Q4 2022 Intuit Inc Earnings Call
Number of hours employees are working and number of workers paid.
Account balances of our small business customers credit card utilization and delinquency rates for members.
Allows us to be forward looking and adjust quickly.
Let me share how we think about our business in context of a mild recession.
To start in fiscal year 2022, 51% of our revenue came from the small business and self employed group.
35% from our consumer and pro tax businesses and 14% from credit Karma.
First on tax our tax businesses are very resilient and we do not expect a mild recession to have any significant impact.
Next with small business and self employed group Quickbooks and mail Chimp are mission critical for our customers, whose livelihoods depend on our platform.
In fiscal year 2022, approximately 80% of the small business and self employed group revenue was subscription based.
As a reminder, <unk> is also primarily subscription base, which adds to the scale of our subscription volume.
The approximately 20% as transactional based and includes revenue from Quickbooks payments capital and per employee pricing for time tracking and payroll.
And the amount of the recessionary environment, we may see an impact on these transactional businesses.
In Q4, we did not see any impact.
This demonstrates how mission critical our platform is especially in this environment.
Finally, turning to credit Karma. This is a business that could be most impacted by weakening economic environment.
As a reminder, this business represents 14% of intuit's revenue in fiscal year 2022.
While we expect member engagement to be strong in any economic environment, our financial institution partners could tightening access to credit.
In Q4, we experienced increased volatility in personal loans.
Many partners that securitized loans are facing a more challenging funding environment as interest rates rise.
For context personal loans represented just over a third of credit Karma as revenue in fiscal year 2022.
Although several personal loan partners tightened underwriting during the quarter, we were able to offset some of this with volume from other partners.
This demonstrates the power of the platform.
In credit cards, we've not seen any significant impact we continue to monitor delinquency rates, which we view as a leading indicator for future credit card origination trends.
While delinquency rates have increased slightly.
Near historical lows.
We expect credit cards to be less negatively impacted by a mild recession and personal loans.
In a mild recession of <unk> <unk> credit card originations declined only a few points.
And for context credit cards represent nearly half of credit cards revenue in fiscal year 2022.
We do expect Lightbox to continue to be a differentiator for credit Karma is this technology allows lenders to deploy their targeting models and an encrypted environment and leveraged thousands of Anonymised financial attributes related to credit Karma members and turbotax customers.
This provides more certainty to members and partners on the platform as recommendations are personalized curran.
Currently no one else can replicate this.
Partners usage of Lightbox at the end of fiscal year 2022 was at an all time high representing nearly 70% of credit card and personal loan transactions on a combined basis.
This was up nearly 15 points from the prior year.
We expect light box to help make credit Karma business more resilient in a recessionary environment.
Now with that as context the guidance, we are providing today assumes current demand trends continue.
Wrapping up we feel more confident than ever in our long term business strategy.
In an uncertain macro environment the benefits of our platform are more important and mission critical than ever.
As part of our three in one year plans that the board just approved we are investing heavily in innovation within each of our big bets the Volvo benefits for our customers.
Delivering topline growth and margin expansion given the strength of our operational playbook.
Combined with our strong business fundamentals, including our balance sheet Intuit remains in a position of strength.
We're proud to be the platform of choice for over 100 million customers around the world, who rely on and see what the prosper now.
Now, let me hand, it over to Michelle.
Thanks, <unk> for the fourth quarter of fiscal 2022, we delivered revenue of $2 4 billion down 6%, reflecting the earlier IRS tax filing deadline. This year, partially offset by the addition of mail chimp.
GAAP operating loss of $75 million versus operating income of $402 million last year.
non-GAAP operating income of $433 million versus $715 million last year.
GAAP loss per share of <unk> 20.
Versus diluted earnings per share of $1 37 figure it out.
And non-GAAP diluted earnings per share of $1 10.
A dollar in 97 last year, you can find our full fiscal 2022 results in our press release and on our fact sheet.
Turning to the business segment, and the small business and self employed revenue grew 41% during the quarter and 20% on an organic basis, excluding $265 million in mail chimp revenue in.
In fiscal 2022 revenue grew 38% and 22% on an organic basis.
Online ecosystem revenue grew 66% in Q4, 32%, excluding mail chimp and 61% for the full year or 34% excluding now check.
With the goal of being a source of truth for small businesses, our strategic focus within the small business and self employed group with three fold grow the core connect the ecosystem and expand globally.
First we continue to focus on growing the core.
Quickbooks online accounting revenue grew 34% in fiscal Q4, driven mainly by higher effective prices customer growth and mix shift.
In fiscal 2020 to Quickbooks online accounting revenue grew 33%.
Second we continue to focus on connecting the ecosystem.
Online services revenue, which includes mail chimp payroll payment capital and time tracking grew 116% in fiscal Q4.
