youre very welcome.
Thank you. Our next question comes from Kirk <unk> of Evercore ISI. Your line is open.
Hi, This is <unk>, calling in for Kirk Thanks for taking the question and congratulations on a great quarter.
Maybe one for Michel given some of the uncertainty in the macroeconomic environment is there anything that you've changed in terms of the forecasting process just to account for some greater uncertainty moving forward. Thank you.
Hi, Thanks for the question yes.
As we see the macro environment and unfolding one of the good things Thats dishonest shared is we really don't see a lot of have not seen a lot of impact to our business.
It is one of the things that we are continuing to look for but given the way our business works. The platform that we have and really the need that small businesses and consumers have in times like these even more for our products and our platform.
We don't anticipate seeing an impact.
And so we're always looking to.
Make sure to see what's happening, but we haven't really changed anything with our forecast at this point in time in any.
As you can see with our guidance that we've given.
And the only thing I would add is.
Majority of our business if not most of it is highly predictable.
And for the most part in some areas its subscription pretty much most of small business, which includes milk jump is subscription so.
<unk> ability is quite high and we are very data driven in terms of what we look at daily to see our performance and as Michelle said.
That combined with the indicators that we see the demand remains very strong on our platform.
Got it thank you both.
Very welcome.
Thank you. Our next question comes from Keith Weiss of Morgan Stanley . Your line is open.
Excellent. Thank you guys for taking the question and really nice quarter.
Maybe let's start out with a question for Michele.
Yeah.
Just a point of clarification so.
My reading this right that we should add that we're going to add but like the 38.
Is not included in your guide for the full year. So if it wasn't for that settlement.
The EPS guide would be like 12 or six months to 12 12.
The right way to read it.
Thats exactly right because.
Because of the nature of the charge. The one time is not an impact to the underlying structural.
Part of our business, we wanted to make sure that you can see really what is the business driving and so yes. It actually would have been higher than it would've been the 37% higher on GAAP and 38% higher on non-GAAP EPS for the full year.
Got it got it.
My question I was just a clarification.
The question is.
The pace of operating margin expansion on a go forward basis, because it does seem like you're outperforming your original expectation for FY 'twenty two you talked about.
Previously and the ability to sort of have a consistent cadence of operating margin expansion on a go forward basis. I think you talked about maybe like 100 basis points a year going forward does that change at all given sort of the outperformance you saw in FY 'twenty, two where do you think that's still achievable on a go forward basis.
I don't know maybe people will get us.
So I didn't know if it was I'm sorry.
Hi, Yes, I just jumped in.
Margin margin questions are for Michelle.
Alright, alright.
Except for my voice.
Can't talk.
You know we have our financial principles first of all so our financial principles to grow revenue double digits and grow operating income faster than revenue, we haven't set out any targets.
For what that margin expansion might look like over time.
We do see that it is possible because of the benefits of being on having the platform that we do and so besides being able to innovate more quickly and deliver for our customers. We do continue to see those opportunities as you're seeing this year.
And that we can really leverage.
Services and capabilities across our business, whether that be in technology or customer success or sales and marketing.
<unk> continued to see an opportunity there, although we have not given any type of specific range of what that expansion might look like.
Got it got it.
Just.
Hoping to get an update on mail chimp.
You saw a nice sequential improvement this quarter and I think that's going to surprise a lot of investors is definitely an area where investors have been most degree of caution.
And I think some of that comes through on some of the data points that we look at we look at like Google trends and it doesn't seem to be trending higher I know a lot of my clients look at credit card panel data and that data has been pretty weak, but the performance has been I think a little bit better than expectation can you give us an update on how <unk> is doing and how far into the integration we are.
Yeah, I'll tell you, we're probably more excited today as we sit here than we were even when we made the announcement because now were into that work and I would just say that we.
We are delivering against our expectations and our belief and confidence is that is the best is yet to come and very specifically.
We are focused on creating a growth platform. So in one place a customer can grow and run their business and we now have proof points of the things that we're starting to deliver like the customers and leads to App thats in Quickbooks, where now we are transferring all your customer and revenue data into mail chimp. The second thing is.
Really looking back the investment.
In marketing and knowing where to invest has been underwhelmed and that excites us as we look ahead, we've got some of our best.
