Good afternoon, my name is Chelsea, and I will be your conference operator. At this time I would like to welcome everyone to Intuit's First Quarter Fiscal Year 2024 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'll turn the call over to Kim Watkins, Intuit's Vice President of Investor Relations. Ms. Watkins?

Thanks, Chelsea. Good afternoon and welcome to Intuit's first quarter fiscal 2024 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 2023, and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit's website at intuit.com. We assume no obligation to update any forward-looking statements. Some of the numbers in these remarks are presented on a non-GAAP basis. We’ve reconciled the comparable GAAP and non-GAAP numbers in today's press release. Unless otherwise noted, all growth rates refer to the current period versus the comparable prior-year period, and the business metrics and associated growth rates refer to worldwide business metrics. A copy of our prepared remarks and supplemental financial information will be available on our website after this call ends. And with that, I will turn the call over to Sasan.

Thanks, Kim, and thanks to all of you for joining us today. We had a very strong first quarter and have great momentum innovating on our platform across the company. Total revenue grew 15%, driven by Small Business and Self-Employed Group revenue growth of 18% and Consumer Group revenue growth of 25%. This was partially offset by Credit Karma revenue decline of 5%, in line with our expectations for Q1 given the macroeconomic environment. With the strong start to the year, we are reiterating our full year guidance for fiscal year 2024. Consumer Group revenue growth reflects a strong finish to the tax extension season. We remain focused on transforming the assisted consumer and business tax categories with TurboTax Live. Our innovation in tax has accelerated in several areas. First, the Credit Karma platform is leveraging data and AI to deliver personalized experiences and compelling tax offers. Second, is the innovation with TurboTax Live to deliver speed and confidence to prior year assisted customers, particularly with full service, where we can get taxes done in as little as an hour using data, AI and our expert platform at scale. And third, Intuit Assist, our GenAI-powered financial assistance, helping customers in key areas where confidence matters most. For example, understanding their refund or getting answers to their questions as if they're talking to an expert. We ran many experiments during the extension season, and the learnings give us confidence in our game plan to win this tax season. We believe this is Intuit's most exciting era yet. Five years ago, we declared our strategy to be an AI-driven expert platform with data and AI core to fueling innovation across our platform. We're delivering experiences where the hard work is done for you with a gateway to human expertise, powering our customers' prosperity and accelerating penetration of our $300 billion in TAM. The launch of Intuit Assist is the result of years of investment in data and AI. At the core of our platform is powerful, relevant data. Intuit has incredibly rich longitudinal, transactional and behavioral data for our 100 million customers. We have 500,000 customer and financial attributes per small business and 60,000 financial and tax attributes per consumer on our platform. And with our GenAI operating system, GenOS, we empower Intuit technologists to create breakthrough AI experiences across the platform. This includes utilizing our own powerful financial LLM as well as those from other leaders in GenAI which together unlock new opportunities to serve our customers with accuracy and speed in a cost-efficient way. We are creating a future of done for you, a future where the hard work is done automatically on behalf of our customers with a gateway to human expertise, fueling their financial success. Intuit Assist powered by GenAI is critical to delivering unparalleled benefits for our customers over the next decade. Let me share a few updates on Intuit Assist across our offerings. First, Mailchimp. We're rolling out two new GenAI experiences, designed to help our customers grow their revenue and save time. These include AI-driven audience segmentation and marketing automation. I'll share more on those in just a moment. Second, TurboTax. As I shared earlier during the extension season we tested new GenAI experiences to deliver higher confidence for our DIY customers. This includes in-topic accuracy checks and personalized explanations throughout the filing process that help explain a customer's tax outcome. We're excited about rolling out these experiences this season. Third, QuickBooks. We are testing GenAI to help customers save time and run their business with complete confidence, including a digital expert that can surface business insights and allow customers to dig deeper or connect them to a human expert. For example, we're serving our proactive business insights to customers with an actionable business summary. These customers are using the business summary as a launching point to learn, create reports directly using Intuit Assist and take actions to drive their business success. These experiences will be rolled out in the coming months and in the future, we plan to automate these actions and do the work for our customers. Fourth, Credit Karma. We're testing GenAI to help our customers find the products that are right for them in a highly personalized way. For example, based on our research, prime members spend an average of five hours online comparing credit card benefits. With our members' credit data and spending history from accounts they choose to link to Credit Karma, we can use GenAI to help members select the right credit card for them optimized based on their personal spending history. This is designed to increase engagement with our members and help them improve their financial health and drive financial success. These experiences will be rolled out in the coming months. We are excited by Intuit Assist's early progress. It will change our relationship with customers as we move from a transactional workflow platform to a trusted assistant that our customers rely on daily to power their prosperity. We believe Intuit Assist will lead to higher frequency of engagement and monetization across the platform. Let me now highlight progress across two of our five big bets. As a reminder, our five 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 fourth big bet 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. In payments, our innovation continues to drive digitization from creating an estimate to invoicing a customer to getting paid to paying a supplier. Today, easier discovery, auto-enable payments, instant deposit and get paid upfront are all helping drive adoption of our payments offering. Total online payment volume growth was strong in the quarter at 21%. We're also making good progress digitizing B2B payments to accelerate and automate transactions between small businesses and ultimately improving their cash flow. We made our bill pay offering widely available to customers during the quarter. While it's early, we are seeing mid-market customers choosing the paid subscription offering at approximately 2x the rate of non mid-market customers, indicating this paid offering is resonating with larger customers. Turning to Mailchimp. We are well on our way to becoming the source of truth for our customers to help them grow and run their business. As I shared earlier, we're rolling out several features powered by Intuit Assist in time for peak holiday season for many of our customers. Let me highlight two of these impactful benefits designed to help our customers grow their revenue while saving time. First, AI-driven audience segmentation, which allows small businesses to target specific audiences. Many customers don't use audience segmentation today despite the fact that it can drive up to 60% lift in average order revenue or average order value over 12 months. With Intuit Assist, a customer can use conversational language to more quickly build segments and use them as a part of a marketing campaign. Second, AI-powered marketing automation, which are automated workflows that help small businesses reach their customers in uniquely tailored way. Today, many of our customers don't use marketing automation because they are time consuming the setup even though they can help them drive higher revenue. With Intuit Assist, Mailchimp creates marketing automation, which can easily be turned on and e-mail content can be generated and edited. Our fifth big bet is to disrupt the small business mid-market representing a TAM of 1.7 million customers, 800,000 of which are already in our franchise, but using a core QBO or desktop product. Online mid-market customer and revenue growth remained strong and we are driving increased adoption of QuickBooks Advanced, payments and payroll, resulting in ARPC expansion as we serve these mid-market customers with a full ecosystem of services. We are proud of our innovation and the impact that we're making on our customers' lives. We also continue to make an impact on the communities that we serve. This quarter, we launched Intuit for education, a new financial literacy program to provide Gen Z and Gen Alpha students access to Intuit products and teach some personal and small business finance skills. We also announced the first set of winners of our Coalfield Solar Fund, providing grants in [Seven-Eye] (ph) solar energy projects in coal mining communities to help build a sustainable future. Wrapping up, with our durable AI-driven expert platform strategy and focus on innovating with GenAI across our platform, we are more excited than ever about the opportunity in front of us and our ability to power prosperity for our customers. We are also delighted to be one of the only eight Fortune 500 companies named to Fortune's inaugural top 50 AI Innovators list. With that, let me now hand it over to Sandeep.

