Should we get started?
Yes, I'm gonna feel at home here, use the shell.
Yeah, yeah, yeah. No, make yourself comfortable. Okay, perfect. Hello, everyone, and thanks so much for attending this event. If you don't know me, my name is Taylor McGinnis. I'm on the software team at UBS, and this session is with Intuit, and we have Marianna, who is the new head of the small business and self-employed segment. So Marianna, thanks so much for coming.
Thank you for having me. I'm super excited.
Yeah. Maybe, Marianna, I think a good place to start, since I know you're not new to Intuit, right? You've been at Intuit for a while. You were in the CTO role, but I think you're about three months into this new role. So would just love to, you know, hear where your key focus areas are, where your priorities are. Should we anticipate, you know, any changes under your leadership and how things could potentially differ?
Fantastic. Maybe I can also take the opportunity to kind of tell a little bit about myself-
Yeah
... and what I've been doing at Intuit.
Absolutely.
But I've been at Intuit for over six years, and I started actually in this business unit, running engineering for the business unit. Then for the last five years, I was the CTO, Chief Technology Officer of the company, really much involved in our platform strategy, defining it, implementing it, et cetera. As part of being a CTO, I was responsible for our technology strategy and execution, our security, our IT, all of it, and including our SBSTG, or our small business and self-employed business unit engineering. So, like, all of it is very familiar to me. Also, being part of CEO staff and being part of defining the strategy, so while I'm new to this team, I've been at Intuit for a while, and I'm very familiar with it.
In terms of how where I focus or how priorities might change, I'm actually gonna say that the priorities at a high level, they're not gonna change. If you don't mind, I would like to iterate some of the big-
Yeah
... big ones, but maybe there's, like, a little bit more color or flavor that I would add with my new hat. So, first of all, several years ago, again, as an executive with leadership team at a company, a CEO staff, we declared five big bets or five priorities, and four of them are very relevant to small businesses and this business unit. Let's start from the first one, which is speed to benefit. This is about data and AI, and how do we get customers fast to their benefit? And what we're more recently focused in small business is generative AI and Intuit Assist. And then big bet two is connecting people to experts, and this is our Live services is another big bet, so I'm gonna continue to focus on that.
Then Big Bet four, which is being the center of small business growth, which is part of the reason why we acquired Mailchimp, because we were missing that as an ingredient.
Yeah
... as well as our money services, like, account receivable, account payable, capital, and so on. Last one is to disrupt the mid-market, small business, and this is going after, like, bigger companies. Of course, one of the things I'm excited about is all the connection between the... all of these. But if I can just put then where you, where you're gonna possibly see changes-
Mm-hmm
... is obviously with the first one in AI. I'm very familiar with the space, and I plan to push harder on anything that has to do with AI and generative AI, so I'm excited about that. Already started making some talent changes and some other advancement there. With live services, I see an opportunity, while generically the category remain the same, I see an opportunity to provide expert help across the customer journey and at the right time, you know, like in more places and more expertise. And then in money services, I want us to really have awesome money capabilities because I know that often it's about speed to money for our customers-
Mm
... and going down in the stack and having really great capabilities are really gonna help us.
Yeah.
With mid-market, the thing I will add there is actually my background before Intuit has been in enterprise software, VMware, Ariba, also sit on a board of a known public company. So I'm very familiar with kind of enterprise, and while we are not an enterprise company, I want to draw the distinction. I would see some opportunity to bring some practices in how we go to market, how we sell, how we think about future development.
Mm-hmm.
So those are the areas probably you'll see a more immediate change and where I'm gonna emphasize. And like I said, also in the connection of the ecosystem-
Yeah
... and all of our services together. That was a long answer.
No, that was a great introduction, and I wanna dive into all of those different topics. But maybe before we get there, I think a very topical question amongst the audience here and investors is just SMB health, where this last earnings season, I think you saw, you know, mixed results amongst a lot of different SMB-exposed software companies. But, you know, last night, looking at your guys' results, I know your commentary sounded, you know, more stable, durable. So I'd love to hear, you know, what are you guys seeing on the SMB front in terms of demand? You know, has there been any incremental weakness? And, you know, maybe what are some of the tailwinds that might be offsetting that for you guys?
