Q2 2024 Intuit Inc Earnings Call

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Angela: Good afternoon, My name is Angela and I will be your conference operator.

Operator: My name is Angela, and I will be your conference operator. At this time, I would like to welcome everyone to Intuit's second quarter fiscal year 2024 conference call. All lines have been placed on mute to prevent any background noise.

Angela: At this time I would like to welcome everyone to Intuit's second quarter fiscal year 2024 conference call.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star 2. With that, I'll now turn the call over to Kim Watkins, Intuit's Vice President of Investor Relations.

Speaker Change: After the Speakers' remarks, there will be a question and answer period.

Angela: If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.

Angela: If you would like to withdraw your question Press Star two.

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

Kim A. Watkins: Thanks, Angela. Good afternoon, and welcome to Intuit's second quarter fiscal 2024 conference call. I'm here with Intuit CEO Sasan Goodarzi and our CFO Sandeep Bajula. 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.com. However, we assume no obligation to update any forward-looking statement.

Kim A. Watkins: Thanks, Angela good afternoon, and welcome to Intuit's second quarter fiscal 2024 conference call I'm here with Intuit, CEO, <unk> <unk> and our CFO Sandy <unk> 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.

Kim A. Watkins: Clearly 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.

Assume no obligation to update any forward looking statement.

Kim A. Watkins: Some of the numbers in these remarks are presented on a non-GAP basis. We've reconciled the comparable GAP and non-GAP numbers in today's press release. Unless otherwise noted, all growth rates refer to the current period versus the comparable prior year period, and the business metrics and associated growth rates refer to worldwide business metrics. A copy of our prepared remarks and supplementary financial information will be available on our website after this call ends. And with that, I'll turn the call over to Sasan.

Kim A. Watkins: Some of the numbers in his remarks are presented on a non-GAAP basis, we've reconciled the comparable GAAP and non-GAAP numbers in today's press release, unless otherwise noted all growth rates refer to the 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 supply.

Kim A. Watkins: <unk> financial information will be available on our website. After this call ends and with that I'll turn the call over to Sun.

Sasan K. Goodarzi: Thanks, Kim, and thanks to all of you for joining us today. We had another strong quarter and have great momentum innovating on our platform. We're executing on our strategy to be the global AI-driven expert platform powering prosperity for consumers and small businesses. Second quarter revenue grew by 11%, and we're on track to achieve our fiscal year 2024 full year guidance of 11-12% revenue growth while expanding operating margins. Let's start with tax

Sun: Thanks, Kim and thanks to all of you for joining US today, we had another strong quarter and have great momentum innovating on our platform. We're executing on our strategy to be the global AI driven expert platform powering prosperity for consumers and small businesses.

Sun: Second quarter revenue grew by 11% and we're on track to achieve our fiscal year 2020 for full year guidance of 11% to 12% revenue growth, while expanding operating margins, let's start with tax we're confident in our innovation and game plan to win and are reiterating our full fiscal year guidance of 7% to 8% revenue growth.

Sasan K. Goodarzi: We're confident in our innovation and game plan to win and are reiterating our full fiscal year guidance of 7-8% revenue growth for the consumer group. Tax preparation represents a $35 billion TAM. This includes $31 billion within the assisted consumer and business tax categories, which we have barely started to penetrate.

Sun: For the consumer group.

Sun: Tax preparation represents a $35 billion Tam.

Sun: This includes 31 billion within the assisted consumer and business tax categories, which we have barely started to penetrate.

Sasan K. Goodarzi: We're well positioned to disrupt the assisted category by leveraging data, AI, and our virtual expert platform to revolutionize how taxes get done for consumers and small businesses. By leveraging the power of our platform and ecosystem, we're also extending TurboTax to our Credit Karma members and QuickBooks Online small business customers by enabling them to complete their taxes and access expertise directly within these products. Let me share more about the areas of focus this season. First, we can serve consumers however they want to file, virtually or in person, while providing confidence that their taxes are being done accurately and they are getting their maximum refund. More than 80% of U.S. filers live within a 10-mile radius of a TurboTax expert.

Sun: We are well positioned to disrupt the assisted category by leveraging data AI and our virtual expert platform to revolutionize our taxes get done for consumers and small businesses by.

Sun: By leveraging the power of our platform and ecosystem. We're also extending turbotax, so our credit Karma members and Quickbooks online small business customers by enabling them to complete their taxes and access expertise directly within these products let.

Speaker Change: Let me share more about our key areas of focus this season.

Speaker Change: First we can serve consumers however, they want to file virtually or in person, while providing confidence our taxes are being done accurately and theyre getting their maximum refund more than 80% of U S. Filers live within a 10 mile radius of a turbotax expert.

Sasan K. Goodarzi: These experts use Intuit's virtual expert platform that's powered by data and AI to deliver best-in-class service. While it's early in the season, TurboTax Live's full service is responding with customers. We're seeing strong growth, and the offering has a product recommendation score of 88 season to date, one of the highest at Intuit. Second, small businesses can file their taxes with TurboTax, and if a small business is a QuickBooks Online customer, they can file their taxes with an expert.

Speaker Change: These expertise intuit's, a virtual expert platform, that's powered by data and AI to deliver best in class service. While it's early in the season Turbotax live Turbotax live full service is resonating with customers, we're seeing strong growth in the offering as a product recommendation score of 88 season to date, one of the highest fit into.

Speaker Change: It <unk>.

Speaker Change: Second small businesses can file their taxes with turbotax and if a small business as a quickbooks online customer they can file their taxes with an expert.

Sasan K. Goodarzi: With these offerings, they can maximize their refund and get advice from experts when they need it. Our campaigns and easy-to-use experience are driving strong early interest. This is tax returns at a much higher average revenue per return because they are more complex, and we expect them to contribute to average revenue per return expansion over time. Third, we're deeply integrating Credit Karma and TurboTax, making it even more seamless for Credit Karma members to file with TurboTax directly in the Credit Karma app, with exclusive offers for members, whether they want to file themselves or with an expert. We're also unlocking the benefits of the Credit Karma platform for tax filers to make smart money decisions. This includes earlier access to the refund or, for those that qualify, access to an interest-free refund advance loan in as little as 30 seconds after IRS acceptance when depositing the refund into a Credit Karma money account.

Speaker Change: With these offerings that can maximize our refund and get advice from experts when they need it or.

Speaker Change: Our campaigns and easy to use experience are driving strong early interest business tax returns at a much higher average revenue per return because they are more complex and we expect them to contribute to average revenue per return expansion over time.

Speaker Change: Third we're more deeply integrating credit karma and turbotax, making it even more seamless for credit Karma members to filed with turbotax directly and the credit Karma App with exclusive offers for our members whether they want to file themselves or with an expert.

Speaker Change: We're also unlocking the benefits of the credit Karma platform for tax filers to make smart money decisions.

Speaker Change: This includes earlier access to the refund or for those that qualify access to an interest free refund advance loan and as little as 30 seconds. After IRS acceptance when deposits that refund into a credit karma money account.

Sasan K. Goodarzi: This is designed to lead to higher engagement and monetization in credit karma over time. Our Gen AI-powered financial assistant is live in TurboTax this season. With Intuit Assist, we are creating a future of "done for you," where the hard work is done automagically on behalf of our customers with a gateway to human expertise, fueling their financial success. For example, customers are using Intuit Assist to better understand their refund. In early results, Intuit Assist's helpfulness rating is one and a half times greater than our legacy explanations, indicating Intuit Assist is helping deliver confidence to TurboTax customers.

Speaker Change: This is designed to lead to higher engagement and monetization in credit Karma overtime.

Speaker Change: Fourth Intuit assist our Gen AI powered financial assistance is live in Turbotax. This season with Intuit at this we are creating a future of done for you where the hard work is done automatically on behalf of our customers with the gateway to human expertise fueling our financial success. For example customers are using intuit assistant.

Better understand their refund and early results intuitive helpfulness rating is one five times greater than our legacy explanation, indicating intuit assist is helping deliver confidence to turbotax customers.

Sasan K. Goodarzi: Our focus this tax season further showcases how our Big Bets have accelerated innovation and growth for the future. We're leveraging the power of data and AI with Intuit Assist to revolutionize speed to benefit for customers, disrupting the assisted consumer and business tax categories by connecting people with experts virtually, and bringing the TurboTax and Credit Karma experiences together to unlock smart money decisions. We're off to a great start in tax.

Speaker Change: Our focus this tax season further showcases how our big bets and accelerated innovation and growth for the future. We're leveraging the power of data and AI with intuit assess to revolutionize speed to benefit for customers.

Speaker Change: Wrapping the assisted consumer and business tax categories are connecting people with experts virtually and bringing the turbotax and credit Karma experience together to unlock smart money decisions, we're off to a great start and tax let.

Sasan K. Goodarzi: Let me now highlight progress across two of our Big Bets. As a reminder, our five Big Bets are to revolutionize speak-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 first Big Bet is to revolutionize speed to benefit.

Speaker Change: Let me now highlight progress across two of our big that as a reminder, our five big bets are revolutionize speed to benefit connects people to experts unlock smart money decisions in the center of small business growth and disrupt the small business mid market.

Speaker Change: Our first big bet is to revolutionize speed to benefit our platform enables us to innovate for our customers with speed and at scale, which is foundational to all of our big bets five years ago, we declared our strategy to be an AI driven expert platform with data and AI fueling innovation across the platform at the core of our platform is powerful relevant.

Sasan K. Goodarzi: Our platform enables us to innovate for our customers with speed and at scale, which is foundational to all of our Big Bets. Five years ago, we declared our strategy to be an AI-driven platform, with data and AI fueling innovation across the platform. At the core of our platform is powerful, relevant data for our 100 million customers. We have 500,000 customer and financial attributes per small business and 60,000 financial and tax attributes per consumer, which fuels what's possible with AI. And with our Gen AI operating system, Gen OS, we empower Intuit technologists to create breakthrough Gen AI experiences across our platform.

Speaker Change: Data for our 100 million customers, we have 500000 customer and financial activities per small business and 60000 financial and tax attributes per consumer which fuels what's possible with AI.

Speaker Change: And with our Gen AI operating system Genoa, we empower intuit technologists to create breakthrough Jenny I experiences across our platform. This includes utilizing our own powerful financial llm's as well as those from others leaders in Gen, II, which together unlock new opportunities to serve our customers with accuracy and speed.

Sasan K. Goodarzi: This includes utilizing our own powerful financial LLMs, 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. As I mentioned earlier, with Intuit Assist, we're creating a future where the hard work is done automagically on behalf of our customers, with a gateway to human expertise fueling their success. Assist is critical to delivering unparalleled benefits for our customers over the next decade and is in the hands of select customers now. We believe Intuit Assist will lead to higher frequency of engagement and monetization across the platform, driving customer growth, accelerated adoption of services, and live offerings. I'm really excited about the rapid pace at which we're innovating, testing, learning, and adapting to deliver our core benefits of more money, no work, and complete confidence for customers. Let me share a few updates.

Speaker Change: In a cost efficient way.

Speaker Change: As I mentioned earlier with Intuit assist we're creating a future of done for you for the hard work is done automatically on behalf of our customers with a gateway human expertise feeling their success.

Speaker Change: <unk>. This is critical to delivering unparalleled benefits for our customers over the next decade and is in the hands of select customers now.

Speaker Change: We believe into it if this will lead to higher frequency of engagement and monetization across the platform driving customer growth accelerate adoption of services and live offerings.

Speaker Change: Im really excited about the rapid pace at which we're innovating testing learning and adapting to deliver our core benefits of more money no work and complete confidence for customers, Let me share a few updates.

Sasan K. Goodarzi: TurboTax. As I shared earlier, Intuit Assist is live in the product this season and is delivering increased confidence to our customers. Second, MailChimp. To help small businesses grow revenue and save time, we're providing AI-powered automations and content generation using Intuit Assist. Cookbooks.

Speaker Change: First turbotax as I shared earlier Intuit assistance live in the product this season and is delivering increased confidence to our customers.

Speaker Change: Meltdown to help small businesses grow revenue and save them time, we're providing AI powered automation and content generation using intuit assess.

Speaker Change: Third cookbooks and two to assist us in beta and is designed to help small businesses optimize cash flow and make confident decisions to grow their business.

