Q2 2023 Intuit Inc Earnings Call

Good afternoon. My name is Abby and I will be your conference facilitator at this time I would like to welcome everyone to the Intuit second quarter fiscal year 2023 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 Star followed by the number one on your telephone keypad.

With that I'll now turn the call over to Kim Watkins Intuit's, Vice President of Investor Relations Milwaukee.

Thanks Abby.

Good afternoon, and welcome to Intuit's second quarter fiscal 2023 conference call I'm here with Intuit CEO to Tonga, Darzi and Michelle Clutterbuck our CFO .

Before we start I'd like to remind everyone that our remarks will include forward looking statements.

There are a number of factors that could cause intuit's results to differ materially from our expectations. You can learn more about these risks in the press release, we issued earlier this afternoon.

Our Form 10-K for fiscal 2022, and our other SEC filings.

All of those documents are available on the Investor Relations page of Intuit's website at Intuit Dotcom.

We assume no obligation to update any forward looking statement.

Some of the numbers in these remarks are presented on a non-GAAP basis, we've reconciled the comparable GAAP and non-GAAP numbers in today's press release.

Unless otherwise noted all growth rates refer to the current period versus the comparable prior year period, and the business metrics and associated growth rates refer to worldwide business metrics, a 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.

Great. Thanks, Kim and thanks to all of you for joining us today.

As you read in our press release, we announced that Michelle will step down from the CFO role and plans to retire from Intuit I am pleased to share that Sandeep agila.

Assume the role of Chief Financial Officer on August 1st 2023.

As a well crafted succession plan that will cover more in a few minutes, but let's first get started with the business.

We had another strong quarter as we executed on our strategy to be the global AI driven expert platform powering prosperity for consumers and small businesses.

Quarter revenue grew 14% fueled by small business and self employed group revenue growth of 20% and consumer revenue growth of 26%.

This year, we are celebrating intuit's 40th anniversary.

We're incredibly proud of our history of re imagining the company and reinventing ourselves, which has enabled us to thrive during various technological shifts in economic cycles.

Having successfully navigated multiple platform shifts over the years, including our largest transformation to artificial intelligence in the area of Digitization, we continue to be confident in our ability to fuel growth given our large tam low penetration proven strategy and five big bets.

We are proud to be the global financial technology platform that powers prosperity for the people and communities that we serve.

I will first start with some thoughts about the tax season, and our business in the current macro environment.

As you know the scale of our platform and rich data gives us unique insights into the lives and spending habits of 100 million plus customers.

Our small business performance continues to be very strong despite uncertainty in the broader macro environment.

We continue to see strength in the areas that have the greatest impact, including the growth of our online mid market customers contributing to our strong subscription revenue and higher RPC.

In Q2 growth in both the number of companies running online payroll and the number of employees paid on our platform remains strong.

Total online payments volume grew 25% moderating some from the first quarter.

We are seeing strong growth in the number of payment enabled invoices set by our small business customers a good sign that our innovation is continuing to drive digitization.

The shift to Digitization and the power of our small business platform, including Quickbooks and mail chimp.

<unk> with customers as they grow their business and improved cash flow.

We continue to observe that our AI driven expert platform is critical to our customers' success.

Now turning to tax we are confident in our strategy to both extend our lead in the do it yourself category and transform the assisted category.

Following a highly successful extension season last year, we doubled down on our learnings to further accelerate innovation to better serve our customers.

We're evolving our turbotax brands increased awareness that we are the best alternative in the assisted tax segment for consumers and small businesses, a combined $30 billion Tam.

Our new campaign come to Turbotax and don't do your taxes is resonating with our customers and is the key to our strategy as we focus on attracting customers from the assisted segment.

Second we launched a number of high impact Turbotax live innovation.

As part of our second Big bet, we're solving one of the largest problems our customers face lack of confidence.

Connecting people to experts virtually builds.

Building on our learnings from last season, we're continuing to use AI to bring in our customers' data and match them to the right expert to help customers get the maximum refund they deserve with confidence.

To help customers finish their taxes, even more quickly we've created a new gamify it experience focused on efficiency.

By our lifetime guarantee.

We evolved our full service offerings of <unk> can have their return completed in a single virtual session.

We are off to a great start attacks and we continue to be confident in our game plan to win.

Now shifting to our five big bets I would like to highlight some examples of recent progress as a reminder, our big bets are revolutionize speed to benefit <unk>.

People to experts on.

<unk> smart money decisions.

Be the center of small business growth and disrupt the small business mid market.

Our second Big bet is to connect people to experts and.

In addition to what I shared about Turbotax live we have achieved product market fit with Quickbooks live, which we expect could help us penetrate non consumption and drive breakthrough adoption.

We're evolving our quickbooks live into a portfolio of expert services and are embedding. These services as part of our lineup similar turbotax live and.

In the second quarter, we launched a free expert at expert guidance setup available for all new <unk> customers leveraging our virtual expert platform.

Early results indicate that customers using this offering have more confidence in and awareness of our full ecosystem of services, which translate into better retention and higher adoption of our service offerings.

With our third Big bet, our vision for credit Karma is to become the comprehensive self driving financial platform the <unk>.

<unk> our members forward wherever they are on their financial journey.

We're innovating across all verticals and continue to have confidence in our long term growth expectations of 20% to 25% despite near term headwinds.

There are a few examples we're innovating to help members get faster access to cash and make financial progress, including improving their credit score with the help of credit Karma money for example, with the integration of Turbotax and credit Karma approved members can get money in their hands in as little as one minute after the IRS accepts their return.

This is the largest paycheck of the year for many this enables them to take care of immediate expenses pay down debt or build savings member.

Members also receive recommendations for how to achieve their financial goals, such as creating an emergency savings fund with our high yield savings account or building credit with credit builder.

Members, who activate credit builder see an average score increase of 21 point in as little as 30% to 45 days.

Members, who use credit Karma money show higher engagement on the credit Karma platform.

We are driving more confidence for members with Carmike guarantee.

As a reminder, carmike guarantee offers indicate that members will either be approved or they'll receive $50 at the end of the quarter, 59% of members were eligible for at least one karma guarantee offer.

With <unk> now part of the credit Karma platform, we're beginning to build a new experience for members with prime credit scores, which credit Karma is underpenetrated in today.

Leveraging meant we see the opportunity to develop personalized product recommendations leveraging network transaction and spend data to highlight the product benefits that matter most to these members.

Our fourth Big bet is to become the center of small business growth by helping our customers get new customers get paid fast manage capital and pay employees with confidence in an omnichannel world.

We continue to innovate to digitize money movement.

From creating an estimate to invoicing the customer to getting paid today.

Today easier discovery auto enabled payments instant deposit and getting paid upfront are all helping drive adoption of our payments offering.

And we are making meaningful progress digitizing BTB payments to accelerate and automate transactions between small businesses and ultimately improve their cash flow.

We see a tremendous opportunity as 70% of BD transactions are still completed with checks. This quarter, we launched a quickbooks business network to millions of quickbooks customers to further digitize BTB payments in the U S. We're also building our bill pay functionality in Quickbooks and plan to launch this capability in the future.

Now turning to mail chimp.

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.

Disrupting the mid market by developing a full marketing automation and CRM and E Commerce suite.

Third accelerating global growth with a holistic go to market approach.

This quarter, we made some great progress against these priorities to.

To help our small business customers run and grow their business in one place we launched a real time data, saying that brings <unk> data such as invoices sales receipts items customers and addresses into mail chimp.

This puts customer and purchase data together all in one place to power our customers' success.

To help our customers plan execute and track their marketing campaigns across multiple channels in one place, we launched a new capability called campaign manager.

This reduces the number of tools needed to manage marketing and assess performance across channels.

And to drive accelerated global growth and execute our refreshed international strategy, we're translating the product into multiple languages, including Spanish and Portuguese.

Beyond the progress we've made on these priorities the product lineup innovation assistant Onboarding and improve first time use we shared last quarter is driving green shoots and paid conversion, which was up two points year over year in the second quarter.

Our fifth Big bet is to disrupt the small business mid market, representing a Tam of one 7 million customers of which 700000 are already in our franchise today.

As I mentioned earlier online mid market customer growth remains strong and we are seeing increased adoption of <unk> advanced payments and payroll driving RPC expansion as we serve these customers across our full ecosystem of services.

<unk> up we feel confident in our AI driven expert platform strategy and five big bets.

The uncertain macro environment the benefits of our global financial technology platform are more important and more mission critical than ever to our customers now let me hand, it over to Michelle.

Thanks for the time for the second quarter of fiscal 2023, we delivered revenue of $3 billion.

GAAP operating income of $270 million versus 60 $56 million last year.

non-GAAP operating income of $856 million versus $612 million last year.

GAAP diluted earnings per share of <unk> 60.

It's 35 times a year ago.

non-GAAP diluted earnings per share of $2 20 versus $1 55 last year.

Turning to the business segments in the small business and self employed group revenue grew 20% during the quarter and online ecosystem revenue grew 24% with.

With the goal 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 Quickbooks online accounting revenue grew 27% in Q2, driven mainly by customer growth higher effective prices and mix shift.

Second we continue to focus on connecting the ecosystem.

Online services revenue, which includes payroll mail chimp payments capital and time tracking grew 21% in Q2.

Within payroll revenue growth in the quarter reflects an increase in payroll customers and a mix shift to higher end offerings.

Mail chimp revenue growth in the quarter was up low teen.

Growth was driven by higher effective prices aligning with our pricing for value philosophy and improving conversion we.

We will continue to provide regular updates on the business. So you can track our performance over time, including a deeper dive at Investor day, similar to what we do for the rest of the business.

Within payments revenue growth reflects ongoing customer growth as more customers adopt our payments offerings to manage their cash flow and an increase in total payment volume per customer.

Third we continue to make progress expanding globally by executing our refreshed international strategy, which includes leading with mail chimp.

On a constant currency basis total international online ecosystem revenue grew 17% in Q2.

Desktop ecosystem revenue grew 10% in the second quarter the.

Subscription model for our desktop accounting solution makes us revenue more predictable and we raised our desktop prices for several products in September to more closely align with pricing for value.

We're about halfway through the three year transition to a subscription model for desktop.

Quickbooks desktop enterprise revenue grew high teens during the quarter. We expect continued strong desktop ecosystem revenue growth as we progress through the back half of the fiscal year.

We continue to expect the online ecosystem to be our growth catalysts going forward, we remain confident in our guidance for total small business and self employed group.

19% to 20% revenue growth this year.

Consumer group revenue of $516 million grew 26% in Q2, reflecting a faster forming season this year.

We remain confident in our guidance for consumer group of 9% to 10% revenue growth for fiscal 2023.

Turning to the pro tax group revenue grew 7% in Q2 in line with our expectations.

Credit Karma delivered revenue of $375 million in Q2 down 16%.

This was slightly ahead of our expectations in a seasonally smaller quarter.

