Q1 2025 Intuit Inc Earnings Call
$1.00
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David: Good afternoon, my name is David and I will be your conference operator. At this time, I'd like to welcome everyone to Intuit's first quarter fiscal year 2025 conference call.
David: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during that time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press star and 2.
Speaker Change: Thanks David. Good afternoon and welcome to Intuit's first quarter fiscal 2025 conference call. I'm here with Intuit CEO Sasan Goodarzi and our CFO Sandeep Aujla.
Speaker Change: Before we start, I'd like to remind everyone that our remarks will include forward-looking statements.
Speaker Change: There are a number of factors that could cause Intuit's results to differ materially from our expectations.
Speaker Change: You can learn more about these risks in the press release we issued earlier this afternoon, our Form 10-K for Fiscal 2024, and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit's website at Intuit.com.
We assume no obligation to update any forward-looking statement.
Speaker Change: 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.
Speaker Change: 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.
Sasan Goodarzi: A copy of our prepared remarks and supplemental financial information will be available on our website after this call ends. With that, I'll turn the call over to Sasan.
Sasan Goodarzi: Great. Thank you, Kim. And thanks to all of you for joining us today. It was wonderful to see many of you at Investor Day. We hope you were inspired by our momentum and innovation that demonstrates the power of our AI-driven expert platform strategy, which is delivering tangible benefits for our customers and feeling into its growth. Thank you.
With that as context, let's talk about the first quarter.
Sasan Goodarzi: We're confident in delivering double-digit revenue growth and margin expansion this year, and we're reiterating our full-year guidance.
Sasan Goodarzi: The future is here, and it's AI-driven, and it will fundamentally transform every part of our work and personal lives.
Sasan Goodarzi: We've transformed the company from a tax and accounting platform to an AI driven expert platform. We're leading this transformation by creating done-for-you experiences where the customer is always in control.
Sasan Goodarzi: Enabled by AI, with access to AI-powered human experts, our platform fuels the financial success of consumers and businesses.
Sasan Goodarzi: We have a significant competitive advantage with our scale of data, data services, AI capabilities, ecosystem of applications, and our large network of AI-powered virtual experts.
Sasan Goodarzi: We're disrupting the categories we operate in to drive better money outcomes for consumers and businesses. The progress we've delivered and the proof points we're observing continue to bolster our confidence in our strategy.
Sasan Goodarzi: I will now share how our Big Bets are solving customer problems and powering our success as a platform.
Sasan Goodarzi: Starting with our consumer platform, BigBet3 is focused on helping customers make smart money decisions, take steps to improve their financial health year-round, achieve their best tax outcome, and accelerate the receipt of their refund.
Sasan Goodarzi: We're focusing on winning as an AI-driven expert platform by leading with ease of use, speed to completion, and best price for our customers.
Sasan Goodarzi: Our strategy is to first win in the do-it-yourself tax category by improving value for low-income filers, accelerating growth with more complex filers, and offering fast refund access.
Sasan Goodarzi: Second, we're disrupting the assisted tax category. We're showing how the new way of taxes done for you is superior in experience, speed, and price.
Sasan Goodarzi: We've expanded marketing to drive awareness ahead of tax season, and are working on methods to surface our experts in local search and match customers with the best expert for them.
Sasan Goodarzi: Third, we're driving year-round engagement with our consumer platform, accelerating money benefits including refund access and growing credit card mark costs are vertical such as prime and insurance, all of which accelerates monetization.
Sasan Goodarzi: Moving on to our business platform, our vision is to help customers run and grow their businesses end-to-end. We made significant progress during the quarter across two of our big bets.
Sasan Goodarzi: Our first bet is to revolutionize speed to benefit, delivering done-for-you experiences with Intuit Assist, our Gen-AI powered financial assistant.
Sasan Goodarzi: After successfully piloting Intuit Assist with over 2 million customers, it is now generally available to all U.S. QuickBooks Online customers.
Sasan Goodarzi: To help businesses manage cash flow, Intuit Assist uses AI agents to automatically turn emails, electronic documents, and handwritten notes into estimates, invoices, and bills.
Sasan Goodarzi: It spots potential cash flow shortages in real time and suggests solutions like applying for a line of credit.
Sasan Goodarzi: It also generates invoice reminders to help customers get paid 45% faster, an average of 5 days sooner, and automates accounting by matching transactions to bills and invoices for review.
Sasan Goodarzi: This is the power of our AI-driven expert platform, delivering tangible benefits to our customers, which we expect to drive increased adoption of our platform, and we are just getting started.
Sasan Goodarzi: Shifting the Big Bet 5 disrupts the mid-market, which represents an $89 billion TAM. We already have 800,000 mid-market customers in our franchise who can grow into our QBO Advanced and Intuit Enterprise Suite offerings.
Sasan Goodarzi: In fiscal year 2024, QBO advanced customers grew 28%, online ecosystem revenue grew 36%, and ecosystem ARPC was 5x that of the rest of the QBO base.
Sasan Goodarzi: We introduced Intuit Enterprise Suite, or IES, to expand further upmarket from where we are today with a configurable suite of integrated financial products for mid-market businesses.
