Good afternoon. My name is Abby, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Intuit Second Quarter Fiscal Year 2023 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 session. [Operator Instructions] With that, I'll now turn the call over to Kim Watkins, Intuit's Vice President of Investor Relations. Ms. Watkins?

Thanks, Abby. Good afternoon, and welcome to Intuit's second quarter fiscal 2023 conference call. I'm 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 2022 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. And with that, I'll turn the call over to Sasan.

Great. Thanks, Kim, and thanks to all of you for joining us today. As you read in our press release, we announced that Michelle will step down from the CFO role and plans to retire from Intuit. I'm pleased to share that Sandeep Aujla will assume the role of Chief Financial Officer on August 1, 2023. It is a well-crafted succession plan that will cover more in a few minutes, but let's first get started with the business. We had another strong quarter, as we executed on our strategy to be the global AI-driven expert platform, powering prosperity for consumers and small businesses. Second quarter revenue grew 14%, fueled by Small Business & Self-Employed Group revenue growth of 20% and Consumer revenue growth of 26%. This year, we are celebrating Intuit's 40th anniversary. We're incredibly proud of our history of reimagining the company and reinventing ourselves, which has enabled us to thrive during various technological shifts and economic cycles. Having successfully navigated multiple platform ships over the years, including our largest transformation to artificial intelligence in the era of digitization, we continue to be confident in our ability to fuel growth, given our large TAM, low penetration, proven strategy and 5 Big Bets. We are proud to be the global financial technology platform that powers prosperity for the people and communities that we serve. I will first start with some thoughts about the tax season and our business in the current macro environment. As you know, the scale of our platform and rich data, gives us unique insights into the lives and spending habits of 100 million-plus customers. Our Small Business performance continues to be very strong, despite uncertainty in the broader macro environment. We continue to see strength in the areas that have the greatest impact, including the growth of our online mid-market customers, contributing to strong subscription revenue and higher ARPC. In Q2, growth in both the number of companies running online payroll and the number of employees paid on our platform remains strong. Total online payments volume grew 25%, moderating some from the first quarter. We are seeing strong growth in the number of payment-enabled invoices set by our Small Business customers, a good sign that our innovation is continuing to drive digitization. The shift to digitization and the power of our small business platform, including QuickBooks and MailChimp, resonate with customers as they grow their business and improve cash flow. We continue to observe that our AI-driven expert platform is critical to our customers' success. Now turning to tax. We're confident in our strategy to both extend our lead in the do-it-yourself category and transform the assisted category. Following a highly successful extension season last year, we doubled down on our learning's to further accelerate innovation to better serve our customers. First, we're evolving our TurboTax brand to increase awareness that we are the best alternative in the assisted tax segment for consumers and small businesses, a combined $30 billion TAM. Our new campaign, Come to TurboTax and Don't do your taxes is resonating with our customers and is the key to our strategy as we focus on attracting customers from the assisted segment. Second, we launched a number of high-impact TurboTax Live innovation. As part of our second Big Bet, we are solving one of the largest problems our customer's face, lack of confidence, by connecting people to experts virtually. Building on our learning's from last season, we're continuing to use AI to bring in our customers' data and match them to the right experts to help customers get the maximum refund they deserve with confidence. To help customers finish their taxes even more quickly. We've created a new gamified experience focused on efficiency, backed by our lifetime guarantee. We evolved our full-service offering, so filers can have their return completed in a single virtual session. We are off to a great start in tax, and we continue to be confident in our game plan to win. Now shifting to our 5 Big Bets, I would like to highlight some examples of recent progress. As a reminder, our Big Bets are revolutionize speed to benefit, connect people to experts, unlock smart money decisions, be the center of small business growth and disrupt the small business mid-market. Our second Big Bet is to connect people to experts. In addition to what I've shared about TurboTax Live, we've achieved product market fit with QuickBooks Live, which we expect could help us penetrate non-consumption and drive breakthrough adoption. We're evolving our QuickBooks Live into a portfolio of expert services and are embedding these services as part of our lineup, similar to TurboTax Live. In the second quarter, we launched a three expert-guided setup available for all new QBO customers leveraging our virtual expert platform. Early results indicate that customers using this offering have more confidence in and awareness of our full ecosystem of services, which translate into better retention and higher adoption of our service offerings. With our third Big Bet, our vision for Credit Karma is to become the comprehensive self-driving financial platform that propels our members forward, wherever they are on their financial journey. We are innovating across all verticals and continue to have confidence in our long-term growth expectations of 20% to 25% despite near-term headwinds. I'll share a few examples. We're innovating to help members get faster access to cash and make financial progress, including improving their credit score with the help of Credit Karma Money. For example, with the integration of TurboTax and Credit Karma, approved members can get money in their hands in as little as one minute after the IRS accepts their return. As this is the largest paycheck of the year for many, this enables them to take care of immediate expenses, pay down debt or build savings. Members also receive recommendations for how to achieve their financial goals, such as creating an emergency savings fund with our high-yield savings account or building credit with credit builder. Members who activate credit builders see an average score increase of 21 points in as little as 30 to 45 days. Members who use Credit Karma Money show higher engagement on the Credit Karma platform. We are driving more confidence for members with Karma Guarantee. As a reminder, Karma Guarantee offers indicate that members will either be approved or they'll receive $50. At the end of the quarter, 59% of members were eligible for at least one Karma Guarantee offer. With Mint now part of the Credit Karma platform, we're beginning to build a new experience for members with prime credit scores, which Credit Karma is underpenetrated in today. Leveraging Mint, we see the opportunity to develop personalized product recommendations, levering gene net worth, transaction and spend data to highlight the product benefits that matter most to these members. Our fourth Big Bets is to become the center of small business growth by helping our customers get new customers, get paid fast, manage capital and pay employees with confidence in an omnichannel world. We continue to innovate to digitize money movement from creating an estimate, to invoicing a customer, to getting paid. Today, easier discovery, auto-enabled payments, instant deposit and getting paid upfront are all helping drive adoption of our payments offering. And we are making meaningful progress digitizing B2B payments to accelerate and automate transactions between small businesses and ultimately improve their cash flow. We see a tremendous opportunity as 70% of B2B transactions are still completed with checks. This quarter, we launched a QuickBooks business network to millions of QuickBooks customers to further digitize B2B payments in the U S. We're also building our Bill Pay functionality in QuickBooks and plan to launch this capability in the future. Now turning to Mailchimp. We're well on our way to becoming the source of truth for our customers to help them grow and run their business. We have three acceleration priorities with Mailchimp. First, delivering on our vision of an end-to-end customer growth platform; second, disrupting the mid-market by developing a full marketing automation, CRM and e-commerce suite; and third, accelerating global growth with a holistic go-to-market approach. This quarter, we made some great progress against these priorities. To help our small businesses customers run and grow their business in one place, we launched a real-time data sync that brings QBO data such as invoices, sales receipts, items, customers and addresses into mail channel. This puts customer and purchase data together all in one place to power our customers' success. To help our customers plan, execute and track their marketing campaigns across multiple channels in one place, we launched a new capability called Campaign Manager. This reduces the number of tools needed to manage marketing and assess performance across channels. And to drive accelerated global growth and execute our refreshed international strategy, we're translating the product into multiple languages, including Spanish and Portuguese. And beyond the progress we've made on these priorities, the product lineup innovation, assisted onboarding and improved first-time use we shared last quarter, is driving green shoots in paid conversion, which was up 2 points year-over-year in the second quarter. Our fifth Big Bet is to disrupt the small business mid-market representing a TAM of 1.7 million customers, of which 700,000 are already in our franchise today. As I mentioned earlier, online mid-market customer growth remained strong, and we are seeing increased adoption of QBO Advanced, payments and payroll, driving ARPC expansion, as we serve these customers across our full ecosystem of services. Wrapping up, we feel confident in our AI-driven expert platform strategy and 5 Big Bets. And in an uncertain macro environment, the benefits of our global financial technology platform are more important and more mission-critical than ever to our customers. Now, let me hand it over to Michelle.