As a reminder, credit Karma represented 14% of our total revenue in fiscal 2022.

On a product basis, the decline was driven primarily by headwinds in personal loans.

Auto insurance and auto lines, partially offset by growth in credit card and credit Karma money.

We continue to see an impact across all verticals in this uncertain macro environment.

In credit cards, we continued to see partners tightened eligibility and rescue or cohort.

In personal loans, we continue to see pressure as partners further tightened eligibility and we expect personal loan revenue to decline. This year after a very strong growth in fiscal 2022.

We remain confident in our guidance of a decline of 15% to 10% in fiscal 2023.

Our financial principles guide our decisions remain our long term commitment and are unchanged. We finished the quarter with approximately $2 $1 billion in cash and investments and $7 1 billion in debt on our balance sheet.

We repurchased $500 million of stock during the second 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> 78 per share payable April 18th 2023. This represents a 15% increase versus last year.

As I said consistently in the past several quarters, we have an operating system, we used to run the company and this includes a proven playbook for operating in both good and difficult economic times.

Our first priority is to do the right thing for customers, giving them access to the tools and offerings they need most.

We 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.

The scale of our platform along with our rich data. It gives us the unique ability to see leading indicators that allow us to be forward looking and adjust quickly.

We also have a strong balance sheet that enables us to play offense.

We will continue to accelerate our innovation and our goal remains for intuit to emerge from this period of macro uncertainty in a position of strength.

Moving onto guidance, we are reaffirming our fiscal 2023 guidance. This includes total company revenue growth of 10% to 12% GAAP operating income growth of 9% to 13%.

non-GAAP operating income growth of 17% to 19%.

GAAP diluted earnings per share to decline approximately 5% to 1%.

And non-GAAP diluted earnings per share growth of 15% to 17%.

Our guidance for the third quarter of fiscal 2023 includes revenue growth of 8% to 9%.

GAAP earnings per share of $6 82 to $6 89.

And non-GAAP earnings per share of $8 42 to $8.49.

You can also find our full fiscal 2023 in Q3 guidance details in our press release and on our fact sheet.

On a personal note as we announced today I will be stepping down as CFO on July 31.

And made it a priority over the last several years to focus on our long term strategy for driving growth and that includes ensuring I have a high performing finance team with strong succession plans in place Sandeep.

Sandeep has been an integral part of the finance leadership team for over seven years and I have no doubt he will be a terrific leader and CFO .

He has shown its ability to drive key strategic priorities to create value for our business time and time again and I look forward to working with him over the next five months to ensure a smooth transition.

And with that I'll turn it back over to Suzanne.

Great. Thank you Michele well, while the CFO transition is it official until August I wanted to just take this opportunity to express my sincere appreciation for all of that Michelle has contributed over the past 20 years at Intuit.

Including the last five years as CFO . She has been an amazing partner and will lead into it better than what she founded.

And during Michelle's tenure, as CFO and to its market cap and revenue more than doubled.

Michelle's commitment to developing top and diverse talent has created a deep bench of strong leaders, making for a very seamless transition.

Sandeep will be an exceptional CFO and with this track record of leading outstanding performance across our small business and self employed group and our technology organizations.

With that let me go ahead and summarize.

We are seeing continued momentum as we execute on our strategy of being a global AI driven expert platform and growing intuit revenue double digits with margin expansion.

With our accelerated organic innovation and the additional the addition of credit Karma and mail chimp.

We are the leading global financial technology platform that powers prosperity for people and communities. We're proud that intuit has been named number five Unfortunately, most admired company in the software category.

One of glass doors 2023, best places to work and honored to be including included among just capitals, just 100 ranking for 2023.

With that let's now open it up to your questions.

Thank you ladies and gentlemen, thank you would like to ask a question. Please press Star then the number one on your telephone keypad if.

If you would like to withdraw your question press.

And the number one on your telephone keypad.

Your first question comes from the line of Kirk <unk> from Evercore ISI. Your line is open.

Hey, This is Sean said dialing in for Kirk.

Appreciate.

Taking the question and congratulations on a strong quarter.

I wanted to ask about what youre seeing in Quickbooks online growth.

<unk> from new customers and from up selling existing customers.

Just any commentary you might be able to provide around the dynamics there. Thank you.

Yes sure. Thank you for the question I would lead with we're seeing strength both in terms of.

Customer acquisition retention, we are seeing.

Strengthen our in our services as we mentioned.

A moment ago, both the number of companies that are running payroll. The number of employees that are getting paid is very strong.

Sure.

Compare our results to what Youre seeing in the marketplace. We are continuing to grow payments, 25% total payments charge volume, which is really outstanding.

Yeah.

The fact that our customers are continuing to benefit from digitizing on our platform and I think just the additive piece is we're seeing strength in mid market, which is much higher RPC.

Quite excited about really being able to pursue non consumption with what we talked about earlier with quickbooks live actually being embedded as part of our overall offering and I would just end with one of the goals that we talked about with all of you for years ago, Our bold 2025 goals one of those goals.

Was that we wanted the success rate of all small businesses on our platform to be 10 points better than industry and in fact, the small businesses on our platform.

Their performance is.

Is north of 15 points better than anyone in the industry.

That just suggests is that the small businesses on our platform are more successful they are digitizing and they're leveraging this opportunity to continue to accelerate to deliver for their customers.

Alright, thank you.

Youre very welcome your next one comes from the line.

<unk> <unk> from Mizuho Your line is open.

Thank you.

It's a great quarter I think what's impressive is your small business growth in this macro environment. When some of your peers are talking about push out of digital transformation and small business. Some weakness. So just wanted to ask what you are seeing in terms of like for the next few quarters like you.

Looked at a lot of data what kind of what sort of help you are seeing in the SMB economy, right now and it looks like your second half is pretty easy comp right now so would love to hear your comments on small business.

Yes for sure city. Thank you.

So much for your question and it's actually a really important question in terms of.

What we've often talked about which is it's important that you all look at intuit as really the authority when it comes to what's happening.

In the small business space and the reason is.

Is that our platform is mission critical for small businesses our platform.

With Quickbooks Mail chimp and all the services that we have on our platform is really used by small businesses to be able to grow customers manage their customers manage their cash flow be able to manage their employees and.

And therefore, what that means is it fuels our success supported by the Stat I shared a moment ago, where small businesses that are on our platform are actually 15 plus points more successful than those that are not on our platform.

Set that very important context, and I'll just point to.

Payments total charge volume as an example, when you look at our performance being at 25% of that is.

By far the best in the industry and that is because it is all about digitization and it's not just about payments, but it's about all of the services that are small businesses use on our platform.

And we are.

<unk>, our small businesses to continue.

To be successful even in this macro environment and we are here to support them I will just end by saying the following which I think you were hinting at in your question.

The strength of.

Our businesses is Michelle and I described in.

A moment ago, we expect that strength to.

Continue although when you look at our guidance I think the way you should look at our guidance. It is that it has been derisked for sure for the rest of the year.

Great and a quick follow up basically clarification your online services growth, 21%, but if I exclude mill chip.

47% growth that's quite impressive.

Compared to like Q1, 28% just wanted to clarify that I'm looking at it right.

You are we didn't break out the number but yes, you are looking at it right because in essence online services mining. This male jump grew faster. So therefore, just by design are grew much faster than 21%. So you are correct.

Thank you.

Youre very welcome.

Your next question comes from the line of Michael <unk> from Wells Fargo. Your line is open.

Okay, Great I appreciate you taking the question nice job on the quarter, maybe one for Michel are you still with us on margin.

Last quarter, you took the credit Karma outlook down, but left the EPS guide intact, we've gotten questions from investors around whether that provides maybe less wiggle room on margin, but the first couple of quarters of still shown EPS upside. So can you just walk through the margin levers you are finding.

Are there advantages unfolding various brands together and just how we should think about the longer term margin potential there.

Okay.

Yeah. Thank you Michael I appreciate the question.

We.

Yes, we absolutely have felt very strongly about being able to still keep our guidance for op income for margin, even though we did take down our revenue guidance last quarter and that's actually something that we were very plan full about as we went through our three.

When you're planning process, we had identified a number of levers that we can pull across the expense horizon.

A lot of that is in marketing some of it's in travel and some other discretionary type expenses. So that we would be able to still hit our bottom line financial commitments.

That's what we have done and we feel very good about the guidance that we've given for the rest of the year, but.

But it is something that we take very seriously and we make sure that we do have those levers that we can pull given different macro environments as that has unfolded this year.

That's very helpful. Just one more if I may the desktop business came in exceptionally strong could.

Could you just speak to what you're finding as you move that base for subscription and then how to think about the revised small business target after were through the migration journey, there and what keeps the 15% growth sustained afterwards. Thank you.

Sure Michael maybe I will I will take that first of all I'll just start with context. This is a business model shifts that we're actually quite excited about in that one week.

We've shifted the customers to subscription so it's far more predictable.

Two in that context, we have had a very plan full process of aligning our prices between desktop and our online products and the reason. This is really important as we've been heavily investing in the last several years really ensuring that some of the key capabilities.

For our desktop customers, particularly those product based businesses that those capabilities are available in online.

And being in the middle of this business model transition one we see another year and a half continued strength, but we also see ahead of that.

The fact that we can now migrate these customers through our online platform because we now have the capabilities that they need and by the way when we do that that actually opens up the doors to additional online services to continue to fuel the success of our small businesses and.

And therefore, when you step back ultimately the growth of this franchise will come from online and with.

With all of the innovation growth levers, we have moving upmarket that is what continues to give us a lot of confidence in our 15% to 20% long term expectations for the small business franchise.

Thanks very much.

Youre very welcome.

Your next question comes from the line of Mark Murphy from Jpmorgan. Your line is open.

Yes. Thank you very much and I'll add my congratulations I was wondering if you can drill down into the favorable trend that youre seeing from a higher effective prices.

Particular for Quickbooks online accounting.

Just in terms of the magnitude and the duration of that impact and I'm curious if that should continue to provide.

Any kind of material uplift for the next several quarters.

Yes, Thanks for your question Mark.

Let me, let me start with contacts that we always look at our largest growth across the company no matter what the business has to come from volume.

On mix.

Those two are driven of course by our innovation and or if we are moving upmarket, which in many cases across our businesses.

We are moving up market and Turbotax. The example, moving into the assisted segment, so price and mix are really the largest drivers and because of just the VAT and accelerated innovation.

We also have price as a leverage because we always want to be disruptive from the bottom.

And we want to continue to disrupt at the top and that actually gives us a lot of pricing power because of the value equation and the benefits that we deliver for our customers and so with that as context looking ahead not just in the next couple of quarters, but looking in terms of just the long term durability of Intuit and how we think about things.

We believe the majority of our growth will continue to come from volume and mix and price will always be a lever because particularly that we are moving upmarket and I think it was even more pronounced.

In small business because of the business model shift in desktop, where we're bringing pricing to parity with online and we're just we expect that to continue in the next several quarters, but theres a durability elements of this not just a quarterly element to this.

