Intuit Inc (INTU) — Q2 2025 Earnings Call Transcript

Thanks, Angela. Good afternoon, and welcome to Intuit's second quarter fiscal 2025 conference call. I'm here with Intuit's CEO, Sasan Goodarzi, and our CFO, Sandeep Aujla. Before we start, I'd like to remind everyone that our remarks will include forward-looking statements. There are a number of factors that could cause Intuit's results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our Form 10-K for fiscal 2024 and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit's website at intuit.com. We assume no obligation to update any forward-looking statement. Some of the numbers in these remarks are presented on a non-GAAP basis. We've reconciled the comparable GAAP and non-GAAP numbers in today's press release. Unless otherwise noted, all growth rates refer to the 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'll turn the call over to Sasan.

Great. Thanks, Kim, and thanks to all of you for joining us today. We delivered very strong results in Q2 with revenue growth of 17%, and we are off to a great start in tax. We have strong momentum this year, as we execute our global AI-driven expert platform strategy powering prosperity for consumers and businesses. We are confident in delivering double-digit revenue growth and expanding margin this year, and we are reiterating our full-year guidance. Today, I will focus on three areas: revolutionizing speed to benefit by delivering done-for-you experiences with expertise, winning in tax, and mid-market. We are making strong progress across our platform with our data and AI investments to deliver done-for-you experiences with AI-powered human expertise. Our focus is on automating tasks, end-to-end workflows, and entire functions, connecting customers to one of our more than 12,000 AI-powered human experts for that last mile or to complete all of the work. This is Intuit Assist, the combination of AI and AI-powered human experts, digitizing everything for customers and fueling their success. Let me share one example to demonstrate our progress. On our business platform, Intuit Assist delivers done-for-you experiences, automating workflows using AI agents. It automatically turns emails, electronic documents, and handwritten notes into estimates, invoices, or bills, while doing the accounting in the background. It spots potential cash flow shortages in real-time and suggests personalized solutions like applying for a line of credit through QuickBooks Capital. With these capabilities, we're seeing a 10% higher payment conversion rate on overdue invoices when customers use AI-generated invoice reminders versus those that don't. We are also connecting customers to our AI-powered experts at their point of need through QuickBooks Live, up 2.5x in Q2, with a 20-point higher ecosystem attach rate than the rest of the QBO base. Repeat engagement with our done-for-you invoicing experience continues to grow, and has increased more than 50% since November. As we continue to scale these experiences, we are encouraged by new customers converting, and adoption of platform offerings, such as payments and QuickBooks Live. This is Intuit Assist working at scale, fueling the success of our customers. Turning to tax, we are off to a great start. Our strategy is to win as an AI-driven expert platform by delivering the best experience, speed to money, and best price for customers. As one consumer platform, with a seamless customer experience across TurboTax and Credit Karma, we have incredible scale to win in the DIY and Assisted categories. We've made significant progress with Intuit’s data, data services, and AI investments, delivering done-for-you tax experiences. We have transformed the shopping experience, helping guide customers to the offering that is best for them, which is driving higher starts. For those that choose to do their own taxes, we're delivering an AI-driven, highly personalized product experience. This includes easy data-in from over 200 partners, now covering 90% of our customers' most common tax documents, up from 68% last year. And with the intelligent application of the data to personalize navigation, customers can complete their taxes more quickly with higher levels of confidence. When customers choose us to do their taxes for them, we match them with the best expert on our AI-driven expert platform within seconds and share the expert's qualifications while automatically uploading the customer's data, making the first interaction a wow experience. An AI-powered human expert then completes the customer's return in less than two hours, offering proactive and personalized assistance, and providing the opportunity for customers to access their money immediately, all while on the go or in the comfort of their home. The experience is resonating, and TurboTax Live Full Service has a Product Recommendation Score