Q4 2023 Intuit Inc Earnings Call

Speaker 1: 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 the issues earlier this afternoon, our Form 10K 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.com.

Speaker 1: We assume no obligation to update any forward-looking statement.

Speaker 1: Some of the numbers in these remarks are presented on a non-GAAP basis. We reconciled the comparable GAAP and non-GAAP numbers in today's press release. And once 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. With that, I'll turn the call over to Sushant. All right. Excellent, Kim. Thank you. And thank you, everybody, for joining us today. We have a very strong fourth quarter as we executed on our strategy to be the global AI-driven expert platform powering prosperity for consumers and small businesses. We grew full year revenue 13%, delivered strong operating margin expansion, and exited the year with momentum.

Speaker 1: Our overall performance demonstrates the strength of our platform and diversity of our portfolio, including our ability to maintain earnings power in uncertain times. This past year, we expanded our operating margin again while investing in the most important areas to drive durable long-term growth. We're guiding to another year of double-digit revenue growth and margin expansion in fiscal year 2024, even with a macroeconomic environment that is uncertain.

Speaker 1: We're entering Intuit's most exciting era yet. Five years ago, we declared our strategy to be an AI-driven expert platform with data and AI core to fueling innovation across our five big bets.

Speaker 1: We've made strong progress transforming from a tax and accounting platform where consumers and small businesses have to do the work to achieve the benefit that they are seeking. So it's a global financial platform where we do the hard work for them.

Speaker 1: Now, we're creating a future of done for you. A future where the hard work is done automatically on behalf of our customers to fuel their financial success. Hi!

Speaker 1: This future is only possible because of our history of significant investments in our platform, talent, data, and AI, and now our accelerated investments in generative AI.

Speaker 1: At the core of our platform is powerful, relevant data. Intuit has incredibly rich longitudinal, transactional and behavioral data for 100 million customers.

Speaker 1: For small businesses, we have a 360-degree view of their business and customers.

Speaker 1: We have 500,000 customer and financial attributes per small business on our platform, and this data gives us insight into behaviors, income streams, expenses, profitability, and cash flows, enabling us to provide personalized experiences and recommendations to help them prosper.

Speaker 1: Additionally, we have 60,000 financial tax attributes per consumer on our platform, including income, expenses, credit history, spending history, outstanding loans, cash flow and tax information, which enables us to become a financial assistance in their pocket.

Speaker 1: We're using our data to fine tune our own financial large language model that specialized in solving tasks, accounting, cash flow, marketing, and personal finance challenges.

Speaker 1: The investments that we've made in data and AI over the years allow us to introduce innovation at an accelerated rate. Intuit's rich data platform is a powerful foundation that allows us to create innovative AI-assisted experiences for all of our customers powering their prosperity.

Speaker 1: In June , we introduced our generative AI operating system called GenOS to ignite innovation at scale for the benefit of millions of consumers and small businesses.

Speaker 1: Gen OS empowers Intuit technologists to create breakthrough generative AI experiences.

Speaker 1: We are using a platform approach, given our teams across intuitive resources and the tools they need to design, build, test and deploy these new experiences with unparalleled speed.

Speaker 1: This includes our own powerful financial LOMs, as well as those from other leaders in GenAI, which together unlock new opportunities to serve our customers in a cost-effective way.

Speaker 1: We are entering Intuit's most exciting era yet and believe the next several years will be game changing. On September 6th, we'll be hosting Intuit Innovation Day, a virtual event where we will unveil exciting Gen AI innovation across our platform and how it will drive business growth in the years ahead. We look forward to sharing more with you then.

Speaker 1: Now, let me turn to our big bets, which are driving growth and benefits for our customers today. I'd like to highlight some examples of recent progress in one of our big bets. As a reminder, our five big bets are revolutionize, speed to benefit, connect people to experts.

Speaker 1: unlock smart money decisions, be the center of small business growth, and disrupt the small business mid-market.

Speaker 1: 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. In payments, our innovation continues to drive digitization from creating an estimate to invoicing a customer to getting paid. Today, easy discovery, auto-enabled payments, instant deposits, and getting paid up for are all helping drive adoption of our payments offering, leading to 22% total online payment volume growth this quarter.

Speaker 1: We're making significant progress digitizing B2B payments to accelerate and automate transactions between small businesses and ultimately improving their cash flow. We see tremendous opportunity as 80% of businesses still pay other firms via paper checks. We recently expanded the availability of the beta of our native bill pay solution by 10x.

Speaker 1: Turning to Mailchimp, we're 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 Mailchimp. First, delivering on our vision of an end-to-end QuickBooks and Mailchimp customer growth platform.

Speaker 1: Second, disrupting the mid-market by developing a full marketing automation, CRM and e-commerce suite. And third, accelerating global growth with a holistic go-to-market approach.

Speaker 1: This last quarter, we implemented our first generative AI capability in Mailchimp, the email content generator, enabling customers to create faster email campaigns based on industry, marketing intent, and brand voice.