Yeah, that's a great question. Actually, this was like in the different meetings I had today, was asked multiple times, but I think there's real concern. And I would start from a stat that we are very, very familiar with, which is actually it's very hard to be a small business, and we know that 50% of the small businesses actually fail in the first five years. So the odds are really stacked.
Mm-hmm.
against all the small businesses. And by the way, that stat doesn't change in good times or bad times. It's just hard to be a small business.
Yeah.
We also know that for small businesses that are on our platform, their odds actually jump up, and they have 70% of those are actually succeeding, you know, on this same time frame. So we are very excited about that, and we focused on that.
Yeah.
This is not by coincidence. It's a focus area for us, but it's hard to be a small business. I will also say that since the pandemic, it's been like this kind of like time where different headwinds for small business, and it's been tough for small business, uncertain times, et cetera. We take this into account when we make our plans, and when we give our plans, et cetera. This is something we keep in mind.
Yeah.
Particularly, to your point, we actually just announced our Q1 results this week, and, you know, and they're really strong. We grew 18% in small business. It's very strong. Our guidance remained the same. In terms of where we do see weakness, I would point to two areas. One is when we look at our data and where we see the cash available for-
Yeah
... small businesses, it is 90% of what it was last year.
Mm.
It is still better than what it was during the pandemic, but we see kind of... We do see, like, compared to last year, slight softening for the small businesses. Another data point is we were really proud to say that our payment volume grew 21%-
Mm.
-which is amazing. But again, if you compare it to last year, where we saw, payment volume grow 30%+-
Mm.
That's again, like maybe you could see that there's some weakness there. But all in all, we see still strength, and it's still better than the pre-pandemic. The reason we're still very bullish about what we shared in terms of our expectations is that there's few things that are true for our business. One, it's a very resilient business in terms of the need.
Mm.
So we know that small businesses need our software. It's good times, bad times. It's a very mission critical software. It's less of like: Oh, I have bad time, I'm gonna drop that-
Yeah
... that you know, my financial management and, you know, that the customers don't do that. The other thing that I would say that adds resiliency is the fact that we're a subscription business, so 80% of our revenue comes from subscription business-
Mm-hmm
... which again removes a lot of volatility in our business. So, that's why we feel very bullish about what we announced, and we're seeing still strength in the market.
Yeah, and maybe just to dive in a little bit deeper to that. So I think if you look at the guide that you guys have set out, it seems that in order to, you know, get to the high end of the guide or even like, you know, closer to the midpoint, that you almost have to assume that growth stabilizes, right? In the back half, or I think even, you know, slightly accelerates on the online side. So in terms of like, you know, the trends that you guys are seeing and, you know, how you think about that guide, maybe you can go into a little bit more in terms of like, the expectations that you have for this business. I know you guys have products that are rolling out.
Are there any products that could, you know, like, help some of the momentum in the back half? Maybe you can talk through some of the puts and takes there.
Yes, absolutely. And to your point, our guidance remains 16%-70%, 17% for the year.
Mm-hmm.
And then, and that's kind of like, you know, where we actually see us grow, and that kind of hasn't changed. And we expect like a 10%-20% customer growth, 10%-20% revenue growth. So this is kind of like our expectation in the long run.
Yeah.
That all remain the same. In terms of like where we see the growth, I would say different, and this kind of goes back a little bit to where I talked about our Big Bets and where we focus, but several areas where we see opportunity for growth. First, you mentioned that we do have a lot of services, so obviously we're known for accounting, but we're way beyond where we started several years ago, being mostly an accounting business. We have a lot of added services, from payroll to we talked about money services, payments. We just added Bill Pay-
Yeah
... most recently. We actually just released QB Money, which is an invoicing front door, hoping to catch customers earlier in their cycle and when they need just an invoicing solution. We're very excited about that. And of course, we have Mailchimp, where we're doubling down on that, connecting it to the rest of the ecosystem. And another thing that, we're doing is focusing on, mid-market, where we maybe have less customers, but more, bigger customers that actually need that portfolio of services-
Mm
... that I mentioned. Another thing that I would say is where we uniquely position in the market is the fact that we have a portfolio of services and the fact that it's fully connected, with the data fully flowing, and ease of, not just kind of buy the services but use them. And that's something that, I don't think there's any parallel in the market.