Thank you, Sasan. For the first quarter of fiscal 2024, we delivered very strong results that exceeded the high end of our guidance range across all key metrics, including revenue of $3 billion, up 15%. GAAP operating income of $307 million versus $76 million last year. Non-GAAP operating income of $960 million versus $662 million last year, up 45%, GAAP diluted earnings per share of $0.85 versus $0.14 a year ago and non-GAAP diluted earnings per share of $2.47 versus $1.66 last year, up 49%. I am pleased with our early momentum this fiscal year. Turning to the business segment. Small Business and Self-Employed Group revenue grew 18% during the quarter, driven by online ecosystem, which grew 20%. Our results demonstrate the power of our small business platform and the mission-critical nature of our offerings, which continue to resonate with customers as they look to grow their businesses and improve cash flow in any economic environment. with the goal of being the source of truth for small businesses, our strategic focus within a Small Business and Self-employed group is threefold, grow the core, connect the ecosystem and expand globally. First, we continue to focus on growing the core. QuickBooks Online’s accounting revenue grew 19% in Q1, driven mainly by customer growth, higher effective prices and mix shift. Second, we continue to focus on connecting the ecosystem. Online services revenue grew 20% in Q1, driven primarily by Payroll, Mailchimp, Payments, Capital and Time Tracking. Within Payroll, revenue growth in the quarter reflects an increase in customers adopting the payroll solutions and a mix shift towards higher-end offerings. In Mailchimp, revenue growth was driven by higher effective prices and paying customer growth. And within Payments, revenue growth in the quarter reflects ongoing customer growth as more customers adopt our payments offerings to manage their cash flow as well as an increase in total payment volume per customer. Third, we continue to make progress expanding globally by executing a refreshed international strategy, which includes leading with both QuickBooks Online and Mailchimp in established markets, and leading with Mailchimp in all other markets as we continue to execute on a localized product and lineup approach. On a constant currency basis, total international online ecosystem revenue grew 16%. Desktop ecosystem revenue grew 14% in the first quarter, and QuickBooks Desktop Enterprise revenue grew in the high single digits. We are more than two-thirds of the way through a three-year transition for customers that remain on our license-based desktop offering to a recurring subscription model. In conjunction with our business model transition, we also raised prices across multiple desktop products in October, consistent with our principle to price for value. Looking ahead, we expect continued strong desktop ecosystem to revenue growth this year as we complete the remaining part of the three-year transition. Our focus is to continue innovating across our online ecosystem and to help our desktop customers migrate seamlessly to our online offerings. We continue to expect the online ecosystem to be a growth catalyst longer term. Moving to Credit Karma. Credit Karma delivered revenue of $405 million in Q1, down 5% year-over-year. We saw partners taking a conservative approach to extending credit in both personal loans and credit cards during Q1. We -- This performance was consistent with our expectations and a prudent approach to guidance given the uncertain macroeconomic environment. On a product basis, the decline in Q1 was driven primarily by macroeconomic trends across personal loan, auto insurance, home loans and auto loans, partially offset by growth in credit cards and Credit Karma money. Shifting to the consumer and ProTax groups. Consumer Group revenue was $187 million and grew 25% in the quarter and ProTax revenue was $42 million and grew 24%. During the quarter, we saw stronger-than-expected TurboTax return volume from states, both with and without extended tax deadlines and strong performance in share of total returns during extension season. As Sasan shared earlier, we are excited about our innovation across TurboTax. The multiple experiments we ran during the extension season, bolster our confidence in our game plan to win this coming tax season. Now let me briefly touch on our financial principles and capital allocation. Our financial principles guide our decisions that remain our long-term commitment and are unchanged. We finished the quarter with approximately $2.3 billion in cash and investments and $5.9 billion in debt on our balance sheet. In September, we raised $4 billion in secured -- sorry, in senior notes to repay the outstanding balance on an unsecured term loan. These notes carry a weighted average coupon of 5.29%, approximately 1 point lower than the term loan rate at the end of Q4. As a reminder, during Q1, we made tax payments of approximately $710 million that were deferred from fiscal 2023 due to the IRS disaster area tax relief. We also repurchased $603 million of stock during the first quarter. Depending on market conditions and other factors, our aim is to be in the market each quarter. And lastly, the Board approved a quarterly dividend of $0.90 per share, payable on January 18, 2024. This represents a 15% increase versus last year. As I stated earlier, I'm pleased with the early momentum we're seeing in fiscal 2024, highlighting the strength of our platform within the uncertain macroeconomic environment that is consistent with our expectations. We have a proven playbook and a track record of managing for the short and the long term, including controlling discretionary spend to deliver strong results while investing in what is most important for future growth. Our goal remains for Intuit to emerge from this period of macroeconomic uncertainty in an even greater position of strength. Moving on to guidance. We are reaffirming our fiscal 2024 guidance. This includes total company revenue growth of 11% to 12%, GAAP operating income growth of 15% to 18%, non-GAAP operating income growth of 12% to 14%, GAAP earnings per share growth of 11% to 15% and non-GAAP earnings per share growth of 12% to 14%. Our guidance for the second quarter of fiscal 2024 includes revenue growth of 11% to 12%, GAAP earnings per share of $0.62 to $0.68 and non-GAAP earnings per share of $2.25 to $2.31. As a reminder, we are taking a prudent approach with guidance given the continued macroeconomic uncertainty. You can find our full fiscal 2024 and Q2 guidance details in our press release and on our fact sheet. With that, I'll turn it back over to Sasan.