Thanks, Sasan. For the second quarter of fiscal 2023, we delivered revenue of $3 billion; GAAP operating income of $270 million versus $56 million last year; non-GAAP operating income of $856 million versus $612 million last year; GAAP diluted earnings per share of $0.60 versus $0.35 a year ago; and non-GAAP diluted earnings per share of $2.20 versus $1.55 last year. Turning to the business segments. In the Small Business & Self-Employed Group, revenue grew 20% during the quarter, and online ecosystem revenue grew 24%. With the goal of being the source of truth for small businesses, our strategic focus within the Small Business & Self-Employed group is threefold: grow the core, connect the ecosystem and expand globally. First, we continue to focus on growing the core. QuickBooks Online accounting revenue grew 27% in Q2, driven mainly by customer growth, higher effective prices and mix shift. Second, we continue to focus on connecting the ecosystem. Online services revenue, which includes payroll, Mailchimp, payments, capital and time tracking, grew 21% in Q2. Within payroll, revenue growth in the quarter reflects an increase in payroll customers and a mix shift to higher-end offerings. Mailchimp revenue growth in the quarter was up low teens. Growth was driven by higher effective prices, aligning with our pricing for value philosophy and improving conversion. We will continue to provide regular updates on the business, so you can track our performance over time, including a deeper dive at Investor Day, similar to what we do for the rest of the business. Within payments, revenue growth reflects ongoing customer growth, as more customers adopt our payments offerings to manage their cash flow and an increase in total payment volume per customer. Third, we continue to make progress expanding globally by executing our refreshed international strategy, which includes leading with Mailchimp. On a constant currency basis, total international online ecosystem revenue grew 17% in Q2. Desktop Ecosystem revenue grew 10% in the second quarter. The subscription model for our desktop accounting solution makes this revenue more predictable. And we raised our desktop prices for several products in September, to more closely align with pricing for value. We're about halfway through the three-year transition to a subscription model for Desktop. QuickBooks Desktop Enterprise revenue grew high teens during the quarter. We expect continued strong Desktop Ecosystem revenue growth, as we progress through the back half of the fiscal year. We continue to expect the online ecosystem to be our growth catalyst going forward. We remain confident in our guidance for total Small Business and Self-Employed group of 19% to 20% revenue growth this year. Consumer Group revenue of $516 million grew 26% in Q2, reflecting a faster forming season this year. We remain confident in our guidance for Consumer Group of 9% to 10% revenue growth for fiscal 2023. Turning to the ProTax Group, revenue grew 7% in Q2, in line with our expectations. Credit Karma delivered revenue of $375 million in Q2, down 16%. This was slightly ahead of our expectations in its seasonally smaller quarter. As a reminder, Credit Karma represented 14% of our total revenue in fiscal 2022. On a product basis, the decline was driven primarily by headwinds in personal loans, home loans, auto insurance and auto loans, partially offset by growth in credit cards and Credit Karma Money. We continue to see an impact across all verticals in this uncertain macro environment. In credit cards, we continue to see partners tighten eligibility in riskier cohorts. In personal loans, we continue to see pressure as partner's further tightened eligibility, and we expect personal loan revenue to decline this year after a very strong growth in fiscal 2022. We remain confident in our guidance of a decline of 15% to 10% in fiscal 2023. Our financial principles guide our decisions, remain our long-term commitment and are unchanged. We finished the quarter with approximately $2.1 billion in cash and investments and $7.1 billion in debt on our balance sheet. We repurchased $500 million of stock during the second quarter. Depending on market conditions and other factors, our aim is to be in the market each quarter. The Board approved a quarterly dividend of $0.78 per share payable April 18, 2023. This represents a 15% increase versus last year. As I shared consistently in the past several quarters, we have an operating system we use to run the company, and this includes a proven playbook for operating in both good and difficult economic times. Our first priority is to do the right thing for customers, giving them access to the tools and offerings they need most. We manage for the short and long term and control discretionary spend to deliver strong results, while investing in what is most important for future growth. The scale of our platform, along with our rich data gives us the unique ability to see leading indicators that allow us to be forward-looking and adjust quickly. We also have a strong balance sheet that enables us to play offsets. We will continue to accelerate our innovation, and our goal remains for Intuit to emerge from this period of macro uncertainty in a position of strength. Moving on to guidance. We are reaffirming our fiscal 2023 guidance. This includes total company revenue growth of 10% to 12%, GAAP operating income growth of 9% to 13% and non-GAAP operating income growth of 17% to 19%. GAAP diluted earnings per share to decline approximately 5% to 1% and non-GAAP diluted earnings per share growth of 15% to 17%. Our guidance for the third quarter of fiscal 2023 includes revenue growth of 8% to 9%, GAAP earnings per share of $6.82 to $6.89 and non-GAAP earnings per share of $8.42 to $8.49. You can also find, our full fiscal 2023 and Q3 guidance details in our press release and on our fact sheet. On a personal note, as we announced today, I will be stepping down as CFO on July 31 and made it a priority over the last several years to focus on our long-term strategy for driving growth, and that includes ensuring I have a high-performing finance team with strong succession plans in place. Sandeep has been an integral part of the finance leadership team for over seven years, and I have no doubt he will be a terrific leader and CFO. He has shown his ability to drive key strategic priorities to create value for our business, time and time again, and I look forward to working with him over the next five months to ensure upcoming transition. And with that, I'll turn it back over to Sasan.