of 84 season-to-date, one of the highest at Intuit. This is an unmatched experience at scale, delivering delight and speed to money, at the best price. With the scale of our data and AI capabilities, Intuit Assist is the control tower automating tasks and workflows, with human experts engaging where needed to deliver done-for-you experiences for our customers. Let's shift to our durable go-to-market approach. We have reinvented our marketing campaigns focused on experience, speed to money, and price. We've strengthened our overall AI-driven personalized lineup and monetization capabilities. We are seeing great traction early in the season in DIY across simple and complex customers, with strong monetization driven by benefits such as early access to refunds and AI-powered human experts. In the assisted category, with the significant improvement in experience, speed to money, and our 'Beat Your Price' campaign, our early full-service funnel is strong. This is driven by marketing that started in the fall and improvements in local search for those looking for a pro near them. We estimate that our local experts in 130-plus designated market areas will give us access to approximately 80% of nationwide assisted filers, and we have found that filers are historically 5x more likely to convert when given a local option. We are also seeing more than 3x higher starts on the Credit Karma platform, driven by an increase in the availability of seamless zero-click login to TurboTax from 5% last season to 70% this season. In summary, we are off to a strong start in tax. We are seeing strong growth across simple and more complex returns as the season progresses and strong overall average revenue per filer. We are also pleased with the power of one consumer platform given the seamless experience across TurboTax and Credit Karma. Let me now turn to the business platform and the progress we are making serving mid-market customers, which represents an $89 billion TAM. We are focused on winning as an AI-driven expert platform to fuel the success of customers with QBO Advanced, Intuit Enterprise Suite, and our ecosystem of services. Our go-to-market and product investments are fueling accelerated progress. With the QBO Advanced platform, we are delivering strong ARPC across our broader ecosystem of services, with payroll and payments penetration exceeding QBO Core by 12 points and 9 points, respectively, at the end of the quarter. With Intuit Enterprise Suite, we are seeing growing momentum week-to-week. This includes the number of contracts we signed in January, which are up 2x versus November. IES is resonating with larger businesses and accountants across our ecosystem, particularly those with over $10 million in revenue where win rates are trending nearly 2x higher versus smaller customers. And the efficiency of our sales funnel continues to improve, with sales productivity up more than 60% over the last two months. We are winning because of the valuable benefits of our platform, ease of adoption, price, and total cost of ownership. With IES, we are able to boost customers' productivity by saving them time, and providing deeper insights across the platform to fuel their growth. We are seeing traction with mid-market customers extending across multiple industries including construction, IT services, legal services, management consulting, finance, and insurance. I'll share two examples that highlight our excitement in fueling customer success and Intuit's growth. We recently signed a financial services firm with five entities that chose IES over other competing solutions to optimize its financial operations, marketing and sales, with AI, all in one place. The firm is using Mailchimp, an integral part of IES, to optimize sales and marketing by leveraging the insights from dimensional reporting to assess product mix and view profitability by product type. The marketing and sales teams tell us they are obsessed with the insights which enable them to get the most out of Mailchimp with more targeted customer engagement to fuel their growth. We also signed a deal with a large professional services and accounting firm, which serves clients across 13 industries including construction, dental, government contracting, real estate, and technology. This firm was looking to standardize solutions and consolidate across vendors, and our disruptive price and ease of use was key to their purchasing decision. They migrated several clients, including some using competitive solutions, to IES in a deal worth six figures annually, and we are partnering with them to bring many more clients onto IES. Wrapping up, with our progress and momentum, we are well-positioned to win as an end-to-end platform with done-for-you experiences that fuel the success of consumers, small and mid-market businesses, and accountants. Now, let me hand it over to Sandeep.

