Intuit (INTU) 22 May 182018 Q3 Earnings call transcript

Company Profile

Participants

Jerry Natoli	Vice President, Finance and Treasurer
Brad Smith	Chairman and Chief Executive Officer
Michelle Clatterbuck	Chief Financial Officer
Brent Thill	Jefferies
Jesse Hulsing	Goldman Sachs
Jennifer Lowe	UBS
Ross MacMillan	RBC
Walter Pritchard	Citi
Scott Schneeberger	Oppenheimer
Brad Reback	Stifel
Keith Weiss	Morgan Stanley
Kartik Mehta	Northcoast Research
Kash Rangan	Bank of America/Merrill Lynch
Siti Panigrahi	Wells Fargo
Raimo Lenschow	Barclays
Jim MacDonald	First Analysis
Kirk Materne	Evercore ISI
Michael Millman	Millman Research

Call transcript

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Operator

Good afternoon. My name is Latif and I will be your conference facilitator. At this time, I would like to welcome everyone to Intuit’s Third Quarter Fiscal Year 2018 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session period. I Vice the Treasurer. President that, Jerry over With Intuit’s Natoli, of Instructions] will call turn to [Operator Finance and

Jerry Natoli

Latif. am welcome XXXX and and Michelle our Good third CFO. CEO Thanks, fiscal our quarter Chairman to and conference with here Intuit’s I Clatterbuck, Brad Smith, call. afternoon

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

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

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

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

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

Brad Smith

per average growth Thanks, revenue strong of to us. producing per XX%, results year’s Small XX% the revenue, growth season, strong this we Business results. overall played Jerry me our and tax joining by the quarter, of growth That’s all very headline, tax Because With out, overall the are season XXXX. drivers Self-Employed Heading category our and very observations year revenue company, earnings growth consumer fueled continued indeed income thanks this start with return. and fiscal that We in fiscal and delivered do-it-yourself of would for primary for you and revenue be the will I with our in third higher on XX% the that into in and operating Consumer across Group strength share and business. let of we and momentum some how foreshadowed our guidance share business Group. raising

drivers we years, business. As Consumer four primary the over our there in are have communicated

of the the IRS number data with the about IRS our first grew The returns in total returns is filed line total latest expectations. and indicates X% with

returns The those that do-it-yourself were using second software. is percentage the filed of

the prep a DIY As reminder, growth point, DIY share of is the grown over again has category. largest To-date, revenue tax our assisted the category lever X.X just growth. category outpacing

as growth. drive As responsibility leader, we awareness help it our category to and view the

So, we are pleased with this result.

return, The third share modest X.X and beyond DIY value. product was the in growth market to a driven point TurboTax per fourth Bottom includes successful total within combination share our nicely Live increased our which of our shift average a to we well season. of line, of by DIY. competed also earned revenue When which season. was you a mix increase this higher end pricing quite this The of the is is it season. tax line, share. returns, for category attach, the The gained look We total and

they experience an one, year engage strong Overall, season it season to beyond progress consumer the assisted with the their employees our tax. by who In in the are all want our of our we support also season. We are pleased served data, who behind year, assisted completed to customers X,XXX with Turbo real business seeking that come share additional It in up to TurboTax business feel income expands a for share opens confidence do of on with into tax. today’s our consumer some in a platform We congratulate Turbo so Nearly role for option extending Investor strategic the increasingly This nearly beyond has results years transforming a paid to played pros encouraging they throughout delivered provides screen. business overall with ratio confidence tax registered many will each Feedback Live customers our billion fall, with while will combining where be prep, million our customers are As basis. extend TurboTax addition our to stand. these of per our last the providing transforming innovative in offering pro when the about Michelle that tax $XX full performance. touch personal their season. I tax more expanding This DIY, of user reinforced debt-to-income from a a average filers shared model. our customers category return. view lead come. show of transfer their and Turbo The portfolio that first ongoing we the to by Day X we the was in customers a in prep our tax to situation the verified to we data good and a enabled and its Live first revenue financial an offering, around return. of on accessing foundation as moment. delivering financial they health increasing potential our in the and data and to company a tax this value truly focused their prep their Turbo to an our beyond it tax tax had made account at TurboTax offering results progress dollar opportunity this us credit transformative in customers score, grow the priorities provides us this assisted with that TurboTax the

professional with up for X% Partner quarter, revenue getting forward deliver to expectations the we our tax with next looking in we to just TurboTax revenue Group, what line with year-to-date. Live are We Shifting the and started are can was season. Strategic our

at growing multi-service focus to small our continue do to This both We success our books firms business taxes. that and same on time. the while accountants’ enables ecosystem us drive accounting

TurboTax and strong XXX,XXX ago. of XXX,XXX. business, we delivered to our across from continued Online U.S. million offering. XX%. Online QuickBooks growth about and small remains over multiple subscribers those to X.X to grew a geographies, grew exited the a up subscribers are Growth subscriber subscribers XX% Small quarter XX% growing growing Self-Employed Group. with subscribers, Approximately pace Business Ecosystem X in with at Online, subscribers Online revenue Within the QuickBooks year to X.X XX% XXX,XXX, QuickBooks We and another approximately just quarter rapid XXX,XXX strong year-over-year. Turning international increase Self-Employed million over Self-Employed from

Intuit So, Michelle in Business putting of our ecosystem strategy the to Self-Employed We strong a our of business over performed ahead me and to Group. details. vibrant hand continues and a walk overview, our financial bow expectations around you One gain through Small With let our continued this that performance tax momentum. the quarter, to delivered season it

Michelle Clatterbuck

and good afternoon everyone. Brad Thanks,

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

the earlier year. in our is contributed than reduction result a analysis new tax to lower Our non-GAAP XX% third this the U.S. we XX.X%, impacts is $X.XX rate which The rate earnings of lower is from continued tax rate legislation. non-GAAP the This the anticipated of tax quarter.