Great. Thank you, Michelle. Well, while the CFO transition isn't official until August, I wanted to just take this opportunity to express my sincere appreciation for all that Michelle has contributed over the past 20 years at Intuit including the last five years as CFO. She has been an amazing partner and will leave Intuit better than what she founded. And during Michelle's tenure as CFO, Intuit's market cap and revenue more than doubled. Michelle's commitment to developing top and diverse talent has created a deep bench of strong leaders, making firm a very seamless transition. Sandeep will be an exceptional CFO and with his track record of leading outstanding performance across our Small Business and Self-Employed Group and our technology organizations. So with that, let me go ahead and summarize. We are seeing continued momentum as we execute on our strategy of being a global AI-driven expert platform and growing Intuit revenue double-digits with margin expansion. With our accelerated organic innovation, and the additional -- the additions of Credit Karma and Mailchimp, we are the leading global financial technology platform that powers prosperity for people and communities. We're proud that Intuit has been named number five, on Fortune's Most Admired Company in the software category, one of Glassdoor's 2023 Best Places to Work and honored to be including -- included among Just Capital's Just 100 ranking for 2023. With that, let's now open it up to your questions.

Thank you. [Operator Instructions] Your first question comes from the line of Kirk Materne from Evercore ISI. Your line is open.

This is Chirag Ved, dialing in for Kirk. I really appreciate you taking the question and congratulations on a strong quarter. I wanted to ask about what you're seeing in QuickBooks online growth, both from new customers and from upselling existing customers. Just any commentary you might be able to provide around the dynamics there? Thank you.

Yes, sure. Thank you for the question. I would lead with -- we're seeing strength both in terms of customer acquisition, retention, we are seeing strength in our services. As we mentioned a moment ago, both the number of companies that are running payroll, the number of employees that are getting paid is very strong. We're -- if you compare our results to what you're seeing in the marketplace, we are continuing to grow payments 25%, total payments charge volume, which is really outstanding because of the fact that our customers are continuing to benefit from digitizing on our platform. And I think just the additive piece is we're seeing strength in mid-market, which is much higher ARPC and we're quite excited about really being able to pursue non-consumption with what we talked about earlier with QuickBooks Live actually being embedded as part of our overall offering. And I would just end with one of the goals that we talked about with all of you four years ago, our bold 2025 goals. One of those goals was that, we wanted the success rate of small businesses on our platform to be 10 points better than industry. And in fact, the small businesses on our platform, their performance is north of 15 points better than anyone in the industry. And what that just suggests is that, the small businesses on our platform are more successful, they're digitizing and they're leveraging this opportunity to continue to accelerate to deliver for their customers.

All right. Thank you.

You’re very welcome.

Your next question comes from the line of Siti Panigrahi from Mizuho. Your line is open.

Thank you. And Sasan, it's a great quarter. I think what's impressive is your small business growth in this macro environment, like when some of your peers are talking about, like push out digital transformation in small business, some weakness. So I just wanted to ask, what you were seeing in terms of like for the next few quarters, like you look at a lot of data. What kind of -- what sort of health you are seeing in the SMB economy right now? And it looks like your second half is pretty easy comp right now. So would love to hear your comments on small business.

