Intuit [INTU] Conference call transcript for 2021 q3
2021-11-19 02:11:05
Fiscal: 2022 q1
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 First Quarter Fiscal Year 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. . With that, I will now turn the call over to Kim Watkins, Intuit's Vice President of Investor Relations. Ms. Watkins.
Kim Watkins: Thanks, Latif. Good afternoon and welcome to Intuit 's First Quarter Fiscal 2022 Conference Call. On here with Intuit CEO Sasan Goodarzi and Michelle Clatterbuck, our CFO. Before we start, I would like to remind everyone that our remarks will include forward-looking statements. There are a number of factors that could cause Intuit 's results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our Form 10-K for fiscal 2021, and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit's website at intuit.com. We assume no obligation to update any Forward-looking statements. Some of the numbers in these remarks are presented on a non-GAAP basis. We reconciled the comparable GAAP and non-GAAP numbers in today's press release. Unless otherwise noted, all growth rates refer to the current period versus the comparable prior year period and the business metrics and associated growth rates refer to worldwide business metrics. A copy of our prepared remarks and supplemental financial information will be available on our website after this call ends. With that, I will turn the call over to Sasan.
Sasan Goodarzi: Great. Thanks, Kim. And thanks to all of you for joining us today. We're off to a strong start in fiscal year 2022 with continued momentum across the Company, given our strategy of becoming a global AI-driven expert platform, powering the prosperity of consumers and small businesses. We have nearly a $300 billion addressable market driven by digital tailwinds that include a shift to virtual solutions, acceleration to online and omnichannel capabilities, and digital money offerings. First quarter revenue grew 52%, including 32 points from the addition of Credit Karma. Total revenue growth was fueled by small business and self-employed group revenue growth of 22%, and Credit Karma revenue of $418 million, another record quarter. Consumer Group and ProConnect Group revenue was in line with our expectations in a seasonally small quarter. As a result, both of our strong start to the year and the close of Mailchimp transaction, we are raising our revenue and non-GAAP operating income and earnings-per-share guidance for fiscal year 2022. Michelle will cover this in detail later. Our AI-driven expert platform strategy is accelerating innovation and our 5 Big Bets for solving the largest problems are customers states face. We continue to deliver strong proof points that demonstrate the success and are well-positioned for durable growth in the future. As a reminder, these Big Bets are revolutionized speed to benefit, connect people to experts, unlock smart money decisions, be the center of small business growth, and disrupt the small business mid-market. Today, I'd like to highlight examples of our recent progress across 3 of these Big Bets. Our third Big Bet is to unlock smart money decisions. I am extremely proud of the momentum we are seeing with Credit Karma. Credit Karma is a data platform with powerful network effects, solving a two-sided problem. We are focused on our goal of creating a personal financial assistant that helps consumers find the right financial products, put more money in their pockets, and access financial experts and insights. Credit Karma achieved record high revenue again in Q1. We continue to deliver innovation across all verticals fueled by our proprietary Lightbox platform, enabling personalized experiences for our members, creating a network effect. Within the core, partners ' usage of Lightbox reached all-time highs across both credit cards and personal loans. Lightbox more than doubled the average approval rate for members who apply for credit cards on Credit Karma versus outside of Credit Karma. Within the growth verticals, we're solving a larger set of financial challenges for consumers. Karma Drive is giving U.S. members the opportunity to see if they can save money on auto insurance with usage-based pricing. We're actively exploring expansion opportunities with Lightbox in other verticals, including auto loans, building off of the success as we've seen in credit cards and personal loans. Within the emerging verticals, we remain focused on innovation with Credit Karma money. We integrated Credit Karma money into TurboTax last season and experimented with how we could best meet our customers ' needs and announced an integration with QuickBooks Online Payroll. Given our learnings, we are excited about launching our improved experiences in the upcoming tax season. We believe Credit Karma Money is the key to driving growth in frequency of visits over time, one of the many key drivers of average revenue per monthly active user. Zooming out, we continue to grow members and are focused on building trust by delivering personalized financial products right for members, helping members save money, pay down debt, and get faster access to their money while providing insight and advice. Over time, we're creating a virtual cycle, which we expect to increase the frequency of engagement, transaction, and monetization across our ecosystem. Our fourth Big Bet is to become the center of small business growth by helping our customers get customers, get paid fast, manage capital, pay employees with confidence and grow in an omnichannel world. 60% of small businesses struggled with cash flow and we are continuing to innovate to create solutions for customers to overcome this challenge. In fiscal year 2021, total payments volume on our platform grew 40% year-over-year to over $90 billion. An online payment volume grew more than 60% driven by an increase in customer using our payments offering. As we continue to innovate for our customers and payments, those using QuickBooks cash of nearly 3 times higher engagement compared to customers who've just used QuickBooks Online. To accelerate engagement and usage of our platform, we recently introduced Get Paid Upfront, a game - changing innovation that will help qualified customers get paid soon after their invoice is set. Our fifth Big Bet is to disrupt the small business mid-market with QuickBooks Online Advance. We're seeing strong traction with QBO Advance, with customers growing to 118,000 in fiscal year 2021, up 57% year-over-year. As we continue to move up-market and serve these customers most critical needs, we're seeing a services ecosystem ARPC that is 4x higher than the ARPC for QBO customers. We're pleased with our results and remain confident in our game plans to win. Across all of our Big Bets, we're building momentum and accelerating innovation, which we believe positions us well for durable growth in the future. This will be further fueled the by Mailchimp. I'm delighted that we closed Mailchimp. They closed the acquisition earlier this month, which seeks to significantly accelerate 2 of our Big Bets, bet: to be the center of small business growth, and to disrupt the small business mid-market. Getting and engaging customers remains a significant paying-point for small and mid-market businesses. We