Marketing leadership teams now in mail chimp and the investments that we're making in terms of one go to market strategy pricing principles and how to invest.
Is that we're starting to see some green shoots and with the investments that we're making and we're quite good at these sorts of things we foresee the financial results will be forthcoming and then last but not least both going upmarket to mid market and international in fact, we.
We will talk more about this at Investor day, but we have refreshed our international strategy.
A big part of that will actually include mail chimp because of the fact that half of their business came from outside of the U S really with <unk>.
Little effort, so that was a long way of saying, we're quite excited about our momentum and we're very excited about the trajectory of the business and.
Sort of the best in terms of growth as is yet to come and I don't think youre going to be able to pick up the performance of <unk> through Google trends.
Got it.
Thank you very much guys.
Yes, very welcome Keith.
Thank you. Our next question comes from Brent Thill of Jefferies. Please go ahead.
Hi. Thank you this is John Byun for Brent Thill.
Kind of extra another macro question I Wonder if you could remind us how you performed in past recessions.
And how it might be different.
For you. This time, obviously you have no change in your credit Karma, but plus or minus side.
Then I have a follow up.
Yes sure. Thanks for the question first of all the last.
Recession that we look back on we actually grew.
4% and this is I think this was in 2000.
Eight.
And we grew 4% where most of our peers actually declined and so we perform.
Well in Recessionary times I would also then go on to say we are a totally different company today than when we were in 2008 in terms of the strength of our platform today versus in 2008. The one we don't have a platform and by definition. We're in the cloud, whereas back then were primarily desktop.
We're in the cloud where the <unk> around Digitization, a shift to a virtual world the shift to online.
<unk> to drive managing our cash flow is actually essential for customers and then you combine that with what I mentioned earlier with our credit Karma platform, where demand is actually higher in recessionary time, and our strength of our data and light box capability that makes them a great.
Light to quality for our partners, which is the current strength that we are that we're seeing so we'd actually expect it to perform better if it was exactly like for like compared to 2008, but nevertheless.
Those were the stats of the past recession on how we performed on more in a much stronger position today.
Very helpful. Thank you and then just another quick one on Enel, Chile I just wanted to see if you could update us on the progress in terms of where the growth is coming from is it still mainly from marketing or are you getting more traction with the <unk>.
Broader CRM suite and the website builders in e-commerce.
Yes, I would say the majority of really the growth is still coming from just the viral word of mouth nature of the platform and we are building out the capabilities of the platform. The one of the biggest things that we've learned now having the business as part of the company.
Is how much capabilities. The platform has the customers don't know about and how many customers don't even know about mail chimp, because we've really never invested in marketing and so a lot of what we're seeing is sort of just continued where word of mouth because of the benefits that it delivers with our investments in the product that I mentioned a moment ago.
<unk> that we are making strategically in marketing and that will accelerate over time, and then doing so going upmarket in international.
We expect that will be accretive to the growth as we head into the future, but most of it right. Now is just I would say word of mouth.
Thanks very much.
You're very welcome.
Our next question comes from Brad Sills with Bank of America. Your line is open.
Hey, Thank you. This is Adam on for Brad I guess my first question is can you compare and contrast, any differences in demand you might be seeing between Quickbooks and mail chimp if at all.
In the enterprise category.
C. A division of spend between the two but I was kind of wondering.
If that is kind of different with giving you guys kind of focusing on the SMB.
Sure first and foremost I would start with these are both subscription based businesses and.
And together they create magic apart one helps you manage your cash flow, which.
Which is quickbooks. The other one helps you actually grow your business and so I.
I would say the demand and the strength of the demand is fairly consistent for us for those customers, whether they're new or customers that have been in business for a while that realize that they have to find a way.
To market to their existing customers to be able to grow with them and grow their wallet share and also <unk>.
Find ways to market their business on different channels, whether it's our website, whether it's on Instagram Facebook Amazon Etsy and so the demand is consistent it depends on what you are trying to do in all businesses are trying to both grow their business and be able to run their business and manage the cash flow and what they don't have is the platform in one place nor do they have the.
Data and that's why bringing male chairman cookbooks together will over time actually drive higher retention and higher expansion of services and wallet share and also higher penetration because what we can do together, it's hard to do our part.
Got it. Thank you and then turning to Turbotax real quick.
When I think of some of my favorite Differentiators for the product I think of interest.