Sasan K. Goodarzi: Intuit Assist is in beta and is designed to help small businesses optimize cash flow and make confident decisions to grow their business. New customers who were previously running their business manually will be able to get started quickly by sharing their email, website, and bank account information. Their unstructured data will be translated into benefits for them, such as generating customized pay-enabled invoices that save time and enable customers to get paid faster, experiencing the benefits of switching to a digital platform. And for existing customers, we will translate their data and analyze their money in and money out transactions into insights and recommendations. Assist will do the work for our customers in the background with suggested automated actions that increase customer productivity by saving time and leading to better outcomes such as getting paid faster and obtaining capital. Furthermore, we intend to provide an option to connect and interact with an expert to help provide insights and make decisions specific to their financial situation and fuel their success at the moments that matter most, such as closing their book. Assist.

Speaker Change: Customers, who were previously running their business manually, we'll be able to get started quickly by sharing their E Mail web site and bank account information their unstructured data will translate into benefits for them such as generating customized payable the invoices that save time and enable customers to get paid faster experiencing the benefits of switching to a digital platform.

Speaker Change: And for existing customers, we will translate their data and analyze their money in and money out transactions into insights and recommendations.

Speaker Change: And two to assist will do the work for our customers in the background with suggested automated actions that increases customer productivity by saving time, and leading to better outcomes, such as getting paid faster and updating capital. Furthermore, we intend to provide an option to connect and interact with an expert to help provide insights and make decisions specific to their financials.

Speaker Change: Actuation and fueled our success at the moments that matter most substance such as closing their books.

Sasan K. Goodarzi: Fourth, Credit Karma. Intuit Assist for Credit Karma is in beta, and we're excited about the rapid innovation and the progress we're making to help connect members to financial products that are right for them, saving them time and money. We're focused on using Gen AI to interact with members to help answer their questions in a highly personalized way when shopping for financial products. Customers can interact, learn more, and ask questions to help make confident decisions. Intuit Assist will engage more members with a wide range of financial needs beyond credit. We recently expanded by 6x the number of topics we can provide help on and now address items like major purchases, home buying, savings, and more. We believe this can drive increased member engagement and conversion and drive higher revenue per monthly active user.

Speaker Change: Credit Karma intuitive for credit Karma is in beta and we're excited about the rapid innovation and the progress we're making to help connect members to financial products that are right for them saving them time and money. We're focused on using gen. AI to interact with members to help answer their questions in a highly personalized late when shopping for financial products customers can interact.

Speaker Change: And more and ask questions to help make confident decisions intuitive. This will engage more members with a wide range of financial needs beyond credit.

Speaker Change: We recently expanded by six <unk> the number of topics. We can provide help on and now address items like major purchases home buying savings and more we believe this can drive increased member engagement and conversion and drive higher revenue per monthly active user.

Sasan K. Goodarzi: We remain excited with our early progress with Intuit Assist across the company. It's changing our relationship with customers as we move from being a transactional workflow platform to a trusted assistant that customers can rely on daily to power their prosperity. 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 omni-channel world. We are well on our way to becoming the source of truth for our customers to help them grow and run their businesses. In Mailchimp, we're focused on better serving mid-market customers across different stages of their life cycle to drive higher engagement and retention. After we've successfully onboarded them, we're pairing larger customers with an account manager to help them understand and adopt the breadth of Mailchimp's capabilities. We're seeing green shoots from account management, which gives us confidence in the future. Customers who have engaged with an account manager have higher monthly revenue retention. We believe this will also drive higher ARPC over time. Assist is live in Mailchimp's higher-end offerings and is designed to help customers develop personalized marketing campaigns and drive their revenue growth.

Speaker Change: We remain excited with our early progress with Intuit assist across the company, it's changing our relationship with customers as we move from being a transactional workflow platform say trusted assistant that customers can rely on daily the power of their prosperity.

Speaker Change: 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.

Speaker Change: We are well on our way to becoming the source of truth for our customers to help them grow and run their business and Mel churn, we're focused on better serving mid market customers across different stages of their lifecycle to drive higher engagement and retention.

Speaker Change: After we have successfully on boarded them, we're pairing and larger customers with an account manager to help them understand and adopt the breadth of <unk> capabilities, we're seeing green shoots from account management, which gives us confidence in the future customers, who have engaged with an account manager of higher monthly revenue retention. We believe this will also drive higher RPC over.

Speaker Change: Right.

Speaker Change: Intuitive is alive in Belgium, higher end offerings and is designed to help customers develop personalized marketing campaigns and drive their revenue growth.

Sasan K. Goodarzi: We're offering customers three AI-powered automations today, including New Customer Welcome, Abandoned Shopping Cart, and Recovering Lost Customers. Automations are time-consuming to set up, but they can drive higher revenue. With Assist, personalized automations are 50% more likely to be activated by customers. Assist is also reducing work by generating new content and editing existing content for marketing campaigns.

Speaker Change: We're offering customers three AI powered automation is today, including new customer welcome abandoned shopping cart and recovering lost customers.

Speaker Change: Automation is are time consuming to set up but can drive higher revenue.

Speaker Change: Intuitive this personalized automation as a 50% more likely to be activated by customers.

Speaker Change: Intuitive is also reducing work by generating new content and editing existing content for marketing campaigns recent improvements have driven gen. AI text generation adoption rates by more than 70% over the past several months reducing work for our customers.

Sasan K. Goodarzi: Recent improvements have driven Gen AI text generation adoption rates by more than 70% over the past several months, reducing work for our customers. However, getting paid fast remains a big challenge for small businesses. We're uniquely positioned to help customers with our end-to-end money platform and innovations, such as easy discovery, auto-enabled payments, payment-enabled invoices, instant deposits, and Get Paid Up Front, which are all helping our customers get paid faster and drive adoption of payments. Total online payment volume growth was 20% in the quarter.

Speaker Change: Getting paid fast remains a big challenge for small businesses, we are uniquely positioned to help customers with our end to end money platform innovations such as easy discovery.

Speaker Change: To enable payments payment enabled invoices instant deposit and get paid upfront, which are all helping our customers get paid faster and drive adoption of payments total online payment volume growth was 20% in the quarter.

Sasan K. Goodarzi: We're beginning to roll out a new payment-enabled invoicing experience that will provide more benefits to customers, including more ways to get paid. While early, we're seeing that customers who use the new invoicing experience are engaging more, driving an increase in customer adoption of our payment rails to get their invoices paid. We're also making progress digitizing B2B payments to accelerate and automate transactions between small businesses and ultimately improve their cash flow. The number of connections in our QuickBooks business network has doubled since August, and we're pleased with the initial adoption of our bill pay offering. To better serve small businesses, during the quarter, we began rolling out faster payment timelines for qualified customers that reduce payment time by 40%, including a paid next day ACH option and batch payments, allowing customers to hold onto their cash longer and save time.

Speaker Change: We're beginning to rollout a new payment enabled invoicing and experience that will provide more benefits to customers, including more ways to get paid while early we are seeing that customers are using new invoicing experience are engaging more driving an increase in customer adoption of our payment rails to get their invoices paid.

Speaker Change: We're also making progress digitizing BTB payments to accelerate and automate transactions between small businesses and ultimately improve their cash flow the number of connections and our Quickbooks business network has doubled since August and we're pleased with the initial adoption of our bill pay offering.

Speaker Change: To better serve small businesses during the quarter, we began rolling out faster payment timelines for qualified customers that reduce payment time by 40%, including a paid next day, ACTH option and batch payments, allowing customers to hold onto their cash longer and save time.

Sandeep Bajula: Wrapping up with our durable AI-driven expert platform strategy and focus on innovating with Gen AI across our platform, we're more excited than ever about the opportunity in front of us and our ability to power prosperity for our customers. We're honored to be recognized by Bloomberg as one of the top 50 companies to watch in 2024 and to be ranked 22 on this year's Just 100, and the highest ranked customer or software company on the list. Now, let me hand it over to Sandeep.

Speaker Change: Wrapping up with our durable AI driven expert platform strategy and focus on innovating with Gen AI across our platform, we're more excited than ever about the opportunity in front of us and our ability to power prosperity for our customers. We're honored to be recognized by Bloomberg as one of the top 50 companies to watch in 2024 and to be ranked 22.

Speaker Change: This year is just 100 and the highest ranked customer or software company on the list now let me hand, it over to Sandeep.

Sandeep Bajula: Thanks, Hassan. For the second quarter of Fisco 2024, we delivered another strong quarter despite the IRS opening approximately one week later this year. We achieved healthy operating margins and are on track to achieve four-year guidance as we continue to deliver operating leverage across the business. Our Q2 results include revenue of $3.4 billion, up 11%, GAAP netting income of $369 million versus $270 million last year, up 37%, non-GAAP netting income of $1 billion versus $856 million last year, up 17%, GAAP diluted earnings per share of $1.25 versus Turning to a business segment, small business and self-employed group revenue grew 18% during the quarter, driven by online ecosystem revenue, which grew 21%.

Sandeep: Thanks Hassan.

Sandeep: The second quarter of fiscal 2024, we delivered another strong quarter. Despite the IRS opening approximately one week later this year, we achieved healthy operating margin and are on track to achieve our full year guidance as we continue to deliver operating leverage across the business.

Sandeep: Our Q2 results include revenue of $3 4 billion up 11% GAAP operating income of $369 million versus $270 million last year up 37% non-GAAP operating income of $1 billion versus $856 million last year up 17%.

Sandeep: GAAP diluted earnings per share of $1 25.

60, a year ago, and non-GAAP diluted earnings per share of $2 63.

Sandeep: Versus $2 20 last year up 20%.

Sandeep: Turning to our business segments small business and self employed group revenue grew 18% during the quarter driven by online ecosystem revenue, which grew 21%.

Sandeep Bajula: Our results continue to demonstrate the power of our small business platform and the mission-critical nature of our offerings, which resonate with customers as they look to grow their business and improve cash flow in any economic environment. With the goal of being the source of truth for small businesses, our strategic focus within the small business and self-employed group is threefold. Grow the core, connect the ecosystem, and expand globally. First, we continue to focus on growing the core. QuickBooks Online accounting revenue grew 19% in Q2, driven mainly by customer growth, higher effective prices, and makeshift.

Sandeep: Our results continue to demonstrate the power of our small business platform and the mission critical nature of our offerings, which resonates with customers as they look to grow their business and improved cash flow in any economic environment with.

Sandeep: 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 ecosystem and expand globally.

Sandeep: First we continue to focus on growing the core Quickbooks online accounting revenue grew 19% in Q2, driven mainly by customer growth higher effective prices and mix shift.

Sandeep Bajula: We continue to prioritize disrupting the small business mid-market to continue to focus on both go-to-market and product innovation. While mid-market customers are a smaller subset of the total small business market, they drive a higher ARPC over time, given their more complex needs and higher usage of services across our platform. This, coupled with our strategy to sell more of our ecosystem services to existing customers, shifts the emphasis in our growth formula towards ARPC over time. Second, we continue to focus on connecting the ecosystem. Online services revenue grew 24% in Q2, driven by payroll, payments, mailchimp, capital, and time tracking.

Sandeep: Continue to protest disrupting the small business mid market. Two continued focus on both go to market and product innovations.

Sandeep: Long mid market customers are smaller subset of the total small business Pam did drive a higher RPC overtime, given the more complex needs and higher usage of services across our platform.

Sandeep: Coupled with our strategy to sell more of our ecosystem services to existing customers shifts the emphasis and our growth formula towards the RPC overtime.

Sandeep: Second we continue to focus on connecting the ecosystem online services revenue grew 24% in Q2, driven by payroll payments near chimp capital and time tracking.

Sandeep Bajula: Within payroll, revenue growth in the quarter reflects an increase in customers adopting a payroll solution, higher effective prices, and a mid-shift towards higher-end offers. Within payments, revenue growth in the quarter reflects ongoing customer growth as more customers adopt our payment offerings to manage their cash flow, higher effective prices, and an increase in total payment volume per customer. Milk and Brawny Growth was driven by higher effective prices and paid customer growth. Third, we continue to make progress expanding globally by executing a refreshed international strategy that 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 products and lineups. On a constant currency basis, total international online ecosystem revenue grew 16% in Q2.