are well on our way to becoming the source of truth for our customers to help them grow and run their business. We have 3 acceleration priorities with Mailchimp. First priority is to deliver on our vision of an end-to-end customer growth platform to help customers get their business online, market their business, manage their customers ' relationships, get paid, access capital, pay employees, manage cash flow, and be compliant with virtual experts at their fingertips, all in one place. Second, disrupting the mid-market by developing a full marketing automation, CRM, and e-commerce suite for mid-market customers at an attractive price point, enabling mid-market customers to use the power of the platform to grow their business. And third, accelerating global growth with a holistic go-to-market approach. With Mailchimp now part of the Intuit family, we are uniquely positioned to enable small and mid-market businesses to combine their customer data from Mailchimp and purchase data from QuickBooks to deliver actionable insights they need to grow and run their businesses with confidence. This is where the real magic happens. Our combined platform technology enables us to move with speed, and we've already seen strong interest from our customers. The teams are hard at work, and we are excited about the opportunity ahead. Foundational to our Company's success is building a high-performance culture. I want to take a moment to acknowledge our progress with our diversity, equity, and inclusion efforts. Last year, we declared our focus on increasing the percentages of women in technology roles and underrepresented minorities across our business. We achieved 30% and 13% respectively and we are inspired to accelerate our plans and push even harder as much work remains to be done. Additionally, we've made meaningful progress supporting our communities. First, we recently announced the Intuit Climate Action Marketplace, which will help 1 million U.S. small businesses find sustainable solutions to reduce carbon emissions. This is part of our decade-long climate positive goal to go beyond net carbon neutral and reduce global carbon emissions by 2 million metric tons by 2030, or 50 times greater than our 2018 operational footprint. We also recently announced a 23-year partnership with the Los Angeles Clippers that includes economic benefits for the local community with Intuit Dome, the team's future home. And finally, we launched Intuit Ventures to invest in the startup community and accelerate FinTech innovation for consumers and small businesses. All the work we do starts with our mission of powering prosperity around the world. And I'm proud of the momentum across the Company and delivering on that mission for our customers and communities. Now let me hand it over to Michelle.
Michelle Clatterbuck: Thanks, Sasan. Good afternoon, everyone. And I'd also like to welcome the Mailchimp team to Intuit. Now, let me turn to the results. For the first quarter of Fiscal 2022, we delivered revenue of $2 billion, GAAP operating income of a $195 million versus $209 million last year, non-GAAP operating income of $555 million versus $334 million last year, GAAP-diluted earnings per-share of $0.82 versus $0.75 a year ago and non-GAAP diluted earnings per share of a $1.53 versus $0.94 last year. Note that our GAAP results include a $39 million net gain on other long-term investments. Turning to the business segments; in the small business and self-employed group, revenue grew 22% during the quarter, with online ecosystem revenue up 36%. With the aim of being the source of truth for small businesses, our strategic focus within small business and self-employed is three-fold, grow the Core, connect the ecosystem, and expand globally. First, we continue to focus on growing the Core. QuickBooks Online accounting revenue grew 32% in fiscal Q1, driven mainly by customer growth, higher effective prices, and mix shift. Second, we continue to focus on connecting the ecosystem. Online services revenue, which includes payroll, payments, capital, and time-tracking, grew 42% in fiscal Q1. Within Payroll, we continue to see revenue tailwinds during the quarter from growth in Payroll customers, and the mix shift to our full-service offerings. Within Payments, revenue growth reflects ongoing customer growth, along with an increase in charge volume per customer. Third, our progress expanding globally added to the growth of online ecosystem revenue during fiscal Q1. Total international online revenue grew 39% on a constant currency basis. We believe the best measure of the health and success of our strategy is Online Ecosystem revenue growth, which we expect to grow better than 30% organically over time. This is driven by 10% to 20% expected growth in both customers and ARPC. Desktop Ecosystem revenue grew 7% in the first quarter. QuickBooks Desktop Enterprise revenue grew high-single digits, driven by strong customer growth and price increases we put in place late last year. As a reminder, this fall we transitioned to a subscription model for this year's Desktop offering, which we expect to be a headwind to revenue growth in the second half of the year. We expect the Desktop business to decline longer-term. Moving onto Credit Karma, revenue was $480 million in Q1, another record revenue quarter, driven by high levels of monthly active users and revenue per monthly active user. Within the core, we saw another record quarter, driven by the combined strength in personal loans and credit cards. The growth verticals also achieved another strong quarter, reflecting momentum in home loans and auto loans. And we're developing the emerging vertical by focusing on innovation with Credit Karma money, part of our digital money offering, so this is not a large revenue driver today. We continue to expect pent-up demand across the core verticals to taper sometime in the second half of fiscal 2022 after a strong year of investment by our partners. We remain excited about the opportunities ahead. Consumer Group revenue of $120 million in Q1 was in line with our expectations. Looking ahead to the upcoming tax season, we continue to focus on our strategy to expand our lead in DIY and transform the assisted segment with TurboTax Live. As to the ProConnect Group, revenue of $26 million in the quarter was also in line with our expectations. Turning to our financial principles, we remain committed to growing organic revenue double-digits, and growing operating income dollars faster than revenue. As I've shared before, as we lean into our platform strategy, we see the opportunity for margin expansion over time. We take a disciplined approach to capital management, investing the cash we generate in opportunities that yield an expected return on investment greater than 15%. We continue to reallocate resources to top priorities with an emphasis on becoming an AI-driven expert platform. These principles guide our decisions and remain our long-term commitment. Our first priority for the cash we generate is investing in the business to drive customer and revenue growth. We consider acquisitions to accelerate our growth and fill out our product roadmap. We returned excess cash that we can't invest profitably in the business to shareholders via both share repurchases and