All right. Well, thank you, Sandeep. And to wrap it up, we are confident in our AI-driven expert platform strategy and progress across our five big bets and creating a future of done for you with a gateway to human expertise. We believe this will change our relationship with customers, becoming their trusted adviser, leading to higher engagement and monetization. The combination of our assets and our strategy creates a growth flywheel for Intuit to accelerate at penetrating our $300 billion in TAM. With all of that said, let's now open it up to your questions.

Thank you. [Operator Instructions] Our first question will come from Raimo Lenschow with Barclays. Your line is open.

Perfect. Thank you. Sasan, on the AI strategy, like obviously, you have like one -- it seems like one big platform that is driving it. Like can you -- what's the kind of opportunity to kind of learn from one segment and use it in the other segment? And as part of that also, like are you impacted by the chip shortage? Will that kind of impact the rollout for you? Thank you.

Yeah. Thank you for your question. And I actually think it's a really interesting question that you're asking in terms of how are we learning across platforms. The short answer is we capture best practices and share the insights on a daily basis across our teams. And in fact, I'll just use our staff as an example. We get weekly slacks with documents that share the best practices, the progress that has been made and how that informs the next week across each of the platforms. And we spend 80% of my staff meeting actually doing product reviews of Intuit Assist. A big large part of it is what the key best practices are, learnings are. And I would tell you that there's a lot of commonality in themes across our learnings across the platform, which actually is simply putting us in a position to accelerate our pivot and our progress and innovation and the timing of going GA across the platform. To your second question, no, we're not impacted by the chip shortage. It does not at all impact our launch plans.

Okay. Perfect. Congrats. Thank you.

Thank you.

Our next question will come from Keith Weiss with Morgan Stanley.

Excellent. Thank you for taking the question guys, and congratulations on a really solid quarter. Two questions, one for Sasan and one for Sandeep and really digging into what I think were some of the bigger surprises in the quarter, Sasan, in this environment, I think we're surprised to see strength in a marketing platform like Mailchimp and you called that out as part of the strength in online services. Do you think that's more of an Intuit sort of independent factor of repackaging, marketing more aggressively distribution? Or is it -- the market is better than we expect? And then for Sandeep, operating margins were really strong in the quarter. Any one-time items or pull forward expenses or push out expenses that we should be mindful of in terms of why that type of operating margin performance isn't going to be reflected in the rest of the year? Thank you.