Excluding mail Chimp online services revenue grew 29%.
In fiscal 2020 to Quickbooks online services revenue grew 107%.
Excluding mail Chimp online services revenue grew 34%.
Mail Chimp revenue included an online services was $265 million.
Although we're making progress with this business as we accelerated our year over year revenue growth several points in fiscal Q4 versus when we closed the acquisition in fiscal Q2 revenue was slightly below our expectations. During the quarter, we focused on product innovation to improve conversion ahead of peak season, which starts in <unk>.
Timber and therefore pulled back on marketing investments.
I'm confident that these are the right steps to position us well as we head into mail Chimp peak season.
We expect to ramp up marketing in September after these enhancements are complete.
We continue to have confidence in our game plan and acceleration priority female channel.
Within payroll revenue growth in the quarter reflects an increase in payroll customers and a mix shift to higher end 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 on a constant currency basis total international online ecosystem revenue grew 193% in fiscal Q4, and 23% on an organic basis, excluding mail chimp.
Desktop ecosystem revenue grew 1% in the fourth quarter and 4% for the full year.
Quickbooks desktop enterprise revenue grew low double digits in fiscal 2022, driven by price increases and customer growth.
Nearly all of our desktop accounting revenue is now subscription base similar to our online accounting offerings.
Moving on to credit Karma revenue grew 17% to $475 million in Q4, another record revenue quarter, driven primarily by growth in average revenue per monthly active user.
Full year revenue was $1 8 billion.
We've had two exceptional years for this business growing 37% in fiscal 2021, and 58% in fiscal 2022 on a pro forma basis, well above our longer term expectation of 20% to 25%.
On a product basis revenue growth was driven primarily by credit cards and personal loans. This was partially offset by headwinds in auto insurance and home loans.
As the Sanchez earlier, we're seeing increased volatility in personal lines.
We continue developing the emerging verticals by focusing on innovation with credit Karma money, which we believe is key to growing the frequency of visits over time, we remain excited about the opportunities ahead.
Consumer group revenue was $3 $9 billion in fiscal 2022 up 10% I am proud of our execution. This season as we grew share in average revenue per return.
Turning to the <unk> group, we reported $546 million in revenue for fiscal 2022 up 6%.
Our financial principles guide our decisions remain our long term commitment and are unchanged.
We finished the quarter with approximately $3 $3 billion in cash and investments and $6 9 billion in debt on our balance sheet.
We repurchased $508 million of stock during the fourth quarter and one $9 billion during fiscal 2022.
Florida approved a new $2 billion repurchase authorization, giving the company a total authorization of $3 5 billion to repurchase shares.
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> 78 per share payable October 18, 2022. This represents a 15% increase versus last year.
We have an operating system, we use to run the company and this includes our proven playbook for operating in both good and difficult economic times.
As a nearly 40 year old company, we've been through many economic cycles are.
Our first priority is to do the right thing for customers, giving them access to the tools and offerings they need most.
Manage for the short and long term and control discretionary spend to deliver strong results while investing in what is most important for future growth.
Economic environment with a consideration as we look ahead.
We've identified several levers we can pull to deliver against our financial principles and a variety of scenarios based on where we see opportunities across our platform.
Many of these can be pulled in real time should the need arise in areas like marketing spend travel hiring and others as we progressed through the year in order to maintain earnings power, while positioning the company for a stronger future.
We have a strong balance sheet that enables us to play offense in any macro environment.
These principles are intended to accelerate our innovation in the future and our goal remains for intuit to emerge from any downturn in a position of strength.
Moving onto guidance, our fiscal 2023 guidance includes revenue of $14 5 billion to $14 7 billion.
Growth of 14% to 16%.
Our guidance includes revenue growth of 19% to 20% for small business and self employed.
10% to 10% for the consumer segment.
10% to 15% for credit Karma.
As a reminder, our credit Karma and grew 58% on a pro forma basis year over year in fiscal 2022, well ahead of our long term expectation of 20% to 25%.
Our overall guidance assumes recent demand trends continue.
Our guidance also includes GAAP earnings per share of $6 92 to.
The $7.22.
non-GAAP earnings per share of $13 59 to $13 89.
We expect a GAAP tax rate of 25% in fiscal 2023.
Our fiscal 2023 guidance includes stock based compensation of $1 8 billion, an increase of 39% over fiscal 2022.
Approximately 25% of this total is equity granted as part of the credit Karma and mail chimp transaction.
Approximately 75% of this total is related to our broad based equity program designed to attract retain and incentivize employees.
Looking ahead, we expect stock based compensation as a percentage of revenue to flatten over the next few years.
