Good afternoon. My name is Latif and I will be your conference facilitator. At this time, I would like to welcome everyone to Intuit’s Third Quarter Fiscal Year 2022 Conference Call. [Operator Instructions] With that, I will now turn the call over to Kim Watkins, Intuit’s Vice President of Investor Relations. Ms. Watkins?

Thanks, Latif. Good afternoon and welcome to Intuit’s third quarter fiscal 2022 conference call. I am here with Intuit’s CEO, Sasan Goodarzi; 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 statement. Some of the numbers in these remarks are presented on a non-GAAP basis. We have 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. And with that, I will turn the call over to Sasan.

Thanks, Kim and thanks to all of you for joining us today. I am 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 shifts 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 6 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 am 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 per 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 multiyear strategy is to extend our lead in the do-it-yourself category and transform the assisted category with TurboTax Live. This strategy is working. This fiscal year, we expect our share of total IRS returns to be up approximately 1 point and our share of the do-it-yourself category to increase 2 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…

Thanks, Sasan. For the third quarter of fiscal 2022, we delivered revenue of $5.6 billion, up 35%, including 6 points from the addition of Mailchimp, GAAP operating income of $2.4 billion versus $1.9 billion last year, non-GAAP operating income of $2.9 billion versus $2.2 billion last year, GAAP 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 4, 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 onetime 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 $0.37 and $0.38 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 31, 2022 versus the prior year through July 31, 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 1 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…

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 31, 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 has 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 7 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 powering 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 – go now to your questions.

Thank you. [Operator Instructions] Our first question comes from the line of Siti Panigrahi of Mizuho. Your line is open.

Thank you. Thanks for taking my question. It’s very impressive to see strong momentum in Credit Karma as well as small business and how you raise the guidance. So Sasan, I’m wondering given this geopolitical uncertainty and even some concern about any macro slowdown, how is Credit Karma positioned in terms of growth and also in your small business segment?

Yes, 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. I’ll start with tax. I know that was not part of your question, but it’s important to start there, which is tax is sort of very resilient in any type of an environment, and it’s more than 30% of the company’s revenue when you look at both TurboTax and our ProTax business. In small business, there is a flight to digitization to manage your cash flow. And just 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 the two stats that I would use that are very recent and sort of the here and now, one, our loan business had a record high volume in April. It was 3x higher than it’s been year-over-year. 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 a 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 it’s – the discussion is about the supply side. And in fact, with our partners, there is 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 Karma models on our platform, they are 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.

Sasan, 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 product?

Yes, great question. I would just start with – there is 86 million customers that are in the assisted category and the TAM is over at $20 billion, and we hit a major milestone this year of delivering $1 billion 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. That is really the long-term really bright spot and future growth for TurboTax, which we are very excited about.

Thank you.

You are very welcome.

Thank you. Our next question comes from Kirk Materne of Evercore ISI. Your line is open.

Hi, this is [indiscernible] calling in for Kirk. Thank you 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.

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 don’t see a lot of – 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 and to make sure to see what’s happening, but we haven’t really changed anything with our forecast at this point in time in any – as you can see with our guidance that we’ve given.

And the only thing I would add is 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’s 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.

Got it. Thank you both.

Very welcome.

Thank you. Our next question comes from Keith Weiss of Morgan Stanley. Your line is open.

Excellent. Thank you, guys for taking the question and really nice quarter. Maybe – sorry, that was 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 $12.06 to $12.12? Is that the right way to read it?

That’s exactly right, Keith. Because of the nature of the charge, the one-time, it’s not an impact to the underlying 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 $0.37 higher on GAAP and $0.38 higher on non-GAAP for EPS for the full year.

Got it. Got it. That wasn’t my question, it 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 FY ‘22. You 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 in FY ‘22? Or do you think that’s still achievable on a go-forward basis?

First of all...

Maybe Keith, I’ll get – I didn’t know it was for Michelle. Michelle, go for it.