Thanks, Sasan. We delivered a strong second quarter of fiscal 2025 across the company. Our second quarter results include: revenue of $4 billion, up 17%; GAAP operating income of $593 million versus $369 million last year, up 61%; non-GAAP operating income of $1.3 billion versus $1 billion last year, up 26%; GAAP diluted earnings per share of $1.67 versus $1.25 a year ago, up 34%; and non-GAAP diluted earnings per share of $3.32 versus $2.63 last year, up 26%. Now, let me turn to our business segments, starting with our Global Business Solutions Group. Our business platform helps customers run and grow their business end-to-end. Global Business Solutions Group revenue grew 19% during Q2, driven by Online Ecosystem revenue growth of 21%, or 25% excluding Mailchimp. The momentum in our online ecosystem is demonstrating the power of our business platform and the mission-critical nature of our offerings, as customers look to grow their business and improve cash flow in any economic environment. QuickBooks Online Accounting revenue grew 22% in Q2, driven by higher effective prices, customer growth, and mix-shift. We continue to prioritize disrupting the mid-market through ongoing focus on both go-to-market motions and product innovations, which we expect to drive ARPC growth. Online Services revenue grew 19% in Q2, or 30% excluding Mailchimp. Growth in Q2 was driven by Money, which includes payments, capital, and bill pay, Payroll, and Mailchimp. Within Money, revenue growth in the quarter reflects payments revenue growth, which was driven by customer growth, an increase in total payment volume per customer, and higher effective prices, and QuickBooks Capital revenue growth. Total online payment volume growth in Q2 was 18%. Within Payroll, revenue growth in the quarter reflects customer growth, mix-shift, and higher effective prices. Within Mailchimp, revenue growth in the quarter was driven by higher effective prices and paid customer growth. We are making early progress with product improvements, but continue to expect it to take several quarters to deliver improved outcomes at scale. As a reminder, in Q2 we began lapping the price changes we made in Q2 of last year, which drove a deceleration in growth this quarter versus Q1. We remain confident in, and are executing on, our vision of an end-to-end business platform that integrates the power of Mailchimp and QuickBooks. This is enabling our customers to both run and grow their business, all in one place. Third, we're executing our international strategy, which includes leading with our connected business platform in our established markets and leading with Mailchimp in all other markets as we continue to execute on a localized product and lineup. On a constant currency basis, total international Online Ecosystem revenue grew 9% in Q2, or 19% excluding Mailchimp. As we have previously shared, we win as a platform company. Our Online Ecosystem revenue growth reflects the progress we are making with our strategy of serving both small- and mid-sized businesses with more complex needs. This represents an addressable market of over $180 billion, roughly half of which is mid-market. In Q2, Online Ecosystem revenue grew 21%, including approximately 40% growth in Online Ecosystem revenue for QBO Advanced and Intuit Enterprise Suite that serves mid-market. Online Ecosystem revenue for small businesses and the rest of the base grew a strong 18%. We are excited about our progress in serving mid-market customers while continuing to focus on smaller businesses. Looking ahead, we continue to expect Online Ecosystem revenue in total to grow approximately 20% in fiscal 2025. Turning to desktop. During Q2, Desktop Ecosystem revenue grew 14%, and Desktop Enterprise revenue grew in the high teens. As a reminder, quarterly Desktop Ecosystem revenue growth trends in fiscal 2025 reflect the offering changes we made in early fiscal 2024 to complete the transition to a recurring subscription model, including more frequent product updates. We continue to expect Desktop Ecosystem revenue to grow in the low single digits in fiscal 2025. Turning to our consumer platform. Our consumer platform is helping customers make smart money decisions, take steps to improve their financial health year-round, achieve their best tax outcome, and get their tax refund faster. Consumer Group revenue grew 3%, ahead of our guidance for a low single-digit decline. Our strategy is to win as an AI-driven expert platform by delivering the best experience, speed to money, and best price for customers. As one consumer platform with a seamless customer experience across TurboTax and Credit Karma, we have incredible scale to win in the DIY and Assisted tax categories. We are off to a strong start in tax this season and are reiterating our guidance for Consumer Group of 7% to 8% revenue growth in fiscal 2025. Turning to the ProTax Group, revenue was $272 million in Q2, down 1%. Shifting to Credit Karma. Credit Karma revenue growth accelerated again this quarter to 36%, reflecting strength in credit cards, personal loans, and auto insurance. On a product basis, credit cards accounted for 15 points of growth, personal loans accounted for 14 points, and auto insurance accounted for 6 points. As a reminder, starting in Q3 we are lapping the strong growth in auto insurance that began a year ago. We are pleased with our early results this tax season as we execute on our vision for one consumer platform with a seamless customer experience across TurboTax and Credit Karma. Let me touch briefly on our investments in AI and how they are benefitting our operations. In addition to the AI-driven experiences we are delivering for our customers to fuel their success that Sasan spoke to earlier, we are also leveraging AI to operate more efficiently and increase productivity internally. Within our customer success organization, our investments in AI capabilities have delivered nearly $90 million in annualized efficiencies in the first half of the year. That's because we're leveraging AI for expert training, matching customers to experts, automating workforce operations, and eliminating data entry. We're using AI agents to deliver done-for-you experiences, and this has contributed to a 20% reduction in the contact rate for TurboTax product support year-to-date. This is Intuit Assist working at scale. We also are seeing improved coding productivity, with up to 40% faster coding using GenAI code assistants, driving faster innovation for our customers. In summary, I'm pleased with our momentum this fiscal year and our opportunities ahead. Shifting to our balance sheet and capital allocation. Our financial principles guide our decisions, they remain our long-term commitment, and are unchanged. We finished the quarter with approximately $2.5 billion in cash and investments, and $6.3 billion in debt on our balance sheet. We recently entered into a $4.5 billion revolving credit facility that we are using to fund our 5-Day Early refund offering. This facility expires on April 30, 2025. We repurchased $721 million of stock during the second quarter. Depending on market conditions and other factors, our aim is to be in the market each quarter to offset dilution from share-based compensation over a three-year period. The Board approved a quarterly dividend of $1.04 per share, payable on April 18, 2025. This represents a 16% increase per share versus last year. Moving on to guidance. We are reaffirming our fiscal 2025 guidance. This includes: total company revenue growth of 12% to 13%; GAAP operating income growth of 28% to 30%; non-GAAP operating income growth of 13% to 14%; GAAP diluted earnings per share growth of 18% to 20%; and non-GAAP diluted earnings per share growth of 13% to 14%. Our guidance for the third quarter of fiscal 2025 includes: total company revenue growth of 12% to 13%; GAAP earnings per share of $9.22 to $9.28; and non-GAAP earnings per share of $10.89 to $10.95. Building on our strong Q2 results and robust Q3 guidance, we are highly confident in the continued strength and positive trajectory of our business through Q4 and beyond. With the majority of the tax season still ahead, we are well-positioned to deliver strong results and look forward to sharing an updated full-year outlook on our next earnings call, in line with our usual practice. You can find our full fiscal 2025 and Q3 guidance details in our press release and on our fact sheet. With that, I'll turn it back over to Sasan.

