Intuit Inc. (INTU) Q2 2025 Earnings Report, Transcript and Summary

Good afternoon. My name is Angela, and I will be your conference operator. At this time, I would like to welcome everyone to Intuit's Second Quarter Fiscal Year 2025 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions] With that, I will now turn the call over to Kim Watkins, Intuit's Vice President of Investor Relations. Ms. Watkins?

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

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

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

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

Thank you. [Operator Instructions] We'll go first to Siti Panigrahi with Mizuho. Your line is open. Please go ahead.

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

Yeah, sure. Thanks for the question, Siti. First of all, I'll just start with, our strength is really across both DIY and the Assisted category. We're actually seeing very strong traction with both simple and complex filers in DIY. And based on all of our innovation, actually monetization is very strong with things like access to expert help in the DIY category and access to money. So, our repositioning of the lineup has actually really helped us accelerate paid growth. So, we feel good in the DIY category. In Assisted, listen, it's really end-to-end. All the work from reinventing our campaign, which is really resonating in terms of what it means to digitally get your taxes done from anywhere with the best experience, immediate access to your money, and the best price. So, from really from campaign to all the work that we've done to begin to show up nearly 80% of the assisted filers and where they hold their homes, we're within a short radius of their homes. All the way to the experience, we've completely revamped the experience. Just as a reminder, when an expert connects to one of our customers, the conversion rate is 80%. And with all of our data and AI investments, we're able to use our algorithms to match customers to experts within seconds, immediately get the experts engaged with the customer while they're engaging, upload all their data so that the expert can deliver value immediately, and then get their taxes done in less than two hours. But this is -- by the way, this is across consumer and business. And so, our funnel is strong from the campaigns that we started in the fall and all the work that we've done leveraging data and AI and with our experiences and given where we are. So, it's the combination of all of our choices and decisions, all really powered by data and AI, that gives us confidence, Siti, in our guidance. The second thing around DOGE, I would just reiterate our ongoing and my personal ongoing engagement with the administration even as late as just a couple of weeks ago, and they're very focused on significantly reducing waste, reducing fraud and eliminating bureaucracy. And there's many areas where we're talking about contributing and helping them with their goals. And with that said, their focus is to really drive that elimination of tax fraud, waste, overhead costs in IRS. And those are the actions that they're very focused on taking. And we are very focused on helping the administration in any way possible. And we don't see, by the way, any risk to the IRS providing services to consumers and businesses with some of the actions that have been taken. So, hopefully that answers your question. We're quite excited about our progress and quite bullish about the rest of the season.

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

All right. Thank you.

We'll go next to Kirk Materne with Evercore ISI. Your line is open. Please go ahead.

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

Yeah, sure, Kirk. I would just say it remains very stable in terms of just the macro environment for businesses. If I give you a click down, the smaller businesses, up to about 10 employees, sort of $2.5 million, $3 million in revenue, on our platform, their profits and cash flows are up year-over-year. Of course, as you know, we're not overly concentrated in any particular industry, it differs a little bit by industry. But overall, that should be your takeaway for the smaller businesses. The larger businesses sort of $3 million and above $10 million into $50 million, $100 million-plus, the mid-market customers that we serve, they're actually very much looking towards digitization, looking towards being able to save time, finding ways to drive both the revenue growth and profitability. And I would say same goes for our accountant partners that also serve these businesses, and that's really where Intuit Enterprise Suite comes in and the power of Intuit Enterprise Suite, because these larger businesses and based on the proof now that we have with customers using IES, they actually want to lean into it because they can see with our AI-powered experiences, they have a partner by their side, an assistant that can help them grow their business and are actually leading -- leaning into digitization because it leads into their growth. So, we're seeing even healthier environment, the larger the businesses get.

Thanks, Sasan.

Yeah, very welcome.

We'll go next to Keith Weiss with Morgan Stanley. Please go ahead.

Thank you, guys, for taking the question, and congratulations on a really solid quarter. Maybe one for Sandeep on the expense side of the equation. Coming into this year, you guys had made room for more aggressive investment to sort of get the skill sets needed on board for you guys to sort of progress on your plans on a go-forward basis. Thus far in the first half and definitely in this quarter, we saw a really impressive margin expansion, a lot of leverage showing up on that bottom-line. Is that in any way due to maybe expense timing? Because -- are you guys still planning on basically like hiring back to the same type of headcount levels that we were talking about when we came into the year, or is there perhaps more sort of opportunity for driving leverage than we were thinking about earlier?

