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Conference Facilitator
Facilitator
Lateef and I will be your conference facilitator. At this time, I would like to welcome everyone to Intuit's third quarter fiscal year 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. With that, I'll now turn the call over to Kim Watkins, Intuit's Vice President of Investor Relations. Ms. Watkins?
Kim Watkins
Vice President of Investor Relations
Thanks, Lateef. Good afternoon and welcome to Intuit's third quarter fiscal 2022 conference call. I'm here with Intuit's CEO, Sasan Ghadarzi, and Michelle Clatterbuck, our CFO. 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 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've reconciled the comparable gaps and non-gap 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. And with that, I'll turn the call over to Sasan.
Sasan Ghadarzi
Chief Executive Officer
Thanks, Kim, and thanks to all of you for joining us today. I'm proud of our continued momentum as we execute on our strategy to be the global AI-driven expert platform powering the prosperity of consumers and small businesses. We have a nearly $300 billion addressable market driven by tailwinds that include a shift to virtual solutions, acceleration to online and omnichannel capabilities, and digital money offerings. This, combined with the team's execution, is contributing to the strength of our performance. Third quarter revenue grew 35%, including six points from the addition of MailChimp. It was another strong quarter for our small business and self-employed group, with revenue up 42%, 20% organically. Credit Karma posted another quarter with revenue at an all-time high, up 48%. And I'm proud of how the team executed in the consumer group in another unusual tax season. We are confident in our business trajectory and are raising our total Intuit revenue and non-GAAP earnings for share guidance for fiscal year 2022. We expect to grow total company revenue 31 to 32% as our platform is in demand now more than ever. Let me now turn to tax. Our multi-year strategy is to extend our lead in the do-it-yourself category and transform the assist category with TurboTax Live. This strategy is working. This fiscal year, we expect our share of total IRS returns to be up approximately one point and our share of the do-it-yourself category to increase two points. We're also growing average revenue per return once again. We expect customers in under-penetrated segments, including Latinx, self-employed, and investors to grow double digits in total. Within transforming the assisted category, we continue to make progress connecting people to experts with TurboTax Live. We anticipate achieving a significant milestone with TurboTax Live revenue reaching $1 billion in fiscal year 2022, growing approximately 30%, and customers growing 20%. Note that last year, TurboTax Live customer growth significantly benefited from the introduction of the free basic offer. We're proud of the progress against our strategy. However, slower total IRS returns growth is resulting in expected consumer group revenue growth of 10% this fiscal year. We now expect overall IRS returns to decline 3% through July 31st compared to IRS returns growth of 3% to 4% the last two seasons. This was driven by one-time stimulus filers that did not return this season and overall IRS extensions up significantly year over year. with the number of TurboTax customers filing extensions nearly doubling. As a reminder, every point of IRS return growth equals about one point of TurboTax revenue growth. We now expect the Do It Yourself category share of total IRS returns to be flat this year, below our expectations after growing an average of approximately one point per year over the last two years. Our hypothesis is that the Do It Yourself category performance was weaker than we expected due to the one-time stimulus filers, approximately 30% of whom were paid customers for us last season. While the last three years were anything but normal, over the period, IRS returns grew on average one percentage per year, and the do-it-yourself category gained an average of just over half a point of share per year, consistent with long-term trends. Looking ahead, we expect more normal total IRS returns growth. More broadly, our AI driven expert platform strategy is accelerating innovation and our five big bets are solving the largest problems our customers 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 three of these big bets. Our third big bet is to unlock smart money decisions. We continue to see strong momentum with Credit Karma, a data platform with powerful network effects solving a two-sided problem. Our vision is to unlock smart money decisions by creating an autonomous financial platform that helps consumers find the right financial products, put more money in their pockets, and connect them to insights and advice. In Credit Karma, we continue to innovate across all verticals. All proprietary lightbox technology allows us to better personalize and connect members to the products that are right for them, providing more certainty to members and partners on the platform. We continue to see strength in credit cards and personal loans, with combined lightbox penetration remaining very high. Lightbox approximately doubles the average approval rate of members who apply for credit cards on Credit Karma versus outside of Credit Karma, making it a competitive differentiator for both our members and partners. We continue to make progress combining our capabilities to fuel the success of both TurboTax and Credit Karma. We integrated Credit Karma money into TurboTax filing experience, more than tripling the number of TurboTax online customers who deposited their refund into their Credit Karma money account this year. This gave them the ability to receive their refund up to five days earlier with direct deposit. These TurboTax customers drive Credit Karma member growth and, like other Credit Karma members, get access to personalized products across the platform, which accelerates engagement over time. 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. Sixty percent of small businesses struggle with cash flow, and we continue to innovate to help customers overcome this challenge. In payments, we offer a single place where small businesses can get paid, pay others, manage money, and access capital. We are seeing more customers accessing loans through QuickBooks Capital with loan volume at record level, more than tripling year over year in April. We have increased discoverability and expanded eligibility in the product. This is driven by our rich data and proprietary risk models, which allows us to use our customers' data on their behalf and with their permission to offer access to loans. In addition to cash flow, getting and engaging customers remains a significant pain point for small and mid-market businesses. With Mailchimp, 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 three acceleration priorities with Mailchimp. First, delivering on our vision of an end-to-end customer growth platform. Second, disrupting the mid-market by developing a full marketing automation, CRM, and e-commerce suite. And third, accelerating global growth with a holistic go-to-market approach. We continue moving with speed as we focus on product innovation, marketing, and improving conversion. First, we launched a customers and leads tab within QuickBooks Online which allows new and existing customers to send revenue and customer data from QBO to Mailchimp in real time, where small businesses can segment customers and automate marketing campaigns based on QuickBooks data. We're also saving customers time by bringing in their contact list into Mailchimp from other partners and platforms. Second, we continue to invest in marketing. We are seeing early signs of the recent investments in paid media are driving growth in customer signups across large markets like the U.S. We expect this to take time for it to translate into financial results, but we're excited about the potential. And third, we're focused on opportunities to improve conversion as we look at the top of the funnel traffic to how we deliver benefits in the product for our customers. This includes highlighting product benefits as soon as customers enter the product, improving the checkout page experience, and streamlining in-product navigation. Our fifth big bet is to disrupt the small business mid-market with Cookbook's online advance. During the quarter, we launched in Canada the first market outside of the U.S., expanding the geographic reach of this offering. Accelerating innovation and executing our strategy starts with our employees. I'm proud to share that we were Fortune's 100 best companies to work for list for the 21st year in a row, this year proudly ranking number 11. We remain focused on creating an environment where our employees can bring their whole selves to work and do the best work of their lives, which is reflected in our employee retention rate that is above our peers. Wrapping up, we feel confident in our long-term business strategy. Our strong business fundamentals, including our balance sheet, our speed of innovation, and the demand for our platform, continues to put Intuit in a position of strength. In the current macro environment, the benefits of our platform are more important than ever. We're proud to be the platform of choice for over 100 million customers around the world who rely on Intuit to prosper. Now let me hand it over to Michelle.