Yeah.
We're gonna continue doubling down, not just on it as a marketing message, but also in how our products continuously just connect and also how you can discover our products more easily from within. Those are some examples, and of course, there's GenAI and-
Yeah
Live and other things we already talked about.
Yeah, that was, that was helpful. So I wanna talk on GenAI. So I know that was the first one that you mentioned, and you're talking about putting more of an emphasis on there. So given your role as the CTO, I'm sure you have a very interesting view on, view on this. So I'd love to hear about the applicability that you see with generative AI within the small business and self-employed segment. And I know, Intuit Assist is still in beta for parts of that, but just in terms of early feedback that you've heard from customers, I know you have some Mailchimp offerings out there as well, too, so maybe you could also dive into those.
Yeah, and it's just like a warning, everything that is kind of related to AI, GenAI or technical AI, can go very deep.
Yeah.
So, you know, feel free to stop me. But, you know, really quickly, first of all, we're extremely excited about generative AI, and I believe we're so well-positioned with everything we've done. Also, while I was in my CTO's seat, with releasing what we call GenOS, or Generative AI Operating System, that allows us to have multiple LLMs. We're actually using best LLM for the, for the needed task.
Mm-hmm.
So we have that. We have ability for our developers to rapidly develop GenAI experiences. So we're, like, very excited about our starting point-
Yeah
... with having data that is well organized, which we know is the precursor for AI, with having knowledge, talent, and the capabilities that are related to AI, and then with how we're approaching GenAI, which is a platform approach, that really gives us scale and just robustness in what we can do. So I'll start there-
Yeah
... with, like, that we're really excited of where we're starting from and how we're able to bring it to bear in our product. In terms of actual examples, let me give you some QuickBooks examples and then some Mailchimp examples.
Mm-hmm.
And I also wanna say, where we at, and maybe this is, like, generically a statement I can make, where we're at with GenAI is that we already releasing these experiences, but the way we release is, like in any software-SaaS software release, where we start small, we learn, we scale, both in terms of number of customers these experience is available to, as well as, you know, how deep we go into the experience and how we learn. So everything that I'm saying, some of it is already released to a subset of customers, some of it is in the works-
Mm-hmm
... and some of it is maybe slightly more like coming, but all of it is real.
Yeah.
You know, so the first thing I would say in inside QuickBooks, we're focused on, new customers as well as existing customers. For new customers, what we really wanna do is really quickly being able to get them to benefit. First of all, onboard quickly, and very quickly get them to benefit because we know that customers that get to benefit fast, that they actually experience the goodness of the platform-
Mm-hmm
... they're more likely to not only help their business, but also stay good customers for us.
Yeah.
So we're focused there. And for existing customers, we're also looking into just generically help them with generative AI. And I'm gonna give you an example where we... A feature we released to a subset of customers called Business Brief, which when they come in into the platform, they're able to generate a Business Brief that provides them with multiple insights about the platform.
Mm-hmm.
We actually initially re-released this with, like, insights, but fairly quickly we realized we can make it super actionable for our businesses. So for example, they might look at cash flow, and we might say, "Hey, have you thought about taking a loan because you see you're gonna run low on cash?
Yeah.
Or have you thought about you have outstanding bills? Have you thought about using our bill pay-
Mm-hmm
... to pay your bills? You know, and or you have you know, invoices that have not yet reached out. Do you want us-
Right
... to help you pursue those invoices," et cetera?
Yeah.
So those are examples that we already releasing to our customers, again, in different phases, and where we bring GenAI to customers. And in the Mailchimp, this is where, like, GenAI is really good with anything that is creative.
Mm-hmm.