units up XX% to Turning We of business guidance X% XX% free units the segments, the grew faster quarter both this of exceeding paid season, and revenue year. year-to-date This TurboTax offerings. at in the annual now growth while Group performance X%. X% TurboTax X% revenue grew gave was to the grew our beginning expect growth and Consumer in we fiscal year. driven Online is XX% the for the unit by total

Brad within X.X market total slightly, share the our tax of up As category earlier, mentioned was share the while preparation DIY point. grew our

We season. the have for the new rated experience performance in in by who from of We our to is and product did And last not. are in-market who Live contributor progress final our care offerings. review highest XX any TurboTax recommendation Customers feedback first encouraged its filing their This feature during used Live received. offering TurboTax than the paid a consumer we an those test season. fall offering are a had meaningful positive scaled year higher of with we nearly first of tax this extension score points great pleased its the

to in scale CPAs, attorneys look Additionally, and agents this future. feedback what We our was enrolled further on applying serving platform. clients from the forward learned to we positive offering tax

revenue tax Strategic the We to guided in XX%, X% from million we X% previously. revenue revenue better and Small quarter. reported than XX% now to growth quarter, grew the Group, Total in revenue for X% third grow we the professional XX% Partner Ecosystem in year-to-date. up expect XXXX, fiscal Self-Employed quarter. grew up Online to the the second X% of Business slightly to $XXX X% Turning

revenue the growth. better was equating over the have subscribers. subscribers quarter grew ending to to X.X Desktop a year million continue We XX%. to revenue with total million with XX% X.XX channel. Self-Employed X% XXX,XXX XX%, end to up and in to to expect the year-to-date. expect of quarter a and Online QuickBooks come X% is subscribers, channel that We TurboTax grow for significant Ecosystem subscribers now XX% X.XXX grew than Online Ecosystem through approximately QuickBooks

Desktop and mid fiscal mid QuickBooks up XXXX, we revenue Ecosystem For high-teens to units be to decline single-digits. expect to Desktop

the XX%. we disciplined $X.X greater in principles, yield investments generate the management, a cash we financial to our our finished sheet. than to return balance to and investing in with investment on that We a on Turning cash capital continue billion take opportunities quarter approach

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

in a $XX the The share We accelerate billion payable use can’t on our repurchased out we return our per we business product growth dividends. share repurchases remains authorization. cash quarterly Next, of invest and dividend approved We both shares acquisitions XX, in quarter. that the Approximately $X.XX shareholders third roadmap. and fill profitably via to $X.X to XXXX. of July million board our

now XX%, quarter expect of $X.XX Our to XX.X% tax non-GAAP $X.XX. fourth of share $X.XX, GAAP diluted for $X.XX XX% XX% of earnings XXXX of We share rate of includes rate non-GAAP growth to and diluted GAAP fiscal per tax a earnings per fiscal to guidance and XXXX. a revenue

and QX to find release in details With our will turn and it Brad sheet. can XXXX our to updated close. fiscal guidance press on our back fact You I that,

Brad Smith

Thank Michelle. you,

the that context couldn’t of end the our the of in job closing, I’d Group We Before to will for done and into Zero, bring member spearheading and been season. innovation, Self-Employed of of Self-Employed senior of marketing like Manager in year, Under Dan has assisted changes was initiatives, the the Effective that next be driving TurboTax earnings tremendous fiscal and set a business the the our lead at outstanding accelerated his for ability today. couldn’t to Group. management a team years beyond shared more we some commercial disrupt to been years to the Greg’s Consumer General want Consumer release I analytics, Dan he the Greg but leadership, consumer in team. time, proud and more the an business working QuickBooks tax the has chapter. built. for Wernikoff, General he that Consumer of of brought projects. remain step the down succeed member in on have I leading our our him of At together the will the at Senior same foundation thank me growth as Group, as helping of force TurboTax for the the our for and President the our model, leadership business, Intuit we Consumer business. to be key that X leader has prep Group of season spent has Johnson, leading strategic extended in go-to-market do-it-yourself the Marketing last introduction team of Greg advanced tax. Vice expanded Consumer our growth consumer business tax confident efforts will He and capabilities come. a Turbo He our has continued key Group as Intuit’s I Manager Intuit’s Absolute repositioning to Dan reinvention with Live this and we market tax lead category. the category a

continue am For efforts. a those as I change we bench. have you who our followed while, delivered building a the you and those the year. we where of point ourselves know pride that very baton strong to Consumer about we we watch of Intuit feel is reflective at stand momentum excited Dan to this sum deep on And for talent Greg this up a takes Group. from good quarter And it the to lead in overall,

While But next year out heads that, in year finish execution fiscal we Latif, pursue closing everyone’s focused line down keep it high for and our on as And sights on now, note, on with mind. of will set to focus world. we the already our with around mission have powering the we continue prosperity what’s let’s up and we hear on on sight. remain a open our the beyond and

Operator

of of from first comes Thank you. Brent Our the [Operator line Instructions] question Thill Jefferies.

line open. Your is

Brent Thill

the Brad, Consumer you Thank X% started business Good you. X% to guidance. afternoon.

the just if in doubled. reasons of little that And were? be I to almost for TurboTax bridge that? You you highlight you get primary what ending is could the anymore there a numbers think are also bit just that loan some on if or outperformance Live, would if impacts color the was financial could to curious you helpful