Putting the investments or TT live until service.
But it seems like you know a lot of the R&D work for those who've done. So I guess my question is where where are the incremental investments going in terms of R&D for sure.
Sort of a tax now thank you.
Sure first of all there is no destination to the investments we are continuing to invest in machine learning and knowledge engineering to not only makes the experts that are on our platform smarter. So that we can lead how we answer questions through technology and not just through human labor.
Two in terms of how we do the matching and how we ensure that our really our technology. The bots are engaging in answering the questions. So we're getting better at this every single day and we're going to continue to invest in that area. I think the other thing I would say is around the money. The biggest thing that we learned this year, where we're excited about next year, that's actually about everything in the <unk>.
That segment is about speed the taxes done and speed that my money and so the integration of credit Karma into Turbotax, where you can now get early access to your refund. That's another area of investment for us because there's so much more we can do and the experience. So it's both.
Getting you to a place where taxes are done and experts are smarter in terms of how they help you and also faster access to money and then being able to do that across a very specific segments like investors self employed latinx and overtime the creator economy. So.
Our investments.
We will continue in those areas and remember we invest at the platform level and at the company level. These are not just investments within Turbotax was then they also benefit us and Quickbooks live in other areas.
Awesome, that's awesome color. Thank you very much.
Youre very welcome.
Our next question comes from Kash Rangan of Goldman Sachs. Your question. Please.
Thank you very much congratulations on a spectacular results. So it's not I think.
Some of US, including you will finally remember that back of the Tucows nucleolus named recession Intuit was probably the only company. It's one of the few companies that actually grew its revenues through the recession.
Of course, we're not calling for anything specific here, but is somewhat running.
Yes.
Admired companies with significant exposure to the SMB space I'm curious, how intuit's products are positioned in a way that it could help customers the most.
To weather through this.
To understand the combination of inflation rates et cetera.
And also if you could.
I think that that's.
Quite a question so just part of that and hear your thoughts. Thank you once again congratulations.
Yeah. Thank you Kash and thank you for the question.
You sort of tangible adhere now answers so it doesn't seem.
Over the generic I would just start with saying that.
We are most important in tougher times.
And then just in good times and I'll start with small business. There is a accelerated flights to digitization to manage your cash flow.
Small business in these tougher times and we're seeing that now in the example, I think I used earlier, but it's worth bringing up again is.
In the month of April our volume of Quickbooks capital loans was at an all time high three <unk> higher than the same time last year, where times, we're much much better compared to what environment all of us see today and the other is our.
Payments volume.
Just in the last month in the last week.
Our growing north of 30% and this is our payments volume. So I use those as tangible examples just to state that we have truly become a growth platform at the money center for small businesses and in times like this we are in need more than ever because our capabilities are so different than the last time, we were in a recession.
We have all the capabilities with male chairman Quickbooks to grow your business and help you with your cash flow and I'll, just maybe pause there with small business and I'll remind us that no tax both our pro tax and turbotax business is more than 30% of the company and its resilience in very tough times because people have to do.
Their taxes and then <unk>.
Last but not least as demand is higher in recessionary times on the credit Karma platform and there was actually a flight to quality.
Based on our data on Lightbox capability, that's proprietary more and more partners are wanting to be on lightbox, because they can actually control the quality of their offers and it makes our platform and even more demand, which is what you saw in the last quarter and so I would foresee that playing forward, which I think it was the nature of your question. We are the best positioned.
To serve consumers and small businesses in tough times and good times.
Got it that's all just to clarify small business formation.
That doesn't affect it to it.
Theyre, probably lag before you get to the point, where they could afford to buy two products. So should we be concerned how concerned should we rather.
<unk> business creation might come to us to answer during the recession, and how that might affect into it thats probably correct yes.
I wouldn't be concerned at all if you look at our history. When the formations were high when the formations were low or negative it really that's not the driver of the long term or short term health of the business and so it is not something we worry about it's actually not something we track it.
Not something we talk about a lot until you all start asking questions got it.
So I would just say that it is not an area of concern for us.
Thank you for taking cash.
Our next question comes from Daniel Jester of BMO capital markets. Your line is open.
Hey, great. Good afternoon, Thanks for taking my question.
On Turbotax live.
Just can you help us understand how much of the growth. This year was from DIY customers transitioning to turbotax live versus how many were kind of net new to the platform. This year.