Michelle Clatterbuck
Chief Financial Officer
Thanks, Hasan. For the third quarter of fiscal 2022, we delivered revenue of $5.6 billion, up 35%. including six points from the addition of Mailchimp. Gap operating income of $2.4 billion versus $1.9 billion last year. Non-gap operating income of $2.9 billion versus $2.2 billion last year. Gap diluted earnings per share of $6.28 versus $5.30 a year ago. and non-GAAP diluted earnings per share of $7.65 versus $6.07 last year. On May 4th, we entered into a settlement agreement with the State Attorneys General regarding our advertising practices related to free tax preparation. This resulted in a $141 million one-time charge in our fiscal third quarter. Under the terms of the settlement, we admitted no wrongdoing. We are pleased to put this issue behind us so we can continue to focus on delivering innovative solutions for our customers. Excluding the settlement charge, our fiscal third quarter GAAP and non-GAAP operating margin would have been 250 basis points higher, and GAAP and non-GAAP earnings per share would have been 37 cents and 38 cents higher, respectively. Turning to the business segments, Consumer group revenue was $3.2 billion up 32% reflecting the earlier IRS tax filing deadline this year. I'm proud of our execution this season as we expect to gain share and grow our average revenue per return. There are four primary drivers of our consumer business. This data reflects our expectations through July 31st, 2022 versus the prior year through July 31st, 2021. The first is the total number of returns filed with the IRS. We now expect total returns to decline 3% this year below our original expectations. Every point of IRS returns growth equals about one point of TurboTax revenue growth. The second is the percentage of those returns filed using do-it-yourself software. We expect the DIY category share of total IRS returns to be flat by the end of the year, also below our expectations. The third driver is our share. We expect our share of total IRS returns to expand approximately a point this year, and our share of the DIY category to be up two points, excluding users of the TurboTax free file offering in prior year periods. The fourth is average revenue per return, which we expect to increase this year, driven by a mixed shift to TurboTax Live and our premier offering used by investors, as well as fewer free customers. As a result of the weaker IRS returns, we now expect total customer growth of 1%, including TurboTax Online paying customer growth of 8% this year. We expect the base of customers paying us nothing in our commercial free offering to decline 11% this year to just over 13 million from over 14 million last year. This was driven by one-time stimulus filers that did not return this season, approximately 30% of whom were paying customers We now expect consumer group revenue growth of approximately 10% in fiscal 2022 versus our prior guidance of 10 to 11%, reflecting the decline of total IRS returns I mentioned earlier. We continue to expect consumer group revenue growth of 8 to 12% long term. Turning to the ProConnect group, revenue grew 10% in Q3, reflecting a shift in the timing of the IRS tax filing window year over year. For the full year, we now expect ProConnect group revenue growth of 4% to 5%. In the small business and self-employed group, revenue grew 42% during the quarter, or 20% on an organic basis, excluding $257 million in revenue from MailChimp. Online ecosystem revenue grew 67%, or 31%, excluding MailChimp. With the aim of being the source of truth for small businesses, our strategic focus within the small business and self-employed group is threefold, 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 Q3, driven mainly by higher effective prices, customer growth, and mix shift. Second, we continue to focus on connecting the ecosystem. Online services revenue, which includes Mailchimp, payroll, payments, capital, and time tracking, grew 121% in fiscal Q3. Excluding Mailchimp, online services revenue grew 28%. Mailchimp revenue recorded in online services was $257 million in the quarter, and this was in line with our expectations. Within payroll, revenue growth in the quarter reflects growth in payroll customers, and a mixed shift to our full-service offering. Within payments, revenue growth reflects an increase in charge volume for customer and ongoing customer growth. Third, we continue to make progress expanding globally. Total international online ecosystem revenue grew 221% in fiscal Q3 on a constant currency basis and 29% on an organic basis, excluding MailChimp. 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 3% in the third quarter. QuickBooks desktop enterprise revenue grew mid-teens, driven by strong customer growth and price increases. Longer term, we don't expect the desktop business to be a growth driver for the small business and self-employed group. Moving on to Credit Karma, revenue grew 48% to $468 million in Q3, another record revenue quarter, driven primarily by growth in average revenue per monthly active user. On a product basis, revenue growth was driven primarily by personal loans and credit cards and to a lesser extent auto loans. We are developing the emerging verticals by focusing on innovation with Credit Karma money, which we believe is key to growing the frequency of visits over time. As Hassan shared earlier, we saw a more than tripling in the number of TurboTax online customers who deposited their refund into their Credit Karma money account this year. We remain excited about the opportunities ahead. Turning to our financial principles, We remain committed to growing organic revenue double digits and growing operating income dollars faster than revenue. As we 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 being 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 return excess cash that we can't invest profitably in the business to shareholders via both share repurchases and dividends. We finish the quarter with approximately $3.9 billion in cash and investments on our balance sheets. We repurchased $489 million of stock during the third 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 68 cents per share, payable July 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 earnings per share guidance to reflect the momentum we've seen throughout the year in the small business and self-employed group and Credit Karma. Our updated fiscal 2022 guidance includes revenue of $12.633 billion to $12.674 billion, growth of 31% to 32%, including mail chimp as of November 1st, and a full year of Credit Karma. up from prior guidance of 26% to 28% growth. Excluding $765 million to $770 million in MailChimp revenue, growth of 23% to 24%, up from prior guidance of 18% to 20% growth. Gap earnings per share of $6.95 to $7.01, down from prior guidance of $7 to $7.17, excuse me, $7.16. We now expect a GAAP tax rate of approximately 20% this year, up from 18% previously. Non-GAAP earnings per share of $11.68 to $11.74, up from prior guidance of $11.48 to $11.64. Our fiscal 2022 guidance includes the impact of the $141 million one-time charge related to the state attorney's general settlement. Excluding this charge, our expected GAAP and non-GAAP operating margin would be approximately 110 basis points higher in fiscal 2022 above our prior guidance. Expected fiscal 2022 GAAP and non-GAAP earnings per share would be approximately 37 cents and 38 cents higher respectively. Our guidance for the fourth quarter of fiscal 2022 includes a revenue decline of 8% to 9%, reflecting the earlier tax filing deadline this year versus last year. Gap loss per share of 53 cents to 47 cents, and non-gap earnings per share of 94 cents to $1. You can find our full Q4 and fiscal 2022 guidance details in our press release and on our fact sheet. With that, I'll turn it back over to Sasan.