Thanks for the question, Keith. I'll take your first one. What you're seeing from us in Mailchimp is entirely execution. We're not getting tailwinds from the macro environment. And as I mentioned, when we closed the acquisition a while back, that our biggest opportunity was to be clear about our product improvements, our lineup and to be able to create one growth platform, develop strength internationally and go to mid-market. And by the way, we've made a lot of progress in all of those areas. We still have a lot of work ahead of us, to be clear. But everything that you're seeing is based on our execution and no macro tailwinds.

And on the margin question, Keith -- on the margin question, let me start by reiterating our commitment to having our expenses growth lower than revenue and in essence, delivering our margin expansion and operating leverage, which is something that we hold dearly and our guidance of 40 to 60 bps expansion for the year reflects the discipline that we have as a management team. On the margin for the quarter, I would share that, I won't get too fixated on the quarterly number. We had some expenses that moved out of the quarter into later parts of the year, including some marketing expenses. And as I shared during the prepared remarks, we are committed to our full year guidance on our operating income. So that's what I would guide you and the teams towards.

Excellent. Really nice job guys. Thank you.

Thank you.

Our next question comes from Siti Panigrahi with Mizuho.

Thanks for taking my question. Sasan, I wanted to ask about the health of small business. Where do you see right now, strength and weakness in this environment?

Thanks for the question, Siti. As you know, we've been in this macro environment for some time now. And the small businesses that we serve are resilient for a couple of reasons. One, they're on our platform. And by digitizing what they do, which is how they grow customers and managing their cash flow, they are far more resilient and as we've shared before, anybody that's on our platform is nearly 20 points higher in their success rate than those that are not on our platform. So we are part of sort of the health that we're experiencing on our platform. With that as context, I would just share a couple of data points. One, the number of companies and the number of employees that our small businesses are hiring still remains strong. Two, our total online payments volume grew 21%, which means that our small businesses are continuing to be competitive. and -- and serving their consumers. I also remind us, by the way, I think, a year ago or more, that growth was in the 30% plus. And so we have seen an impact, but just our overall platform is very resilient. And then the last thing I would say is that the cash reserves of our small businesses is 90% of where it was this time last year. However, it's 128% of where it was pre-pandemic. So their cash flow is stronger than several years ago, but 10% down from last year. And then very specifically, as you know, we serve service-based businesses, which is about 70% of the market. We're not concentrated in any one particular area. But you'll see place things like auto repairs and -- that are doing well, professional services that are doing well. But just like pure construction, those that do lending not doing well. So there's sort of ups and downs across the small businesses that we see. But in aggregate, the health comes from the numbers that I shared with you.

Thanks for that color, Sasan.

Yeah. Very welcome.

Our next question will come from Alex Zukin with Wolfe Research.

Hi, this is Allan Verkhovski on behalf of Alex Zukin. Thank you for taking the question. QuickBooks Online accounting growth decelerated another 3 percentage points this quarter. With respect to your growth drivers, is there anything that got meaningfully worse in the quarter? Or something that is worth emphasizing to investors? And that will be helpful for thinking about what growth could look like for the rest of the year.

Yeah, that was really driven by a larger price increase last year versus this year. That was really the only -- the driver. We liked what we saw in terms of our acquisitions, our retention. So that's really the variance.

Okay. And as just a quick follow-up, would you be able to step through the monthly linearity that you saw in Credit Karma through the quarter and in November? Thanks.

Sorry, can you ask your question again?

Just on the Credit Karma, thinking about the linearity of the business through the quarter and November, I was wondering if you could just kind of talk through on a monthly basis what you saw in the underlying trends for Credit Karma?

Yeah. Well, I'll answer your question in two ways. One, as you heard in our prepared remarks, we saw and we anticipated further tightening by our partners. By the way, it happened exactly the same time last year. And so we expected that as a -- our partners prepare for the end of the fiscal year and next year, there would be some further tightening, and that's really what we saw. And that was included in our expectations and in our guidance as we thought about the year. That's number one. Number two, there -- not everything is linear because it depends on the number of days like a month like November based on in the US, based on Thanksgiving week, the number of days that people take off that actually impacts certain behaviors. And so there is no linearity. But the quarter just in total was in line with what we expected.

Thank you.

Yeah. Very welcome.

Our next question will come from Alex Markgraff with KeyBanc Capital Markets.

Hey, thanks for taking my question. Yeah, maybe just be curious to understand, Sasan, as you've done some of the testing around Intuit Assist across product categories, has there been any sort of price testing involved in that as well? And how well received has that been if so?

