Category and grew our share within the category, driven by our innovation and significantly improved customer experiences. We produced our most robust free offering yet and made significant progress in our effort to transform the assisted category. As we've communicated, there are 4 primary drivers in our consumer business. The first is the total number of returns filed with the IRS. The latest IRS data indicates total returns were up 0.2% through May 10th, below historical trends and our own expectation of 1% to 2% growth.
The second is the percentage of those returns filed using do it yourself software. Category share grew over a point, the fastest pace since 2016, once again outpacing the assisted tax prep category. We are very pleased with this outcome. And as a reminder, DIY category growth estimate TurboTax Online share to 0.5 point. The 4th is our average revenue per return, which increased again this season.
The growth reflects a stronger contribution by TurboTax Live, improved attach and tune product lineup adjusted for the new tax legislation. Experience for customers with simple returns, including year over year data transfer for no charge and extending free state filings for the entire season. This season, we had more customers than ever before paying nothing. We grew this customer in the high teens, above total unit growth of 5%. We are confident these were the right strategic decisions to drive durable growth, especially as we look for ways to help customers make ends meet going beyond taxes.
Our commitment to provide a robust free offering has resulted in more than 55,000,000 TurboTax customers who paid nothing for their TurboTax experience over the last 5 years. As I've shared before, our consumer group strategy is to expand our lead in the DIY category, transform the assisted tax preparation category and disrupt traditional consumer finance by expanding beyond tax to build a consumer platform. This is all in service of helping our customers make ends meet and maximizing their tax refund. We made significant progress against these strategic objectives this season. Within DIY, we saw evidence that the bold changes we made to improve the experience for customers who file simple returns resonated.
These changes drove a 6 point improvement in product recommendation scores for the free offering and contributed to higher retention. Transforming the assisted tax customer experience by connecting people to experts on our platform with TurboTax Live. We introduced a range of price points within the product line this season to offer access to an expert for even the simplest returns. After just 2 years, TurboTax Live is now a meaningful contributor to our business and this product line is among the fastest ever to reach this revenue level. The number of customers using TurboTax Live more than tripled year over year.
We estimate 70% of customers who are new to Intuit this season and use TurboTax Live came from the assisted method the prior year, higher than TurboTax Online. And for the approximately 2,000 pros on our platform, we improved the onboarding experience and technology tools, resulting in lower attrition and improved operating efficiencies through the season compared to last year. TurboTax has now approximately 28% share of total individual returns, leaving us with a large addressable market. Beyond tax, our consumer platform is aimed at helping customers unlock smart money decisions by connecting them to financial products to help them make ends meet. As we learn about their financial lives, we can notify them of benefits that can save them money.
We now have over 14,000,000 customers register for Turbo, up from 5,000,000 last season. We have approximately 70 offers this season focusing on 4 verticals, including credit cards, lending, investing and mortgages. We continue to test benefits and monetization models. While we don't expect a significant contribution to revenue in the near term, we're making progress and continue to be excited about this opportunity. In summary, I'm very proud of what the team delivered across the consumer offerings.
Now, let me turn to small business. We delivered another strong quarter in our small business and self employed group with online ecosystem revenue growth of 38%, again exceeding our target to grow better than 30%. We continue to place an increased emphasis on online services to deliver more value for our customers by solving their biggest pain points. We're working to achieve our vision of being the center of small business growth by helping our customers get paid fast, manage capital, and pay employees with confidence. Earlier this year, we launched next business day payments, allowing our customers to receive their funds much faster than previously experienced.
QuickBooks Capital has funded $360,000,000 in cumulative loans since launching about a year and a half ago. Finally, we remain encouraged by our early progress with QuickBooks Advanced Online, designed to disrupt the mid market by addressing the needs of mid market small business customers with 10 to 100 employees. Within our strategic partner group, our professional tax revenue is on track to grow 4% for fiscal year 2019. That's the high end of our initial range for this segment. To wrap this section up, we are very pleased with our results.
Now let me shift to a different topic. You may have heard assertions that Intuit engaged in practices designed to consumers from filing their taxes for free. These assertions have come in several forms and I want to address them directly. We stand behind our marketing actions as both being appropriate and consistent with our core value, integrity without compromise. In addition, any suggestion that Intuit does not support the IRS refile program is wrong.