Speaker 1: This quarter, we launched the data of new product announcement generator, which uses AI to automatically create an email that a small business can send to their customers.

Speaker 1: We also announced over 150 new and updated features at recent Mailchimp conference in London designed to support the needs of advanced marketers including a calendar view, custom reporting and analytics, more ecommerce advanced segmentation, more real-time behavioral data based on ecommerce automation and SMS marketing.

Speaker 1: Lineup changes and free trials are driving positive trends in year-over-year paid customer growth, which accelerated this quarter. We continue to make progress in mid-market. Our 90-day retention rate this quarter is the highest it's been in two years.

Speaker 1: We've also translated the product into five different languages.

Speaker 1: We'll share more on the outcomes we're delivering across our 5 gig VEPs at our investor day.

Speaker 1: Wrapping up, with our durable AI-driven expert platform strategy and focus on innovating with Gen AI across our products, we're moving at a high velocity. This will help us put more money in our customers' pockets, save them time, and ensure complete confidence in every financial decision they make.

Speaker 1: As we lead this next technological shift, we are well positioned to power prosperity for our customers and communities that we serve, with a leadership team that has built for the era of AI. Now let me turn it over to Sandeep. It's great to have you on the call, my friend. Thank you, Fafan. I'm excited to be here. And I look forward to meeting many of you in the future.

Speaker 2: We delivered strong results in Cisco 2023, including total revenue growth of 13%, strong margin expansion, and gap and non-gap EPS growth of 16% and 22%, respectively. For the fourth quarter of Cisco 2023, we delivered results that exceeded the high end of our guidance range across all key metrics, including revenue of 2.7 billion of 12%,

Speaker 2: Gap operating income of $17 million versus a loss of $75 million last year. Non-gap operating income of $627 million versus $433 million last year, up 45%. Gap diluted earnings per share of 32 cents versus a loss of 20 cents a year ago. And non-gap diluted earnings per share of $1.65 versus $1.10 last year, up 50%. Now turning to the business segment.

Speaker 2: In the small business and self-employed group, revenue grew 21% during the quarter and 24% for the full year, which included four points of benefit from a full year of Mailchimp revenue this year versus three quarters last year.

Speaker 2: All night ecosystem revenue grew 21% during the quarter and 30% for the full year.

Speaker 2: With the goal of being the source of truth for small businesses, a strategic focus within the small business and self-employed group is threefold. Grow the core, connect the ecosystem, and expand globally.

Speaker 2: First, we continue to focus on growing the core. Groupbooks online accounting revenue grew 22% in Q4 and 26% in fiscal 23. Growth for the quarter and fiscal year were driven mainly by customer growth, higher effective prices, and mix shifts. Second, we continue to focus on connecting the ecosystem.

Speaker 2: Online services grew 20% in Q4, driven by payroll, mail chips, payments, capital, and time tracking.

Speaker 2: For the full fiscal year 23, QuickBooks Online Services grew 34%, driven by MailChimp, Payroll, Payment, Capital, and Time Striking.

Speaker 2: Within Terrel, revenue growth in the quarter reflects an increase in customers adopting a Terrel solution and a makeshift towards higher end offerings.

Speaker 2: Milk ship revenue grew mid-teens in Q4. Growth was driven by higher effective prices and paying customer growth.

Speaker 2: Within payments, revenue growth in the quarter reflects ongoing customer growth as more customers adopt our payments offering to manage their cash flow, as well as an increase in total payments volume for a customer.

Speaker 2: Third, we continue to make progress expanding globally by executing our fresh international strategy, which includes leading with both QuickBooks Online and Mailchimp in our established markets and leading with Mailchimp in all other markets as we continue to execute on localized product and lineup.

Speaker 2: On a constant currency basis, Total International online ecosystem revenue grew 12% in Q4 and 31% in Cisco 23.

<unk> to $16 47 growth of 12% to 14%.

We expect GAAP tax rate of approximately 23% in fiscal 2024.

Our guidance for the first quarter of fiscal 2004 include Remy.

The revenue growth of 10% to 11% GAAP earnings per share of 15 to 20 months.

And non-GAAP earnings per share of $1 94.

Two $2.

We are taking a prudent approach with guidance given the continued macroeconomic uncertainty.

A reminder, in Q1 of fiscal 'twenty four.

<unk> two paying approximately $700 million in cash tax payments related to fiscal 'twenty three.

Deferred due to the IRS disaster tax relief you can find our full fiscal 2024 and Q1 guidance details in our press release as well as on our fact sheet with that I will turn it back over to use of funds.

Great. Thank you.

Wrapping up we are confident in our AI driven expert platform strategy and progress with our five big bets the.

The investments that we're making in Gen AI and our leadership team driving our platform innovation the combination of our assets and our strategy creates a growth flywheel for Ngls to accelerated penetrating our $300 $300 billion in town.

In today's uncertain macro environment, the benefits of our global financial technology platform are more important and mission critical than ever to our customers.

We look forward to your attendance at our innovation day on September six and Investor Day on September <unk> 2008, with that let's open it up to your questions.