It really helps our customers craft with—you know—GenAI in Mailchimp helps it craft different marketing messages, use previous campaigns to construct new campaigns with it-
Mm-hmm
... and then, actually also, suggest action. Like, for example, we can say, "We see how you have abundant carts," or, "We see you have customers that have coming birthdays," and suggest to them where they can be proactive with their customer acquisition. Where we focus with Mailchimp is making sure that we can actually help our customers get revenue.
Mm-hmm.
So that's kind of where we're anchoring on these features, and we're actually able to specify to them: If you do these things, here's the kind of revenue this represents.
Mm-hmm.
So that's kind of very, very benefit-oriented for our customers.
Yeah. All, all super interesting. And then when we think about the, the monetization strategy around this, I think you guys at a high level have talked about that this could be used, you know, to help with the top of funnel. It could be used to as a venue, as you mentioned, with Live, you know, to go into different products as well. But I guess, how are you thinking about, you know, the, the evolution of that? I think at the Analyst Day, it was talked about maybe Mailchimp could be an area where we see some standalone SKU pricing. And two, you know, could this be used potentially as, like, a pricing lever down, down the line?
Yes. To your point, we see indirect monetization with increased customers-
Mm-hmm.
-with increased ARPC, and I gave very concrete examples where, you know, we can say, "Hey, have you thought about using our bill pay? Have you thought about taking capital? Have you thought about hiring an employee? Have you thought about using payroll?
Yeah.
So, like, a very clear way for us to increase usage of our product in a very customer-backed way, which is why we're excited about that. So, increasing customer base, increasing ARPC, to your point, when we're in discussion with a customer, we also wanna say, "Hey, have you thought about connecting to an expert at this time?" By the way, one of the biggest problems big businesses, small businesses face is confidence. They simply don't have confidence or they're not sure.
Mm-hmm.
Sometimes they need that expert touch to give them that assurance or talk to a human, and that's why we're excited about this opportunity of live across the platform and just kind of having that help their confidence, because we know that's a major problem with—for small businesses. So those are all kind of the indirect.
Yeah.
On the direct side, we are gonna possibly explore dedicated SKUs to GenAI features.
Mm-hmm.
But where we are actually experimenting now is in Mailchimp. We have actually those features that I mentioned. In addition, also segmentation, being able to segment automatically your audience and send marketing to specific segments, different automations. All of those features we're actually offering in higher SKUs. So this is an opportunity for us to do a little bit of a shift the mix of where the SKUs are.
Mm-hmm.
That's where we see more direct monetization. We're gonna experiment, learn, and then learn from that to QuickBooks as well as, like, dedicated SKUs. We're also gonna look at what others are doing and where there's traction.
Yeah. Makes perfect sense. Maybe let's shift to another huge opportunity that you guys have, which is in the payment space. So I know bill pay is still relatively new. It only went GA, you know, in the middle of September. But maybe you can just talk about the traction and the adoption that you're seeing there and, you know, what you're anticipating in terms of the trajectory for that business. Like, could this start to be, you know, a material revenue contributor this year, next year? So, one, how do we think about that? And the second part of the question is, I would love to hear where you guys are in terms of building out the product. So have you closed some of the feature functionality gaps with competitors? Where are you in building out the supplier network?
It would be great to get your thoughts there.
Yeah. Bill pay is another area that, you know, kind of, we got to this year finally, because we knew it was a big customer need. And just to kind of give some numbers, which I know I mentioned, like, in a few meetings, is when we look at the bills that are recorded in our system today-
Mm-hmm
... we actually see close to $1 trillion of bills a year. I mean, this is, like, a massive number-
Yeah
... and a massive opportunity. Another thing that we know, and this is generic, is that 80% of bills are still paid with check.
Mm-hmm.
So there is a huge opportunity of moving to more to online ways and more automatic ways.
Yeah.
There are systems where we capture these, and we can actually move into action these. So with this in mind, we released the bill pay feature and the B2B Network, which allowed customers to really quickly pay bills and also, like, you know, submit bills in the network.
Mm-hmm.
Because we can pre-verify, et cetera, all of it is just not just automated, it's just faster-
Yeah
... and just, like, a lot more streamlined experience. So we launched it, and we also announced and did a Bill.com migration for our customers-
Mm-hmm
... with an offering that's a lot more integrated-
Yeah
... and native to QuickBooks. We are seeing traction. We're excited about that. It's early, though, to your point.