dividends. We finished the quarter with approximately $3.3 billion in cash and investments on our balance sheet. On November 1st, we entered into a $4.7 billion term loan under our new credit arrangement at credit agreement to partially fund the Mailchimp acquisition. We repurchased $339 million during the first quarter. Depending on market conditions and other factors, our aim is to be in the market each quarter. The Board approved a quarterly dividend of $0.68 per share payable January 18th, 2022. This represents a 15% increase versus last year. Moving on to guidance, we are raising our full-year fiscal 2022 revenue and non-GAAP operating income and earnings per share guidance to reflect both the acquisition of Mailchimp and the stronger than expected start to the year in the small business and self-employed group and Credit Karma. Our updated fiscal 2022 guidance includes revenue up $12.165 billion to $12.3 billion, growth of 26% to 28%, including Mailchimp as of November 1st and a full-year of Credit Karma. Excluding Mailchimp, revenue grows of 18% to 20% up from our prior guidance of 15% to 16%, GAAP earnings per share of $7 to $7.16, and non-GAAP earnings per share of $11.48 to $11.64. This updated fiscal 2022 guidance includes organic growth for the small business and self-employed segment of 16% to 17%, up from 12% to 14%, expected Mailchimp revenue of $760 million to $770 million, and Credit Karma revenue of $1.54 billion to $1.565 billion, up from $1.345 billion to $1.38 billion. As I shared before, we continue to see opportunities to leverage the platform and drive margin expansion over time. Excluding Mailchimp, our non-GAAP operating income guidance continues to imply approximately 60 basis points of margin expansion in fiscal 2022. Our guidance assumes the Mailchimp transaction is accretive to Intuit 's non-GAAP earnings per share in full-year fiscal 2022. However, we expect an approximate 80 basis points onetime step-down in non-GAAP operating margin reflecting the impact of Mailchimp as we plan to invest aggressively in the business. We expect non-GAAP operating margin expansion to continue from this new level over time in line with our financial principles. Our fiscal 2020 GAAP operating income guidance includes approximately $165 million for stock-based compensation associated with the acquisition of Mailchimp. In addition, our GAAP operating income guidance includes the impact of the Credit Karma acquisition along with investments we are making in stock compensation to attract and retain talent. We're confident these are the right decisions to drive long-term growth. And we expect a GAAP tax rate of 18% in fiscal 2022. Our guidance for the second quarter of fiscal 2022 includes revenue growth of 73% to 74%. GAAP earnings per share of $0.55 to $0.59 and non-GAAP earnings per share of $1.84 to $1.88. You can find our full Q2 and updated fiscal 2022 guidance details in our press release and on our fact sheet. And with that, I'll turn it back to you, Sasan.
Sasan Goodarzi: Great. Thank you, Michelle. We are off to a strong start this year with continued momentum across the Company, given our strategy of being an AI-driven expert platform that's powering prosperity for consumers and small businesses. I'm proud of what our employees have accomplished this quarter and I'm excited about the opportunities ahead to find new innovative ways to serve our more than 100 million customers. Now let's open it up to your questions.
Operator: Thank you. Our first question comes from Ken Wong of Guggenheim. Your question, please.
Ken Wong: Great. Thank you so much. Sasan, the success of Lightbox has been very impressive. Just wondering, is there a way to quantify where we are in terms of adoption of Lightbox within that your core credit vertical and what that potential adoption could look like? And then you touched on expanding into other verticals. What verticals do you think are appropriate to integrate into Lightbox?
Sasan Goodarzi: Yeah, Ken, thanks for the question. In terms of Lightbox, as we talked about it at Investor Day, we've actually made significant progress year-over-year in terms of penetration. I think what we talked about at Investor Day is we had 50% and 40% penetration in credit cards and personal loans compared to, I think, 40, 20 a year before. One, we have significant penetration opportunity ahead of us. I think equally as important, if not more, is what financial institutions are seeing, which is really the payoff for their investments. And so, more and more financial institutions are joining the platform and this gives us, really, an opportunity to significantly increase penetration. I think that's the way I would probably give you the punch line. Our penetration in credit cards is, I think, less than 5%, just as an example, and personal loans and other verticals are even lower than that. So, Lightbox, the trust we build with our members, the trust we are building with our partners gives us an opportunity for significant penetration, and I think are sort of best years are ahead of us when you think about Lightbox and particularly a penetration. In terms of your question around expansion, auto loans are just one example of where we can expand Lightbox and there are other areas that we've not talked about publicly. I won't do it today until we see our further proof points where we can further expand Lightbox. I think this is 13 years of investments that now positions us to really deliver for members, partners, and really create this network effect.
Ken Wong: Got it. Fantastic. Appreciate the color. And then, if I could sneak one in for you, Michelle. When I look at that Mailchimp number 760, 770, any way to help us understand what that growth might have looked like on a three-quarter basis versus last year?
Michelle Clatterbuck: Hi, Ken. Yeah. We're really excited about Mailchimp. And we think that we're going to do some great things together. Their revenue and their new paying user growth were negatively impacted during the pandemic. I would let to know that. And they did pull back on some of their marketing spend so they could preserve their profitability, and we did see their churn decline some there too. We're going to be investing aggressively to drive their growth as we go forward. It won't happen overnight, but we're really excited about the opportunities we see to grow as we look forward. We haven't really given any additional details on what their growth was previously.
Ken Wong: Okay. Understood. Thank you very much, Michelle.
Operator: Thank you. Our next question comes from Keith Weiss of Morgan Stanley. Your line is open.
Keith Weiss: I just want to thank you guys for taking the question and really impressive quarter across the board. It is -- there's really nothing to pick on in here. I wanted to dig into the QuickBooks Online business a little bit. Both sort of the subscriptions and the online services boasting acceleration in the quarter. Can you help us understand how much of that is the continued reflation post the calendar '20 macro impacts, and how much comes from just fundamentally improving attach rates? I know you guys are focusing on higher level customers with QBO Advanced. Is that starting to improve your overall attach rate picture in that business?