Our guidance for the first quarter of fiscal 2023 includes revenue growth of 23% to 25% GAAP loss per share of <unk> 43 to 37 cents.
And non-GAAP earnings per share of $1 14 to $1 25.
You can find our full Q1 and fiscal 2023 guidance details in our press release and on our fact sheet.
Going forward were bringing mint and credit Karma together under a unified personal finance strategy.
<unk> in fiscal Q1, we will be reporting mint as part of the credit Karma segment.
This is reflected in the guidance I shared today, but it's not material for the growth rate.
I also want to share an important change regarding our long term expectations for small business and self employed group revenue growth going forward.
In the past, we shared with you our aspiration to achieve online ecosystem revenue growth of better than 30% organically over time.
We first provided this expectation in fiscal 2017, when our online ecosystem revenue was $850 million.
It comprised less than a third of our small business ecosystem and we were early in our journey building our online presence.
Today, the online ecosystem is over five times larger at $4 $4 billion.
And it comprised more than two thirds of total small business revenue in fiscal 2022.
This along with the fact that the majority of the business is now subscription base given the shift to subscription in desktop we believe the right measure moving forward is to look at the performance of our overall business rather than just the online ecosystem.
We now expect total small business and self employed long term revenue growth of 15% to 20% up from 10% to 15% previously.
While the online ecosystem will continue to be our growth catalysts, we will no longer provide specific online ecosystem goals.
With that I'll turn it back over to Stephane.
Great Michelle Thank you.
As you have not heard from Michel and I. We are seeing continued momentum across the company given our strategy of being an AI driven expert platform.
With our accelerated organic innovation and the addition of credit Karma Mill Chip, we are the leading global financial technology platform that powers prosperity for people and communities.
We have a large tam secular.
Secular shifts working in our favor and a highly predictable set of revenue streams.
Our innovation is unlocking new opportunities for our platform and delivering truly game changing benefits for our customers.
And so it remains a best place to work around the world and I'm proud of the team and what we've accomplished this year now.
Now, let me turn it there'll be you for any questions that you may have.
I will say I think we're ready to take 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.
To withdraw your question. Please press star two.
Our first question will come from Keith Weiss with Morgan Stanley .
Excellent. Thank you guys for taking the question and very nice quarter.
Michelle.
Is it more of a question for you.
For the FY 'twenty three guide Youre looking for operating margins continue to move higher or just to move higher from where they were in FY 'twenty two.
Part of that is just kind of anniversarying the legal settlement on those part of FY 'twenty two could you talk to us about sort of the.
Organic if you will or sort of like the fundamental margin improvement that you're expecting in the business in FY 'twenty three how big is then helped durable on a go forward basis. If we think about the model like beyond FY 'twenty three is this.
A progression that we could see being.
Being more durable in terms of driving operating efficiencies number one and number two in your remarks about.
Finding levers in the business is the one that really stuck out to me is saying.
There is levers to maintain.
The earnings power.
Should I take that to mean that a lot of those levers have to do with your opex side of the equation that there's levers you could pull to maintain margins and maintain profitability even in a weaker macro environment. If you will thank you.
Thank you. Thanks for your questions appreciate it yes.
Yes.
Very happy to see our operating margin guidance.
For this coming year, it implies margin expansion of 100 basis points versus FY 'twenty two.
And as you know that align to our financial principles to be able to grow revenue double digits.
Operating income dollars faster than revenue. So we feel really good about that as we look at where that's really coming from you know as we've been continuing to grow more and more as a platform over time that really does enable us to look across the business.
And be able to drive efficiencies and effectiveness, while driving accelerated revenue growth, which is resulting in our ability to expand margins, while being able to continue to invest to really drive the accelerated revenue growth.
How do we think about that I don't really see anything that.
Really structurally that impact that over time, we haven't given any longer term expectations. Our long term guidance on what margins might look like in the longer term, but I don't necessarily see anything really structurally that prevents us.
We continue to grow with a platform that prevents us from continuing that growth.
So the second part of your questions as for the levers that we would call them. Yes. I mean, there are a number of things that we would pull which could be opex as I mentioned, there is marketing spend or travel.
Hiring and other things like that that we can pull pretty much in a lot of other things real time to be able to impact.
Our operating expenses and be able to maintain the.
But the margins that we have committed to sell.
We want to be ready it it's really kind of what we do on a day to day basis, we're always looking for opportunities to.
To drive different efficiencies across the business.
Awesome. Thank you very much.
Thank you.
Our next question will come from Brad Zelnick with Deutsche Bank.
Great. Thank you so much and congrats on a strong finish to the year and a strong guide for next year. Maybe this is my first question with no chance a bit disappointing can you double click on the actions you are taking and what it is that gives you the confidence its product and not the environment.
Yeah.
Yes, Brad how are you I will take that question.
