Intuit (INTU) 20 Nov 172018 Q1 Earnings call transcript

Company Profile

Participants

Jerry Natoli	VP, Finance and Treasurer
Brad Smith	Chairman and Chief Executive Officer
Neil Williams	Chief Financial Officer
Michelle Clatterbuck	Incoming Chief Financial Officer
Brent Thill	Jefferies
Kash Rangan	Bank of America/Merrill Lynch
Matt Fall	William Blair
Adam Holt	MoffettNathanson
Michael Nemeroff	Credit Suisse
Jesse Hulsing	Goldman Sachs
Kirk Materne	Evercore ISI
Michael Millman	Millman Research
Ross MacMillan	RBC Capital Markets
Scott Schneeberger	Oppenheimer
Jennifer Lowe	UBS
Matthew Wells	Citi
Jim MacDonald	First Analysis
Nandan Amladi	Deutsche Bank

Call transcript

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Operator

Good afternoon. My name is James and I will be your conference facilitator. At this time, I would like to welcome everyone to Intuit’s First Quarter Fiscal Year 2018 Conference Call. [Operator Instructions] With that, I will now turn the call over to Jerry Natoli, Vice President, Finance and Treasurer. Natoli?

Jerry Natoli

for joining thanks and James all us. for Thanks, you, the line we couldn’t open. hopefully hear quite James, is so If it’s know. not, let and please work the communications line us XXXX and call. afternoon welcome Intuit’s quarter Good to fiscal first conference Brad Smith, and CFO; our I am Clatterbuck, here our and Williams, Michelle CEO; CFO. Chairman incoming our Neil with

Before from everyone Intuit’s of our factors could would cause remarks our are will remind I we There number to include to a materially differ results expectations. start, like that forward-looking statements. that

the in fiscal risks release these other about more learn our for can earlier issued XX-K SEC afternoon, XXXX press this You we our filings. Form and

All intuit.com. the Investor We of any Relations at obligation available no website update to Intuit’s those documents assume forward-looking are page on statement. of

a of non-GAAP basis. Some in presented numbers the these remarks on are

worldwide the and numbers that, copy available release. on metrics. non-GAAP to call be and reconciled after call this business have current in growth refer rates A website and will period will GAAP prepared With otherwise turn associated Unless versus Brad. ends. of remarks to comparable year the press supplemental over period prior the rates the information our all noted, refer metrics growth business I and comparable today’s financial the We to our

Brad Smith

to thanks for all and Jerry, joining Thanks, you of us.

ecosystem grew observations growing Online strong We surpassing continues quarter targets. and year-over-year accelerating. grew over Online, grew in XXX,XXX QuickBooks XX%. the Online with backdrop, the subscribers. States, financial with base with during overall QuickBooks XXX,XXX X.X X is revenues the online to X let in million XXXX. The In Self-Employed and strong approximately Self-Employed overall, million starting what are Small Business grew United work experience quarter milestone online that with our revenue revenue the at pace, With subscribers, XXX,XXX, more revenue Strategic Group. XX% XX% on fiscal XX%, in and matters and Consumer and the quarter business growing Partner Business to a QuickBooks off no our reflects subscribers revenue subscriber Both last line Group customers on also exceeded roughly with rapid ecosystem non-U.S. online in growth the confidence. just focus QuickBooks up growth Group our Group revenue from me to a the the exited ecosystem Self-Employed subscriber QBO year share Within some We Small expectations. and start Online were first XX% our money, year our and our while customer lives quarter, choosing and their the subscribers most ago. that products XXX,XXX improving and complete delivering when we in

of of teams conference a last have flow many delivering benefits were Our these they steady and features focused showcased capabilities, week. produced our at which and are customer laser on new QuickBooks Connect

are positioning our innovations globe XX time more of drove improvements revenue local giving top net QBO our in XX%. the subscriber confidence us us resonating once more with on by most point Our than points, of customers, last year. improving this promoter recent the we X again improvement scores expected These than around alternatives geography each continuing ecosystem growth well of in north reflected are online with growth versus XX%, QBO and with

our quarter up expectations, Turning with to finished line first year-over-year. the Consumer Group, in X% revenue

an do-it-yourself season for customer tax We are outstanding on experience taxpayers. laser gearing up and for delivering end-to-end remain focused the upcoming

on demand. Live new a tax for launching We access offering, seeking are also those our expert leveraging technology to TurboTax

head the the results tax as into extension us with an encouraged season. experience water some run opportunity October and filers we are gave to through pipes we Our the by

first of Conference includes the financial platform end-user. Consumer We platform unveiled step was health the management. our beyond new Money towards improve our quarter, Mint XX/XX the expanding last tax This discussed overall at platform. offering and to consumer the Turbo a mid-October. score financial we goes debt-to-income the Group an to to will Turbo As stand. now personal starting a credit Turbo IRS-filed beyond give ratio where slate use customers participating show exciting the for who a score calendar XXXX. who truly consent and initial credit income, power they of in the offerings and will partners We early unleashes verified announced provide of platform the in customers

expectations on for Partners professional tax also with line revenue Group, Strategic our the the Moving to was in quarter. our

let growing Putting focus taxes. the is ecosystem. we to to and continue do that to to around multi-service accountant’s XXXX quarter, accounting in firms are financial Neil This about the are With our while excited prospects fiscal off on and both me a walk a overview, year. We hand that the to through business bow details. strong books we you small our success, start it our for service to driving