Sasan Goodarzi: With IEF, we're focusing on addressing the needs of complex businesses, enabling multi-entity management, leveraging AI agents to boost productivity through powerful automation, and delivering actionable insights.
Sasan Goodarzi: While it's early days, I'll share two customer examples that highlight the opportunity ahead and give us confidence in our strategy.
Sasan Goodarzi: We signed an eight-entity RV park operator with approximately $10 million in annual revenue who was evaluating competitive solutions to streamline its workflow and consolidate reporting across entities.
Sasan Goodarzi: With the seamless upgrade to the IES platform, the company went from outsourcing its multi-entity reporting to a fractional CFO, which took several days, to being able to do this on its own in just five minutes now.
Sasan Goodarzi: With this data immediately accessible and at its fingertips, the company can make the decisions it needs to run and grow their business. Their CTO referred to IES as a game-changer for their business and values the relationship-based AI-powered support.
Sasan Goodarzi: We also recently signed an economic development organization with more than $60 million in annual revenue across 18 corporate entities.
Sasan Goodarzi: As part of its IES contract, this customer also adopted bill pay, payments, and payroll.
Sasan Goodarzi: For customers like this, having all of these services in a single platform solves many challenges by seamlessly integrating data that previously came from multiple apps and point solutions, helping them streamline operations and save time.
Sasan Goodarzi: Last month, we hosted our first ever Intuit Connects conference with more than 2,000 attendees, including mid-market businesses and the large accounting firms that serve them.
Sasan Goodarzi: We showcased our vision for an end-to-end business platform that fuels revenue and profitability growth for our business customers and the success of accountants.
Sasan Goodarzi: We spotlighted IES and the initial reaction we received at the event was overwhelmingly positive.
Sasan Goodarzi: Customers that have already been using the offering are strong advocates. Sharing that IEF is helping them see how their business is performing, saving them time, and helping them make the decisions they need to improve growth and cash flow.
Sasan Goodarzi: In addition, current customers are finding it easier and less costly to upgrade to IES than switch to an entirely new platform.
Sasan Goodarzi: We are excited, more than ever, to serve this $89 billion dollar mid-market TAM to fuel the success of large businesses and accountants.
Sasan Goodarzi: Wrapping up, we're honored to be ranked number three on Forbes America's best companies list which came out this month.
Sasan Goodarzi: Forbes evaluated the nation's largest public companies and considered factors such as financial performance, trust, and customer and employee satisfaction.
Sasan Goodarzi: With the progress and momentum we are delivering, we continue to believe we are well positioned to win as an end-to-end platform with done-for-you experiences that fuel the success of consumers, small and mid-market businesses. Now let me hand it over to Sandeep.
worth his $960 million last year.
versus $0.85 a year ago.
Sasan Goodarzi: Our graph results reflect a restructuring charge of $9 million recognized in the quarter related to the organizational changes we announced in July, and a $42 million net loss on a private company investment.
Now turning to the business segment.
starting with the Global Business Solutions Group.
Sasan Goodarzi: Our business platform helps customers run and grow their business end-to-end. Global Business Solutions Group revenue grew 9% during Q1, driven by online ecosystem revenue growth of 20%, a two-point acceleration from the year-over-year growth we saw in Q4.
Sasan Goodarzi: This was partially offset by a 17% decline in desktop ecosystem revenue, reflecting the desktop offering changes we made in early fiscal 2024 and highlighted last quarter.
Sasan Goodarzi: The momentum in our online ecosystem is demonstrating the power of a small and mid-market business platform and the mission-critical nature of our offerings as customers look to grow their business and improve cash flow in any economic environment.
Sasan Goodarzi: QuickBooks online accounting revenue grew 21% in Q1, driven by customer growth, higher effective prices, and makeshift. We continue to prioritize disrupting the mid-market through our focus on both go-to-market motions and product innovations, which we expect to continue to drive ARPC growth.
Sasan Goodarzi: Online services revenue grew 19% in Q1, driven by money offerings, which include payments, capital and bill pay, payroll and MailChimp.
Sasan Goodarzi: Within money, growth in the quarter reflects higher payments revenue, which was driven by customer growth, higher effective prices, and an increase in total payment volume per customer.
Sasan Goodarzi: and QuickBooks Capital Revenue Growth. Total online payment volume growth in Q1 was 17%.
Sasan Goodarzi: Within payroll, revenue growth in the quarter reflects customer growth, higher effective prices, and a makeshift towards higher-end offerings.
Sasan Goodarzi: Within MailChimp, the revenue growth in the quarter was driven by higher effective prices and a paid customer growth.
We're seeing good progress serving mid-market customers in Mailchimp.
but are seeing higher churn from smaller customers.
Sasan Goodarzi: We are addressing this by making product enhancements and driving feature discoverability and adoption to improve first-time use and customer retention.
Sasan Goodarzi: While we feel good about the product work we are prioritizing, we are expecting it to take a few quarters to deliver improved outcomes at scale.
Sasan Goodarzi: In addition, beginning next quarter, we are lapping the price changes we made in Q2 of last year.