Okay understood and then as a quick follow up.

On the midstream side are the initiatives that are designed to stimulate higher growth.

For mail Chimp, which I think has been including the very creative advertising campaigns, you've had out there are those starting to take hold and produce an effect in terms of weather.

Whether we look at email marketing campaign volumes or.

<unk> customers opt into the right products, there too where they run the a b test and kind of connect back with the rest of the ecosystem is that something you see.

That's starting to take hold currently or in the next cut.

Quarters as well.

Yes, Mark I would say that when you think about the priorities that we talked about in the focus areas. We are starting to see green shoots and we started seeing green shoots a couple of quarters ago sort of the biggest one is.

Conversion and paid the one in addition to the initiatives starting to deliver green shoots that we are the most excited about is the work that we're doing to retain our high value customers and its really penetrated mid market. This is really the same story.

That we've talked about in the mid market with Quickbooks advanced where our retention was actually not quite that high when it came to our high value customers and Quickbooks and we built a platform and really a team to focus on these mid market customers and that is really one that I'm very excited about it I think we will see the results of that in the next two years.

Three quarters, where we'll start.

Making a bigger impact in not only retaining our high value customers, but also penetration in mid market. That's also in context of all the other things that we've talked about doing which is.

Campaign redesigned web redesign first time use one hour assisted onboarding and know what we just shared earlier in the script, which we said is coming and that is the data. The data is huge because now it puts the customer data and purchase data all in one place and it really puts the power of growth.

In the hands of customers in a way, where they can get that feel anywhere else and so.

All of these things take time, but we are we are seeing the green shoots it'll translate into faster revenue growth sort of in the coming quarters.

Which is by the way not embedded in our guidance just to be clear, but we're excited about the progress that we're making.

Thank you very much.

You're very welcome.

Your next question comes from the line of Brad Zelnick from Deutsche Bank. Your line is open.

Excellent. Thank you so much for taking the question. So I think everyone appreciates, what's happening in credit Karma and Theres only so much that's within your control and within that context, it's great to hear all the goodness around how credit Karma guarantee is doing but as we think about the other elements of the portfolio the other products.

In an environment that's supply constrained can you maybe just talk about the performance.

And how you're investing it against the opportunity in context of what you can control and how do you even know the progress perhaps that you are making in auto and in home for example, if the market just isn't there to support it.

Yes, Brad actually great Great question and the reason, it's such an important question is.

We are very focused on delivering for our members in the near term and to your point, leading through this macro environment, but we are undeterred relative to the strategic focus areas for the business and so let me specifically answer your questions first of all let me start with a macro point.

This applies to all of them do it.

At Intuit there are outcomes that we declare that we monitor but theyre also input that we focus on and inputs are key deliverables around product around go to market around technology investments in each of our inputs have success measures.

And we spend the majority of our times on inputs, because managing input and.

And managing where you choose to invest.

Ultimately the biggest predictor of the outcomes that we want to achieve so we're very intentional about delivering and managing in the near term for our customers and for you all and we are undeterred relative to the focus areas that we're focused on in the long term, which are the inputs with that as sort of Uber context in terms of how we run the company there are several air.

We continue to be focused on and they are not new but this is why we believe in the long term growth.

Of credit Karma, one is karma guarantee.

By the way somebody is typing. So hopefully you all can hear me.

But karma guarantee is that is a big time differentiator. This is where we use our data and our machine learning capabilities to in essence.

<unk> certainty that a customer is eligible for a credit card or a personal loan and now 59% of our members are actually.

Able to get a karma guarantee offer which is a huge deal we're continuing to invest in that area with our financial institutions and getting financial institutions onto our lightbox.

<unk> is credit Karma money. This is this is huge right. This is <unk>.

Building out the other side of credit Karma platform, where in essence, we are helping our members manage money, whether it's paying bills early access to their money early access with a refund building their credit finding ways to save money and the more we members engage with credit Karma money the more they're their engagement goes up on the platform and the more we can.

So that's the second area and then the third area is what we've talked about.

In the last several quarters, which is our focus on prime customers. This is why we put mint and credit Karma together, we're very underpenetrated with our prime members and we are building out services and when we launched symbol of course, you'll be the first to know to really begin to penetrate and monetize prime customers and last but not least and this is very important it is.

Better together with Turbotax, it's all the investments that we're making because our goal is we want every credit Karma member to use turbotax and we want every turbotax customer to put their refund on credit Karma money accounts. So those are the four big areas of focus.

Thanks, So much for that is just one if I could just ask a quick follow up.

Michelle.

Michele I appreciate the cash flow is lumpy from quarter to quarter. It looks like cash taxes had an impact in the first half of the year on free cash flow growth, but just trying to reconcile your merchant upside in the quarter with free cash flow performance are there any items to call out any reasons why for the full year, we shouldnt expect free cash flow growth to be somewhat.

In line with net income growth. Thanks.

Thanks for the question Brad.

Typically that is exactly what we would expect so I would say that this year, we can pretty much expect the same that same trend to continue yes sure. We are going to have the lumpiness as we've always talked about we have that throughout the year and given the way our quarters fall with tax and so forth.

Yes, I would expect that you would see that trend continue for the year.

Excellent. Thank you so much for taking the questions.

Thank you Brad.

Your next question comes from the line of Brad <unk>.

From Bank of America Securities. Your line is open.

Great. Thank you wanted to ask a question here on Turbotax full service given that this is the first year.

That you are really making a push here with the offering and then we're getting into the tax season.

Curious to get your perspective on whether you think this year might be the year, you might see more conversion of existing turbotax filers to full service.

Or is this more of a net new file are coming into the franchise through through full service.

Maybe over time, you shift more towards the latter as the brand gains some traction just curious on your expectations there net new versus.

Existing filers upgrading.

Yes. Thanks for the question Brad in fact, I will start with something that we mentioned earlier, but it is really important in context of your question and that is.

Our entire campaign strategy and all the investments that we've made in turbotax live as a platform has been to bring in prior prior year assisted customers.

And and these prior year and by the way our campaign.

We'll talk about it in more detail right after tax season, but our campaign is certainly raising has and we are seeing more prior year assisted customers come into the franchise.

Because they see it as a great opportunity to digitally get their taxes done from wherever they are and get the expert help that they need with that said the way. We think about turbotax live is its really one platform. We are we don't look at it like full service as just.

And attach we look at there are those that will come in and choose to get help along the way and there are those that will come in and digitally exchange all of the documents had a appointment and have a discussion with our expert that's been matched with them and then have us do their taxes for them.

And I think we.

We see.

The type of strength that we would've expected in this area in where.

Where we are in the season.

With full service you see more of that strength more towards the latter part of the season, but we're pleased with the Halo effect that really it creates because that's what we're really after is to ensure that we communicate and deliver on the promise.

If you want to help with your taxes are you want us to do it for you. We're here for you and it's the combination of that both campaign strategy and platform delivering on that promise that is what we look for with that said the big change. This year is a one session our virtual engagement, where we can get.

Your taxes, one and done and we're seeing success there and I would also just say we're going to see a lot more sort of in March and April and that's where this full service offering will have the largest impact.

Yeah.

Yeah.

Your next question comes from the line of Pete <unk> from Citi. Your line is open.

Okay, great. Thanks for thanks for taking the question I guess, maybe just to follow up on the turbo.

Turbotax Atlantic Atlanta, questioning I guess.

So far what have you.

Are you seeing in terms of kind of the broader adoption of some of those more.

Full service offerings or even turbotax live in terms of in terms of driving the upside in the quarter and I guess from a.

Referral standpoint between credit Karma, and Turbotax, I guess, what kind of engagement everything in between.

The two of those to drive that.

The.

Co branded offering out there.

Yeah very good question, a couple of things that I'll say first of all Steve.

Steve.

As we talked about earlier, we have just had a faster forming season. This year, which is great because we're able to not only deliver for our customers. But these are folks that really need their money faster than we've seen a really strong uptake of putting their money on a credit Karma money account, which is exactly why we've got the integration between.

Those two platforms. The second thing I would say and of course, we'll share more tangible results when season is over but.

I'm actually quite excited about what we're seeing this year relative to credit Karma member.

Members in essence, engaging with turbotax, we spent a lot of.

Our investments in time this past <unk>.

Six months to remove friction to remove blockers to make it much easier if you remember to pick the right product and then get your taxes done whether it's you want to do it yourself, where we will do it for you so where we're seeing.

Good engagement.

France, and I think just last but not least.

We're seeing strength with returning customers that used turbotax live you know coming back this year and again, it's very early in the season, we're actually excited about all the possibilities of acquiring new customers as we look at the rest of the season and particularly because of our campaign. That's raised a lot of heads that we typically wouldn't have raised so warrant.

When season is over and by the way, we're iterating real time, making product improvements real time launching new features every seven days. So we're excited about the game. That's ahead of us and where we are as we sit today.

Okay great.

A couple of contracts there and just a quick one if I can get it in here on AR.

I just wanted to EPS outlook I guess, how should we think about what's been.

Put more to work on in terms of the marketing how.

How much more is getting kind of being put to work there versus conservatism niches.

Hair out of the model.

At this point because we're just seeing really good upside of the past couple of quarters and not necessarily seen a raise on the EPS side. So just would love to kind of your thoughts on that.

Yeah, absolutely. It's a very very very good question, because if you just do the math, what we've delivered the first half of the year and you look at what we're going to deliver the second half of the year It would suggest.

A significant deceleration. So thank you for asking the question I would say everything that we talked about across all the businesses spans were confident in our guidance and we're confident in what we're seeing in the businesses and where each business asset I think the reality is generally we have a principle, we don't touch our guidance.

While we are heading into our third quarter, our third quarter is double the revenue of any other quarter and so we'd like to get through the third quarter and then talk to you all about what our guidance is moving forward. So really the way you should think about our guidance as it de risks.

Perfect I appreciate you taking my questions.

Yes, absolutely.

Your next question comes from the line of Kash Rangan from Goldman Sachs. Your line is open.

Thank you very much congratulations on a strong quarter of Michelle we'll definitely Miss your smile and energy Sandeep look forward to working with you back to your <unk>.

You digitize taxes, which were done manually walks out like tickets.

The digitized payments I'm curious as you look at payments what are the parts of the payments ecosystem that Intuit is not traditionally played in I know that you've quantified $125 billion of transactions going through your network vis vis two trillion or so that's transacted more broadly speaking when I listen to your comments on payments it sounds like that is.

The big Kahuna out here.

Demystify, what parts of the payments ecosystem as into it not participated in before and which parts would you be able to participate in going forward. You mentioned beta be accounts payable receivable et cetera that would help frame how much of an option to be payments, because it's a smaller towards the smallest businesses, but it looks like it's got the biggest growth potential.

Thank you so much.