Yeah, sure. Let me answer your question in two ways because I think they're -- it's a great question, and it's connected. First of all, the biggest insight and learning that we have had is, it's really important to have embedded benefits where the customer is doing the work versus sort of something on the side where the assistant is there to help the customer. So what I mean by that is while a customer is looking to build a marketing campaign right within the flow, we, in essence, help them with the audience they should segment, the audience they should target and then we will build their marketing campaign for them, but with them in complete control. So that's a really -- it may sound really obvious, but it's a really important learning, which, by the way, translates to also what we learned in tax, which is within the flow of helping a customer understand their money outcome, helping them understand and doing accuracy checks for them. And if they miss something, calling it out so they can address it right then and there. Those are examples that, by the way, is consistent across all of our platform workflows where embedded matters a lot. The second is depth, depending on the customer and what they're trying to do, there's a level of depth that they want to go to. So an example is within QuickBooks, one of the things that we've been testing and it's been testing really well is a business summary. And the business summary, in essence, provides what we believe are the most important things that, that customer should know and the customer that engages with those business insights and ultimately, will create reports or ask more questions. What we've learned is we're not building propensity models in terms of the timing of when to connect them to an expert. That's a monetizable event for us because if not, you can go on and on having a Q&A and ultimately not get to the benefit as quickly as possible. So those are major insights and learnings and those insights and learnings have led to how we're thinking about monetization. In the case of Mailchimp, having GenAI SKUs based on the things that we can do for customers automatically on their behalf. In the case of QuickBooks and by the way, TurboTax it's a monetizable event because it's a gateway to human expertise and expert help. And then we will be testing GenAI specific SKUs also in QuickBooks. So those are illustrative examples of based on the benefits that we're learning about what's important to customers, that then informs how we think about price testing. And so far, we're pleased with what we're learning and how fast we're pivoting as a company.

That's great. Thank you, Sasan.

Yeah. Very welcome.

Our next question will come from Steve Enders with Citi.

Okay, great. Thanks for taking the question here. I guess I'm going to ask on the tax business, what you saw with some of those newer product initiatives and maybe what kind of drove the strength there year-over-year and the share gains with some of those newer initiatives?

Yeah, sure. Let me answer your question on two dimensions. One, there was a macro element, which there were just more filers in the extension season than we anticipated, both by the way, states that extended and states that did not extend. And these are more complex filers and it's actually our sweet spot. It's why we were able to take share in this extension season. And so that's one element of what drove our better-than-expected results. The three areas that we're excited about, these have been durable priorities where we did a lot of tests and experiments and got a lot of green shoots and learnings that will lead into this coming tax season, it's Credit Karma platform, it's TurboTax Live and its Intuit Assist. And I'll briefly touch on each of them. Within the Credit Karma platform, we have more seamlessly built out the tax experience, whether you want to do it yourself or you want somebody to do it for you. And we've been -- we've developed very compelling SKUs within the Credit Karma platform, which having the opportunity to serve 42 million monthly active users that engage five times a month, was not only a great product, but a great set of SKUs. we saw green shoots and we're excited about that as we look at. The second is TurboTax Live. We expanded the scale of our data, AI and expert network. What that means is, and I'll just point out in two areas. One is the fact that for many customers that want to hand off all their taxes to us, we can get their taxes done within an hour. And that's a very big deal to be able to engage an expert, have your data available and get their taxes done in one setting and then also being able to serve business tax customers, which we'll be launching at scale. Those were areas of green shoots. And the last is Intuit Assist. Two big areas. One is accuracy checks and making sure that in place, we help the customer, in essence, correct something that we believe is a mistake. That's a big conversion driver, by the way. And then the second is just explaining refunds, explaining their money outcome, which is all done and driven by Intuit Assist leveraging our knowledge engineering capabilities and our GenAI capabilities. So those are the three things along with the macro where we saw green shoots that give us a lot of confidence as we head into season.

Great. Perfect. Thanks for taking the question.

Very welcome.

Our next question will come from Brent Thill with Jefferies.

Hi, thank you. This is [indiscernible] for Brent. First question on Mailchimp. Wondering if you could share some color on how it's doing in US versus international? And I don't know if you could talk about also about cross-selling synergies with the rest of the small business platform. And second, any update on how the native bill pay is ramping? Thank you.

What was your last question, bill pay?

Yes. On bill pay.

Yeah. Got it. Thanks for the question. So I'll start with Mailchimp. As we talked about, one of our top priorities includes international. We've spent quite a bit of time and investment in translating to local languages, building out a team that can focus on EMEA and third, making sure that we've got the right pricing lineup and go-to-market plan. And we're executing against that. We like what we see. And it's contributing to the numbers that we reported. And I would say, for us, it's the balance of focus between US and international. We see an enormous opportunity in US and in international. So we have the right balance focus as we think about the geographies. The second, in terms of cross-sell as we shared at Investor Day, we are a big part of the thesis behind the acquisition was to create one growth platform. And what we shared at Investor Day was that we are building an AI native CRM within the QuickBooks platform. We're continuing to make progress in testing and learning and pivoting to get the product market fit. When we get the product market fit. That's really where the cross-sell takes place. We've not assumed or anticipated any contribution from that in our guidance this year. But it's a very important long-term strategic priority. It's the reason why we acquired the platform is to ultimately have one growth platform where you can grow your customers and manage our cash flow all in one place. So that's on the Mailchimp front. On Bill Pay, we're pleased with the fact that we're GA and we -- and as I think noted earlier, what we're seeing with our mid-market customers is -- mid-market versus non-mid market customers, there's a 2x increase in those that are taking the subscription, the paid subscription. So that just means that we're adding value. We also have work ahead of us in Bill pay, things around batch payments, faster funding, all the things that we know we have to have. It's on our roadmap, and it will be launched in the future. So along with the fact that we're GA, we're clear on what the gaps are and what -- and it's on our roadmap, we're working feverishly to really be able to digitize B2B for our customers because we believe it's a big opportunity for our customers to improve their cash flow and a big growth opportunity for us in the long term. So that's the progress on both fronts.