Sasan Goodarzi: We remain confident in, and are executing on, our vision of an end-to-end business platform that integrates the power of Mailchimp and QuickBooks services, enabling our customers to both run and grow their business, all in one place.
Sasan Goodarzi: As we shared at Investor Day, we win as a platform company. Our online ecosystem revenue growth reflects the progress we are making with our strategy of serving both small businesses and mid-market businesses with more complex needs.
Sasan Goodarzi: This represents an addressable market of over $180 billion, roughly half of which is mid-market.
Sasan Goodarzi: In Q1, Online Ecosystem Revenue grew 20%, including approximately 42% growth in Online Ecosystem Revenue for QBO Advanced and Intuit Enterprise Suite. This reflects our progress serving customers with our mid-market offerings.
Sasan Goodarzi: Online ecosystem revenue for small business and the rest of the base grew a strong 17%.
Sasan Goodarzi: We are excited about our progress in serving mid-market customers while continuing to focus on small businesses.
Sasan Goodarzi: Looking ahead, we continue to expect online ecosystem revenue in total to grow approximately 20% in fiscal 2025.
Sasan Goodarzi: Turning to desktop. During Q1, desktop ecosystem revenue declined 17%, including QuickBooks desktop enterprise revenue, which declined in the low teens.
as we described last quarter.
Sasan Goodarzi: Q1 Desktop Ecosystem Revenue reflects changes the company made to its QuickBooks Desktop offering in early fiscal 2024.
Sasan Goodarzi: to complete the transition to a recurring subscription model, including more frequent product updates. We continue to expect desktop ecosystem revenue.
Sasan Goodarzi: to return to growth in Q2, and overall, we expect desktop ecosystem revenue to grow in the low single digits in Fiscal 2025.
Sasan Goodarzi: Turning to a consumer platform. Our consumer platform is helping customers make smart money decisions, take steps to improve their financial health year-round, achieve their best tax outcome, and accelerate receipt of their tax refund.
starting with Karate Karma.
Sasan Goodarzi: Building on the momentum, we saw each quarter in fiscal 2024, credit karma revenue growth accelerated to 29% during Q1, reflecting strength in personal loans, auto insurance, and credit cards.
Accelerate money benefits across the consumer platform.
and Girl Prime.
Sasan Goodarzi: and insurance. Our vision is to create one consumer platform with seamless integration of TurboTax and Credit Karma products that delivers year-round benefits for customers and drives monetization for Intuit. We are excited by our significant progress this year.
Sasan Goodarzi: Moving to consumer and pro-tax groups. Consumer group revenue declined 6% as we left the period a year ago that included the extended tax filing deadline for most California filers. Our focus this season is on ease and speed at the best price.
Sasan Goodarzi: A strategy is to win in DIY tax, disrupt the assisted tax category, and create one consumer financial platform by delivering year-round benefits leading to engagement and monetization.
Sasan Goodarzi: We launched new experiences during the extension season this year, and the results we saw further bolster our confidence in our strategy as we look ahead.
Sasan Goodarzi: Turning to the pro-tax group, revenue was $39 million in Q1, down 7% as we left the period a year ago that included the extended tax filing deadline for most California filers.
Sasan Goodarzi: In summary, I am pleased with our early momentum this fiscal year and our opportunities ahead.
Sasan Goodarzi: 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 approximately 3.4 billion in cash and investments and 6.1 billion in debt on our balance sheet.
Sasan Goodarzi: We repurchased $570 million of stock during the first quarter. Depending on market conditions and other factors, our aim is to be in the market each quarter to offset dilution from share-based compensation over a three-year period.
Sasan Goodarzi: The board approved a quarterly dividend of $1.04 per share, payable on January 17, 2025. This represents a 16% increase per share versus last quarter.
Sasan Goodarzi: total company revenue growth of 12 to 13 percent, gap operating income growth of 28 to 30 percent, non-gap operating income growth of 13 to 14 percent, gap diluted earnings per share growth of 18 to 20 percent, and non-gap diluted earnings per share growth of 13 to 14 percent.
Sasan Goodarzi: GAAP guidance reflects an expected 14 million restructuring charge related to our related to the reorganization we announced in July.
Sasan Goodarzi: Our guidance for the second quarter of fiscal 2025 includes total company revenue growth of 13 to 14 percent.
Sasan Goodarzi: This includes our expectation of single-digit decline in consumer group revenue due to some promotional changes in retail channels largely related to our desktop offering.
Sasan Goodarzi: This only impacts revenue timing and does not impact overall unit or revenue expectations for fiscal year 2025.
Sasan Goodarzi: Gap earnings per share of $0.84 to $0.90 and non-gap earnings per share of $2.55 to $2.61.
Sasan Goodarzi: You can find a full FISCO 2025 and Q2 guidance details in a press release and on our fact sheet.
Sasan Goodarzi: We have a durable advantage with our depth of data and AI capabilities and the strategy to win, given the proof points we're observing. And with less than 5% penetration of our $300 billion in TAM, we have a massive runway ahead of us. Let's now open it up to your questions.
Speaker Change: Go to Beadaholique.com for all of your beading supplies needs! Beading supplies needs!