Yes. Thank you for the question Kash and I just have to start by saying, we've got a lot of octane in the tank left across all of our big bets I Love all of my five children, but I'll answer to your question around around payments.

I think there are three things and let me 30 seconds of context, and I'll specifically answer your question.

We talked about in payments and money movement, a lot one huge element of what happens on our platform as small businesses come in.

They create an estimate.

Invoice and then they need to get paid for that invoice once they do the work and our penetration in that we talk often about we have two trillion dollars of invoices that are managed on our platform. Our penetration there is still low and so it's just important to start there and not move off of that because that's a huge growth opportunity is.

Huge area of investment is by the way why in this macro environment and where everybody's payments volumes are.

Not accelerating or Theyre significantly decelerating, we still have 25% total charge volume as well. So that's number one there's a lot of octane left there and we are significantly focused I think the other one that we've traditionally not focused on at all is this entire <unk> network.

Which is digitizing business of business between our small businesses. We now have the capabilities we launched.

The business network last quarter.

Millions of our quickbooks customers that is big.

Big opportunity of course, very low no penetration because we didn't have it before and it's 70% checks. So that's a big one and then part of that is also just bill pay capabilities, which we've had on our platform through a couple of really strong partners and now we're building that capability ourselves because we believe that it can deliver far seamless experience for.

For our customers and then when you take all of that and go to mid market, it's even a bigger opportunity, which is why we're seeing the strength in our mid market.

Growth because of just the size of payments and payroll that takes place. So hopefully that answers your question.

So that is allowing you to participate in these vectors that you couldn't previously access and that's it for me. Thank you.

Yeah, absolutely. Thank you Kash.

Your next question comes from the line of Scott Schneeberger from Oppenheimer. Your line is open.

Thanks, very much congratulations Michelle and Sandeep.

Just.

First question is going to be in the tax category, it's kind of a multipart, but yes.

The early season the industry. The IRS is clearly up year over year significantly and that's probably good for you and in multi for multiple reason like you just mentioned the credit Karma money probably helped but.

Just love your thoughts on the industry why do you think is up so much this year versus last year to start and then it's still way behind in through mid February versus pre pandemic. So just kind of high level thoughts on the.

The the kind of the cadence of this tax season, the start and how that may influence the tax season, and your view of it overall thanks.

Yes, Scott actually I love the question, because it's actually important for everybody to hear.

Since you see the IRS reports on a weekly basis.

It's almost as if I were to tell you all it's almost hard for you all to pay attention to these reports because so much has changed and will continue to change. So let me start with context.

Before Covid before 2020.

Things were generally predictable, but things were all continuing year in and year out to get pushed out to April what do I mean by predictable generally you would see.

A strong first peak, which went through mid February and it would start end of January and then you would sort of have very low volume and then you would have a lot of volume come in on the 14th and 15th of April .

And what was happening every year that curve was predictable.

<unk> is every year more and more people pushed out to do their taxes on the 14th and 15th because there are solutions like ours, where they could wait till last minute to do it so that was pre COVID-19 when COVID-19 hit.

When everybody sort of was locked up in their homes when tax season got extended two years in a row and now the fact that folks are actually working virtually it completely blew up the curve.

And the habit.

Customers and so what we're now seeing this season is initially we saw a fast forming season similar to what what happened pre COVID-19, where a lot of people came in because they needed money on what we're seeing now is what we've been seeing which is a lot of people are pushing out to complete their <unk>.

<unk> sort of last minute, but what's very difficult I know for you all to compare we have a lot of internal data. So we can assess whats happening is that it's hard to compare year over year, because there's so much that changed in the last several years and again, what we're seeing this year is now people are ORC, but remember they are still generally.

Working in a hybrid environment. So even days of the week times of the day, we visited with taxes is not comparable to last year, but generally speaking fast warming and then a bunch of people are going to do their taxes for the last several days of April before taxes are due is the way you should think about it.

Okay.

Great. Thanks, I appreciate all that color.

Just one follow up.

In credit card or a credit card or a guarantee you've discussed it a good bit on this call, but when you gave guidance for credit card at the beginning of the year you were really excited about guaranteed contributing in the back half I may be a quarter or two early here asking this question.

You mentioned the 59%.

Penetration of the base just curious how are you tracking ahead of where you expected.

To be at this point and could it could it be a in fact, a driver you mentioned de risked.

Guidance for credit Karma.

Is this it.

How are you progressing on guarantee is this going to be really meaningful through the back capex.

Yeah sure first of all let me start with my comments were.

The guidance for the company is Derisked that includes credit Karma. So my comments weren't just about credit Karma was really about the whole company because if you just do the math.

It seems that we are significantly decelerating the second half of the year versus the first half of the year and that's the point I made which is principally we don't touch guidance.

Until we get through our largest quarter, which is this quarter and and so therefore, the way to think about our guidance is that it's derisked that includes credit Karma.

Second thing is if you recall, when Michelle and I talked about when we reset the credit Karma guidance to minus 15 to minus 10.

We talked about is one we feel the new guidance was very prudent. We also really built in some deterioration in the second half of the of the year and we didn't count on our innovation, having the kind of impact. We initially had assumed in our first guidance and I think that still stands.

With that said I actually feel very good about where we are I would say, we are where we want it to be because we have very high goals with karma guarantee 59% of our members now having at least one carmike guarantee offer is it really a big deal. So I feel good in terms of the progress we're making on that front.

The front of credit Karma money with the integration with Turbotax those are all our input goals and those areas are on track and it'll be fun to watch how they play out the rest of the year, but we're not relying on that to achieve our guidance.

Okay, great. Thanks very much.

Yeah very welcome.

Your next question comes from the line of Brent Thill from Jefferies. Your line is open.

Thanks, Sissonne online services was slower than <unk> accounting, 27%. So I think just wanted to clarify.

The weakness really just the mail chimp or was there any weakness you saw in payments or payroll.

Yes, Brent.

To your point the first one is you're always going to see toggling between online accounting growth rate and online services growth rate. What you really should pay attention to is the overall growth rate with that said to answer your question we actually.

Soft strength across the board mail Chimp outgrowth is what brought down the online services growth to 21% because it is growing slower.

Then of course, it's growing low teens, but it was really driven.

Down by my math, you're in the mail chimp is growing low teens can you know similar to last quarter, but that was really.

The primary reason a little bit varies a small amount by payments now growing at 25%, but really its mail chip.

Follow up on mail Chimp do you feel that is more internal execution of getting the product right and not wanting to push it out until its ready or is there something competitive going on.

That youre seeing that that's may be distracting.

No. It's it's a it's really we have very clear priorities. We've put great leaders in the business that was actually just in Atlanta about three weeks ago spent more than a day with the entire team.

And it's just a.

It really execution and I feel very good about the focus areas the progress on our execution.

It is in our control, which is sort of a great place to be and it's not macro at Jos.

Okay.

Your next question comes from the line of Alex Zukin from Wolfe Research. Your line is open.

Hey, guys. Thanks for taking my question and congrats on a great quarter I guess, maybe just two quick ones first.

If I if.

If I count the amount of times, you said de risk on this stuff with respect to the guidance I think that's definitely.

Great to here, but if you think about like the kpis that you're seeing in real time around the macro and the SMB like.

What would you say how would you compare them to the trend line that you saw last quarter, and where do you see them kind of going from a macroeconomic perspective and influencing the demand environment.

Yeah.

Good question, Alex Let me start with small business and given that we have 10 million plus small businesses on our on our platform.

And by the way with the way they are digitizing its probably best to just talk specifically about the data that we are seeing if you go back to last quarter. What I had mentioned is small businesses generally still have strong cash reserves, they're using some of those cash reserves to continue to invest in their business and.

There are still hiring Ah theres still having a little bit of a hard time hiring but they're still hanging there couldn't find talent, but then there are sectors like financial services and real estate auto that were down nearly 15% in revenue year over year, if I forwarded to the data that we're seeing now.

This quarter.

Two things one they are continuing to hire and they are actually finding it easier to hire and those same industries that I, just mentioned real estate financial services and auto actually kicked off in performance. Our performance is better like for instance, I think real estate and financial services.

They were down like 15% plus and now they are down less than 10% as an example.

And auto believe it or not was down minus 2% versus the minus sort of 10% to 15%. It was down so we're actually seeing an uptick and improve the performance in our base in those areas that were actually hit.

The hardest so that's and that's sort of the macro environment that I would say and I would actually reiterate what Michel and I talked about earlier, which is.

Our focus on innovation on payments is working because although consumer spending has moderated a bit our total charge volume is growing 25%, which is quite healthy and insignificant. So that's what we're seeing on the small business side on the consumer side, two things I would say and remember we have nearly $100 million.

Consumers on our platform. So this is really indicative of the world outside of our platform.

Since March of last year credit scores are down about 13 points and credit card balances are up a little bit over 20%, but those that are hit the hardest are those that are in the credit band of 600 to 660, where their average balance on the credit card is like $9000. So that's the.

A little bit of the state of the world on the consumer side.

Hopefully that answers your question Alex.

Yes that was.

Actually extremely.

Extremely detailed so I really appreciate that and then I guess I'd be remiss if I didn't ask your question about degenerative AI and how were if at all Intuit has plans to monetize or integrate that technology. It does seem like having your own personal financial digital assistant or a lives plus functionality would kind of seem logical but would be.

Interested to kind of get a sense for how you all think about it.

Alex I'm glad you got it in.

Surprised it took until the top of the hour for somebody to ask so thank you for asking it it's actually a really important question and I want to take you all back to AI.

As core to our strategy and now that everybody is talking about AI I'm actually delighted because hopefully it'll exposed to all of you why four years ago. When we refreshed our strategy. It was about being an AI driven expert platform and the investments that we've made in data and AI is really what's fuel.

A lot of our innovation across the company and as you heard US talk about at Investor Day is why we put Marianna in front of you. All we're just at the beginning of the curve as to what's possible. So first and foremost the investments around data and AI is what's fueling our success and we've been looking at generative AI in fact, our multiple areas.

Across our platform, where we've launched.

Launched some of the capabilities of generative AI, because it's all about reducing work and finding ways to put more money in your pocket with confidence and it actually helps our experts the key areas that we're focused on working with a couple of companies in this area as accuracy and it will become more accurate over time, but we deal with People's money.

And that matters in terms of the advice that we give for US. This is all an accelerant, which why the way we've been working on for many many many months before this became sort of the buzz, but AI is core to our strategy. So we're delighted with the possibilities of the future.

Awesome. Thank you guys.

Youre very welcome.

Ladies and gentlemen, this concludes our question and answer session would you like to close with any additional remarks.

Yes, well listen thank you everybody for your time. Thank you for your wonderful questions. Once again I want to thank for Michel for 20 years at Intuit she'll be back with us by the way she sees what else through August and delighted.

With Sandeep, joining us as our new CFO in August , but with that said, we will talk to you at the next earnings until then be safe be good bye everybody.

Ladies and gentlemen, thank you for participating this concludes today's conference call.

