Well, fortunate to have the head of the consumer group here, Mark Notarainni. Mark, thank you for joining us.
Of course. Thanks, Brad. Nice to have you.
Looking forward to the discussion. Great to have you here. I think this is, as far as I can remember, about the 10th consecutive year of Intuit's participation.
Ah, that's great!
Thank you for joining the conference again.
Awesome. My first time.
Looking forward to the discussion. Thanks so much.
Awesome.
I'm Brad Sills. Why don't we just get started, Mark, with just a little background on yourself. You've been with Intuit for quite some time. The company is known for developing talent organically. A little bit about your background and your role now with Intuit.
Great. Great. Yeah, I survived my first tax season as a general manager. But I've been with Intuit for 16 years, in TurboTax, with my first job, and have had progressive roles across the company. Many years within TurboTax, growing, launching TurboTax Live from that launch, then moved in to a role in Small Business Group, leading our customer success team there. And then, ultimately leading customer success all of Intuit as a platform and an ecosystem leader. And then last year, right around this time, actually, was given the amazing opportunity to lead the Consumer Group. And so, have been in this job now for roughly a year. 16 years within the franchise.
Wonderful. On just the culture of Intuit, we often hear about how that's the strength of the company, the platform that has been built across consumer and small business. So maybe just if you want to elaborate a little bit on what it is that Intuit .
Yeah, it's a great, it's a great question. You know, I really have loved the company. Now, prior to Intuit, you know, I had tenure across about 2-4 years, depending on what that was. But when I landed up at Intuit, there are a couple of things that really was amazing. It's obviously the people and the values that we operate under. And you actually see literally in interactions that we have as a team, which is really, really special. But even more than that, it's what we do mission, right? Of powering prosperity. It's a really worthy cause.
When you think about it on the consumer side, consumers are struggling to make ends meet, fear, uncertainty, and doubt, as they go into that process, but is their largest paycheck for many Americans in particular. And so what we do is actually, it's really, it's palpable within the organization. We're obsessed with helping our consumers and our small businesses power prosperity; however, they define prosperity that obsession around that, that mission is, like I said, palpable and incredibly exciting to be a part of.
Wonderful. Sometimes, you've seen a lot of the evolution of the tax platform. I think you were on the team that was responsible for launching TurboTax Live, now TurboTax Full Service. Provide a little bit of perspective on that effort. What was the kind of rationale? When did the company decide that Live was the next step for the TurboTax franchise and Full Service, pulling that platform together?
Yeah, it was, you know, I'll date myself now. When I first started at Intuit, I was in TurboTax, we still had roughly 40 per, but it's not the case anymore. But in that transition, as customers were adopting, at that point, do their taxes, and then ultimately, mobile as well, we started to see a transition in how our customers interacted with us, right? So sort of technical support, a lot of setup- type of engagements that we had with customers, that as they migrated onto TurboTax Online, about how do I? Like, where do I put this? What should I do with field X? And also our business model changed quite a bit, right? We'd sell, in retail, revenue would be recognized, right? And then we'd serve our customers.
In TurboTax Online, our customers get started for free. And so an opportunity for us, to drive conversion and keep and help customers get through. So then we started to think about confidence, and we started to think about ease, and initially, when we started off that transition, it was really all around, like, how do I use the product? And that's when we were really, the do-it-yourself category was still our primary category. And then we thought, you know, part of this industry is actually in what is called Assisted.
In the Assisted category, it's about $31 billion TAM there. We actually don't participate in that, or we didn't. W hat we thought was, you know, we've got this amazing platform in TurboTax. There's an amazing network, potential network opportunity out there with CPAs. What if we were to merge them together? That's really what started to give, that does that unlock a whole new market for us, that Assisted market that I referenced earlier. I hope they're okay. That one did not sound good. There was a pretty significant gap between that online experience on Turbo and calling. There was just this digital divide.