Yes, for sure, Siti. Thank you so much for your question. And it's actually a really important question in terms of what we've often talked about, which is, it's important that you all look at Intuit as really the authority when it comes to what's happening in the small business space. And the reason is that, our platform is mission-critical for small businesses. Our platform with QuickBooks, Mailchimp and all the services that we have on our platform, is really used by small businesses to be able to grow customers, manage their customers, manage their cash flow, be able to manage their employees end-to-end. And therefore, what that means is, it fuels our success, supported by the stat I shared a moment ago, where small businesses that are on our platform are actually 15-plus points more successful than those that are not on our platform. And so, I set that very important context, and I'll just point to payments total charge volume as an example. When you look at our performance being at 25%, that is, by far, the best in the industry. And that is because, it is all about digitization. And it's not just about payments, but it's about all the services that our small businesses use on our platform. And we expect our small businesses to continue to be successful, even in this macro environment, and we are here to support them. I will just end by saying the following, which I think you were hinting at this in your question. The strength of our businesses, as Michelle and I described a moment ago, and we expect that strength to continue, although, when you look at our guidance, I think the way you should look at our guidance is that it has been de-risked for sure, for the rest of the year.

Great. And a quick follow-up, basically clarification. Your online services growth, 21%, but if I exclude Mailchimp, it's around 27% growth. That's quite impressive, like just compared to like Q1, 28%. Just want to clarify that I'm looking at it right.

You are -- we didn't break out the number. But, yes, you're looking at it right, because, in essence, online services, minus, Mailchimp grew faster. So therefore, just by design, it grew much faster than 21%. So you are correct.

Thank you.

You're very welcome.

Your next question comes from the line of Michael Turrin from Wells Fargo. Your line is open.

Hey, great. I appreciate you taking the question. Nice job on the quarter. Maybe one for Michelle while you're still with us, on margin. Last quarter, you took the Credit Karma outlook down but left the EPS guide intact. We've gotten questions from investors around whether that provides maybe less wiggle room on margin, but the first couple of quarters have still shown EPS upside. So can you just walk through the margin levers you're finding? Are there advantages in folding various brands together and just how we should think about the longer-term margin potential there?

Yes. Thank you, Michael. I appreciate the question. We – yes, we absolutely have felt very strongly about being able to still keep our guidance for op income for margin, even though we did take down our revenue guidance last quarter. And that's actually something that we were very plantful about as we went through our three in one year planning process. We had identified a number of levers that we could pull across the expense horizon. A lot of that is in marketing. Some of it's in travel and some other discretionary type expenses so that we would be able to still hit our bottom line financial commitments and that's what we have done. And we feel very good about the guidance that we've given for the rest of the year. But it is something that we take very seriously, and we make sure that we do have those levers that we can pull, given different macro environment as that has unfolded this year.

It's very helpful. Just one more, if I may. The desktop business came in exceptionally strong. Can you just speak to what you're finding as you move that base for subscription? And then how to think about the revised small business target after we're through the migration journey there and what keeps the 15% growth sustained afterwards. Thank you.

Sure, Michael, maybe I will take that. First of all, I'll just start with context. This is a business model shift that we're actually quite excited about in that. One, we've shifted the customers to subscription, so it's far more predictable. Two, in that context, we have had a very planful process of aligning prices between desktop and our online products. And the reason this is really important is we've been heavily investing in the last several years really ensuring that some of the key capabilities for our desktop customers, particularly those product-based businesses, that those capabilities are available in online. And being in the middle of this business model transition, one, we see another 1.5 years of continued strength, but we also see ahead of that, the fact that we can now migrate these customers through our online platform, because we now have the capabilities that they need. And by the way, when we do that – that actually opens up the doors to additional online services to continue to fuel the success of our small businesses. And therefore, when you step back, ultimately, the growth of this franchise will come from online. And with all of the innovation growth levers we have, moving up-market, that is what continues to give us a lot of confidence in our 15% to 20% long-term expectations for the small business franchise.

Thanks very much.

You’re very welcome.

Your next question comes from the line of Mark Murphy from JPMorgan. Your line is open.

Thank you very much. And I’ll add my congratulations. I was wondering if you can drill down into the favorable trend that you're seeing from higher effective prices. In particular, for QuickBooks Online Accounting, just in terms of the magnitude and the duration of that impact. And I'm curious if that should continue to provide any kind of material uplift for the next several quarters.

Yes. Thanks for your question, Mark. Let me start with context that we always look at our largest growth across the company, no matter what the business is to come from volume and mix. And those two are driven, of course, by our innovation and/or if we are moving up market, which in many cases across our businesses, we are moving upmarket. In TurboTax, the example is moving into the assisted segment. So price and mix are really the largest drivers. And because of just the vast and accelerated innovation, we also have price as a leverage because we always want to be disruptive from the bottom, and we want to continue to disrupt at the top. And that actually gives us a lot of pricing power because of the value equation and the benefits that we deliver for our customers. And so with that as context, looking ahead, not just the next couple of quarters, but looking in terms of just the long-term durability of Intuit and how we think about things, we believe the majority of our growth will continue to come from volume and mix and price will always be a lever because particularly that we are moving upmarket. And I think it was even more pronounced in small business because of the business model shift in desktop, where we are bringing pricing to parity with online and we just -- we expect that to continue in the next several quarters, but that there's a durability element of this, not just a quarterly element for this.