Neil Williams

good and Brad Thanks, afternoon everyone.

a For per $XX we versus the diluted of per a up Non-GAAP GAAP non-GAAP year-over-year, year, income from share $X.XX of $XX first operating million of share last revenue ago. versus $XX of quarter $X.XX earnings loss million fiscal million last and loss $X.XX million, $X.XX, GAAP year operating of year. million versus up of year XX% delivered $XX $XXX XXXX, last

in the Self-Employed ending XX% to at Online up growth in subscriber quarter, accounting this Small in XXXX. from grew in X.XXX revenue Turning from to drive XX% Small XX%, continues online fiscal accelerated million Online first segments, XX% with revenue business quarter and XXXX. quarter the fiscal to XX% ecosystem total revenue subscribers. strong QuickBooks business the growth. remains Business the

the year season. second our fiscal in our bundle remain last half confident QBO as subs expect in tax reflected of the million subscribers. guidance to due in outlook in Self-Employed QBO X.XXX year-over-year for growth We subscriber We slow growth the to XXXX X.XXX to introduction of the of

operating online newest X% Enterprise desktop that upgrade which system Desktop year. Remember the revenue XX%. driven the grew units to revenue to ecosystem unit in Desktop ago fell We customers drove the changes last also strength. led to version, quarter strong better by grow to continue growth XX%. year expect ecosystem in than QuickBooks QuickBooks period

to ecosystem up while revenue Strategic up the mid-teens within tax For Desktop fiscal X% Group Total QuickBooks professional to revenue quarter, was single-digits. desktop be XXXX, grew expect the units for Partner X%. revenue we mid and Consumer decline

Looking provides needs TurboTax us each to the address ahead, opportunity filers. pro I keep am opportunity provides more Live of customers prior to these typically customers franchise. TurboTax the excited in Live million year tax of to the about X a our We year. more TurboTax see go

quarter we Turning and cash to approach balance disciplined $XXX approximately financial take finished on to our our sheet. in to principles, We management. a the with million continue capital investments

in growth. drive customer to remains revenue cash and for priority the first investing business Our

business our shareholders acquisitions roadmap. growth dividends. use via on quarter. Approximately and We we accelerate remains the share repurchased repurchases cash can’t profitably million out both to Next, first that billion fill to and $XXX of in $X.X our our invest authorization. return We in the shares product we

We quarter payable expect market an XX, the increase to of dividend XX% be XXXX, year. this in $X.XX last Board per over The year. share each quarterly approved January of a

per GAAP fiscal QX $X.XX. of Our $X.XX, to to XXXX of earnings diluted XX%, growth non-GAAP revenue and $X.XX XX% of earnings $X.XX share diluted guidance share per provides to

in our You QX XXXX guidance sheet. release press our our fact can find fiscal details on and and

my to years. It to thankful highpoint I will say you career to last you together like been that and opportunity time just during would has laugh the from I miss the for to of XX you am our and with work you. Brad Finally, learn I with the for

Brad Smith

been our have although years say words, end by start are business, flown no on that into peak XX up was blink more awesome at an as we of to back are it we that, some open but I proud season. year There Shifting mind. fiscal share the that With this I the of just employees we to with the look pleased are last We couldn’t strong eye. do head to ride. let’s what’s will It’s hear forward the it of the to your work an and call, the doing. our like momentum accelerating be

Operator

comes [Operator Thank Instructions] Our Thill Brent you. question with first Jefferies. from

open. line Your is

Brent Thill

had a you group would to bit could connected just talk about Brent, it, afternoon. as aspirations little small you capital, was lenders I that your on curious past loan I a and understand businesses. in the Good QuickBooks of if

you own you your this I out just a quick had capital through how these to initiative? businesses. dynamics I Can the small think follow-up. putting and walk are changes And now in this

Brad Smith

Brent. Sure,

Let me unchanged. start our saying goal remains that by

we who that have them look If visibility look most XX% self-employed yet things you at turned only the of businesses are small a and credit, into seeking to don’t and at down have backwards history. still have, lenders most get number access of

also a look We forwards. have

flow, score the includes inventory projects to a forward-looking combination algorithm a in the institutions. QuickBooks ecosystem considered invest. on a have of were future over invoices we rating process of outstanding, by people proprietary XX% other hand, past think to credit cash businesses XX led loans predictive point we at, and transactions it’s you have look much and facilitate case system that have are and been like have credit been has the things more that a We billion can and of to able would And that we date is which so good to that able is the unlendable in far that been or in to that issue

our to we to it a that rapid whether tool this into small self-employed. the To second on for lenders. really So, What top. over other these excited we to we the better or capital very algorithms think long-term, and prime so your access feedback it of get be was the could use was loop predicting our would a were really are make but capital question, opportunity do to things promising fuel a needed, needed the get hands businesses we of

using time, And a plans capital. so access to tune be a for provide make really bank platform lean we a to we, have that our good for to point algorithms aggressively at as as this opposed have able it to it lenders to become don’t to us and in to and way other plans into don’t

QuickBooks your So, the and capital summary that’s hopefully answers of question. sort of

Brent Thill

and it that And think the had but I rate fundamentally early big doesn’t the point, you perspective how is the investors is know the in thing? rationale is cited like would from be how Great. market see this early rate is just why of but questions sound the year, there how we at back is, QuickBooks of the is of quick on I a kind you any of what it factors, business the a given off, growth of just and follow-up given this and half couple why type the curious should growth any fading one