Sasan Goodarzi: Yeah, Keith, thanks for the question. I would say the majority, if not all, compared to previous quarters, is simply customer growth. Its improved mix based on the traction of QuickBooks Advance, QuickBooks Live to a lesser degree, and things like full-service Payroll, and just all the innovation we've been doing in payments with instant deposit making it easier to use our payments offering, and now our new launch with Get Paid Upfront. So, I would say the majority of what we're starting to experience is the actual innovation on the platform and the portfolio that we have solving a broad range of needs for our customers. I would say bounce back from the pandemic, of course, happened and we started experiencing the pickup, but that was, I would say, 4 to 6 months ago. I think now we're seeing the actual true performance of the platform.
Keith Weiss: Outstanding. And then maybe a follow-up from Michelle. You called out again the potential impacts on the Desktop business from a shift towards subscription. Any way you can help us quantify what those impacts are going to be?
Michelle Clatterbuck: Hey, Keith. What I can tell you about Desktop is, obviously, we saw the 7% growth in the Ecosystem in first quarter. And that was really driven by 2 different components. The majority of it was 2 components. First was we saw higher Desktop Enterprise customer growth and some price increases. Desktop Enterprise revenue growth was high single-digits in Q1. The other half of that is really the Desktop subscriber mix. Last year, what we saw was Desktop subs grew 48%, and outright units declined by 47%. And so, that growth in subs last year, because of the way we do revenue recognition, you get an extra pop of revenue from subscriber growth in the -- in Q1. And so that is what we saw. We do expect to see some headwinds for that growth as we go further out through the rest of the year, especially with all the subscriber growth instead of an outright.
Keith Weiss: Got it. All right. Thank you, guys.
Sasan Goodarzi: Thank you.
Operator: Thank you. Our next question comes from Kirk Materne of Evercore ISI. Your line is open.
Chirag Ved: Hi, this is Chirag Ved on for Kirk. Thanks for taking the question and congratulations on the great quarter. I know it's still early days, but can you talk a little bit about the plan for the go-to most -- go-to-market with Mailchimp? For example, are you planning to approach customers or the one-stop shop vendor or do you think both will be filled separately given potential different buying centers and companies? Does Mailchimp expedite your plans to potentially expand QuickBooks into more geographies on a quicker timeline? And I guess how do you expect this to evolve over time as we reached steady-state.? Thanks so much.
Sasan Goodarzi: Yeah, thanks for the question. I'll take you back to the 3 priorities that we've declared because I think it goes after the great question that you've asked. First and foremost, our number one priority is really around creating one growth platform, and it's really a lot of the work behind the scenes in terms of building data pipelines and connecting the services so that the magical power of the data, both Mailchimp data and QuickBooks data can come together for the customer to put the power of the insights in their hands. So first and foremost, it's all about the product and creating one growth platform. The second is we see a huge opportunity to serve mid-market. As you know, we're already doing that from a financial management solutions perspective with QuickBooks Advance. Now we're going to, in essence, build out the capabilities on Mailchimp and really disrupt the mid-market because this is a huge need for mid-market. And I would say third is actually having a global playbook and investing -- accelerating our investments in go-to-market, which I think will get at the last question that you asked that I didn't answer yet, and that is we want customers to have choice. So, if customers first want to engage with Mailchimp to be able to take their business online, to market their business and use CRM tools, they can use Mailchimp and -- but we'll make sure everything is payment-enabled. And then over time, if they want to use all of the invoicing capabilities, payroll capabilities, access to capital, ensure that they're compliant, all of that will be enabled within Mailchimp. The vice versa is true. If you're using QuickBooks and you want to start using capabilities to market your business and manage your customers, all the capabilities of Mailchimp will be available to you, and Mailchimp could end up being, for instance, a nab item on the left-hand side. So, we will let customers make choice is, I think, the headline answer to your question. We will go to market separately. We will go to market together. We will raise awareness and ensure that customers know that there is one place where they can run their business, and more importantly, the power of all their data will be in one place to fuel their success. That's the approach that we're taking.
Chirag Ved: All right, thank you so much.
Sasan Goodarzi: You're welcome.
Operator: Thank you. Our next question comes from Sterling Auty of JP Morgan. Your line is open.
Greg Jackson: Great, thanks. Hey, it's Greg Jackson on for Sterling tonight. Thanks for taking our questions. The first one is actually on the better-than-expected performance for the remainder of the year from Credit Karma. And we're curious, is this -- I mean, is it driven more by a stronger bounce-back from an impact in 2020 in your traditional verticals, or is it more about having increased confidence, Michelle? And I think what you mentioned on the home and auto loans side.
Sasan Goodarzi: Yeah. Thank you for the question. A couple of things I would start with. Last year, when you look at the full year of Credit Karma compared to the prior year, we grew 37%. And our new guidance for Credit Karma going forward is a range of 35% to 37%. And so, I think what you see within that is there has been a macro bounce back. But really a lot of what we're really seeing is the innovation on the platform, the power of Lightbox, the fact that members are getting better matches to things that they are looking for. Financial institutions are – and insurance companies are seeing the power of the platform. And it's really just creating that network effect. So, I think what we're gaining confidence in is just the innovation, the technology investments in Lightbox, and in context of the macro environment as we look ahead that gives us confidence around the performance of Credit Karma. And again, I would just remind us that this is more of a longer-term comment. Credit Karma is a platform, and we're creating an ecosystem effect here. Credit Karma is part of the TurboTax experience, and we're excited for all of you to see what we're going to be launching in the coming tax season. TurboTax is part of the Credit Karma experience. Credit Karma is part of the payroll experience. So really think about Intuit as 1 platform with many platforms that solves different problems, and that's really what fuels our confidence as we look ahead.