In fact, we're proud that for nearly 2 decades, millions of Americans have used TurboTax Free File program to file their taxes without paying. Our commitment to free dates back to 1998 when we launched a program to offer free tax preparation software and e filing services to lower income and active duty military taxpayers. In 2002, the entire tax software industry and the IRS formed the IRS Free File Program modeled after our initiative. As a founding member, we're committed to IRS Free File's shared goals of public service and providing free tax filing to those who need it most, as we have for nearly 20 years. As I mentioned earlier, we have more than 55,000,000 Turbo Tax customers who paid nothing for their Turbo Tax experience over the last 5 years.
Thank you. And now let me hand it over to Michelle to walk you through the financial details.
Thanks, Sasan. Good afternoon, everyone. For the Q3 of fiscal 2019, we delivered revenue of $3,300,000,000 up 12 percent year over year. GAAP operating income of $1,800,000,000 versus $1,600,000,000 a year ago, an 11 percent increase. Non GAAP operating income of $1,900,000,000 versus $1,700,000,000 last year, an 11% increase.
GAAP diluted earnings per share of 5 point $5.3 a year ago, a 15% increase and non GAAP diluted earnings per share of $5.55 up from 4 point 7
dollars last year, a 16% increase.
Turning to the business segments, consumer group revenue grew 10% in the fiscal 3rd quarter. TurboTax Online units grew 7% this season, while overall units increased 5%. We significantly improved the experience within TurboTax Live this season, not only for the customers who use this platform, but also for the tax pros providing tax advice. The improvements we put in place increased pro NPS by more than 50% versus a year ago and created operational efficiencies. These include a 30% reduction in pro attrition and improvements in the pro portal that drove a 30% increase in time spent serving customers this season versus last year.
We're excited to continue scaling this business in the future. We also offered TurboTax Self Employed customers the opportunity to benefit from tracking their financials throughout the year in QuickBooks Self Employed. TurboTax Self Employed product recommendation scores tied TurboTax Live for the highest score among our paid offerings. Turning to the strategic partner group, we reported $235,000,000 of professional tax revenue for the 3rd quarter, up 4 percent year to date. In small business, total small business and self employed revenue grew 19% during the quarter.
Online ecosystem revenue remained strong with growth of 38%. We believe the best measure of the health and success of our strategy going forward is online ecosystem revenue growth, which we continue to expect to grow better than 30%. Online services year over year growth slowed this quarter compared to the prior 4 quarters. This was primarily a function of lapping the TSheets acquisition a year ago. QuickBooks Online subscribers grew 32% ending the quarter with over 4,200,000 subscribers.
Growth remains strong across multiple geographies, with U. S. Subscribers growing 25 percent to over 3,100,000 and international subscribers growing 55% to over 1,100,000. Within QuickBooks Online, self employed subscribers grew to approximately 970,000, up from roughly 680,000 1 year ago. TurboTax was a significant channel for QuickBooks Self Employed and 440,000 subscribers have come through this channel, up from 330,000 last year.
We continue to expect total subscriber growth to moderate as we a greater focus on additional services and penetrating a broader range of customers. Desktop ecosystem revenue was up 4% in the 3rd quarter. Our desktop units were up 12%, reflecting unusually strong renewals during the quarter. During fiscal 2019, we expect QuickBooks Desktop units and Desktop Ecosystem revenue to be roughly flat. Within the Desktop Ecosystem, our QuickBooks Enterprise customers and revenue continue to grow at a double digit pace in the 3rd quarter.
This further reinforces our our financial principles, we remain committed to growing organic revenue double digits and growing operating income dollars faster than revenue. We take a disciplined approach to capital management, investing the cash we generate in opportunities that yield a return on investment greater than 15%. Our first priority for the cash we generate is investing in the business to drive customer and revenue growth. We consider acquisitions to accelerate our growth and fill out our product roadmap. We return excess cash that we can't invest profitably in dollars in cash and investments on our balance sheet.
We repurchased $135,000,000 of stock in the 3rd quarter. Approximately 2,800,000,000 dollars remains on our authorization and we expect to be in the market each quarter this year. The Board approved a quarterly dividend of $0.47 per share payable July 18, 2019. This represents a 21 percent increase versus last year. Turning to guidance.
Our 4th quarter fiscal 2019 guidance includes revenue growth of 10% to 12%, GAAP loss per share of $0.35 to $0.33 and non GAAP loss per share of 0.16 dollars to $0.14 We are also raising our fiscal 2019 guidance following strong performance the 1st 3 quarters of the year. Our new guidance includes revenue growth of 12%, up from prior guidance of 8% to 10% growth. GAAP diluted earnings per share of $5.72 to 5.74 dollars and non GAAP
diluted earnings per share of $6.67 to
$6.69 We now expect the GAAP tax rate of 18 point 5% for the fiscal 2019. You can find our Q4 and updated fiscal 2019 guidance details in our press release and on our fact sheet. And with that, I'll turn it back over to Sasan.
