Q1 2024 Intuit Inc Earnings Call
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Speaker 3: Good afternoon. My name is Chelsea and I will be your conference operator.
Good afternoon, My name is Chelsea and I will be your conference operator.
Speaker 3: At this time, I would like to welcome everyone to into its first quarter fiscal year, 2020 War Conference Call.
At this time I would like to welcome everyone to Intuit's first quarter fiscal year 2024 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.
Speaker 3: 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 ask a question. During this time simply press Star then the number one on your telephone keypad.
Speaker 3: If you would like to withdraw your question, press star cue.
If you would like to withdraw your question Press Star Q.
Speaker 3: With that, I'll turn the call over to Kim Watkins and to its Vice President of Investor Relations. Ms. Watkins?
With that I'll turn the call over to Kim Watkins Intuit's, Vice President of Investor Relations Mr pockets.
Speaker 4: Thanks, Chelsea. Good afternoon and welcome to into its first quarter fiscal 2024 conference call. I'm here with into its CEO , Sassan Gidharzi, and our CEO , CFO , Sandy Pujolai.
Thanks, Tom good.
Good afternoon, and welcome to enter its first quarter fiscal 2024 conference call I'm here with Intuit, CEO, <unk>, <unk> and our CEO CFO Sandeep.
Speaker 4: 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 into its results to differ materially from our expectations. You can learn more about these risks in the press release the issued earlier this afternoon, our Form 10K for fiscal 2023 and our other SEC filings. All of those documents are available on the Investor Relations page of into its website at Intuit.com. We have seen no obligation to update any forward looking statements.
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 2023, and our other SEC filings.
All of those documents are available on the Investor Relations page of Intuit's website at Intuit Dot com.
We assume no obligation to update any forward looking statements.
Speaker 4: Some of the numbers in each remarks are presented on a non-GAP basis. We recognize the considerable gap in non-GAP numbers in today's press release.
Similar 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.
Speaker 4: 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. And with that, I'll turn the call over to Cesson.
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 <unk>. Thanks.
Speaker 5: Thanks, Kim. And thanks to all of you for joining us today. We had a very strong first quarter and have great momentum innovating on our platform across the company.
Thanks, Kim and thanks to all of you for joining US today, we had a very strong first quarter and have great momentum innovating on our platform across the company total revenue grew 15% driven by small business and self employed group revenue growth of 18% and consumer group revenue growth of 25%.
Speaker 5: Total revenue grew 15% driven by small business and self-employed group revenue growth of 18% and consumer group revenue growth of 25%. This was partially offset by credit karma revenue decline of 5% in line with our expectations for Q1 given the macroeconomic environment. With the strong start to the year, we are reiterating our full year guidance for fiscal year 2024.
This was partially offset by credit Karma revenue decline of 5% in line with our expectations for Q1, given the macroeconomic environment with a strong start to the year. We are reiterating our full year guidance for fiscal year 2024.
Speaker 5: Consumer group revenue growth reflects a strong finish to the tax extension season. We remain focused on transforming the assisted consumer and business tax categories with turbo tax life.
Consumer group revenue growth reflects a strong finish to the tax extension season, we remain focused on transforming the assisted consumer and business tax categories with Turbotax live.
Speaker 5: Our innovation in taxes accelerated in several areas. First, the Credit Karma platform is leveraging data and AI to deliver personalized experiences and compelling tax offers.
Our innovation in taxes accelerated in several areas first the credit Karma platform is leveraging data and AI to deliver personalized experiences and compelling tax offers.
Speaker 5: Second is the innovation with TurboSax Live to deliver speed and confidence to prior year assisted customers, particularly with full service, where we can get taxes done in as little as an hour of using data, AI, and our expert platform at scale.
Second is the innovation with turbotax live to deliver speed and confidence to prior year assisted customers, particularly with full service, where we can get taxes done in as little as an hour using data AI and our expert platform at scale.
Speaker 5: And third, into it, assist our Gen AI Powered Financial Assistance, helping customers in key areas where confidence matters most. For example, understanding their refund or getting answers to their questions as if they're talking to an expert.
And third Intuit assist our Gen AI powered financial assistance, helping customers in key areas, where confidence matters. Most for example, understanding their refund or getting answers to their questions. As if they are talking to an expert we ran many experiments during the extension season, and the learnings give us confidence in our game plan to win this tax.
Speaker 5: We ran many experiments during the extension season and the learnings give us confidence in our game plans to win this tax season.
Lisa.
Speaker 5: We believe this is into its 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 platform. We're delivering experiences where the hard work is done for you with a gateway to human expertise, powering our customers' prosperity and accelerating penetration of our $300 billion in town. The launch of Intuit Assist is the result of years of investment in data and AI.
We believe this isn't to us the 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 platform. We are delivering experiences where the hard work is done for you with a gateway to human expertise powering our customers' prosperity and accelerating.
Penetration of our $300 billion in town.
Lots of Intuit assist as the result of years of investment and data and AI at.
Speaker 5: At the core of our platform is powerful, relevant data. Intuit has incredibly rich longitudinal, transactional, and behavioral data for our 100 million customers.
At the core of our platform is powerful relevant data in.
<unk> has incredibly rich logic funeral transactional and behavioral data for $100 million customers.
Speaker 5: We have 500,000 customer and financial attributes per small business and 60,000 financial and tax attributes per consumer on our platform.
We have 500000 customer and financial attributes per small business and 60000 financial and tax attributes her consumer on our platform.