Yes. Thank you for the question you don't we don't break out the specifics, but I will take you back to why we love the Turbotax live platform.
One there is more than 10 million people in the assisted segment that actually a trip and go to another person to help them with assistance within these are directional numbers.
Within Turbotax is probably more than 10 million people that log in but never actually finish their their taxes and then there are switching that happens back and forth between doing it yourself and then getting assistance. The reason I bring up those three figures if there's actually a lot of sort of movement in the tens of millions.
In each category and across the category between do it yourself and assistance and it's all driven by a lack of confidence.
Can I do this myself that I do it right and so when we look at the Turbotax live platform and in fact, I would say turbotax as a whole. That's why we are now a platform where you can do it yourself, we can do it with you or we can do it for you across the platform. So our growth in Turbotax live comes from all those three areas. There are those that switched from assistant there are those.
That would have left DIY that now stay with us.
And vice versa. It helps us with.
Final metric so that is the driver of where we are in turbotax live that has been the driver looking backwards and it will continue to be the driver looking ahead.
Great.
Really helpful context. Thank you and then just to stick with tax the comment you made about you had <unk> the number of turbotax users, who deposit their refund and a credit Karma account I wonder how much of a leading indicator actually is that do you track their balances in or is there any color you can share about.
What that could mean in the future. Thanks.
Sure first of all we're really focused on the money benefit for our customers and for those that live paycheck to paycheck to get five days early access to their refund is really meaningful so I am super proud of our team for what they're doing here and because it really changes.
Lives with that said, we believe our hypothesis is one over time this will actually help with turbotax retention.
These customers become new credit Karma members.
Then as you know credit Karma on the credit Karma platform, we're really good at leveraging what we know about you with your permission.
Then really match you to financial products that are right for you and find ways to save money and get out of that so.
It's new customers on our platform that already has over 120 million members that overtime as we engage them, we will be able to monetize we do watch their behaviors do they keep the money on a credit karma money do they drain it.
What we can help them with in terms of things they can do without money to be able to build their credit. So it's really.
It truly feeds into the network effect of delivering benefits in the customers coming back for more benefits.
Great. Thank you very much.
Very welcome.
Thank you. Our next question comes from Alex Zukin of Wolfe Research. Your line is open.
Thank you this is strecker VAT young for Alex.
So with the success that you and everyone's been seeing with credit Karma and mail chimp.
Has it changed your view on doing additional M&A over the next 12 months to 18 months.
Our even making you consider more of these larger transformational deals.
So can you just give us an update on how youre thinking about M&A right now.
And would you say that maybe your resource wise.
Youre very focused on integrating these companies still or you have some room to take on additional deals if it's the right deal. Thank you.
Yes. Thanks for the question first I'll start by saying our principles around acquisitions have not changed for US. It is all about.
The market and having a platform that can fundamentally power the prosperity of consumers and small businesses that we serve.
And secondarily, we we expect excellence from ourselves and our teams and we expect these acquisitions to be building that kind of momentum that we are building and we are we have a set of mechanisms within our intuit operating system, where we monitor very closely our progress against the deliverables and I mean the.
Product and marketing deliverables in the talent on the team.
And their engagement to really ensure that things are.
Are on track and really everything with both of these acquisitions is about acceleration, we only integrate as long as it accelerates and so we have a very I would say a good playbook in terms of how to make acquisitions and in both cases when you look at credit Karma Mail Chimp, we bought the capabilities and the incredible talent because they do things.
We're not great at and there are things, we do that they're not great items together as a family we can create magic so with all of that said it doesn't accelerate or decelerate.
What we are looking at from a time to market perspective, there are both on track in terms of our expectations and we are very discrete in terms of how we allocate mindshare and resources to.
So both of these assets and frankly, the biggest hindrance for future acquisitions is how good their management team as it is not our mind share or our resources. So that's the way we think about it.
Thank you.
Very welcome.
Our next question comes from Brad Zelnick of Deutsche Bank. Please go ahead.
Hey, Thanks for taking my question. This is Bob on for Brad Congrats on the strong texture and despite the IRS headwinds just sticking with tax quickly now that you've had a second year of more basic less skus under your belt, how should we think about the rate and pace of customers shifting from maybe a more basic SKU to deluxe and premier and how that compares to typical directly that you might see.