First and foremost I would share with you that we are the ones that got pulled back that resulted in the outperformed.
Performance that we just shared the great news is it's in our control.
The second point I would make is the biggest thing thats been reaffirmed as we've become one family with mail chimp is.
Two of the biggest problems that matters, most to our customers and especially by the way in tougher times is being able to grow their customer base.
And being able to manage their cash flow.
And the biggest insight that we learned as we started accelerating our marketing spend which we had shared with all of you that we would do.
There are I'm conversion gaps in the product that we felt like were critical to address not just spend the marketing dollars without the benefit of improved conversion and specifically those were things like <unk>.
I'm coming to the website and the number of people that we saw falling off versus what we would expect based on our experience with across the quickbooks platform across the credit Karma platform Turbotax platform. What we believe are some best in class engagement and conversion than when you get into the product, we measure active use and making sure that youre getting.
Into the features that you really wanted to get into and hence why we signed up for mail chimp and even our checkout process. So those are just three illustrative examples.
What I would say just basic blocking and tackling product conversion that we really wanted to double down on to make sure that we are ready for busy season that did not take away from the priorities that we have a shared about mail chimp, which is one is to create one growth platform.
With Quickbooks, which where we are on track to do.
It's a double down on international in fact that is now part of our refreshed international strategy to double down on helping customers grow customers of mail Chimp and then the third is to actually go into mid market. So what what we just announced in terms of our results actually has nothing to do with the environment that has everything to do with what an orphan.
Paul and decisions that we made very explicitly to be ready for our busy season and these are playbooks that we don't have to execute when it comes to the product conversion.
Thank you that makes a lot of census on and maybe if I can follow up with a quick one for Michelle Michelle just on the on the.
The long term guidance and how we're thinking about small business going forward and you talked about a range of 15% to 20% growth from 10% to 15%, but thinking more holistically.
So as I think about some of the pricing actions more recently and desktops. For example can you just remind us as you think about that long term view.
How should we think about.
Pricing is a lever and pricing for value going forward. Thank you.
Hi, Brad Thank you for the question.
Really excited about being able to raise the long term expectations for small business.
From 10% to 15% to 15% to 20% and I think it goes to show as defined talked about earlier.
Really the mission critical nature.
And the offerings that we have in small business.
As we have increased the growth expectations.
<unk> of the growth algorithm. All overall is really still focused on the same things, it's about driving customers and it's about driving arpus be.
Yes pricing, maybe part of AARP C, but really it is about focusing on driving value and how do we continue to provide.
Offering for customers that may have a higher RPC, whether it's <unk> advance.
Chip Quickbooks live those kinds of products.
And we really are focused on pricing for value. So not just continually raising price, but once we're delivering those additional feature that are providing additional value to the customers and we're bringing more innovation to the table.
When we looked at.
Should we be raising the price, but overall very excited about the growth, we see with small business.
Excellent.
Questions.
Thanks Juan.
One other thing Thats, just amplifying what Michelle just shared and that is our reliance on price.
Has not changed meaning that we have an algorithm whereby prices just an element of our overall performance and we're not relying more on price looking ahead than we did looking backwards. So just reiterating one point that Michel made just a moment ago.
Excellent. Thanks again.
Thank you.
Our next question will come from Alex <unk> with Wolfe Research.
Hey, guys. Thanks for taking the question.
Yes.
The one big bigger picture credit question and then.
Just one on tax.
As we parse the numbers I think the surprise factor sitting here is the guidance.
It's surprising in that.
It feels like it's.
It's not that conservative I guess in summary, I want to press on that a little bit I think what you are saying is that you guys have a lot of forward looking indicators into the macro environment.
And Youre looking at those indicators and they were really good in the quarter.
And then I think you mentioned in your script that you.
Our guidance does not assume significant deterioration in those factors. So I guess my first question would be why not and why what gives you the confidence to guide with that methodology and then if you.
If you do that conservatism into the guidance for next year, where would we find it and just tactically maybe what is the assumption for for mail chimp growth given that.
<unk> you talked about that was it.
Joyce I guess in the quarter.
Sure Alex I appreciate the question.
Ill say a couple of things first of all.
Our approach to how we run the company and our approach to guidance on how we factor things then.
Has not is not at all changed so just know that our approach is consistent with the wale Intuit as always.
All set expectations and set guidance, which is really to deliver on our commitments.
Number one.
Number two.
What really informed our perspective as we look ahead is all of the <unk>.
Indicators that we see that our forward looking but let me just if I could double quick in a few of the areas.
I'll start with tax to put that out of the way which is.
No matter the environment, we're not going to expect nor have we seen in our history really any material impacts impacts about 35%.
The company.
When you look at the other 51% of the company, which is small business.