Great. Thank you, Sandeep. We are confident in our long-term growth strategy, including double-digit revenue growth and operating income growing faster than revenue. We like our momentum in the first half of the fiscal year which sets us up for a solid second half. Looking ahead, we are confident in our momentum and the progress we are seeing with Intuit Assist delivering done-for-you experiences with AI-powered human expertise, increasing our 5% penetration of a $300 billion total addressable market. We have an incredible runway ahead. With that, let's now open it up to your questions.

Great. Congratulations on a great quarter. Of course, now this is a focus on tax season at this point. And Sasan, what's driving your increasing confidence to deliver that 7% to 8% guidance for consumer? Any color on the trends that you're seeing in the Assisted category since you started promotion this year earlier in October? Also, if you could cover on the same, we hear some concern about the DOGE initiative, wondering how Intuit can drive efficiency for the IRS.

Thank you for the question, Siti. Our strength lies in both the DIY and Assisted categories. We're experiencing strong growth among both simple and complex filers in DIY. Our innovations have led to solid monetization, particularly through access to expert help in the DIY category and access to money. Our repositioning of the lineup has effectively accelerated our paid growth, and we are optimistic about the DIY category. In Assisted, we're taking an end-to-end approach. Our reinvented campaign is resonating well, emphasizing the convenience of completing taxes digitally from anywhere, getting immediate access to funds, and offering the best pricing. We’ve done significant work to be present near 80% of assisted filers in proximity to their homes. We've also overhauled the customer experience. For context, when an expert connects with a customer, the conversion rate is 80%. Our investments in data and AI allow us to quickly match customers with experts, enabling immediate engagement and efficient processing of taxes, often in less than two hours. This applies to both consumer and business sectors. Our funnel is strong due to the campaigns we launched in the fall, along with our strategic use of data and AI, giving us confidence in our guidance. Regarding DOGE, I want to emphasize my ongoing discussions with the administration, including recent talks about their goals of reducing waste, fraud, and bureaucracy. We're actively exploring ways to contribute to these objectives, focusing on eliminating tax fraud and reducing overhead costs at the IRS. We believe there is no risk to IRS consumer and business services due to the actions taken, and we're excited about our progress and optimistic for the remainder of the season.

That's super helpful, Sasan. I'm going to stick to one question. Thank you.

Yeah. Thanks very much, and congrats on the good quarter. Sasan, just wondering if you could talk a little bit about just the SMB or the small business environment. I think we all came into this year hoping that we'd be seeing a little bit of green shoots in terms of the economic activity level. Has anything changed on that front in your view, just given some of the macro dislocation perhaps questions around tariffs, things like that? I was just kind of curious if you could give us a little bit of an update on what you're seeing on the small business side right now. Thanks.

The macro environment for businesses remains very stable. For smaller businesses with up to about 10 employees and around $2.5 million to $3 million in revenue on our platform, their profits and cash flows have increased year-over-year. We're not overly concentrated in any single industry, so there are some variations by sector, but overall, this is a positive takeaway for smaller businesses. For larger businesses, those with revenues from $3 million to $10 million and upwards of $50 million or $100 million, the mid-market customers we serve are heavily focused on digitization to save time and drive both revenue growth and profitability. This trend also applies to our accountant partners who support these businesses. Intuit Enterprise Suite plays a crucial role here; larger companies are eager to adopt it, as the AI-powered experiences provide them with support and assistance that can aid in their growth. We're observing a healthier environment as businesses get larger.

Thanks, Sasan.

Thank you for taking my question, and congratulations on a strong quarter. I have a question for Sandeep regarding expenses. At the beginning of the year, you indicated plans for more aggressive investments to build the necessary skill sets to advance your plans moving forward. In the first half of the year, particularly this quarter, we've noticed impressive margin expansion with significant leverage reflected in the bottom line. Is any part of this related to timing of expenses? Also, are you still aiming to return to the headcount levels we discussed at the year's start, or is there a greater opportunity for driving leverage than previously anticipated?