On the traditional turbotax online side of things.
Yes, it's a really good question first of all I would tell you having kind of experimented with our turbotax live basic offer.
Good experiment and it worked the biggest thing that I would tell you that we learn.
In this particularly this last year is what really matters is speeds your taxes done with an expert and speed the money and that is an area, where we are doubling down going into next year because the majority of these customers. They want their taxes done right by an expert or if you do it for them and they want access to their money as soon as possible both of which we can deliver.
And so really.
In that context folks that using an assisted method generally have more.
Complex situation and and we would expect over time, the higher skus that we have to play a bigger role when it comes to Turbotax live.
That's helpful. There.
To the earlier point you made earlier on the call just on international have you seen any change in terms of trends in new customer growth or even top of funnel with either quickbooks and Nielsen.
When you look internationally versus in the market in the U S.
Yes, what is consistent is.
What I've shared before which is I would say U S and Canada and I will just use <unk> as an example, coming out of we're not out of Covid, but coming out of sort of the world shutting down a bounce back much faster than the other countries that we're in.
The UK and Australia, and France, Theres been so many sort of start stop start stop that impacted.
The sort of building momentum in that country, and I don't mean to us I, just mean, how consumers and small businesses thinking about managing their financial lifestyle, they're starting to bounce back.
For sure are tracking behind the U S and Canada, and again, I'll say that what it really excites US looking ahead as the possibilities to help customers grow their customers in small business with mail chimp that'll be a bigger part of our future as we rollout our.
Our strategy and game plan and that and we believe that that will be over the long term accretive to our growth.
That's helpful. Thanks for taking my questions.
Yes very helpful. Thank.
Thank you very much.
Our next question comes from Scott Schneeberger of Oppenheimer. Please go ahead.
Great. Thanks, very much and congratulations Susana I wanted to I wanted to dig into this as kind of an overriding question on the cadence of the tax season and wanted to dig into.
The extensions you mentioned that the IRS has elevated extension this year in you do as well could you speak a little bit more to that end.
Address might there be any.
Variability, good or bad relative to what you're what you're expecting for the volume for the full year, just on where your fiscal year ends and potential extension.
Thanks.
Yes, sure Scott well first of all I'll start with the headline which is there could be but now let me give you more specifics of the guidance and what we're talking to you about is for our fiscal year, which is through the end of July .
At the top the IRS returns through July .
We are observing that it will be down three points and it's driven by a stimulus filers that didn't come back about 30% of them were actually paying customers.
And IRS extension being up and in our base there are nearly doubled and so we've made some assumptions in terms of what will happen through through July and of course.
We will talk to you all Muller as we talk about our guidance for next fiscal year, because we have not made those estimates and we won't communicate it today because our focus was what we communicate to you through July .
But certainly the extensions most of those customers at some point come back and but.
But we have not estimated what that will be after July and we do expect just so it set against that.
IRS total returns will.
The more normal next year because in essence this year, we're digesting what happened in the last two years because of all the stimulus filers and we would expect it to be more back to the normal flatter up as we look into the future.
Yes, certainly that would make sense.
And just as a follow up still in tax.
When Michelle was given her part on revenue per return she she called out.
<unk> and premier so in the.
<unk> ex self employed.
Investment category.
I assume that's probably a little bit more weighted that double digit growth.
On the <unk>.
Premier the Investor.
Category, just curious is that so and also for latinx self employed an investor group, how sustainable is that growth you've had really nice growth for a few years is there a long runway to that thanks.
Yes for sure let me start with the latter part of your question.
When we look at the assisted category, where there is more than a $20 billion Tam and by the way there's another $10 billion Tam, which is business tax that we've not talked about so in total it's 30 billion Turbotax live is a $1 billion and so we've got a lot of runway and as you've heard me talk in prior years, we're sort of.
In the early days and we got a 10 year run here hopefully now that we've evolved how big Turbotax live as you can see how much runway. We have so there's a lot of runway. There theres also a lot of runway in our Underpenetrated segments. We are truly just getting started with latinx self employed and the investor segment, because we are actually under shared.
In those segments.
Just on all the data that we see and so when we look at those segments, which is both do it yourself and in the assisted segment. We also have an equal runway and we believe down the road the creator community create.