Great. Thank you very much.

Yeah. You're very welcome.

Our next question comes from Brad Reback with Stifel.

Great. Thanks very much. Sasan, as you think about the mid-market opportunity for the QuickBooks and the online ecosystem, given the value prop, is it easier to take share during difficult economic times because of that value prop? Or are customers just hesitant to move and wait for the economy to get better before they'll make a back-office switch? Thanks.

Yeah, great question. I'll share two different perspectives in terms of what we're seeing. The first one is, it really doesn't matter what the economic environment is. If it's great, they don't behave differently. If it's challenging like it is now, they don't behave differently. We certainly don't see them -- any of our customers wanting not to switch because the economy is not good, which leads to the second point I wanted to make. So the headline on the first question is, it's not a tailwind or a headwind, whether it's good times or bad times. However, what I would say is we see some green shoots that's early when we do bundling for our customers. When we go to our customers and share with them that they can digitize all of their payments, all of their payroll and the benefits that it will have for our customers from a cash flow perspective, we see that having traction with our customers. And as we've continued to build out our sales team, we're doing, I think, a far better job of account management. And this is an area where if you look back five years ago, we didn't have the kind of value-added account management teams that we're building now where we're engaging our customers, they’re are hearing from us, right? We've been entirely a [self-sell] (ph) platform. And now that we're engaging our customers, a lot of them are starting to realize, wow, you have payments, I didn't realize you have payroll. I didn't you have time tracking. I didn't realize your own Mailchimp. And that is an opportunity for us to drive an increased penetration in wallet share. So I share that just to say that's where we're getting traction. That's where we're seeing progress, and that's where we see an opportunity as we look ahead.

And Brad, what I'll add is beyond just the QuickBooks side, we also are seeing strong progress on the Mailchimp side in terms of mid-market where historically before we acquired the company was not a focus and now with some of the stuff was Sasan mentioned, including account management, better onboarding, we're seeing better customer acquisition on the mid-market as well as better retention year-over-year in the mid-market, so that opportunity extends beyond just the QuickBooks for us across the entire platform, including Mailchimp.

Excellent. Thank you.

You're very welcome.

Our next question will come from Kirk Materne with Evercore ISI.

Yeah. Thanks very much and congrats on the quarter. Sasan, I was wondering if you could just talk about the -- I realize you have a vast and sort of wide open TAM in your markets on the small business side. But I was kind of curious if you're seeing any evidence that small businesses are looking to consolidate multiple technologies onto one platform. You all obviously offer a lot both on the front office and as well in the back office. Are you starting to see any of that sort of activity happening now that you're sort of integrating Mailchimp with QuickBooks? I realize it's early days, and you need that to happen to be successful. But I was just wondering if you're seeing any evidence of that yet? Thanks.

Yeah, Kirk, the short answer is, it's early, but we're seeing green shoots, and it's primarily because of what I shared just a moment ago, as we're building out our account management team across Mailchimp and QuickBooks platform, as we're talking to our customers, and in fact, I personally spoke to three of them in the last month that are very large mid-market customers, two of them in LA and one of them in Miami. And it actually starts with -- they didn't know even know we have, Payments, Payroll. They didn't even know we're the same company that owns Mailchimp as an example. Some of them will use Mailchimp but they'll use QuickBooks. Some of them use our Payroll, but don't use our Payments and so the thing that we're inspired by and where we believe there's a big opportunity is the fact that we actually have a huge differentiation, which is around data, AI and network of experts and an ecosystem of applications. And the applications are all the things that a small business would want. And our account management team is really discovering for us the fact that our customers just don't know. And so therefore, we engage them, build relationships and talk about the benefits of all of our applications and then what could be done based on all of the capabilities that we have around AI and how that could fuel their success. That's what's really opening up doors for us is just the unknown. And that's what we're excited about as we continue to accelerate building out our talent management team. So I think the long answer to your short question is, yes, customers would prefer to be on one platform. And what we're learning is a lot of customers are not because they just actually don't even know what we do holistically, and that's the mission that we are on.

Thank you so much.

Yeah, you're very welcome.

Our next question will come from Mark Murphy with JPMorgan.