Speaker 5: And with our Gen AI operating system, Gen OS, we empower into a technologist to create breakthrough AI experiences across the platform. This includes utilizing our own powerful financial LLM as well as those from other leaders in Gen AI, which together unlock new opportunities to serve our customers with accuracy and speed in a cost efficient way.
And with our Gen AI operating system Genoa, we empower intuit technologists to create breakthrough AI experiences across the platform. This includes utilizing our own powerful financial LLM as well as those from other leaders in NII, which together unlock new opportunities to serve our customers with accuracy and speed.
In a cost efficient way.
Speaker 5: We are creating a future of done for you. A future where the hard work is done automatically on behalf of our customers with a gateway to human expertise, fueling their financial success.
We are creating a future of done for you a future where the hard work is done auto magically on behalf of our customers with a gateway to human expertise fueling their financial success.
Speaker 5: Intuit Assist, powered by Gen AI, is critical to delivering unparalleled benefits for our customers over the next decade. Let me share a few updates on Intuit Assist across our offering.
Intuit assist powered by Gen. AI is critical to delivering unparalleled benefits for our customers over the next decade, let me share a few updates on intuit assist across our offerings.
Speaker 5: First, Mailchip, we're rolling out two new Genai experiences designs to help our customers grow their revenue and save time.
First male chest.
Rolling out two new Gen. AI experience is designed to help our customers grow their revenue and save time. These.
Speaker 5: These include AI-driven audience segmentation and marketing automation. I'll share more on those in just a moment.
These include AI, driven audience segmentation and marketing automation I'll share more on those in just a moment.
Speaker 5: Second, TurboTax. As I shared earlier, during the extension season, we tested new Gen AI experiences to deliver higher confidence for our DIY customers.
Second turbotax as I shared earlier during the extension season, we tested new Gen AI experiences to deliver higher confidence for our DIY customers. This.
Speaker 5: This includes in-topic accuracy checks and personalized explanations throughout the filing process that help explain a customer's tax outcome. We're excited about rolling out these experiences this season.
This includes in topic accuracy check and personalized explanation throughout the filing process that help explain a customer's tax outcome. We're excited about rolling out these experiences this season.
Speaker 5: Third, QuickBooks. We are testing Genai to help customers save time and run their business with complete confidence, including a digital expert that can surface business insights and allow customers to dig deeper or connect them to a human expert. For example, we're serving up proactive business insights to customers with an actionable business summary. These customers are using the business summary as a launching point to learn, create reports directly using into it as this, and take actions to drive their business success.
Third cookbooks, we are testing <unk> to help customers save time and run their business with complete confidence, including a digital experts that can surface business insights and allow customers to dig deeper or connect them to human expert for example, we're serving a proactive business insights to customers with actionable business summary.
These customers are using the business summary, as a launching point to learn create reports directly using intuit assess and take actions to drive their business success. These.
Speaker 5: These experiences will be rolled out in the coming months and in the future we plan to automate these actions and do the work for our customers.
These experiences will be rolled out in the coming months and in the future. We plan to automate these actions and do the work for our customers.
Fourth credit Karma, we're testing Gen AI to help our customers find the products that are right for them in a highly personalized way for example, based on our research Prime members spend an average of five hours online comparing credit card benefits with our members credit data and spending history from accounts they choose the linked to credit Karma we can.
Use Gen AI to help members select the right credit card for them optimize based on their personal spending history. This is designed to increase engagement with our members and help them improve their financial health and drive financial success. These experiences will be rolled out in the coming months.
Speaker 5: This is designed to increase engagement with our members and help them improve their financial health and drive financial success. These experiences will be rolled out.
Speaker 5: We are excited by Intuit Assist's early progress. It will change our relationship with customers as we move from a transactional workflow platform to a trusted assistant that our customers rely on daily to power their prosperity. We believe Intuit Assist will lead the higher frequency of engagement and monetization across the platform.
We are excited by intuitive. This early progress it will change our relationship with customers as we move from a transactional workflow platform to a trusted assistance that our customers rely on daily to power. Their prosperity. We believe intuitive this will lead to higher frequency of engagement and monetization across the platform.
Speaker 5: Let me now highlight progress across two of our five big bets. As a reminder, our five big bets are revolutionized speed to benefit, connect people to experts, unlock smart money decisions, be the center of small business growth, and disrupt the small business mid-market.
Let me now highlight progress across two of our five big bets as a reminder, our five big bets are revolutionize speed to benefit.
Connect people to experts unlock smart money decisions be the center of small business growth and disrupt the small business mid market.
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 payment our innovation continues to drive digitization from creating an estimate so invoicing a customer to getting paid to paying a supplier.
Today easier discovery auto enabled payments instant deposit and get paid upfront are all helping drive adoption of our payments offering.
Total online payment volume growth was strong in the quarter at 21%.
We're also making good progress digitizing BTB payments to accelerate and automate transactions between small businesses and ultimately improving their cash flow.
We made our bill pay offering widely available to customers during the quarter. While it's early we are seeing mid market customers choosing the paid subscription offering at approximately two <unk> the rate of non mid market customers, indicating this paid offerings is resonating with larger customers.
Turning to <unk>, we are well on our way to becoming the source of truth for our customers to help them grow and run their business as I shared earlier, we're rolling out several features powered by Intuit assists in time for peak holiday season for many of our customers. Let me highlight two of these impactful benefits designed to help our customers grow their revenue loss.
<unk> time.
AI driven audience segmentation, which allows small businesses to target specific audiences.
Many customers don't use audience segmentation today. Despite the fact that it can drive up to 60% lift in average order revenue or <unk> average order value over 12 months with Intuit assist a customer can use conversational language to more quickly build segments and use them as a part of our marketing campaign.