Great. Thanks, Michelle. With that overview of the quarter, I'd like to remind you of the strategic objectives I covered last quarter, starting with what matters most to our customers. All of our customers have a common set of needs. They're all trying to make ends meet, maximize their tax refund, save money and pay off debt.
And those who've made the bold decision to become entrepreneurs and go into business for themselves have an additional set of needs. They want to find and keep customers, get paid, access capital to grow and ensure their books are right. That's why our mission is to power prosperity around the world and our strategy is the 1 Intuit ecosystem, which focuses on unlocking the power of many for the prosperity of 1. The evolution of our strategy is to become an AI driven expert platform. This is about becoming an open, trusted and easy to build on platform where we and our partners solve the most pressing customer problems and deliver awesome experiences.
It's about significantly accelerating our application of artificial intelligence, which progressively learns from the large data sets across the platform and accelerates speed to benefit to revolutionize the experience for our customers. And it's about solving the largest problem customers face, lack of confidence, by connecting them with experts on our platform, leading the digitization of the services industry. Let me provide a few examples. When it comes to connecting people to experts, we're doing this today with TurboTax Live. Imagine the opportunity we have to expand live expertise across the platform to serve consumers, self employed and small businesses in the areas of tax, bookkeeping and financial advice.
For small business owners, we're focused on being the center of small business growth, using AI across our platform to accelerate faster funding and payments and to help our customers access capital. Over time, we see an opportunity to better serve product based businesses as they find and sell to customers across channels, transforming omni channel commerce. We're also focused on helping customers make smart decisions with their money by connecting them to financial products that help put more money in their pockets. This is our vision for Turbo, where we are increasing active use and engagement leveraging the tax refund moment to connect customers on our platform to meaningful benefits. Last but not least, we're focused on disrupting the mid market with QBO Advanced.
Our AI driven expert platform will help provide what mid market customers need at a disruptive price. We are making great progress and we'll have more to share with you in the coming quarters and at our Investor Day. I want to thank our employees, our customers and our partners for another strong quarter. Now let's open it up for questions.
Thank you. Keith, you are now live.
Excellent. Thank you guys for taking the question and nice quarter. I want to touch on sort of the tax business this quarter. And then 2 kind of related questions. One, you talked about some of the actions that you guys took during the quarter, the sort of free state for the entire period as well as free data transfer that push more people into the free category.
Can you talk to like what was the rationale behind it? What was like the business reason for making those moves, number 1. And number 2, we have heard kind of the press reports. So we've also seen some political sort of rhetoric starting to rise. We saw a letter some Senator sent to you today.
Is there any reaction needed from that type of kind of political pressures? Is there any behavioral changes or anything you plan on doing differently in the TurboTax business in response to senators' pressure or sort of the pressure you're getting from some state and local governments as well?
Great. Hi, Keith. Thank you for your question. Let me start with what matters most to our customers. And as you've heard us talk about, there are 2 things that matter most to our customers.
1 is helping them make ends meet and the other is helping them get the largest tax refund. In that context, there are 3 areas that we're focused on. 1 is expanding our lead in the do it yourself category. It's about transforming the assisted category and it's actually disrupting consumer finance and going beyond tax. In that context, our focus in essence expanding our lead in the do it yourself category has been to ensure that we have the best product experience.
And so what we did this year was very much in line with our strategic approach, very durable, which is to deliver the best free offering this year through the year over year data transfer for free and also actually extending free for the whole year and including state. And we did that because it gives us the opportunity to really help those that are underserved and those that struggle with the income that they make, while at the same time helping transform the assisted category. This gives us the opportunity as we grow our customers to ultimately find ways to help them make ends meet through the offerings that we have in turbo. So those were the drivers behind the decision, and we're actually quite excited about seeing the results that we got, which is both customer growth and revenue growth. PRS is actually up over 8 points.
Retention is up based on the decisions that we've made. So all in all, we feel very good about the decisions. And again, it's in context of our durable game plan. I think the second thing that I would say is that we have been supporters of free. And in fact, as I shared earlier, this dates back to 20 years ago.