Sasan Ghadarzi
Chief Executive Officer
Great. Thank you, Michelle. And before closing, I wanted to mention the leadership changes in our consumer group that we shared in our earnings release today. Effective May 31st, Greg Johnson, General Manager of the Consumer Group, will step down as the leader of Intuit's consumer business to become CEO of McAfee. Varun Krishna, Senior Vice President and General Manager of TurboTax Growth Products, will succeed Greg as the General Manager of the Consumer Group. Greg's done a tremendous job driving growth for our consumer business, and I couldn't be happier for this next chapter for him. Intuit is well known for developing world-class leaders, and Greg is no exception. McAfee is lucky to have him. At the same time, I couldn't be more excited to welcome Varun as the consumer group's next general manager. With over seven years of experience leading commercial and product innovation for TurboTax, Varun is perfectly suited for leading consumer group's next phase of growth. We are seeing continued momentum across the entire company given our strategy of being an AI-driven expert platform that is power and prosperity for consumers and small businesses. I'm proud of the team and how we've delivered for our customers so far this year. And with that, let's now open it up to your questions.
Conference Facilitator
Facilitator
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Our first question comes from the line of CC Pantagrahi of Mizuho.
CC Pantagrahi
Mizuho
Your line is open. Thank you. Thanks for taking my question. It's very impressive to see, you know, strong momentum in Credit Karma as well as small business and how you raised the guidance. So, Sasan, I'm wondering, given this geopolitical uncertainty, even some concern about any macro slowdown, how is Credit Karma positioned in terms of growth and also in your small business segment?
Sasan Ghadarzi
Chief Executive Officer
Yeah, sure. Thank you for the question. I'll break down your question sort of in three parts, given that we are a platform company with sort of a great profile of businesses. You know, I'll start with tax. I know that was not part of your question, but it's important to start there, which is, you know, tax is sort of very resilient in any type of an environment and it's more than, you know, 30% of the company's revenue when you look at both TurboTax and our ProTax business. You know, in small business, there is a flight to digitization to manage your cash flow and just, you know, I would remind us that we are now fundamentally a growth and money center platform for small businesses and so there is a flight to be able to manage your cash flow on our platform and you know the the two stats that I would use that are very recent and sort of the here and now you know one our you know loan business had the record high volume in April it was 3x higher than it's been you know year over year and And our charge volume continues to be strong. As of last month and even in this last week, our charge volume has been growing north of 30%. And I use those couple of stats just more as proof points in terms of the importance of our platform in these unique times. And when it comes to Credit Karma, first of all, on the demand side, I would say that when you get into tougher recessionary times, the demand for the products on our Credit Karma platform actually grows. Now, the discussion is about the supply side. And in fact, with our partners, there's a flight to quality. This is where the power of the data that we have on our customers' behalf and Lightbox that I've been talking about over the last couple of years come into play because with our partners and the flight to quality, putting their credit card models on our platform, they're actually able to really get the kind of quality customers that they need. And so it's just sort of a perfect match between members and partners, which is, by the way, why we saw the strength this past quarter of 48% growth and why the platform continues to be very resilient in these times. So those would be, I would say, the headlines I would share with you about our platform being in need at probably some very unique times where our customers need us most.
CC Pantagrahi
Mizuho
So, Sam, thanks for covering the tax, but just a quick follow-up on TurboTax Live full service. This is the second year. What sort of trend you have seen? Do you see more share gain from the assisted category or your own customer now moving more into full service kind of, you know, product?
Sasan Ghadarzi
Chief Executive Officer
Yeah, great question. I would just start with, you know, there's 86 million customers that are in the $20 billion, and we hit a major milestone this year of delivering a billion dollars of revenue with TurboTax Live growing at 30%. So we are in the very early stages of what's possible in growth and penetration in the assisted category, and that is really the long-term really bright spot and future growth for TurboTax, which we are very excited about.
CC Pantagrahi
Mizuho
Thank you.
Bob
Representative for Brad Zelnick, Deutsche Bank
You're very welcome.
Conference Facilitator
Facilitator
Thank you. Our next question comes from Kirk Matern of Evercore ISI. Your line is open.