Speaker Change: At this time, if you'd like to ask a question, please press the star and one keys on your telephone keypad. Keep in mind, you may remove yourself from the question queue at any time by pressing star and two.
Speaker Change: We'll take our first question from Brad Zelnick with Deutsche Bank. Please go ahead, your line is open. Great, thank you so much for taking the question.
Speaker Change: And congrats on a strong start to the year. As we look through the mix, you know, starting the year with about 20% online ecosystem growth.
Speaker Change: I think was just barely in line with what some were modeling. How should we think, Sandeep, about the progression in drivers that'll get us to your full year of GBS guidance and what might be the greatest sources of upside?
Speaker Change: And as we look ahead and you know it's the same things that drove the acceleration. It is a continued strong customer engagement of the platform. We saw good attrition. That's how good retention sorry low attrition after our price changes. We are seeing good makeshift. I shared that the mid market grew approximately 42 percent.
Speaker Change: and Joe Walsh. And that is driving the improvements and should continue for the remainder of the year. And we're seeing good adoption of our services. So all of those things are what we feel confident in and reinforces our confidence in the guidance that we reaffirmed today.
Speaker Change: Thank you. It's very helpful. Maybe just a quick follow-up. If I look at TurboTax marketing expense...
Speaker Change: in the quarter, I think it was up $46 million year-on-year, and a strategy that has you out in front of filers even earlier this year.
Speaker Change: and ahead of the season, which, by the way, we see the ads, and I think they're great. How should we think about the overall strategy and expected marketing spend over the full season? Thank you.
Brad, as we shared previously
Speaker Change: Our strategy with Consumer Group is to disrupt the sister tax category. And one of the things that we know for as we have continued to evaluate the market is many customers make the decision on who they're going to use the following year to do their filing well before January which is when traditionally the Consumer Group marketing campaigns would start.
Speaker Change: With that, and as we shared previously, we started our marketing campaigns earlier, and that actually drove really strong consideration by what we call prior-year assisted, those who got their taxes done through the assisted method this year. We saw a strong lift in traffic and consideration, and even more so in our targeted segments that we are going after for the assisted category. So that reinforced our belief that that was a good spend, good ROI, and bolsters our confidence for the full year. You should expect us to...
Speaker Change: continue to optimize our spend throughout the entire tax season and I would expect consumer group marketing budget to be up slightly but not not more so than that.
Thank you so much, very helpful.
Speaker Change: We'll take our next question from Keith Weiss with Morgan Stanley. Please go ahead, your line is open.
Thank you guys for taking the question.
Congratulations on a good start to the year.
Speaker Change: Sorry to harp on a part of the equation that's not going as well. But on MailChimp, the churn at the lower end of the base that you mentioned on the call, I don't recall hearing that previously from you guys. So is that a new phenomenon that you're seeing in the marketplace?
Speaker Change: and on the flip side of the equation, can you talk to us a little bit about where we are with the integrated bundled solution. It seems to make, there's a lot of industrial logic behind being able to offer your customers both the backend and the front office solution together. Where are we in teasing out those synergies and getting that bundle in the market and driving good results in the market?
Speaker Change: Hey Keith, thanks for your question. Let me take it. You know, first and foremost...
Speaker Change: MailChimp is actually part of that suite and available to our customers today.
integrated experience across all of our services.
Speaker Change: I would say, think about the expectation of, you know, several quarters from now, we should be in the marketplace with our really end-to-end experience that...
Speaker Change: where there's deeper and much depth in the integration of the product and more importantly, all the data and AI capabilities that allows us to create done-for-you experiences.
Speaker Change: So, think about it as several quarters, we are in sort of final stages of building it out and having customers tested.
Speaker Change: So that's one element of your question. The second element of your question is the reason we called out...
customer growth in the mid-market.
Speaker Change: It made discovery and usability tougher than it should be for the very, very small customers. And so we have a team that's really focused on first-time use and first-time benefit.
Speaker Change: so that these smaller customers can get the benefit of some of these larger innovations that I just talked about that our mid-market customers are enjoying. And we just wanted to be clear and call it out.
Speaker Change: And just to be clear, it's more of an idiosyncratic issue with that innovation and not a broader market commentary or macro weakness that sometimes you see in smaller customers and more marketing focused solutions. It's not about the macro.
Speaker Change: It is not at all about the macro. It's driven entirely by all of our innovation that is benefiting the larger customers, but frankly, I think we have an opportunity to make the first-time use for smaller customers much better, which is exactly what we're working on. But it is not macro.
Perfect, super helpful, thank you so much.
Yep, thank you.
Speaker Change: We'll take our next question from T.D. Penegrahi with Mizuho. Please go ahead, your line is open.
Speaker Change: Thanks for taking my question and congratulations on a good start to the year.
Speaker Change: I want to dig into the online ecosystem and mainly QBO, online accounting. Good to see that two-point acceleration. But so you guys started this mid-market, go-to-market sales team hiring. So wondering, where are you in terms of hiring and ramp? And have you started seeing like the contribution this quarter from that, that drove that acceleration? And if so, how should we think about the contribution for subsequent quarter? Is it something we should see now or will it take a year for that to, you know, for the team to ramp and start?
are contributing webinar.