Second AI powered marketing automation, which are automated workflows that help small businesses reach their customers and uniquely tailored way today many of our customers don't use marketing automation because they are time consuming to set up even though they can help them drive higher revenue with Intuit assist mail chimp create marketing automation as we can.
Easily be turned on and E mail content can be generated and edited.
Our fifth Big bet is to disrupt the small business mid market, representing a Tam of one 7 million customers 800000 of which are already in our franchise, but using a core TBO or desktop product online.
Online mid market customer and revenue growth remains strong and we are driving increased adoption of quickbooks advanced payments and payroll, resulting in RPC expansion as we serve these mid market customers with a full ecosystem of services.
We are proud of our innovation and the impacts that we're making on our customers' lives. We also continue to make an impact on the communities that we serve this quarter, we launched Intuit for education, and New financial literacy program to provide Gen Z and Jen offer students access to intuit products and see some personal and small business finance.
We also announced the first set of winners of our coal fields solar farm, providing grants and <unk> solar energy projects and coal mining communities to help build a sustainable future.
Wrapping up with our durable AI driven expert platform strategy and focus on innovating with Gen. AI across our platform. We are more excited than ever about the opportunity in front of us and our ability to power prosperity for our customers.
We are also delighted to be one of the only eight fortune 500 companies named to Fortune's inaugural top 50, AI innovators list with that let me now hand, it over to Sandy.
For the first quarter of fiscal 2024, we delivered very strong results that exceeded the high end of our guidance range across all key metrics, including revenue of 3 billion up 15% GAAP operating income of $307 million versus $76 million last year non-GAAP operating income of.
$160 million versus $662 million last year up 45% GAAP diluted earnings per share of <unk> 85.
Versus 14 cents, a year ago, and non-GAAP diluted earnings per share of $2 47.
$1 66 last year up 49%.
I am pleased with the early momentum this fiscal year.
Turning to the business segments.
Small business and self employed group revenue grew 18% during the quarter driven by online ecosystem, which grew 20%.
<unk> demonstrates the power of our small business platform and the mission critical nature of our offerings, which continue to resonate with customers as they look to grow their businesses and improve cash flow in any economic environment.
With the goal of being the source of crude 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 19% in Q1, driven mainly by customer growth higher effective prices and mix shift second we continue to focus on connecting the ecosystem.
Online services revenue grew 20% in Q1, driven primarily by payroll mill chip payments capital and time tracking with.
Within payroll revenue growth in the quarter reflects an increase in customers adopting our cloud solutions and a mix shift towards higher end offerings and.
And mill chip revenue growth was driven by higher effective prices and paying customer growth.
And within payments revenue growth in the quarter reflects ongoing customer growth as more customers adopt our payments offerings to manage their cash flow as well as 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 Quickbooks online and merchant and established market, leading with merchant and all other markets as they continue to execute on a localized product and lineup approach.
On a constant currency basis total international online ecosystem revenue grew 16%.
Desktop ecosystem revenue grew 14% in the first quarter and Quickbooks desktop enterprise revenue grew in the high single digits.
We are more than two thirds of the way through a three year transition for customers that remain on our licensed based desktop offering to our recurring subscription model in conjunction with our business model transition. We also risk prices across multiple desktop product. This October consistent with our principles to price for value looking ahead.
We expect continued strong desktop ecosystem revenue growth this year as we complete the remaining part of the three year transition.
Our focus is to continue innovating across our online ecosystem and to help our desktop customers Microsoft seamlessly to our online offerings. We continue to expect the online ecosystem to be a growth catalyst longer term.
Moving to credit Karma.
<unk> delivered revenue of $405 million in Q1 down 5% year over year, we saw partners, taking a conservative approach to extending credit in personal loans and credit cards. During Q1. This performance was consistent with our expectations and our prudent approach to guidance given the uncertain macroeconomic environment.
On a product basis. The decline in Q1 was driven primarily by macroeconomic trends across personal auto insurance home loans, and automotive, partially offset by growth in credit cards and credit Karma money.
Shifting to the consumer and pro tax groups consumer group revenue was 187 million and grew 25% in the quarter and protect revenue was $42 million and grew 24% during.
During the quarter, we saw stronger than expected Turbotax would return volume from states, both with and without extended tax deadlines and strong performance and share of quarterly returns during extension season.
<unk> shared earlier, we are excited about our innovation across turbotax. The multiple experiments we ran during the extension season bolster our confidence in our game plan to win this coming tax season.
Now, let me briefly touch on our financial principles and capital allocation.
Friendship principles guide our decisions to remain a long term commitment and are unchanged.
Finished the quarter with approximately $2 3 billion in cash and investments and $5 9 billion in debt on our balance sheet in September we raised $4 billion secured senior.
Senior notes to repay the outstanding balance on our unsecured term loan.
These notes carry a weighted average coupon of five two years, 9% approximately one point lower than the term loan rate at the end of Q4 as a reminder, during Q1, we made tax payments of approximately $710 million that were deferred from fiscal 2023 due to the IRS disaster area.
Tax relief.
We also repurchased $603 million of stock during the first quarter, depending on market conditions and other factors. Our aim is to be in the market each quarter and lastly, the board approved a quarterly dividend of 90 cents per share payable on January 18 2024.
This represents a 15% increase versus last year.
As I stated earlier I am pleased with the early momentum we are seeing in fiscal 2024, highlighting the strength of our platform within the uncertain macroeconomic environment that is consistent with our expectations. We have a proven playbook and a track record of managing for the short and the long term, including controlling discretionary spend.