Okay. Understood. And then as a quick follow-up, on the Mailchimp side, are the initiatives that are designed to stimulate higher growth for MailChimp, which I think has been including the very creative advertising campaigns you've had out there. Are those starting to take hold and produce an effect in terms of whether we look at e-mail marketing, campaign volumes or seeing customers opt in to the right products there where they run the AB test and kind of connect back with the rest of the ecosystem. Is that something you see starting to take hold currently or in the next couple of quarters as well?

Yes, Mark, I would say that when you think about the priorities that we talked about in the focus areas, we are starting to see green shoots, and we started seeing green shoots a couple of quarters ago. And sort of the biggest one is conversion in paid. The one -- in addition to the initiatives starting to deliver green shoots that we are the most excited about is the work that we are doing to retain our high-value customers and to really penetrate in mid-market. This is really the same story that we talked about in mid-market with QuickBooks Advance, where our retention was actually not quite that high when it came to our high-value customers in QuickBooks. And we built a platform and really a team to focus on these mid-market customers. And that is really one that I'm very excited about, and I think we'll see the results of that in the next two to three quarters, where we'll start making a bigger impact in not only retaining our high-value customers, but also penetration in mid-market. And that's also in context of all the other things that we've talked about doing, which is campaign redesign, web redesign, first-time use, one-hour assisted onboarding and now what we just shared earlier in the script, which we said it's coming, and that is the Data Sync. The Data Sync is huge, because now it puts the customer data and purchase data all in one place, and it really puts the power of growth in the hands of customers in a way where they can't get that fuel anywhere else. And so, all these things take time, but we are seeing the green shoots. It will translate into faster revenue growth, sort of, in the coming quarters, which is, by the way, not embedded in our guidance, just to be clear, but we're excited about the progress that we're making.

Thank you, very much.

You’re very welcome.

Your next question comes from the line of Brad Zelnick from Deutsche Bank. Your line is open.

Excellent. Thank you so much for taking the question. Sasan, I think everyone appreciates what's happening in Credit Karma, and there's only so much that's within your control. And within that context, it's great to hear all the goodness around how Credit Karma Guarantee is doing. But as we think about the other elements of the portfolio, the other products, in an environment that's supply-constrained, can you maybe just talk about the performance and how you're investing against the opportunity in context of what you can control? And how do you even know the progress perhaps that you're making in auto and in home, for example, if the market just isn't there to support it. Thanks.

Yes, Brad, actually, a great question. And the reason it's such an important question is, we are very focused on delivering for our members in the near term and to your point, leading to this macro environment, but we are undeterred relative to the strategic focus areas for the business. And so, let me specifically answer your questions. First of all, let me start with a macro point, which applies to all of Intuit. At Intuit, there are outcomes that we declare that we monitor, but there are also inputs that we focus on. And inputs are key deliverables around product, around go-to-market, around technology investments, and each of our inputs have success measures. And we spend the majority of our time on inputs, because managing inputs and managing where you choose to invest is ultimately the biggest predictor of the outcomes that we want to achieve. So we're very intentional about delivering and managing in the near term for our customers and for you all, and we are undeterred relative to the focus areas that we are focused on in the long term, which are the inputs. With that as sort of uber context in terms of how we run the company, there are several areas that we continue to be focused on, and they're not new, but this is why we believe in the long-term growth of Credit Karma. One is Karma Guarantee. By the way, somebody is typing. So, hopefully, you all can hear me. But Karma Guarantee is a big time differentiator. This is where we use our data and our machine learning capabilities to, in essence, provide certainty that a customer is eligible for a credit card or a personal loan. And now 59% of our members are actually able to get a Karma Guarantee offer, which is a huge deal. We're continuing to invest in that area with our financial institutions and getting financial institutions onto our light box. The second is Credit Karma Money. This is huge, right? This is building out the other side of Credit Karma platform where, in essence, we're helping our members manage money, whether it's paying bills, early access to their money, early access of their refund, building their credit, finding ways to save money. And the more we -- members engage with Credit Karma money, the more their engagement goes up on the platform and the more we can monetize. So that's the second area. And the third area is what we've talked about in the last several quarters, which is our focus on prime customers. This is why we put Mint and Credit Karma together. We're very underpenetrated with our prime members, and we're building out services. And when we launch them, well, of course, you'll be the first to know to really begin to penetrate and monetize prime customers. And last but not least, this is very important. It's better together with TurboTax. It's all the investments that we are making because our goal is we want every Credit Karma member to use TurboTax, and we want every TurboTax customer to put their refund on Credit Karma Money account. So those are the four big areas of focus.

Thank you so much for that, Sasan. If I could just ask a quick follow-up, maybe Michelle. Michelle, I appreciate that cash flow is lumpy from quarter-to-quarter. It looks like cash taxes had an impact in the first half of the year on free cash flow growth. But -- just in trying to reconcile your margin upside in the quarter with free cash flow performance, are there any items to call out? Any reasons why for the full year, we shouldn't expect free cash flow growth to be somewhat in line with net income growth? Thanks.

Thanks for the question, Brad. Typically, that is exactly what we would expect. So I would say that this year, we could pretty much expect the same – that same trend to continue. Yes, we are going to have the lumpiness as we've always talked about, we have that throughout the year and given the way our quarters fall with tax and so forth. But yeah, I would expect that you would see that trend continue for the year.

Excellent. Thank you so much for taking the questions.

Thank you, Brad.

Your next question comes from the line of Brad Sills from Bank of America Securities. Your line is open.