It's important to note that.
We are a very different company today than we were three years ago much less five years ago, where small businesses are relying on our platform to run their business is actually their livelihood and 80% of our <unk>.
Revenue is subscription.
And the 20% that is transactional based.
Take the current environment and how things could play out into account as we set guidance.
And the third which is credit karma and 14% of the overall company revenue.
We have taken the current environment and what we assume will take place into account and most of our verticals other than credit Karma in fact have seen an impact and we have included that in our guidance because it really that was a long way of saying we are fairly consistent across all of our of our sector.
And and we feel very good about the indicators that we see how we view things will play out and how that informed our guidance moving forward.
So it sounds like you are reaffirming a notion of diversification and.
And exposures I guess.
Maybe just a follow up on.
On the tax side on the consumer business.
When you think about.
You mentioned that business is kind of much more resilient irrespective of the macro everybody's doing their taxes is there any impact we should think about from from recent legislation and just in general.
This type of a tax season that are more volatile macroeconomic recession.
We're environment might might instigate.
Alex I would say.
Nothing more than what we've experienced in the last couple of years.
And that's really the short answer when you look at the last two to three years environmentally it has had probably more of an impact in the tax business than we've seen in years and as you know I've been with the company for <unk>.
17, plus years ran the tax business for for three years and what happened when we hit Covid implications on consumers to extend the tax season.
The child tax credit.
So many things that played into the tax season in the last several years and as we look at the year ahead, frankly, we view a much more simplified approach to the tax season, although.
Some of the tax laws will impact.
We need to do on the product that's what we're great at and Thats, what we know how to do well. So we actually see more normality as we look ahead than we experienced in the last two to three years.
Got it can argue with the results guys congratulations.
Thank you Ali.
Thank you. Our next question will come from Kash Rangan with Goldman Sachs.
Alright, congratulations on a superb finish to the fiscal year and also very constructive guidance.
Michelle we look at the Youre not going to be talking about the small business online ecosystem revenue split going forward, but it clearly looks like the business is at a point, where we have two thirds of the business going from online ecosystem.
Growing roughly 30 plus percent rates right.
All of us.
So price does the outlook for that business.
The overall business to 50% to 40%. So it looks like online ecosystem is actually a pretty decent clip right. So in the event of a delta.
I noticed the funds. This was exactly the question that I've asked you in prior conference calls.
How confident are you that.
Of course, retaining subs is one thing.
Adding net new subscribers and the challenging economy. How confident are you that you can keep that ball rolling while continuing to cover your.
Price increases stick.
At the same time, managing retention, especially because.
Session goes down a bit more pressure to add mortgage so how does that mathematical equation play out.
During a downturn. Thank you so much and congrats.
Yes sure Kash. Thank you for the compliment of actually love the nature of your question and let me hit on a couple of things. This is why.
Earlier, one of the things I talked about is we are such a different company. When it comes to the small business platform than we were even three years ago and so to your question of is.
Why do we have confidence around our guidance.
I know that it doesn't go past us that in this environment, we actually raised our long term expectation and it's because of <unk>.
Just the how mission critical the platform, but the services that we haven't seen two examples I would share with you is when you look at the Formula that we've shared which is we're going to grow customers, 10% to 20% and we're going to grow RPC and the 10% to 20%. The two examples I would give is we have a set of <unk>.
<unk> offerings on our platform today that we didn't have before quick.
Quickbooks, Quickbooks advanced which is going after mid market, which has much higher arpus. The forex the use of sort of services is something that we didn't have three to four years ago and we are just early in our penetration.
Into that Tam and in fact, we've not only seen no slowing but strengthening in this environment because.
Folks want to ensure that they are on our platform to get paid faster to be able to take care of their employees and so one is when you look at going up mid market. When you look at our Quickbooks live which is really an opportunity for us to lift peds.
And go after non consumption.
Our offerings, we have that we didn't have before that are actually higher RPC. That's one.
To remember four to five years ago, our payments business was growing 11% because of where we were on innovation on the platform now we're growing north of 30%.
And we have about almost two trillion dollars of invoices that are managed on our platform. We are growing at that rate and our penetration is very low and more and more customers are starting to digitize their form of payments because of the innovation on our platform and they are already on our platform. So we have and those are just two illustrative examples.
Samples, but very real examples of why we're seeing the strength that we're seeing here now and the strength and all the indicators that we see in the <unk>.
<unk> year, and I would just sort of finished with the bank box of 80% of our business is subscription business. So it's highly highly predictable and those are the things that give us confidence as we look at.
Tremendous section of what is driving your concept. Thanks, so much and we will not let Microsoft tell us anything about Smbs will listen to you first. Thank you. So much we are the ones to look for when we talk about F&B.
Thank you.