To deliver strong results, while investing in what is most important for future growth. Our goal remains for intuit to emerge from this period of macroeconomic uncertainty and an even greater position of strength.
Moving on to guidance, we are reaffirming our fiscal 2024 guidance. This includes total company revenue growth of 11% to 12% GAAP operating income growth of 15% to 18% non-GAAP operating income growth of 12% to 14%.
GAAP earnings per share growth.
Of 11% to 15% and non-GAAP earnings per share growth of 12% to 14%.
Our guidance for the second quarter of fiscal 2024 include.
Revenue growth of 11% to 12% GAAP earnings per share of <unk> 62 to 68.
And non-GAAP earnings per share of $2 25 to $2 31.
As a reminder, we are taking a prudent approach with guidance given the continued macroeconomic uncertainty.
You can find our full fiscal 2024, and Q2 guidance details in our press release and on our fact sheet with that I will turn it back over to Suzanne.
Alright, well, thank you sandeep and to wrap it up we are confident in our AI driven expert platform strategy and progress across our five big bets and creating a future of done for you with a gateway to human expertise. We believe this will change our relationship with customers, becoming their trusted adviser leading to higher engagement and monitor.
<unk> the combination of our assets and our strategy creates a growth flywheel for intuit's accelerated penetrating our $300 billion in town.
With all of that said, let's now open it up to your questions.
Okay.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please press Star then the number one our direct telephone keypad.
If you would like to withdraw your question Press Star two.
Please limit yourself to one question, we'd like to get to as many people as we can.
Our first question will come from Raimo <unk> with Barclays. Your line is open.
Perfect. Thank you.
So on the on the AI strategy.
Okay.
Like it seems like one big platform that is driving it.
Okay.
What's the kind of opportunity to kind of learn from one segment and use it in the other segment as part of that also are you impacted.
Impacted by the chip shortage, we led kind of impact the rollout. Thank you.
Yes. Thank you for your question and I actually think it's a really interesting question that youre asking in terms of how are we learning across our platforms. The <unk>.
The answer is we capture best practices.
Sure the insight on a daily basis across our teams and in fact I'll just use the our staff as an example, we get weekly flax with documents that share the best practices. The progress that has been made and how that informs the next week across each of the platform.
And we spend 80% of my staff meeting actually doing a product reviews of Intuit assess a big large part of it is.
But the key best practices, our learnings are and I would tell you that there is a lot of commonality and themes.
Ross, our learnings across the platform, which actually is simply putting us in a position to accelerate our pivot and our progress in innovation and the timing of going across the platform to your second question no. We're not impacted by the chip shortage. It does not at all impact our launch plans.
Perfect. Congrats thank you.
Thank you.
Our next question will come from Keith Weiss with Morgan Stanley.
Excellent. Thank you for taking the question guys and congratulations on a really solid quarter.
Two questions one for <unk> on a 1% deep and really digging into what I think with some of the bigger surprises in the quarter.
In this environment I think we were surprised to see strength in a marketing platform like mail chimp and you called that out as part of the strength in online services do you think that's more of a sort of independent factor of repackaging marketing more aggressively distribution or is it the market is better than we expect and then for Sandeep.
Operating margins were really strong in the quarter any onetime items or pull forward of expenses or pushout of expenses that we should be mindful of in terms of why that type of operating margin performance isn't going to be reflected in the rest of the year. Thank you.
Okay.
For the question Heath I'll take your first one what youre seeing from Us and Nelson. It is entirely execution, we're not getting a tailwind from the macro environment and as I mentioned, when we closed the acquisition.
Allow back that our biggest opportunity was to be clear about.
Product improvements our lineup.
To be able to create one growth platform.
Develop strength internationally and got our mid market and by the way we've made a lot of progress in all of those areas. We still have a lot of work ahead of us to be clear, but everything that youre seeing and based on our execution and no macro tailwind.
And on the margin question.
On the margin question, let me start out by reiterating our commitment to having that expenses grow slower than revenue and in essence, delivering our margin expansion and operating leverage which is something that we hold dearly and our guidance of 40 to 60 bps expansion for the year reflects the discipline that we have as a management team on the margin.
For the quarter I would share that I wouldn't get too concerned on the quarterly number we had some expenses that moved out of the quarter into later parts of the year, including some marketing expenses.
And as I shared during the prepared remarks, we are committed to our full year guidance on operating income. So that's what I would guide you enter teams towards.
Excellent really nice job guys. Thank you.
Yes. Thank you.
Yeah.
Our next question comes from <unk> <unk>.
Thank you.
Thanks for taking my question. So I wanted to ask about the health of small business, where do you see like now strength and weakness.
In this environment.
Yeah. Thanks for the question.
We've been in this macro environment for some time now.
And.
The small businesses that we serve are resilient.
For a couple of reasons one they are on our platform and by digitizing, what they do which is how they grow customers in managing their cash flow there are far more resilient.
And as we've shared before anybody that's on our platform is that nearly 20.
<unk> higher and their success rate than those that are not on our platform. So we are part of sort of the health of that that we're experiencing on our platform.
With that as context, I'll just share a couple of data points.
One.
The number of companies and the number of employees that are small businesses are hiring still remains strong.
Two our total online payments volume grew 21%, which means that our small businesses are continue to be competitive in.
Serving their consumers I'll also remind us by the way I think a year ago or more of that growth was in the 30% plus and so we have seen an impact but just our overall platform is very resilient and then last thing I would say is that the cash reserves of our small businesses is 90% of where it was this time last.
Year, However, it's a 128% where it was pre pandemic. So their cash flow is stronger than several years ago, but 10% down from last year and then very specifically as you know we serve service based businesses, which is about 70% of the market. We're not concentrated in any one particular area.