Great. Thank you. I wanted to ask a question here on TurboTax Full Service given that this is the first year that you're really making a push here with the offering and then we're getting into the tax season. Curious to get your perspective on whether you think this year might be the year you might see more conversion of existing TurboTax filers to full service or is this more of a net new filer coming into the franchise through full service or maybe over time, you shift more towards the latter as the brand gains some traction. Just curious on your expectations there, net new versus existing filers upgrading?

Yeah. Thanks for the question, Brad. In fact, I'll start with something that we mentioned earlier, but it's really important in the context of your question, and that is our entire campaign strategy and all the investments that we've made in TurboTax Live as a platform has been to bring in prior year assisted customers. And these prior year – and by the way, our campaign, we'll talk about it in more detail right after tax season. But our campaign is certainly raising heads, and we are seeing more prior year-assisted customers come into the franchise because they see it as a great opportunity to digitally get their taxes done from wherever they are and get the expert help that they need. With that said, the way we think about TurboTax Live is it's really one platform. We are -- we don't look at like full service as just an attach. We look at -- there are those that will come in and choose to get help along the way. And there are those that will come in and digitally exchange all of the documents, had appointment, and have a discussion with our – expert that's been matched with them and then have us do their taxes for them. And I think we see the type of strength that we would have expected in this area in the – where we are in the season. With full service, you see more of that strength more towards the latter part of the season. But we're pleased with the halo effect that really it creates because that's what we're really after is to ensure that we communicate and deliver on the promise of, if you want to help with your taxes or you want us to do it for you, we're here for you. And it's the combination of that both campaign strategy and platform delivering on that promise. That is what we look for. With that said, the big change this year is one session virtual engagement where we can get your taxes one and done, and we're seeing success there. And I would also just say we're going to see a lot more sort of in March and April, and that's where this full-service offering will have the largest impact.

Your next question comes from the line of Steve Enders from Citi. Your line is open.

Okay. Great. Thanks for taking the question. I guess maybe just to follow up on the last TurboTax line questioning. I guess, so far, what have you seen in terms of kind of the broader adoption of some of those more full service offerings or even TurboTax Live in terms of driving the upside in the quarter? And I guess from a referral standpoint between credit card and TurboTax, I guess what kind of engagement have you seen between the two of those that drive that co-branded offering out there?

Yes. Very good question. A couple of things that I'll say. First of all, Steve, as we talked about earlier, we have just had a faster forming season this year, which is great because we're able to not only deliver for our customers, but these are folks that really need their money fast and we've seen a really strong uptake of putting their money on a Credit Karma Money account, which is exactly why we've got the integration between those two platforms. The second thing I would say, and of course, we'll share more tangible results when season is over. But I'm actually quite excited about what we are seeing this year relative to Credit Karma members, in essence, engaging with TurboTax. We spent a lot of sort of our investments in time this past five, six months to remove friction, to remove blockers, to make it much easier if you're a member to pick the right product and then get your taxes done, whether you want to do it yourself or we'll do it for you. So we're seeing good engagement on that front. And I think just last but not least, we're seeing strength with returning customers that use TurboTax Live coming back this year. And again, it's very early in the season. We're actually excited about all the possibilities of acquiring new customers as we look at the rest of the season, particularly because of our campaign. That's raised a lot of heads that we typically wouldn't have raised. So more to come when season is over. And by the way, we're iterating real-time, making product improvements real-time, launching new features every seven days. So we're excited about the game that's ahead of us and where we are as we sit today.

Okay. Great. There's helpful context there. And just a quick one, if I could get it in here on -- and just on the EPS outlook, I guess, how should we think about what's being put more to work on in terms of the marketing, how much more is getting kind of being put to work there versus conservatism, such as inherent in the model at this point because just seeing really good upside in the past couple of quarters and not necessarily seeing a raise on the EPS side. So just would love to kind of get your thoughts on that.

Yes, yes, absolutely. It's a very, very good question because if you just do the math, what we've delivered the first half of the year and you look at where we're going to deliver the second half of the year, it would suggest significant deceleration. So thank you for asking the question. I would say everything that we talked about across all the businesses stands. We're confident in our guidance and we're confident in what we're seeing in the businesses and where each business sits. I think the reality is, generally, we have a principle, we don't touch our guidance while we're heading into our third quarter. Our third quarter is double the revenue of any other quarter. And so, we'd like to get to the third quarter and then talk to you all about what our guidance is moving forward. So really, the way you should think about our guidance is it's derisked.

Perfect. Appreciate taking the questions.

Yes, absolutely.

Your next question comes from the line of Kash Rangan from Goldman Sachs. Your line is open.

Thank you, very much. Congratulations on a strong quarter. Michelle, we’ll definitely miss your smile and energy. Sandeep, look forward to working with you. Back to you, Sasan. You digitized taxes, which were done annually, what not like decades ago. Now you're about to digitize payments. I'm curious, as you look at payments, what are the parts of the payments ecosystem that Intuit is not traditionally played in. I know that you've quantified $125 billion of transactions going through your network, vis-à-vis $2 trillion or so that's transacted more broadly speaking. And listen to your comments on payments, it sounds like that is the big kahuna here. You can demystify what parts of the payments ecosystem has Intuit not participated in before and which parts would you be able to participate in going forward? You mentioned B2B, accounts payable, receivable, et cetera, that would help frame how much of an opportunity payments is. It's a small -- it's one of your smallest businesses, but it looks like it's got the biggest growth potential. Thank you so much.