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

If you would like to withdraw your question. Please press star two.

Please limit your question yourself to one question, we'd like to get there.

Dan.

And we'll take our first question from me.

Mike with Morgan Stanley Your line is open.

Excellent. Thank you guys for taking the question and really nice quarter and nice to see.

Forward EPS guide ahead of kind of where consensus was see those numbers start moving up.

My Inbox, though is getting filled up with questions about the consumer business and the consumer guide you've talked about a longer term.

8% to 12% growth there the four year CAGR of 10%, but this year, we're looking for 7% to 8% so below that.

The guidance framework and I think people are trying to understand is why that is last year was a difficult season.

Did you pull the levers too hard on pricing or was it doing.

Do we need to refill the tank in terms of units like what is it that's going to keep this tax season to be underperforming those longer term targets. Thank you.

Thank you for your question, let me give you the headlines but allow me to unpack that I think the headline that we're just simply being prudent.

Our.

Focus on future growth and our bullishness does not change at all let me unpack that first and foremost when you look at the assistant segment. There is a $30 billion Tam and $20 billion of it is consumer assistance segment and $10 billion evidenced business segment and the second is the secular shift towards Digitization.

We'll continue and only accelerate in the years to come and with that as context, we probably saw some of our biggest reinsurance this year, which is why were probably more bullish about what's possible in this business than we were even three to four years ago and I would put it in two buckets credit Karma and then the assisted segment and credit Karma just.

As a reminder, our vision from the moment that we bought credit Karma was to create one consumer platform, where consumer can manage their financial lives managed our money and get their taxes done in one place. After several years of just rapid experimentation and we had a massive break certainly this past year, our our customer growth within there.

Credit Karma platform. This is a number of credit Karma members that became turbotax customers was up five apps and we are.

Scaling that both on the product side and on the business model side, because that gives us a lot of confidence going into next year and beyond.

The second is on the assisted segment and SM three parts first and foremost.

We actually have product market fit is past share full service. Our biggest focus was how do we scale, we had some breakthroughs into and how the scale in fact as you heard from Sandeep and had our best product recommendation score of any product across the company and we are significantly leaning into that in the coming year.

Second as business tax, we launched and learned.

To get the product market fit in business tax that is not going to be available both across our quickbooks live platform and are directly going to market with turbotax and we have hundreds of thousands if not millions of people at Kumba Turbotax looking for business that we've never had an offering we will next year and we are scaling it the last thing I would say in the <unk>.

<unk> segment, one of the biggest things that we've learned in this last year's local matters. What that means is people will go on Google and they will search if I'm in San Diego is very pro close to me, while we've never been good at being found in local and in fact, when you look at the experts that we have we are 10 miles from every home in the household in the United States.

And so we're going based on local this year and so when I look at our green shoots in the assisted segment and credit Karma. It gives us a lot of confidence as we look at this coming year in the future and I'll end with where I started which is the absence of your question about our guidance, we're simply being prudent given the year that we just had.

Excellent that's super helpful guys. Thank you.

Thank you.

And we'll take our next question from PDP to Grubhub Mizuho. Your line is open.

Thank you.

Late quarter and Sunday congratulation on your <unk> call and looking forward to working with you.

So John I wanted to ask about your <unk>.

Bill.

What sort of feedback have you been getting from your customer from that group.

<unk> built there.

How should we think about the near term opportunity.

Switching the legacy powered by payments solution with built.

And then on the broader vision side on small business now that you have full end to end cash flow management now.

AI and voice by man in AP Bill Mudd.

Money back Colin So what is your broader vision in terms of monetizing the whole ecosystem.

Yes. Thank you for your question, let me take it in and <unk>.

Two parts first and foremost you've heard us in the past year plus talk about digitizing.

B to B with respect to all of the manual work that gets done today in terms of 80% of the back and forth between small businesses is off.

All sort of paper tax and manual and our goal has been to digitize all of that and one last element of what we needed to do was to launch a bill pay I think the headline I would just get it is the feedback we've been getting is even better than what we thought and we're now at a place where we are connecting our data and we hope to have it available.

All too.

All of our customers soon so we feel very good about what we're seeing in dump and how fast we're able to build that based on the platform capabilities that we have and the feedback that we've gotten from customers.

I think back to your second question.

And in fact, the vision I would take you back to is that we have set out to be the source of truth for a business and to truly be the.

The center of small business growth and in order to do that we have to have capabilities that not only helping small business grows our customers retaining our customers markets and their customers, but to be able to manage their cash flow and be able to manage their employees. We now have all of those capabilities and you and I think particularly whats important that advantages us to deliver.

For our customers is the data and our AI investments that we've made in the last five plus years and I think I would just encourage you to attend and if you can attend.

When its on real time, what's the replay of our September 6th Intuit innovation data and you will see Howard our data AI engine AI capabilities.

We help customers manage their cash flow and really digitize all of money movement in a way that's so intuitive so easy and delivered at a moment of truth. So we're quite excited about what's possible as we look at this coming year, but the but the years ahead and let me by the way be very explicit that none of our potential in.