But youll see play things like auto repairs and.
That are doing well professional services that are doing well, but just like pure construction.
Is that do lending not doing well. So there is sort of ups and downs across the small businesses that we see but in aggregate.
The health plans from the numbers that I shared with you.
Thanks for that color.
Very welcome.
Our next question will come from Alex Zukin with Wolfe Research.
Hello. This is Alan on for Alex Zukin. Thank you for taking the question.
Quickbooks online accounting growth decelerated three percentage points this quarter with respect to your growth drivers is there anything that gotten meaningfully worse in the quarter or something that is worth emphasizing to investors that would be helpful for thinking about what growth could look like for the rest of the year.
Yes that was really driven by a larger price increase last year versus this year that was really the only.
The driver we liked what we saw in terms of our acquisitions our retention. So that's the that's the.
Really the variance.
Okay.
Just a quick follow up would you be able to step through the monthly linearity that you saw and credit karma through the quarter and in November. Thanks.
Sorry can you ask your question again.
Just on the credit Karma is thinking about the linearity of the business through the quarter in November I was wondering if you could just kind of talk through on a monthly basis. What you saw in the underlying trends for credit Karma.
Yes.
I'll answer your question in two ways one.
As you heard in our prepared remarks, we saw and we anticipated.
Further tightening by our partners by the way it happened exactly the same time last year and so we expected that as our partners prepare for the end of the fiscal year and next year, there will be some further tightening and that's that's really what we saw and that was included in our expectations and in our guidance as we thought about the year. That's number one number two.
They're not everything is linear because it depends on the number of days.
Amongst like November.
Based on in the U S based on Thanksgiving week, the number of days that people take off that actually impacts.
Certain behaviors and so there is no linearity, but the quarter just in total was in line with what we expected.
Thank you.
Very welcome.
Our next question will come from Alex <unk> with Keybanc.
Bank capital markets.
Hey, Thanks for taking my question.
Yes, maybe just be curious to understand since on as you've done some of the testing around intuit assist across product categories.
Has there been any sort of price testing involved in that as well.
And how well received has that been if so.
Yeah sure let me let me answer your question in two ways because I think there is a great question and it's and it's connected.
First of all the biggest insight and learning that we've had is it's really important to have embedded benefits, where the customer is doing the work versus sort of something on the side, where the assistant is there to help the customer so what I mean by that is allow a customer is looking to.
<unk> build a marketing campaign right within the flow.
We in essence help them with the audience. They should segment the audience. They should target and then we will build.
They're a marketing campaign for them, but with them and complete control. So thats a really it may sound really obvious, but it's a really important learning, which by the way translates to also what we learned in tax which is within the flow of helping our customer understand.
There are money outcome, helping them understand their doing accuracy checks for them and if they have missed something.
Calling it out so they can address it right then and there. Those are example that by the way is consistent across all of our platform workflows, where embedded mattered a lot. The second is that depending on the customer and what they're trying to do there is a level of depth that they want to go too. So an example is within quickbooks one of the things that.
We've been testing and it's been testing really well.
A business summary, and the business summary in essence provides.
What we believe are the most important thing is that that customer I should know and the customer then engages with those business insights and ultimately will create reports are asked more questions. What we've learned is we're not building propensity models in terms of the timing of when to connect them to an extra monetize able event for us because.
If not we can go on and on having a Q&A and ultimately not get the benefit as quickly as possible. So those are.
Major insights and learnings and those insights and learnings have led to how we're thinking about monetization in the case of mail chimp, having gen AI skus.
On the things that we can do for customers automatically on their behalf.
In the case of Quickbooks and by the way Turbotax monetize them all of that because it's a gateway to human expertise and expert help and then we will be testing Gen. AI specific skus also in cookbook. So those are illustrative examples of based on the benefits that we're learning about what's important to customers that then.
<unk>, how do we think about.
Price testing and so far we're pleased with what we're learning and how fast we're pivoting as a company.
That's great. Thank you for the time.
Very welcome.
Our next question will come from Steve Enders with Citi.
Okay, great. Thanks for thanks for taking the question here.
I guess I wanted to ask on the tax business.
What you saw with some of these newer.
Product initiatives.
Maybe you can address that.
Strength of our year over year and the share gains.
Some of those newer newer initiatives.
Yeah sure. Let me answer your question. Your question on two dimensions, one there was a macro elements, which there were just more filers.
The extension season than we anticipated at both by the way it states that extended in states that did not.
Extend and these are more complex filers and it's actually our sweet spot. It's why we were able to take share in this extension season, and so thats one element of what drove.
Our better than expected results.
The three areas that we're excited about these have been durable priorities, where we did a lot of tests and experiments and got a lot of green shoots and learning that will lead into.
This coming tax season.
Credit Karma platform, it's turbotax live in its intuit assessed and I'll briefly touch on each of them.
Within the credit Karma platform, we have more seamlessly built out the tax experience, whether you want to do it yourself or you want somebody to do it for you.
We've been we've developed a very compelling skus within the credit Karma platform.
Having the opportunity to serve 42 million monthly active users that engage five times a month.
With not only a great product, but a great set of Skus.
We saw green shoots and we're excited about that as we look at that.
Secondly, it's turbotax live we expanded the scale of our data AI and expert network, what that means is and I'll just point out two areas.
One is the fact that for many customers that want to hand off all of their taxes. So we can get their taxes done within an hour and thats, a very big deal to be able to engage and expert heavier data available and get your taxes done.