Brad Smith

And I year-over-year Net-net, free to growth two our and in customer, opportunities minute DIY end people will drivers as the compete TurboTax season remember context, was of up down at TurboTax the pricing really the strategic obviously then Live increased and for a mix you on introducing tens going share comments, Bent, Live out say product millions we We Live and each the of opportunity result we a The because large the Turbo. situation, it higher to click have a a year was, to assisted then shift prep and brought end of if is that that an in lost it because customers method, about by They in of services. some in and X nagging where confidence you lose and we out tax have year saw because also million new in product and Pro, review, an question. to mentioned pickup Live. bit to are happy attach plan. the that category, higher their saw in final they through something overall, fact primary that changed addition a a point category if my second played in millions using that consumers average do of the key taxes the per products, which value. file strategically was tens store or are was for software. a revenue CPA What recommendation as extent they to TurboTax would this answered, came in had a we score. opening to of we went way on actually those encouraging this a ability able little saw prosper of The simply that. Michelle when who they those executed to final year I with anticipated. on line then question an two really the tax was Sure, a mentioned a and again the review the the was acceleration category it with that road growth team took looked went a just go effectively while TurboTax that well XX areas year had Really,

side improved recommendation improved of We obviously and sell looking other also the see the Pros that that retention. is very the for we from we retention piece on scores high product And did were other network.

entering last category, because wanted the are saw first for from Investor TTO. there sources at versus we ones least that a the we to about Pro exactly did conversion not And a see, higher our those and live more talk new time also then XX who of but Day. will filers for also customers assisted tax are point prep available up methods is those just signed who We

and excitement this willing you high breakdown customers share going or point, revenue, actual should those our to of So, we are that year. kinds of number about are a of at are confidence not in hear an we numbers degree the next tone the but to

Brent Thill

we a can you you curious not I could up just the really for last years? years. a to you when the margin what talk couple couple the am last just Michelle you if to open of think the you quick over flow-through look given the seen bottom And when have the outperformance line are line, seeing more relative meaningful the margin little at of top on in as structure follow-up

Michelle Clatterbuck

things about use money first we in I had can to it year to want revenue to one When our business the that, is were AI in and that’s development AWS invest out have, earlier engineering that and we more were competencies, area we continue and and investing efficiencies actually go we that in want in do customer also helping back software additional then the this financial we to pointed And of ML brand. growth. transition really to specifically principles. drive our we the doing, think investing we we with and that corporate additional our foremost marketing how so our

look company to And you so continue at as as Day in like update grow what Investor invest, obviously to to we to we we will and will the closer get then opportunities going that look forward. might

Brent Thill

Thank you.

Operator

you. Thank

Our next Sachs. comes Jesse question Goldman from Hulsing of

open. is line Your

Jesse Hulsing

Yes, thank you.

differ SKUs? last versus Brad, a your And are marketing guess from question product does change wanted follow-up the Live, that lower how or I did the live put feel gas for to Just marketing the perspective going season? you enough like of see you you to marketing tax around on next out your on foot

Brad Smith

next are will is but confident put the to on foot cautious going are to gas game year’s to Live. Yes, what want enough say plan Jesse, get we TurboTax not we away, I much with of be our I

lot in actually In dual our to back is learned had of be the the can that at campaigns they a nothing One was are screen. have the season. free at introduce been there got taxes your the this and messaging, year. in terms you afraid going. little could of expert was side tests we practice began into other with which We of of the touch a of free have team a least We an half understand to the running fact move bit people helping and

I a says we and can tax go for you. that reason your here to basically are feel regardless if have have message we to And waiting got confident into someone to connect with have ahead somebody right need with, we that situation. So, market any very you of there you work

feel figured filers. that I with entire So, pretty to how we out go year of spectrum good to this the campaign to tax speak out the

Jesse Hulsing

feel it. mix with Got guess extension that comfortable products response, I guess as higher question king the core being consumer price I And or that business end you forward? an of driver going of of how and in the

Brad Smith

Yes, for thank question. the you

a you all been years for has the translated monetization customers company when non-consumption. that growing and revenue our that great our principle to of are principle Many inside converting is than businesses true into grow follow. will that that’s is a faster guiding have We and across times customers and

situation from total. into maybe growth spreadsheet are and people people of In or business revenue. our customer a the you of a you pencil, often paper a Those or few tax million come you get are X So, have about so them even a pencil very a and products free. on and in getting case priced many with outpaces filing shoebox right left paper off times somewhat now, lower getting tax out small

and alternatives. people we who So, are are Live adopted them already higher-priced we it a TurboTax method means from converting with converting now

we getting come So, that when revenue Xx TurboTax per our in they category, into with for come Live. the average customer, are customers those

and in growth. we is are grow are per So, and revenue accelerating grow in tax right average customer, able that interesting that revenue share customers an our now situation which is we to and

in not trade-off are we So, there. a situation

both are situation in share being a and grow to faster. expand able pretty revenue do think we I actually in good

strategy the So I and feel about way playing it’s out. the good

Jesse Hulsing

Brad. Thanks Okay.

Brad Smith

you. Thank

Operator

Thank you.

question of of from next comes Our Lowe Jennifer the line UBS.

open. is line Your

Jennifer Lowe

of and in some slightly renewing Great, was thank particularly given those looks better you. little that you was first a I of renewal like on sort experience was more the give how I there, gross pieces customers. the wanted that just attached look those of maybe the drill of adds, much more major to the strength that, Can of to questions about sort QuickBooks the know much are us color Self-Employed what how was there better year-over-year. types like on than rate there? that what doubled it that renewals, TurboTax might number,

Brad Smith

Yes. Thanks, Jennifer.

rates First our of original better we did had than see renewal all, and we retention forecasts. in

that. we So, are by encouraged

in got executing is better filing promoter tax itself converting TurboTax improve. into of we end customer to scores the second net the process, customers the the The at the and their at experience product continue

a So was the It it that better also stronger and was products. had board. conversion top experience strength it actively renewals with was customers funnel of quality was It the engage the retention. really stronger and across

So and particular year about product are we well. we this feeling to forward are good looking next as combination