Okay.

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Good afternoon. My name is Abby and I will be your conference facilitator at this time I would like to welcome everyone to the Intuit second quarter fiscal year 2023 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 Star followed by the number one on your telephone keypad.

With that I'll now turn the call over to Kim Watkins Intuit's, Vice President of Investor Relations Ms Walker.

Thanks Abby good.

Good afternoon, and welcome to Intuit's second quarter fiscal 2023 conference call.

Here with Intuit CEO to Tonga, Dorothy and Michelle Clutterbuck our CFO .

Before we start I'd like to remind everyone that our remarks will include forward looking statements.

There are a number of factors that could cause intuit's results to differ materially from our expectations. You can learn more about these risks in the press release, we issued earlier this afternoon.

Our Form 10-K for fiscal 2022, and our other SEC filings.

All of those documents are available on the Investor Relations page of Intuit's website at Intuit Dotcom.

We assume no obligation to update any forward looking statement.

Some of the numbers in these remarks are presented on a non-GAAP basis, we've reconciled the comparable GAAP and non-GAAP numbers in today's press release.

Unless otherwise noted all growth rates refer to the current period versus the comparable prior year period, and the business metrics and associated growth rates refer to worldwide business metrics, a 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.

Great. Thanks, Ken and thanks to all of you for joining us today.

As you read in our press release, we announced that Michelle will step down from the CFO role and plans to retire from Intuit I am pleased to share that Sandeep agila.

Assume the role of Chief Financial Officer on August one 2023.

It is a well crafted succession plan that will cover more in a few minutes, but let's first get started with the business.

We had another strong quarter as we executed on our strategy to be the global AI driven expert platform powering prosperity for consumers and small businesses.

<unk> quarter revenue grew 14% fueled by small business and self employed group revenue growth of 20% and consumer revenue growth of 26%.

This year, we are celebrating intuit's 40th anniversary.

We're incredibly proud of our history of Reimagining, the company and reinventing ourselves, which has enabled us to thrive during various technological shifts in economic cycles.

Having successfully navigated multiple platform shifts over the years, including our largest transformation to artificial intelligence in the area of Digitization, we continue to be confident in our ability to feel growth given our large tam low.

Asian proven strategy and five big bets.

We are proud to be the global financial technology platform that powers prosperity for the people and communities that we serve.

I will first start with some thoughts about the tax season, and our business in the current macro environment.

As you know the scale of our platform and rich data gives us unique insights into the lives and spending habits of 100 million plus customers.

Our small business performance continues to be very strong despite uncertainty in the broader macro environment.

We continue to see strength in the areas that have the greatest impact, including the growth of our online mid market customers contributing to our strong subscription revenue and higher arpus.

In Q2 growth in both the number of companies running online payroll and the number of employees paid on our platform remains strong.

Total online payments volume grew 25% moderating some from the first quarter.

We are seeing strong growth in the number of payment enabled invoices set by our small business customers a good sign that our innovation is continuing to drive digitization.

The shift to Digitization and the power of our small business platform, including Quickbooks and mail chimp.

Resonate with customers as they grow their business and improve cash flow.

We continue to observe that our AI driven expert platform is critical to our customers' success.

Now turning to tax we are confident in our strategy to both extend our lead in the do it yourself category and transform the assisted category.

Following a highly successful extension season last year, we doubled down on our learnings to further accelerate innovation to better serve our customers.

First we are evolving our turbotax brands increased awareness that we are the best alternative in the assisted tax segment for consumers and small businesses.

Buying the $30 billion Tam are.

Our new campaign come to Turbotax and don't do your taxes is resonating with our customers and is the key to our strategy as we focus on attracting customers from the assisted segment.

Second we launched a number of high impact Turbotax live innovation.

As part of our second Big bet, we are solving one of the largest problems our customers face lack of confidence.

Connecting people to experts virtually.

Building on our learnings from last season, we're continuing to use AI to bring in our customers' data and match them to the right experts to help customers get the maximum refund they deserve with confidence.

To help customers finish their taxes, even more quickly we've created a new game of five experience focused on efficiency.

By our lifetime guarantee.

We evolved our full service offerings of pilots can have their return completed in a single virtual session.

We are off to a great start in tax and we continue to be confident in our game plan to win.

Now shifting to our five big that I would like to highlight some examples of recent progress as a reminder, our big bets are revolutionize speed to benefit <unk>.

People to experts on.

Unlock smart money decisions.

Be the center of small business growth and disrupt the small business mid market.

Our second Big bet is to connect people to experts and.

In addition to what I shared about Turbotax live we have achieved product market fit with Quickbooks live, which we expect could help us penetrate non consumption and drive breakthrough adoption.

We're evolving our quickbooks live into a portfolio of expert services and are embedding. These services as part of our lineup similar that turbotax live and.

In the second quarter, we launched a free expert and expert guidance setup available for all new <unk> customers leveraging our virtual expert platform.

Early results indicate that customers are using this offering have more confidence in and awareness of our full ecosystem of services, which translate into better retention and higher adoption of our service offerings.

With our third Big bet, our vision for credit Karma is to become the comprehensive self driving financial platform that propels our members forward wherever they are on their financial journey.

We are innovating across all verticals and continue to have confidence in our long term growth expectations of $20 to 25%. Despite near term headwinds I'll share a few examples we're innovating to help members get faster access to cash and make financial progress, including improving their credit score with the help of credit Karma money.

For example, with the integration of Turbotax and credit Karma approved members can get money in their hands in as little as one minute after the IRS accepts their return.

As this is the largest paycheck of the year for many this enables them to take care of immediate expenses pay down debt or build savings.

Members also receive recommendations for how to achieve their financial goals, such as creating an emergency savings fund with our high yield savings account or building credit with credit builder.

Members, who activate credit builder see an average score increase of 21 point in as little as 30% to 45 days.

Members, who use credit Karma money show higher engagement on the credit Karma platform.

We are driving more confidence for members with Carmike guarantee.

As a reminder, carmike guarantee offers indicate that members will either be approved.

Or are they will receive $50 at the end of the quarter, 59% of members who are eligible for at least one karma guarantee offer.

With me, it's not part of the credit Karma platform, we're beginning to build a new experience for members with prime credit scores, which credit Karma is underpenetrated in today.

Leveraging meant we see the opportunity to develop personalized product recommendations leveraging network transaction and spend data to highlight the product benefits that matter most to these members.

Our fourth Big bet is to become the center of small business growth by helping our customers get new customers get paid fast manage capital and pay employees with confidence in an omnichannel world.

We continue to innovate to digitize money movement.

From creating an estimate to invoicing a customer to getting paid today.

Today easier discovery auto enabled payments instant deposit and getting paid upfront are all helping drive adoption of our payments offering.

And we are making meaningful progress digitizing BTB payments to accelerate and automate transactions between small businesses and ultimately improve their cash flow.

We see a tremendous opportunity at 70% of BTB transactions are still completed with checks. This quarter, we launched the quickbooks business network to millions of Quickbooks customers to further digitize BTB payments in the U S. We're also building our bill pay functionality in Quickbooks and plan to launch this capability in the future.

Now turning to mail chimp.

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.

Disrupting the mid market by developing a full marketing automation and CRM and E Commerce suite.

Third accelerating global growth with a holistic go to market approach.

This quarter, we made some great progress against these priorities to.

To help our small business customers run and grow their business in one place we launched a real time data sink that brings TBO data such as invoices sales receipts items customers and addresses into mail chimp.

This puts customer and purchase data together all in one place to power our customers' success.

To help our customers plan execute and track their marketing campaigns across multiple channels in one place, we launched a new capability called campaign manager.

This reduces the number of tools needed to manage marketing and assess performance across channels.

And to drive accelerated global growth and execute our refreshed international strategy, we're translating the product in multiple languages, including Spanish and Portuguese.

Beyond the progress we've made on these priorities the product lineup innovation consistent Onboarding and improve first time use we shared last quarter is driving green shoots and paid conversion, which was up two points year over year in the second quarter.

Our fifth Big bet is to disrupt the small business mid market, representing a Tam of one 7 million customers of which 700000 already in our franchise today.

As I mentioned earlier online mid market customer growth remains strong and we are seeing increased adoption of <unk> advanced payments and payroll driving RPC expansion as we serve these customers across our full ecosystem of services.

<unk> up we feel confident in our AI driven expert platform strategy and five big bets.

The uncertain macro environment the benefits of our global financial technology platform are more important and more mission critical than ever to our customers now let me hand, it over to Michelle.

Thanks Hassan for the second quarter of fiscal 2023, we delivered revenue of $3 billion.

GAAP operating income of $270 million versus 60 $56 million last year.

non-GAAP operating income of $856 million versus $612 million last year.

GAAP diluted earnings per share of <unk> 60.

<unk> 35, a year ago.

non-GAAP diluted earnings per share of $2 20 versus $1 55 last year.

Turning to the business segments, and the small business and self employed group revenue grew 20% during the quarter and online ecosystem revenue grew 24% with.

With the goal 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 Quickbooks online accounting revenue grew 27% in Q2, driven mainly by customer growth higher effective prices and mix shift.

Second we continue to focus on connecting the ecosystem.

Online services revenue, which includes payroll mail chimp payments capital and time tracking grew 21% in Q2.

Within payroll revenue growth in the quarter reflects an increase in payroll customers and a mix shift to higher end offerings.

Mail chimp revenue growth in the quarter was up low teen.

Growth was driven by higher effective prices aligning with our pricing for value philosophy and improving conversion we.

We will continue to provide regular updates on the business. So you can track our performance over time, including a deeper dive at Investor day, similar to what we do for the rest of the business.

Within payments revenue growth reflects ongoing customer growth as more customers adopt our payments offerings to manage their cash flow and an increase in total payment volume per customer.

Third we continue to make progress expanding globally by executing our refreshed international strategy, which include bleeding with mail chimp.

On a constant currency basis total international online ecosystem revenue grew 17% in Q2.

Desktop ecosystem revenue grew 10% in the second quarter with.

Subscription model for our desktop accounting solution makes us revenue more predictable and we raised our desktop prices for several products in September to more closely align with pricing for value.

We're about halfway through the three year transition to a subscription model for desktop.

Quickbooks desktop enterprise revenue grew high teens during the quarter. We expect continued strong desktop ecosystem revenue growth as we progress through the back half of the fiscal year.

We continue to expect the online ecosystem to be our growth catalyst going forward, we remain confident in our guidance for total small business and self employed group.

19% to 20% revenue growth this year.

Consumer group revenue of $516 million grew 26% in Q2, reflecting a faster forming season this year.

We remain confident in our guidance for consumer group of 9% to 10% revenue growth for fiscal 2023.

Turning to the pro tax group revenue grew 7% in Q2 in line with our expectations.

Credit Karma delivered revenue of $375 million in Q2 down 16%.

This was slightly ahead of our expectation.

Seasonally smaller quarter.