<unk> setting and then also being able to serve business tax customers, which we'll be launching in scale those were areas of green shoots in the lap is.
Intuit assessed two big areas, one is accuracy, Jack and making sure that in place we help the customer.
In essence, correct something that we believe it is a mistake that the big conversion driver by the way.
And then the second is just explaining a.
Refunds, explaining their money outcome, which is all done and driven by intuit assess leveraging our knowledge engineering capabilities and our Gen. AI capability. So those are the three things.
Along with the macro where we saw green shoots that give us a lot of confidence as we head into the season.
Okay perfect. Thanks for taking the question.
Very welcome.
Our next question will come from Brent Thill with Jefferies.
Hi. Thank you this is John Gunn for Brent.
First question on <unk> wondering if you could share some color and highlights.
In U S versus international.
I don't know if you could.
Let it was about the cross selling synergies with the rest of the small business platform.
And second any.
Any update on how the <unk> ramping thank you.
What's your last question Bill pay.
Yes on Bill pay.
Yes got it.
Thanks for the question so I'll start with <unk> as we've talked about one of our top priorities include the international we spent.
Quite a bit of time and investment in translating for local languages.
Building out a team that can focus on EMEA.
And third making sure that we've got the right.
Pricing lineup and go to market apart and we're executing against that.
Like what we see and it's contributing to the numbers that.
We reported.
And I would say for us.
It's the balance of focus between U S and international we see an enormous opportunity in U S and in international So we have the right balance focus as we think about the geographies.
In terms of cross sell as we shared at Investor Day, We are a big part of the thesis behind the acquisition was to create one growth platform and what we shared at Investor Day was that we are building an AI native CRM within the Quickbooks platform, we're continuing to make progress in our testing and learning.
Pivoting to get the product market fit when we get the product market fit that's really where the cross sell takes place.
We've not assumed or anticipated any contribution from that in our guidance this year, but it's a very important.
Long term strategic priorities is the reason why we acquired the platform is to ultimately have one gross platform, where you can grow your customers and manage our cash flow all in one place. So thats on the <unk> front on Bill pay we're pleased with the fact that we're GAA.
And that.
I think noted earlier, what we're seeing with our mid market customers as their mid.
Mid market versus non mid market customers or is that too.
The increase in those that are taking the subscription of the paid subscription. So that just means that we're adding value. We also have work ahead of us in bill pay things around in the batch payments faster funding all of the things that we know we have to have it done on our roadmap and it will be launched in the future. So along with the fact that we're we're clear on.
What the gaps are and it's.
Our roadmap, we're working feverishly to really be able to digitize V to be our customers because we believe it's a big opportunity for our customers to improve their cash flow and a big growth opportunity for us in the long term.
So that's the progress on both fronts.
Great. Thank you very much.
Very well.
Our next question comes from.
Brad Reback with Stifel.
Great. Thanks, very much <unk>.
And as you think about the mid market opportunity for the Quickbooks online ecosystem.
Given the value prop is it easier to take share during difficult economic times because of that value prop or are customers just hesitant to move and wait for the economy to get better before they will make our back office switch.
Yes, great question.
I'll share a few different perspectives in terms of what we're seeing.
The first one is it really doesn't matter what the economic environment is if it's if it's great they don't behave differently.
Challenging like it is now they don't behave differently, we certainly don't see them any of our customers wanting not to switch because the economy is not good which leads to the second point I wanted to make so that.
The headline on the first question is it's not a tailwind or headwind.
Whether it's good times or bad times, However, what I would say, we see some green shoots it's early when we do bundling for our customers. When we go to our customers and share with them that they can digitize all of their payments all of their payroll and the benefits that it will have for our customers from our cash flow <unk>.
<unk>.
See.
That having traction with our customers and as we've continued to build out our sales team. We're doing I think a far better job of account management and this is an area where if you look back five years ago. We didn't have the kind of value added account management teams that were building now where we're engaging our customers are hearing from us right we've been.
Entirely a self serve platform and now that we're engaging our customers a lot of them are starting to realize Oh wow year payments. All I didn't realize we have payroll I didn't mean IGF time tracking I didnt realize you own mail chimp.
And that is an opportunity for us to drive and increase penetration in wallet share. So I share that just to say, that's what we're getting traction and thats what were seeing progress and that's why we see an opportunity as we look ahead.
Great Brian.
Yes.
And Brad one without us beyond just a cookbook side. We also are seeing.
Strong progress on the merchant side in terms of the Midmarket, where historically before we acquired the company was not a focus and now with some of the Stefan mentioned, including account management better.
Onboarding, we are seeing better customer acquisition on the mid market as well as better retention year over year in the mid market. So that opportunity extends beyond just the quickbooks for us across the entire platform including motion.
Excellent. Thank you.
Marijuana.
Okay.
Our next question will come up.
Kirk <unk> with Evercore ISI.
Yes, thanks, very much and congrats on the quarter, so far and I was wondering if you could just talk about the.
I realize you have that.
Asked and sort of wide open cam.
In your markets on the small business side that was kind of curious if youre seeing any evidence that small businesses are looking to consolidate multiple technologies onto one platform you. All obviously offer a lot both on the front office as well in the back office are you starting to see any of that sort of activity happening now that youre sort of integrated mail channels with quickbooks.
I realize it's early days and you need that to happen to be successful, but I was just wondering if you're seeing any evidence of that.
<unk>.
Yes, Kirk the short answer is it's early but we're seeing green shoots and it's primarily because of what I shared just a moment ago as we're building out our account management team across milk campaign Quickbooks platform.
