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    Intuit Inc (INTU)

    Q3 2024 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$662.26Last close (May 23, 2024)
    Post-Earnings Price$621.00Open (May 24, 2024)
    Price Change
    $-41.26(-6.23%)

    What went well

    • TurboTax Live is driving significant growth, with revenue expected to grow 17% to $1.4 billion, representing approximately 30% of total consumer group revenue. This demonstrates Intuit's success in penetrating the assisted tax segment and gaining market share.
    • Intuit is accelerating investments in key growth areas, including GenAI-powered solutions, mid-market expansion, and international growth with Mailchimp and QuickBooks. These areas are showing promising results, positioning Intuit for sustained future growth. , ,
    • Strong performance in the Small Business segment, with total online payment volume growth of 22% and improvements in small business profitability on the platform. This highlights the resilience of Intuit's ecosystem and its importance to small business customers.

    What went wrong

    • Intuit's international online ecosystem revenue growth has slowed to 12% in constant currency, affected by Mailchimp's decelerated revenue growth due to lapping a prior year's price increase and lineup changes. This raises concerns about the company's ability to drive overseas growth.
    • The strategic focus on higher average revenue per return customers in TurboTax, while yielding higher revenue per customer, results in losing share in the pay-nothing and lower ARPR segments. This could limit overall customer base growth and future revenue opportunities.
    • Macroeconomic challenges are impacting small businesses, with cash reserves down 8% compared to last year, potentially affecting demand for Intuit's small business offerings. Additionally, payroll growth is moderating, which may indicate weakening in this segment.

    Q&A Summary

    1. TurboTax High-ARPC Focus
      Q: Why focus on higher-end tax customers over low-end?
      A: Intuit is concentrating on high-value customers in the assisted tax segment, growing TurboTax Live to a $1.4 billion business at 17% growth and comprising 30% of the franchise. They choose not to pursue low-end customers who switch platforms for free software, instead emphasizing quality customers to accelerate share in the assisted segment.

    2. Mailchimp Performance
      Q: What's the outlook for Mailchimp amid SMB cutbacks?
      A: Mailchimp's revenue deceleration is due to lapping a prior price increase and lineup changes. The fundamental health remains consistent, and Intuit is accelerating investments in Mailchimp's integration with QuickBooks, targeting mid-market and international expansion, seeing green shoots, especially in international markets.

    3. Small Business Macro Impact
      Q: How is the macro environment affecting small business?
      A: Small businesses on Intuit's platform are showing improved profitability. Sectors like manufacturing and professional services have profits up nearly 20%, while real estate and lending are down 15%. Cash reserves are down 8% compared to last year but up over 16% from pre-COVID levels. Hours worked have increased compared to last quarter.

    4. AI and Intuit Assist
      Q: What progress has been made with AI and Intuit Assist?
      A: Intuit Assist has been used by 24 million TurboTax customers to understand refunds and get questions answered. In Credit Karma, nearly 20 million users have access to Intuit Assist, helping them make financial decisions. In Mailchimp, 300,000 customers use it for personalized marketing campaigns. In QuickBooks, 30,000 customers benefit from AI features that turn unstructured data into actionable insights.

    5. Credit Karma and TurboTax Integration
      Q: How will deeper Credit Karma and TurboTax integration evolve?
      A: Intuit embedded the TurboTax experience within Credit Karma, driving over 10 million customers and achieving a 76% growth in TurboTax customers using the embedded experience. Challenges like seamless login (only 25% had no friction) and app performance (load times of 7–8 seconds) are being addressed to enhance future growth.

    6. Growth in TurboTax Full Service
      Q: How is TurboTax Full Service performing and what's next?
      A: New customers in TurboTax Full Service tripled, notably among younger millennials. Intuit plans to improve the shopping experience by greeting customers with experts rather than presenting SKUs, aiming to reduce drop-offs and increase conversion.

    7. QuickBooks Desktop to Online Shift
      Q: Is there more opportunity to move desktop users online?
      A: Intuit is transitioning desktop customers to subscription and enhancing online capabilities. With investments in QuickBooks Online Advanced, targeting larger enterprises, they expect over time all desktop customers will have an online destination, improving growth prospects.

    8. International Growth Prospects
      Q: How can Intuit boost international growth?
      A: Mailchimp’s growth was impacted by lapping price increases and lineup changes, affecting international revenue as 50% comes from abroad. Intuit is accelerating investments internationally, focusing on leveraging Mailchimp and QuickBooks integration to drive growth.

    9. Money Platform Strategy
      Q: What's the strategy for the Money platform?
      A: Intuit is digitizing processes from estimating, invoicing, to getting paid, with payment volume up 22%. They're focusing on Credit Karma Money, with a 28% increase in customers placing refunds into Credit Karma Money accounts, aiming to provide earlier refund access and monetization opportunities.

    10. Increasing IRS Return Share
      Q: Will Intuit's share of IRS returns grow?
      A: Despite IRS total returns growing around 1%, Intuit aims to increase its share by expanding TurboTax Live from 30% to 70% of the franchise. They focus on high-value filers in the assisted segment, which will accelerate the growth of the overall TurboTax franchise.

    11. DIY Paid Customer Share
      Q: How is Intuit performing with DIY paid customers?
      A: Intuit feels good about its paid share; total paying customers grew 2%, and retention increased by 3 points. They lost share among simple filers who switch platforms for free software but remain focused on paying DIY customers through improved product experiences.

    12. Small Business & Self-Employed Growth
      Q: What's driving Small Business & Self-Employed growth?
      A: The strength is driven by online performance, with online revenue growing 19% and services up 20%. Despite deceleration due to lapping desktop price increases, they expect desktop to continue growing once the business model shift ends.

    13. Payroll Growth Outlook
      Q: Is payroll growth slowing in small business?
      A: Although payroll was not the top growth driver, Intuit continues to see customer adoption and a shift toward higher-end payroll offerings. Payments charge volume increased 22%, up from 20% in the prior quarter, contributing to overall ecosystem growth.

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