As a reminder, credit Karma represented 14% of our total revenue in fiscal 2022.

On a product basis, the decline was driven primarily by headwinds in personal loans.

Loan auto insurance and auto lines, partially offset by growth in credit cards and credit Karma money.

We continue to see an impact across all verticals and the uncertain macro environment.

In credit cards, we continued to see partners tightened eligibility and riskier cohorts.

In personal loans, we continue to see pressure as partners further tightened eligibility and we expect personal loan revenue to decline. This year after a very strong growth in fiscal 2022.

We remain confident in our guidance of a decline of 15% to 10% in fiscal 2023.

Our financial principles guide our decisions remain our long term commitment and are unchanged. We finished the quarter with approximately $2 $1 billion in cash and investments and $7 1 billion in debt on our balance sheet.

We repurchased $500 million of stock during the second 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> 78 per share payable April 18th 2023. This represents a 15% increase versus last year.

As I've said consistently in the past several quarters, we have an operating system, we used to run the company and this includes a proven playbook for operating in both good and difficult economic times.

Our first priority is to do the right thing for customers, giving them access to the tools and offerings they need most.

We manage for the short and long term and control discretionary spend to deliver strong results, while investing and what is most important for future growth.

The scale of our platform along with our rich data. It gives us the unique ability to see leading indicators that allow us to be forward looking and adjust quickly.

We also have a strong balance sheet that enables us to play offense.

We will continue to accelerate our innovation and our goal remains for intuit to emerge from this period of macro uncertainty in a position of strength.

Moving onto guidance, we are reaffirming our fiscal 2023 guidance. This includes total company revenue growth of 10% to 12% GAAP operating income growth of 9% to 13% non-GAAP operating income growth of 17% to 19%.

GAAP diluted earnings per share to decline approximately 51% and.

And non-GAAP diluted earnings per share growth of 15% to 17%.

Our guidance for the third quarter of fiscal 2023 includes revenue growth of 8% to 9%.

Earnings per share of $6 82 to $6 89.

And non-GAAP earnings per share of $8 42 to $8 49.

You can also find our full fiscal 2023 in Q3 guidance details in our press release and on our fact sheet.

On a personal note as we announced today I will be stepping down as CFO on July 31.

And made it a priority over the last several years to focus on our long term strategy for driving growth and that includes ensuring I have a high performing finance team with strong succession plans in place Sandeep.

Sandeep has been an integral part of the finance leadership team for over seven years and I have no doubt he will be a terrific leader and CFO .

He has shown its ability to drive key strategic priorities to create value for our business time and time again and I look forward to working with him over the next five months to ensure a smooth transition.

And with that I'll turn it back over to Suzanne.

Great. Thank you Michele well, while the CFO transition is it official until August I wanted to just take this opportunity to express my sincere appreciation for all of that Michelle has contributed over the past 20 years at Intuit, including the last five years as CFO . She has been an amazing partner and will lead into it.

And then what she founded.

During michelle's tenure as CFO and to its market cap and revenue more than doubled.

Michelle's commitment to developing top and diverse talent has created a deep bench of strong leaders, making for a very seamless transition.

Sandeep will be an exceptional CFO and with this track record of leading outstanding performance across our small business and self employed group and our technology organizations.

With that let me go ahead and summarize.

We are seeing continued momentum as we execute on our strategy of being a global AI driven expert platform and growing intuit revenue double digits with margin expansion.

Our accelerated organic innovation and the additional the addition of credit Karma and mail chimp.

We are the leading global financial technology platform that powers prosperity for people and communities. We're proud that Intuit has been named number five on Fortune's most admired company in the software category.

One of glass doors 2023, best places to work and honored to be including included among just capitals, just 100 ranking for 2023.

With that let's now open it up to your questions.

Thank you ladies and gentlemen, thank you would like to ask a question. Please press Star then the number one on your telephone keypad if.

If you would like to withdraw your question press.

And the number one on your telephone keypad.

Your first question comes from the line of Kirk <unk> from Evercore ISI. Your line is open.

Hey, This is Sean said dialing in for Kirk.

We appreciate.

You're taking the question and congratulations on a strong quarter.

I wanted to ask about what youre seeing in Quickbooks online growth.

Both from new customers and from up selling existing customers.

Just any commentary you might be able to provide around the dynamics there. Thank you.

Yeah sure. Thank you for the question I would lead with we're seeing strength both in terms of.

Customer acquisition retention, we are seeing.

Strengthen our in our services as we mentioned.

A moment ago, both the number of companies that are running payroll. The number of employees that are getting paid is very strong.

Sure.

If you compare our results to what Youre seeing in the marketplace. We are continuing to grow payments, 25% total payments charge volume, which is really outstanding.

The fact that our customers are continuing to benefit from digitizing on our platform and I think just the additive piece is we're seeing strength in mid market, which is much higher RPC.

Quite excited about really being able to pursue non consumption with what we talked about earlier with quickbooks live actually being embedded as part of our overall offering and I would just end with one of the goals that we talked about with all of you for years ago, Our bold 2025 goals one of those goals.

Was that we wanted the success rate of small businesses on our platform to be 10 points better than industry and in fact, the small businesses on our platform.

Their performance is.

North of 15 points better than anyone in the industry.

Just suggest is that the small businesses on our platform are more successful they are digitizing and they're leveraging this opportunity to continue to accelerate to deliver for their customers.

Alright, thank you.

Youre very welcome your next one comes from the line.

<unk> <unk> from Mizuho Your line is open.

Thank you.

It's a great quarter I think what's impressive is your small business growth in this macro environment. When some of your peers are talking about push out of digital transformation and small business. Some weakness. So just wanted to ask what you are seeing in terms of like for the next few quarters like you.

Look at a lot of data what kind of what sort of help you are seeing in the SMB economy, right now and it looks like your second half is pretty easy comp right now.

So would love to hear your comments on small business.

Yeah for sure city. Thank you.

So much for your question.

Actually a really important question in terms of.

What we've often talked about which is it's important that you all look at intuit as really the authority when it comes to what's happening.

In the small business space and the reason is.

Is that our platform is mission critical for small businesses our platform.

With Quickbooks Mail chimp and all the services that we have on our platform is really used by small businesses to be able to grow customers manage their customers manage their cash flow be able to manage their employees and.

And therefore, what that means is it fuels our success supported by the Stat I shared a moment ago.

<unk> small businesses that are on our platform are actually 15 plus points more successful than those that are not on our platform and so I set that very important context, and I'll just point to.

Payments total charge volume as an example, when you look at our performance being at 25% of that is by.

By far the best in the industry and that is because it is all about digitization and it's not just about payments, but it's about all the services that are small businesses use on our platform.

And we are.

We expect our small businesses to continue.

To be successful even in this macro environment and we are here to support them I will just end by saying the following which I think you were hinting at in your question.

The strength of.

Our businesses is Michelle and I described in.

A moment ago, we expect that strength to.

Continue although when you look at our guidance I think the way you should look at our guidance. It is that it has been derisked for sure for the rest of the year.

Great and a quick follow basically clarification your online services growth, 21%, but if I exclude mill chip.

47% growth that's quite impressive.

Compared to like Q1, 8% just wanted to clarify that I'm looking at it right.

You are we didn't break out the number but yes, you are looking at it right because in essence online services mining. This male jump grew faster. So therefore, just by design are grew much faster than 21%. So you are correct.

Thank you.

Youre very welcome.

Your next question comes from the line of Michael Cohen from Wells Fargo. Your line is open.

Okay, Great I appreciate you taking the question nice job on the quarter, maybe one for Michel are you still with us on margin.

Last quarter, you took the credit Karma outlook down, but left the EPS guide intact, we've gotten questions from investors around whether that provides maybe less wiggle room on margin, but the first couple of quarters of still shown EPS upside. So could you just walk through the margin levers you are finding.

Are there advantages and folding various brands together and just how we should think about the longer term margin potential there.

Okay.

Yeah. Thank you Michael I appreciate the question.

We.

Yes, we absolutely have felt very strongly about being able to still keep our guidance for op income for margin, even though we did take down our revenue guidance last quarter and that's actually something that we were very plan full about as we went through our <unk>.

When Youre planning process, we had identified a number of levers that we could pull across the expense horizon.

A lot of that is in marketing some of it's in travel and some other discretionary type expenses. So that we would be able to still hit our bottom line financial commitments.

That's what we have done and we feel very good about the guidance that we've given for the rest of the year, but.

But it is something that we take very seriously and we make sure that we do have those levers that we can poll given different macro environments as that has unfolded this year.

That's very helpful. Just one more if I may the desktop business came in exceptionally strong could.

Can you just speak to what you're finding as you move that base towards subscription and then how to think about the revised small business target after were through the migration journey, there and what keeps the 15% growth sustained afterwards. Thank you.

Sure Michael maybe I will I will take that first of all I'll just start with context. This is a business model shifts that we're actually quite excited about in that one week.

We've shifted the customers to subscription so it's far more predictable.

Two in that context.

I have had a very plan full process of aligning our prices between desktop and our online product and the reason. This is really important as we've been heavily investing in the last several years.

Really ensuring that some of the key capabilities for our desktop customers, particularly those product based businesses that those capabilities are available and online.

And being in the middle of this business model transition one we see another year and a half continued strength, but we also see ahead of that.

The fact that we can now migrate these customers who are online platform because we now have the capabilities that they need and by the way when we do that that actually opens up the doors to additional online services to continue to fuel the success of our small businesses and.

And therefore, when you step back ultimately the growth of this franchise will come from online and with.

With all of the innovation growth levers, we have moving upmarket that is what continues to give us a lot of confidence in our 15% to 20% long term expectations for the small business franchise.

Thanks very much.

Youre very welcome.

Your next question comes from the line of Mark Murphy from Jpmorgan. Your line is open.

Yes. Thank you very much and I'll add my congratulations I was wondering if you can drill down into the favorable trend that youre seeing from a higher effective prices.

Particular core Quickbooks online accounting.

Just in terms of the magnitude and the duration of that impact and I'm curious if that should continue to provide.

Any kind of material uplift for the next several quarters.

Yes, Thanks for your question Mark.

Let me, let me start with contacts that we always look at our largest growth across the company no matter what the business has to come from volume.

On mix.

Those two are driven of course by our innovation and or if we are moving upmarket, which in many cases across our businesses.

We are moving up market and Turbotax. The example, moving into the assisted segment, so price and mix are really the largest drivers and because of just the vas and accelerated innovation.

We also have price as a leverage because we always want to be disruptive from the bottom.

And we want to continue to disrupt at the top and that actually gives us a lot of pricing power because of the value equation and the benefits that we deliver for our customers and so with that as context looking ahead not just for the next couple of quarters, but looking in terms of just the long term durability of Intuit and how we think about things.

We believe the majority of our growth will continue to come from volume and mix and price will always be a lever because particularly that we are moving.

Upmarket and I think it was even more pronounced.