And with respect to when we see any behavioral changes from us, our view is that our focus has been to actually grow the do it yourself category and expand our lead in the category, one element of it being through free. So we don't actually see our behaviors changing. We believe that we are focused on the right thing, which is delivering for our customers. And we'll continue to work on with industry and the IRS to see if there are ways that we can continue to improve the pre file program. But at the end of the day, our focus is our customers and we believe that everything that we've been doing is very durable and very much in line with what's most important to our customers and I actually have a lot of confidence in the actions that we're taking.
Excellent. That's super helpful. Thank you.
Your next question comes from the line of Brad Zelnick from Credit Suisse. Brad, your line is now open.
Great. Thank you so much. And I echo the congrats on a great tax season. Sasan, with TurboTax Live units more than tripling, it seems like there was a lot of success there. And I know you shared some data points, but can you maybe just expand a bit more on the mix within TurboTax Live in terms of net new versus customers coming over from the existing base?
And as well, if you can How did that play out versus expectations? Hi, how did that play out versus expectations?
Hi Brad and thank you for your question. I think I'll just go back to where I started just a moment ago, which is every choice that we are making is very deliberate. And based on what we saw this season, it was really within our expectations. And our singular focus is to serve our customers. And we want to do that through expanding our lead in the do it yourself category, and we want to also do that through transforming the assisted category and helping all of those customers with benefits that goes beyond taxes.
With that as context, we're very pleased with TurboTax Live performance this year. Given that we, in essence, gave our customers those customers that came in, the new ones were actually from the assisted category the prior year. For our pros, the net promoter was up 50%. They spent 30 more percent of their time serving customers this year compared to last year. So we're very pleased with our progress this year and we know exactly the areas to improve to actually accelerate our growth in this area next year.
As it relates to the tax code, as you well know, we are big supporters of tax simplification. We believe that it enables consumers to take more control over their financial life. It actually is a catalyst for the do it yourself category, and we needed to change our lineup this year to ensure that we delivered for customers given the tax code changes. And in essence, what we saw was all really within our expectations and we're very pleased with the performance for our customers, our PRS scores and the team did a wonderful job.
Thanks, Hassane. If I could just squeeze one in there for Michelle. With consumer margin ticking down from prior Q3s, and I know you've been fairly disciplined and consistent with how you think about acquisition costs and metrics like LTV to CAC. But can you just remind us, especially with TurboTax Live coming into the mix, how you're thinking about acquisition costs and how we should think about the cost of delivering PTL this season and how we should really think about consumer margins going forward? Thank you.
So Brad, I do this to Michelle all the time in our meetings. So let me start and then I'm going to turn it over to Michelle. It's a great question and I know others have it on their mind. I want to go back to the evolution of our strategy, which is about being an AI driven expert platform. And this is about significantly accelerating our progress with a platform and an ecosystem.
And when you think about a platform and an ecosystem, we are actually building more and more of our services to be able to serve all of our segments. The examples would be the services that we build across our ecosystem for TurboTax Live, for QuickBooks Live, for cybersecurity, the data scientists that we hire that ultimately fuels our machine learning engines that drives our AI benefits for our customers, those are all at the company level, which is why we always talk about we manage margins at the company level. And therefore, that's really what's important for you all to pay attention to. Specifically in the consumer group, our year to date margins are actually pretty much flat with last year. So we're actually quite pleased with the progress.
I don't know if I left anything for you to answer, but
The only thing I would add to that, Brad, is that when we look at the consumer margin specifically, there have been a number of 3x 3x this year and yet we had pretty much the same number of pros, the 2,000 pros that we had last year. So that just demonstrates some of the efficiencies that I spoke about earlier, the operational efficiencies and being able to increase the customer serving time of our pros by 30%. So we actually like the incremental margins that we're seeing for this offering and we are looking when we look forward, we're focused on opportunities here like automation and augmented intelligence, all of these things to look for ways to continue to make the agents as efficient as possible and also to continue to streamline the onboarding process.
Thank you so much.
Your next question comes from the line of Kirk McKeonney from Evercore ISI. Kirk, your line is now open.
Thanks very much. Hassane, I wanted to
just double click a little
bit on your commentary around the commentary around the platform, the expert platform powered by AI. Clearly, we've seen some of the benefits that with TurboTax Live. There's been some discussion on the website about QuickBooks Live and you guys testing that And I was just kind of wondering how we should think about the evolution on sort of the small business side around that narrative. And I know you're not going to give us too many data points now in part of your way, but what should we be expecting to do perhaps at the Analyst Day? Or just give us some idea about how we can kind of hold you guys
or what we should expect
for you all around the development of this narrative?