Jennifer Lowe

this more talked the those you about monetization there the opportunities or past well? and at sort customers that. sort post-tax there is At what’s financial Okay, from I in opportunities acquisition so targeting point, there things think is Turbo status term you at around million really offers customers monetization point looking this that season, is certain drive that have of of had mode to revenue the near-term user me, one like registered to great. X of it longer business And as

Brad Smith

customers active users monthly upon those both, We acquisition financial situation. then users or are into their particular daily depending actually is priority executing and customer turning the but

first strategy really and number you we some The That the in registered and monetization one our money had we as the we more ourselves. we portfolio know in less beyond So people of had have customer two Mint, to Mint, which expected to million products was year. money only what lofty a encouraged its pretty were was is to the addition X spends, make. products the this where in is goals similar

to So monetization gives the us I we us will there reach we way, strategy The reason head deals dozen particular next customers. with us seeing year, to and we ahead a priority said those to a nice say, have more partners as we now partners a products unqualifiedly, year. seeing for them those better financial proved is other conversion into to in and would lean now lower and look we for as fees was and leaning right next companies customers. are this monetization give And half but to and year nice active we pay rates which introduced them out into then are users very we our start that they very another and

Jennifer Lowe

Great, you. thank

Brad Smith

Thank you.

Operator

you. Thank

Our from line MacMillan Ross of next question comes the of RBC.

Your line is open.

Ross MacMillan

possible filing level the DIY Brad, the is we that much. we guess population category had percentage impact had the big wondered point with tax go deduction. a it’s one And that might then change as that at if season, next so into will but new see I deduction not just much the I itemized as tax early, very higher of you simple Thanks do I it’s know legislation a to And growth? how and any thoughts this follow-up. the standard I high

Brad Smith

move to people there heading they category, DIY means understand to then and will the Ross. does especially for standardized year. services psychology know it that yourself enforce expert some is the priced the but which a doing and we you. products catalyst category with post of to DIY. the you you binary for are When an facts, tax introduce this facts to opportunity the working put opportunity when ready we Thanks, spend into help next more have to this Live, like season the of category the into grow their the to we assistant of move in deductions, qualify lower studying end as Sure. it We a have customers which out behaviors better prep the also math time together, year do-it-yourself choice tax having the between TurboTax see means lot when And all

encouraged. we for category going head the tailwind really So, opportunity us are next an as this we be and to We for into season. think a is

Ross MacMillan

Great. is or question on is year-to-date, that might actually number. net a adds as TurboTax a add number were is be that number but the about was it read a And because QBSE just net my flat I a unit, follow-up add a suggested base it Jennifer’s number which that that had XXX,XXX total clarification net the implies year-over-year,

clarify just you could that? So, Thanks.

Brad Smith

Yes, Ross.

XXX,XXX anticipated well number is than customers You rates are base that renewal correct, the the of adds. includes net out as we XXX,XXX originally active stronger both so today, had the as

Ross MacMillan

Brad. Thanks

Brad Smith

welcome. You’re

Operator

Thank you.

Our Walter comes the line next question from of Pritchard of Citi.

please. question Your

Walter Pritchard

grew just percent you growth in on similar to decelerated am what quite on good of the in have the difference seen really I it drove growth thanks. year. the sort there some on about of had early Could follow-up couple subs? year-over-year. sort wondering you desktop performance Hi, a Two talk that unit and of a questions on [indiscernible] like side, business bit looks it I

Brad Smith

Walter, QuickBooks sure the wasn’t question, what of question, line on asking cut product the heard I first that out you but part about. the I you was desktop it are

Walter Pritchard

No, discrepancy ask pretty the I been unit the been trying have declines you think performance these revenue growth similar, stronger have that I desktop, unit drove similar, on I to year-over-year the pretty QuickBooks growth, you what and am slight in the Desktop? a revenue in year quarter explains just wondering of this sort earlier in the has is deceleration if was seen basis

Brad Smith

had recognized it’s of of the third an in a period quarter anomaly you. Walter. discontinued Thank product last it, a Sure. year deferred Got revenue been Really, for that time. some that

me that product tell Let what was. you

product an of called ago, You you that and QuickBooks to we rules, the of a When you introduced license. retail, the in and Online accounting QuickBooks we revenue QuickBooks the it on at defer included desktop version SKU. a option into carried purchase bought choose Chooser a extent Desktop years could or subscription you opt that may recall had of the we anyone either of can couple because go over of Desktop out and who

not were the who third taken So, recognized lot in that did product, happened ones we was what but quarter. that of last the found a customers year revenue that got

balloon a grow we So, over we had to quarter. of bit a if little will payment you this had

actually is you line revenue quarter. prior that would product grown QuickBooks which out, have If the Desktop X%, with pull in

a a So, was one-time ago. based product from a years of it discontinued really anomaly upon couple

Walter Pritchard

it. Got

the for even fewer high implies subs that’s helpful. just you wondering last and in might year And that am been that’s ago more if X.XXX explained a net over Okay, the growth next just something the in adds than why net all we else end, on you then adds? seeing year. quarter, year or conservatism a have the decel guide significant adds I at net see

Brad Smith

the the Walter, eyes in conservatism is of holder.

and We are we we And clearly do accelerate our growth leaning continue about have. international momentum how thinking QuickBooks the in the give here to in Online both and subscriber do markets? still I

testing fourth different fiscal discounting different our rates. of are quarter year in approaches, We this now promotional right

feel fall, game we when little bit to And the we of peak head opportunity a have experiment, into plan so we really we give an ourselves season confident a in. in so that

testing consider as that for fiscal are year should probably year. we ready this wrap we for things, of little next us hedge a get as bit as you So, and up

Walter Pritchard

the Appreciate Great. Thank That you. color. makes sense.