Chirag Venn
Representative for Kirk Matern
Hi, this is Chirag Venn calling in for Kirk. Thanks for taking the question, and congratulations on a great quarter. Maybe one for Michelle. Given some of the uncertainty in the macroeconomic environment, is there anything that you changed in terms of the forecasting process just to account for some greater uncertainty moving forward? Thank you.
Michelle Clatterbuck
Chief Financial Officer
Hi, thanks for the question. Yes, as we see the macro environment unfolding, one of the good things that Sasan has shared is we really have not seen a lot of impact to our business. It is one of the things that we are continuing to look for, but given the way our business works, the platform that we have, and really the need that small businesses and consumers have, in times like these even more for our products and our platform, we don't anticipate seeing an impact. And so we're always looking to make sure to see what's happening, but we haven't really changed anything with our forecast at this point in time and any, as you can see with our guidance that we've given.
Sasan Ghadarzi
Chief Executive Officer
And the only thing I would add is the majority of our business, if not most of it, is highly predictable. And for the most part, in some areas, it's subscription. Pretty much most of small business, which includes MailChimp, is subscription. So the predictability is quite high. And we are very sort of data-driven in terms of what we look at daily to see our performance. And as Michelle said – That combined with the indicators that we see, the demand remains very strong on our platform.
Chirag Venn
Representative for Kirk Matern
Got it. Thank you both.
Sasan Ghadarzi
Chief Executive Officer
Very welcome.
Conference Facilitator
Facilitator
Thank you. Our next question comes from Keith Weiss of Morgan Stanley. Your line is open.
Analyst for Keith Weiss
Morgan Stanley
Excellent. Thank you guys for taking the question and really nice quarter. Maybe I'll start out with a question for Michelle. Just a point of clarification. So am I reading this right that we should add that – or not add, but like the $0.38 is not included in your guide for the full year. So if it wasn't for that settlement, the EPS guide would be like 1206 to 1212. Is that the right way to read it?
Michelle Clatterbuck
Chief Financial Officer
That's exactly right, Keith. You know, because of the nature of the charge, the one time is not an impact to the underlying, you know, structural – part of our business, we wanted to make sure that you could see really what is the business driving. And so, yes, it actually would have been higher. It would have been the 37 cents higher on GAAP and 38 cents higher on non-GAAP for EPS for the full year.
Analyst for Keith Weiss
Morgan Stanley
Got it. Got it. That wasn't my question. That was just a clarification. So the question is, pace of operating margin expansion on a go-forward basis? Because it does seem like you're outperforming your original expectation for FY22. You had talked about previously an ability to sort of have a consistent cadence of operating margin expansion on a go-forward basis. I think you talked about maybe like 100 basis points a year going forward. Does that change at all given sort of the outperformance you saw on FY22, or do you think that's still achievable on a go-forward basis?
spk00
You know, maybe Keith, I'll get us.
Sasan Ghadarzi
Chief Executive Officer
Oh, sorry. I didn't know it was for Michelle. I'm sorry. I thought it was for me. Well, you know how I am. I just jump in.
Analyst for Keith Weiss
Morgan Stanley
You go. Marching questions are for Michelle. All right. All right.
Michelle Clatterbuck
Chief Financial Officer
Except when I use my voice and can't talk. But, no, you know, we have our financial principles, first of all. So our financial principles to grow revenue double digits and grow operating income faster than revenue. We haven't set out any targets. for what that margin expansion might look like over time. But we do see that it is possible because of the benefits of having the platform that we do. And so besides being able to innovate more quickly and deliver for our customers, we do continue to see those opportunities, as you're seeing this year, that we can really leverage key services and capabilities across our business whether that be in technology or customer success or sales and marketing, we do continue to see an opportunity there, although we have not given any type of specific range of what that expansion might look like.
Analyst for Keith Weiss
Morgan Stanley
Got it, got it. And then for Sasan, I'm hoping to get an update on MailChimp. You saw a nice sequential improvement this quarter, and I think that's going to surprise a lot of investors. It's definitely an area where investors have the most degree of caution. And I think some of it comes from some of the data points that we look at. We look at, like, Google Trends, and it doesn't seem to be trending higher. I know a lot of my clients look at credit card panel data, and they said that data has been pretty weak. But the performance has been, I think, a little bit better than expectations. Can you give us an update on how MailChimp is doing and how far into that integration we are?
Sasan Ghadarzi
Chief Executive Officer
Yeah, I'll tell you, Keith, we are probably more excited today as we sit here than we were even when we made the announcement because now we're into the work. And I would just say that we are delivering against our expectations and our belief and confidence is that the best is yet to come. And very specifically, we're focused on creating a growth platform so in one place a customer can grow and run their business. And we now have proof points of the things that we're starting to deliver, like the customers and leads tab that's in QuickBooks, where now we are transferring all your customer and revenue data into MailChimp. The second thing is really looking back, the investment in marketing and knowing where to invest has been underwhelming. And that excites us as we look ahead. We've got some of our best marketing leadership teams now in MailChimp and the investments that we are making in terms of one go to market strategy pricing principles and how to invest is that we're starting to see some green shoots and you know with the investments that we're making and we're quite good at these sorts of things you know we foresee the financial results will be forthcoming and then last but not least both going up market to mid market and international in fact we We'll talk more about this at Investor Day, but we have refreshed our international strategy, and a big part of that will actually include MailChimp because of the fact that half of their business came from outside of the U.S. really with little effort. So that was a long way of saying we're quite excited about our momentum, and we're very excited about the trajectory of the business, and sort of the best in terms of growth is yet to come. And I don't think you're going to be able to pick up the performance of MailChimp through Google Trends.
Analyst for Keith Weiss
Morgan Stanley
Got it. Thank you very much, guys. Yeah, very welcome, Keith.
Conference Facilitator
Facilitator
Thank you. Our next question comes from Brent Thill of Jefferies. Please go ahead.