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

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

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

Excellent. Super helpful. Thank you, guys.

We'll go next to Brent Thill with Jefferies. Please go ahead.

Thanks, Sasan. I know you launched some clever and innovative new marketing early into the tax season. I'm curious if you've seen any early signs of different reaction or traction, what has been the response? And is it -- does it give you a little more confidence heading into this tax season based on what you're seeing from that? Any color would be helpful. Thanks.

Yeah, Brent, thank you for the question. The short answer is yes. Based on where we are and what we've seen, it does give us just a lot of confidence in the flywheel that we're creating in the assisted segment. To double-click, it's really the combination of continuing to raise awareness in the market around really three benefits that matters a lot to those that spend over $35 billion, whether it's businesses or consumers to get somebody else to get their taxes done for them. One is about experience. It's from the ease of wherever you are virtually and the fact that we can get it done for you in less than a couple of hours, some by the way in 30 minutes and with immediate access to your money at the best price. And just given our scale with all of the data and AI investments that we've made, yeah, and you think about us competing with a lot of, I would just say, smaller players because the majority of our competition is several hundred thousand very local tax firms and tax pros, the experience, the scale in which we can deliver the experience, the price and, ultimately, immediate access to money is just really very attractive for both consumers and businesses. And the punchline is the accumulation of what we started in the fall around Beat Your Price because we know that there is a segment of customers that actually make their decision in the fall to what we've carried through to where we sit today, our funnel is actually quite strong. That's number one. Number two, our experience is significantly improved, given -- the best way I would put it is when you hear us talk about experience improvement, we finally made the shift from being a software provider to disrupt the assisted segment to being a service provider, which means that we're not just leading with software where these customers have to do the work. We're doing all the work what -- for them with the expert engaging customers right up front. And we're just seeing the accumulation of all of that given where we are in season and are excited about the next six weeks.

Okay, thanks.

Very welcome.

We'll go next to Steve Enders with Citi. Please go ahead.

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

Yeah. Well, a couple of things I would say. One, every day in the past is our sales folks are getting more productive because of just the timing of when we hired them, the timing of when we launched Intuit Enterprise Suite, it was just literally last fall that we launched it and went GA. And of course, prior to that, we were hiring and ramping up our sales folks. So, as we touched on earlier, we've actually seen a 60% productivity improvement in the last couple of months just with our sales folks, which is just sort of natural progression. But I would also say, in many ways, I don't want to downplay, but it's an easier sell because it's -- because of the experience, because of the total cost of ownership, and because how competitive it is on price. I think the big shift that we are now accelerating is really coverage of our large accountant partners. We initially started really focusing on talking to the businesses. We are now accelerating and shifting to making sure that our large accountant partners can actually play around with Intuit Enterprise Suite, because they are -- it's going viral, they're hearing about it. So giving them a sandbox to do that, coming up with a pricing framework because these large accounting firms may have up to 15 different practices from real estate to construction to manufacturing to technology, IT services, and just having a -- really a framework to focus by practice to, in essence, offer Intuit Enterprise Suite to their customers. And that's the area where I would say we're accelerating our coverage. But the productivity is significantly improving and it's something that we watch for. This is a business where we don't want to overly focus on optimization because we're scaling it and the growth is exciting, but at the same time, the productivity of the sales folks is really important. I don't know, Sandeep, if you would add anything.

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

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

Yeah, of course.

We'll go next to Kash Rangan with Goldman Sachs. Please go ahead.

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

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

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

Yeah, very welcome.

We'll go next to Alex Zukin with Wolfe Research.

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

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

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

Super helpful. Thank you.

Very welcome.

We'll go next to Brad Sills with Bank of America.

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

Yeah, sure. Thank you for your question. A couple of things I would just say. This is the strength of that we are seeing in the funnel and really -- how we're feeling about the rest of the year is really a combination of reinventing our end-to-end from campaign to the experience focused on three things. One is the best experience that you could have virtually. The second is immediate access to your money. Third is the best price. And really our campaign of showing how taxes are different virtually where you can get immediate access to your money and get your taxes done faster than anybody else can do it has really had -- that coupled with our campaign that started in the fall has really had a positive impact on building out our funnel plus we really have revamped our full-service experience. One of the things I mentioned earlier was that the big change, the big from to in our experience this year is we shifted from a software company to a services company as it relates to disrupting the assisted segment. And what that really means is even last year, we were still having full-service customers do a lot of the work as if they're doing it themselves. This year, we now within seconds match a expert with a customer in the background, we are ingesting all of their data and within minutes, the expert is delivering real insights to the customer and while the customer is on the go getting their taxes done and sometimes it's as little as 30 minutes. So just from campaign to the experience and being disruptive in our price, we're seeing strength in the funnel and we're quite bullish about the rest of the year. And I'll just end with -- for us, it's about the assisted category. It's about the experiences across do it with me and full-service where we're seeing end-to-end strength.