Brad Smith

me Yes, too. you. Thanks. Thank

Operator

Thank you.

Oppenheimer. Scott comes next from question Our of Schneeberger

open. Your line is

Scott Schneeberger

a then a attach just list Michelle. return, strategic revenue in order follow-up elaborate then for could all the particularly have per that a is little the bit is I am you truly number shift two-parter on X attach, that for price and the rank increase. And they one? Thanks. you order, Hey, then were on won is little is and you you it then bit if follow-up or curious mentioned When equal I Brad. a mix more

Brad Smith

Yes, it. I appreciate

the we will just the anything called some We have do and some have bundle little but put percentage it’s you had transfer, terms when points, you want in you we that you you across different security Investor Day, decide combination software find would the come that the to IRS. and against a this breakthrough There wasn’t in to in better I we and was that those then did small it they of refund conservatism? have being those. to to we in And it defense, year What a ability unpack by was to of price features, then can point if for there as variation which of have the more We a have refund. audited is of out it some had is have give attach, we to it’s a attach. customers refund significant pay we so in really of ability by call offering new a expose products purchase, of order plus to isn’t for continuing ways your I The this refund bundles, shift, basically the protection attach audits, mix and that now, those attach, just would a need. this, ability

Scott Schneeberger

$XX about this have for Thanks guide just down that, full Thank us think the remind that. Great. Michelle, forward? just for year, how on year, just CapEx kind we should And not of going but could you the you. million

Michelle Clatterbuck

Sure. Thanks, Scott.

having the – that’s things means this all is look actually, are our as Our then transitioning centers we that about to for is couple don’t of that the have refreshing an we impacting and data for what that. year-to-date, you where at to a in impact of year, there. talked AWS, do there are have we CapEx so And different if

other this the inflated last software year. the some at And that renovation campus is had still things so of were One last doing some and on capitalization. View time construction and do of our year Mountain lower have then we we

to And that. look so will at we continue

that We give the into we are more some you going the those are but forward now. that will of Investor seeing right insights as you drivers think decrease about Day, big at

Scott Schneeberger

much. Thanks very

Operator

your. Thank

next comes Reback the of from Brad Our Stifel. line question of

Your question please.

Brad Reback

it Michelle, of growth, from flow to level, gross OpEx be continue much. if should the think so is about high we dollar the outpace dollars go very a margin this going profit thanks Great, benefit to if should cash forward? a back where net-net situation we some commentary

Brad Smith

clear the Brad, She the I repeat question. you am about sorry, could wasn’t question.

Brad Reback

absolutely. sure, Yes,

flow while dollars, cash margin about dollars we the still future, than profit down OpEx the positive? gross faster should in growing the go benefit think may So, so is

Michelle Clatterbuck

right don’t to I am thought not now, am think I that it sure I if I know through that is about that actually, trying way.

Brad Smith

mean, faster rate not So I they about be cost typically is than sold dollars of goods but that’s is margin at the the what little relatively a be if growth we as they just in. going of same jump usually margin our are can stable that revenue, assume then I this bit and you are operating going year, to do. revenue about XX%, to gross

answer you So Brad, you will into I go back an are ahead. much pretty think expecting. that’s No, what

Brad Reback

just ahead, was going Brad. to thanks. No, Go I say

Brad Smith

that Well, unpack do, a Michelle earlier this out and couple came there. came job for of question what of and I points up you up then I a to thought this putting just Michelle know I now I’d it did thought answered going was and really I nice

the reviewed board and just weeks double-digit grow The operating the income is them first than is our the financial mid-teens. which remain organic with a grow on in faster the line, principles which dollars to us couple enduring company top growth allows ago, in we expense, revenue of

also We opportunities accelerated in this that saw of the would As a would top that accelerate we walked lean and invest wanted line we and growth both year, through. to opportunity year, year were entered this said saw four that operating this areas ahead we stronger saw Michelle foundation the XX%. strong growth we growth line income for we multiyear top but growth those set our to

our This AWS, the not that are talk hear in AWS terms at at in XXX% back we that a question. we course sell dollars. you brand. get Investor not the again financial TurboTax company peak leverage to income model anticipation and operating accelerating We good our business RAM of should and opportunities sciences, But going out in to technology, and of We second this August will choice. come to is was from continue This then by which operating way strategic into invest data a and saw real principles benefit our Day. growing about of

anyone’s just can question is So that putting leverage there on if operating is tell you answer there the the mind eyes I out straight the about and so an issue a no. heart, I is there company, clear a with with am of

Brad Reback

Got it. Very clear. Thanks, Brad.

Brad Smith

Thank you.

Operator

Stanley. Next question Morgan comes of of from Weiss line Keith the

Your line is open.

Keith Weiss

guys like to and at everybody my think you quarter I quarter to is great get the is attack XX% a the taking Excellent. this a highest question Nice for on had the in if in consumer makes have Is quarter of Again, nature versus I sort special, head there of year sort question. there? thinking seen be that trying I think and thank product and year-to-date, should great tried rate anything I one-time higher in the we that growth we or a will, can how prior non-repeatable on or that given consumer model. a expanded basis you don’t about this this durable years of that potentially forward you portfolio going see

Brad Smith

Keith. Thanks, Yes.

fall. business opportunity we what durable when this into growth we about talk the is think in get will the We

with lower our what years offering and a around tried the to said end of the double-digits product customers, to even what has when think do this historically, grow We different ago, are category been But I have is further into they X% often free I of historically we up grow and versus at touched few that is aware minutes we the the XX% a last on up. couple teens. year line fully came in grower the

they to in as Live out coming customers a higher are we of the we TurboTax at are method, prep average assisted in per revenue are getting and with getting come Now customers tax customer.

grow growing the revenue. we also are expand we as So category customers, and

think we that look events in looks a the here, to continue about good starting And talk into us we a can are really if will growth that when to sustainable much we so I don’t but believe should what see we business as economics execute rate the you shift like you more structural fall. I see a one-time give ahead, get

Keith Weiss

That’s Excellent. very helpful.