Thank you.
Our next question will come from Daniel Jester with BMO capital markets.
Great. Thanks for taking my question.
Maybe just on credit Karma and now moving into that segment on an official basis.
Maybe just spend a minute talking about sort of the opportunities there and a little more detail how much Kinmen drive engagement. In addition to credit card money and just over the long term how should we be thinking about that combination.
Yeah, Danielle. Thank you for your question, we ticked off.
Strategy project.
It's been almost probably a year ago.
Just understand how we can accelerate making ends meet at our vision to truly have a consumer financial platform that can be the self driving platform for consumers no matter, where they are in their in their life, whether they're or students or someone that is later in their life.
Where they have achieved a level of financial freedom and have different set of needs.
And given the work that we did around our.
Vision.
We decided to bring mint and credit Karma together because in essence.
Although we have a lot of prime members as part of the credit Karma base.
<unk> actually has a number of feature and functionality that the prime members need the most so that's number one is bringing some of the features and functionalities together as part of the credit Karma platform and over time that will actually make credit karma much more robust to be able to serve all kinds of number of members.
Matter, what their sort of credit band is number two is actually leveraging the scale and the power of the algorithms and machine learning capabilities. The decision engine that we have in credit karma that ultimately deliver.
North of 35 billion in machine learning predictions per day, we can leverage a lot of those capabilities to make meant a lot better as part of credit Karma. So we do expect that this will be accretive in the long term delivering benefits to the members and ultimately.
Truly are achieving our mission our vision of unlocking smart money decisions for for consumers. So that is our approach and thinking of are very excited about it.
Great. Thanks, and then just the second one on mail Chimp I. Appreciate all the context, you provided about the quarter and the trajectory of the business I guess are there any learnings from the mail chimp acquisition that you'd share that maybe will impact your acquisition philosophy going forward and just maybe comment on sort of what the.
Acquisition, the outlook and playbook is today, thank you very much.
Sure absolutely let me start with the single biggest thing that we've learned and we're diagnosing it wouldn't have changed any of what we've done we're very very excited about what we're going to do and executing our vision with Mel jumping quickbooks coming together, but having diagnosed ups.
Some of the product conversion.
Opportunities that we are that we're going after I would say that's probably the single biggest thing that we did.
Did not diagnosed as well as I would like to see us diagnosed I would also say that the if youre going to Misdiagnose something thats.
Okay, one because it's within your control and you can address it but I would say that's probably the biggest one that is not at all altered the priorities that I mentioned, a moment ago, but.
But it is something that we've really gone back and we're looking as to how we can put that in our playbook to do a better job diagnosing upfront, but in no way shape or form does it change how we feel about the possibilities ahead and it has not impacted our timeline at all.
Second thing is our M&A playbook has not changed our Uber goal has tightened the market our principles around looking at capabilities that can help us accelerate delivering our vision are unchanged and so I would just I would leave it at that nothing nothing new to report.
James.
Great. Thank you.
You're very welcome.
Thank you.
Our next question will come from city, Pentagon <unk> with Mizuho.
Thank you thanks for taking my question and great quarter.
Just wanted to dig into the payment part of the business I guess, that's one of the underappreciated assets I would say.
Intuit has.
You talked about total invoice us growing to $3 million versus last year $1. Five trillion could you help us understand how you have been gaining share within the business and also what are the opportunity you see for input payments to expand beyond quickbooks like some of the quota.
Asset.
If you could share some of your long term vision on that that would be great.
Sure absolutely.
What's great about your your question that it is.
Our big before which is about being the center of small business growth is really about helping.
Our customers grow their customer base and its actually about cash flow managing their cash flow and that's where the power of mail chimp and quickbooks come together.
Cynically around the two trillion dollars of invoices that we're now managing on our on our platform and your question about how do we continue to gain share I'll start with just sharing how we've accelerated our growth from the 11% several years ago too.
The 30% that I mentioned, a moment ago from a charge volume perspective, and it's and it's really just basic innovation is.
It's around discover ability it's around innovation like instant deposit it's around innovation like they've paid upfront, which.
Really gives you the ability to send an invoice and get paid instantly because of all the data points that.
That we see.
And it's just really making the experience auto, enabling the experienced or payments to always be on versus.
Versus opting in those are illustrative examples of where we have innovated to accelerate the growth in payments and by the way our clear there is so much more yet to do there because.
When you look at the last five to six years. Our team has spent probably the first half of those six years just building the basic.
Our platform capabilities to be able to innovate much.
Much faster, we have a lot of those capabilities now, we're able to innovate and deliver faster innovation to our customers. So that's one area, where we'll continue to double down to take more share, but we also have a significant opportunity.
Digitize all of business the business a big chunk of this two trillion dollars of invoices that are managed on our platform.