Brad Smith

weakness itself. Yes, no the in business there fundamental is

heard, have net every geography. you in are improving the As promoter scores

only one XXX-day of will hope management. turbotax.com strong to just think funnel pause reality funnel. company nice at visiting million first QuickBooks a any that got released have we is accelerate the the last whole of for and period biggest year innovations up a seeing the which a of could conversion just last that exposed are the time. customers week of channels set we of We We we for It’s that opened new XXX Connect people in we

little half are that we big want don’t as to want but second so we as manage in go that sure or that to compares difficult of a get grow foundational are right thing make to seasonality a tranche simply did view just first We we know going season, that And can have customers we period tax time we how a weakening, strong we a that will over. than the see the we half. view systemic we now and more of that through expectations a

Brent Thill

Thank you.

Brad Smith

You’re welcome. you. Thank

Operator

you. Thank

with from question Kash Rangan comes next Bank Lynch. of Our America/Merrill

Your open. line is

Kash Rangan

And market albeit segment potential TurboTax market you, research the the more you guys. here we XX and happen, what you go true Live miss after, definitely solid trying is that are on question specific to are – Neil, for if TurboTax conducted may how that but flipside uncover Live? much can at very you a you you thank much. were about potential Thank little your that any of you looking to validate years the for congratulations talk is you experience will there Brad, on cannibalization so Hi, Intuit. to it bit have that and to is higher you the even ASP of

Brad Smith

go of and and the approaching over the million we’ll XXX Great. Well, to at market to really as answer an nagging the million IRS TurboTax an back professional that, them. questions store those happy step size to it’s I whether get have and to Thank myself the will and been sometimes underneath would go to questions a tax returns if as the complete And only in. far at you, answer their Kash. or do my little turn it’s U.S. when leans XX or tax a somewhere Live to taxes had look series we question, for expert, taxes one just of where I

have TurboTax Now, Live. two flavors we of

get actually I We We answered as where for between think on on historically they the an of simpler from think simply sold to your finish we to underserved. this a question taxes They actually it opportunity. you have market big had moved confidence. well demand further people They pro, into and see advice switch and moved and we a giving. states. and we opportunity our in over great a retention expert the go are cannibalization. see it’s have stock DIY to can opportunity life question is this to and advice the tax where the actually event is lost a going that think into have change. that of be lot extend we being those because sign that they has big take to out a have return me but to offer value both taxes based tax be and part as there We They nagging do it A or child. then able we market may for tool then marketplace, to a as do-it-yourself with the is me do it and the don’t go category not there going complete to return the a a as and opportunity an upon

Kash Rangan

Do that me. because That’s demand fantastic. for value That’s you enough it a if the like surges, terrific proposition. handle sounds have to it capacity Thanks.

Brad Smith

were waters the professional the the is consumer to October, Yes. scale. tax There on there we also like in tell run the platform validate we side you able real pipes our real the on the and to extension season went Kash, experience side. We to only demand created. interest we they in were through is of ability would to and I as have filing not market able

benefit now, because season, we are volume we as be closer learn, to into as Now, April obviously right get volume we going that and have season consumer to strong say the operational really feel got and excited but continue will we we we there go and are we confidence have to come. for to a to both like more model has XX, tax professional

Operator

you. Thank

comes Fall question with next from Matt Blair. Our William

is line Your open.

Matt Fall

taking for Thanks guys. Hi, questions. my

a Just wanted a typically on that every mentioned is go there Live, TurboTax TurboTax to X all, customers bit so million first of you to around pro year. that think follow-up I

prior guess a start any those to there terms moving demand heard customers a do terms parlaying you offering that feedback will be them out message go and that to the customers happen handle kind even big of to stop then then roadblock from case on that to enough I switchover, communicating something a just also it that a pro? confident how them return good these of to and the And into switch in to you have that able run of then the have up Thanks. sort to Live or wondering provide Just of network are that, tax And accounts from offering return the is on build getting they you you switch you initial experience? to that a and over starting to about motivates wondering the or their to in does them pro? that how pro over

Brad Smith

Right. Matt. Thanks,

TurboTax a reference end themselves, X because year-over-year confidence losing in million did they who customers event you right, of professional. change So, and a live to up are asked simply go we to

for Sometimes we a for year, win have back. of next that sometimes be them could it years, couple to

where sold and they child into is they and no logging start that magic product, a gate claim Sometimes, get made crossed once as confidence. have many they realize now them stock a that the that’s decision to the deduction even product as they the had before lose they and can times into longer they

ways, about to demand. our expert advertising we tax them? you are going have on and our Two the how a So, go-to-market see talking now ability are reaching to campaigns

So, you the log because will if can, the you you know have software. into now you tax product, don’t expert that included with will a be

too the to area For to there particular if those you press that and product, want long in in-product the in are here. access see you perpetual so hovering throughout an get that link if have product is expert a we simply discovery, says

advertising product advertising. So we both outside the inside product and have the

the of terms In things that happened. have two experience,

ahead recruit way expectations for our we the number need are to of think ability and professionals we’ll We our season. of

ahead have We this every the signing to milestones up milestone in we month are terms for people leading season and for of of up service.

strong So very above second goal. we supply. promoter targeted extension of the those net was professional the have October our And professionals think season we’ll the tax scores during is

we excited we’re so able experience as we sustain levels we of So enjoying those to but to now season. they’re get the in far, both tax have the if see are we the peak professionals volume into also recruit, can

Matt Fall

Thanks. guys. Great. from That’s it me

Brad Smith

Okay. Thanks Matt.