Operator

you. Thank

the of of question Mehta Research. next comes Our Northcoast Kartik from line

Your line is open.

Kartik Mehta

Brad. Hi,

Brad Smith

Kartik. Hi,

Operator

Please Mr. Mehta, sure your open. is Please continue. line your line make is un-muted.

Kartik Mehta

would this you product Live year, TurboTax primary what the was you for be next primary year? year and this product for objective say the The will objective what for that

Brad Smith

think of that question? I the that primary year, primary the what objective year TurboTax was question, I heard be majority Kartik, will next what objective Live, this and your the your was

Kartik Mehta

Yes.

Brad Smith

tend changes if a have they either by nagging get existing on to we our when million move lose to something what is was we could impact to their to did stock. introducing we year seek So, base our could it that the tax situation, the this married, question say they X between retention we to we do they that They sell in customers child wanted have Pro see primary objective. in and improve a states, actually average customer

more talk like As we fall, I mentioned achieve the earlier, what will we the look but that. as results we about did get into

so this successful hypothesis. method into like the change we new CPAs that is the the source people customers bring category of And stores tax to begin category. season and to and people of been customers could we as assisted get new looks have improving or an we wanted have we of who that coming as thing to other the may time actually far say if we into finished gone our mix could also filers The first

transform the to of category. long So as to that into more lean to for be $XX objective think be we them opportunity billion the tax and the year, run. prep into big the us begin next primary assisted going We is the over category do-it-yourself will bring

Kartik Mehta

bit to Brad an than now for the past? and changed in maybe you more some has is maybe And side do a little maybe raise consumers tax value they market the think the getting opportunity because pricing, on as the the than do have prices are believe have more you you in you then talk you seeing about past, there

Brad Smith

as there move as ago, but will you to you person or get that pay the they so a someone to really and value to closely. more the at when can deductions, is few want willing are customers hypercompetitive question something and is their consumers that market into coming to into the legislation for Kartik the lower when you through software And free, that products need and follow answer seen category. for. of they minutes we the qualify tax also willing talk have know schedule we Well, of convenience free mentioned space lower priced point to for pay even opportunity products, give have to people the being end standardized It’s ability they a could are

that do we also to like can revenue, feel category. So, right we proposition growing grow strategic the value the with continue while

not there we than us relative to have so differentiate competitors if higher In able to deliver price. our become that value-add is can to to for a earn be more taking terms price, and of and a competitor difficult

Kartik Mehta

it. you much. Appreciate very Thank

Brad Smith

Take welcome. care. You’re

Operator

you. Thank

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

Your line is open.

Kash Rangan

or and in is not Brad, were did you the professional perhaps question heart to on TurboTax that at question, upgrade clear heart accountant eye? look either professional to demographic was people because going is say actually. that you straight clear was even that your when of that we a the profile, That waterproof your a a using versus of eye try base I came am might curious competition how point tariffs got that straight were much replied My both people are TurboTax. profile, or how Live. from a and that to, to brick-and-mortar from flow have are people existing complicated categorize

and live could you as bigger the plays that different of where into be be you if us all going as these see characterize business understand actually hoping the future you say, big TurboTax Live is as project let’s help can how in picture that through vectors the changes company to better, from the to vectors TurboTax to the going TurboTax, what of flow product it you is a season, Thank out, will even So, inflow one you. the standpoint, year as it? equip forget you next product go-to-market, potentially went making RAM perspective? TurboTax the And see do this the business. from standpoint coming you Where for do from see products of but core a and Live

Brad Smith

me you and through use the that and think here. thank thank helping Kash things you, the Yes, I quotes for

what even can’t side Virginia West out I that of and Sometimes comes I remember me said.

get So, let the Investor we fall more into to Live lot on going detail me at are start a first breakout when with we Day. TurboTax

to will we out million of time do, at share category level, enter million are by encouraged X the as tax a always we I people what we sources first X high will but know customer, their the year. workforce for hit filed up you the They As the time is the first of entering for each are filing whole There college. first first They divorced. jointly. people host a why is return. filing end of are time. are reasons They They

we So, into a and scenarios, one the category any of inflow you disproportionate take into saw those TurboTax.

So that was exciting.

will an So, source talk customers about fall. know we that’s and we in of do evergreen more the that

have thing we other home. The been as left, who them couple saw with customers TurboTax coming we a years saw of had and ago

gone for assisted TurboTax with method that points a And some a from had us prep And for it’s whether method or does. we been TurboTax who those tax alternatives. other then category They as well. tax an we more an all so was have about assisted actually or Online CPA, saw that XX regular opportunity than did Live good to see

they first-time are going home tend assisted method. So, or like prep they customers, is filers, tax who people sources to coming be do are those an used we to the are who what be of to people

granularity We out will break the later.

but to prep prove tax and In a about $XX lot a terms and category, of today. assisted ourselves at prove look it’s category we the you sliver to billion opportunity, we have if tax still the very a small you, have to to

business any a to the create in continue us. is. more for So, see market, how big have than that and value can execute very well to alternatives just other the will be of we If nice this could we

Kash Rangan

The product no otherwise you big the if thanks, sweat. perspective, time, have

Brad Smith

to ahead time do Live of of did the and not this I all marketplace in will were them next Obviously, point at of TurboTax are what lot year felt people Kash, rather to products. of get are Yes, interested sharing the in there what we would in in do that we plan with in year this we are investors. not we to going what terms headlights our

those plans getting close we And sure talk keep more about the we so we vest we product just some of when that to to that want are the and ready to will product. launch make