Greg Jackson: Okay, great. And then a follow-up, actually, on the tax business. And by the end of the second quarter, we'll be into the tax season. So, this is -- we're coming up on marketing time on TurboTax advertisement spent. So, any color that you can give us on what plans are for the marketing budget as we ramp up into January?
Sasan Goodarzi: Yeah. Well, I'm not going to talk about the marketing budget, but what I will share with you is it's very consistent and durable in context of what you've seen in the last couple of years. We are very focused on really fundamentally changing how you get your taxes done if you need assistance. And you're going to continue to see us be assertive in terms of how we raise awareness with 88 million customers that need assistance and how there's a better way to get your assistance. And also, the under-penetrated segments that we've talked about, which is Latinx, the investment community, and the self-employed. I think you can -- what you should expect is our investments on a platform has continued in those areas. We're really excited about the season coming up, and our marketing efforts will be really focused in those areas to continue to raise awareness.
Greg Jackson: All right, great. Thank you.
Sasan Goodarzi: You're very welcome
Operator: Thank You. Our next question comes from Siti Panigrahi of Mizuho. Your line is open.
Siti Panigrahi: Congratulations. Great quarter. Sasan, I want to ask you about the new business, I mean, new customer acquisition trend that you are seeing. I remember you talked about lagging effect to new business creation in the U.S. So, wondering what's trend you're seeing on the QuickBooks new customer acquisition site, and what promotion or anything you are doing at this point?
Sasan Goodarzi: Yes. Thank you for your kind comments and the question. I would say that it's very consistent with what we talked to you all about at Investor Day, and that is that we're continuing to see the acquisition trends that we would expect in the U.S. across-the-board, both in the low-end of the market but also the trends that we're seeing in the mid-market, so those trends continue. And as we've shared before, we're not overly reliant by any means on new business formations. From just a health perspective, I would say the U.S. is consistent with what we talked about with all of you a few months ago. And I would say outside of the U.S., again, very consistent with what before, the recovery has not been like the U.S. Now, if I were to double-click on that, I would say behind the U.S. has been Canada. And I think we're going to start seeing UK and Australia start to come back. Sorry, UK and France. And then Australia is, I would say behind UK and France. We do believe that in the next year or less, that international will start to slowly bounce back. And the reason for just the slowness in international bouncing back is there's just been so many starts and stops those small businesses that just lost confidence. Do I build up inventory? Do I go hire more employees? Do I increase my own marketing budget? That they've just been slower in bouncing back. But we believe, within the next year or so, we'll see that strength. But the headline news is U.S. continues to be strong and match what we've expected, and international role will bounce back within a year.
Siti Panigrahi: That's great. And a follow-up to TurboTax question, this is probably the first year you are going to tap into the Credit Karma members who are not using TurboTax. Do you see as -- what strategy do you have at this point to tap into such a massive member base in Credit Karma?
Sasan Goodarzi: Yeah. We are really excited about just the possibilities of what we can do for members -- Credit Karma members and TurboTax customers. Last year really was a learning year and I think we're going to learn a lot more this year. Listen, our goal is we want every TurboTax customer to be using Credit Karma and all the benefits of Credit Karma, and we want every Credit Karma member to be using TurboTax, whether they want to do it themselves or they need assistance. I think we're going to be one year better than we were last year in terms of all of our experiences, in terms of just the investments that we've made and the experiences, and we're excited about it. But just to put it in context, at Investor Day, we shared with you our Horizon framework. Horizon 1 being sort of revenue impact within 0 months to 18 months, Horizon 2 being 18 months to 36 months, and Horizon 3 being 36 months plus. We actually put the impact of Credit Karma integrated as part of TurboTax and vice versa is almost 3 years out because we really want to nail the experience. But nevertheless, we're leaning in and we're excited about the things we're going to be launching in the weeks to come.
Siti Panigrahi: Thank you, Sasan.
Sasan Goodarzi: You are very welcome.
Operator: Thank you. Next question comes from Michael Turrin of Wells Fargo. Your line is open.
Michael Turrin: Hey there. Thank you, and congrats on the amazing results to start off the fiscal year. We've talked about it. I mean, you've gotten a few questions on tax. We see this on the live technology, we see you're now offering expert setup for QuickBooks as well. So, wondering if you can just add any color on how far that expert led vision extends. Is that something you could take to consumer finance or potentially even something like email marketing with Mailchimp? It seems like a powerful addition to the product portfolio, and clearly a big bet you've been focused on. So, I'd love to hear more. Thank you.
Sasan Goodarzi: Yeah, Michael. Thank you for your kind words, and great question. When we declared our bet around connecting people to experts and creating our virtual expert platform, we have been, I think we're onto now, I don't know 5 plus years, really investing in this virtual expert platform. There are so many underlying technologies, services where AI is being used to ensure that the platform matches the right customer to the right experts, to make the platform simple and easy-to-use for experts and we feel really confident relative to just the where we are with the virtual expert platform, and our focus, intentionally, has been really about serving customers when it comes to tax time and helping small businesses with the bookkeeping and eventually also with their taxes. But more importantly, just helping them run their business. And we have so much opportunity ahead of us just in that space. With that said, we do have a few, what we call small mission-based genes that are exploring other spaces because we can leverage a lot of the capabilities of this virtual expert platform to serve spaces like marketing, potentially spaces like financial services. So, we are doing experiments but very intentionally to ensure that we can learn. I think I will just end with the opportunities of where we can take this virtual expert platform is endless. However, the biggest growth opportunity ahead of us right now is helping customers with taxes and helping small businesses run their business. And then as these other -- our verticals become reality, we'll, of course, share our plans with all of you. But it is something that will extend over time horizontally, continue verticals.