Operator

you. Thank

next comes Weiss Morgan with from Our question Stanley. Keith

line Your open. is

Unidentified Analyst

[Indiscernible] this that are for terms have One guys. two terms of flag? plans, you questions I to Keith in is for that’s important new of in coming Weiss. any international this year this Hi, expansion onboard year countries

Brad Smith

countries. At this point, additional we haven’t announced

say, we we the are in. much have often countries so we in As opportunity

in We Canada, Australia. acceleration have happening real and the UK

other validated back countries, that have to product calls, last tests this tests market. not compliance those Brazil. do we’ve to in ready but and yet go into in prior We we’re India referenced and going in in of mile still get are that market France, We fit have on working

the and I X.XX say we’ve ones and just lot we still in And celebrated announced subscribers, headroom is countries. the we would this in a we of million stay those would at focused on million opportunity just point so XXX are countries as that prospect a got time,

Unidentified Analyst

exiting the That’s indications go any that be the on back of maybe of they’re to normal? back the super weather might – to last customers they’re – then higher talk bundle. board what the those on sort cohorts for rates whether commentary on than Apollo early helpful. on retention And year leading on commentary whether singed TurboTax early on staying Any

Neil Williams

David. Yes,

that I that think all season. in the the look of we proof tax customers. value their itself for proposition is The is customers attributes. preparation now retention good But bundle terms process going in have tax be the to their know and these preparation that the is big that

we think an a filing annual what I want these definitive get their so before entire And we to to and about through cycle characteristics customers have season retention are. full get

Unidentified Analyst

so much. you Thank Great.

Brad Smith

Thank you.

Operator

Thank you.

question next MoffettNathanson. Adam comes Our from Holt with

line Your is open.

Adam Holt

are thanks Holt you? MoffettNathanson. Adam so It’s Hi, Hi, much. How guys. from

Brad Smith

Adam. Hey,

are are doing great. We How buddy? you,

Adam Holt

well. Thank very I’m you.

So two the another I had business. questions good quarter first on QuickBooks and

margin points strong that, drive looks different year-on-year it you you’ve enable it in factors a on margins X, expansion maybe First, despite like look the relates that expand unit see about but basis that X outstanding did much? year-on-year so quarter you QuickBooks, this specifically lot talked growth. what like as

Brad Smith

a of the a announces can I there, seasonality on play terms at is we margins the do don’t too quarter-by-quarter in look something think Adam, much tricks on basis. really that trying to some it

retention the accounting QuickBooks top revenue driving what’s revenue is doing growth the the rates on I the really nicely. mentioned our for call, is As line

and distributed so side not our year. really held investments are evenly expenses well, And up the not really, that’s the throughout but revenue our

through a where move it about but around it’s to year. we’re going is, So excited the bit

growth the growth sure. So we’re customer and top for excited line about the

Adam Holt

well, and forward the bit numbers case to we’ve in you the ask this quarter Well, down beat the another But as annual which change, got you this as little of year quarters. in take so sometimes you a to quarter past numbers means apologize question. going don’t into roll numbers that did in – the or unit as one and we’ve I’m a

and a) you what in QX, is falls in that Thanks the quarter? seem the assume in that, delta about for it assume Given me. principally tougher QuickBooks b) we should third comps that said the we be so tough That’s QuickBooks in much. to

Brad Smith

the talk in that was I the definitely in business that QX. a particularly have got group Adam, growth in grow-over driving small We we one revenue QX small do think think business.

overall have we and subs revenue have why that that’s for into compare guidance tough cautioning takes people self-employed year for so to given we in that’s we And QX. have that the to one we of for those account, been when units bundle going a get the are

So, I play QX full both and in full think terms the look small revenue wouldn’t online terms from but for subs the out the on and to either in far away guidance stick how business of would those, – subs year ecosystem and QX for revenue I year segment. about guidance of or I get would

Adam Holt

Thanks much. Great. so

Brad Smith

Take care.

Operator

Thank you.

Michael with Our Suisse. next Nemeroff Credit question from comes

open. line Your is

Michael Nemeroff

sense Hi, great. bunch but going a second? tax to nice season looked what Brad, for trial with TurboTax and working you be going it a give this has priced us period for been like the expect Thanks. pricing forward. wanted can on Congrats that’s questions and on how you during to luck then this a into that of I Good I good quarter know has you. there ask it, Live, of and Neil been about

Brad Smith

Michael. Hi,

So, have been you many part a offline to we of test and you spoken product of through sales. have you and been our going have the

lot We price out a have been testing points of there.

will what back see out be the get for a and that don’t are say us to will not, then I little to but be I announced have give We asked premium still it, you point mind, on we or to have It’s to see that others would in out you you TurboTax to going there. closer or landed points lineup, price have we not that but yet little and the a will to you not the yet see pull current price points a going far too competition we our it’s price that have announced pricing. but what

Michael Nemeroff

very questions. for taking Thanks great. much the Okay,

Brad Smith

care. You Take are welcome.