Kash Rangan

Completely and you so understand. congratulations. Thank much

Brad Smith

Take Kash. you, care. Thank

Operator

Thank you.

from question Fargo. Siti comes of Panigrahi Wells next Our the line

open. is line Your

Siti Panigrahi

question. Thanks for taking my

those on Going QBO some you of good internet of from update talked India give that’s by France, this could that marketplace, pretty Self-Employed? back you And driven Brazil, versus to QBO’s growth, should some kind seeing product start how XXX,XXX regions? that also growth when we Business much Small about

Brad Smith

Siti. thanks Yes,

about growth So continuing its the That QuickBooks is I growth driven we markets but by first really right that as primarily in say very ramping prospect, that up opposed of is all international country to predominantly we add are now, core product are growth excited the QBO. driven QBO to functionality and was XX% by Self-Employed. was core and specific the would

these In seeing market like are and in India the where day really looking terms and are is we the by of terms were we France of in markets the search we other markets still of healthier product what in fit, prospects.

around with as terms QuickBooks process Online tax capitalize situation are the their of opening up acquisition to small did that them of yet for looking stack are clarity providers the a a We handful as well on impacts Brazil now working for and through, right we now, businesses. implement in GST, that how new engaged we is technology still don’t have right actively help government the which best on we ZeroPaper is offering.

in India pack would the working we team we France behind, of Brazil them is turn the I market we a sequencing, of a little fit. and of say are just and make a product on those but I green have would dashboards actively of ahead get and further all got is So to little that do the terms bit trail sure and

Operator

you. Thank

next the comes of of Barclays. Our line from question Lenschow Raimo

open. is line Your

Raimo Lenschow

monetization, doing they you congrats that levels a as saw what you obviously. well about question earlier sign questions of clients Thanks are Quick what product, is up the talk X you with on million, you little how that you how that you see can to for little are bit in Turbo how taking talked and often from what of going you my can – you activity a about about using me and Brad, the the etcetera? early like terms talk the the

Brad Smith

Scott And is, has in Raimo. need what been Turbo average of score thanks investments, decisions the terms would that working Cook, financial with more know be customer is their their savor actually services, in we of paycheck-to-paycheck the our what customer, that’s the a Yes, kinds know credit little like, what looks We we to surprise. bringing actually, as can the are this financial and their tend a them. of we say know Founder, lower score partners different a customer a much more with bring credit in met

Quicken. than from use Mint active in their might so past had other have a see And what or customer different we is products we any the like

aware notifications and And like them the speak. financial What drives And alerts we engagement. are so also we process things making changes we in learning finding are as of that very are know in important of them. we active is to that, situation their

at are we people X million So saying the have have who of registered. we process

the apart then we share be differences and are seeing in we encouraged to gotten the other leads conversion and to you some are say for many make health? in decisions we cases as the by to to you, of to with people some Xx break that able what are make encouraged do can these we the other by customers But will engage how help are relative we will encouraged are better they very them they quality what and than I the to those money more we with that their fact by XXx get this, the our the that best of will is fall signed partners to have we insights in products. actively from we we Now, money improve them getting And up, fact financial closer we save sources. as

just us is over and for that them, active we they and a long-term. we win, get win now more win, viable users think have And them if of the a turn business can we into real so

Raimo Lenschow

where me the XXX% question one the think some the talk And big a just earlier you doing on move where process guys major like are overall you been have towards have on side, AWS, are I Perfect. follow-up should that investment in referred of RAM initiatives, on like you through benefit have AWS you kind said investment of but from can me the you the for I heard I of TurboTax ones?

Brad Smith

Yes.

will we small was be own is of But we of bubble, and the XX about next have months a years know the levels now, or that. other we X there So the little AWS Raimo product, in we out migrating have AWS mid-April everything have long working year to are and AWS. with we we really you the TurboTax, AWS At been will to moving tale moved in talked have have performance then then our was working several our now as a the delighted services in, the in before, another our into years get ensure of when we we that and major of Online data data AWS been process has up through of and right datacenter over towards also and process and will the peak the the products which security combination able as XX moving own center with XXX% we above year are were and experience, hope were have getting AWS QuickBooks was for of double so in to got the and that that products for of into expectations. after we the products months have volume the this our we and getting of kinds dealing in. we have last of in, our and quality, business probably what RAM those second moving a we architected into where with mentioned, I products

that’s investment feel we continue everything to year, keep terms our our they good. the while over. until moved of got AWS on into we into so And out we when like it to are AWS, another we what theirs. actually and of of for garage XX to be products get on our we seeing And part paying the plus perform and in moved how We months are as call lights in got get foreshadowed everything pay we own this went we that datacenter volume we in to

Raimo Lenschow

Well clear. Very Perfect. done.

Brad Smith

Thank you.

Operator

you. Thank

from next First comes MacDonald Our question Jim of Analysis.

Your question please.

Jim MacDonald

afternoon Believe or demand issues Yes, capacity you not have any bit the another guys. or talk I did about of supply Live either that, good enough equation you either side can there? have or have did a it TurboTax you question, on little

Brad Smith

Thanks, certainly products and TurboTax Live. about Jim. asking the apologize about of Never for any

own at the to will get schedule to you we with some am a when of an to demand connected you your and end very, supply that within were this willing professional We and extension, your have go you. product of And this is platform. no, maintain ahead real service by a year. are not delighted I and at very our by were supply match to also in where of offering question the cases the pros were said were the the the time to we to delighted be work Pro. We have to ability in wanted file or connect because ability on proud levels ready they could convenience did answer the and not. you And wanted short We us and delighted to professionals see the flex team to and minutes season myself hey, I customers who with

the at they when working have get the to to help and in front I of done. end at our it’s you pros think log it taxes and re-imagine have also office we an we of hoped at really entire a had from case it better did out an and So, because home office their this you sitting get are work turn come can you opportunity the category, than to any the in day day time end but constrained in many get in point much waiting their in done, the times

So, I think changer. this is really a game

Jim MacDonald

there? strong seem services And your a subject, good. to on Very be Online QuickBooks quarter, this just going particularly different on anything was there

Brad Smith

Yes, Jim, it was.

for continued and acquisition we improvement execution excited have We needed continued have driving talking teams to ability that time in services. time addition core that our as payroll about and that’s this the in that, we growth? a But was online our it our just execution, a both by services quarter drive are acquisition, fact those been we to the behind really accounting payments have execute services of to helping TSheets, that and what’s then did improve some rolled our And that and acknowledge improve to teams but into our well. the those beyond and is attendance our

Jim MacDonald

Thanks. Great.