John Bion
Representative for Brent Thill, Jefferies
Hi, thank you. This is John Bion for Brent Thill. Just had actually another macro question. I wonder if you could remind us how you performed in past recessions and And how it might be different for you this time. Obviously, you have MailChimp and you have Credit Karma, but, you know, on the plus or minus side, then I have a follow-up.
Sasan Ghadarzi
Chief Executive Officer
Yeah, sure. Thanks for the question. You know, first of all, you know, the last recession that we look back on, we actually grew 4%, and this is – I think this was in 2008 – and we grew 4% where most of our peers actually declined. And so we perform, you know, well in recessionary times. I would also then go on to say we are a totally different company today than when we were in 2008 in terms of the strength of our platform today versus in 2008. You know, one, we now have a platform, and by definition we're in the cloud, whereas back then we were primarily desktop. You know, we're in the cloud where the – tailwinds around digitization, a shift to a virtual world, a shift to online. Digitization to drive managing cash flow is actually essential for customers. And then you combine that with what I mentioned earlier with our Credit Karma platform where demand is actually higher in recessionary time and our strength of our data and lightbox capability makes it a great flight to quality for our partners, which is the current strength, you know, that we are seeing. So we'd actually expect to perform, you know, better if it was exactly like for like compared to 2008. But nevertheless, those were the stats of the past recession and how we performed, and we're in a much stronger position today.
John Bion
Representative for Brent Thill, Jefferies
That's very helpful. Thank you. And then just another quick one. On MailChimp, just wanted to see if you could update us on the progress of In terms of where the growth is coming from, is it still mainly from email marketing or are you getting more traction with the broader CRM suite and the website builders and e-commerce?
Sasan Ghadarzi
Chief Executive Officer
Yeah, I would say the majority of really the growth is still coming from just the viral word-of-mouth nature of the platform. And we are building out the capabilities of the platform. One of the biggest things that we've learned now having the business as part of the company is is how much capabilities the platform has that customers don't know about, and how many customers don't even know about Mailchimp because we've really never invested in marketing. And so a lot of what we're seeing is sort of just continued word of mouth because of the benefits that it delivers. With our investments in the product that I mentioned a moment ago, the investments that we are making strategically in marketing, and that will accelerate over time, and then doing so going upmarket and international, We expect that will be accretive to growth as we head into the future. But most of it right now is just, I would say, word of mouth.
John Bion
Representative for Brent Thill, Jefferies
Thanks very much.
Bob
Representative for Brad Zelnick, Deutsche Bank
You're very welcome.
Conference Facilitator
Facilitator
Our next question comes from Brad Sills of Bank of America. Your line is open.
Adam
Representative for Brad Sills, Bank of America
Hey, thank you. This is Adam on for Brad. I guess our first question is, can you compare and contrast any differences in demand you might be seeing between QuickBooks and MailChimp, if at all. Um, I know in the enterprise category, you know, you, you kind of see a division of spend between the two, but I was kind of wondering, you know, if, if that's kind of different with, you know, given you guys kind of focus around the SMB.
Sasan Ghadarzi
Chief Executive Officer
Sure. You know, first and foremost, I, I would start with, uh, these are both subscription, you know, based businesses and, uh, and together they create magic apart. One helps you manage your cash flow, which is QuickBooks. The other one helps you actually grow your business. And so I would say that the demand and the strength of the demand is fairly consistent for those customers, whether they're new or customers that have been in business for a while that realize that they have to find a way to market to their existing customers to be able to grow with them and grow their wallet share and also manage find ways to market their business on different channels, whether it's their website, whether it's on Instagram, Facebook, Amazon, Etsy. And so the demand is consistent. It depends on what you're trying to do. And all businesses are trying to both grow their business and be able to run their business and manage the cash flow. And what they don't have is the platform in one place, nor do they have the data. And that's why bringing MailChimp and QuickBooks together will over time actually drive higher retention and a higher expansion of services and wallet share and also higher penetration because what we can do together is hard to do apart.
Adam
Representative for Brad Sills, Bank of America
Got it. Thank you. And then turning to TurboTax real quick, you know, when I think of some of my favorite differentiators for the product, I think of, you know, just auto-importing the investment or TT Live on full service. But it seems like, you know, a lot of the R&D work for those are done. So I guess my question is, you know, where are like the incremental investments going in terms of R&D for for TurboTax now? Thank you.
Sasan Ghadarzi
Chief Executive Officer
Sure. First of all, there is no destination to the investments. We are continuing to invest in machine learning and knowledge engineering to not only make the experts that are on our platform smarter so that we can lead how we answer questions through technology and not just through human labor, but two, in terms of how we do the matching and how we ensure that really our technology, the bots are engaging and answering the questions. And we're getting better at this every single day. And we're going to continue to invest in that area. I think the other thing I would say is around the money. The biggest thing that we learned this year, where we're excited about next year, that's actually about everything in the assistance segment is about speed to taxes done and speed to my money. And so the integration of Credit Karma into TurboTax, where you can now get early access to your refunds, that's another area of investment for us because there's so much more we can do in the experience. So it's both getting you to a place where taxes are done and experts are smarter in terms of how they help you and also faster access to money. And then being able to do that across very specific segments like investors, self-employed, Latinx, and over time, the creator economy. So our investments will continue in those areas. And remember, We invest at the platform level and at the company level. These are not just investments within TurboTax because then they also benefit us in QuickBooks Live and other areas.
Adam
Representative for Brad Sills, Bank of America
Awesome. That's awesome, Keller. Thank you very much. Yeah, you're very welcome.
Conference Facilitator
Facilitator
Our next question comes from Cash Rankin of Goldman Sachs. Your question, please. Thank you very much.
Cash Rankin
Goldman Sachs
Congratulations to San and team. Spectacular results. Sasan, I think some of us, including you, will fondly remember that back in the 2008-2009 recession, Intuit was probably the only company, one of the few companies that actually grew its revenues right through the recession. Of course, we're not calling for anything specifically, but as someone running one of the most admired companies with significant exposure to the SMB space, I'm curious how Intuit's products are positioned in a way that it could help customers the most to be able to weather through this, as we all understand, combination of inflation rates, et cetera. And also if you could, I think that's quite a question. So I'll just pause with that and hear your thoughts. Thank you once again and congratulations.