I’m sorry, I thought it was for me.

Well, you know how I am. I just jump in. You go.

Margin questions are for Michelle?

Alright. Alright. I’ll be quiet.

Except that I lose 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 target for what that margin expansion might look like over time. But we do see that it is possible because of the benefits of being on – 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.

Got it. Got it. And then for Sasan, I’m hoping to get an update on Mailchimp. It’s – 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 somebody that 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 that has been pretty weak. But the performance has been, I think, a little bit better than expectation. Can you give us an update on how Mailchimp is doing and how far into that integration we are?

Yes. 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 that is 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 lead tab that’s in QuickBooks, where now we are transferring all of your customer and revenue data into a 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 with the investments that we’re making, and we’re quite good at these sorts of things. We foresee the financial results will be forthcoming and then last but not least, both going upmarket to mid-market and international. In fact, we will 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.

Got it. Thank you very much.

Yes. Very welcome, Keith.

Thank you. Our next question comes from Brent Thill of Jefferies. Please go ahead.

Hi, thank you. This is John Byun on for Brent Thill. Just kind of actually not a macro question, I wonder if you could remind us how you performed in past recessions and how it might be different for you this time. Obviously, you have Mailchimp and you have Credit Karma, but on the plus or minus side. Then I have a follow-up.

Yes, sure. Thanks for the question. First of all, 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 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. One, we now have a platform and by definition, we’re in the cloud, whereas back then, we’re primarily desktop. We are in the cloud where the tailwinds around digitization, a shift to a virtual world, the 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 them a great flight to quality for our partners, which is the current strength that we are seeing. So we’d actually expect to perform 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.

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 in terms of where the growth is coming from? Is it still mainly from e-mail marketing or are you getting more traction with the broader CRM suite and the side builders in e-commerce?

Yes. 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 how much capabilities the platform has the 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.

Great. Thanks very much.

You are very welcome.

Next question comes from Brad Sills of Bank of America. Your line is open.

Hey, thank you. This is [indiscernible] for Brad. I guess my first question is, can you compare and contrast any differences in demand you might be seeing between QuickBooks and Mailchimp, if at all? I know in the enterprise category, you kind of see a division of spend between the two, but I was kind of wondering if that’s kind of different with – given you guys kind of focus around SMB?

Sure. First and foremost, I would start with – these are both subscription-based businesses and together, they create magic. A part, 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, it’s fairly consistent for those customers, whether they are 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 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, a higher expansion of services and wallet share and also higher penetration because what we can do together is hard to do a part.

Got it. Thank you. And then turning to TurboTax real quick, when I think of some of my favorite differentiators for the product, I think of just auto importing the investments or TT Live and tool service. But it seems like a lot of the R&D work for those are done. So I guess my question is, where are like the incremental investments going in terms of R&D for TurboTax now? Thank you.

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 our – really our technology, the bots are engaging and answering the questions. So 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, it’s actually about everything in the assisted segment is about speed the tax is done and speed to my money. And so the integration of Credit Karma into TurboTax where you can now get early access to your refund, that’s another area of investment for us because there is 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 invested the platform level and at the company level. These are not just investments within TurboTax, and they also benefit us in QuickBooks Live and other areas.

That’s awesome color. Thank you very much.

Yes. You are very welcome.

Our next question comes from Kash Rangan of Goldman Sachs. Your question please.

Thank you very much. Congratulations, Sasan 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 or one of the few companies that actually grew its revenues right through the recession. Of course, we’re not calling for anything specific here, but as someone running 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, etcetera. 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. Congratulations.

Yes. Thank you, Kash, and thank you for the question. I’ll use sort of tangible here and now answer 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’ll 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’re 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 and 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, because we have all the capabilities with Mailchimp and QuickBooks to grow your business and help you with your cash flow. And I will just maybe pause there with small business, and I will remind us that tax, both our ProTax and TurboTax 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 is 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 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 to serve consumers and small businesses in tough times and good times.