Operator

you. Thank

question from Hulsing Sachs. Jesse next of Our Goldman comes

Your open. is line

Jesse Hulsing

ask proposition looking you turbo next to were other I others, you to Brad, wanted turbo them it versus I credit card platforms the institution launching app? which Yes, others, a turbo of if you. sounds partner out what’s thank value to guess there, some finance the are for the year to about lenders? consumers the like consumer are to like at and value to get institutions those what’s I if And and the guess use proposition partner you compare

Brad Smith

Thank Great. Jesse. you,

with start just me the interaction model. Let

believe incomplete is is families we with platform because we manage is mission provide data prosperity. capital, with a financial and unlike freedom power I help customers with reason interactions it’s were year, to customers. where shared not access customer have get together what health. has we not But interactions and income ecosystem XXX that to IRS at basis, Our you their by And as have our if for look had and government. but on provide backward-looking, if with begin the standalone both challenge year financial to that cards. to with two but can you what verified then task. QuickBooks score better Today and individuals when credit we freedom bring can other more the you enjoyed them The the being platform and a so can been consumer you XXX partner to consumers more a data filed Mint enjoy is income to a TurboTax, in have access it a is only financial day with group, a that that’s ratio, Historically the for we forward-looking. credit basically you debt The

three put you income score, start have source credit So, together also you things it’s do you real can and for wonderful a and to some those combination the pretty to the can of things consumers.

to You card you car mortgages help help student get them help and get them loans, find you credit fees can better other things. get lower them host loan for better access whole of can can a loans for financing to

to half today. solve be that with others, you frankly that going the Turbo to we the we have for the together start We that more still XX to put quite And fundamentally already match much them to important with just and able signed the believe we that have we have, we the written market in dozen Mint, algorithms financial have that’s problems for and up than think prove. are that the So, others excitement. the can’t consumers partners, some came data a

baked haven’t into any a we think focused have that get it for are on but and something this financials right. we lot really it consumers So, of could for a meaningful sure team on we if year, be we that we

Jesse Hulsing

declined And quarter. mix international QuickBooks a given was second, That’s year-over-year flat see helpful, about in and then year-over-year to third, Brad. looks first question it fourth also of the which was Online, mix. the like self-employed and ARPU great in is year-over-year flat the increasing It and quarter last year

So pattern Thank through the play of year? expect that this same you. remainder to do you I wondering, am out

Brad Smith

welcome. appreciate You are I the question.

had QuickBooks we a If on mix. our a of because see Neil non-U.S., together you, laying summarize to expected to it is to that cohorts, you I them Day up stronger be Investor what QBO health U.S., ARPU the self-employed ARPU forward. QBO What basically you’re lay you to it individual has did deck, for when those page going job basis out. a is out going go on put but of all is if a wonderful trends the the all And cohort on getting

ARPU. pressure You’re on going downward have to

only you story getting and given a ARPU healthier it’s seeing growth a the is self-employed the we’re would said, said, in each you time. of as flat cohorts know the every this echo and is underneath good what U.S. outside the you So I thing good should news that

back page you what it’s Investor are just and Day said that the to I out assumed. what of I if in Neil’s think much you our for So refer kind lays ARPU deck expectations think pretty

Jesse Hulsing

Thanks Brad.

Brad Smith

You’re welcome.

Operator

you. Thank

Our next with comes from Materne Kirk question Evercore ISI.

open. Your is line

Kirk Materne

the Thanks sort back you last terms on everything very – inform filing units what of I much. and of the view when season I had just all if start season, check Brad, Did want the of to data to piece sounds in last sort now just But we wondering of your in thoughts any was double year. from it your look that? line got upcoming pretty and are – you mean you much through is you the what you like when on baseline I with thought. extended

Brad Smith

those IRS going including and of you Yes, going think still everything many and anomaly, season not And of muted last extensions in to year still had more XXXX, X% were industry. I in one the I as as out expectations that’s know between be is anticipated our when growth, to total play an we we little unlike around returns. years hovering than throw tax flat a a X

still in than to and IRS and my one and season. we’ll the we ahead, able been Washington, has same coming better as the We for other peers gear in to season hypothesis to it’s year. have look of X% X outlook knows what had really think in weeks for growth X diagnose, happened tax this total up Commissioner just no who the that with ready here I sort just However, was an we meeting a for returns, one have no industry ago in get

modest So expectations government fairly level. total year, I for at we’re looking hasn’t changed happening growth the it our think returns this at

Kirk Materne

perspective just Okay. a it what the from And terms does now, your – happens? right a wait is of change any thoughts in just in to we’ll of still of Congress pushing shape just that more see seasonal have view the the or season and through legislation

Brad Smith

Yes, doesn’t. point, at this it

it’s the there You’re operational we’re and day IRS delayed are season. who’ve to leads and the looked the industry tax one versus we early coming a calendar for much the of that then works There right caveat to filing the fundamentally or and If the cascade get a sometime retroactive. closely. one still of it’s just eight long going we a can that the season end to it’s and we the believe the an recommendations have will of and Senate way down total of is comes season little calendar and the us year’s that The move through proactive, Congress filing is day those bit. This day will year January don’t news, XXX If wait proactive out of reshape it’s most challenge as think season, see Retroactive around House QX there’s lot caveat for shape before still really we that both positive calendar one see. either sometime one curve. just pretty as to actually and all going and things extra anything, same. just can there

Kirk Materne

best of Neil, Great. from it forward. going me. luck That’s And

Neil Williams

Thanks, Kirk.