Yeah.
There's still a lot of innovation. I just reviewed it yesterday, where we looked at both the numbers of the funnel, the pipeline, and where we see dropoffs, where we see kind of areas where we need to tackle, and what's our roadmap to go after this thing. So it's an area of innovation for us, and it's early, but we obviously see these numbers of $1 trillion, 80% manual checks. So, like, we just think it's a great opportunity. One bright spot that I could share, and I think it was mentioned in the earnings call, is that we actually see for Mid-Market customers, we actually see twice as much choose the subscription offering that we have for bill pay, which is exactly what we want, because this is an offering we made from Mid-Market.
As you can imagine, most of the bills are paid for bigger companies, so we're excited about that. We see traction. There is still much we need to do there. And by the way, our approach there is that for this and other things that we're offering, we have a small tiger team now that can go after this, get feedback really rapidly, address it-
Mm-hmm
... and just, like, innovate really quickly, as opposed to kind of think about really long roadmaps. So we can really test and get traction quickly in the market.
Got it. And that last question might tie into my next one. But earlier, you mentioned, you know, comfort with some of the long-term targets that you guys have out there. If we look at this last year, and I know that there's, you know, macro headwinds at play, but it looked like the QBO subscriber growth, I think, was around 10%. I think the average subscription revenue per customer growth was in the low teens. And I know for both those metrics, your longer-term targets are within the range of 10%-20%. So with, like, some of those metrics at, like, the lower end, maybe you can just talk about some of the drivers that gives you comfort, you know, when you look out-...
You, when you look out and say, "Hey, you know, here are the, like, the areas where you could start to see, you know, more, more momentum or why we could continue to stay above those levels.
Yeah, to your point, our guidance is, you know, and in general is like 10%-20% customer growth, 10%-20% revenue growth, and this is kind of an—obviously, our guidance for this year was 16%-17% revenue growth.
Yeah.
So these are like all kind of within that. Where, let me talk about a few places where we emphasize that we emphasize and gives us confidence. One of them is I talked about the number of services we have-
Mm-hmm.
and the ability for our customers to really use the services that we have, throughout, make it available to them, innovate for each one of them. And, and, you know, so like more of our customers, more of our customers being able to onboard with things like, QB Money.
Yeah.
This ability of like targeting a customer that may be earlier in the cycle, so onboarding customers in different, earlier in the cycle, and then having customers grow to our, full range of services, which we have, many, is, is part of our strategy. And, we didn't talk much about, offering services like QB Live or-
Mm-hmm.
We already talked about that. Talk much about Mid-Market and-
Mm-hmm
... how we're thinking about that segment of customers that are bigger, more complicated, have more interesting payment volumes, more interesting bill pay needs, employee needs. So even more so for that segment of customers, how we go after them and how we're gonna continue, that's another area where we're pursuing both in terms of product innovation and as well as in our go-to-market. So those are some of the examples of what gives us confidence in the continuous growth of customers and growth of like ARPC and revenue.
Yeah. Let's talk a little bit more about the advanced customer base, 'cause I think you guys spoke at your analyst day that that's, you know, growing very healthy in the mid-thirties, and that I know you've also mentioned tends to have a higher online services attached. So any high-level color you can provide on what that might look like today when we look, you know, five years out, how big of a business do you think advanced could be? And any, like, visibility you can give us in terms of what an Advanced customer has on the online services attached, maybe versus some of your other customers.
Yes, and to your point, actually, last year, we said that our Advan customer base grew 35%. We have over 200,000 customers already-
Mm-hmm
... advanced customers. So we're, again, we're like very bullish in this space. We believe we're a big disruptor there. And we're like we wanna. It's a space we're going after. Just a few stats is first of all, there is 1.7 million customers that we will put in the advanced category, which we say they're 10- 100 employees. So there's about 1.7 million businesses that fit into that category. Interestingly, 800,000 of them are already using one of our core services.
Mm-hmm.