Got it. That’s just to clarify. Small business formation that doesn’t affect Intuit, so you – they probably lag before you get to the point where they could prefer to buy two products. So, should we be concerned – how concerned should we rather that small business creation might come to a standstill during the recession, how that might affect Intuit? That’s it for me. Thanks.

Yes. 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. And so you all start asking questions, got it. So, I would just say that it is not an area of concern for us.

Our next question comes from Daniel Jester of BMO Capital Markets. Your line is open.

Hey, great. Good afternoon. Thanks for taking my question. 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?

Yes. 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 is more than 10 million people in the assisted segment that actually a trip and go to another person to help them with assistance within – and these are directional numbers. Within TurboTax, there is probably more than 10 million people that log in, but never actually finish their taxes. And then there is switching that happens back and forth between doing it yourself and then getting assistance. The reason I bring up those three figures is there is actually a lot of sort of movement in the tens of millions in each category and across the category between do-it-yourself and the systems. 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. They are those that switch from assisted, they are those that would have left DIY that now stay with us and vice versa. It helps us with a 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.

Great. That’s really helpful context. Thank you. And then just to stick with tax, the comment you made about you had 3x the number of TurboTax users who deposit their refund in a Credit Karma account. I wonder how much of a leading indicator actually is that? Do you track their balances, or is there any color you can share about what that can mean in the future? Thanks.

Sure. First of all, we are 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. So, I am super proud of our team for what they are doing here and – 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 and the Credit Karma platform, we are 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. So, it’s new customers on a platform that already has over 120 million members that over time, as we engage them, we will be able to monetize. We do watch their behaviors. Do they keep the money on a 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’s really – it truly feeds into the network effect of delivering benefits and the customers coming back for more benefits.

Great. Thank you very much.

Very welcome.

Thank you. Our next question comes from Alex Zukin of Wolfe Research. Your line is open.

Thank you. This is Strecker Backe on for Alex. So, just with the success that you and with seeing with Credit Karma and Mailchimp, has it changed your view on doing additional M&A over the next 12 months to 18 months? And are even making you consider more of these larger transformational deals? So, can you just give us an update on how you are thinking about M&A right now? And would you say that maybe your – resource-wise, you are 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.

Yes. Thanks for the question. First, I will 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 are – 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 are not great at and there are things we do that they are not great at and together as a family, we can create magic. So, with all of that said, it doesn’t accelerate or decelerate what we are looking at from a time-to-market perspective, they are both on track in terms of our expectations. And we are very discrete in terms of how we allocate mind share and resources 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.

Thank you.

Very welcome.

Our next question comes from Brad Zelnick of Deutsche Bank. Please go ahead.

Hey, thanks for taking my question. This is Bob and on for Brad and congrats on a strong tax year despite the IRS headwinds. Just sticking with tax quickly, now that you have 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 deluxe premier? And how that compares to the typical trajectory that you might see on the traditional TurboTax Online side of things?

Yes, it’s a really good question. First of all, I would tell you, having sort of experimented with our TurboTax Live basic offer is 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 the 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 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.

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 of new customer growth or even top of funnel with either QuickBooks and Mailchimp when you look internationally versus maybe more in the U.S.?

Yes. What is consistent is what I have shared before, which is, I would say, U.S. and Canada, and I will just use COVID as an example, coming out of – we are not out of COVID, but coming out of sort of the world shutting down, bounce back much faster than the other countries that we are in. In the UK, in Australia and France, there has been so many sort of start, stop, start-stop, that it’s impacted the sort of building momentum in that country. And I don’t mean to us, I just mean how consumers and small businesses thinking about managing their financial life. So, they are starting to bounce back, but they, for sure, are tracking behind the U.S. and Canada. And again, I will say that what it really excites us looking ahead is the possibilities to help customers grow their customers in small business with Mailchimp. That will 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.

That’s helpful. Thanks for taking my questions.