Yes. Thank you for the question, Kash. And I just have to start by saying, we've got a lot of octane in the tank left across all of our Big Bets. I love all of my five children. But I'll answer your question around payments. I think there are three things. And let me -- 30 seconds of context, and I'll specifically answer your question, because we talked about payments and money movement a lot. One huge element of what happens on our platform is, small businesses come in, they create an estimate, they invoice and then they need to get paid for that invoice once they do the work. And our penetration in that -- we talk often about we have $2 trillion of invoices that are managed on our platform. Our penetration there is still low. And so, it's just important to start there and not move off of that, because that's a huge growth opportunity. It's a huge area of investment. And by the way, why in this macro environment where everybody's payments volumes are not accelerating or they're significantly decelerating, we still have 25% total charge volume growth. So that's number one. There's a lot of octane left there, and we are significantly focused. I think the other one that we've traditionally not focused on at all, is this entire B2B network, which is digitizing business to business between our small businesses. We now have the capabilities. We launched the business network last quarter to millions of our QuickBooks customers. That is a big opportunity, of course, very low -- no penetration, because we didn't have it before, and it's 70% checks. So that's a big one. And then part of that is also just bill pay capabilities, which we've had on our platform through a couple of really strong partners. And now we're building that capability ourselves, because we believe that it can deliver a far seamless experience for our customers. And then, when you take all of that and go to mid-market, it's even a bigger opportunity, which is why we're seeing the strength in our mid-market growth, because of just the size of payments and payroll that takes place. So, hopefully, that answers your question

That is allowing you to participate in these vectors that you couldn't previously access. And that's it for me. Thank you.

Yeah. Absolutely. Thank you, Kash.

Your next question comes from the line of Scott Schneeberger from Oppenheimer. Your line is open.

Thanks very much. Congratulations Michelle and Sandeep. Sasan, first question is going to be in tax category. It's kind of a multi-partner. Yeah. This the early season in the industry, the IRS is clearly up year-over-year significantly, and that's probably good for you in multi – for multiple reasons, like you just mentioned, the Credit Karma Money probably helped. But – just love your thoughts on the industry, why you think it's up so much this year versus last year to start and then it's still way behind in -- through mid-February versus pre-pandemic. So just kind of high-level thoughts on the kind of the cadence of this tax season, the start and how that may influence the tax season and your view of it overall? Thanks.

Yeah, Scott. I love the question, because this is actually important for everybody to hear since you see the IRS reports on a weekly basis. It's almost – if I were to tell you all, it's almost hard for you all to pay attention to these reports because so much has changed and will continue to change. So let me start with context. Before COVID, before 2020, things were generally predictable, but things were continuing year in and year out to get pushed out to April. What do I mean by predictable. Generally, you would see a strong first peak, which went through mid-February and it would start end of January, and then you would sort of have very low volume and then you would have a lot of volume come in on the 14th and 15th of April. And what was happening every year, that curve was predictable – about what's happening is every year, more and more people pushed out to do their taxes on the 14 and 15 because there were solutions like ours where they could wait until last minute to do it. So that was pre-COVID. When COVID hit, when everybody sort of was locked up in their homes, when tax season got extended two years in a row, and now the fact that folks are actually working virtually, it completely blew up the curve and the habits of customers. And so what we are now seeing this season is initially, we saw a fast forming season similar to what would happen pre-COVID. A lot of people came in because they needed money. And what we're seeing now is – what we've been seeing, which is a lot of people are pushing out to complete their taxes sort of last minute. But what's very difficult, I know for you all to compare, we have a lot of internal data so we can assess what's happening is that it's hard to compare year-over-year, because there's so much that changed in the last several years. And again, what we're seeing this year is now people are at work, but remember, they're still generally working in a hybrid environment. So even days of the week, times of the day when their taxes is not comparable to last year. But generally speaking, fast forming and then a bunch of people are going to do their taxes in the last several days of April before taxes are due is the way you should think about it.

Great. Thanks. I appreciate all that color. Next one, a follow-up. Over in Credit Karma Guarantee, you've discussed it a good bid on this call. But when you gave guidance for Credit Karma at the beginning of the year, you were really excited about Guarantee contributing in the back half. I may be a quarter or two early here asking this question. You mentioned the 59% penetration of the base. Just curious, how are you tracking this? Is this ahead of where you expected to be at this point? And could it be, in fact, a driver. You mentioned de-risk guidance for Credit Karma segment. Is this -- how are you progressing on Guarantee? Is this going to be really meaningful through the back half tax?

Yes, yes, sure. First of all, let me start with my comments where the guidance for the company is derisked. That includes Credit Karma. So my comments weren't just about Credit Karma, it was really about the whole company because if you just do the math, it seems that we are significantly decelerating the second half of the year versus the first half of the year and that's the point I made, which is principally, we don't touch guidance until we get to our largest quarter, which is this quarter. And so therefore, the way to think about our guidance is that it's derisked. That includes Credit Karma. The second thing is, if you recall, when Michelle and I talked about when we reset the Credit Karma guidance to minus 15% to minus 10%, what we talked about is, one, we feel the new guidance was very prudent. We also really built in some deterioration in the second half of the year and we didn't count on our innovation having the kind of impact we initially had assumed in our first guidance. And I think that still stands. With that said, I actually feel very good about where we are. I would say we are where we want it to be because we have very high goals with Karma Guarantee. 59% of our members now having at least one Karma Guarantee offer is really a big deal. So I feel good in terms of the progress we're making on that front, the front of Credit Karma Money with the integration with TurboTax. Those are all -- our input goals in those areas are on track, and it will be fun to watch how they play out the rest of the year, but we're not relying on that to achieve our guidance.

Okay. Great. Thanks very much.