As we're talking to our customers and in fact I personally spoke to three of them in the last months that are very large mid market customers, who element la and one of them in Miami and it actually starts with they didn't even know we have payments payroll.
They didn't even though we're the same company that owns a male channel as an example, some of them will be used now Chad, but don't use quickbooks some of them use our payroll, but don't use our payments.
And so the thing that we're inspired by and where we believe there's a big opportunity is the fact that we actually have.
A huge differentiation, which is around data.
And network of expert.
Ecosystem of applications and the applications are all the things that a small business would want and our account management team is really discovering for us. The fact that our customers just don't know and so therefore, we engage them those relationships and talk about the benefits of all of our applications and then what could be done based on all of the.
Capabilities that we have around AI and how that could fueled our success. That's what is really opening up doors for us is just the unknown.
And that's what we're excited about as we continue to accelerate building out our accounts management team. So I think the long answer to your short question is yes customers would prefer to be on one platform.
And what we're learning is a lot of customers are not because they just actually don't even know what we do.
Holistically and that's the mission that we're on.
Super Thank you so much.
Yes, Youre very welcome.
Our next question will come from Mark Murphy with JP Morgan.
Okay.
Alright. This is already go on for Mark Murphy, Congrats on the quarter and thanks for taking the question I just wanted to touch on our Quickbooks advanced you'd mentioned there at your Investor Day.
The success of that product was more about just the go to market versus kind of a new product or feature development. So can you kind of discuss progress from your perspective on that front and then in terms of the mid market is that you talked about how that's faring in terms of overall health and maybe compare that to the low end of the market.
Yes sure. Thank you for your question first of all just to play back what I shared at Investor Day, I said, if I had to pick one that was the most important lever going forward. Its go to market. We are continuing feverishly to build out the product capabilities that we need on the platform because we don't plan to stop.
At 100 employees. Our plan is to serve mid market customers over time that are far larger than 100, however in the near term sort of near and midterm the biggest needle mover.
Is go to market.
And I would tell you that it continues to be.
Bringing on the right skill sets of talent in sales and marketing and so even in the last couple of quarters. It's been we've hired a very strong marketing leader, where we've hired a very strong sales leader, we're hiring a couple of more sales leaders were.
Ringing on account managers that have a lot of skill in selling and nurturing our customers.
Because when we think about mid market, it's really about a lot of the examples I was using earlier, which is really helping customers understand they can run their business in one place on one platform and the benefits of doing cell and what it will mean to their cash flow and particularly helping them understand our roadmap as a company and what we are doing with intuit assist which is.
Really creating a future of Dunmore, you with always having a gateway to human expertise and Thats enticing.
For mid market customer ourselves so.
Net net that's the way I would describe our focus area, but would want you to walk away to be we're continuing to invest in the product on the platform. So that's a big opportunity in the long term as well and in terms of health I think it really comes down to the sector.
If you just use the U S. As an example comes down to the state the sector that you're in.
Generally speaking based on our history looking backwards larger more tenured customers can withstand more of economic turmoil versus someone that literally just started out their business and they only have $100000 in their savings and a $500000.
Expense than Theyre done right. They go bankrupt. So it really depends on the size of the business how long that they've been in business and then the segment their businesses and all of those variables plan I wouldn't say younger ones are more or less healthy than the older ones are healthier I would just say it depends on.
The components that I, just described a moment ago.
Perfect. Thank you.
Very welcome.
Our next question comes from Kartik Mehta with Northcoast research.
Good afternoon.
Maybe.
Talked a lot about the full service business and as you look at that business and all the learnings you've talked about.
How would you define success for that business at the end of the tax season.
The number of returns you process.
I guess what are the metrics that you will use to figure out if you had success or not.
Yes. Thanks for your question first of all start with something that's really really important and that is the investments that we've made over the years where.
Turbotax has now one platform and that platform is built on an incredible rich sort of data layer AI layer and expert network.
And now an ecosystem of apps, which is consumer app and business taxes and the reason I start. There is is because now we have the ability in one place for you to do your taxes yourself get help with an expert that's matched specifically to your needs.
And we can do your taxes for you and in fact, you can request the same person.
Thanks for your year end year out and provide advice along the way.
And the reason I started with that foundational elements that we are one platform as we go to market and start talking to customers about the notion of.
That choice with us and we can do everything for you it actually creates a halo effect and so what we will look at that.
Our metrics around number of customers conversion retention RPC across the entire franchise and we also look at it by area. So very specifically full service plays a very important halo effect, because it's an element of confidence it's actually knowing that if I want to hand everything off of someone that intuit can now do it.
Farming, whether it's virtually or now locally I want to connect to an expert but ultimately the metrics that will matter. The most full service is going to be a RPC because it's not just a numbers game.
The value of these of these customers. We of course, we will measure a number of customers and the RPC, but RPC will have the largest.
Impact to our outcomes this year and in the future because now we do your taxes for you as a consumer and as a business.
Perfect.
Just one quick question you talked about.
Wanted to focus on one quarter for margins, but I'm wondering as you look at the year.
Differentiation or movement in marketing, especially as the tax season unfolds.
Yeah Kartik.
We are continuing to invest across our product across the big bad across geos across marketing and particularly as we go to a full service we want to make sure that we are expanding our brands equity beyond the DIY category through the full service, but I would not expect any meaningful shift in the seasonality of our marketing spend which I think is there.
Questions that you're asking so.
And I feel pretty good about the cash.
Pain from the investments, we've been making across the go to market motion across tax as well as the other segments.
Thank you that was the question I was asking I just did a poor job of sort of thank you.
Thank you.
Okay.
Our next question will come from.
Sills with bank of America.