Speaker Change: Thank you for your question. Let me kick us off. First of all, if you reflect back on what Sandeep talked about earlier, when you look at our overall 20% online ecosystem revenue growth, 42% of that, not 42% of it, but we had 42% growth.
Speaker Change: when you look at our QBO Advanced and Intuit Enterprise platform and all the services that comes with it. And we wanted to explicitly call that out because
Speaker Change: As we continue to build out our go-to-market capabilities in the mid-market, it will benefit QBO Advanced and Services, and it will benefit, of course, with the Enterprise Suite.
We are actually seeing the benefit now, and it's material.
Speaker Change: We've also added over 200 account managers, business development folks that are
Speaker Change: You know, it came from more services, it came from a mid-market, which is both TBO Advanced and Intuit Enterprise Suite. It came from better retention, higher ARPC, better mix.
Speaker Change: So we're sort of clicking on all the key cylinders that strategically we've communicated to you all, and we expect that to continue.
Speaker Change: Thanks for the color and quick follow-up to your Q2 guidance for consumer. I understand that all the January quarter is a big chunk of that comes from desktop TurboTax. I understand that but what was this promotion about? I understand that you guys wanted to push a consumer to online but what's driving the desktop promotion?
Speaker Change: Yeah, first of all, a couple of factors. The primary factor is, you know, typically we would do promotions from December timeframe to middle of January. And really what we've aligned more so this year with our retail partners, because this is TurboTax Desktop, is really the buying patterns and the buying behaviors of those consumers that buy our desktop product. What we've done is we've really lined up...
Speaker Change: the promotional time frame that now starts much later in January and goes beyond January.
Speaker Change: And that positions us better to deliver for consumers, deliver for their buying behaviors, again, on TurboTax Desktop. And because of that move, that really shifted revenue into Q3. Our full year is as-is, and it just shifted between quarters. And we also, of course,
Speaker Change: estimate then also the timing of the IRS opening and those factors play into it, but the biggest one is what I just described. And so we feel very bullish and confident about the year and particularly because of what Sandeep articulated.
Speaker Change: and our campaign, which we've never tested in the time of the year that we did this year. And frankly, we're more bullish and confident about this coming season than we have been for a while, just because a lot of the results that we saw based on everything that we launched.
Thank you.
Yeah, very welcome Siddhi.
Speaker Change: We'll take our next question from Scott Schneeberger with Oppenheimer. Please go ahead, your line is open.
Speaker Change: Thanks very much. One question for each of you, and I think they're kind of tied together. Sasan, the early marketing strategy sought earlier than ever before. Brad brought it up, and we've talked about it a little bit since. It was good, but I think that you had changed that up a little bit due to NAPP, and just curious if you could give us a state of the union on how you are going to market, what that campaign is, and you said that you're seeing early success. If you could just elaborate a little bit more on that. And then, Sandeep, for you, the EPS guide for the upcoming quarter, we're seeing revenue growth in the next quarter, but that is guided down.
Speaker Change: on the ground year-over-year. So if you could just clarify it a little bit more, I think you've given us the big components, but just if you could talk us through that a little bit, I'll turn it over. Thank you both.
Speaker Change: Thank you for the question. Let me take the tax element and then I'll turn it over to Sandeep. First of all, from all the learnings and insights that we've had to really disrupt the assisted tax segment, one element was just really a lot more clarity and precision in terms of timing of decisions by the customers that have somebody else do their taxes for them.
Speaker Change: And that's what really drove the early marketing campaign. And there was a couple of things we were looking for. One, now that we're in market, does it raise heads?
Speaker Change: It raised, there was engagement better than what we thought and price was a significant factor.
Speaker Change: in a very positive way, and that informs the campaign that we are putting together for season.
Speaker Change: and really the campaign we're putting together for season is really about demonstrating
Speaker Change: what a new way of taxes looks like and what it means, and it will focus on experience, speed, and best price.
Speaker Change: And to specifically answer your question around what we learned, one of the biggest things that we learned in the campaign that we just ran was really the focus is about the new way. And the focus is about a better experience, and it's about a better price.
Speaker Change: the experts of the old way is a bad experience because at the end of the day experts are critical to
are experienced, the accountants that partner with us.
Speaker Change: There are a lot of them are on our platform the 12,000 experts that we have on our platform are the very accountants that we Partner with and the thing that we learned is to ensure that we really focus on the experience the speed of it and the price of it
Speaker Change: and then not at all depict that the expert in the old way doesn't deliver a great experience or is not a good expert. So that's the learning that we've had. That's how what we are incorporating as we look at the campaign that we're developing. I will just end with the punchline that it worked really well and we're super excited about it.
Speaker Change: Before I turn it over to Sandeep, I wanted to just use this opportunity since you asked about tax.
Speaker Change: Some of the news this week around the new administration and whether or not they would create new tax software or free tax software, and I just wanted to touch on that while I have the floor.
Speaker Change: And what I would share with you is a couple of key priorities that I think all of you have seen in the news, but I've personally also learned that really matters to the new leaders and new administration coming in.
Speaker Change: One is being very aggressive on budget cuts and workforce reduction to really streamline the operations of the government. Two is to really look at the regulatory environment and to reduce the regulatory environment that ultimately will benefit consumers and businesses.