And so actually, at that point, when we launched TurboTax Live, we really started with something called SmartLook and to collaborate with customers via video. At the time, it's kind of funny now, when you look back, given what we've all been through over the years, we were center in the world right when we launched, because we embedded SmartLook into the, into the product.
What we heard from customers, this gets back to the customer obsession t he feedback we got from customers when we launched this, "Oh, right at my kitchen table. And that's really where we said, "You know, we've got something big here," because now we've bridged the experiences, and we've embedded this amazing right into our product. Now we can start to bring expertise in, and it starts to feel like we're bringing experts to people's kitchen tables to help them get their taxes done.
That's why we started to bring in certified public accountants and enrolled agents, et cetera, onto the platform and serve our customers in even more- advanced ways.
Before we get onto the tax quarter that you just reported, while we're on the same topic, you know, maybe you did a great job of outlining the platform. and the evolution there, and the rationale for launching the offering to market, from a go-to-market standpoint. In traditional DIY, do-it-yourself category, how is Assisted different? How do you target those filers differently from the traditional DIY?
You track them the same way. Our brand is incredibly powerful. It stands for trust, it stands for confidence. And so when we first launched, we really picked up that the benefit of this year as we started to build our capabilities to really accelerate our growth in Assisted, is we have to be local. And we have to be personal. And personal meaning the capabilities of our experts, right? Like, whether they know real estate or small business, we had to really start to do that matchmaking locally and at a personal, like, capabilities level.
That's at a product level, but it's also at a marketing level. Like, when a customer search tax pro, we need to show up as with a tax pro in San Diego. And when you do that, it really breaks down the trust barrier, 'cause in many cases, to know that this person knows San Diego taxes, not sitting in a call center somewhere else that's far removed from my business. And so that's how the second piece of that is, people do not do taxes year round, right? They do taxes in January through April, but largely January through April.
The Assisted market, though, is very different. There's more of a persistent connection and establishing your expert customer moves, or they change jobs, or they buy a home. Those events are moments of truth, where they're, they're not necessarily doing their taxes, going to affect their taxes, and they're looking for that expertise at that moment and so that's also shifted to a much more persistent view of our connections with customers versus once a year. It really is an expert expertise.
Wonderful. While we're on that topic, you know, when you say that one of the advantages is having that local presence, can you give us a sense for how involved or the question that I'm getting at is really, what do the unit economics look like?
Right.
How can that get to what you are seeing in TurboTax Online and the traditional software business?
Yeah. One of our unique advantages, we're entering this market from a technology-first perspective. And so the fact that, you know, we were TurboTax Online, I said this- or TurboTax Live, I said this all the time: We're blessed to have an amazing platform called TurboTax Online to attach to, because it's amazing. It does a lot of work, it provides a lot of consumers, and the combination of those two actually allowed us to do Assisted services in a, in a much different, and more efficient. While we're incredibly excited about the progress that we've made, even in this last quarter, the opportunities from a technology perspective are accelerating.
Right? Generative AI is certainly a game. You can help customers get prepared for taxes by getting their documents for them. Doing work on those documents as you collect those in the platform. Experiences to be much more about advisory and decision making and almost eliminating the data entry. Traditional market is, it's heavy, heavy on data entry and less on advisory. Our business is very different. It's less on data entry and much more on advisory and what we consider really and our on our platform is it allows them to focus on the things they love, which is engaging with consumers helping them make good decisions and removing the fear, uncertainty, and doubt that they may have coming in.
Thank you. Well, why don't we get to the tax quarter that you reported recently? D o you have any highlights you wanna, you know, point out here from the, how the tax season unfolded, how the result through this, through, through the tax season? Anything you'd like to highlight on the Q3 tax quarter?
J ust building on, this investment that we made five years in that, what's amazing is that we saw this year is we continued to see growth, right? We have 12% customer growth, 17% revenue growth, and five years ago, that was maybe even 4%. And so, seeing the business really start to accelerate, it's 30% of our revenue in the Consumer Group.