Hey, Keith. Thanks for that question. Let me address the question both on the hiring aspect and then also on the margin aspect. On the hiring, we saw a really good take rate in terms of recruiting in the first two quarters of the year. In fact, it was ahead of even our internal expectation in terms of just the reputation the firm has and how many people we were able to attract to the company in a short order of time. In terms of expectation for the year, consistent with what we have shared before, expect it to be flat to slightly up for the year as we continue to lean into investing in areas that are key to our future growth and also using AI internally to drive efficiency in terms of our employees. In terms of the broader question around our expenses and our margin expansion, look, we are committed to driving margin expansion over the long term, and I feel super confident in our ability to deliver on the guidance that we've given for margin expansion this year. And really the trends you've seen year-to-date come down to three things. One is day-in, day-out expense discipline we have across this company, and that shows up in every aspect of how we allocate our dollars and the ROI we expect from those dollars. Secondly, the efficiencies from implementation of AI in our customer success, that came in a bit earlier than what we had internally forecasted. So that was a good trend that we saw. And lastly, with a slower start to the tax season, that also aided a bit in Q2. So, net-net, you should look at Q2 as further solidifying our confidence in our margin for this year and beyond.

Got it. And just to clarify on point number one on the hiring, it sounds like your hiring is going to plan. So, there wasn't like an outperformance in Q2 margins that came from delayed hiring in any sense?

No, we had good hiring take rates and we hired a little less than what we thought we would need, just given the efficiencies we saw, such as 40% higher productivity of engineers using GenAI tools. The stuff I talked about on AI implementation in CES where we saw 20% lower call volume from TurboTax's as we implemented for experiences. So, there are a plethora of things such as that led to us needing fewer people than we thought we would need, but that should be the key areas that you should take away in terms of hiring trends.

Excellent. Super helpful. Thank you, guys.

Thanks, Sasan. I know you introduced some innovative marketing strategies at the beginning of tax season. I'm interested to know if you've noticed any early reactions or traction, what has the feedback been? Does it give you more confidence as you head into this tax season based on what you're observing? Any insights would be appreciated. Thanks.

Thank you for the question, Brent. The short answer is yes. We feel very confident about the momentum we're building in the assisted segment. To elaborate, it comes down to our efforts to raise awareness regarding three key advantages for the over 35 billion spent by businesses and consumers looking for help with their taxes. Firstly, there's the experience—our service can be accessed virtually, allowing us to complete the process in less than a couple of hours, and some cases even in 30 minutes, with immediate access to funds at competitive rates. Our scale and the data and AI investments we've made position us uniquely against many smaller competitors, which are typically local tax firms and professionals. The combination of our experience, delivery scale, pricing, and immediate fund access is very appealing to both consumers and businesses. Furthermore, the groundwork we laid last fall with our "Beat Your Price" initiative has proven effective, as we know some customers decide to engage with us during that time. Our current funnel looks strong. Secondly, we have substantially improved our service experience. We've transitioned from being merely a software provider to a full-service provider, ensuring we handle everything for the customer right from the start. This approach has shown positive results as we progress through the season, and we're looking forward to the next six weeks with enthusiasm.

Okay, thanks.

Okay, great. Thanks for taking the questions here. I guess, I wanted to ask just on the strength that maybe you're seeing in the advanced in the enterprise suite side of the equation. Just how are you kind of thinking about the productivity rates of the sales force that you've built out, how you're thinking about further investments and just kind of how you're viewing that opportunity to move upmarket further and invest behind the strength you're seeing there?

Sure. I want to highlight a few points. Firstly, our sales team has been becoming more productive daily due to the timing of our hiring and the launch of Intuit Enterprise Suite, which just went live last fall. We've actually observed a 60% productivity increase in recent months, reflecting a natural growth in capabilities. Additionally, selling this solution is becoming easier because it significantly demonstrates value in terms of total cost of ownership and is competitively priced. A key area we are now focusing on is enhancing our engagement with large accounting partners. Initially, we concentrated on businesses, but we are now ensuring that these partners can explore the Intuit Enterprise Suite. It's gaining traction, and they are hearing positive feedback about it. We are providing them with environments to experiment and creating a pricing structure since these large firms typically manage multiple practices spanning various industries. We aim to offer the Intuit Enterprise Suite to their clientele with a tailored approach. As for our overall strategy, while we see productivity ramping up, we are careful not to overly prioritize optimization as we are in a growth phase, which is very promising. At the same time, monitoring our sales team's productivity remains essential. Sandeep, would you like to add anything?