Sandeep: Within payroll revenue growth in the quarter reflects an increase in customers adopting our payroll solutions.

Sandeep: Effective prices and a mix shift towards higher end offerings.

Sandeep: Within payments revenue growth for the quarter reflects ongoing customer growth as more customers adopt our payment offerings to manage their cash flow higher effective prices and an increase in total payment volume per customer.

Sandeep: <unk> revenue growth was driven by higher effective prices and paid customer growth.

Sandeep: Third we continue to make progress expanding globally by executing our refreshed international strategy, which includes leading with both quickbooks online and merchant in our established markets and leading with Milton had been all other markets as we continue to execute on localized product and lineup.

Sandeep: On a constant currency basis total international online ecosystem revenue grew 16% in Q2.

Sandeep Bajula: Now moving to our last topic of the day. Desktop ecosystem revenue grew 10% in the second quarter, and QuickBooks Desktop Enterprise revenue grew in the mid-teens. We are more than two years into a three-year transition for customers that remain on a license-based desktop offering to a recurring subscription model. In fiscal 2025, the tailwinds from the three-year transition will be behind us.

Sandeep: Now moving to our desktop ecosystem.

Sandeep: Desktop ecosystem revenue grew 10% in the second quarter and Quickbooks desktop enterprise revenue grew in the mid teens, we have more than two years into a three year transition for customers that remained on a license based desktop offering to a recurring subscription model.

Sandeep: In fiscal 2025, the tailwind from the three year transition will be behind us, but we expect our desktop enterprise offering which accounts for over half of desktop accounting revenue to grow in the high single digit range.

Sandeep Bajula: But we expect our desktop enterprise offering, which accounts for over half of desktop accounting revenue, to grow in the high single-digit range. We will also continue to encourage remaining desktop plus subscription customers, who tend to be more complex and higher value, to migrate seamlessly to either QuickBooks Online or our desktop enterprise offering when they are ready. Additionally, we see opportunities to continue to price the product for value. The online ecosystem remains a growth catalyst in the longer term. Shifting to a consumer and pro-tax group. Our four-year outlook remains unchanged, even though consumer group revenue declined 5% in the quarter, reflecting an approximately one-week later IRS open this year.

Sandeep: Also we will continue to encourage remaining desktop plus subscription customers, who tend to be more complex and higher value to migrate seamlessly to either quickbooks online or our desktop enterprise offering when they already. Additionally.

Sandeep: Additionally, we see opportunities to continue to price the product for value.

Sandeep: The online ecosystem remains a growth catalyst longer term.

Sandeep: Shifting to our consumer products groups.

Sandeep: Our full year outlook remains unchanged, even though consumer group revenue declined 5% in the quarter, reflecting an approximately one week later IRS opened this year, we are confident in our game plan to win the season.

Sandeep Bajula: We are confident in our game plan to win this season and are reiterating our guidance for consumer groups of 7% to 8% revenue growth in fiscal 2024. Turning to the pro-tax group, revenue grew 8% to $274 million in Q2, reflecting the timing of when tax forms were delivered, which is a driver for revenue recognition. Moving to credit cards. Credit Karma delivered revenue of $375 million in Q2, compared to a year ago, primarily reflecting growth in Credit Karma money, credit cards, and auto loans, offset by declines in home loans, personal loans, and auto insurance.

Sandeep: Iterating on guidance for consumer group of 7% to 8% revenue growth in fiscal 2024.

Sandeep: Turning to the protest group revenue grew 8% to $274 million in Q2, reflecting the timing of when tax once were delivered which is a driver for revenue the commission.

Sandeep: Moving to credit Karma.

Sandeep: Credit Karma delivered revenue of $375 million in Q2 flat to a year ago.

Sandeep: Reflecting growth and credit Karma money credit cards, and auto loans offset by a decline in home loans personal loans and auto insurance, we saw select partners, taking a conservative approach to extending credit in both personal loans and credit cards in Q2, reflecting expected macro trends.

Sandeep Bajula: We saw select partners taking a conservative approach to extending credit on both personal loans and credit cards in Q2, reflecting expected macro trends. And as a reminder, Q2 is typically the seasonally weakest quarter of the year. We expect Q3 to benefit from additional credit card money revenue during tax season. In summary, I am pleased with our continued momentum this fiscal year. Now shifting to a balance sheet and capital allocation. Our financial principles guide our decisions. They remain our long-term commitment and are unchanged. We finished the quarter with $1.5 billion in cash and investments and $6 billion in debt on our balance sheet. We repurchased $536 million of stock during the second quarter.

As a reminder, Q2 is typically the seasonally weakest quarter of the year, we expect Q3 to benefit from additional credit Karma money revenue during tax season.

Sandeep: In summary, I am pleased with our continued momentum this fiscal year.

Sandeep: Now shifting to our balance sheet and capital allocation.

Sandeep: Our financial principles guided decisions they remain a long term commitment and are unchanged.

Sandeep: In the quarter with $1 5 billion in cash and investments and $6 billion in debt on our balance sheet.

Sandeep: We repurchased $536 million.

Sandeep: I will start during the second quarter.

Sandeep Bajula: Depending on market conditions and other factors, our aim is to be in the market each quarter. The board approved a quarterly dividend of 90 cents per share payable on April 18, 2024. This represents a 15% increase compared to last year. Moving on to guidance, we are reaffirming our fiscal 2024 guidance. This includes total company revenue growth of 11 to 12%, gas offering income growth of 15 to 18%, non-gas offering income growth of 12 to 14%, gas earnings per share growth of 11 to 15%, and non-gas earnings per share growth of 12 to 14%. Our guidance for the third quarter of fiscal 2024 includes revenue growth of 10% to 11%, GAAP earnings per share of $7.77 to $7.84, and non-GAAP earnings per share of $9.31 to $9.38.

Sandeep: On our market conditions and other factors our aim is to be in the market each quarter.

Sandeep: The board approved a quarterly dividend of <unk> 19 per share payable on April 18, 2024. This represents a 15% increase versus last year.

Moving on to guidance.

Sandeep: Reaffirming our fiscal 2024 guidance. This includes total company revenue growth of 11% to 12%.

Sandeep: 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%.

Sandeep: Our guidance for the third quarter of fiscal 2020 include there.

Sandeep: Revenue growth of 10%, 11% GAAP earnings per share of $7 77 to $7 84.

Sandeep: And non-GAAP earnings per share of $9 31 to $9 38.

Sandeep Bajula: As a reminder, we are taking a prudent approach with guidance given the continued macroeconomic uncertainty. You can find full-year Fiscal 2024 and Q3 guidance details in our press release and on our fact sheet. With that, I'll turn it back over to Sasan.

Sandeep: As a reminder, we are taking a prudent approach to guidance given the continued macroeconomic uncertainty.

Sandeep: Can find our full year fiscal 2024, and Q3 guidance details in our press release and on our fact sheet with that I'll turn it back over to Sofia, great. Thank you Sandeep and just to quickly wrap up we're very confident in our AI driven expert platform strategy, our progress toward our five big bets and creating a future of done for you.

Sasan K. Goodarzi: Great. Thank you, Sandeep. And just to quickly wrap up, we're very confident in our AI-driven expert platform strategy, our progress with our five big bets, and creating a future of "done for you" with a gateway to human expertise. We believe that this will change our relationship with our customers, becoming their trusted advisors, leading to higher engagement and monetization. The combination of our assets and our strategy creates a growth flywheel for Intuit to accelerate penetration of our $300 billion in TAM. With that, let's open it up to your questions. Thank you. Ladies and gentlemen, if you would like to ask a question, please press star then the number one on your telephone keypad. If you would like to withdraw your question, press star 2. Please limit yourself to one question.

Sofia: A gateway to human expertise, we believe that this will change our relationship with our customers, becoming their trusted advisers, leading to higher engagement and monetization the combination of our assets and our strategy creates a growth flywheel for intuit to accelerate penetrating our $300 billion in Tam with that let's open.

It up to your questions.

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

Speaker Change: I would like to withdraw your question Press Star two.

Speaker Change: Please limit yourself to one question wed like to get to as many people as we can.

Operator: We'd like to get to as many people as we can. Our first question comes from Siti Panigrahi on Azuho. Please go ahead.

Speaker Change: Our first question comes from CD Panic Rohit with Mizuho. Please go ahead.

Siti Panigrahi: Thank you. Thanks for taking my question. Sasan and Sandeep, I want to dig into the health of the small business. Just a two part question on the online accounting system. Revenue seems to be, you know, in line with our expected from the site should be sell. Is there any one time factor that influences it, and how should we think about the second half, given that's an easy comp.

Speaker Change: Thank you thanks for taking my question.

Speaker Change: On Sunday of I want to dig into that.

Out of those small business.

Speaker Change: Just two part question on the online accounting system revenue seems to be so.

Speaker Change: In line, our expectations sites or T cell is there any one time factors that influence announce should we think about second half given that some easy comps.

Sasan K. Goodarzi: And, and other parties on the services while we're presently subprime are accelerated, and you've talked about some of this payroll payments and MailChimp. Is there anything you're doing differently, specifically drilling into MailChimp? How's that part of the business doing? Yes, Siti, thank you for your question. Maybe I'll start us off, and, Sandy, please jump in as you wish.

Speaker Change: And other part is on the services, while we're pleasantly surprised this accelerator and you've talked about some of this payroll payments and melt you is there anything youre doing differently specifically.

Speaker Change: Drilling into the Medicaid.

How is that part of the business doing.

Speaker Change: Yes Citi. Thank you for your question, maybe I'll start us off and Sandeep. Please.

Speaker Change: Jump in as you wish.

Sasan K. Goodarzi: I mean, the headline that I would give, Siti, is that we're really pleased with the momentum that we have, the growth that we've experienced. You know, when you think about it in context of the current macro environment, we're continuing to see, you know, larger, higher-value customers, mid-market customers want to shift to digitization, and the more we spend time with them, with our account managers, with our sales folks, with our customer success folks, they tend to have a tendency of wanting to move more of their services to us, because for the most part, you know, we are already the standard of financial management solutions that they use for, you know, their financial records, but they see it as an opportunity to get paid faster, you know, manage their workforce, to be able to use our capabilities, market to their customers, and so the net of it that I would leave you with is I like our momentum in this macro environment.

Speaker Change: The headline that I would <unk> city is that we're really pleased with the momentum that we have the growth that we've experienced when you think about the amount of it in context of the current macro environment, we're continuing to see larger higher value customers mid market customers.

Speaker Change: Wanted to shift the Digitization and the more we spend time with them with our account managers with our sales folks with our customer success folks.

Speaker Change: They tend to have a tendency of wanting to move more of their services to us because for the most part we are already the standard our financial management solutions that they use for their financial records, but they see it as an opportunity to get paid faster manage their workforce to be able to use our capability.

To be able to market to their customers and so the net of that I would leave you with is I like our momentum in this macro environment. We expect that to continue for the rest of the year and Theres a lot of puts and takes in our online accounting and online services and so I wouldn't read anything into it the most important element of it.

Sasan K. Goodarzi: We expect that to continue for, you know, the rest of the year, and there are a lot of puts and takes in our online accounting and online services, so I wouldn't read anything into it. The most important element to take away is the 21% overall online growth, and our services are strong, and we continue to innovate with our services. And, you know, I expect that we'll continue to lead digitization and transformation for our small businesses. Sandeep, I don't know if you want to add anything, but those would be the headlines from New York City.

Speaker Change: Hawaii is the 21% overall online growth and and our services are strong and we continue to innovate with our services and.

Speaker Change: And I expect that we will continue to lead Digitization and transformation for our small businesses Sandy I don't know if you want to add anything but those would be the headlines from ace it.

Sandeep Bajula: Yeah, so finding cover for City, what I would also remind you of is, as we've shared in the past, there are three imperatives that you focus on as a management team. One is new customer acquisition, driving adoption of our platform, and being better together across our platform. And with that, in new customer acquisition, our team continues to focus on mid-market customers. As you acquire those mid-market customers, they're a larger, richer revenue pool. They have higher customer acquisition costs, but they also take a little longer to ramp up because most of the size of the price for those mid-market customers is in services revenue, which ramps up as opposed to accounting, which, you know, you start booking as soon as they become a customer.