This year, again, it was zero. And so opening up that new market, bringing amazing services to those customers, and in our Full Service part, right, which is really the most service-centric part of our portfolio, we improved our Product Recommendation Score from an 84 to an 85. I know it sounds small but when you have that kind of growth, and you retain growth, our Product Recommendation Score gives us a ton of confidence that we've got a product that is very different than the rest of the market, and gives us confidence heading into the years.
I wonder if we could unpack the kind of core growth drivers in the business for consumer tax. You know, IRS returns growth, your share revenue per return. Those are the three primary growth drivers of the business. Could you just maybe comment on how each of those unfolded through this tax season?
Yeah, and maybe I'll start with the category itself. It's a $35 billion market when you look at taxes across the United States, and that's between consumers and small businesses. $31 billion and $4 billion is in DIY. And so our focus is really on generating a revenue share, right, in that achieved. We also want to protect and grow our core business, which is DIY. And when you look at that, our Credit Karma, which is part of our consumer ecosystem, is enormous. Credit Karma has 40 million monthly active users. Many of those active users now have to do taxes.
And so the integration, and the experience as we think about the consumer ecosystem, not just Credit Karma to TurboTax, there is a very big moment of truth in TurboTax when that customer gets that refund. And what you do with that refund is something that Credit Karma excels at. Right? How to manage your money to make. And so the path back into Credit Karma and really looking at that as an ecosystem is an area where we see our growth, especially in the DIY area going forward.
You talked about or some share losses at the low end as you're addressing the Assisted category. Could you elaborate on that? Is this kind of just a consequence into this new category, and, you know, as maybe a little less focused on the downmarket business? Or, or is there some competitive dynamic that we should be thinking about?
And so we have, gosh, we had over 10 million or about 10 million customers that filed for completely $0 in our, in our portfolio. And all those customers, but what we, what we're really focused on going forward is not just going into the category, that $31 billion category. We do more for consumers other than taxes. Because what we know is that, for a large base of customers, doing taxes for free is super important. But to manage their money, they have to make money decisions as well. And so, we made really good progress this year in our consumer ecosystem.
But we have opportunity experience, and be able to share data across the platform that will unlock more customer value, and that's what you'll see us doing more and more in that DIY category.
Wonderful. Why don't we shift to, AI and Intuit Assist. Could you give us an understanding of kind of the underpinnings of that offering, LLMs supporting it, the data set supporting that, and more AI in the consumer tax business?
Yeah, and specifically for consumer tax, I'll address that. At Intuit, we have this thing called, we launched Intuit Assist, right? And the platform OS. Alex and Marianna before, Alex, our CTOs really made a critical decision where we want to be a platform for generative AI. Meaning, let's not go vertical, let's actually create a capability where we can use multiple LLMs to solve discrete opportunities, right? Some LLMs are good at translation. And so that decision enabled us to work across multiple LLMs, including our own. We have our own proprietary LLM called FinLM, approach the underlying capabilities there. For TurboTax, what we decided to do is we decided to deploy generative AI in three different areas.
One is we and that showed up with things like points of need in a customer or explainability of a refund, like why something happened in their return. We used it there. We also used it proactively, right? So as we're working with the customer through their tax experience, they may have an accuracy situation. We would pop that. It was all generative AI- based.
And then the third was reactive, and that was, we rebranded our help system. We infused it with Intuit Assist, and that allowed us to answer way more through a much more, conversational experience, and actually allowed customers to navigate and ask multiple questions to get to their answers.
We actually, portfolio, we had 24 million+ customers actually interact with the generative AI experience in one way, shape, or form throughout any one of those three different areas. We measure that as engagement. We looked at helpful rates, right? Like progression rates. Once they consumed a generative AI piece of content, did they conversion?
We saw really great outcomes across all three of those dimensions. And now we're looking at generative AI being something that you embed or you're reactive, but actually a core product, part of our product and our entire experience, all the way up to shopping.