Oh, great. Thank you so much.
Question here on Turbotax as Youre kind of heading into the next tax season here.
Now that the focus is more on full service in Turbotax live.
There is something different about the end user the end consumer.
Consumer filer that Youre targeting now say going after the CPA segment, that's different from traditionally where <unk> gone after that tax store you've got.
Had tremendous success there against tax stores now that Cta segment.
The difference there and is there some learning from last year and go to market that you could apply this year to gain more traction there that enter the market. Thanks again.
Yes, Brian. Thank you for your question and its actually spot on the way you asked it and that is we.
We view.
Our opportunity.
As nearly 100 million customers.
That are either consumers, which is about $88 million of the 100 and the rest of our.
Our business customers small businesses.
We view our opportunity going after them, which.
Is a combination of small pro as mom and pop shops stores is actually a smaller part of the.
The whole pie and in the last I would say 18 months, we've experimented a lot with how do we go after these customers how do we raise awareness how do we get them to consider.
Ultimately, how do we ensure that when they come to our front door offering front door as a service front door not a software front door because.
The behaviors that they have and a lot of those both go to market and and platform insights and learnings is what as informed a number of things that I touched on earlier that we experimented with.
And ran test in the tax extension season, and what we feel good about going into this coming season. So it was a long answer to your question, but yes, a lot of those insights have informed our game plan because we're not just the software platform, where software and service platform, given who we're focused on serving and by the way while I have the floor. The same thing applies for small businesses.
As we think about what we're doing to embed quickbooks live in our offering.
Wonderful thank you.
Very welcome.
Our last question will come from Scott Schneeberger with Oppenheimer.
Thanks, very much I have a follow up for us and even though once these as Sean.
Sandeep.
On the on the margins in the quarter, you cited marketing, which I assume it was predominantly that was there anything else in the quarter that was beneficial or was that the lion's share and then you mentioned spread over the balance of the year and cardiac center I felt you kind of were speaking to turbotax, but it looks like you are.
In a bit of a down quarter on margin in the second quarter. So it will and it seemed like it was mostly in the small business the real benefit in the first quarter, so will that and as a second quarter or is that is that will be something that is going to tail off in the second half as well and then I'll come back to the follow up thanks.
Sure. Thanks for the question Scott.
I would think about for Q1, we had multiple.
<unk> that moved out of the quarter into later parts of the year and marketing was one of those.
Expense lines, and I would not say that marketing was the lion's share of it.
There were several.
Things that we would expect it will hit us in October.
Pushed out, but I would definitely not takeaway as marketing being the lion's share of items like that.
Got pushed out and you're right some of those will get.
We will get caught up and we will have those expenses in Q2 and so once you look at the Q1 and Q2 spent together those things will start normalizing out again I'll bring you and the team back to the effective you should all be focusing on our margins on a full year basis in any given year.
Could have different expense trend lines. So again, we remain confident in our guidance for the full year across margins for the company.
Thanks, I appreciate that.
We're pretty well along now.
Carmen guarantee would love just to get an update on that and <unk>.
Credit Karma was a bit stronger than we had anticipated in the quarter is it something that could potentially inflect the positive year over year growth in the fiscal first half or is that something that you would expect more in the back half. Thanks.
Yes. Thank you for your question first of all I'll start with.
Based on our insights and learnings from last year, we really took an approach to be intentional and prudent about the guidance that we provide which means that taking into account not only the macro environment, but also not just banking a bunch of <unk>.
<unk> in the back half of the year.
We are aggressive in the initiatives that we're working on.
We did not make them into our guidance because we just wanted to be thoughtful and prudent.
With that as context I would.
I Love your question about Karma guarantee because we haven't explicitly been talking about and it's not because it's not important anymore. It's because of the way. We are now thinking about it and incorporating it into several areas. One is you've heard us talk about.
The entire App redesign.
Which is far more focused on putting the right benefits in front of the customers at the right time, which we talked about.
At Investor day that coupled with Intuit assist and the example, I used in.
Our earlier was the fact that prime customer spend literally four or five hours doing comparison shopping between credit cards, because they can get whatever credit card they want but they're looking for the perks now we can auto magically do that for them based on all of the data on everything that we know about them. So you combine the app redesign with intuit assist.
And our focus on prime customers.
Guarantee plays an important role, helping our customers, particularly those that have a hard time getting access to financial products guarantee them that.
They choose what's in front of them that they're going to be approved for it or we'll put $50.
And their bank account so the combination of those things is what the set of initiatives are that we are focused on that we expect will drive engagement higher frequency AD monetization and we've not included that in our in our guidance, but it's very important for the future growth of the business not only that and I'll end with this.
Taxes, an enormous part of it we've now spent several years.
Thinking about how does every interaction and move a customer makes and the credit Karma platform, how does that inform what that will mean to their taxes. So that when it's tax time, it's a much more seamless experience along with compelling offer so taxes now as we look ahead, such an important part of the life of the member and.
Our focus area within credit Karma and all of those combined is what we have high hopes for in the future again, not in our guidance, but important for the future.
Excellent thanks for all that.
Youre very welcome.
Yeah.
Alright, thank you.
Ladies and gentlemen.
Go ahead Sir.
Please go ahead.
There are no further questions that you may proceed with any additional or closing remarks.
Alright, Jeff interrupted yes, I was just going to say thank you for all the questions and we look forward to hearing from everyone next quarter until then we think by everybody.
Okay.
Ladies and gentlemen, thank you for participating.
Does conclude today's conference call and you may disconnect at this time.
Yeah.
<unk>.
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Yes.
Hum.
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Okay.