Sandy: So finding the covenant city, what I would also remind you office as we've shared in the past there are three imperatives that you're focused on as a management team new customer acquisition.

Sandy: Driving adoption of our platform and be better together across our platform and with that new customer acquisition. Our team continues to focus on mid market customers.

Part of the mid market customers.

Sandy: The larger richer revenue pools, they have higher customer acquisition cost, but they also take.

Sandy: A little longer to ramp up because most of the size of the prize in those mid market customers on services revenue, which ramped up efforts to accounting, which you started booking as soon as they become a customer. So just a dynamic to keep in mind that thats why in my prepared remarks, I called out that our growth from we will continue to find many more towards the RPC going forward and the second component of the services.

Sandeep Bajula: So just a dynamic to keep in mind, and that's why in my prepared remarks, I called out that our growth formula will continue to start leaning more towards ARPC going forward. And the second component of services is basically us executing on our focus of driving adoption of our platform. Thanks. Great execution, guys.

Sandy: Executing on our focus of driving adoption of our platform.

Speaker Change: Thanks, Greg some guys.

Kash Rangan: Thank you. The next question comes from Kash Rangan with Goldman Sachs. Hi, congratulations to the founders on the really good call here. I'm wondering if you could give us an update on what's happening in the S&P market. It looks like enterprise spending seems to be stabilizing. I know that you're not really entrepreneurial, but how would you characterize the outlook for small businesses, given that the economy is on stable footing, and we don't have the worries that we had going into 2022? Thank you so much.

Speaker Change: Thank you.

Speaker Change: The next question comes from Kash Rangan with Goldman Sachs.

Hi, Congratulations performance really good cause here.

Kash Rangan: If you can give us some update on what's happening in the SMB market looks like enterprise spending seems to be stabilizing.

Kash Rangan: So the enterprise Quickbooks events, if I'm to characterize your outlook for small businesses.

Speaker Change: Even though the economy is on stable footing.

Speaker Change: Where is that we've had.

Speaker Change: Drilling it becomes explains it thank you so much.

Sasan K. Goodarzi: Kash, great to hear from you. Great, great question. I would, let me categorize the answer into two buckets. You know, first of all, facts are friendly. And let me start with some facts.

Speaker Change: Great to hear from you.

Speaker Change: Great question.

Speaker Change: Let me categorize the answer in two buckets first of all facts are friendly and let me start with some facts.

Sasan K. Goodarzi: What we see across our base is that cash reserves are down 11% year over year. That's really what small businesses care about. But it's actually up 115% over pre-pandemic levels. And so the takeaway you should have from that is small businesses are being challenged in this macro environment, consumers are spending less dollars, but they're actually healthier at the aggregate level than they were several years ago. In fact, what I would call out is the number of hours worked is higher this year by several points compared to last year. So just the strength of the work that they're doing, being able to have access to talent is in a better position for small businesses compared to last year. And that, by the way, as you can imagine, differs by country and by sector. You know, sectors like real estate, IT spending are struggling if the sector of small businesses is in, but things like professional services, auto repair, and auto repairs are actually quite healthy.

Speaker Change: What we see across our base as that cash reserves are down 11% year over year, that's really what small businesses care about but.

Speaker Change: It's actually up 115% over pre pandemic levels and so the takeaway you should have and that is.

Speaker Change: Small businesses are being challenged in this macro environment consumers are spending less dollars, but theyre actually healthier.

Speaker Change: <unk> level than they were several years ago in fact, what I would call out as the number of hours worked is higher this year several points compared to last year. So that's just the strength of the work that they're doing being able to have access to talent.

Speaker Change: Is in a better position for small businesses compared to last year and.

Speaker Change: And that by the way as you can imagine differs by country and by sector sectors like real estate it spending is struggling.

Speaker Change: The sector are small businesses, and but things like professional services Ottawa for auto repairs is actually quite healthy.

Sasan K. Goodarzi: The last thing I would end with is that higher-value customers, more than mid-market customers, are healthier than those that are small and just starting out, which, by the way, we've seen this, you know, in our 20 plus years, right? We've seen this as a normal trend, whereby the larger businesses have a lot more levers to be able to pull, and they're generally healthier. Lastly, our view, and we're not economists, but we see a lot of data, is that 2024 is going to be a lot of the same for small businesses. We don't believe that there's going to be any kind of economic tailwind as we think about the rest of the calendar year.

Speaker Change: Last thing I would end with it.

Speaker Change: The.

Speaker Change: The higher value customers more than mid market customers.

Speaker Change: Are healthier than those that are that are small and just starting out which by the way we've seen this.

Speaker Change: Our 20 plus years right. We have seen this this is a normal trend whereby the larger businesses have a lot more levers to be able to pull in there generally healthier lastly, our view and we're not economists, but we see a lot of data. Our view is that 2024 is going to be a lot of the same for small businesses.

Speaker Change: We believe that there's going to be any kind of an economic.

Speaker Change: <unk> as we think about the next the rest of the calendar year.

Sasan K. Goodarzi: Thank you so much. Thank you. The next question comes from Brad Zelnick with Deutsche Bank. Great, thank you so much.

Speaker Change: Thank you so much.

Speaker Change: Very welcome.

Speaker Change: The next question comes from Brad Zelnick with Deutsche Bank.

Brad Zelnick: Great. Thank you so much.

Brad Zelnick: And nice job in Q2. Maybe a tax question, just with the slower start to the season, Sasan, and we appreciate every season is more and more back-end loaded. But can you talk about what it is that you're seeing in the funnel?

Brad Zelnick: Nice job in Q2, maybe a tax question just the slower start to season and we appreciate every season is more and more backend loaded but can you talk about what it is that you're seeking in the funnel and anything else that supports your confidence in the full year consumer guide. Thanks.

Sasan K. Goodarzi: And anything else that supports your confidence in the full-year consumer guide? Thanks. Yeah, sure, Brad.

Sasan K. Goodarzi: First of all, I'll amplify what you started out with. You know, having been in the tax business and run it more than, you know, 10 years ago, and watching our trends in the last 10 years, every season, there's a push for a later start. And it's just consumer behavior. And we're seeing that this year. So that's not anything unique.

Speaker Change: Yes, sure Brad first of all amplify what you started out with having been in the tax business and ran at more than 10 years ago and watching our trends in the last 10 years every season. There is a push to a later start and just the consumer behavior and we're seeing that this year, so thats not any.

Speaker Change: <unk> unique there is two things that I would call out that are strategic to us that.

Sasan K. Goodarzi: There are two things that I would call out that are strategic to us and worth calling out because we see green shoots in both. With the early part of the season, you know, one is full service. Just as a refresher, there are nearly 100 million consumers and small businesses that spend about $30 billion to have somebody else do their taxes for them. And we really leaned into our overall full service experience; we really leaned into our campaigns, both on air and digital, very basic things, by the way, that we didn't used to have the capabilities of that we're now building, which is if you use an expert, and you love that expert, you can recommend that expert to a friend.

Speaker Change: Ill worth calling out because we see green shoots in both.

Speaker Change: With the early part of season one.

Speaker Change: One is full service just as a refresher there is nearly 100 million consumers and small businesses.

Speaker Change: That spend about $30 billion to have somebody else do their taxes for them.

Speaker Change: And we really leaned into our overall full service experience, we really leaned into our campaigns both on air and digital very basic things by the way that we didn't used to have the capabilities that we're now building, which is if you use an expert and you love that expert that you can recommend that expert.

Speaker Change: Frank.

Sasan K. Goodarzi: That's basics, but the infrastructure that we're building to really disrupt the full service space is a necessity. And we feel very good about the green shoots that we're seeing, both on the consumer front and on the business tax front. And I'll remind you that this is our first year leaning all the way into business tax. So, you know, it's beyond early.

Frank: That's basic but the infrastructure that we're building to really disrupt the full service space.

Sasan K. Goodarzi: But everything that we've seen just indicates that this is an enormous opportunity for us. So that's on the full service front. The second thing I would mention is credit karma. This is really an area where we have nearly 45 million monthly active users. They engage more than five times a month.

Sasan K. Goodarzi: And the majority of those monthly active users actually use a different method and not TurboTax. And so we've really heavily invested in the experience, whether you want to do it yourself in the app, or you want us to do it for you, which is full service and compelling offerings that we've been testing and scaling. And we also like the green shoots there.

Sasan K. Goodarzi: So those are the two things that I would call out. And it really positions us for share of spend. You know, I'll end with the following, which is that we said the goal line for taxes, our share of total IRS returns, and really what matters is the share of spending that we're getting. And full service is essential for that, both this year and in the future. Thanks, Sasan. Great, great, great color and keep up the good work.

Frank: Sends us for sheriff's spat.

Frank: L N with the following which as we said the goal line and taxes.

Frank: Our share of total IRS returns and really what matters is the sheriff spend that we're getting and I am full service is essential for for that this year and in the future.

Speaker Change: Thanks to sound, great great great color and keep up the good work. Thank you.

Brad Zelnick: Thank you, Thank you, Brad. The next question comes from Michael Turrin with Wells Fargo. Hey, great. Good afternoon.

Speaker Change: Thank you Brian.

Speaker Change: The next question comes from Michael turn with Wells Fargo.

Okay, great. Good afternoon I. Appreciate you taking the question I was hoping we could go back to the mix of online services.

Michael Turrin: Appreciate you taking the question. I was hoping we could go back to the mix of online services. And maybe you could just help us compare and contrast in more detail what you're seeing from a growth perspective across the payroll payments and MailChimp business. And is there a float aspect at all to the payroll portion of the business that might be helping reinforce some of the margin strength you're seeing given headwinds from the floor start to tax? I think a lot of focus on just the EPS strength in the quarter. Thank you.

Michael Millman: Maybe you could just help us compare and contrast in more detail, what you're seeing from a <unk> perspective across the payroll payments and male chimp business and is there a float aspect at all to the payroll portion of the business that might be helping reinforce some of the margin strength, you're seeing given headwinds from the slower start to tax I think.

Michael Millman: A lot of focus on just the strength in the corner. Thank you.

Sandeep Bajula: Do you mind repeating the last part of your question? Yeah, just wondering if there's at all on the payroll side, a flow component that might be also just softly helping margin outside of the consumer ad ones you're seeing. Let me start with the overall services question that you asked, and Sandeep will weigh in here with some of the facts that you asked about flow.

Michael Millman: Sure.

Speaker Change: Mind repeating the last part of your question.

Speaker Change: Yeah, just wondering if there is that all on the payrolls side of flow.

Speaker Change: Component that might be also just softly helping margin.

Speaker Change: Sign up for the consumer auto interesting.

Speaker Change: Yeah, Let me let me.

Speaker Change: Start with the overall services question that you <unk> way in here with some of the facts are that you asked around <unk> I think the the things that I would just say around services goes back to my earlier comment which is what is spending.

Sasan K. Goodarzi: I think the thing that I would just say about services goes back to my earlier comment, which is that we're just spending a lot more time with higher-value customers, really helping them understand what we can do to digitize their businesses, and, by the way, continuing to improve our offerings. As we talked about earlier, our total online payments growth this quarter was 20% in a fairly tough macro environment. That's because we continue to invest in making the experience easier, providing multiple methods to get paid, instant deposit, and getting paid up front. Those really help with, in essence, payments adoption. Our payroll adoption has been strong, particularly larger customers and with full service. We're continuing to really invest in some of the most important foundational elements with MailChimp that higher-value customers are adopting, particularly some of the things that I called out with Intuit Assist. It's not really one thing. It's the combination of all of our services and the focus on higher-value customers that is really helping us with some of the service adoption. Maybe, Sandeep, I'll turn it over to you on the float, and then Neil, do you want to add anything?

Speaker Change: A lot more time with higher value customers really helping them understand what we can do to digitize their businesses and by the way continuing to improve our offerings and so as we talked about earlier are total online payments growth. This quarter was 20 per cent in a fairly tough macro environment.

Speaker Change: We continue to invest in making the experience easier.

Speaker Change: Providing multiple methods to get.

Speaker Change: Get paid instant deposit getting paid upfront.