Steve, a couple of points I would add is that what we look at internally is that we want to make sure that each cohort of salespeople coming in is more productive than the prior, and each cohort is laddering up faster than the prior cohort in terms of their productivity. Secondly, when we look at these investments, we also want to make sure that we're investing in the right industry specialization, as well as product specialization because we see better growth rates when we bring in people with those specializations. And lastly, let me touch on AI, because AI also is a big contributor here to driving productivity. What we are able to do with implementing AI across our sales desk is we are able to give them the next best action based on where they are in the sales process. We're able to give them the right talk track to address the customer's need or to address what competitive solution they are using AI, aka, what the battle card could be for the product offering. So, there are multiple areas that we look at to drive efficiency and the stats that we're looking at we've been disciplined and feeling really good about the improvements we're seeing in our productivity.

Okay, great to hear. Thanks for taking the questions here.

Hi, thank you very much. Congratulations on the results. And Sasan, I can always count on you to be the beacon of hope for SMBs. So, I know that you have been progressively feeling better and better about the SMB spending environment. If we take a step back, Online Ecosystem was barely a blip on your income stream. Now, it's a multi-billion dollar business unit, right? So near-term, longer-term, how should we think about the Online Ecosystem revenue? And within that, QBO Advanced certainly seems to be off the hook. What is your dream scenario? What would make you ecstatic as to the outcome of QBO Advanced? How big of a business could that be? And although it's a little bit too early, but if you dream the dream, how big of a business could IES be within the confines of Intuit? Thank you so much.

Well, Kash, thanks for your question. We love the dream and we love to execute. So, I love the nature of your question. A couple of things I would say. One, if you just look at the size and scale of our business group, well north of $11 billion in terms of the way we've guided this year, we expect the business group to continue to grow overall between 15% to 20%. And the majority of that is really driven by online growth because we continue to expect that desktop will be very, very low single digits as you think about the future. So that's the first takeaway is look at this franchise as growing 15% to 20%, which means that the online portion, which is the largest portion, should continue to grow at a healthy rate. I think to answer your question, when you look at the total size of the addressable market, which for the business group is nearly $200 billion, half of that is mid-market. And it's the way we've defined mid-market today, which does not mean it will stand as is. And what I mean by that is today, really anything north of $3 million in revenue in terms of a business all the way up to a couple of hundred million. The other way to look at it is up to like a couple of hundred employees is the way we've defined mid-market. And that's about $100 billion in TAM and that's where QBO Advanced Intuit Enterprise Suite and solutions come in. We believe mid-market one day will be bigger than the entire business group. That's why we started talking about the growth rate of mid-market separately because it's an area where we're getting great traction. It's an area where we have actually more confidence today than even five years ago when we declared disrupting mid-market, given our expansion of our innovation on the platform, but also our go-to-market. And we're not going to stop at a couple of hundred million in revenue. We believe we have so much more room and we just have so much more confidence sitting here today than even last fall because we're in the market with Intuit Enterprise Suite and we can see how we're winning on experience total cost of ownership and price. And by the way, there's still a lot that we're adding to the platform. There's still areas where we have work to do, which actually excites us based on the progress that we're seeing and then what's possible. So, we think mid-market is just for the next 10 years is going to be a significant growth driver and we believe it will be the largest, over time, driver of growth for the business group, while we continue by the way to serve those that are new entrants in the business market because we want to grow with them. So, the dream is it will be far bigger than the business group is today and we're excited about our potential.

Love the dream, love the execution even more. Thank you.

Hey, this is Patrick on for Alex. Can you help us contextualize the result in Credit Karma as it's the second quarter in a row with a pretty large outperformance relative to consensus? What are you seeing there that's providing such strength in the segment? And then, given the first half of the year, was there any consideration to update the annual guidance? If not, why not? Thank you.

Yeah, sure. So, first of all, I would just start by reminding everyone, our strategy is really about the one consumer platform and winning as one consumer platform, which is all of the, I would say, great execution of the team with the integration of Credit Karma and TurboTax is our goal is from helping you build credit to helping you build wealth and in the middle, helping you manage your money and get your taxes done. So that's ultimately what we're focused on with one consumer platform. And all of our innovation as one consumer platform and particularly all of it sitting on top of all of our data and AI investments where we've dramatically improved the shopping experience for members where we in essence help you make buying decisions, whether it's insurance, whether it's personal loans, whether it's credit cards, whether it's connecting you to taxes. And so, when you look at our accelerated growth rate, probably 40% is macro, things are just better versus last year, 60% is execution. And we love our trajectory. More importantly, we love the integration that we've done with TurboTax because, for us, everything is about helping customers manage their money and helping them get their taxes done. And lastly, I would just say that this is a segment in the long run that we would expect to grow 10% to 15%. Overall, we would expect our consumer platform, right, the combination of TurboTax and Credit Karma to grow double digits. And that's the purpose that it serves. And as you heard Sandeep touch on this and I'll then turn it over to him for any additional insights, given where we are in the year, we'll look at updating our guidance after Q3.