<unk> that youre going to experience in September 6th around NII is included in our guidance, but we believe it is.

Fundamentally revolutionary as we think about the world, we're going to create in the future.

Thank you.

Youre very welcome.

And our next question comes from Brent Thill with Jefferies. Your line is open.

Thanks, just on you mentioned prudent in the tax guide I'm curious.

Are you baking in more wiggle room this year than in past years in the guidance or can you just walk through what you mean.

Prudent.

Sure Great question, well first of all I'll just take you back to what you already know, but I think it's important that we start there.

This past year IRS returns, we continue to estimate will be down a couple of points. The do it yourself category will be down nearly one point and the driver of that which we are now certain non based on all the work and the analysis that we've done is we had a number of folks that came in to get their stimulus dollars in tax prep.

And so it was pandemic driven and.

And so that created just what you heard from Sandeep as sort of a very unusual tax season, but then when you step back and you look at the last four year trends.

It's sort of straightened out and so what we mean by prudent is really a couple of things one.

We're not assuming IRS growth in our numbers this year and we're not banking on all of the innovation that I just shared are paying off this coming year and that's just part of us being prudent because we want to demonstrate to all of you that.

This is a business that grows 8% to 12% and by doing so we must deliver the results and so it's just being very intentional and very prudent as we think about by the way our guidance Holistically not just turbotax with turbotax Thats credit Karma and the way we thought about small business, but those are that's sort of a definition of what we mean by prudent.

Thank you Suzanne.

Yes, Youre very welcome.

Our next question comes from Michael <unk> with Wells Fargo. Your line is open.

Okay, great. Thanks, so much.

Liberty outsized margin expansion. This past year, you had mentioned the focus on cost controls given the tougher environment throughout the year realized its one of the guiding principles, but maybe you can just speak to what's allowing you to guide for continued margin expansion with a starting point here and maybe how we should think about what's allowing for continued margin expansion as you break into the upper 30 percents there.

On the operating margins back up.

Thanks for the question, Michael and then let me unpack that a little bit we go through.

We're planning process and as I shared in the prepared remarks and do the process. If you look at Werent the biggest needle mover to deliver growth both in the near term and the long term durable growth levers for the company and we make sure those are funded for success.

Inclusive of big bets and investments in Gen AI.

The 40 to 60 bps of guidance reflects those investments and of course, thank you to reflect the strength and resilience of our platform. As a reminder, this is an expansion with delivering on top of the three points of expansion we delivered over the last three years.

As I look ahead I see plenty of.

But any way for us to continue to operate in accordance with our financial principles to grow expenses slower than revenue, therefore, implying margin expansion and really as I look at it what gives me confidence is that we earn AI driven expert platform and we operate as an ecosystem across technology.

<unk> across customer success across marketing. So in addition to giving us a competitive advantage for having faster time to market.

Nothing is the ecosystem and also give us advantage in getting operating leverage as we scale the business.

Thank you.

Our next question comes from pillar Mcguinness with UBS. Your line is open.

Yeah, Hi, thanks, so much for taking my question, maybe I'll focus on the small business and self employed full year guide, which was really strong. So I know, there's a bunch of moving pieces in there between customer adds mix ship online services attach and price, but are you sort of help us understand how each of those levers are contributing to the guide and based on what Youre seeing.

And the environment, what's giving you comfort and the durability of those growth drivers.

Yes. Thank you for your question, let me, let me start us off and suddenly please jump in and add anything yes first of all we have a framework at the company level, where we want to drive the majority of our growth from a volume and mix.

A lesser part from price, but we always focus on pricing for value and so when we look at our growth drivers. This year. It is it is coming from customer growth and it is coming from mix and to lesser extent this year compared to last year by the way from from price with that as context, I would just remind you that the big picture.

When you look at our opportunities this coming year, but even in the next three to five years, plus we now have a platform and a portfolio of services, where we have the opportunities to drive further adoption of our services from milk had two payments to payroll to time tracking into law.

Our new innovations around bill pay and digitizing VW just mentioned, but also although we are hopeful for three years to four years and we're just at the beginning of what's possible in the mid market mid market is a significant RPC opportunity because these customers use a lot of the capabilities that I just mentioned, except they pay a lot more.

And we're just at the beginning of the flywheel of penetrating mid market. So when you look at the portfolio of the services that we have that strength.

The experience that we're delivering because of data and AI and because the mid market. It allows us to drive most of our growth from a customer growth and mix and none of that by the way takes it into account what's possible as we look into the future with our generative AI experiences that youll be able to observe on September six but those are the main drivers.

And Taylor.

To date.

Over the long term, we remain committed to our growth algorithm of 10% to 20% the RPC and customer growth that remains unchanged and really at this time I mentioned innovation across our platform. The gift of opens up the aperture for us to cross sell and upsell our customers across more offerings on our platform as a growth opportunity for us to price of oil.

As we look ahead.

Great. Thank you.

Very welcome.

And that we're ready for our next plant and our next question comes from.

Rankin with Goldman Sachs. Your line is open.