Michael Turrin: That's a great answer. Michelle, you've historically not updated guidance before tax season. We've talked about some of the pockets of strength of Credit Karma. But in terms of breaking that historical pattern, are we just seeing a more diversified Intuit come through, or any comments you can provide just around the change there? Thank you.
Michelle Clatterbuck: Yes. Thanks, Michael. Yes. This is something that diverges from what we have done historically. Historically, also, the Consumer Group has been such a large percentage of our business also. And now if we're adding -- Other parts of the business are growing more. We're adding Credit Karma. And overall, the composition of the business is just changing. Ans also, this is the one of the first times we've seen a real pandemic hit like this. And so, the growth after the pandemic has also had some implications for recovery and so forth. So yes, it is a little bit different, composition of the Company is a little different, but we feel really good about what we're seeing, and are very excited about the accelerated growth we're seeing in Credit Karma and in small business, and ready to jump into tax season.
Operator: Thank you. Our next question comes from Brad Zelnick of Deutsche Bank. Your line is open.
Brad Zelnick: Excellent. Thank you so much for taking the question, and congrats, guys. My question. You had a price increase go into effect during the quarter in small business. Any discernible impact to retention across your various skews, particularly from those who haven't attached payments or payroll?
Sasan Goodarzi: Yeah, Brad. Thank you for your kind words and the question. I would -- I'll say 2 things. 1. Really the majority of our growth continues to come from customer growth and mix in a much lesser extent price so you should just be aware of that, and 2. There's nothing that we've seen from the price increase that's outside of the balance of what we expected. So, the short answer is no. It's within our control limit as we expected it based on the testing that we had done.
Brad Zelnick: Got it. And if I could just follow-up with one more, Sasan. There's no doubt a significant opportunity with Credit Karma money, and I believe you called out the opportunity for QuickBooks Payroll customers to deposit up to $232 billion of payroll funds into a CK money account. What traction have you seen on this so far, or what percentage of QuickBooks Payroll payees do you think you can ultimately capture with something like this?
Sasan Goodarzi: Yeah, you know the -- well, first of all, we've not divulged our traction other than I would tell you. We generally are excited. As part of many things that we are providing in our portfolio to customers, giving them early access to wages, I think a lot of what we are learning and a lot of what we're excited about as we move forward. It depends on the customer and the cohort of customers. There are certain customers that depending on their situation and how much they depend on living weekly -- connected to their weekly paycheck. If you live paycheck to paycheck, you are much more focused on can I get early access to that versus if you don't live week-to-week. So, we're learning about those cohorts within our payroll to your question and where we can get traction and where it's just not a need for customers. I would say more broadly, we are excited about early access to wages both providing it across payroll standalone, providing it through Credit Karma. And frankly I think over time this is just something that's going to be commodity. I think everybody is going to have a product feature that gives you early access to the wages. For us it's not just about the feature, it's about the ecosystem effect that it creates for our customers and our members.
Brad Zelnick: Awesome. Thank you, Sasan.
Sasan Goodarzi: Yeah. Thank you.
Operator: Thank you. Our next question comes from Brent Thill of Jefferies. Your question, please.
Brent Thill: Sasan, you were clear when the Mailchimp deal closed that this is not just a mail Company, that there was a broader platform play for marketing and selling up a website. I'm just curious along that theme. What you're seeing in terms of the most excitement where you can bring Mailchimp into your clients and ultimately this platform plays for the front office and how that evolves. If you could cover that, that'd be great.
Sasan Goodarzi: Yes, absolutely, Brent. One of the things that we -- one of our mechanisms that we have as a Company is called our Big Bet review, where we take our officers of the Company through the experiences of each of the Big Bets to what we've learned, where we are, and where we're headed. And this is the last Big Bet review happened to be one where we brought in Ben as a team from Mailchimp, and actually walked through the experience in detail, where we are, and where we're going. And I would just tell you that we continue to even get more excited as we've closed the deal because the needs of our customers are in all the areas that you mentioned. They are -- and every customer it's in a different place, but customers are really looking for ways to be able to engage, getting new customers. It's their bread and butter. Almost 70% of our customers are looking for ways to get new customers. We now have those capabilities and we'll integrate it into QuickBooks and vice versa, QuickBooks into Mailchimp. They want to be able to manage their existing customers in an automated way, in an insightful way where everything is automated. They don't have to know when do I follow up with a customer, what additional products can I sell them. All of that can get automated through Mailchimp. And one of the things people don't realize is one of the largest ways that you still engage customers, we see it through what we do in TurboTax, is actually email. So now we have all those capabilities. We have abilities to put you on mega platforms with all of our digital assets, manage all of your existing relationships, all the email capabilities, but more importantly, it's the leveraging the power of the data, the customer data, and the purchase data to help you understand who is the customer, who bought what, what did they not buy, who's leading your shopping card, and how do you pursue them. It's consistent with what we've talked about before. That's the opportunity ahead, and that's about the work that we do now on the product to put the power of those capabilities in the hands of our customers. We couldn't be more excited to help our customers with their success. So, stay tuned.
Operator: Thank you. Our next question comes from Kartik Mehta of Northcoast Research. Please go ahead.
Kartik Mehta: Hey, good afternoon or good evening, Sasan. I wanted to ask you a little bit about TurboTax Live, maybe what the trends have been in terms of customers that are already TurboTax customers shifting to that product and new customers, and how you anticipate that trend evolving this tax season.