Speaker Change: So it doesn't really help with in essence payments adoption, our payroll adoption has been strong, particularly larger customers and with full service are continuing to really invest in some of the most important foundational elements with milk jump that high.

Speaker Change: Higher valued customers are adopting and particularly some of the things that I called out with intuitive. So it's really it's not one thing. It's a combination of all of our services and the focus on higher value customers that is really helping us with some of the services adoption, maybe some deep alternative with you on the floor and then nails you want to add.

Sasan K. Goodarzi: Sure. Thanks, Hassan. Michael, the float component is a very small part of our payroll business. As one thing said, we really aim to do for our small businesses is to hold their cash as little as possible, so float is not a big component for us. And I think the overarching theme of your question was the ability for Intuit to preserve the earnings power of the company despite the one-week delay in the IRS opening. And I think Hassan touched on that, and it's also some of the great work that the team has been doing around acquiring larger customers around the lineup work we did to make the higher-end SKUs and payroll more attractive to those customers, and the work the team is doing So it's a plethora of activities that continue to give us confidence across our portfolio of assets that we have here at Intuit. I appreciate the details there. Thank you. Thank you, Michael.

Speaker Change: Sure Thanks for fun.

Speaker Change: Michael the fluids component is a very small part of our apparel business as one thing said, we aim to do for our small businesses is to hold their cash as little as possible. So fluid, it's not a big component of for us and I think.

Speaker Change: The overarching theme of your question was the ability for integrative preserved the earnings of the company. Despite the one week delay into Iris opening thinks of sand touched on bet and it's also some of the great to work with the team has been doing accordingly.

Speaker Change: According larger customers around the lineup what we did to make the higher end skews appear more attractive to those customers to work. The team is doing around mid market account management and milk.

Speaker Change: <unk> of activities that continues to give us confidence across.

Speaker Change: Portfolio of assets that we have here it into it.

Speaker Change: I appreciate the details Sir thank you.

Speaker Change: Thank you Michael.

Taylor McGinnis: The next question comes from Taylor McGinnis with UBS. Yeah, hi, thanks so much for taking my question. Maybe another one on online services. So, if I've heard you correctly earlier, it sounds like you guys are expecting a more stable macro environment as we move throughout the year. So can you talk about what that means for the durability of the acceleration in online services that we just saw to 24% year over year? Could you actually see online services hanging in here at these levels? Is there anything, you know, once in a lifetime in nature?

Speaker Change: The next question comes from Taylor Mcinnes with you B S.

Taylor Mcinnes: Yeah, Hi, thanks, so much for taking my question, maybe another one on on online services. So if I heard you correctly earlier sounds like you guys are expecting a more stable macro environment has been moved throughout the ear. So can you talk about what that means for the durability.

Taylor Mcinnes: Celebration online services that we just saw the 24% year over year could you actually see you know online services hanging here at these levels is there anything one time in nature and just curious you know as the macarena more challenging how the pricing Lopper continues there to help you guys. During this time thanks so much.

Sasan K. Goodarzi: And just curious, you know, as macro remains more challenging, you know, how the pricing lever could be used there to help you guys during this time. Thanks so much. Yeah, sure, Taylor.

Speaker Change: Yeah sure Taylor, let me add a few things if I could first of all I'll start with.

Sasan K. Goodarzi: Let me add a few things, if I could. First of all, I'll start with we don't view the macro environment as entirely stable. We think it's going to continue to be uncertain. So we're not sort of banking on any of our growth coming from any type of a tailwind from the macro environment. We think 24 will be somewhat choppy, like 23 was from a macro environment perspective.

Taylor Mcinnes:

Speaker Change: We don't view the macro environment as entirely remaining stable. We think it's going to continue to be uncertain. So we're not sort of banking on any of our girls coming from any type of a tailwind from the macro environment, We think 24 will.

Speaker Change: Will be somewhat choppy like twenty-three was from a from a macro environment perspective, when we see it in the consumer.

Sandeep Bajula: And we see it in the consumer credit scores of consumers. As you know, we have over 100 million members across Credit Karma, and their credit scores in the last couple of years are down almost 20 points. Gen Z credit card balances are up over 60%. And those are just a couple of illustrative examples that, you know, consumers are strained. So the first Uber point would be that we think the environment is stable to uncertain, and we're not trying to outguess the economy but really focus on our customers and our innovation, which gets to the second point. And that is, we have confidence in the guidance that we provided of 16 to 17% for the year, even in the context of the macro environment, just because we continue to really emphasize and focus on our high-value mid market customers, digitization.

Speaker Change: Consumer credit scores of consumers as you know, we see over 100 million members across credit Karma and their credit scores in the last couple of years or down almost 20 points.

Speaker Change: <unk> credit card balances are are up over 60% and those are just a couple of illustrative examples that consumers are strange so.

Speaker Change: The first Hoover acquaintances would be that we think the environment is stables uncertain and we're not trying to get the economy, but really focus on our customers and our innovation, which gets to the to the second point and that is we have confidence in the guidance that we provided of the 16% to 17% for the year.

Speaker Change: Even in context of the of the macro environment, just because we continue to really emphasize and focus it was our high value mid market customers Digitization and that's really what's <unk>.

Sandeep Bajula: And that's really what's leading to our overall, you know, 21% online growth that we talked about. And that gives us confidence in our guidance and, really, as we look into the future, our entire focus is really all about our innovation and our and our go-to-market strategy to win despite the tough economic environment. And so the one thing I would add, and just to build on Sean's point, you asked a question about pricing, pricing power. Our tenet around pricing is around the offerings, the power of our offerings, and the innovation we're building into the offerings. And the perceived actual value that we're delivering to our customers is not related to the macro environment. So that's another point I just wanted to emphasize in terms of how we think about our pricing. Thanks, I really appreciate the thoughts.

Speaker Change: Leading to our overall, 21% online growth that we talked about and and.

Speaker Change: That's what gives us confidence in our in our guidance and really as we look into the future. Our entire focus is is really all about our innovation and our in our markets to win despite the tough economic environment.

Speaker Change: The one thing I would add on just to build onto the phones point.

Speaker Change: You asked a question I run pricing pricing power or turn it around pricing is around.

Speaker Change: Offering February or offerings, and the integration with building into the offerings and receive an actual value debit delivering to our customer is not related to the macro environment with another point I just wanted to emphasize in terms of how we think about our pricing.

Speaker Change: Thanks, I really appreciate the thoughts.

Alex Zuckin: You're very welcome. The next question comes from Alex Zuckin with Wolf Research. Hey guys, thanks for taking the question and congrats on the quarter. Sasan, maybe a Gen AI question for you, you know, clearly it's something that continues to really evolve and become a core part and parcel of the company, both on the SMB side and the consumer side. I wanted to ask, if you look at the coming tax season on the consumer side, how do you expect to see the benefit of some of the assist functionality? Is it more conversion, free to pay, or does it pay you to pay more?

Speaker Change: You're very welcome.

Speaker Change: The next question comes from Alex a second with both research.

Alex: Hey, guys. Thanks for taking the question and congrats on the quarter.

Alex: Maybe a journey I question for you.

Alex: Clearly.

Alex: Something that continues to really evolve and and and.

Alex: And you know.

Alex: Come a core part and parcel of.

Alex: The company both of them on the <unk> on the consumer side I wanted to ask if you look at the coming tax season on the consumer side, how do you expect to to see the benefit of some of the functionality is it more <unk>.

Alex: Converting kind of free to pay us and pay to pay more and then similarly on both credit Karma and on the <unk> site. If you think about the progression of the year.

Sasan K. Goodarzi: And then similarly, on both Credit Karma and on the SMB side, if you think about the progression of the year, where are you seeing the biggest opportunities as you start to see the interactions build on the platform? Alex, thank you. Great, great question.

Alex: Where are you seeing the biggest opportunities as you start to see the interactions build on the platform.

Speaker Change: Yeah, Alex. Thank you great. Great question, Let me start was one headline, particularly as we've been in beta or or with certain capabilities.

Sasan K. Goodarzi: Let me start with one headline, particularly as we've been in beta or with certain capabilities, you know, at scale. And GA, I'll start with a headline, which is that we believe that over time, and I want to emphasize the overtime piece, that this is going to create an entirely new category of experiences and growth that is not even possible today because of truly creating a set of experiences where the work is done for customers. And there's always a gateway to human experts that's all AI powered. And the more we're in the market, the more we're learning, adjusting, adapting, the more we are convinced that we're going to be able to create a new category of services and what it's possible to penetrate our $300 billion in TAM. Now, with that said, let me get real specific and sort of real tactical.

Alex: Capabilities.

Alex: At scale.

Alex: I'll start with a headline which is we believe that over time and I want to emphasize the overtime. These that this is gonna create entirely new category of experiences and.

Alex: Growth.

Alex: Is that even possible today because of truly creating a set of experiences where the work is done for customers and there's always a gateway.

Alex: The human expert that's all a high powered and the more we're and market them all of our learning adjusting adapting the more we are convinced that we're gonna be able to create a new category of services and what's possible to penetrate are $300 billion in town now with that said, let me get real spit.

Alex: <unk> in sort of real tactical.

Sasan K. Goodarzi: The second piece of headline news that I would give is none of the work that we're doing with Intuit Assist, which is really about what we're doing across the platform. It's not a feature, none of it is in our results today, and we're not counting on it to be in our results in the near future. But with that said, to answer your question, in tax, to start with, there's a couple of areas where it will have a profound impact. One is a full service restaurant.

Alex: The second headline news that I would give is.

Alex: None of the work that we're doing within two of assess which is really about what we're doing across the platform. It's not a feature none of it is in our results today and we're not counting on it to be and are resolved.

Alex: In the near future, but with that said to answer your question.

Alex: Tax and to start with there's a couple of areas, where it will have profound impact one is full service and the profound impact by the way is from the investments that we've made in the last five years I mean could do what we're doing in full service at scale.

Sasan K. Goodarzi: And the profound impact, by the way, is from the investments that we've made in the last five years. I mean, to do what we're doing in full service at scale, and think about it, it's really based on data, AI, and the ecosystem of apps. Because now we can do your taxes in a way that's through Credit Karma, through the QuickBooks platform, and one of the largest networks of experts that we have. And all of that sits on machine learning, knowledge engineering, and now next-gen AI capability. So the biggest, in our view, based on what we're seeing in the market, the biggest opportunity is the ease and the speed of getting people's taxes on. So imagine a world where you're a full service customer, that we can get your taxes done in less than an hour, get the maximum refund, and extend your dollars because of what we can do with you on the Credit Karma platform. An excellent service, the best service you can imagine in the world, which, by the way, is supported by our product recommendation score of 88.

Alex: And think about it it's really based on data.

Alex: Ecosystem of apps, because now we can D. R taxes through credit Karma through cookbooks platform and one of the largest network of experts that we have and all of that fits on machine learning knowledge engineering and now Jenny capabilities. So the biggest.

Alex: In our view based on what we're seeing in market right. The biggest opportunity is about the ease and speed of getting people's taxes on so I imagine a world where you are a full service customer that we can get your taxes done in less than an hour maximum refund and extend your <unk>.

Alex: Because of what we can do with you on on the credit card my platform and excellent service, but that service you can imagine in the world, which by the way supported by our product recommendation score of 88. So really it's full service that will have the biggest impact now the whole underlying platform is what full service uses and so the other is over time, yes.

Sasan K. Goodarzi: So really, it's full service that will have the biggest impact. Now, the whole underlying platform is what full service uses. And so the other thing is, over time, yes, it will help with conversion. And really, it's about confidence.

Alex: It will help with conversion and really it's about confidence.

Sasan K. Goodarzi: And we're seeing that right now where Intuit Assist, when it's engaged to understand my tax outcome and refund outcome, the helpful rating is one and a half times better than we've ever seen. And by the way, we are very early. We haven't perfected it by any means.

Alex: And we're seeing that right now we're into it assist when it's engaged to understand my.

Alex: My tax outcome and refund the outcome. The helpful rating is a one and a half times better than we've ever seen in finding where we are very early we haven't perfected it by any means so that's on the tax front just very quickly.