Sasan Ghadarzi
Chief Executive Officer
Yeah, thank you, Cash. And thank you for the question. You know, I'll use sort of tangible here and now answers so it doesn't seem overly generic. I would just start with saying that we are most important in tougher times than just in good times. And I will start with small business. There is an accelerated flight to digitization to manage your cash flow as a small business in these tougher times. And we are seeing that now. And the example I think I used earlier but is worth bringing up again is in the month of April, our volume of QuickBooks capital loans was at an all-time high, 3x higher than the same time last year, where times were much, much better compared to what environment all of us see today. And the other is our payments volume. Just in the last month, in the last week, we are growing north of 30%. This is our payments volume. So I use those as tangible examples just to state that We have truly become a growth platform and a money center for small businesses. And in times like this, we are in need more than ever because our capabilities are so different than the last time we were in a recession. We have all the capabilities with MailChimp and QuickBooks to grow your business and help you with your cash flow. And I'll just maybe pause there with small business, and I'll remind us that tax, both our pro-tax and turbo-tax business, is more than 30% of the company and it's resilient in very tough times because people have to do their taxes. And then last but not least is demand is higher in recessionary times on the Credit Karma platform and there's actually a flight to quality. And based on our data and Lightbox capability that's proprietary, more and more partners are wanting to be on lightbox because they can actually control the quality of their offers and it makes our platform in even more demand which is what you saw in the last quarter and so i would foresee that playing forward which i think was the nature of your question we are the best positioned uh to serve consumers and small businesses in tough times and good times god that's just to clarify small business formation uh that doesn't affect into it so you
Cash Rankin
Goldman Sachs
they probably lag before you get to the point where they could afford to buy into a product system. Should we be concerned? How concerned should we rather that small business creation might come to a standstill during a recession and how that might affect Intuit? That's it for me. Thank you.
Sasan Ghadarzi
Chief Executive Officer
Yeah, I wouldn't be concerned at all. If you look at our history, when the formations were high, when the formations were low or negative, it really, that's not the driver of the long-term or short-term health of the business. And so it is not something we worry about. It's actually not something we track. It's not something we talk about a lot until you all start asking questions about it. So I would just say that it is not an area of concern for us.
Karthik Mehta
North Coast Research
Thank you.
Conference Facilitator
Facilitator
Our next question comes from Daniel Jester, BMO Capital Markets. Your line is open. Hey, great. Good afternoon. Thanks for taking my question.
Daniel Jester
BMO Capital Markets
On TurboTax Live, just can you help us understand how much of the growth this year was from DIY customers transitioning to TurboTax Live versus how many were kind of net new to the platform this year?
Sasan Ghadarzi
Chief Executive Officer
Yeah, thank you for the question. We don't break out the specifics, but I will take you back to why we love the TurboTax Live platform. One, there's more than 10 million people in the assisted segment that actually trip and go to another person to help them with assistance. And these are directional numbers. You know, within TurboTax, there's probably more than 10 million people that log in but never actually finish their taxes. And then there's switching that happens back and forth between doing it yourself and then getting assistance. The reason I bring up those three figures is there's actually a lot of sort of movement in the tens of millions in each category and across the category between do-it-yourself and assistance. And it's all driven by a lack of confidence. Can I do this myself? Did I do it right? And so when we look at the TurboTax Live platform, and in fact, I would say TurboTax as a whole, that's why we are now a platform where you can do it yourself, we can do it with you, or we can do it for you across the platform. So our growth in TurboTax Live comes from all those three areas. There are those that switch from assisted. There are those that would have left DIY that now stay with us, and vice versa. It helps us with funnel metrics. So That is the driver of where we are in TurboTax Live. That has been the driver looking backwards, and it will continue to be the driver looking ahead.
Daniel Jester
BMO Capital Markets
Great. That's really helpful context. Thank you. And then just to stick with tax, you know, the comment you made about you had 3X the number of TurboTax users who deposited their refund in a Credit Karma account. I wonder how much of a leading indicator actually is that? Do you track their balances? Is there any color you can share about what that can mean in the future? Thanks.
Sasan Ghadarzi
Chief Executive Officer
Sure. First of all, we're really focused on the money benefit for our customers. And for those that live paycheck to paycheck, to get five days early access to their refund is really meaningful. I'm super proud of our team for what they're doing here because it really changes lives. With that said, we believe our hypothesis is one, over time this will actually help with TurboTax retention. These customers become new Credit Karma members. And then as you know, Credit Karma on the Credit Karma platform, we're really good at leveraging what we know about you with your permission to then really match you to financial products that are right for you and find ways to save money and get out of debt. It's new customers on a platform that already has over 120 million members that over time as we engage them, we'll be able to monetize. We do watch their behaviors. Do they keep the money on Credit Karma money? Do they drain it? What we can help them with in terms of things they can do with that money to be able to build their credit. So it truly feeds into the network effect of delivering benefits and the customers coming back for more benefits.
Daniel Jester
BMO Capital Markets
Great. Thank you very much.
Sasan Ghadarzi
Chief Executive Officer
Very welcome.
Conference Facilitator
Facilitator
Thank you. Our next question comes from Alex Zookin of Woof Research. Your line is open.
Strecker
Representative for Alex Zookin, Woof Research
Thank you. This is Strecker back. You're on for Alex. So just with the success that you and everyone's been seeing with Credit Karma and MailChimp, has it changed your view on doing additional M&A over the next 12 to 18 months and or even making you consider more of these larger transformational deals. So can you just give us an update on how you're thinking about M&A right now? And would you say that maybe you're resource-wise, you know, you're very focused on integrating these companies still, or you have some room to take on additional deals if it's the right deal? Thank you.