Okay.

Hi, Thank you very much I hope you can hear me. Okay. So the recession that everybody has been expecting it doesn't seem to be quite happening.

I know you've got a great read on your SMB ecosystem, what are some of the indicators that you're seeing and if you've already proactively addressed this my apologies for bringing it up again.

Some of the forward looking indicators that you see.

And the credit Karma business or the SMB and ecosystem that give you renewed confidence that.

We are going to be okay, because your fiscal 'twenty four guidance indefinitely.

It's not it's not reflective of any caution in the environment, that's more like a continuation of what we've seen in the last four quarters.

That would be great. Thank you so much and congrats yes sure. Thank you for your question and you are loud and clear my friend.

So so let me start with small business and generally I would just lead with.

They continue to be healthy, but theyre challenged in this environment the specifics that I would share is.

The cash flow and.

Cash reserves of small businesses is 90% of what it was this time last year. However, it is still stronger than it's been pre pandemic.

In terms of looking for labor and Im finding employees to drive their growth that's still quite strong and in fact in this environment small businesses or are able to do a better job finding what they need versus when the market was hot which is good for them. Because then they can deliver for their customers and drive growth.

The last thing I would just say is there are certain sectors that are very weak transportation real estate advertising.

Very weak within small businesses. So that's the aggregate picture all animals why started.

Struggling, but still healthy compared to pre pandemic.

The consumer side, let me hit on sort of two different points I'll quickly hit on credit Karma.

We've mentioned, what we're seeing is stability.

And in our innovation that we've been focused on is really getting hold and there are some exciting things that we're working on and credit Karma that will share both on September six and at Investor.

Investor Day, one where we redesigned the entire app and we have begun to roll it out the small cohort of customers, who will eventually scale it and we're actually seeing.

Very good engagement with the redesigned App and then that coupled with our Gen II experiences along with all of our innovation with Lightbox from credit Karma money.

Gives us a lot of excitement around the future none of which by the way is in our guidance, but the headline is stability and credit Karma and lots of innovation that is helping us with where we are and coming.

I just focus on the consumer a couple of things I would say.

If you could look back to last March of 2020, due our credit scores are on average down 13 points.

Credit balances are up about 30%.

Credit band of like 660, <unk> have the largest balances are carrying about $10000 on average and that and the Gen Z balances have gone up the most are up 45% year over year herself.

Job market has still got people still have jobs, but there are certainly some level of strain on the consumer.

Brian Thank you so much.

Yes, very well.

Our next question comes from Brad Reback with Stifel. Your line is open.

Great. So on following up on that credit Karma commentary.

Obviously the world we live in today is different than when you acquired the business do you think the long term growth rate of credit Karma is meaningfully different in a world where interest rates are mid single digits versus zero.

Yes, Brian . Thank you for your question. The short answer is no we're very bullish on.

On the business and in fact, a couple of them.

Things that I would share with you, which we can talk more about at Investor day, but just not to leave you hanging.

The monetization model and credit Karma is how many members you have how frequently to engage and Theres a model for.

Every time, a customer engages or is that.

A.

Average revenue per customer that we benefit from and in fact, this past year in 'twenty three.

Our results were down year over year, our frequency of engagement is actually higher than the prior two years, we'll be at 37% growth and 58% growth now why is that.

Because of all of our innovation is because the customer is engaging but in many areas of credit is still tight so when credit begins to open up and thats the stability that we're seeing now.

We view this business will accelerate back to the 20% to 25% growth rate plus I'll remind you that that plus the integration with <unk>.

Turbotax drives actually more stickiness more monetization and truly created this one consumer platform, which was our vision from day, one when we acquired credit Karma and with all of the data and AI capabilities that we have in our accelerated <unk> experience as I said earlier.

Youre going to see on September six some of the new innovations that are coming that will make it easier for customers to find what they need the benefits that they need.

Engaging the financial product that they want and manage their money and so all of that leads to our view is completely unchanged relative to the long term expectations of 20% to 25% growth in credit Karma and Brian . The one thing I would add to that because you asked about a scenario in which interest rates are higher rates interest rates are higher the consumer have a high propensity to shop around.

Because even a small improvement in the rates that they're getting has a bigger difference in terms of the interest rate their pain and a bigger difference to the bottom line. If in fact, the product becomes more important and critical to the end user.

Higher rate environment.

That's great. Thank you very much.

Very welcome.

Our next question comes from Kartik Mehta with Northcoast Research Your line is open.

Good evening to time.

This year, you really focus at least from a TV advertising standpoint on full service really trying to get the message out and I'm wondering you know one of the things we've talked about as being a little bit more prudent on revenue growth on the consumer business I'm wondering if.

Does your strategy change at all on how you're marketing the full service product.

How did the full service product performed compared to your expectations this quarter.

Here as well.

Yes, great Great question, let.

Let me give you an answer that I think youll find somewhat helpful. In somewhat vague intentionally we learned a lot this year.

We came into the year with a full service offering that has a product market fit in as you know it all AI driven it's all AI driven.