Hey, Patrick, the only couple of things I would add is in addition to the partner confidence we are seeing and the better together experience across our consumer platform, we're also seeing the AI experiences we embedded across Credit Karma, drive better shopping experiences and better ARPC. So that's also aiding in the trends you're seeing there. And lastly, as you look ahead and model out the rest of the year, just keep in mind that last year, Credit Karma started with a negative 5% growth rate in Q1 and exited at plus 14% in Q4. So the comps in the back half of the year for Credit Karma do get more challenging. So, please do take that into account as you model out the rest of the year.

Super helpful. Thank you.

Great. Thank you so much. I wanted to ask a question on tax as we're heading into the tax season here. You've talked about the effort to advertise to the full-service filer in that CPA segment. Wanted to get any perspective on how that might be tracking. Are there any leading indicators that suggest you're seeing the traction there in the full-service segment as a result of some of the ads we've all seen on TV, and just general outlook for full-service as we head into the season? Thank you.

Thank you for your question. I want to highlight the strength we're observing in our funnel and how we feel about the remainder of the year. This is largely due to our efforts to reinvent our end-to-end process, focusing on three key areas: offering the best virtual experience, providing immediate access to funds, and delivering the best price. Our campaign has effectively showcased the differences in virtual taxes, allowing customers to access their money quickly and complete their tax filings faster than competitors. This approach, combined with our campaign that began in the fall, has positively impacted our funnel, and we have also revamped our full-service experience. One significant change this year is our transition from being a software company to a services company, particularly in revolutionizing the assisted segment. Previously, full-service customers had to do much of the work themselves, but now we can instantly match them with an expert. We efficiently gather their data, allowing experts to provide valuable insights within minutes, even while the customer is on the go, sometimes in as little as 30 minutes. Across our campaigns and the overall experience, we are seeing strong momentum in the funnel and remain optimistic about the upcoming year. Ultimately, our focus is on the assisted category and the overall experience in both the "do it with me" and full-service segments, where we continue to see strength throughout the process.

Very exciting. Thank you, Sasan.

Hey, everyone. Thanks for taking my question. Sandeep, could you maybe just talk about the Consumer Group result, as you noted, better than guided? Just curious kind of what surprised particularly in the context of a slower start to the season. Thank you.

Yeah. Thanks for the question, Alex. A couple of things did better than expectation on our Consumer Group. One is we just saw, as Sasan pointed out, a strong start to the year in terms of TurboTax online as well as average revenue per return as more customers engage with an expert and as they added on offerings, including getting auto defense and faster access to their refund. That was a key driver in terms of both the units as well as the ARPR that we experienced that drove the results better than what we had guided you all to.

And just to clarify, no sort of change in expected seasonality as you're modeling the business, is that a fair statement?

There is no expected seasonality. If you're referring to the IRS opening on the 27th, I assume you're considering that in terms of seasonality, but we don't anticipate any. Additionally, regarding the unfortunate events in LA with the fires, we expect that to have a non-material impact on our Q3.

Yeah. Okay, great. Thank you for the answer.

Yeah, hi. Thanks so much for taking my question. Maybe I'll ask on the Online Services business, because I think you said that, that accelerated to 30% growth excluding Mailchimp, which is really solid. So, when we think about the growth potential of Online Services in the second half, can you just unpack that a little bit more? So, is the acceleration really being driven maybe by scaling in the AP payments business? Is it possible that we continue to see 30% plus growth potential? And then, maybe just as like the offset with Mailchimp, I think you mentioned that we're going to be lapping some pricing changes. So, is it possible that we start to see some declines in that business?

Sure, I'll start and collaborate with Sandeep. The strength you are observing is largely due to the robust capabilities of our platform, which includes a variety of financial services such as payment processing, invoicing, accounts payable solutions, and line-of-credit options, along with instant deposit features. This extensive range of financial tools enables our businesses to effectively manage their cash flow. Additionally, we're beginning to notice that our AI-driven features are enhancing our financial growth opportunities. Furthermore, our payroll services are performing very well, showcasing the platform's overall strength. Notably, in the mid-market segment, especially with QBO Advanced and the Intuit Enterprise Suite, the integration of payroll and payments is significantly stronger compared to QBO Core. Lastly, while we are aware of the price increases related to Mailchimp, we are also focused on highlighting the strength of our services excluding Mailchimp as we work to enhance its growth. Sandeep, would you like to add anything?