Sasan Goodarzi: Yeah, it's a great question. It's one thing that's just really excites us about the Live platform. 1. There's 88 million folks that use an assisted method today. Within the assisted method, you have 10 million folks every year where there's churn, they go -- jump from one assisted method to another. So, from 1 accountant to another or from 1 store to an accountant. And then within the TurboTax base, the do-it yourself or as we have 4 million people that leave, and they ultimately go to an assisted method. I think that the answer to your question is it's all the above. We've seen conversion improvements, retention improvements. We've seen TurboTax customers that did it themselves a year before where they had a life change, or they just weren't sure if they did their home deductions the right way or if they had a kid and the kid went to college, how that ultimately account for those deductions where they are now using the live platform and vice versa. You may use the life platform and I've enough confidence with the year after, you do it yourself and then you may then after that bounce back and now we're seeing 3, 4 years of trends. Really, it's all of the above with the largest, I would say, driver being folks that use a different assisted method coming onto a platform and, of course, those that have life changes within TurboTax, growing with TurboTax, and using the live platform. And we just see that continuing as we view this opportunity with a 10-year lens.
Kartik Mehta: And just a question on Credit Karma. Sasan, you've talked about Credit Karma money and that sounds like a very interesting opportunity. I'm wondering, is there any concern that your customer says, hey, you're competing with me now for deposits and that causes issues?
Sasan Goodarzi: One of the sorts of essential strategic principles that we have within Credit Karma is that it is an agnostic platform. And our financial institutions and all our partners see the power of that, how diligent and intentional we are about not creating our own products, but ensuring that we match members with a product that's right for them. And a lot of the capabilities that we have within Credit Karma ultimately had an institution that's participating in it. So that is not a concern that we have. Our say due is very, very high with financial institutions and we just believe that that's the beginning of it, especially with attraction of Lightbox which actually delivers more success for members and more success for financial institutions. So, it is not a concern of ours.
Kartik Mehta: Perfect. Thank you so much. I appreciate it.
Sasan Goodarzi: Yeah. You're welcome.
Operator: Thank you. Our next question comes from Kash Rangan of Goldman Sachs. Your line is open.
Kash Rangan: Thank you very much. Fantastic quarter, Sasan and Michael. Sasan, I'm curious to get your take on the issues that are facing -- that are being faced by the U.S. economy. You've got unprecedented labor shortage, got a supply chain issue, got an inflation issue. A lot of these problems do pertain to the small business ecosystem. When you think of Intuit and the dramatic transformation you've undertaken very successfully, but betting on AI, what can Intuit do to solve these problems for small business customers as it plays to these near-term headwinds that we're facing from your product perspective? Thank you so much.
Sasan Goodarzi: Kash, thank you, 1, for your kind comment and it's a wonderful question on all those areas, the labor shortage, some of the supply chain challenges if you're a product-based business, and certainly inflation is absolutely impacting small businesses. I would make a broad comment that I would say we are experiencing. When you couple what happened with the pandemic starting in March of 2020, where it really, I think, forced everyone around the globe, whether you're a small business or not, but let's stay focused on small businesses to reinvent yourself. And it really accelerated the shift to virtual solutions. It accelerated the shift to going online whether it's how you invoice get paid, how you do your payroll, how you do your time tracking. And I think that movement which is just simply continuing, I don't think wherever going to go back to the old way. I think this pandemic really has accelerated the shift in those areas that I mentioned, in particular to, of course, to digital money offering. I think that coupled with this not only labor shortage but also labor movements from job to job, some of the supply chain challenges that generally we believe as I talked to my peers will get -- start to get addressed by the second half of 2022, first half of 2023, an inflation is actually causing small businesses to leverage more platforms. And so, if I then bring that back to our platform and the fact that if you use our platform, you can get paid upfront, you can get instant deposit, you can do same-day payroll, you can use an expert to ensure that you've got the best deductions as a small business and to ensure that you're running your business effectively, and the fact that you can do more with less people if you use one platform. That's where the power of Mailchimp comes into play, rather than having multiple tools where you're bouncing back and forth between tools and you're not really sure what your customer profitability is, when you should follow up with the customer, how to acquire more customers. All of those things are thrust to the use of our platform, and our platform is actually built to help you grow your business with less focus on labor and to be able to embrace as much as possible the inflation. Now, ultimately, we have to address overtime, and I believe it will get address some of these supply chain issues and inflationary issues. But that's where our platform comes into play and why we are so well-positioned for small businesses, and the role we need to play to continue to educate them.
Kash Rangan: Excellent. Thank you so much. Quick 1 for Michelle. How do you assist of the long-term margin drivers, and generally, discreet things that margin growth is somewhat linear, but generally these things tend to go up in an S-curve, so we often underestimate the true profitably of companies in the long term? In your case, what are the things that we should be looking for that could drive increased operating leverage in the future? Thank you so much and congrats.
Michelle Clatterbuck: Thank you, Kash. Appreciate that. Well, in the current year, as I spoke about earlier, we will see a margin adjustment with the acquisition of Mailchimp and so we do though believe that over time, we will continue to expand our margins as we've talked about from this new step-down level going forward. But as we become more and more of a platform, we see opportunities for us just across the Company, whether it is in technology and being able to increase the velocity of development on our platform and driving more services, using things like money movement across the Company, and our fraud and risk capabilities not having to duplicate those across the Company. Or in customer success is another great example, where we're scaling a common customer success platform so that we can more efficiently and effectively serve customers. And then also in the go-to-market area, really leveraging a common infrastructure to be able to more effectively target customers, manage our sales and marketing processes also. So, we do see a number of opportunities all across the P&L that as we look forward, there will be opportunities for us to leverage this.
Kash Rangan: Wonderful. Brilliant. Thank you.
Operator: Thank you. Our next question comes from Brad Sills, Bank of America Securities. Your line is open.
Brad Sills: Great. Thanks, guys. I'll likely to congratulations on a real nice quarter. I wanted to ask a question about TurboTax if I might, please. With this being the second year of your targeting the full-service opportunity, what were the learnings from the last year, your first year with this offering? Historically, you've seen this 1% to 2% share gain within Do-It-Yourself. Do-It-Yourself has gained 2 to 4 points as a category. Could this potentially accelerate those trends as you gain more intelligence to become more successful with this effort? And just generally, what are your expectations for this year with that offering?