And we can virtually get things done within an hour or same day, we learned a lot around housing scalable and how to.

Customers find our full service offering and a lot of it also has to do with what I mentioned earlier, which is local marketing.

In San Diego assignment in Kansas City.

Even if I see that turbotax can provide expert I go to service as the locally if there's somebody there with all of our experts that we have are within 10 miles of many of the households in the United States, but we've never marketed that way and lapping a one of our marketing going forward. So there's a lot that we learned in terms of.

How to evolve our marketing still becomes in hand does not an either or and we're excited about it.

Thank you.

Yes, very welcome.

Our next question comes from Kirk <unk> with Evercore ISI. Your line is open.

Yes, thanks very much.

Let's say here you just give a little bit more detail on what's you're counting on mail chimp severe this year and maybe not if you don't want to get too much into the quantitative side qualitatively you guys have done a lot of work around the product the amortization.

How important is sort of a continued acceleration of mail chip as you look at sort of a small business in aggregate for next year. Thanks.

Yes, Kurt Thank you for your question, it's really to answer your question is really threefold first and foremost.

As you know we made this acquisition are ultimately to create one gross platform. So we can help a small business in one place being able to grow their business and manage the cash flow manage our workforce all in one place and really the key to all of this has been data AI and now our accelerated investments in Gen II and so first and foremost.

As we want to make significant progress in this area and you'll actually see some of that on both September 6th our Intuit innovation day and at Investor Day, That's number one and the second is as I mentioned earlier, we had the largest relief in June that we've ever had announcement history, we had.

150, new and updated features that we released on top of multiple Gen AI driven.

The announcements that we had made a couple of weeks prior to that so our second focus is adoption.

Getting our customers to adopt these benefits because not only will it help fueled our success, but it will help us lift our monetization, particularly in the mid market, which is where our focus is very similar to the focus that we've had with quickbooks mid market and then third is international Nelson is I believe.

<unk> internationally.

And we've done a lot to localize the product.

Mentioned earlier into five languages and more is coming we've also been doing a lot of price studies of price testing because we've had like one price internationally that doesn't work, sometimes they should be higher sometimes they should be lower so we've learned a lot in terms of some of our testing and many of that were going to be scaling. This year. So those are if I were to just sort of.

Carve out.

Your question those are the three big areas.

We are very focused on in the coming year.

Great. Thanks, guys.

Yes Youre welcome.

Our next question comes from Brad Zelnick with Deutsche Bank. Your line is open.

Hi, everyone. It's Nick <unk> on for Brad This evening and congratulations on the strong end to the year and welcome Sandeep I. Appreciate you taking the question.

International growth has decelerated since the beginning of the year can you talk us through how you see that growing going forward. Thanks.

Okay. Thanks for the question Nick.

Couple of things on the international growth.

I should go with as I shared earlier, our focus our refresh strategy is to lead with both real estate and Quickbooks in the markets, where we have product market fit.

And in other areas to meet with membership at the tip of the sphere.

Our growth decelerated for a couple of reasons and some of that's upon shared as we lead into.

<unk> pricing formula because some of these geographies historically it was the same price. It was basically the price estimate U S simply converted into the local currency and applied in that geography, we maintain and we looked at whats the price should be based on the competitors in the market based on the GDP per capita and all these other factors and we right size the price.

Secondly, as we do in Quickbooks, we introduced free trials are discounts and midstream folks join the product is what we have experienced over a years of doing that if people more people come into the product and to stick around as that leads to a better than 90 days overdue retention et cetera. So these are all the factors and all the <unk>.

We are making in the melting.

Product in the lineup, which is leading to describe as a temporary headwind in terms of our international growth.

Great. Thank you very much.

Very welcome.

Our next question comes from Alex Zukin with Wolfe Research Your line is open.

Hey, guys. Thanks for taking my question and congrats on.

On a really nice and prudent guidance methodology for for next year I guess, maybe I'll just.

Both of my questions really target the SMB growth rate it seems like the guide.

There.

Ed.

Thanks, Milton is really strong.

You are now in the CFO .

Just talk about you talked about the prudent intact with the prudence and the SMB guys. What gives you guys the confidence.

To kind of guide that way and how much of it has to do with some of the payments personalities that are coming to market. Some of the Chennai Gen AI functionality coming to market.

Gives you guys that guidance and then dovetailing into that new leader for that group, obviously as well is there.

Talk about the potential for either disrupt or how is that accounted for or why.

<unk> was the right fit for.

For that role, specifically and kind of where you are.

To bring to the table.

And Alex can I take the leadership question and take it more broadly and then let Andy jump in and answer specifically your question around.

The guide.

Taking this opportunity to talk about the leadership changes that we've had in the company and all of course includes marianna in that as well.

First of all one of our greatest superpowers as a company is leadership development and succession planning.

One of the focus areas that we have as part of our Intuit operating system, which starts at the top with my staff and staff as we spend four times a year several days at a time focusing on talent.

Talent, focusing on succession planning reviewing development plan and being very intentional about architect King mobility move then ultimately our goal is to be three deep in.