Yes, very welcome.

Your next question comes from the line of Brent Thill from Jefferies. Your line is open.

Thanks, Sasan, online services was slower than QBO accounting at 27%. So I think I just wanted clarify, was the weakness really just in Mailchimp or was there any weakness you saw in payments or payroll?

Yes, Brent, two over points. The first one is you're always going to see toggling between online accounting growth rate and online services growth rate. What you really should pay attention to is the overall growth rate. With that said, to answer your question, we actually saw strength across the board. Mailchimp, our growth is what brought down the online services growth to 21% because it is growing slower then, of course, it's growing low teens, but it was really driven down by Mailchimp. And Mailchimp is growing low teens, similar to last quarter, but that was really the primary reason a little bit very small amount by payments now growing at 25%, but really, it's Mailchimp.

Follow-up on Mailchimp, do you feel that is more internal execution of getting the product right and not wanting to push it out until it's ready, or is there something competitive going on that you're seeing that's maybe distracting?

No. It's really -- we have very clear priorities put great leaders in the business. I was actually just in Atlanta about three weeks ago, spent more than a day with the entire team, and it's just really execution. And I feel very good about the focus areas, the progress on our execution, it is in our control, which is sort of a great place to be in. It's not macro, it's us.

Your next question comes from the line of Alex Zukin from Wolfe Research. Your line is open.

Hey, guys. Thanks for taking the questions and congrats on a great quarter. I guess, maybe just two quick ones. Sasan, first, if I count the amount of times you said derisk on this call with respect to the guidance, I think that's definitely great to hear, but if you think about like the KPIs that you're seeing in real time around the macro and the SMB, like, what would you say -- how would you compare them to the trend line that you saw last quarter and where do you see them kind of going from a macroeconomic perspective and influencing the demand environment?

Yes. Good question, Alex. Let me start with small business. And given that we have 10 million-plus small businesses on our platform and by the way, with the way they're digitizing it's probably best to just talk specifically about the data that we are seeing. If you go back to last quarter, what I had mentioned is, small businesses generally still have strong cash reserves. They're using some of those cash reserves to continue to invest in their business. And they're still hiring. They're still having a little bit of a hard time hiring, but they are still hiring. They couldn't find talent. But then there are sectors like financial services, real estate, auto that were down nearly 15% in revenue year-over-year. If I forwarded to the data that we're seeing now, this quarter, two things. One, they're continuing to hire, and they're actually finding it easier to hire. And those same industries that I just mentioned, real estate, financial services and auto have actually kicked off in performance. Their performance is better. Like, for instance, I think real estate and financial services are -- they were down like 15% plus, and now they're down less than 10% as an example. And auto, believe it or not, was down minus 2% versus the minus sort of 10% to 15%, it was down. So we're actually seeing an uptick and improved performance in our base in those areas that were actually hit the hardest. So that's sort of the macro environment that I would say. And I would actually reiterate what Michelle and I talked about earlier, which is, our focus and innovation on payments is working, because although consumer spending has moderated a bit, our total charge volume is growing 25%, which is quite healthy and significant. So that's what we're seeing on the small business side. On the Consumer side, two things I would say. And remember, we have nearly 100 million consumers on our platform. So this is really indicative of the world outside of our platform. Since March of last year, credit scores are down about 13 points and credit card balances are up a little bit over 20%. Those that are hit the hardest are those that are in the credit band of 600 to 660, where their average balance on their credit card is like $9,000. So that's the -- a little bit of the state of the world on the consumer side. Hopefully, that answers your question, Alex.

Yes. That was actually extremely detailed. So I really appreciate that. And then, I guess, I'd be remiss if I didn't ask you a question about generative AI and how we're, if at all, Intuit has plans to monetize or integrate that technology. It does seem like having your own personal financial digital assistant or a live plus functionality would kind of seem logical, but would be really interested to kind of get a sense of how you're all thinking about it.

Alex, I'm glad you got it in. I'm surprised it took till the top of the hour for somebody to ask, so thank you for asking. It's actually a really important question. And I want to take you all back to – AI is core to our strategy. And now that everybody is talking about AI, I'm actually delighted because hopefully, it will expose to all of you why four years ago, when we refreshed our strategy, it was about being an AI-driven expert platform. And the investments that we've made in data and AI is really what's fueled a lot of our innovation across the company. And as you heard us talk about at Investor Day, it's why we put Marion in front of you all, we're just at the beginning of the curve as to what's possible. So first and foremost, the investments around data and AI is, what's fueling our success. And we've been looking at generative AI. In fact, there are multiple areas across our platform, where we've launch some of the capabilities of generative AI because it's all about reducing work and finding ways to put more money in your pocket with confidence, and it actually helps our experts. The key areas that we are focused on working with a couple of companies in this area is accuracy. And it will become more accurate over time, but we deal with people's money. And that matters in terms of the advice that we give. For us, this is all an accelerant, which, by the way, we've been working on for many, many, many months before this became sort of the buzz. But AI is core to our strategy. So we're delighted with the possibilities of the future.

Awesome. Thank you, guys.

You’re very welcome.

Ladies and gentlemen, that concludes our question-and-answer session. Would you like to close with any additional remarks?

Yes. Well, listen, thank you, everybody, for your time. Thank you for your wonderful questions. Once again, I want to thank Michelle for 20 years at Intuit. She'll be back with us, by the way. She's with us through August, and delighted with Sandeep joining us as our new CFO in August. But with that said, we'll talk to you at next earnings until then, be safe, be good. Talk soon. Bye, everybody.

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