Sasan K. Goodarzi: So that's on the tax front. Just very quickly, let me touch on Credit Karma. As you know, one of the powers of Credit Karma on behalf of our customers is that we know everything about the customer. We have all the data and leverage AI to deliver personalized credit cards that are right for them or personal loans, whatever it may be. And what we've found with Gen AI that we're learning and seeing in the market today is that now customers can interact with Credit Karma, whereas before they couldn't. The from, too, is that I would show you the three credit cards that are right for you based on everything that I know about you. But now you can interact with Credit Karma and ask, "hey, I'm looking for travel rewards. Which of these three credit cards is the best for me?"

Alex: Let me touch on credit Karma as you know one of the powers of credit Karma on behalf of our customers as we know everything about the customer we know I'll have up all the data and leverage AI to deliver personalised credit card that are right for that more personal loans whatever it may be one thing that's profound with Jen AI that we're learning and seeing and Mark.

Alex: Today is now customers can interact with credit comment, whereas before they could.

Alex: The from two is the from US I would show you. The three credit cards that are right for you based on everything that I know value, but now you can act interact with credit card <unk>, Hey, I, what I'm looking for travel rewards, which of these sort of three credit cards are the best for me and then we interact with you and help you understand which one is the best for you based on an additional set of <unk>.

Sasan K. Goodarzi: So we interact with you and help you understand which one is the best for you based on an additional set of questions that you've asked where we now know more about you. That's profound because that will, over time, drive higher engagement, monetization, et cetera. And on the small business front, our entire focus is revenue and profitability increases. Everything that we're testing in the market, learning in the market, is so that we can help you with campaigns that increase your revenue or manage your cash flow that better helps you with profitability. And one of the things we're testing is to have experts that actually provide insights to you. And those insights could be, hey, it's time to take out capital because your sales are strong. Or, hey, I just finished doing your books for you.

Alex: <unk> that you've asked where are we now know more about you that is profound because that will over time and drive hiring gauge met monetization et cetera, and on the small business from our entire focus is revenue and profitability increase everything that we are testing and market learning and market is so that we can help you with campaigns that increase.

Alex: Is your revenue our manager cash flow better it helps you with profitability.

Alex: And one of the things we're testing with is.

Alex: To have experts that actually provide insights to you in.

Alex: And those insights can be hey, it's time to take out capital because your sales are strong or hey, I. Just finished doing your books for you would you like to have a conversation. So you can understand your cash flow and how your books clothes for the month and that's a monetize herbal events for us so.

Sasan K. Goodarzi: Would you like to have a conversation so you can understand your cash flow and how your books close for the month? And that's a monetizable event for us. So, probably a longer answer than you were looking for, but those are the things that are in the market and where we're learning and adjusting. And we think over time, we haven't perfected any of this yet, because it's actually hard, but we believe it will create an entirely new category of services and growth. Super insightful; thank you guys. Thank you, Alex. The next question comes from Kirk Materne with Evercore ISI. Yeah, thanks very much.

Alex: Probably a longer answer that you were looking for but those are the things that are embarking we're we're learning and adjusting and we think over time, we haven't perfected any of this yet because it's actually hard but we believe it will create an entirely new category of services and growth.

Speaker Change: You've reached cycle. Thank you guys.

Speaker Change: Yep. Thank you Alex.

Speaker Change: The next question comes from Kirk My turn with Evercore ISI.

Kirk: Yeah, Thanks, very much and congrats.

Kirk Materne: And congratulations on the quarter. Sasan, can you just remind us where we are in terms of some of the cross-selling of QuickBooks into the MailChimp base and vice versa? And when Intuit Assist goes GA for QuickBooks, will that be the point at which Intuit Assist can answer questions across sort of the front office and back office for customers? Can you just talk about that a little bit? Thanks so much.

Kirk: Congrats on the quarter <unk> can you just remind us where we are in terms of some of the call. So quickbooks ended the mailed shampoo and vice versa, and <unk> G. A real quick bugs will that'd be an appointment with you until this disconnected can answer questions in class sort of that's gone off with an back office for customers.

Speaker Change: Talk about that a little bit thanks, so much.

Speaker Change: Yeah, Great Great question, Sorry, let me start with your <unk> question first and.

Sasan K. Goodarzi: Yeah, great, great question, Kirk. Let me start with your, the Intuit Assist question first. And I'll sequence, I'll share with you how we're sequencing it. You know, right now, our entire focus, and remember, everything that we are doing here is based on data and AI. So a lot of our investments are what you don't see, which is ensuring that the data is usable, that it's clean, that it's structured the right way, and that our machine learning knowledge engineering and gen AI capabilities can digest all of the data, inclusive of data, by the way, that's contributed by the customer, like access to their Gmail account, access to their Excel spreadsheet, because a lot of customers' data are in those two places, or they're in shoeboxes, and being able to take pictures and for us to be able to digest that data and actually deliver insights.

Speaker Change: And I will sequins and I'll share with you how we're sequencing it right now our entire focus and remember everything that we.

Speaker Change: Are doing here is based on data at AI.

Speaker Change: So a lot of our investments are is what you don't see which is ensuring that the data is usable that it's clean that is structured the right way and that our machine learning knowledge engineering Jenny capabilities can digest all of the the data inclusive of data by the way has contributed by the customer like access to their G mail account access to their.

Speaker Change: Excel spreadsheet cause there's a lot of customers data are in those two places or their shoe boxes of being able to take pictures and for us to be able to digest that data and actually deliver insights. So are our first priority of order is to ensure that if you're using our small business platform and if you.

Sasan K. Goodarzi: So our first priority is to ensure that if you're using our small business platform, and if you are looking to put together marketing campaigns, that Intuit Assist is doing that for you. The second element of what we are focused on is then being able to transfer and use Intuit Assist across QuickBooks and MailChimp, because all the data points are connected.

Speaker Change: Looking to put together a marketing campaigns that intuit assist is doing that for you the second element.

Speaker Change: We are focused on his than being able to <unk> transfer and use intuited across cookbook and Belgian because all the data points are connected.

Sasan K. Goodarzi: That is absolutely where we are headed. And it's sequenced, it's in second place compared to what I just articulated. We have to nail the basics. But that's actually where the power of our platform will show up to our customers, where whether you're in Credit Karma or TurboTax, you can ask whatever question you want that is relevant to your life, and we can answer it, because all of our data points are connected, and our AI capabilities are, in essence, working across the product. So that is in order, but we're working on that as we speak. The second is cross-sell.

Speaker Change: That is absolutely where we are headed and it's a sequence.

Speaker Change: In second place compared to what I, just articulated cause we have to nail via the basics, but that's actually where the power of our platform will show up for our customers wear whether you're in credit Karma Turbotax you can ask whatever question you want that is relevant in your life and we can answer it because all of our data points are connect.

Speaker Change: And our AI capabilities are in essence working at cross the product. So that is sequence, but we're working on that as we speak.

Speaker Change: Second is cross-sell first of all start with we're not thinking about it in terms of cross all we're thinking about it in terms of product integration. So what we are really focused on it. This is by the way. This applies the turbo tax and credit Karma. This applies to a male chimp and cookbooks, what we're really focused on.

Sasan K. Goodarzi: First of all, I'll start with, we're not thinking about it in terms of cross-sell, we're thinking about it in terms of product integration. So what we are really focused on, and this is, by the way, this applies to TurboTax and Credit Karma, this applies to MailChimp and QuickBooks. What we're really focused on is integrating the product at moments of truth that matters most based on how the customer does the work. Like, for instance, if you are in QuickBooks, on your left map, this is just an illustrative example, because we're actually testing a lot of this, is that you can actually see how you can manage your customers and put together marketing campaigns, and when you engage and click on that, you have the MailChimp engine that is working behind the scenes, and after maybe a couple of free trials, then we share with you how much it is to pay for these capabilities.

Speaker Change: Is integrating the product at moments of truth that matters, most based on how the customer does that work.

Speaker Change: Like for instance, if you are in a quick books on your lap now. This is just an illustrative examples we're actually testing a lot of this.

Speaker Change: Is that you can actually see how you can manage your customers and put together marketing campaigns and when you engage and click on that you have the male chimp engine that is working behind the scenes and after maybe a couple of free trial, then we share with you how much it is to pay for these capabilities. So that's what I mean by product integration, we want to nail the benefits at the.

Sasan K. Goodarzi: So that's what I mean by product integration. We want to nail the benefits at the moment of truth that matters versus just trying to sell you MailChimp within the platform. We've found over time that that's not as effective.

Speaker Change: A moment of truth that matters versus just try to sell you a male.

Speaker Change: <unk> lab within the platform. We've found over time that that is not as effective what's most effective as of product integration. So that's the approach that we're taking across all of our platforms.

Sasan K. Goodarzi: What's most effective is the product integration. So that's the approach that we're taking across all of our platforms. That's it.

Speaker Change: That's it thanks a bunch.

Brent Thill: Thanks for watching. Thank you. You're very welcome. The next question comes from Brent Thill with Jeffreys. Desandre, for Krita Karma to get back to growth, what are the key ingredients that you need to see for that to get back to growth versus the declines we've seen in the last year? Yeah, good question. You know, a couple of things. One, which we are, you know, starting to see, which is just stability of partners and the environment. For the most part, other than some select partners, we've actually seen stability with our partners. And we've actually seen verticals like insurance come back, although we saw a big decline last year.

Speaker Change: Yep. Thank you you're very welcome.

Speaker Change: The next question comes from Brent fell with Jeffries.

Brad D. Smith: <unk> credit Karma to get back to growth what are the key ingredients that you need to see for that.

Brad D. Smith: Get back to.

Brad D. Smith: Growth versus the declines we've seen the last year.

Brad D. Smith: Yeah. A good question you know a couple of things one, which we are starting to see which is just stability of partners and the environment you know for the most part other than some.

Brad D. Smith: Select.

Brad D. Smith: Partners, we've actually seen stability with our partners and we've actually seen vertical like insurance come back.

Brad D. Smith: We saw a big decline last year. So one is just.

Sasan K. Goodarzi: So one is just stability. And then the second is just the areas of innovation that we are focused on. You know, one is we've redesigned the entire app. Now it's rolled out to all members, which is a massive, massive feat.

Brad D. Smith: Stability and then the second is just the areas of innovation that we are focused on one is we redesign the entire app now it's rolled out to all members, which is a massive massive feet and based on the redesign of the app.

Sasan K. Goodarzi: And based on the redesign of the app, there are many ways in which we can engage customers more than we could before, and that will actually drive monetization. So that's one lever beyond the macro that I mentioned.

Brad D. Smith: There are many ways in which we can engage customers more so than we could before and that will actually drive monetization. So that's one lever beyond the macro that I mentioned.

Sasan K. Goodarzi: The second is Intuit Assist. It's the example I provided earlier, where now customers can actually interact with us and ask questions and let us know what's important to them. And we can personalize things in a way that we couldn't before. And based on very early testing, we see that engagement is higher when customers are interacting with Intuit Assist, which will lead to monetization. That's the second area. Third is just a number of initiatives that we have around Prime. As I've mentioned, and we've mentioned before, Prime is actually quite a large part of our monthly active users, but we've never really focused on it.

Brad D. Smith: The second is intuitive fish.

Brad D. Smith: <unk> provided earlier were now customers can actually interact with us and ask questions and let us know what's important to them, but we can personalize things in a way that we could never before.

Brad D. Smith: And based on very early testing, we see the engagement is higher when customers are interacting with intuitiveness, which over time will lead the monetization at the second area third is just a number of initiatives that we have around prime is mentioned as we've mentioned before prime is actually a quite a large part of our monthly active users what we've.

Brad D. Smith: Never really focused on it.

Sasan K. Goodarzi: Now that's an area of focus. And then, last but not least, is TurboTax. And TurboTax, the way we're thinking about it is actually about product integration, because the more we can engage members year round, whether they have taken out a mortgage or having them take a snapshot of their W-2 and let them know what their refund could be, the more we can actually penetrate more of the members to use TurboTax as a method to get their access to the refund. All those things creating one platform is what we believe and are confident And it's really in that order.

Brad D. Smith: Now that's an area of focus and then last but not least is turbotax.

Brad D. Smith: And turbo tax the way, we're thinking about it is actually about product integration because the more we can engage members year round around if they took out a mortgage or having them take us a snapshot of their W. Do and letting them know what their refunded to be the more we can actually.