All of our key roles at multiple levels of the company, which by the way is very hard to do but that is why we are a leadership factories. The second thing I would say is that we are very focused on mobility.

Senior roles, so the vice President and above which is an officer of the company and above typically within a three to five year period. There's a lot of if you don't have visibility to of course, because you only see.

Potential changes that happen in MISO.

We're very intentional about mobility, because we believe fresh perspective fresh thinking is important.

And our <unk>.

Technology areas in our in our businesses and also training the leader to be ready for a big bigger jobs is very important by the way I'll use myself as an example, before I stepped into the CEO job for five years ago I was in turbotax for three years I was running a small business for three years. When I was the CIO for 10 years. So Thats just an example of mobility.

With all of that.

Sometimes on mobility.

Up and to the right and changes within the company. Some times that we celebrate folks taking on roles outside of the company because that may be the best fit for them with so with that as context.

We had a lot of confidence in our leaders and let me know specifically touch on are three of the leaders just to make it very real.

When you look at Mariano I actually hired Mariana into small business. When I was there. She was a chief product development officer and is very familiar with small business. When I became the CEO I move there into the CEO role and she has done an unbelievable job fueling innovation across the company and now she's going back home to where she started running a small business.

And.

Very excited about what she will do to unlock the next year of growth. When you look at March and Turbotax, I actually started with marketing turbotax a decade ago.

And worked with him for three years.

And then I.

After I left Turbotax a few years later promoted him to lead our chief customer success officer of the company and he has the godfather of our life platform that we talk a lot about today and now he's going back home and running turbotax, but he is very very well versus not only the business, but our disruptive growth driver of the future.

Which is live and then Alex velocity just upon our CTO role I also worked with them into our Botox. We then moved them to a broader chief architect and data role where he has been my right hand person feeling the innovation across the company. We just moved him into the CEO role. The reason I wanted to go through that a bit thoroughly for all.

All of you to understand that succession planning and leadership development is our sort of core competency and I actually believe that we have the strongest team that we've had ever.

Built for the era of AI, given their backgrounds and experiences so with that as context, let me ask Andy to answer the other part of your question Alex.

And let me touch on one additional point or what's the thought that it's never about one individuals we our system and we have strong leadership teams that surround our general managers and CFO stuff as well so getting back to your question on the guidance Alex.

So just for context, the small business group grew 24% in fiscal 'twenty three with four of those points coming from the benefit of the timing of the most simple acquisition. So that's about a 20% organic run rate and as we have shared with you.

Group into passive any percent of the revenues in the small business group our subscription base. So that makes the recurring nature of the revenue mix is highly predictable and NV.

So a strong result in areas, where we have focus such as quickbooks advanced customer growth as well within the mid market area that the funnel touched on so that is one component of what's giving us confidence as we guide for next year. The second aspect is.

Its importance of our products to Smbs.

Something core to how they run their business.

Employees are they get paid.

Sales of other good access to capital to take on new projects and grow their business and we have made tremendous improvements in our product and the ecosystem that makes us platform that much more.

Relevant and important to the lives of our customers. So that is all.

All baked into the guidance that we provided for the small.

Small business and self employed group.

You ask a question we will remind on gen. One.

I want to reiterate and be very clear Jen AI, we believe it will be an accelerant for our business, but that is not baked into our guidance that we shared with you all today.

Super clear thanks, a lot.

Is the thought could vary.

Very in depth explanation.

No doubt.

Telling factor is alive and.

Well.

Thank you Alex.

We'll take our next question from Mark Murphy with Jpmorgan. Your line is open.

Alright. This is already on for Mark Murphy, Congrats on the quarter and thanks for taking my question I just wanted to dig in on a credit Karma, specifically as it relates to the opportunity to begin to pursue prime customers. In addition to the subprime and near Prime customers. You guys are kind of focused on historically.

Yes. Thank you for your question, Yes, it's a big focus area for us going after prime customers and just for context.

Sort of a third of our monthly active users and they are the least engaged because really when you look at the platform and we have traditionally focused on subprime and near Prime and we have a lot of the capabilities.

We developed in the past and know these prime customers very well, which is why we have merged our mint and credit Karma team and platform that really solved for these prime customers and so we have been working I think for the last almost year really.

Understanding their needs and running a number of experiments and are now and have been in the midst of launching multiple things that are very geared towards prime customers and we're actually very excited with the app redesign there's sort of two big things that we've been working on and credit Karma beyond what we've been sharing with you.

One is.

Really redesigning the whole app.

It enables customers in certain cohort of customers light pride to be able to find the benefit that they're looking for because on everything that we know about them proactively. The second is the gen. II experiences that again, we will unveil more of September assets and the combination of those two things out and.

And what I shared a moment ago around prime customers gives us a lot of sort of excitement around what's possible to serve these prime customers going forward, which is something that we have not benefited from a monetization perspective now that are included in our guidance, but it's something that we're very excited about.

Thanks for the insight looking forward to learning more about it.

Thank you.