Is actually business the business, where it's a quickbooks customer that transaction with another quickbooks customer and the opportunity that we have is that at the end of the day you can look up that small business send them an invoice that invoice ends up getting it showing up in their books and they can pay it instantly right on our rail. So that's an example of that.
Types of things that we are working on in addition to what I shared a moment ago to really accelerate increasing our penetration and share of this two trillion dollars and I'll just end with going back a couple of questions that have been I think were asked around what gives us confidence around our.
Small business our guidance and it's really this is one great example.
Helping customers get paid faster, it's already happening on our rails, we don't need to go acquire the customer invoices are being managed on our platform. Now. The question is how do we help the customer put more money in their pocket faster and it's sort of our right to win and.
This is a great example of what gives us a lot of confidence as we look ahead.
That's great color and just a quick follow up to one of your comment on <unk>.
Are you planning to go to mid market.
Can you help us understand where the motive synced right now maybe in the employer segment and where you're targeting right.
Mid market and is it also something youre trying to expand features more beyond email marketing what are you trying to grow into the mid market.
Yeah, absolutely I would liken.
And you and many that are listening or followed us for years I would like in the mail chimp journey that we are on very similar to the Quickbooks journey, specifically there is a lot of overlap in the type of customers that we serve mail chimp generally.
Generally has served the smaller small businesses less than 10 employees.
However, it actually has a lot of the capabilities to be able to serve the mid market customers and it comes down to adding some features and functionality basic things like how you do billing to actually ensure that you have the right inside salesforce and customer success agents to be able to serve these mid market customers a lot of what we have.
<unk> and know how to build.
In mid market.
Quickbooks.
Advanced we're doing the same thing now with that with now Jim. So it has a lot of the feature functionality, but we're building out additional ones. We're also building out.
Our sales and customer success inside sales and customer success.
Be able to then serve those customers and then you put that together with going to market together with quickbooks.
Really sort of brings the power of the benefits that we're able to deliver to customers and makes us far more attractive in the market for those small businesses that we want to serve.
Thank you next we have Michael <unk> with Wells Fargo Securities.
Hey, there. Thanks, good afternoon I appreciate you taking the question.
The EPS guidance for the full year, it's if not the highest among the highest we've ever seen a 16% growth as a starting point for them into it.
Some questions, it's especially notable given the current environment I think it's clear that increasing the target ranch for small business helps but is there anything else you'd point to or their platform advantages you're finding some of the newer segments or just anything else you'd point us towards its helping to unlock the bigger EPS growth algorithm.
Yes, sure Michael I'll, just amplify what Michelle sure shared earlier.
We had leverage that is coming from three places that we view is durable one is on the technology side.
We are actually excited about how they merit on our walk all of you through our technology stack, our technology vision and how it's fueling innovation and also how it's giving US a margin leverage at at Investor day, but in that context, that's one significant lever where.
We are continuing to build our services. So we can build on once and use them multiple times across the company and it's actually one of the things that as an accelerant to fueling innovation and acquisitions like mail chimp and credit Karma.
The second is is the leverage we get from how we're building out our marketing our platform so that our.
Our martech services can be used across all of the segments across the company.
Third is the technology that we're building once in a bind to all of our customer success operations, which just recall is quite large we have over 700 million interactions with customers and we shifted the company years ago from.
Every segment builds out their own operations that we're building at one.
And the segments leverage the same operations across the company and then making sure that we ensure that those services and those platforms are used by not only across the company, but our acquisitions like credit Karma announce them, so that leverages coming from technology across the company Martech and customer success operation.
<unk>.
And that's what's driving.
What we delivered this past year the guidance that you heard Michelle talk about and the durability that we believe we have looking ahead.
Thank you just a quick follow on if I may so some useful commentary around mix throughout the call with credit Karma Youre guiding for 10% to 15% growth. It's below the longer term targets, we've seen but clearly there was some outside outsized growth there over the past year or so I'm wondering if there's any way you can help disaggregate the tough comps versus some of the macro.
Assumptions for the frame that guide in relation to the longer term targets. We've seen thank you, yes sure sure. Michael It is it is in fact, both one is we have a big comp two years of 37% and then last year, 58% growth and and we have a lot of confidence in our long term expectations.
For 2025% so that is unchanged. So yes, one element is the tough comp, but really the I would say the other element.
A bigger element is the.
Current trends that we're seeing that we have really incorporated in our guidance. When you look at our verticals around credit cards personal loans.
Insurance and then home loans, just and then there's the money vertical almost every vertical has been impacted and by the way you can see based on our guide the resiliency of the platform other than of course, the credit card vertical that really has not seen any significant impact. So that's the second piece that we have.
Corporate it into our guidance is the in fact, the macro economic environment that we see.