Hi, this is Arti Vula on for Mark Murphy. Congrats on the quarter and thanks for taking the question. I just wanted to touch on QuickBooks Advance. You mentioned at your Investor Day that the success of that product is more about just the go-to-market versus kind of a new product or feature development. So can you kind of discuss progress from your perspective on that front? And then in terms of the mid-market, is that -- can you talk about how that's faring in terms of overall health? And maybe compare that to the lower end of the market? Thanks.

Yeah, sure. Thank you for your question. First of all, just to play back what I shared at the Investor Day, I said if I had to pick one that was the most important lever going forward, it's go-to-market. We are continuing feverishly to build out the product capabilities that we need on the platform because we don't plan to stop at 100 employees. Our plan is to serve mid-market customers over time that are far larger than 100. However, in the near term, sort of near and midterm, the biggest needle mover is go-to-market. And I would tell you that it continues to be bringing on the right skill sets of talent in sales and marketing. And so even in the last, I think, couple of quarters, it's been -- we've hired a very strong marketing leader. We're -- we've hired a very strong sales leader. We're hiring a couple of more sales leaders. We're bringing on account managers that have a lot of skill in selling and nurturing customers. Because when we think about mid-market, it's really about a lot of the examples I was using earlier, which is really helping customers understand they can run their business in one place on one platform and the benefits of doing so and what it will mean to their cash flow and particularly helping them understand our roadmap as a company and what we are doing with Intuit Assist, which is really creating a feature of done for you with always having a gateway to human expertise. And that's enticing for mid-market customers. So net-net, that's the way I would describe our focus area. But we want you to walk away to be we're continuing to invest in the product and in the platform because that's a big opportunity in the long term as well. In terms of health, I think it really -- it comes down to the sector, if you just use US as an example, comes down to the state, the sector that you're in. Generally speaking, based on our history looking backwards, larger, more tenured customers can withstand more of economic turmoil versus someone that literally just started out their business and they only have $100,000 in their savings and if that $100,000 is spent, then they're done, right, they go bankrupt. So it really depends on the size of the business, how long that they've been in business and then the segment that their business is in, all those variables play in. I wouldn't say younger ones are more or less healthy and the older ones are healthier. I would just say it depends on the components that I just described a moment ago.

Perfect. Thank you.

Yeah, very welcome.

Our next question comes from Kartik Mehta with Northcoast Research.

Good afternoon. Sasan, maybe we've talked a lot about the Full Service business. And as you look at that business and all the learnings you've talked about, how will you define success for that business at the end of the tax season? Is it the number of returns of process? Is it -- I guess, what are the metrics that you will use to figure if you had success or not?

Yeah. Thanks for your question. First of all, I'll start with something that's really, really important, and that is the investments that we've made over the years where TurboTax is now one platform, and that platform is built on an incredible rich sort of data layer, AI layer and expert network. and now an ecosystem of apps, which is consumer app and business taxes. And the reason I start there is because now we have the ability in one place for you to do your taxes yourself, get help with an expert that's matched specifically to your needs and we can do your taxes for you. And in fact, you can request the same person to do your taxes for you year in and year out and provide advice along the way. The reason I started with that foundational element that we are one platform is as we go to market and start talking to customers about the notion of that choice with us, and we can do everything for you, it actually creates a halo effect. And so what we will look at are metrics around number of customers, conversion, retention, ARPC across the entire franchise. And we also look at it by area. So very specifically, Full Service plays a very important halo effect because it's an element of confidence. It's actually knowing that if I want to hand everything off to someone that Intuit can now do it for me, whether it's virtually or now locally, if I want to connect to an expert. But ultimately, the metric that will matter the most for Full Service is going to be ARPC because it's not just the numbers game. It's the value of these customers. We, of course, will measure a number of customers and ARPC, but ARPC will have the largest impact to our outcomes this year and in the future because now we do your taxes for you as a consumer and as a business.

Perfect. And Sandeep just one quick question. You talked about not wanting to focus on one quarter for margins. But I'm wondering, as you look at the year, any differentiation or movement in marketing especially as the tax season unfolds?

Kartik, we are continuing to invest across our product, across the Big Bet, across GenAI, across marketing and particularly as we go to Full Service, we want to make sure that we are expanding our brand's equity beyond the DIY category to the Full Service. But I would not expect any meaningful shift in the seasonality of our marketing spend, which I think is the question that you're asking. So -- and I feel pretty good about the campaigns and the investments we've been making across the go-to-market motion across tax as well as the other segments.

Thank you. Yes. That was the question I was asking. I just did a poor job of it. So thank you.

Thank you.

Our next question will come from Brad Sills with Bank of America.

Great. Thank you so much. Another question here on TurboTax as you're kind of heading into the next tax season here. Now that the focus is more on full service and TurboTax Live, is there something different about the end user, the end consumer filer that you're targeting now, say, going after that CPA segment that's different from traditionally, where you've gone after that tax store, you've had tremendous success there against tax stores. Now that CPA segment. Is there some difference there? And is there some learning from last year in go-to-market that you can apply this year to gain more traction there at that end of the market? Thanks, again.