Operator

Thank you.

question next Millman Research. with Our from Millman is Michael

Your open. line is

Michael Millman

you see IRS Thank do so they and you can impacting you who not those now kind to see And also those gotten deduction I of do another question. using information, the computations similarly increase assuming they and looking put both simple. have increase areas because boy you. this assistant taxpayers And the are then who maybe question, this at these now are and all really do-it-yourself using myself, how of may sort have things. understand first now so can two I numbers though deductions, do some say it’s of how

Brad Smith

you, Thank Yes. Michael.

have for turn today, getting expert an Many overall your success more because thesis the will to think to people nagging do-it-yourself or is that it’s ours too success in they and simplified, the code more drive that category a complicated. think have they I the the question we tax is similar category. growth

One the out. plays Congress points for think is it tax category. growth do-it-yourself of the number for the And for us of revenue you code we news know one worth So, simpler, the as lever us. point category several if gets growth of better that’s that’s

if the is like second the will do-it-yourself they software they answer. ago. category IRS think paper look years at the tell you I the mean, I don’t process X bodies is even they returns to did The you have

we simple software just have like if do software make sure them best most going it get we says someone use and So, so effective done. do they it’s for that are myself, the to have to so to to it

simplification and is good So by story do-it-yourself think for a I category. large news

Michael Millman

see simplification related, you it indeed is don’t and Okay. you postcard? you we so California, to talk got tax this what there maybe And can like on is know things I if have postcard and against it’s a about in the coming assume about have you return in fought forward or we

Brad Smith

Michael. Thanks, Yes.

right owe a voluntary in of you you and we a way citizen overpaid, government and which to simplification, We intimidated here and just the language us we actually the they they more who has to government and the prove have this wrong try for are is we is a the the number me than are the they and for to have we what so the people supporters English determine that what and then believe out owe compliance, against clarify sending are were around. decade Where or standing maybe postcard. by line government as be what can it because for Let that standing who get people for It government it the form getting shouldn’t believers were been California. saying they it’s burden we were paying on not their done in simply draw may second maybe nervous. is the other and

it’s what even they for can it we prototypes plan at say that me private ago government’s so administration in we right Washington the the think postcard is while owe is day help execute and role come to deliver we how wonderful up you believe it have want the individual’s is a not be to I them, to on we tell and tax thing. determine will obligation We built with end to have in weeks So, what that the be can and pay have money. this you them the of and candid they shown am you what few just a done just the me industry Congress the was their going that to build

Michael Millman

on the what advice, impact the government you would business? of takes assuming kind do-it-yourself your see So

Brad Smith

government Well, advice. my I am sure take will not the

felt what Congress they we and was years industry saying going country that of the think of many overall Congress rules ability laws are to we pay. so have we well as upon members make many record determine founded is I as owe the as not dictate set is news us have us to to ago should good based and the have that the been way on what this somebody the the

with gets, the and a day, then only accelerant, happen to for think that but be we it’s thing in be end that job. into do economy, to real and more we the So other for the simpler us not for do-it-yourself sentiment people the move going kind the and camp, I we our ultimately at of of believe this category if

Michael Millman

the Okay, luck thank you and Neil, future. best of in

Neil Williams

Michael. Thanks,

Operator

you. Thank

with comes RBC question Capital next from Ross MacMillan Markets. Our

Your line open. is

Ross MacMillan

And context you I that think at also and dollars that Thanks envelope believe Tax would two I able if and important and assisted customer be other but Xx also to sway about services Brad, audit curious survey was could protection interested think specifically, you the we for those it are has things a insurance you currently guess would that as those new secondarily revenue the have category like just to Turbo about what could not maybe Live you decisions it you return like found call that I we complex or that folks so trying offering, this about for more are pricing just model think fraud I am know maybe ask how I to And in I something has. much. far per go? think pricing filings. TurboTax then and looking recently did frame and that guess talking I are

around was with I bundling services some Thanks. the Live So, sort to curious TurboTax offering just of participation? your increase that try thoughts for additional to

Brad Smith

your that market in Ross the with you do you thank Yes, and surveys discoveries. work end team the and always appreciate the

you Your TurboTax, average take is it’s if a return at get $XX. a little more we the look of per north correct in revenue analysis

at is, $XXX. tax and $XXX it’s go an range in If pro you $XXX at that average to a look can to what you store charge or $XXX

multiple of of that’s the So, price TurboTax. current point

here or Xx announcing to call TurboTax Live. else you point price We are are anybody a tell on we that today the on

that will a In fact here is able model the us a we to for to value and at should business disruptive time and be customer franchise. what same of part provide allow have we TurboTax be half better you think the

kind is ZIP everything important just where they where know south be. audit market other other it’s somewhere today we of threats the only or with are with market going are be we not that whether then things ourselves its cyber Code really point continue insurance products. that the probably the fraud at of those are to and or look of happening protection pricing So where the north services absolutely bundling whether it’s on to in will And in you’re creatively

to then but to that that theme, it, to back got closer of anything a bit we be things, them are peace assurance we’ve some As what people happens we the is get want and hear to see continue if about little we’ll more that’s that there there right those mind for and looking for.

Ross MacMillan

future. Thanks so the as for much. and luck Congrats good Neil well,

Operator

Thank you.