Sasan Goodarzi: Thank you, Brad. I would say 2 big things. One is a full service absolutely has a halo impact on confidence for the customer which actually gets me to the second point, and really the approach which is, we're a platform for our customers and so really if you think customer , we want our customers to know that they have the ability to do it themselves. They can access an expert, if they need the expert to answer any questions that they have, and/or they can just have you -- us do their taxes for them and do everything digitally. By the way, midstream if you choose an expert and utilize, you know what? I don't know if I just want to help, I just want to Intuit to do it all for me, we'll do it all for you. So really our approach and now that we've had several years of experimenting and learning with full service is that now we have a true end-to-end platform where we can meet the needs of any customer, and the power has actually grown with customers over time. If they just start out their career or if they're students who they have life change, we have a platform that will meet all of their needs. So that's really the, I would say the headlines of the answers plays a halo effect, which has informed our platform approach as we look ahead.
Brad Sills: Great to hear, Sasan. One more if I may, please, just on Credit Karma. Last year, you saw nice upside and the tax quarters are converting TurboTax filers to Credit Karma. Could you remind us where you are there? With that some low-hanging fruit initially, what drove that success that you saw in that business, and what is your outlook for that this year and going forward? Thank you.
Sasan Goodarzi: Sure. I would really put last year entirely in the bucket of just learning. And it doesn't mean that's going to change this year. We are a Company that's all about moving fast, experimenting, pivoting, and learning all in context of being stubborn around the vision that we have. Last year was a learning year, although there were some nice member growth impacts to Credit Karma from TurboTax. We're really excited and eager to see how our new innovations and experiences on the platform plays out this year and to see what we learned. I'll take you back to the reason at Investor Day we put the opportunity of Credit Karma is part of TurboTax experience, and TurboTax is part of the Credit Karma platform as a Horizon 3, is we're really focused on the customer and member experience in nailing that because we know over time we can monetize. So, we're excited about the year ahead. Look, we have 11 months under our belt, learning and adjusting and preparing for this tax season. And we're excited about these experiences being launched and seeing how they play out in the next couple of months.
Brad Sills: Great to hear. Thanks, Sasan.
Sasan Goodarzi: You're welcome.
Operator: Thank you. Our next question comes from Scott Schneeberger of Oppenheimer. Your line is open.
Scott Schneeberger: Thanks very much. Good afternoon. First question. In international, Sasan, 39% growth in small business is very nice. Could you just give a little summary of what you saw and where in the quarter, and then part B to the question is you mentioned Mailchimp will --should accelerate global growth. I'm just curious when and how we'll see it showing up in the category. Thanks.
Sasan Goodarzi: Yeah. Sure, Scott. Thank you. First up on international, we saw some of the same trend given our, not only our execution but the macro environment as we've seen the last couple of quarters. There are certain countries like Canada that have bounced back a bit more strongly. Then there's places like Australia that really have been very slow to bounce back based on the fact that the economy keeps opening and shutting down. And again, our view is within the next year, international should start to come back from a macro perspective. So, net-net, our trends in our performance, although we're very pleased with that, we believe over time to paint the different picture as the macro environment comes back. In terms of Mailchimp, our focus is the 3 priorities that I mentioned. We want to create an amazing product and platform that brings QuickBooks and Mailchimp together. We want to build the capabilities to go disrupt mid-market. And then, as Michelle mentioned, we're going to be investing heavily in our global go-to-market. I would say I wouldn't overly anticipate a significant change in our trajectory international because of Mailchimp where there's some fundamental things, we want to get right to ensure that we can truly be the platform that -- where you can grow your business and run your business and over time it will certainly have an impact internationally and we're excited about that because it gives us another foot in the door outside of the U.S.
Scott Schneeberger: Great. Thanks. And just for our last one. Congratulations on the Intuit Dome. I'm just curious -- and maybe beat now crypto.com on that one. But just curious on the overriding big somatic marketing push of the Company in the last few years. How should we think about that on the big scale? Thank you.
Sasan Goodarzi: I would say, and I've said this for years, and I think you're used to hear Brad talk about this. I think where the world's biggest hidden secret, and we don't want that secret to hold true anymore. We want to make sure the world knows who Intuit is and what our brands are. And we have data that shows that the more customers learn that TurboTax, Credit Karma, Mailchimp now, and QuickBooks when they learn that they're part of the Intuit brand and the platforms are all connected, it actually has a positive impact on our potential for growth. So, the way we think about Intuit Dome, it is not, for us, a naming rights deal. We've had many opportunities where we've actually been pursued to be part of deals like this and we pass them up over the years. We did this because one, it's very technology forward dome. We're going to be helping the community. And 2. We're really going to be able to showcase our brands. And it will be yet another way to demonstrate the benefits that we bring to the market as one Intuit platform and the impact that we can have in the lives of consumers and small businesses. That's really how we think about it and why we're excited about it. And by the way, over time, we expected the same return on investment as we do with our marketing investments and that's really what this is. It just goes beyond marketing to impacting the local communities in LA, which we're excited about.
Scott Schneeberger: Excellent. Thanks.
Sasan Goodarzi: You're welcome.
Operator: Thank you. Ladies and gentlemen, would you like to close with any additional remarks?
Sasan Goodarzi: Yes. Sure. Thank you. Well, first of all, I really appreciate all the questions. And once again, I want to just thank our employees for their incredible hard work, our customers and our partners for the strong start to the year, and the opportunity we have ahead of us. We're very passionate about fundamentally powering the prosperity of our customers and communities, and we're proud of our accomplishments, and we continue to believe that we are just getting started. Thanks for your question, Thanks for your time, and we will see you at our next earnings call. Bye, everybody.
Operator: Ladies and gentlemen, thank you for participating. This concludes today's conference call.