Yeah, Brad, thank you for your question. And it's actually spot on the way you asked it, and that is we view our opportunity as nearly 100 million customers that are either consumers, which is about 88 million of the 100 million and the rest are our business customers, small businesses. We view our opportunity going after them, which is a combination of small pros, mom-and-pop shops, stores is actually a smaller part of the whole pie. And in the last, I would say, 18 months, we've experimented a lot with how do we go after these customers, how do we raise awareness, how do we get them to consider and ultimately, how do we ensure that when they come to our front door, front door is a service front or not a software front door because of the behaviors that they have. And a lot of those both go-to-market and platform insights and learnings is what has informed a number of things that I touched on earlier that we experimented with and ran test in the tax extension season and what we feel good about going into this coming season. So it was a long answer to your question, but yeah, a lot of those insights have informed our game plan because we're not just the software platform, we're a software and service platform, given who we're focused on serving. And by the way, while I have the floor, the same thing applies to small businesses as we think about what we're doing to embed QuickBooks Live in our offering.

Wonderful. Thank you, Sasan.

Yeah. Very welcome.

Our last question will come from Scott Schneeberger with Oppenheimer.

Thanks very much. I have a follow-up for Sandeep and then one for you, Sasan. Sandeep, on the margins in the quarter, you cited marketing, which I assume was predominantly that. Was there anything else in the quarter that was beneficial? Or was that the lion's share? And then you mentioned spread over the balance of the year and in Kartik’s answer, I felt you kind of were speaking to TurboTax but it looks like you're expecting a bit of a down quarter on margin in the second quarter. So we'll -- and it seemed like it was mostly in small business, the real benefit in the first quarter. So will that end as of second quarter? Is that truly something that is going to tail off in the second half as well? And then I'll come back to the follow-up. Thanks.

Sure. Thanks for the question, Scott. The way I would think about the Q1, we had multiple expenses that moved out of the quarter into later parts of the year, and marketing was one of those expense lines, and I would not say that marketing was the lion's share of it. There were several things that we expected will hit us in October that got pushed out, but I would definitely not take away as marketing being the lion's share of items that got pushed out. And you're right, some of those will get caught up, and we'll have those expenses in Q2 and so once you look at Q1 and Q2 spent together, those things will start normalizing out. Again, I'll bring you and the team back to the fact that you should all be focusing on our margins on a full year basis. In any given year, we could have different expense trend lines. So again, we remain confident in our guidance for the full year across the margins for the company.

Thanks. Appreciate that. And Sasan, we're pretty well along now into Karma Guarantee. Would love just to get an update on that and Credit Karma was a bit stronger than we had anticipated in the quarter. Is it something that could potentially inflect a positive year-over-year growth in the fiscal first half? Or is that something that you'd expect more in the back half? Thanks.

Yeah. Thank you for your question. First of all, I'll start with, based on our insights and learnings from last year, we really took an approach to be intentional and prudent about the guidance that we provide, which means taking into account not only a macro environment, but also not just banking, a bunch of initiatives in the back half of the year. We're aggressive in the initiatives that we're working on, but we did not make them into our guidance because we just wanted to be thoughtful and prudent. With that as context, I would -- I love your question about Karma Guarantee because we haven't explicitly been talking about it and it's not because it's not important anymore. It's because of the way we are now thinking about it and incorporating it into several areas. One is you've heard us talk about the entire app redesign, which is far more focused on putting the right benefits in front of the customers at the right time, which we talked about at Investor Day, that coupled with Intuit Assist. And the example I used in earlier was the fact that prime customers spend literally four or five hours doing comparison shopping between credit cards because they can get whatever credit card they want, but they're looking for the perps. Now we can automatically do that for them based on all of the data and everything that we know about them. So you combine the app redesign with Intuit Assist and our focus on prime customers. Karma Guarantee plays an important role helping customers, particularly those that have a hard time getting access to financial products, guarantee them that if they choose what's in front of them that they're going to be approved for it or we'll put $50 in their bank account. So the combination of those things is what the set of initiatives are that we are focused on that we expect will drive engagement, higher frequency and monetization. And we've not included that in our guidance, but it's very important for the future growth of the business. Not only that, and I'll end with this, tax is an enormous part of it. We've now spent several years thinking about how does every interaction and move a customer mix in the Credit Karma platform? How does that inform what that will mean to their taxes. So that when it's tax time, it's a much more seamless experience along with compelling offers. So taxes now, as we look ahead, such an important part of the life of the member and our focus area within Credit Karma. And all of those combined is what we have high hopes for in the future. Again, not in our guidance but important for the future.

Excellent. Thanks for all that.

You're very welcome.

All right. Thank you. Ladies and gentlemen, there are no -- go ahead, sir.

Sorry, go ahead.

There no further questions, so you may proceed with any additional or closing remarks.

Sorry to have interrupted you. I was just going to say thank you for all the questions, and we look forward to hearing from everyone next quarter. Until then, be safe. Bye, everybody.

Ladies and gentlemen, thank you for participating. This does conclude today's conference call, and you may disconnect at this time.