Scott next Schneeberger with comes from Our Oppenheimer. question

is line open. Your

Scott Schneeberger

afternoon. Good Thanks.

year move a can lot second, things talk there fiscal and comes of maybe day well, and that’s am about curious quarter guidance I side. out I realized other for third been what Act interesting the or items, relative the has around to to curious the tax Just the but others thanks bill consumer like the on tax timing just filing last was extra PATH disruptive

Neil So play start guidance guidance? what’s tax Brad into or strong the season? the the in that you and How of for weak consideration there expecting the are the or does

Brad Smith

Act, opportunity industry filing in taxes. of they to money little end think an of We their fell into going were user in for they that’s in the we all A no muscle still to not last is them there last adjust a be only for the until shock how able was the to Scott. PATH try but their market, bit year finally matter lot definitely the Yes, February. all get the once to of to weren’t educate hard memory that surprised year,

new be of experience that is normal IRS think impact in they to acts that experience the I conjunction terms is a now, we had going anticipate path will in through what we went be. with all the the plus

all to Congress of So now or really that’s material between no subject shift surprises season. any out coming tax see filing we don’t and meaningful year-over-year,

Scott Schneeberger

bring going obviously on if to are that. want how curious am on and the year Appreciate Thanks. second and this affect you. question it’s marketing we line consider on along we a there a since chance, quarter our you front? might can of Thank of last the investments probably just Great. then quarter year And third I things seasonality kind this and lot maybe of Neil, that might similar

Neil Williams

Scott. Yes,

the I both and in are year. then some and but in a little the It think levels different see investments anymore the within I similar path us, and but a last I you quarters periods R&D to as follow saw the categories, few side QX years. for critical wouldn’t seasonality and QX shifts a QX the between well last are may be reallocated don’t QX quarters those Obviously, quarters QX lightest and for invested expect the marketing, investment baked. us have are a pretty the for in on bit but that QX in ways, we may differently

Scott Schneeberger

and Thanks. best wishes. it Appreciate

Neil Williams

Thanks.

Operator

you. Thank

question Jennifer next with comes UBS. from Our Lowe

open. Your line is

Jennifer Lowe

year? metric? step we Great. earlier noticed QX little at pretty that focus up that in step as year-and-year QX might shifting, Neil How the material I to of commented would is to attached maybe spending just the happened an going the also a of we versus quarter-over-quarter earlier as but to like question, I of of always that course well. hiring wanted OpEx that there Since up throughout is look spending and that last here up and normally much later things like got year-over-year Thank the and year a in and happened following the looking in here know I much you you sort the and for some a it think but at looks persist there’s investment how that you. quarter-over-quarter in be was in

Neil Williams

Jennifer. Hi,

of in the is year investments QX XXXX. fiscal making think level the you throughout are saw really reflective I we

significant or X we intelligence but we machine market things assume So end to that wanted loaded, like lean progress Day and again, to artificial wouldn’t areas necessarily productivity it and front transition AWS, that I or in really areas outlined like XXXX improving into was make learning on that. Investor

in it So reflects QX higher a that the and in baked year. should assume level throughout you expect

Jennifer Lowe

Great. Thank you.

Operator

Thank you.

next Our Wells question Citi. with from comes Matthew

line open. Your is

Matthew Wells

taking positioning are Thanks. desktop at you growth my in for add job. for to I’m we QBO week we QuickBooks good maybe were Pritchard. thought that higher Connect in get upstream comment really on thanks guys And on and a your Hi, question. just Jose how sense you QBE did ARPU the targeting Walter San desktop? last And we you to here move essentially customers can anything SMEs, are contributing all

Brad Smith

Yes, thank and you Mathew to first all of QuickBooks coming for Connect. thank you

at XX,XXX amazing the was was given attendees also make had live, level I X,XXX for over And incredible. there, innovations perhaps and best. speakers who it, years the was those, it we to able the event. unveiled us of amongst the in was We over screaming X number aren’t any think participants unprecedented very For energy

really was big it a So, year.

QuickBooks and marketplace to product growing XX% competitors Enterprise, up powered about Solution we any lineup. X%, Enterprise. our QuickBooks mid-market. yet product. to the when that down of is other going total priced to in disruptor fast terms fact product invest It through It’s in a cheaper by revenue than continue are that walk in being QuickBooks units XX% in desktop are desktop that’s In you really Enterprise you a correct, is QuickBooks QuickBooks

down in going So, is the but our I end upper for single-digit mid-teens, are to mid the see powered going be that’s and forward be QuickBooks will enterprise fundamentally by units going product to you see said overall growth mid-market. desktop solutions which as we

Matthew Wells

you. Thank

Brad Smith

are welcome. You

Operator

Thank you.

Our Panigrahi Siti Fargo. of next question Wells from comes

line open. Your is

Unidentified Analyst

payroll if see Siti. the the just is for on you payments QuickBooks services and for this I doing? Online Yes, [indiscernible] wanted to could are revenue, the comment how

Brad Smith

in think QuickBooks and you how little doing ask dropped I bit. and Online? payroll a about Did are out you payments in So

Unidentified Analyst

Yes.