Speaker Change: Sir, reduce fraud whether it's from identity theft and or loans and then last but not least is if there's an opportunity to actually Simplify the tax code. I'm actually excited about those priorities because those are all priorities that we can help as a company
Speaker Change: I would tell you that the last thing that sort of is on the minds of the new leaders coming in is adding to the bureaucracy and adding to the investment levels of something that already exists in private industry.
Speaker Change: So, when it comes to free tax software, as you all know our stances, it already exists. Private industry has free software available to all Americans.
Speaker Change: Our perspective in my learning, in terms of what's most important, the last thing that the new folks want to do is to add to that bureaucracy and to add investments in an area where the offerings already exist and private industry already serves it. With all that said...
Speaker Change: Free is available to all consumers and if tomorrow five new free tax offerings become available in the market
Speaker Change: It does not have an impact to the structure of the market because free is a commodity for the do-it-yourself category.
Speaker Change: I want to just opportunistically touch on that while I have the floor, Sandeep, I'll turn it over to you on EPS. Sure. Hey, Scott. On the EPS, one thing to keep in mind is that we always optimize our spend for the full year and we continue to feel really solid about our guidance for the year. And as I look internally how we are leveraging AI and how we work as a company, I see tremendous opportunities for us to continue to expand our margin. But now let me address your question on Q2.
Speaker Change: Credit Karma is in a very different position this year. Last year, Q1, we were negative 5%. This year, we're 29%. We're seeing partners lean in. So we are also leaning into our go-to-market and our marketing campaigns there and seeing exceptionally strong ROIs and payback periods there. And lastly, in the Global Business Solutions Group, we touched on the approximately 200 people that we have in the mid-market.
Speaker Change: uh, you know, for that now in a run right from Q one heading into Q two
Speaker Change: Great, thank you both for all the color and Sasan for that extra color and very well put.
Thank you very much.
We'll take our next question from Ramo Lenchao with Barclays.
Please go ahead, your line is open.
Speaker Change: If you look at the payment volumes, if I heard you correctly, it was 17%, decelerated a little bit. Can you talk a little bit about the puts and takes there, because obviously you revamped the payment platform, and so that should be an area of healthy growth going forward as well. How do I think about that number in that context? Thank you.
Speaker Change: continues to be an area where we're very bullish particularly as we penetrate with services not only with small businesses but also in mid-market.
Speaker Change: There was a couple of factors that played into the 17% for the first quarter. One is the storms in the east coast.
Speaker Change: actually impacted a lot of service-based small businesses. We saw the impact and we actually saw it start to come back. So that's one element. And also another element is just number of days that fell into this quarter versus the same quarter last year. So those factors played into it and we expect it to, in essence, accelerate as we look ahead.
Thank you.
Speaker Change: Yeah, great question. First of all, just briefly start with the context of our entire strategy as a company is to create done-for-you experiences.
Speaker Change: Marketing is done for you, quote to cash is done for you, your books are done for you, your accounting is done for you, your taxes are done for you, and connecting you to financial products that are right for you as a consumer are done for you. The customer is always in control and always on the path to an AI-powered human expert.
Speaker Change: They can take an email, they can take a picture of a handwritten note, they can take any file.
Speaker Change: And we will create on their behalf an estimate, an invoice, a bill. We will do the accounting for them in the background and match and categorize everything for them. We will ultimately help them if they're a construction company on the road, have to pay for the handwritten note that they just took a picture of and get paid right there on the job site.
Speaker Change: be able to help them with where they're going to have cash flow shortfalls and make immediately a line of credit available for them. That's now all Intuit Assist, the Gen AI powered assistant that will do the work for our customers, generally available for all of our customers.
Speaker Change: That's a huge deal. You can imagine, as we look ahead, our goal is to create a done-for-you experience across the entire platform, across Mailchimp and QuickBooks and all of the services.
Speaker Change: To answer your question around tax, I think what I would say is, you will see this year, based on all of the investments that we've made over the last several years,
Speaker Change: leveraging data and AI to dramatically streamline experiences by how we leverage the data and how we streamline getting right to the refund. It'll make it far more superior and easy. Our focus is best experience.
Speaker Change: the fastest and at the best price for those that want to do it themselves, but also for those that want our experts to do it for them. So our experts are going to be far more effective and efficient. They're going to be able to get your taxes done in less than an hour at the best price, all of which is the result of all of the data and AI investments and revamped experiences that we will have in season this year.
Looking forward to that. Thank you.
Thank you.
Speaker Change: We'll take our next question from Taylor McGinnis with UBS. Please go ahead, your line is open.
Speaker Change: You know, you're seeing more front-end loading of expenses compared to last and that should drive
Speaker Change: stronger growth in the second half. Maybe you can just talk about some of the drivers in the second half expansion, you know, despite some of the continued scaling on the go-to-market investments and other areas. Thanks.
Sure. Hey, Taylor.