In small business because of the business model shift in desktop, where we're bringing pricing to parity with online and we just we expect that to continue in the next several quarters, but theres a durability element of this not just a quarterly element to this.

Okay understood and then as a quick follow up.

On the <unk> side are the initiatives that are designed to stimulate higher growth.

For mail Chimp, which I think has been including the very creative advertising campaigns, you've had out there are those starting to take hold and produce an effect in terms of weather.

Whether we look at email marketing campaign volumes or.

Seeing customers opt into the right products, there too where they run the tests and kind of connect back with the rest of the ecosystem is that something you see.

That's starting to take hold currently or in the next couple of quarters as well.

Yes, Mark I would say that when you think about the priorities that we've talked about in the focus areas. We are starting to see green shoots and we started seeing green shoots a couple of quarters ago sort of the biggest one is conversion.

Conversion and paid the one in addition to the initiatives starting to deliver green shoots that we're the most excited about is the work that we're doing to retain our high value customers need to really penetrate the mid market. This is really the same story.

That we've talked about in the mid market with Quickbooks advanced where our retention was actually not quite that high when it came to our high value customers and Quickbooks and we built a platform and really a team to focus on these mid market customers and that is really one that I'm very excited about it I think we will see the results of that in the next two.

The three quarters, where we will start.

Making a bigger impact in not only retaining our high value customers, but also penetration in mid market. That's also in context of all the other things that we've talked about doing which is.

Campaign redesign web redesign first time use one hour assisted onboarding and know what we just shared earlier in the script, which we said is coming and that is the data. The data is huge because valid puts the customer data and purchase data all in one place and it really puts the power of growth.

In the hands of customers in a way where they can get that feel anywhere else and so all.

All of these things take time, but we are we are seeing the green shoots it'll translate into faster revenue growth sort of in the coming quarters.

Which is by the way not embedded in our guidance just to be clear, but we're excited about the progress that we're making.

Thank you very much.

Youre very welcome.

Your next question comes from the line of Brad Zelnick from Deutsche Bank. Your line is open.

Excellent. Thank you so much for taking the question. So I think everyone appreciates, what's happening in credit Karma and Theres only so much that's within your control and within that context, it's great to hear all the goodness around how credit Karma guarantee is doing but as we think about the other elements of the portfolio the other products.

In an environment that's supply constraints can you maybe just talk about the performance.

And how you're investing it against the opportunity in context of what you can control and how do you even know the progress perhaps that you are making in auto and in home for example, if the market just isn't there to support it.

Yes, Brad actually great Great question and the reason, it's such an important question is.

We are very focused on delivering for our members in the near term and to your point, leading through this macro environment, but we are undeterred relative to the strategic focus areas for the business and so let me specifically answer your questions first of all let me start with the macro point.

Which applies to all of them into it.

Adding to it there are outcomes that we declare that we monitor but there are also input that we focus on and inputs are key deliverables around product around go to market around technology investments in each of our inputs have success measures.

And we spend the majority of our times on inputs, because managing input and.

Managing where you choose to invest.

Ultimately the biggest predictor of the outcomes that we want to achieve so we're very intentional about delivering and managing in the near term for our customers and for you all and we are undeterred relative to the focus areas that we are focused on the long term, which are the inputs with that.

Uber context in terms of how we run the company. There are several areas that we continue to be focused on and they are not new but this is why we believe in the long term growth.

Of credit Karma, one is karma guarantee.

By the way somebody is typing. So hopefully you all can hear me.

But karma guarantee is that is a big time differentiator. This is where we use our data and our machine learning capabilities to in essence.

<unk> certainty that a customer is eligible for a credit card or a personal loan and now 59% of our members are actually.

<unk> got a karma guarantee offer which is a huge deal we're continuing to invest in that area with our financial institutions and getting financial institutions onto our lightbox.

Is credit Karma money. This is this is huge right. This is <unk>.

Building out the other side of credit Karma platform, where in essence, we are helping our members manage money, whether it's paying bills early access to their money early access to the refund building their credit finding ways to save money and the more we members engage with credit Karma money the more they're their engagement goes up on the platform and the more we can.

So that's the second area.

The third area is what we've talked about.

In the last several quarters, which is our focus on prime customers. This is why we put mint and credit Karma together, we're very underpenetrated with our prime members and we are building out services and when we launched nimble of course, you'll be the first to know to really begin to penetrate and monetize prime customers and last but not least and this is very important.

Better together with Turbotax, it's all of the investments that we're making because our goal is we want every credit Karma member to use turbotax and we want every turbotax customers to put their refund on credit Karma money accounts. So those are the four big areas of focus.

Thanks, so much for that as a sign if I could just ask a quick follow up.

Michelle.

Michele I appreciate the cash flow is lumpy from quarter to quarter. It looks like cash taxes had an impact in the first half of the year on free cash flow growth, but just trying to reconcile your margin upside in the quarter with free cash flow performance are there any items to call out any reasons why for the full year, we shouldnt expect free cash flow growth to be somewhat.

In line with net income growth. Thanks.

Thanks for the question Brad.

Typically that is exactly what we would expect so I would say that this year, we can pretty much expect the same that same trend to continue yes sure. We are going to have the lumpiness as we've always talked about we have that throughout the year and given the way our quarters fall with tax and so forth.

But yes, I would expect that you would see that trend continue for the year.

Excellent. Thank you so much for taking the questions.

Thank you Brad.

Your next question comes from the line of Brad <unk> from.

Bank of America Securities. Your line is open.

Great. Thank you wanted to ask a question here on Turbotax full service given that this was the first year.

You are really making a push here with the offering and then we're getting into the tax season.

Curious to get your perspective on whether you think this year might be the year, you might see more conversion of existing turbotax filers to full service.

Or is this more of a net new file are coming into the franchise through through full service or.

Maybe over time, you shift more towards the latter as the brand gains some traction just curious on your expectations there net new versus.

Existing filers upgrading.

Yes. Thanks for the question Brad in fact, I'll start with something that we mentioned earlier, but it's really important in context of your question and that is.

Our entire campaign strategy and all the investments that we've made in turbotax live as a platform has been to bring in prior prior year assisted customers.

And and these prior year and by the way our campaign.

We'll talk about it in more detail right after tax season, but our campaign is certainly raising had.

And we are seeing more prior year assisted customers come into the franchise.

Because they see it as a great opportunity to digitally get their taxes done from wherever they are and get the expert help that they need with that said the way we think about turbotax live is its really one platform we are.

We don't look at it like full service as just.

And attach and we look at there are those that will come in and choose to get help along the way and there are those that will come in and digitally exchange all of the documents.

<unk> had a discussion with our expert that's been matched with them and then have us do their taxes for them and.

And I think we see.

The type of strength that we would've expected in this area in the where we are in the season with full service you see more of that strength more towards the latter part of the season, but we're pleased with the Halo effect that really it creates because that's what we're really after is to ensure that we communicate and deliver on the promise.

If you want to help with your taxes are you want us to do it for you. We're here for you and it's the combination of that both campaign strategy and platform delivering on that promise that is what we look for with that said the big change. This year is one session.

Virtual engagement, where you can get your taxes won and done and we're seeing success there and I would also just say we're going to see a lot more sort of in March and April and that's where this full service offering will have the largest impact.

Yeah.

Okay.

Your next question comes from the line of Steve Enders from Citi. Your line is open.

Okay, great. Thanks for thanks for taking the question I guess, maybe just to follow up on the turbo.

Turbotax Atlantic Atlanta, questioning I guess.

So far what have you seen in terms of kind of the broader adoption of some of those more.

Full service offerings or even turbotax live in terms of in terms of driving the.

Upside in the quarter and I guess from a referral standpoint between credit Karma and Turbotax I guess, what kind of engagement have you seen between.

The two of those to drive that.

<unk> co.

Co branded offering out there.

Yes, very good question, a couple of things that I'll say first of all Steve.

Steve you know as we talked about earlier, we have just had a faster forming season. This year, which is great because we're able to not only deliver for our customers. But these are folks that really need their money faster than we've seen a really strong uptake of putting their money on a credit Karma money account, which is exactly why we've got the <unk>.

<unk> between there.

Those two platforms. The second thing I would say and of course, we'll share more tangible results when season is over but.

I'm actually quite excited about what we are seeing this year relative to credit Karma member.

Members in essence, engaging with turbotax, we spent a lot of.

Our investments in time this past <unk>.

Six months to remove friction to remove blockers to make it much easier if you remember to pick the right product and then get your taxes done whether it's you want to do it yourself, where we will do it for you so where we're seeing.

Good engagement.

That front and I think just last but not least.

We're seeing strength with returning customers that used turbotax live coming back this year and again, it's very early in the season, we're actually excited about all the possibilities of acquiring new customers as we look at the rest of the season and particularly because of our campaign. That's raised a lot of heads that we typically wouldn't have raised so more to come.

When season is over and by the way, we're iterating real time, making product improvements real time launching new features every seven days. So we're excited about the game. That's ahead of us and where we are as we sit today.

Okay great.

A couple of contracts there and just a quick one if I could get it in here on AR.

And just on the EPS outlook I guess, how should we think about what's been.

Put more to work on in terms of the marketing.

How much more is getting kind of being put to work there versus conservatism. That's just inherent in the model.

At this point because we're just seeing really good upside of the past couple of quarters and not necessarily seen a raise on the EPS side. So just.

Love to get your thoughts on that.

Yes, absolutely it's a very very very good question, because if you just do the math, what we've delivered the first half of the year and you look at what we're going to deliver the second half of the year It would suggest.

A significant deceleration. So thank you for asking the question I would say everything that we talked about across all the businesses spans were confident in our guidance and we're confident in what we're seeing in the businesses and where each business as it I think the reality is generally we have a principle, we don't touch our guidance.

While we are heading into our third quarter, our third quarter is double the revenue of.

Any other quarter and so we'd like to get through the third quarter and then talk to you all about what our guidance is moving forward. So really the way you should think about our guidance as it de risks.

Perfect I appreciate you taking my questions.

Yes, absolutely.

Your next question comes from the line of Kash Rangan from Goldman Sachs. Your line is open.

Thank you very much congratulations on a strong quarter of Michelle we'll definitely Miss your smile and energy and some of it look forward to working with you back to use us on.

You digitize taxes, which were done manually whatsapp like decades ago. Now you are about to digitize payments I'm curious as you look at payments.

RV parks of the payments ecosystem that Intuit is not traditionally played in I know that you've quantified $125 billion of transactions going through your network vis vis two trillion or so thats transacted more broadly speaking.

And to your comments on payments it sounds like that is the big kahuna out here.

Demystify, what parts of the payments ecosystem as into it not participated in before and which parts would you be able to participate in going forward you mentioned b to b accounts payable receivable et cetera that would help frame how much of an option would be payments.

It's a small it's always the smallest businesses, but it looks like it's got the biggest growth potential. Thank you so much.