Brad D. Smith: Penetrates more of that members to use turbotax as aware as a method to get their access to the refund all of those things grading. One platform is what we believe and are confident actually that will get us to accelerated.

Brad D. Smith: And it's really in that order. So let me pause there hopefully that helps breath.

Brent Thill: So let me pause there. Hopefully, that helps, Brett. Yeah, that was great.

Speaker Change: Yeah. It was great. Thank you.

Speaker Change: You're very welcome.

Jabes Friedman: Thank you. You're very welcome. The next question comes from Jabes Friedman with Susquehanna. Hi, thank you.

Brad D. Smith: The next question comes from James Freedman with Susquehanna.

James Freedman: Alright. Thank you I was hoping to get your thoughts on the opportunity for additional bill paying options I believe so you mentioned in your prepared remarks ruling out C. D C H.

Sasan K. Goodarzi: I was hoping to get your thoughts on the opportunity for additional bill pay options. I believe this is what you mentioned in your prepared remarks rolling out same day ACH. But any high-level thoughts on other bill pay options, including virtual credit cards?

James Freedman: Any high level thoughts on other bill pay options, including virtual credit cards. Thank you.

Sasan K. Goodarzi: Thank you. Yeah, thank you for the question. First of all, the key to success for us, given where we are in the rollout, is one network connection. And as you heard in our remarks, albeit, you know, very early, the number of business network connections has doubled since August.

Speaker Change: Yeah. Thank you for the question you know first of all is the key to success for us given where we are on the rollout is one network connections.

James Freedman: And as you heard in our remarks, albeit very early the number of business network connections with doubled since August and that's important because it helps it's a he.

Sasan K. Goodarzi: And that's important because it helps, it's a huge step forward to then digitize how we, in essence, help customers get paid and pay bills. The second thing is, just, executing on our roadmap. You know, the big thing that we're starting to roll out, that we talked about earlier, is just faster payments. And that's through both paid ACH next day, which we're rolling out, and also batch payments.

James Freedman: A huge step forward to then digitize, how we in essence help customers get paid and pay bills. The second is just executing on a roadmap. The big thing that we're starting to roll out that we talked about earlier is just faster payments and that's through both paid a C. H next day.

James Freedman: That we're rolling out and also batch payments and so we're going to continue to.

Sasan K. Goodarzi: And so we're going to continue to look at what's most important for our customers, and that's what's informing our roadmap. But we have to do it in conjunction with continuing to increase network connections. And we're really excited about, in the long term, what's possible for digitizing all of B2B, because it's very, incredibly beneficial to our customers because they get paid faster. And two, it's, it's, you know, it's really a sticky product.

James Freedman: Look at what's most important for our customers and that's what's informing our roadmap, but we have to do it in conjunction with continuing to increase.

James Freedman: Where connections and we're we're really excited about it in the long term what's possible digitizing all of you to be because it's very.

James Freedman: It's incredibly beneficial to our customers because they get paid faster and too. It's it's it's really a sticky products.

Jabes Friedman: Thank you so much. You're very welcome. The next question comes from Raimo Lenschow with Barclays. Thank you. Congratulations on behalf of me as well.

Speaker Change: Thank you so much.

Speaker Change: Very welcome.

James Freedman: The next question comes from Ramo Lynch child with Barclays.

Raimo Lenschow: Thank you <unk> for me as well Christian for some deep ask you think about this year you kind of upset that you didn't expect a lot of kind of recovery. Two houses just like how you managed to business, but if you pick about cost so far as you've been doing really well on margins.

Raimo Lenschow: Question for Sandeep. As we think about this year, you kind of said you didn't expect a lot of any kind of recovery to help. It's just like how you manage the business. But if you think about costs, so far, you've been doing really well on margins. But there's also obviously an element of getting ready for things to get better.

Raimo Lenschow: But it also opposite of element of getting ready for things are getting better how do you see the progression of investments this year. Thank you.

Sandeep Bajula: How do you see the progression of investments this year? Thank you. Raimo, thanks for that question. A super important one. And let me share some of my thoughts.

Speaker Change: You're very well thanks for that question Kate Super important one I, let me share some of my thoughts first and foremost let's start with the fact that we deliberately building this business to scale growth, while increasing profitability. In fact, there was a principal <unk> two of a friendship principles ever used to manage this company. So that's a very deliberate approach that we're taking.

Sandeep Bajula: First and foremost, I'll start with the fact that we're deliberately building this business to scale growth while increasing our profitability. In fact, those are principle ones and two of our financial principles that we use to manage this company. So that's a very deliberate approach that we are taking.

Sandeep Bajula: And we have a track record of expanding margin over the years while bringing innovation to markets such as Intuit Assist, such as building innovation to address the opportunity we have in the mid-market, such as innovation to localize products in milking for the international market. So we are not leaving growth opportunities on the table with our focus to scale growth and drive innovation. Now, the second component of your question in terms of the profitability profile so far this year, you know, we look at our margins and aim to deliver our margin commitments for the full year, and I feel quite confident in our path to do so. And the performance we had in the first couple of quarters actually holds to the confidence that I have in our full-year guidance. Perfect, thank you. The next question comes from Mark Murphy with J.P. Morgan. Thank you very much.

Speaker Change: And we have a track record of spending margin over the years, while bringing innovation markets such as.

Speaker Change: But the innovation to address the opportunity we have in the mid market such as innovation through local X product and a milkshake for the international market. So we are not leaving growth opportunities on the table with our focus to scale growth and drive innovation notes on the second component of your question in terms of the profitability.

Speaker Change: Profile. So far this year, we look at our margins and aimed to deliver our margin commitments for the full year and I feel quite confident in our past to do so and the performance of you had in the first couple of quarters continue.

Speaker Change: In fact, both of the confidence that I have an uncle your guidance.

Speaker Change: Perfect. Thank you.

Speaker Change: The next question comes from Mark Murphy with J P. Morgan.

Mark Murphy: Thank you very much so.

Mark Murphy: So, Sasan, within the QuickBooks business, you have this growth vector in the upmarket piece. And I'm curious if you're able to comment on the growth and traction that you're seeing in that 10 to 100 employees segment versus the 1 to 9 or 0 to 9 employees segment. For instance, is one of those growing in the mid 20s, and the other in the high teens?

Mark Murphy: Within the Quickbooks business you have this group that you're in the market peace and I'm curious if you're able to comment on the group in traction that you're seeing isn't that tend to 100 employees segment versus the the one to nine or dessert and unemployed segment. For instance is is one of those growing <unk>.

Mark Murphy: <unk> and the other is a high teams just interested in how much of a spread to see there and maybe where you'd be attending this year.

Sasan K. Goodarzi: Just interested in how much of a spread you see there and maybe where you see it trending this year. Yeah, sure. I'll add a perspective and invite Sandeep to chime in as well.

Speaker Change: Yeah, sure I'll, I'll add a perspective and and <unk>.

Speaker Change: <unk> to chime in as well I think the short answer is we are seeing more traction in our higher value customers in our mid market customers, which I think to your frame is 10, 10, 15 employees and up or or more higher revenue customers. We are seeing more traction there more momentum there.

Sasan K. Goodarzi: I think the short answer is we are seeing more traction with our higher value customers and our mid-market customers, which I think to your frame is 10, 15 employees and up or more higher revenue customers. We are seeing more traction there, and there is more momentum. And by the way, a big part of it is that's where we're really focusing our innovation, our go-to-market. At the same time, to be clear, we always remain paranoid and always believe in the notion of disrupting from the low end, which is, by the way, why we just launched the solopreneur offering, which is to be able to serve those small businesses that, in essence, they're on their own because we believe that it's helping entrepreneurs when they're a team of one because one day, some will become a team of thousands.

Speaker Change: And by the way I think part of it is that's where we're really focusing our innovation or go to market at the same time to be clear. We are we always remained paranoid and always believed in the notion of disrupting from the low end, which is by the way why we.

Speaker Change: Just launched a solid manure offering which is to be able to serve those small businesses that in essence, they're on their own because we believe.

Speaker Change: It's helping entrepreneurs when they're a team of one because one day someone will become a team of thousands.

Sasan K. Goodarzi: So we're not taking our eye off the ball on the low end at all, but we're dabbling in our focus on the higher value customers. And yes, we do see more resiliency, more momentum with these larger customers, and Sasan Goodarzi. It's a fun way to cover the topic.

Speaker Change: So we're not taking our eye off the ball on the low end at all but we're doubling down on our focus on a higher valued customers and yes, we do see more resiliency more momentum with these larger customers.

Speaker Change: And for fun.

Speaker Change: Cover to cover the topic the only thing I would add is that the YOD economics on the upmarket adults pumping refined quite attractive customers very attentive scale too much higher FPC, especially as we get them to adopt our platform faced by definition have more employees. They by definition of processing more payments so that that's.

Sandeep Bajula: The only thing I would add is that the unit economics on the upmarket is also something that we find quite attractive. These customers tend to scale to much higher ARPCs, especially as we get them to adopt our platform. They, by definition, have more employees.

Sandeep Bajula: They, by definition, are processing more payments. So that's also something that we find attractive, and it's very much an area that we are having our go-to-market teams and our product teams deliberately lean into this year. Thank you very much.

Speaker Change: Also something that'd be find attractive and is very much.

Speaker Change: That we are having our go to market teams and my product teams deliberately mean in this year.

Speaker Change: Thank you very much.

Mark Murphy: You're very welcome. The next question comes from Steve Enders with Citi. Okay, great.

Speaker Change: You're very welcome.

Speaker Change: The next question comes from Steve and there's what city.

Steve: Okay, great. Thanks for thanks for taking my questions here I guess, maybe just on the.

Steve Enders: Thanks for taking the questions here. I guess maybe just on the F&B side again, I think you made a comment in the prepared remarks about, you know, shifting towards ARPC over time as a growth lever. I just, I guess I want to clarify that comment.

Steve: And beside again I think he made a comment in the prepared remarks about.

Steve: Shifting towards Arab P. C over time as a as a Garth however, I just I guess, what I want to clarify that comment and then secondarily does that change how you think about the levers of growth moving forward for the up and be segment.

Sandeep Bajula: And then secondarily, does that change how you think about the levers of growth moving forward for the F&B segment from more towards ARPC away from the customer side? Thanks for the question, Steve. The way you know, we think about it, and as we were just discussing in the prior question, we see a tremendous opportunity in the mid market for those that we currently define as having 10 to 100 employees. And what really excites us about this opportunity is that these customers come with a much higher lifetime value, much higher ARPC, and have better retention. And so that just helps our economy. But these customers also tend to have higher customer acquisition costs. So, and there are relatively fewer of those than of the smaller customers, just by definition, when you look at the overall addressable market.

Steve: From more important therapy stay away from the customer side.

Speaker Change: Thanks for the question.

Steve: The way, we think about it and as we were just addressing the prior question, we see tremendous opportunity in the mid market for both of you currently defined as having 10 to 100 employees and what really excited about this opportunity is that these customers come with a much higher lifetime value much higher P C and have better retention.

Steve: And so that just helps our economics, but these customers also tend to have higher.

Steve: Customer acquisition costs. So there are relatively few of those in the smaller customers.

Steve: But that's pretty somebody to look at the overall addressable market. So as we focus on these larger customers that.

Sandeep Bajula: So as we focus on these larger customers, that means we will get higher ARPC per customer, even though there are fewer of those. So that is where the growth formula, we continue to abide by the growth formula that we have publicly discussed, about 10 to 20% customer growth, and 10 to 20% ARPC growth. But as we continue to focus on the mid market, you should expect us to lean in more towards the ARPC growth because of this dynamic with the mid market. And we think that's actually a good thing for the business going forward. Perfect, thanks. The next question comes from Scott Schneeberger with Oppenheimer. Thanks very much. Good afternoon.

Steve: That means we will get higher FPC first customer even though.

Steve: There are a few of those so that is where the growth formula we continue to abide by the quote from US that we have publicly discussed about 10% to 20% customer growth, 10% to 20% <unk> growth.

Steve: Continue to focus on the mid market you should expect us to lean more towards the ERP seagrove because of this dynamic with the mid market and everything that's such a good thing for the business going forward.