Speaker Change: So the investments that we started early on both on the consumer side as I shared that drove
Speaker Change: and the mayor of San Diego. We have a lot of people that have come to our site. A lot of headlifters with the prior assisted that came to our site. That is something that will pay
Speaker Change: So, it is all consistent with a strategy which is optimize the spend to maximize ROI for the full year, and that's what's giving us the confidence that the trajectory continues to strengthen into the back half.
Perfect, thank you so much.
Speaker Change: Thank you. We'll take our next question from Michael Turin with Wells Fargo Securities. Please go ahead, your line is open.
Michael Turin: Hey, great. Thanks very much. I appreciate you taking the questions. Sasan, I'm going to give you a chance to go back to assist. We've seen the QuickBook announcements as well. I was hoping you could just level set for us how you're thinking about capturing the value of those, whether it's through monetization or just other costs or economic benefits you're observing as you start to get those tools in the hands of more of your customers.
Speaker Change: And Michael are you are you referring to the intuitive this that we just announced this week? Is that what you're referring to?
I am, yep.
Speaker Change: Got it. Yeah, absolutely. So I would say, you know, the the biggest thing that we learned Having this in the hands of you know, two million customers before we made it generally available and also Experiences that we had in beta and alpha for new prospects There's really I would say two big outcomes
improved conversion.
Speaker Change: retention and really a third outcome, which is improved adoption of services. Those are and those if you think about back to what Sandeep and I shared, I think it was 18 months ago at Investor Day.
Speaker Change: Our perspective around creating done-for-you experiences with Intuit Assist, we believe will lead to new customer growth.
Speaker Change: It will lead to higher adoption of services and we believe over time there could be offerings stand-alone SKUs that are completely, they do all the work for you and they could be separate price SKUs.
Speaker Change: What we've proven so far to ourselves is this creates new customer growth, it creates better retention, but it also creates better adoption of services. So if you think about what we just launched this week, which is you can take an email,
Speaker Change: and create a bill, that all drives bill pay and payment growth as an illustrative example.
Speaker Change: So those are the things that we've learned as we've been sort of in beta and alpha and now that we're in GA and particularly what we expect this coming season in TurboTax, new customer growth, adoption of our services is what we see as the outcome and why we're so excited as we look ahead.
Speaker Change: Great. If I can just ask on the credit karma bounce back.
Speaker Change: Based on what you're seeing, is there any way to help just split how much of that is macro versus something product specific you've maybe incorporated into the experience there and maybe just help level set what you're seeing today versus what you're guiding for rest of the year given the fiscal year guide now sits below the run rate you just put up this quarter. Thank you.
Yeah.
Speaker Change: the conference. It's the product team as they investing in driving the right experiences and engagement across the platform. And as they added more segments such
Helpful. Thank you.
You're very welcome.
Speaker Change: We'll take our next question from Alex Zukin with Wolf Research. Please go ahead, your line is open.
Speaker Change: Hey guys, thanks for taking the question and congrats on the results. Sasan, I wanted to get your take on just the notion and the topic of what you're seeing in your business right now from a SMB demand environment perspective. Kind of are you starting to see the beginnings of a recovery? How and when do you expect that to show up?
Speaker Change: and on the very fast developing agentic opportunity for kind of AI utilization and modernization in your customer base, when do you believe or strongly think we should start seeing impacts from a modernization standpoint, both with assist around either does it change the magnitude, does it change the strategy over the next few quarters?
Speaker Change: Yeah, great. Thank you, Alex, for the for the question. I'll take the first one. I would say a couple of things. One.
Speaker Change: It's a stable environment. Our belief, which is not baked into our guidance, is that
Speaker Change: We will see an improved environment as we look ahead in 2025, particularly just with some of the things that I mentioned earlier around just interest rates, jobs, the regulatory environment. These things have a real burden on businesses, and we believe that
Speaker Change: a better future is to come, none of which we're making and assuming, but important to say.
Speaker Change: The 20% online revenue growth that we delivered in Q1 and that we would expect, you know, the rest of the year.
Speaker Change: run and grow their business in one place rather than multiple apps where they don't they spend a bunch of money they don't really understand how their business is performing and And we're digitizing that with our with our platform and so our growth that you are
Speaker Change: that we're reporting, that you're experiencing, is all because of our innovation. And we believe that as demand starts improving, we think that will be impactful positively to our results.
Speaker Change: The second element of your question, listen, our core thesis that we have proven over the years and particularly internally as we just launched Intuit Assist and made it generally available to all.
Speaker Change: is that the more we can do the work for customers, the more we will drive new customers into the franchise.
the more we will drive penetration of services.
Speaker Change: And if you look at Intuit Enterprise Suite, the biggest thing that we're learning from customers is they love the experience. Our AI agents are doing the work for them, helping them understand the performance of their business, helping them provide insights into things that may happen and actions that they should take. Those are all our AI agents.
Speaker Change: and we believe our AI agents can ultimately enable them to do the work of a CFO, of a CMO, of a sales officer, of these mid-sized businesses.
Speaker Change: And to get to the essence of your question, we haven't baked any of that into our year. We believe that these are going to be contributors of growth into the future, and of course our desire is accelerated growth.
Speaker Change: Hiring from a go-to-market perspective, is it more just shifting timing to the first half to Taylor's point?