And so, with AI and what it can do within our category. We also have run several experiments within Credit Karma where, we're offering more and more, and we're connecting those together.
Wonderful. A t the Analyst Day, you alluded to some GenAI specific SKUs for TurboTax. I wonder if you could elaborate on that. How are you thinking about you're providing here through those SKUs and pricing potential?
Yeah. I think, for the consumer group, you know, we talked about specific SKUs more for, like, Mailchimp and, SKUs. What we believe, for the consumer group is that it's an embedded part of our experiences that will help us drive scale, and conversion. And that's how we're looking at it from a consumer. So when we talked about that in earnings, it was really SKU-specific for Mailchimp and QuickBooks.
Gotcha. Okay, wonderful.
Get a mic over before you- so we can get the question asked. Or if you wanna just state your question and shout it out.
Yeah. Question is on the conversion for clients to pay a little more for that added feature, or is it still being evaluated there?
Do you mind repeating the question?
Yeah. So the question was, Bit more for a generative AI experience that drives conversion. For us, this is a pure Consumer Group answer. That's not how we're looking at it. What we're looking to extend our reach to segments that we don't serve today and drive ease, confidence, and then also leverage generative AI. And we believe that it will help us with the markets that we wanna get into but also drive retention.
Wonderful. Thank you. It's a newer opportunity that you're addressing here. So maybe if you wanna outline for us, what is the opportunity and where's the effort there?
Of course, yeah. So in small business, in particular, it's a $10 billion category, which is entirely delivered through the assisted segment, right? That's TurboTax historically, w e've had very light presence. We had a desktop product that customers could buy for that. But we've TurboTax that. And so this year, based on a test that we ran the year before, we launched at scale for sole proprietorships as well as LLCs, both a Full-Service offering as well as a do it with me offering. We saw incredible response. We saw incredible response organically, meaning and then we saw incredible interest from our QuickBooks customers as well, which is another ecosystem opportunity that we have within Intuit.
Because compliance, managing a small business is compliance. And so, this year, we launched this across multiple states through service experiences. Had great interest, really strong conversion for what we call a Horizon 3 product. That's our first-year product. We're very aspirational and assisted as we think about new market opportunities for us. So we went from zero to pretty, pretty good number this year.
Great. A lot of interesting new initiatives here for growth, you know, with Assisted, AI, business tax. You-- the company has reiterated their 8%-12%, long-term growth target for TurboTax despite the fact that this year you're tracking to the low end of that. So keys to getting towards the middle or high end of that range?
Yeah. You know, I would say the number one priority is for us to focus on execution. And what we have to execute our demand gen initiatives that we have for Assisted, that we learned an awful lot. The local, the personalization. We have to streamline our experiences, leveraging generative AI. We can scale faster. We can serve customers faster. Then the third is really ensuring that we ecosystem between Credit Karma and TurboTax. When you look at 40 million monthly active users, and you look at our customer base and the depth, and the relationship that we build with TurboTax, the opportunity to do more for consumers is very real and very exciting, but it takes an intense amount of focus and say we need to do.
Wonderful. And were there any learnings on the go-to-market side this year? I think Sasan alluded to some promotion, you know, that you identified some areas that you could improve. Elaborate on just what you learned this year on the go-to-market and, you know, how that could affect the plan going forward.
Yeah. For Assisted, there are three things that we learned in go-to-market. One is the local pricing power that we have. And then the third is the importance of money in the overall possess to- fast access to money is really the primary, job for, for those customers that are, getting refunds.
And those are all enveloped in our, in our go-to-market. But on the promotion that Sasan referred to, it was a promotion that we ran specifically for Full Service . It was a very interesting promotion, drove, although proved to us the power that we have with pricing to really drive disruption. And so you'll see that's a big area of focus for us next year.
Well, Mark, thank you so much for being here.
Thank you for having me, Brad.
Great conversation. Appreciate it.
Yeah, appreciate it.
Thank you all.
Thanks.