Thank you for the question I just have to start by saying, we've got a lot of octane in the tank left across all of our big bets I Love all of my five children, but I'll answer to your question around around payments.

There are three things and let me 30 seconds of context, and I'll specifically answer your question, because we talked about in payments and money movement a lot one huge element of what happens on our platform as small businesses come in there.

They create an estimate.

Invoice and then they need to get paid for that invoice once they do the work and our penetration in that we talk often about we have two trillion dollars of invoices that are managed on our platform our penetration there is still low.

And so it's just important to start there and not move off of that because that's a huge growth opportunity. It's a huge area of investment. It is by the way why in this macro environment, where everybody's payments volumes are.

Not accelerating or Theyre significantly decelerating, we still have 25% total charge volume growth. So that's number one there's a lot of octane left there and we are significantly focused I think the other one that we've traditionally not focused on at all is this entire <unk> network.

Is digitizing business of business between our small businesses, we now have the capabilities we launched.

The business network last quarter.

Millions of our quickbooks customers that is big.

Big opportunity of course, very low or no penetration because we didn't have it before and a 70% tax so thats a big one and then part of that is also just bill pay capabilities, which we've had on our platform through a couple of really strong partners and now we're building that capability ourselves because we believe that it can deliver far seamless experience for.

For our customers and then when you take all of that and go to mid market, it's even a bigger opportunity, which is why we're seeing the strength in our mid market.

Growth because of just the size of payments and payroll that takes place. So hopefully that answers your question.

So that is allowing you to participate in these vectors that you couldn't previously access and that's it for me. Thank you.

Yeah, absolutely. Thank you Kash.

Your next question comes from the line of Scott Schneeberger from Oppenheimer. Your line is open.

Thanks, very much congratulations Michelle Sandeep.

Tucson.

First question is going to be in the tax category, it's kind of a multi target but yes.

The early season the industry. The IRS is clearly up year over year significantly and that's probably good for you and amortize for multiple reason like you just mentioned the credit Karma money probably helps but.

Just love your thoughts on the industry why do you think is up so much this year versus last year to start and then it is still way behind in through mid February versus pre pandemic. So just kind of high level thoughts on that.

The the kind of the cadence of this tax season, the start and how that may influence the tax season, and your view of it overall thanks.

Yes, Scott actually I love the question, because it's actually important for everybody to hear.

Since youll see the IRS reports on a weekly basis.

It's almost as if I were to tell you all it's almost hard for you all to pay attention to these reports because so much has changed and we will continue to change so let me start with context.

Before Covid before 2020.

Things were generally predictable, but things were all continuing year in and year out to get pushed out to April what do I mean by predictable generally you would see.

A strong first peak, which went through mid February and it would start end of January and then you would sort of have very low volume and then you would have a lot of volume come in on the 14th and 15th of April .

And what was happening every year that curve was predictable.

<unk> is every year more and more people pushed out to do their taxes on the 14th and 15th because there are solutions like ours, where they could wait till last minute to do it so that was pre COVID-19 when COVID-19 hit.

When everybody sort of was locked up in their homes when tax season got extended two years in a row and now the fact that folks are actually working virtually it completely blew up the curve.

And the habit.

Customers and so what we are now seeing this season is initially we saw.

Last forming season similar to what what happened pre COVID-19, where a lot of people because they needed money on what we're seeing now is what we've been seeing which is a lot of people are pushing out to complete their taxes sort of last minute, but what's very difficult I know for you all to compare we have a lot of internal data. So we can.

That's what's happening is that it's hard to compare year over year, because there's so much that changed in the last several years and again, what we're seeing this year is now people aren't work, but remember they are still generally working in a hybrid environment. So even days of the week times of the day when do they do with taxes is not comparable to last year.

But generally speaking fast forming and then a bunch of people are going to do their taxes. The last several days of April before taxes are due is the way you should think about it.

Okay.

Great. Thanks, I appreciate all that color.

Next one follow up.

In credit card or a credit card or a guarantee you've discussed it a good bit on this call, but when you gave the guidance for credit card at the beginning of the year you were really excited about guaranteed contributing in the back half I may be a quarter or two early here asking this question you mentioned the 59%.

Penetration of the base just curious how are you tracking. This is this ahead of where you expected.

To be at this point and could it could it be a in fact, a driver you mentioned de risked.

Guidance for credit Karma.

<unk> is this.

How are you progressing on on guarantee is this going to be really meaningful through the back capex.

Yeah sure first of all let me start with my comments were.

The guidance for the company is Derisked that includes credit Karma. So my comments weren't just about credit Karma was really about the whole company because if you just do the math.

It seems that we are significantly decelerating in the second half of the year versus the first half of the year and that's the point I made which is principally we don't touch guidance.

Until we get through our largest quarter, which is this quarter and and so therefore, the way to think about our guidance is that it's derisked that includes credit Karma.

Second thing is if you recall, when Michelle and I talked about when we reset the credit Karma guidance to minus 15 to minus 10.

We talked about is one we feel the new guidance was very prudent.

We also really built in some deterioration in the second half of the of the year and we didn't count on our innovation, having the kind of impact. We initially had assumed in our first guidance and I think thats still stands with that said I actually feel very good about where we are I would say we are aware of.

We want it to be because we have very high goals with karma guarantee 59% of our members now having at least one karma guarantee offer is it really a big deal. So I feel good in terms of the progress we're making on that front the front of credit Karma money with the integration with Turbotax those are all <unk>.

Input goals and those areas are on track and it'll be fun. The watch how they play out the rest of the year, but we're not relying on that to achieve our guidance.

Okay, great. Thanks very much.

Very welcome.

Your next question comes from the line of Brent Thill from Jefferies. Your line is open.

Thanks, <unk> online services was slower than <unk> accounting for 27%. So I think just wanted to clarify.

The weakness really just the mail chimp or was there any weakness you saw in payments or payroll.

Yes, Brent.

To your point the first one is you're always going to see toggling between online accounting growth rate and online services growth rate. What you really should pay attention to is the overall growth rate with that said to answer your question we actually.

Soft strength across the board mail Chimp outgrowth is what brought down the online services growth to 21% because it is growing slower.

And then of course, it's growing low teens, but it was really driven.

Down by my math, you're in the mail chimp is growing low teens similar to last quarter, but that was really.

The primary reason a little bit varies a small amount by payments now growing at 25%, but really its mail chimp.

Follow up on mail Chimp do you feel that is more internal execution of getting the product right now.

Not wanting to push it out until its ready or is there something competitive going on.

Youre seeing that maybe distracting.

No. It's it's a it's really we have very clear priorities. We've put great leaders in the business that was actually just in Atlanta about three weeks ago spent more than a day with the entire team.

It's just.

It really execution and I feel very good about.

Key focus areas the progress on our execution.

It is in our control, which is sort of a great place to be and it's not macro at Jos.

Okay.

Your next question comes from the line of Alex Zukin from Wolfe Research. Your line is open.

Hey, guys. Thanks for taking my question and congrats on a great quarter I guess, maybe just two quick ones.

First if I if.

If I count the amount of times, you said de risk on this call with respect to the guidance I think that's definitely.

Great. This year, but if you think about like the Kpis that you are seeing in real time around the macro and the SMB.

What would you say how would you compare them to the trend line that you saw last quarter, and where do you see them kind of going from a macroeconomic perspective and influencing the demand environment.

Yeah.

Good question, Alex Let me start with small business and given that we have 10 million plus small businesses on our on our platform.

And by the way with the way they are digitizing its probably best to just talk specifically about the data that we are seeing if you go back to last quarter. What I had mentioned is small businesses generally still have strong cash reserves, they're using some of those cash reserves to continue to invest in their business and.

They are still hiring they're still having a little bit of a hard time hiring but theyre still hiring they couldnt find talent, but then there are sectors like financial services real estate auto that were down nearly 15% in revenue year over year, if I forwarded to the data that we're seeing now.

This quarter.

Two things one they are continuing to hire and they are actually finding it easier to hire and those same industries that I, just mentioned real estate financial services and auto actually kicked off and performance. Our performance is better like for instance, I think real estate and financial services.

They were down like 15% plus and now they are down less than 10% as an example.

And auto believe it or not was down minus 2% versus the minus sort of 10% to 15%. It was down so we're actually seeing an uptick and improved performance in our base in those areas that were actually hit the hardest. So that's that's sort of the macro environment that I would say and I would actually.

Reiterate what Michel and I talked about earlier, which is.

Our focus on innovation on payments is working because although consumer spending has moderated a bit our total charge volume is growing 25%, which is quite healthy.

Insignificant. So that's what we're seeing on the small business side on the consumer side, two things I would say and remember we have nearly $100 million.

Consumers on our platform. So this is really indicative of the world outside of our platform.

Since March of last year credit scores are down about 13 points and credit card balances are up a little bit over 20%, but those that are hit the hardest are those that are in the credit band of 600 to 660, where their average balance on the credit card is like $9000. So that's the.

Little bit of the state of the world on the consumer side.

Hopefully that answers your question Alex.

That was actually extremely.

Extremely detailed so I really appreciate that and then I guess I'd be remiss if I didn't ask you. Your question about generative AI and how were if at all.

It has plans to monetize or integrate that technology. It does seem like having your own personal financial digital assistant or a live plus functionality would kind of seem logical but we'd be really interested to kind of get a sense for how youre thinking about it.

Alex I'm glad you got it in.

Apprised of dusk till the top of the hour if somebody had asked so thank you for asking it it's actually a really important question and I want to take you all back to AI.

AI is core to our strategy and now that everybody is talking about AI I'm actually delighted because hopefully it'll exposed to all of you why four years ago. When we refreshed our strategy. It was about being an AI driven expert platform and the investments that we've made in data and AI is really what's fuel.

A lot of our innovation across the company and as you heard US talk about at Investor Day is why we put Marianna in front of you. All we're just at the beginning of the curve as to what's possible. So first and foremost the investments around data and AI is what's fueling our success and we've been looking at generative AI in fact, our multiple.

Areas across our platform where we've.

Launched some of the capabilities of generative AI, because it's all about reducing work and finding ways to put more money in your pocket with confidence and it actually helps our experts the key areas that we're focused on working with a couple of companies in this area as accuracy and it will become more accurate over time, but we deal with People's money.

And that matters in terms of the advice that we give for US. This is all an accelerant, which why the way we've been working on for many many many months before this became sort of the buzz, but AI is core to our strategy. So we're delighted with the possibilities of the future.

Awesome. Thank you guys.

Youre very welcome.

Ladies and gentlemen, this concludes our question and answer session would you like to close with any additional remarks.

Yes, well listen thank you everybody for your time. Thank you for your wonderful questions once again.

I want to thank Michele for 20 years at Intuit she'll be back with us by the way she has let us through August and delighted.

With Sandeep, joining us as our new CFO in August , but with that said, we will talk to you at next earnings until then be safe be good bye everybody.

Ladies and gentlemen, thank you for participating this concludes today's conference call.