So they're already somewhere in our ecosystem. So what our strategy is both going after the ones that are in our platform. They might use one service, but they might not use another, and there might also be a customer that not yet uses even the advanced SKU, right? So they might they need to. We wanna move them to something a little bit more suitable to their size, as well as make sure we introduce more services for them to use, that they, they're able to discover them more easily, and they're able to use more of our services. So that's kind of one area. And then, of course, having go-to-market strategies that help us go after non-consumption today, are basically customers that are not using our services-
Mm-hmm
... or sometimes they're not using any services. The number of customers that actually cobbled together spreadsheets and different kind of tools is actually pretty big. That's another area where we are using more go-to-market strategies to go after them. Even for our existing customers, by the way, we need to have better go-to-market strategies and better way of reaching out to them. We've been, as a company, we've been waiting for years for customers to call us. Now, we're, like, actually in the business where we call customers proactively, or we're allowing them to discover features more proactively. That is relatively new to us.
Yeah.
That's some of the ways in which we're looking at accomplishing traction. I wanna say that it's interesting that another thing where we believe we have enormous strength, maybe like a couple of areas, one is our relationship with accountants, and we're gonna double down on what we're doing there. We just had QBC. In fact, I was just in Vegas, where we had QuickBooks Connect. We had just so much energy from that community and talking to accountants and how we can help them with their customers, making sure they're familiar with the offerings we have, making sure they're familiar with the suite, making sure they understand what we mean by mid-market customers. All of that is area that we can totally do more with, and we are.
So that's kind of one area. And the second one is where I feel like we have a lot of strength that, again, we need to make sure is known, is the fact that we have an ecosystem of services. And you know, the fact that everything is connected, that we have payroll, we have accounting, we have payments, we have all Mailchimp's, all of this is something that we just need to emphasize. We could emphasize a little bit more, and we believe is highly advantageous. Having said all of that, there's other feature function gaps that we need to continue to close to go after the most sophisticated businesses in the categories we define for us.
Perfect. I'll end on one last question-
I love it.
-which is just in terms of price. So price is very topical, is a very topical, part of the, the conversation amongst investors today, and I think this is the third year that you've raised price on QBO and, and some of the online services as well as desktop. So can you just talk about how you are thinking about, price as a lever going forward? Are there features and functionality that maybe you're not monetizing today that, you know, could be an opportunity down the line? And how are you thinking about that as a contributor to average revenue per, per customer as well?
Yeah. Pricing is a lever, and it is a very legitimate way of thinking about what we have to offer. We have actually pretty clear principles about pricing to value.
Yeah.
And one of the things we have done choicefully is to say, and deliberately, is to say, we're gonna continue increase the value of our offering, and we don't necessarily wanna like every little thing to price, but we're gonna put it in the base offering or higher SKUs, and we're gonna continuously price to value. That is one of the principles that guide us. We also have very clear playbooks around pricing-
Mm-hmm.
which is that we, being very clear when we do a change, why are we increasing? What is the customer getting? What is to expect? So we, we just got good at explaining this concept of pricing to value and what they're getting and, and what expectations should be. So, you know, we talked, for example, about GenAI-
Mm-hmm.
-and how some of this might appear in higher SKUs. Well, one of the questions we're gonna have to ask ourselves, does that mean that we're also gonna have to look at adjusting some of the pricing?
Yeah
... you know, of like, those various SKUs? Like, as an example, right? So those are the kind of things, you know, there's nothing concrete, but we'll have to ask ourselves. Or the more we add features, you know, in these different areas, we're gonna ask ourselves that question. I wanna say for desktop, we had slightly different issue there-
Yeah
... where we had a very low price offering that is more than competitive in pricing, and that wasn't healthy, and it was hard to also motivate people to migrate.
Mm-hmm.
It was not price to value. It was very low, and people were motivated to choose that for, like, really, not a good reason. So we slowly raised the price there to be more consistent with, with value, and that really made it clear that, you know, like, the way to go where we have, parity is online.
Perfect. Well, Marianna, thank you so much for your time. This was great, and thanks to everyone in the audience as well-
Thanks for having me.
... who are listening in.