Our next question comes from Brad Sills with Bank of America. Your line is open.

Wonderful. Thanks, so much for taking the question wanted to ask one on AI here as well it sounds like some exciting things coming and looking forward to learning more about that a lot of possibilities here within small business and consumer.

Just love to get your perspective on kind of where youre coming from society, you've alluded to the fact that intuit is well prepared here because of the platform capabilities here and the underpinnings of that with data. So just curious any color as to.

Where intuit is coming from.

Such that Youre able to iterate on AI the way that we're.

We're looking forward to learning more about.

Yes. Thank you for your question I'll start with taking you back two five years ago, where we declared our strategy was to really shift the company from just a tax and accounting platform, which is very important set of problems to solve for customers. So a global financial platform that really.

Played a far more meaningful role in powering the prosperity of consumers and small businesses on a daily basis. When we made that strategic declaration on the five bets that and see what we talked about at that time was that data and AI was going to be core.

We're making that shift and in fact, when we made the acquisition of both credit Karma Mel just one huge driver of the acquisition was around the data because in essence, we will know a lot more about customers that we can leverage that data for their benefit to fuel their success. So I needed prior to five years ago declaring that.

Data and machine learning has been a decade long focus of into it. So when you think about a decade long investment in data usable data cleaning the data and making sure that is structured in a way where it can be used and then our investments in <unk>, specifically and knowledge engineering, which really takes rules in the relationship.

Between data and turns it and the code is what our advantages in Turbotax machine learning and natural language processing those have been it's been a decade long set of investments and the two acquisitions that propels US forward about 10 years and then you couple that with what we started several years ago, which is gen. AI and then what we launched in <unk>.

Our agenda is the operating system <unk> by the way is not something you can create overnight. This is years of investment when we couple.

Those set of investments data AI as Gen <unk>, which is really primarily our own intuit financial large language models that are trained on our customer's proprietary data. It allows us to personalize things humanized thing and do the work for customers in a way that's revolutionary which ultimately gets to the punch.

This line, we are creating a future that is done.

Rather than having to do the work to run your business rather than you have to do the work to be able to power your prosperity manage their finances as a consumer we want to put you in control where it's done for you always in control you have the choice.

Whether or not you can move forward with a decision, but we want to be able to help you grow your customers and run your business for you to help you manage your cash flow always put the right choices in front of you and the same thing goes on the tax side and credit Karma site. So that's what's so exciting about it is a decade long.

Focus we really triple down on it five years ago, when we declared our strategy and where we have now galvanized.

<unk> energized the entire company that the future of done for you that we declared five years ago is very real very much here and we had an enormous opportunity to do amazing things for our customers and that's what really gets us excited about what's possible. In fact, you can do another advertisement join us September six for Intuit.

Innovation day, followed by Investor day, and you'll get a real good feel for the world that we are going to create for the future.

Looking forward to it thanks Hassan.

Youre welcome.

We'll take our last question from Scott Schneeberger with Oppenheimer. Your line is open.

Thank you very much.

Welcome Sandeep.

Good afternoon.

I have a couple of them consumer one.

Very high level in one just a clarification. So the first is on.

Got you cut out on us.

And that can be kind of if any of that.

Your line is open.

Alright, Thanks, John can you hear me.

We can now yes, if you don't mind to start over again, because we lost you.

Absolutely. Thanks, So two quick on consumer first volume and price mix. This your consideration of that going into fiscal 2024 and beyond given given the trends of the recent years and then for your Sandeep just curious in the <unk>.

Extension in the post tax season, what did you see anything interesting with California should we see a.

A shift from fiscal 'twenty three to 'twenty four that's material related to anything extension why thank you.

Sure Let me start with your your volume mix question around Turbotax I would say the way to think about is with what I described earlier leaning into full service leaning into business tax and continuing to lead into Turbotax live was really comes with assistance recognizing it's all data and AI.

Then youre going to see more come from Arpus, even volume and Thats just the nature of the opportunity now there is 88 million plus people that are able to assist the segment on this $30 billion of spend.

So there is both a volume opportunity and an RPC opportunity is just our view looking at the next 10 years by the way. This is not a one year answer.

Both matter Youre going to get we're going to get more from ARCC.

And I'll, let Andy jump in here as well I mean on the extension season, that's just been very weird weather. Many states that got extended to July in California to October and what we're seeing from customers is they are even gotten confused which month they have to file an <unk>. So net net is there is more to file when you look at it at the company level.

It's really not material, but not everybody has filed yet.

So thats basically the answer Scott.

It's not material for our Q1 thats been a unique behavior in the taxpayer, but I'll also remind us that last year. We also saw a great deal of extension, but by taxpayer. So thats also something to keep in mind. If you can kind of Q1.

Okay. Thank you both.

Okay.

Alright, everybody I think that brings our questions our Q&A.

Thank you for your wonderful questions. Thank you for spending the time with US we look forward to seeing you in September six band.

At our Investor day, taking a Caribbean. Thanks Bye everybody. Thank you.

Yeah.

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

[music].

Mhm.