Thank you. Our next question will come from Brent Thill with Jefferies.
Thanks, Susana number of C has been calling out the shift a services based economy from a product base Tonight.
Correct me, if I'm wrong, you have a heavy services base.
On small business I'm curious if you think that's helping kind of shelter the small business in this environment right now is that playing into some of the defensive nature of what Youre seeing in results in small business for your for your for your core.
Yeah. It's a great question Brandon I think the short answer is absolutely and there are two elements I'll start with just a reminder, that when we look at the small business market.
Sort of.
<unk> to 100 employees about 70% of it is service based businesses and about 30% is product based businesses and are.
Really strength is in the service based businesses.
I think the second thing I would just say is we're very very diversified in the services based businesses that we serve we're not sort of overly anchored in one vertical or another and that really helps with the diversification.
<unk>.
Not only our performance looking backwards the opportunity as we look ahead.
And when you look at credit Karma in past downturns can you just give us a compare contrast, I know you've compared the.
The small business segment to be more SaaS, you've got oversee layered services around is there something different.
They have done in the business to diversify assuming things got a little worse im not saying thats, what youre seeing in the guide, but if that was the case, what what gives the defensive nature of that business.
The single single largest.
I would say uniqueness about collecting credit.
Credit Karma aside from you got $100 million customer incredible trust.
High net promoter.
14, plus years of behavioral data, where we know so much about these customers they know what they need when they need it at how they needed putting.
Putting that to the side as a foundation, which is critically important if light box.
With light box it raises.
Certainty of the experiences that and offers that we can deliver members, but in this environment more importantly.
<unk> quality, which is theres, a huge flight to quality by our partners.
So because we now have almost 70% of our credit card and personal loan.
<unk> on Lightbox and by the way growing that's 15 points higher than it was last year and of course.
Almost nonexistent years ago.
I don't even think light market existed in the last recession.
That is the single biggest thing of where financial institutions have a lot of certainty when their models are part of lightbox because they can identify the kind of customer they want to kind of offers that they want to provide and of course, we make the perfect amount. So I would say that is the single biggest thing and it's just the scale of the platform.
We are a large part of the economy, providing a match between what consumers want.
So the financial products with that but I would say like box.
Thank you.
Our next question will come from Kirk <unk> with Evercore ISI.
Thanks, very much and I'll echo the congrats on you've alluded to this a couple of times, but I was wondering if you could just sort of dive into it a little bit more detail just the power of the platform in small business and as we go into a potentially soft.
Economic backdrop your customers starting to talk to you all about trying to consolidate onto your platform in a bigger way now you obviously have the ability to help them address but the back office and the front office and while we're seeing that I think anecdotally and payments and payroll I was just kind of curious given that budgets might come under.
More scrutiny are you benefiting from the idea of consolidating towards one platform versus maybe taking a best of breed approach. Thanks.
Yes, sure Kurt and in fact, this is probably one of the most.
Misunderstood or less least understood element of the benefit that our platform provides and so I'll just start with stating something that I mentioned, a moment ago because it really plays into your to your question and that is we're.
We're not a line item on the small businesses budget. We are the platform that fuels. Our success. We are mission critical without our platform of small business run their business and so it's really important to have that frame of mind as to what's the role that we play in the lives of small businesses.
Second to go to get to your question is we now have the services that we didn't have three years ago five years ago and in fact, yes. They are having those conversations with us less from a can I save money, but more from a perspective of I don't want to deal with all of these different ablative applications where things.
We are sort of desperate and discrete or I can have everything on your platform, if I'm using somebody else's payroll or somebody else's capital or somebody else's payments why not just use all the services on your platform and frankly this is an area where our small business team is actually doubling down on looking forward, which is how do we.
<unk> evolve our go to market actually had a conversation with our customers about all the services that they don't use that they should use where there'll be far more efficient effective and potentially even save some money because we see all their transactions and we can see what they do if they don't do it on a platform because they've connected their bank accounts and so on so we believe this is a.
Opportunity as we look ahead.
Thank you.
Ladies and gentlemen that is all the time, we have today for questions and I would like to turn the call back over to management for any additional or closing remarks.
Awesome well. Thank you for the wonderful questions and we are really looking forward to seeing hopefully all of you at our Investor day on September 29th will.
Number one walk through probably the next level of depth around the experiences that we're delivering and why in this environment. They matter the most.
So our customers across all of our five big bets and you'll have a great opportunity to not only ask more questions about that.
Connect with my wonderful team that leaves a lot of this great work. So look forward to seeing you then until then began stay safe and we'll talk to you all soon thank you.
Ladies and gentlemen, thank you for your time today and this concludes our conference. We appreciate your participation and you may disconnect at any time.
Okay.
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