Speaker Change: Okay perfect. Thanks.

Speaker Change: The next question comes from Scott Schneberger with Oppenheimer.

Scott Schneeberger: Thanks, very much good afternoon.

Scott Schneeberger: Sasan, a couple of tax questions. One, here at the, you know, we're three weeks in. We're pretty well through the early season. You had anticipated earlier, before the tax season, that we would see a probably flattish year for the industry. And that felt kind of conservative.

Scott Schneeberger: Some a couple of packs question one here's a.

Scott Schneeberger: Three weeks and we're pretty well through the early season, you would you had anticipated earlier before the taxes and that we would see a probably flattish year for the industry and and that felt kind of conservative now that we're in a bit and we've also seen a return to DIY category shift I'm curious if you have any update on.

Sasan K. Goodarzi: Now that we're in a bit, and we've also seen a return to the DIY category shift, I'm curious if you have any update on what you're seeing for the industry overall, thus far. And then the second part is, on full service, you sound very happy with it, the 88 number recommendation score. Could you speak to some of the growing pain points you had last year and the fixes you're seeing this year as you're working your way through the early season? Thanks.

Scott Schneeberger: What you're seeing for the industry overall, thus far and then the second part is on full service you sound very happy with it. The 88 number recommendation score could you speak to some of the some of the growing pains points, you had last year and the fixes you're seeing this year as as you're working your way through the early season. Thanks.

Sasan K. Goodarzi: Yeah, sure. Thank you for the question. You know, our view, having been through however many tax seasons we've been through as a company, is that it's early in the season to estimate how many folks will ultimately file when it's all said and done. But with that said, our belief is still the same. You know, the total number of filers will probably be flattish, maybe up a little bit. Our perspective, you know, really hasn't changed.

Speaker Change: Yeah sure. Thank you for the question our view.

Speaker Change: Having been through however, many taxis as we've been through as a as a company is that.

Speaker Change: It's early in the season to.

Speaker Change: Estimate how many folks will ultimately filed when it's all said and done would that sent our belief is still the same and you know it will probably be total of number of filers will probably flattish maybe upload a bit our perspective.

Speaker Change: Really hasn't changed cause our focus is how do we win as many filers within the category that are that are going to file but so the first answer is our view it hasn't really changed the second on full service and some of the growing pains.

Sasan K. Goodarzi: Because our focus is how do we win as many filers, you know, within the category that are that are going to file. But so the first answer is our view, you know, hasn't really changed. The second on full service and some of the growing pains, you know, I would call out a few from last year compared to what we're doing this year.

Speaker Change: Would call out a few from last year is it compared to what we're doing this year. One is we actually made it difficult for customers to get into full service last year and by the way it was more.

Sasan K. Goodarzi: You know, one thing we actually made it difficult for customers to get into full service last year. And by the way, it was more trying to ensure that customers were really, really getting into the right service, but we had so much friction that we had created up front. And if you think about somebody that just walks into somebody's home or office and sort of hands everything over and says, here, get my taxes done, and then they interact until, you know, three, four weeks later, until their taxes are done, the notion of engaging and putting a lot of friction up front and asking a lot of questions up front is not a behavior they're used to.

Speaker Change: Trying to ensure that customers were really really getting into the right service, but we had so much friction that we had created upfront.

Speaker Change: [noise] about somebody that just walked into somebody's home or office and sort of handed everything over and says here get my taxes done that and then they interact.

Speaker Change: Until you know three or four weeks later on file their taxes are done.

Speaker Change: The notion of engaging in putting a lot of friction up and asking a lot of questions upfront is not a behavior that are used to so that was a big learning and growing paying a lot of which we have removed all the friction and engage get a customer to engage in expert depending on what we know about them very very early so that's one I think.

Sasan K. Goodarzi: So that was a big learning and growing pain, a lot of which we have removed all the friction and engaged, got a customer to engage an expert, depending on what we know about them, very, very early. So that's one. I think the second one is that we learned a lot about what did and did not work in our campaign last year.

Speaker Change: The second one we learned a lot about what did and did not work in our campaign last year and there's a lot. We are doing differently to really help customers. Both on air digitally but also the infrastructure that we are working on which by the way is not going to be done. This season right, we're going to be the best thing at four.

Sasan K. Goodarzi: And there's a lot we are doing differently to really help customers both on air digitally, but also the infrastructure that we are working on, which, by the way, isn't going to be done this season, right? We're going to be investing in it for several years, where the basic things, which, by the way, are very powerful, where if I did your taxes and you loved the work that I did for you, and by the way, our product recommendation score of 88 would suggest that our experts are delivering excellent service, you'd want to recommend me to a friend. Well, last year, you could not do that.

Sasan K. Goodarzi: For several years, where basic things, which by the way are very powerful where if I did your taxes and you loved the work that I did for you and by the way our product recommendation score of 80 eights with suggest that our experts of delivering excellent service you would want to recommend me to your friend well last year, you could not do that and this year. We're building the case.

Sasan K. Goodarzi: And this year, we're building the capability so you can actually recommend me to a friend. And that virality is a very big thing, especially when you have an 88% product recommendation score. And then lastly, 43% of those that use an assisted method and choose to switch to somebody else will actually go on Google and search, "is there a tax pro near me?". And again, that's another example of where we didn't have the infrastructure to show up. And we're building that infrastructure. So I can tell you for a fact, you know, in San Jose, California, right, or in Los Gatos, I should say, if you put in tax pro near me, we will show up at the top of the list, us being TurboTax. If you do it in Atlanta, which is where I was a few weeks ago, we don't show up.

Speaker Change: The ability so you could actually recommend me to a friend and that virality is a very big thing, especially when you have an 88 product recommendation score and then lastly is.

Sasan Goodarzi: 43% of those that use an assistant methods that choose to switch to somebody else.

Sasan K. Goodarzi: 43% will actually go on Google and Google is there a tax pro near me and again. That's another example of where we didn't have the infrastructure.

Speaker Change: To show up and we're building that infrastructure. So I can tell you for a fact and San Jose, California, right are in Los Gatos I should say.

Sasan K. Goodarzi: If value put in tax pro near me, we will show off the top of the list, we being turbotax. If you do it in Atlanta, which is why I was a few weeks ago, we don't show up a bit.

Sasan K. Goodarzi: It's because we're working on it. And that's an example of the things that we learned last year that we're implementing this year, but not just for this tax season, but really to nail it with excellence as we think about the future. Great, thanks.

Sasan K. Goodarzi: Cause we're working on it and then so that's an example of the things that we learned last year.

Sasan K. Goodarzi: We're implementing this year, but not just for this tax season, but really to nail it was excellent as we think about the future.

Speaker Change: Great. Thanks.

Scott Schneeberger: Thank you very much. The next question comes from Keith Weiss with Morgan Stanley. Excellent. Thank you guys for taking the questions. This one's for Sandeep as well.

Speaker Change: Very well.

Keith Eric Weiss: The next question comes from key twice with Morgan Stanley.

Speaker Change: Thank you guys for taking the question just one person I'm deep as well [noise] another margin question, but a little bit of a different angle.

Keith Eric Weiss: Another margin question, but with a little bit of a different angle. When it comes to generative AI, we've really been talking a lot about the potential top-line impact. Are there operating margin benefits that you guys can see through just better usage of the next-gen AI technology internally, whether it's stuff like code assist or whatnot? And then on the flip side of the equation, given that a lot of this assist stuff is still ramping up, is there anything we should be looking out for on the gross margin line in terms of just like these capabilities being that much more compute intensive and that much more impactful on COGS versus what you're seeing in consent assessment today?

Keith Eric Weiss: When it comes to generative <unk>, we're we're really been talking a lot about the potential top line impact or they're operating.

Speaker Change: <unk> margin benefits that you guys can see through.

Keith Eric Weiss: Better usage of.

Keith Eric Weiss: Technology internally, whether it's stuff like gorgeous just or whatnot.

Speaker Change: And then on the flip side of the equation.

Sasan Goodarzi: Given that a lot of this stuff is still ramping up is there anything we should be looking out for on the gross margin line in terms of just like these capabilities being that much more compute intensive and that much more.

Speaker Change: Impact long Cogs versus what you're seeing in consensus assessment today. Thank you.

Sandeep Bajula: Thank you. I think, Keith, so let me start by just reminding us all that the GEN-AI costs for the current fiscal year have been incorporated into our guidance, so that's first and foremost, but now, let me address the themes of your question. You know, as I think about the cost structure, and I'll focus on the cost structure, because that's where your question was, we actually feel that we are quite advantageous versus the market, in the sense that the data that we have, that we have touched on, that's residing behind our firewalls, that we are training our large language models on, that are delivering more contextually relevant answers at a faster speed versus other generally available large language We don't have our own data center, and we rely on AWS and other third-party data centers to run our models, so that, again, is a cost advantage because we don't have that build-out cost as some others might have.

Sandeep Bajula: So let me start by just reminding us all that the journey.

Sandeep Bajula: Cost for the current fiscal year have been incorporated into our guidance with us first and foremost, but now let me address the.

Sandeep Bajula: Themes of your question.

Speaker Change: Think about the cost structure and notebooks and the <unk>. The question was we actually feel that we are quite advantageous versus the market in the sense that the data that we have that we have touched on death regarding behind our firewall printing are launched language models on delivering more contextual.

Sandeep Bajula: Goldman answers at a faster speed versus other.

Sasan Goodarzi: <unk> large language models and that they are doing that at a fraction of the cost. So just from my unit Economics point of view Court, Virginia.

Sandeep Bajula: Essentially advantageous, but we are running too we don't have our own data center of you rely on AWS and other third party.

Sasan Goodarzi: Centres to run our model for that again is a cost advantage because we don't have the buildup caused some others Micah.

Sandeep Bajula: Furthermore, as I look across our business, I do see opportunities for us to, over time, improve our economics using GEN-AI and AI. Now, we've already given examples of things such as in customer success, where agents no longer have to take notes or spend minutes summarizing the call that they just had. AI does that, and that's just one small example, but I expect that to continue to lead to more efficiencies in our customer success calls, lead to better unit economics in a full service than live offerings, and, you know, as you kind of carry that forward, also how we are staffing our builders in terms of project managers to designers to engineers.

Sandeep Bajula: Furthermore, as I look across our business I do see opportunities for us to overtime.

Sandeep Bajula: Improve our economics using J, a I M E I that'd be wondering given examples on things such as being customer success weird agents no longer have to take notes so spend minutes.

Sandeep Bajula: Summarizing the call that they just had AI does that and that's just one small example, but expect that to continue to do two more efficiencies in our customer success caused me to more better unit.

Sandeep Bajula: Mix in a full service then life offerings and and you know as you kind of carry that forward also how we are <unk>.

Sandeep Bajula: Staffing a bogus in terms of you know the project manager or designers to engineers ratios. So I assume many opportunities for us to continue to benefit from Gen AI and I feel good about the early start that'd be have leading into some of those capabilities.

Sandeep Bajula: So, I see many opportunities for us to continue to benefit from GEN-AI, and I feel good about the early start that we have leading into some of those capabilities. Got it, so net net, it seems like a positive dynamic versus something that could drag on margins overall. But that would be the right takeaway. Thank you, guys. Ladies and gentlemen, this does conclude today's question and answer period. I will now turn the program back over to our presenters for any additional or closing remarks. All right. Awesome, everybody. Thank you for listening in. Thank you for your wonderful questions. Be safe. We'll talk to you next quarter. Thank you, everybody. Ladies and gentlemen, thank you for participating. This concludes today's conference call. The End

Sandeep Bajula: Got it submitted that it seems like a positive dynamic versus something that to drag on Martin's overall.

Sandeep Bajula: That that would be the right take wake us.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, this does conclude today's question and answer period I will now turn the program back overturned presenters for any additional or closing remarks.

Speaker Change: Alright awesome everybody. Thank you for listening and thank you for your wonderful questions be safe and we will talk to your next quarter. Thank you everybody.

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

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Sandeep Bajula: Mmm.

Speaker Change: Mmm Mmm mmm.

Sandeep Bajula: Alright.

Sandeep Bajula: Mmm.

Sandeep Bajula: Mmm.