Speaker Change: So, all to say, again, we optimized spend for the year, and when we saw revenue uplift that gave us a little bit more flexibility to lean into Q1.
Perfect, thank you guys.
Thank you, Alex.
Speaker Change: We'll take our next question from Brad Rybak with Stiefel. Please go ahead. Your line is open. Great. Thanks very much. Sandeep, in the quarter, money represented well over half of the growth in online services. Should we expect that to continue here for the rest of the year, or will the next shift?
Speaker Change: You know, Brad, we don't, of course, guide by each sub-segment, but we feel very bullish and confident in our money strategy, which includes, of course, payments, bill pay, and capital. The momentum, as you pointed out, has been strong in Q1, and I would expect that to continue throughout the year. And, you know, what I would point you back to is our confidence, our utmost confidence in that 20% online ecosystem growth for the year as we continue to scale the business, and the money portfolio is going to be a key contributor, is a key contributor to that confidence.
Speaker Change: Got it. And just one follow-up. Given Sasan's comments on MailChimp and your comment right there and the overall confidence in the 20%, it would feel like the recovery in MailChimp is more a driver for next year than needed for this year?
Speaker Change: I would think about the MailChimp as a several-quarter journey. We really want the team to nail the first-time use experience. We have internal KPS all around customer behavior and all related to first-time use, FTU, what we call internally. So yes, that's something that we're being patient with because we want a team to focus on the customer experience, and that's not something that we are banking on for the confidence I shared in the 20%.
Awesome, thanks very much.
You're very welcome.
Speaker Change: We'll take our next question from Brent Thill with Jeffries. Please go ahead, your line is open.
Speaker Change: I think there's some fear among investors that this is a much lower-margin business that's going to require a heavier lift and a difference on the market.
Speaker Change: So if you could just comment on how you think the long-term dynamics of that plays out.
Speaker Change: similar to, I think, the concerns investors had four or five years ago when we talked about disrupting the assisted category and how we would do that given we're talking about experts.
Speaker Change: And I would tell you that the answer that we gave then and the answer I'll give you now, there are a lot of parallels.
Speaker Change: The essence of our scale is because of all of our data investments, all of our AI investments, and all of our platform services. When you look at QBO Advanced and Intuit Enterprise Suite, it's actually fueled by a lot of the platform services that we have built over the last several years.
Speaker Change: all the services that we already have, coupled with higher ARPC, it's actually far more lucrative.
Speaker Change: to play a dual role. Number one, to continue to accelerate our growth. As you heard Sandeep talk about earlier, the overall online revenue growth was 20 percent and
Speaker Change: that the variable margin of our TurboTax 5 was actually higher than just the TurboTax on its own. We believe the same will play out here.
Great answer, thank you.
Yeah, thank you.
Speaker Change: We'll take our next question from Mark Murphy with J.P. Morgan. Please go ahead.
Mark Murphy: Thank you very much. On the QuickBooks Enterprise Suite, it's clearly showing robustness. Sasan, how is the early response you're seeing if you can speak to the $20,000 ARPC mentioned earlier? Because you had mentioned a couple of, I think, surprisingly large customer wins on the call today. And I'm just wondering if you can comment on the response to some of the advanced functionality that relates to multiple locations and entities and consolidated segment reporting.
Sasan Goodarzi: Yeah, Mark, the way I want to answer your question is I, you know, frequently will engage our large accountants and accounting firms and these large businesses, and I have had the pleasure and the opportunity to engage a lot of them in a couple of day period very recently at Intuit Connect.
Sasan Goodarzi: And listen, I don't want to downplay what I'm about to say, but money is actually not the object here. These businesses, you know, when I spoke to the CFOs of these businesses or the owners of these businesses,
Sasan Goodarzi: The words that they use is you've changed my life as a business. This is a game-changer.
Sasan Goodarzi: for really two, I would say, significant reasons. You know, one, they can actually see how their business is performing. So put that aside that they go from days of trying to consolidate and understand how their business is performing to now minutes.
Sasan Goodarzi: is actually quite significant. The other is, when you go from using multiple apps and point solutions, everything is in one place.
Sasan Goodarzi: The amount of digitization that happens across all of your money movement, whether it's bill pay, whether it's payments, whether it's payroll, and having all of that in form.
Your dashboard every day is a complete game changer.
Sasan Goodarzi: So the biggest thing that we hear from them is actually about more things they would like to see. And from new customers that are in sectors that we don't yet serve, how can we serve them far more quickly because they're dying to get on into an enterprise suite. So that's the way I would sort of describe.
Sasan Goodarzi: the reaction. The other thing that we're working on, and I'll just end with this, is making sure that we also provide capabilities to fuel the success of accountants.
Sasan Goodarzi: and our sort of monetization model for accountants that not only is good for them, but good for us to really together be able to serve the market together. And we're excited about both.
Thank you.
Yep, you're very welcome.
Speaker Change: And that is all the time we have for questions today. I will turn the program back to our speakers for any additional or closing remarks.
Speaker Change: All right. Well, awesome. Thank you. Listen, everybody, thank you for your time. Thank you for all your questions. Be safe, and we'll see you soon. Bye, everybody.