Sasan Ghadarzi
Chief Executive Officer
Yeah, thanks for the question. First, I'll start by saying our principles around acquisitions have not changed. For us, it is all about time to market and having a platform that can fundamentally power the prosperity of consumers and small businesses that we serve. And secondarily, we expect excellence from ourselves and our teams, and we expect these acquisitions to be building the kind of momentum that we are building. And we have a set of mechanisms within our Intuit operating system where we monitor very closely our progress against the deliverables, and I mean the product and marketing deliverables and the talent on the team and their engagement to really ensure that things are on track. And really everything with both of these acquisitions is about acceleration. We only integrate as long as it accelerates. And so we have a very, I would say, good playbook in terms of how to make acquisitions. And in both cases, when you look at Credit Karma and MailChimp, we bought the capabilities and the incredible talent because they do things that we're not great at. And there are things we do that they're not great at. And together as a family, we can create magic. So with all of that said, it doesn't accelerate or decelerate, you know, what we are looking at from a time to market perspective. They're both, you know, on track in terms of our expectations. And we are very discreet in terms of how we allocate mind share and resources to to both of these assets, and frankly, the biggest hindrance for future acquisitions is how good their management team is. It is not our mind share or our resources. So that's the way we think about it.
Strecker
Representative for Alex Zookin, Woof Research
Thank you. Very welcome.
Conference Facilitator
Facilitator
Our next question comes from Brad Zelnick of Deutsche Bank. Please go ahead.
Bob
Representative for Brad Zelnick, Deutsche Bank
Hey, thanks for taking my question. This is Bob, and I'm for Brad, and congrats on this. a strong tax year despite the IRS headwinds. Just sticking with tax quickly, now that you've had a second year of more basic live SKUs under your belt, how should we think about the rate and pace of customers shifting from maybe a more basic SKU to a deluxe or premier, and how that compares to the typical trajectory that you might see on the traditional TurboTax online side of things?
Sasan Ghadarzi
Chief Executive Officer
Yeah, it's a really good question. First of all, I would tell you, having... sort of experimented with our TurboTax Live Basic offer. It was a good experiment and it worked. The biggest thing that I would tell you that we learned in this, particularly this last year, is what really matters is speed to your taxes done with an expert and speed to money. And that is an area where we are doubling down going into next year because the majority of these customers, they want their taxes done right by an expert or if you do it for them, and they want access to their money as soon as possible, both of which we can deliver on. And so really, in that context, folks that use an assisted method generally have a more complex situation, and we would expect over time the higher SKUs that we have to play a bigger role when it comes to TurboTax Live.
Bob
Representative for Brad Zelnick, Deutsche Bank
That's helpful there. And Sasan, just to the earlier point you made earlier on the call, just on international, have you seen any change in terms of trends or new customer growth or even top of funnel with either cookbooks or middle shed when you look internationally versus anymore in the US?
Sasan Ghadarzi
Chief Executive Officer
Yeah, you know, what is consistent is what I've shared before, which is I would say US and Canada, and I'll just use COVID as an example, coming out of, we're not out of COVID, but coming out of sort of the world shutting down Bounce back much faster than than the other countries that were in you know in the UK in Australia and France There's been so many sort of start stop start stop that it's impacted You know the sort of building momentum in that country, and I don't mean us I just mean how consumers and small businesses thinking about managing their financial life, so they're they're starting to bounce back, but they for sure are tracking behind and the U.S. and Canada. And again, I'll say that what really excites us looking ahead is the possibilities to help customers grow their customers in small business with MailChimp. That'll be a bigger part of our future as we roll out our strategy and game plan, and we believe that that will be over the long term accretive to our growth.
Bob
Representative for Brad Zelnick, Deutsche Bank
That's helpful. Thanks for taking our questions.
Sasan Ghadarzi
Chief Executive Officer
Yeah, very well. Thank you very much.
Conference Facilitator
Facilitator
Our next question comes from Scott Schneeberger of Oppenheimer. Please go ahead.
Scott Schneeberger
Oppenheimer
Great. Thanks very much and congratulations. Sasan, I wanted to dig into, this is kind of an overriding question on the cadence of the tax season and wanted to dig into the extensions. You mentioned that the IRS has elevated extensions this year and you do as well. Could you just speak a little bit more to that and address, might there be any variability, good or bad, relative to what you're expecting for the volume for the full year, just on where your fiscal year ends and potential extension deadlines? Thanks.
Sasan Ghadarzi
Chief Executive Officer
Yeah, sure, Scott. Well, first of all, I'll start with the headline, which is there could be. But now let me give you more specifics of the guidance and what we're talking to you about is for our fiscal year, which is through the end of July. And I'll start at the top. The IRS returns through July. We are observing that it will be down three points, and it's driven by stimulus filers that didn't come back. About 30% of them were actually paying customers, and IRS extensions being up. And in our base, they're nearly doubled. And so we've made some assumptions in terms of what will happen through July, and of course, You know, we'll talk to you all more as we talk about our guidance for next fiscal year because we've not made those estimates and we won't communicate it today because our focus was what we communicate to you through July. But certainly the extensions, you know, most of those customers at some point come back, but we have not estimated what that will be after July. And we do expect, just so it's said again, that IRS total returns will – be more normal next year because, in essence, this year we're digesting what happened in the last two years because of all the stimulus filers, and we would expect it to be more back to the normal, flatter up as we look into the future.
Scott Schneeberger
Oppenheimer
Yeah, certainly. That would make sense. And this is a follow-up still in tax. When Michelle was giving her part on revenue per return, she called out – TurboTax Live and Premier. So in the Latinx self-employed investment category, I assume that's probably a little bit more weighted, that double-digit growth on the Premier, the investor category. Just curious, is that so? And also, for the Latinx self-employed and investor group, how sustainable is that growth? You've had really nice growth for a few years. Is there a long runway to that? Thanks.