Taylor, the only thing I would add on the payment and the payroll side is this is finally us engaging with the customer and across those offerings as a holistic money offering and a holistic workforce solution offering. And this is what happens when you get the product teams and the go-to-market teams actually engaging as a one holistic portfolio. So that's really driving the strength and that shows up as you noted that as we shared that payment volume was up 18% this quarter. And as you recall, it was 17% last quarter. So, it's starting to show up in the results. And looking forward, as Sasan mentioned, it is going to be an increasing contributor to this, not just because of the higher tax rate he mentioned, but these customers are larger, so they are also bringing more volume onto our platform.

Great. Thanks so much for the thoughts.

Wonderful. Thanks so much for taking my questions. Nice to see continued success in the business. I just wanted to ask a follow-up on IES. Really nice to see the early traction here. Maybe if you were to think about some of the early customer wins that you highlighted during your prepared remarks, are you typically landing greenfield with a lot of these opportunities, or are there wins that you have where you're consolidating budget and displacing a number of different point solutions? And maybe alongside that, when we think about early customer feedback, have there been any push points on additional functionality that customers are looking for that informs your future roadmap with IES? Thanks.

Yeah, thanks for the question, and I'll try to hit on all the different elements that you asked about. First of all, I'll start with, this is a $90 billion total addressable market that we are going after. And we have about 800,000 of these customers already in our base. And these customers have the characteristics of larger businesses, over $2.5 million in revenue, multi-entity that have a need for either QBO Advanced and/or Intuit Enterprise Suite. So, first and foremost, where we started has been really focused on our own base and focused on our accountant partners. And that's where we've seen the momentum and the acceleration. And in those cases, we have, in fact, displaced point solutions for sure, because the power of Intuit Enterprise Suite from the lens of the customer is when all of their work that they do from estimate to invoicing to payments to bill pay to payroll, the time tracking depending on the type of business, when it's all in one place, we can then leverage all of our AI capabilities to actually make recommendations to the customer that can help them make growth decisions to resource reallocate based on how different segments are performing. So, the customer is actually motivated to switch from all their point solutions to Intuit Enterprise Suite. That's really number one. Number two, they see significant cost savings and time savings when they do that because generally, although they will pay more than they pay us today if they're an existing customer, they'll pay significantly more with Intuit Enterprise Suite. So they actually end up saving money when they go from different point solutions to Intuit Enterprise Suite. And what we're starting to see is actually accountants and businesses that are on competitive solutions come to us and want to switch to Enterprise Suite just because of, again, the ease of experience, very user-friendly, the total cost of ownership, and ultimately the price. So, with all of that said, the majority has been just focused on our own base, but we are beginning to shift to not only going after those that are greenfield. And greenfield, by the way, means that you're just using a bunch of different apps. None of the apps talk to each other. You're spending a lot of money, but you don't really know how your business is performing to switching to one digital platform. We consider that non-consumption in greenfield and that's where the majority of the money is spent in the TAM and that's where the majority of our opportunity will come from as we sort of look at the next several years.

All right. Wonderful. Thank you.

Thank you very much. This is a tax question, mainly about revenue per return. Sasan, you switched TurboTax from full-service pricing to traditional tiers that you've used with other products, focusing more on form-based pricing, and you mentioned a very positive customer experience with full-service. I'm curious about how that change is being received. Do you believe it's the right approach for that product now? Additionally, regarding 1099 Ks this year, as we are about a month into the tax season, are you noticing an increase given the lower threshold for those? How might this affect revenue per return in this tax season if you are observing a significant volume increase? Thank you.

Thank you for your question, Scott. I want to highlight a couple of key points. This year, we've made significant investments in data and AI, leading to AI-driven personalized lineup experiences. For example, when Sandeep and I check our lineup on any of our platforms, we'll see different options. The time when everyone saw the same lineup is over. It's important to understand this, especially regarding our standard SKU, which many customers don't even encounter. Our data and AI capabilities direct customers to the right experiences based on their individual situations. This is contributing to strong engagement among both simple and complex filers, enhancing our monetization efforts as we effectively place customers in suitable experiences. This also applies to the assisted segment, which is why I wanted to emphasize it. In response to your question, our product recommendation score is impressive at 85, one of the highest in the industry. Our service quality, pricing, and access to funds are resonating well with full-service customers, and we're looking forward to a strong season ahead. This also applies to small businesses; we’re seeing a positive response from them as well. Lastly, regarding the 1099 situation raised by Sandeep, we believe it is not significant. We anticipate increased activity as the season progresses but consider both these factors as not materially impactful.

Thanks for sharing that. Congrats on the quarter.

Awesome. Well, thank you so much for all the great questions and be safe out there, and we'll look forward to seeing you next quarter. Bye, everybody.