Creator segment will continue to become a larger part of those that choose to do taxes and that's an area, where we will be focused over time as well. So that was a long answer to your short question I think the headline I would leave you with is yes, there is a runway for sure.
A multiyear runway in all of those areas.
Okay, great. Thank you.
Youre very welcome.
Our next question comes from Kartik Mehta of Northcoast Research. Please go ahead.
Good evening.
Going down the tax.
I've been a little bit.
I think Michel said that you expect the DIY segment to be flat and I'm wondering I know the last few seasons have been a little bit different.
And I'm wondering as we move forward to next year, what you would expect over the next two or three years for the DIY segment growth to be.
Yes, thanks for the question and I'll start with the first part of what you lead with when we look at the last three years and even more historically.
IRS returns has been up about one percentage and the DIY category has grown.
About half a point and so when you look at the last three years with all the anomalies that also holds true and.
And the way we keep score is our share of the total IRS returns with respect to just know the platform that we have where you can do it yourself or we will do it for you on the other spectrum.
Specifically to answer your question, we do believe.
Over time that the DIY category will continue to grow just as it has grown historically so we do believe that this is Jeff I would say a year, where we're digesting all of the anomalies in the last two years.
And then on credit Karma, and you talked a little bit about how banks credit card issuers rely on critical RV carmike, even more during a recession and I'm wondering if you've seen any signs of banks starting to tighten up.
Credit standards.
If that is a benefit yet to credit Karma.
Yes, we have.
Over 120 partners on.
<unk> on our platform and.
And these partners, they're big and they're in their small and with that as context, we're always experimenting and adjusting both in good times and not so good times their credit cycle and they jumped between bags, whether theyre more interested in that.
Does that have a credit band below six <unk>, which is <unk>.
Prime or between $6 20 to 700, which is.
Which is prime or near Prime and then of course anything over 700, which is prime and.
The point is based on our platform and the demand on our platform and the supply on our platform.
We see very good supply across all of the bands because of the focus areas of the partners and so that drives the strength that we saw this last quarter end.
And we would expect that going forward in context of our guidance.
Alright, Thank you very much appreciate it.
Yes, Youre very welcome.
Thank you. Our next question comes from Brad Reback.
Stifel. Your line is open.
Great. Thanks, very much so sun as you work to put together the fiscal 'twenty three operating plan in the coming weeks and months what type of forward indicators are you focused on internally and externally to sort of inform that decision. Thanks.
Yes, Brian Great question, because we're actually we are done with our three and one year plan.
And the way our cycle works.
While we're in the heat of delivering this year, we finish our.
Our planning for for next year.
We look at a few things one we look at secular trends.
We look at.
Facts and figures on our platform so the secular trends are.
I've mentioned earlier, which is the shift to using virtual solutions and acceleration for online and omni channel and an acceleration to using digital money platform. So we look at the secular shifts when we look at the facts and figures around the secular shifts. We then look at all of the things that actually happens on our platform and our share.
Just use a couple of examples we have over one and a half a trillion dollars of invoices that are generated on our small business platform.
But as we shared last Investor day and of course. This number is bigger now our payment volume was over $90 billion and so when you look at that's very low share. When you look at our share of the assisted category intact very low share. When you look at our share of financial products on credit Karma credit cards personal loans very.
Low share so we look at.
Data around our share and our performance around our share and then we will also look at economic factors like unemployment like default rates.
<unk> projections around the economy by the way, where the big burst projector of the economy because of the data that we see on our small business platform. So we look at all of those things and then the way we put in put together our plan is sort of worst case middle case, best case, and and that's how we manage the company and by the.
This is something that we're quite good at and then we manage based on the data that we see we managed to ensure that we're protecting our long term investor investments, while we deliver today for our customers. So that's a little bit of a snapshot in terms of how we think about it.
That's great thanks very much.
Youre very welcome.
Yes.
Ladies and gentlemen, I'm not showing any further questions would you like to close with any additional remarks.
Yes, alright, well hey, thank you everyone for making the time. Thank you for all your wonderful questions as I said earlier I am Super proud of our.
Employees across the company and our partners and it's a real privilege and honor to be able to serve our members and customers.
These unique times and so all of you be safe be well and that we will talk to you soon thank you.
Ladies and gentlemen, thank you for participating this concludes today's conference call.
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