Sasan Ghadarzi
Chief Executive Officer
Yeah, for sure. Let me start with the latter part of your question. You know, when we look at the assisted category where there's, you know, more than a $20 billion TAM, and by the way, there's another $10 billion TAM, which is business tax that we've not talked about. So in total, it's, you know, $30 billion. TurboTax Live is a billion dollars. And so we've got a lot of runway. And as you've heard me talk in prior years, we're sort of In the early days, and we got a 10-year run here, hopefully now that we've divulged how big TurboTax Live is, you can see how much runway we have. So there's a lot of runway there. There's also a lot of runway in our underpenetrated segments. We are truly just getting started with Latinx, self-employed, and the investor segment, because we are actually undershared in those segments based on all the data that we see. And so when we look at those segments, which is both do-it-yourself and in the assisted segments, We also have an equal runway, and we believe down the road the creator community, the creator segment will continue to become a larger part of those that choose to do taxes, and that's an area where we will be focused over time as well. So that was a long answer to your short question. I think the headline I would leave you with is, yes, there is a runway for sure, and it's a multi-year runway in all of those areas.
Scott Schneeberger
Oppenheimer
Okay, great. Thank you. You're very welcome.
Conference Facilitator
Facilitator
Our next question comes from Karthik Mehta of North Coast Research. Please go ahead. Good evening, Sasan.
Karthik Mehta
North Coast Research
Going down the tax segment a little bit, I think Michelle said that you expect the DIY segment to be flat. And I'm wondering, I know the last few seasons have been a little bit different, and I'm wondering as we move forward to next year, what you'd expect over the next two, three years for the DIY segment growth to be?
Sasan Ghadarzi
Chief Executive Officer
Yeah, thanks for the question. Um, and I'll start with the first part of what you led with, you know, when we look at the last three years and even more historically, you know, IRS returns has been up about one percentage and the DIY category has grown about half a point. And so when you look at the last three years with all the anomalies, that also holds true. And, uh, And the way we keep score is our share of the total IRS returns with respect to just now the platform that we have where you can do it yourself or we'll do it for you on the other spectrum. But specifically to answer your question, we do believe over time that the DIY category will continue to grow just as it has grown historically. So we do believe that. This is just, I would say, a year where we're digesting all of the anomalies in the last two years.
Karthik Mehta
North Coast Research
This is on credit karma. You talked a little bit about how banks or credit card issuers rely on credit karma even more during a recession. I'm wondering if you've seen any signs of banks starting to tighten their credit standards and if that is a benefit yet to credit karma.
Sasan Ghadarzi
Chief Executive Officer
We have over 120 partners on our platform and And these partners, you know, they're big and they're small. And, you know, with that, you know, as context, they're always experimenting and adjusting both in good times and not so good times, you know, their credit cycle. And they jump between bands, you know, whether they're more interested in those that have a credit band below 620, which is, you know, subprime, or between 620 to 700, which is, you know, prime or near prime. And then, of course, anything over 700, which is prime. And, you know, The point is, based on our platform and the demand on our platform and the supply on our platform, we see very good supply across all of the bands because of the focus areas of the partners. And so that drives the strength that we saw this last quarter, and we would expect it going forward in context of our guidance. All right.
Karthik Mehta
North Coast Research
Thank you very much. Appreciate it.
Sasan Ghadarzi
Chief Executive Officer
Yep. You're very welcome.
Conference Facilitator
Facilitator
Thank you. Our next question comes from Brad. Your line is open.
Bob
Representative for Brad Zelnick, Deutsche Bank
Great. Thanks very much. Sasan, as you work to put together the fiscal 23 operating plan in the coming weeks and months, what type of forward indicators are you focused on internally and externally to sort of inform that decision? Thanks.
Sasan Ghadarzi
Chief Executive Officer
Yeah, Brad, great question, because we're actually, you know, we are done with our three and one year plan. And the way our cycle works is, you know, while we're in the heat of delivering this year, we finish our planning for next year. You know, we look at a few things. One, we look at secular trends. We look at facts and figures on our platform. So the secular trends are what I've mentioned earlier which is a shift to using virtual solutions, an acceleration to online and omni-channel, and an acceleration to using digital money platforms. So we look at secular shifts and we look at the facts and figures around the secular shifts. We then look at all the things that actually happen on our platform and our share. If I just use a couple of examples, we have over $1.5 trillion of invoices that are generated on our small business platform But as we shared last investor day, and of course, this number is bigger now, our payments volume was over 90 billion. And so you look at that very low share. When you look at our share of the assisted category in tax, very low share. When you look at our share of financial products on credit karma, credit cards, personal loans, very low share. So we look at data around our share and our performance around our share. And then we will also look at economic factors like unemployment, like default rates, like projections around the economy. By the way, we're the best projector of the economy because of the data that we see on our small business platform. So we look at all of those things. And then the way we put together our plan is sort of worst case, middle case, best case. And that's how we manage the company. And by the way, this is something that we're quite good at. And then we manage, you know, based on the data that we see, we manage to ensure that we're protecting all our long-term investments while we deliver for today for our customers. So that's a little bit of a snapshot in terms of how we think about it.
Bob
Representative for Brad Zelnick, Deutsche Bank
That's great. Thanks very much.
Sasan Ghadarzi
Chief Executive Officer
You're very welcome.
Conference Facilitator
Facilitator
Ladies and gentlemen, I'm not showing any further questions. Would you like to close with any additional remarks?
Sasan Ghadarzi
Chief Executive Officer
Yes, sir, I will. Hey, thank you, everyone, for making the time. Thank you for all your wonderful questions. As I said earlier, I'm super proud of our employees across the company and our partners, and it's a real privilege and honor to be able to serve our members and customers in these unique times. And so all of you be safe, be well, and we will talk to you soon. Thank you.
Conference Facilitator
Facilitator
Ladies and gentlemen, thank you for participating. This concludes today's
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