Brad Smith

payroll that range. platform by the Those payment our in range accelerating to Online Well, of growth and overall. the and performance the in plus and business plus continue QuickBooks payroll we be are rates, at payments XX% encouraged are payroll to fast XX% the the attached

in to over standalone get payroll the stronger continue platform. getting We payments performance and the products to on QBO

Go we innovations introduced fact, In with Payments. some

it Online. both these was with and remember, externally to coming more As We talked was work was the ported ecosystem. We off do, different of Connect technology out a and it had you should we mobile areas. the and our a may standalone offering, QuickBooks now have payments then hear but But in so on about payroll stack. lot enthusiasm focused technology you confidence of over, works a but now still innovation QuickBooks internally

Unidentified Analyst

good. Thanks. It sounds

Operator

Thank you.

from Jim Analysis. with Our next question First comes MacDonald

open. Your line is

Jim MacDonald

Yes, good afternoon guys.

other that for on Online what last other or are addition payments? category in to revenue streams other other up or question, prospects in services following Just the payroll the and possibly QuickBooks

Brad Smith

are are to on something payments? theoretically fact you referring Jim, the there things beyond sheet you we the asking or other and are have in pipeline payroll

Jim MacDonald

could that significant be Right, forward? going

Brad Smith

Well, headroom. of have a Payroll combination. think there Yes. is and lot I payments a

like needed run-rate on invoice and approval execution there. your Connect electronic get have enabled, XX as invoicing some talked clicks in a to X e-invoicing, it’s straightened hour we is minute. at we things to not out week and to double-down we get our clicks or about really we are electronic to The about excited have innovation things seeing we We real that we is QuickBooks QuickBooks it benefit I have start customers. introduced Capital last used XX to one period feel are X P-enabled, got like

payments the Connect next the the place that third-party put I will but Connect And QuickBooks just see would and and all ecosystem, to attention. and what at services my with be, probably might QuickBooks you be we say acts different at opportunities payroll had on look start payments and so the payroll built the now, if then right I being will

Jim MacDonald

in the to of that quarter? number in second of days quarter Great, show is third a terms increase thanks. And the going versus then similar for TurboTax, the decline

Brad Smith

two Yes, it’s a dayshift quarters. between the

Jim MacDonald

wishes, Great. Neil. Best

Neil Williams

you. Thank

Operator

you. Thank

JPMorgan. with Our next from question comes Auty Sterling

Your line is open.

Jackson Ader

question for versus made should from you our Jackson have we on investments the tonight. how guys. side Live if how be thanks One do about in is that thinking SmartLook, compare This those contrast? Hi, TurboTax Sterling and Ader

Brad Smith

as Think question, the core TurboTax TurboTax TurboTax technology Yes, video, the an Live contributed thanks have ability been one-way and proposition, think and not piece you value expert a confusion video product, we Jack to technology the the end-to-end SmartLook only and SmartLook. and it’s end other Live this haven’t of we glad happens I on because I some and connect I over through of as the there a that clear. the that a to enables interchange it’s out interchange of it’s probably happen. asked sort am customer expert. call That between in

the the launch. really we It’s enables SmartLook got name that So bundle Live. technology overall code is was proposition that one-way before end-to-end the video TurboTax value that called

Jackson Ader

it. from Okay. Alright. That’s I all got you. Thank us.

Brad Smith

Alright, buddy.

Operator

Thank you.

with comes from Our next Amladi question Bank. Nandan Deutsche

is open. line Your

Nandan Amladi

Thanks my taking afternoon. for good Hi, question.

you out you have that build relative the you and of online enterprise, roadmap back version the as the future enterprise ecosystem? Online with the comment roadmap new on QuickBooks So coming on Online. QuickBooks about the a QuickBooks do balance brought How API QuickBooks to

Brad Smith

I down parallel Yes, would say path. Nandan, were the you question. for a going thank you

highest online we in out and for to you in ultimately the use Online. so out a of that key an abandoning acquisition by doing what enterprise us need are the score And QuickBooks the make do feature and to about replacement going version. the or example investments product take build sometime and talked And recently the in desktop, We’re in an the in level in solution. appropriate we we’re not alternative to did and mid-market company hope Neil the the we got current market continuing promoter we’re an QBO, strength that it sales sure QuickBooks we’re to to functionality That’s functionality an so of solved QuickBooks Online make an acquisition well the rather product Online provide that tax. to just enterprise to that’s QuickBooks getting have was we while meantime that one in investments, problems net real the build of there’s customer are continuing in making the that’s the enterprise as features

Nandan Amladi

you. Thank

Brad Smith

welcome. You’re

Operator

to questions. Ladies with am remarks? and I you Would further any not you. Thank additional gentlemen, any showing like close

Brad Smith

James, I would.

up Robin you lot and this the really and being. I individual. just States, I of I that outstanding also to drives great he often us, he of the and a left that taken he knowledge to model of thought running. real Lone know tell and the he of want him It’s to going he delighted over She And know and you and Michelle. only been is handed one those this you just an executed his to United years I everyone expert. the a than better navigate that since weeks pleasure have excellent come joke thank together, came go all really because to And rest a will one with Michelle have am the leadership the And as And where all, that and in produced is to us is got I First and Williams. transition been in his he She and the to they bench and great ground sit the want to back the bench. Batmobile by not is it’s sense hit wit them August, believe Batmobile. things an has I unparalleled. questions. I we are like help together easy, February that financial that learn transfer Ranger keys Batman also thank holiday. has should partner. him found is coming is of and to has for human for Neil all Michelle here, the business from but see is strong She those we did humor a joy you that

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going are to professionalism. of whole like a on So toes my that you and be to I new ready rock bring we going are to legs Neil’s tended roll. that understand dancing he mine, stepped level were

and holiday safe said and I and that everybody So a wish for we else you to happy soon. look with season you and speaking forward

Operator

thank This you gentlemen, and today’s conference for call. concludes Ladies participating.

may You all disconnect.

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