Very exciting. Thank you, Sasan.

Yeah. Thank you.

We'll go next to Alex Markgraff with KeyBanc Capital Markets.

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

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

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

No expected seasonality. If you're referring to -- I mean, the IRS opened on the 27th, I'm assuming you're taking that into account in terms of the seasonality, but we don't expect any seasonality. And even some of the questions we get around the unfortunate events in LA with the fires, we expect that to be non-material impact to our Q3.

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

We'll go next to Taylor McGinnis with UBS.

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

Yeah, maybe Taylor, I'll kick us off and tag team with Sandeep. I think the strength that you're seeing is really the strength of the platform with all of our money offerings, whether it's payments with estimates and invoicing to AP with bill pay to line-of-credit, right, all -- we now have instant deposit. We now have really a very large set of money offerings that our businesses can leverage to be able to manage their cash flow and manage their business. And I would also say we're starting to see our AI-driven experiences fuel what's possible when it comes to our money growth. So that's sort of number one. But number two is also payroll. We're seeing great mix in payroll, great strength in payroll. And again, it all comes down to the strength of our platform. And particularly as we look at mid-market, one of the things we touched on earlier with QBO Advanced and Intuit Enterprise Suite, which serves the mid-market, particularly with QBO Advanced, the attach of payroll and payments is 12 points and 9 points, respectively, higher than QBO Core. So that's the strength that you are seeing across all of our services. And on Mailchimp, as we talked about earlier, there are price increases that we're lapping and we also just wanted to really call out the strength of our services minus Mailchimp while we bring Mailchimp to the level of growth that we expect. Sandeep, would you add anything?

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

Great. Thanks so much for the thoughts.

Very welcome.

We'll go next to Rishi Jaluria with RBC Capital Markets.

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

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

All right. Wonderful. Thank you.

Very welcome.

And our last question today comes from Scott Schneeberger with Oppenheimer. Please go ahead.

Thanks very much. Yeah, it's a tax question, essentially two, revenue per return [indiscernible]. The first part, Sasan, you changed your TurboTax by full-service pricing to the traditional tiers that you've used with other products, more to form-based pricing and you noted a very high customer experience for in-full service. Just curious how that's being received. Do you think it's the right formula now for that product? And then, the follow-up question is [1099 Ks] (ph) this year. Now that we're about a month into the tax season, are you seeing the pickup there with the lower threshold for those to go out? And how might that have an impact on revenue per return in this tax season if in fact, you are seeing that significant volume pickup? Thanks so much.

Yeah, Scott, thanks for your question. Let me make one -- a couple of broader points. One of the things that we've done this year based on all of our investments in data and AI is we actually have AI-driven personalized lineup experiences. So that, it's -- for instance, if you go on our -- any of our front doors and look to see what our lineup is and if Sandeep and I go, we're all going to see very different things. And so, the days of the past where there is a lineup and everybody sees the same lineup no longer exists. And it's important for you to know that because we've gotten a lot of questions like for instance on our standard SKU. The reality is many people don't even see our standard SKU. It's customers with certain situations where our data and AI platform will land them in the right experience. That's partly why we're actually getting, I would say, very strong traction with both simple and complex filers and how we're monetizing because we're really putting customers in the right experiences. And that really -- that comment transcends into the assisted segment, which is why I wanted to start there. And to answer your question, I mean, I think the product recommendation score says a lot, an 85 product recommendation score is just one of the highest in any industry. And our experience, our price, and access to money is very much resonating with full-service customers, and we're actually quite excited about the rest of the season. And that by the way, includes small businesses. We're seeing nice uptake with small businesses that are using full service, not just consumers. And last thing is just both the comment that Sandeep made earlier because we've gotten questions on it and 1099. Unfortunate situation in LA, 1099, we just think it's immaterial. We may see a lot of uptake the rest of the season, but we don't -- we view both of them as immaterial.

Thanks for sharing that. Congrats on the quarter.

Yeah. Thank you.

This does conclude today's question-and-answer period. I will now turn the call back over to our presenters for any additional or closing remarks.

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

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