Operator

Thank you.

Our next question Sterling the from Auty of of line comes JPMorgan.

line is Your open.

Sterling Auty

that Yes, amount you thanks. satisfied more what the of were Hi, gains year? guys. category surprised weren’t you that some saw did you they that you the saw, marketplace with DIY maybe market in that the you share you and maybe share a Brad, limited this you mentioned that the see were slight gains share, of gained in that

Brad Smith

you Yes, Sterling. thank

Live. really the have we have perspective of end the as us our day then we not. to continue in and They think in to game slightly good game reinvent is I but we we And have seemed every have and do. year of I as to of remove And would certainly terms the like good if gained look their if for We things invent share, performed share course the to others we they good has who that competitors. word ourselves take I picked up reported level to always this far at reported so how year, for everyone continue keep given who we how next market, and the you consumer. And like products am it’s at placed to and I time, able we it same have publicly, the the player and of build introduced in market And looks the second share. fact the hypercompetitive it were in the was Turbo like and to TurboTax very our proud that on

to I each game this are going expand share and So increase while the out to going category, did into come is services. to team these in that the to And we plan try am market really our pleased year. year be other we

Sterling Auty

Got it. Thank you.

Operator

Thank you.

of question Evercore Kirk the Materne of line from Our comes ISI. next

is open. line Your

Kirk Materne

about from Thanks for if just Thanks. perspective. investment principles you sort that add or you Brad, thinking growth in obviously whether that what had the the fiscal we certain a to thinking very about consumer or of accelerate an lot quarters we in about next into longer into much year? financial is to is into where higher congrats I you going flexibility I guess year, I a how and it’s question whether the and my that success situation had are you be reiterating products offered for the you in guess quarter. will insights your gives more areas investment not Could your in talk in are like thank that the my you perspective investments going allows you your just AI are maybe you as from next

Brad Smith

performance in team delivered. kind you on the quarter the Appreciate Kirk. thank the words that the Yes,

priority $XXX to look the give Our fiscal plans then in to and that even we is beyond. number shareholders million talked recall redirect increase where to first flexibility for priority cash Reinvent-to-Reinvest, areas when place been produced we already that have talked to we ‘XX able we customer and as and we have in the financial basically whether found Michelle, growth. we year invest it’s higher as as return principles areas. of people and business, year year the to And look we we we we priority revenue this investments higher acquisitions about ROI and or leadership continue look but the across resources, flow, accelerate to dollars we under may cash lower called Michelle our time, And implemented us invest company also those about to at repurchase initiative and the to redirect stock an over dividends, you this and

and going expansion, a those And QuickBooks about. areas within have harming dollars take talked where without that I we Live, are look and our spend our to do financial and dollar within have the all other there principles to things we hard capital capacity at redirect you machine to could just that and we do learning those So have that to intelligence Turbo, opportunity are we to things ability TurboTax like artificial believe more ourselves principles. continue say, wisely we also financial our global so to

Kirk Materne

much. very Thanks

Operator

you. Thank

comes Our from next Millman question Research. line of Michael the Millman of

line is open. Your

Michael Millman

you. Thank

the growth been those Second it about but the – do-it-yourself Given could it has would in to question wondering was if because increase that points itemize, past is standard you I past I don’t than seems yet deduction This about number it, at in higher talk XX million you year, do insisted. you. think? X Thank will if why years, a has IRS change was taxpayers numbers with what higher there is it assisted, to we about variance do-it-yourself? think been several this people that X.X is think your there number dropped who is

Brad Smith

good you. Michael. hear from Yes, It’s to thank you

was years, year This little in it a the There we affect all, the assisted outpacing category in fear as uncertainty the market the is affect came out, do-it-yourself this is assisted TurboTax is of that relative would a does which and next so Live First to why legislation was prior and of tax say it keep is. a does mind obviously important. year, year. year, doubt confusion we thing it bit lot of was

to we you you a could that you let help tax had question with wanted professional. we if know a So

a realize really increase and what then quick A that don’t which or that pro. it’s we or the the two a picked we answers it’s X-minute who there up question, and one maybe file could have can’t tax TurboTax full so, this I Live those really if growth. do-it-yourself continues that allow go us people today were their shift out just into believe do our We are And more with will good a in category pack simple move tell have solve do they of accelerated opportunities returns So would be into They effect point pro. a second question using X.X have to million tax XX less taking year much things, doing of that and still or filing share they but is to know your XXXXEZ simplification, Live price. tax they next that people answers year get with you can having legislation could with that exchange We still taxes believe a they two the of TurboTax. assistance a for just to lower know us as category TurboTax that not filers category because the why and to that a

fundamentally Live that as grow So TurboTax help us the will and the legislation we think category.

Michael Millman

Very good. Thank you.

Brad Smith

Thank Alright. you.

Operator

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

Brad Smith

has everybody Day great hope and today. Yes, to weekend. time want I and your questions thank Memorial for your thanks for everyone Latif I a

forward with We care. you until looking and speaking then are soon take to

Operator

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

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