Yes. Thank you very much.

Our next question comes from Scott Schneeberger of Oppenheimer. Please go ahead.

Great. Thanks very much and congratulations. Sasan, I want to dig into – this is kind of an overriding question on the cadence of the tax season, and want to dig into the extension. 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 are expecting for the volume for the full year just on where your fiscal year ends and potential extension? Thanks.

Yes. Sure, Scott. Well, first of all, I will start with the headline, which is there could be. But now let me give you more specifics with the guidance and what we are talking to you about is for our fiscal year, which is through the end of July. And I will 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 are nearly doubled. And so we have made some assumptions in terms of what will happen through July. And of course, we will talk to you all more as we talk about our guidance for next fiscal year because we have 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, most of those customers at some point come back, and – but we have not estimated what that will be after July. And we do expect just – so it said again that IRS total returns will be more normal next year because, in essence, this year, we are digesting what happened in the last 2 years because of all the stimulus filers and we would expect it to be more back to the normal flat or up as we look into the future.

Yes. Certainly, that would make sense. The – and just as a follow-up, still in tax. When Michelle has given her part on revenue per return, she called out TurboTax Live in 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 have got really nice growth for a few years. Is there a long runway to that? Thanks.

Yes. For sure. Let me start with the latter part of your question. When we look at the assisted category where there is more than a $20 billion TAM, and by the way, there is another $10 billion TAM, which is business tax that we have not talked about. So, in total, it’s $30 billion. TurboTax Live is $1 billion. And so we have got a lot of runway. And as you have heard me talk in prior years, we are sort of in the early days, and we got a 10-year run here, hopefully, now that we have divulged how big TurboTax Live is, you can see how much runway we have. So, there is a lot of runway there. There is 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 under-shared 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 segment, 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 multiyear runway in all of those areas.

Okay, great. Thank you.

You’re very welcome.

Our next question comes from Kartik Mehta of Northcoast Research. Please go ahead.

Good evening Sasan. Just going down the tax segment a little bit, I think Michelle said that you expect the DIY segment to be flat. And I am wondering, I know the last few seasons have been a little bit different. And I am wondering as we move forward to next year, what you would expect over the next 2 years, 3 years for the DIY segment growth to be?

Yes. Thanks for the question. And I will start with the first part of what you led with. When we look at the last 3 years and even more historically, IRS returns has been up about 1% and the DIY category has grown about 0.5 point. And so when you look at the last 3 years with all the anomalies, that also holds true. 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 will 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 are digesting all of the anomalies in the last 2 years.

And this is on Credit Karma, you talked a little bit about how banks will – or credit card issuers will rely on Credit Karma even more during the recession. And I am wondering if you have seen any signs of banks starting to tighten credit standards and if that is a benefit yet to Credit Karma?

Yes. We have over 120 partners on our platform and these partners, they are big and they are small. And with that as context, are always experimenting and adjusting both in good times and not so good times, their credit cycle and they jump between bands, whether they are more interested in those that have a credit band below 620, which is subprime or between 620 to 700, which is prime or near prime and then, of course, anything over 700, which is prime. And 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.

Alright. Thank you very much. I appreciate it.

Yes. You’re very welcome.

Thank you. Our next question comes from Brad Reback of Stifel. Your line is open.

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.

Yes, Brad, great question because we are actually – we are done with our 3-year and 1-year plan and the way our cycle works is while we are in the heat of delivering this year, we finish our planning for next year. 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 have mentioned earlier, which is a shift to using virtual solutions, an acceleration to online and omnichannel and an acceleration to using digital money platform. 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 happened 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’s a 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 are 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 in – 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 are quite good at. And then we manage based on the data that we see, we managed to ensure that we are protecting our long-term investor 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.

That’s great. Thanks very much.

You’re very welcome.

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

Yes. So, I will. Hey, thank you, everyone, for making the time. Thank you for all your wonderful questions. As I said earlier, I am 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.

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