Great question, thank you Kurt. A couple of things I would say, one is we think about this opportunity starting with what's most important to our customers. And the biggest challenge that our customers face, consumers, self employed and small businesses is confidence. In fact, you've heard us talk over the years around the opportunity around non consumption. One of the drivers as to why people don't switch is because they're looking to interact with a human being to help them do their taxes, their bookkeeping and advice.
On the other side, we've got enrolled agents, pros and accountants that only serve customers within maybe a 10 to 50 mile radius max and they don't like marketing and they don't like pursuing customers. And we believe that this informs a huge strategic opportunity we have to connect people to experts to really go after non consumption to help our customers make ends meet, to help them run their business and be successful. So I wanted to start there because not only are we in the very early innings of TurboTax Live and what the opportunity that we have to transform the assisted category, that same opportunity exists when it comes to helping small businesses get started and run their business. And we've been, 1, leveraging the same common services that we've built over the years for TurboTax Live to significantly accelerate building out QuickBooks Live and we've been testing QuickBooks Live over the last many months and what we learned is very consistent with what we learned from consumers that are trying to do their taxes. They're They're looking for ways to get started and get set up.
Some are actually looking for advice of I have payroll due on Friday, am I going to be able to make my payroll, what advice do you have for me? Some actually want the bookkeeper to actually take all their information, all their documents and set cookbooks up for them and then give them advice. So we're learning a variety of things and we believe that the opportunity is significant for our customers and the ARPU is actually quite significant because the benefit is there. I would say on the other side as we've been talking to enrolled agents, accountants and pros, once they understand what we're trying to do, they are very excited about this opportunity because they see it as an opportunity to be able to grow their business, but do it through focusing on what matters most to them versus marketing. And so the way we want all of you to think about this is this is a big opportunity for us to connect people to experts on our platform to go after consumers, self employed and small businesses and fundamentally digitize the services industry and build advantage across the company.
That's really helpful. If I could just sneak in one for Michelle, sort of related on that topic. As we think about sort of the need for you guys to build out more AI services below this platform, I assume there's advantages for you all to work with AWS on that where you can sort of leverage them as well as add people on your side to so that the narrative around growing operating income fast and revenue even as this platform narrative unfolds over the next couple of years? Thanks.
Thanks, Kurt. Thanks for the question. Yes, I mean, when we talk about our financial principles, I would start there and those really are truly durable. And we are committed to the growing organic revenue double digits and operating income dollars faster than revenue as you mentioned. When you think specifically about something like the expert platform, employed and continue to employ as we talked about in Investor Day, a number of data scientists who are coming in to really help us continue to develop this critical capability.
AWS is absolutely a key partner with us. We've moved all of our customer facing apps to it already. We're continuing to move some of the back end stuff and we expect that to take maybe another 18 to 24 months. But they are absolutely a critical partner for us and we don't see that having an impact when we look at growing operating income.
Okay. Thanks so much.
Your next question comes from the line of Scott Schneeberger from Oppenheimer. Scott, you are now live. Scott Schneeberger, your line is now live.
Thank you. Can you me? Good afternoon. Thanks. Good afternoon, everyone.
Congratulations on the quarter. I wanted to ask in the consumer segment, your margin, someone asked earlier, it was a little lighter than expected in 3rd, but Michelle, you pointed out that year to date, it was about on track with last year. So my question is somewhat to the extent you could speak to this year you marketed TurboTax Live in the early season, but you hadn't in the early season last year. You also had the 4 tiers of pricing in TurboTax Live this year. So is there anything unique or interesting about that, that had an impact?
And if you could elaborate a little bit on what you saw introducing the 4 tiers year over year versus last year? Thanks.
Okay. I'll start, Sasan. Thank you, Scott. Thanks for the question. Actually where I'm going to start is, if I step back and look at TurboTax Live, Sasan did mention earlier that this year we made the very deliberate decision to offer it across our lineup.
It really then enabled folks from simple returns all the way up to very complex returns to be able to have access to experts to really get the confidence they need to go through their tax filing situation. So with that, we believe that that's absolutely the right thing for us to do and the right strategic decision. We didn't see a lower ARPC in that, but we believe that term with the opportunity that we have in TurboTax Live that that's the right thing to do for our customers. If I think back to just margins overall, we did talk about the consumer margins earlier. When I think about just CG margins in total, there we marketed TurboTax Live this year at the very beginning of the season and we didn't do that last year, but we are continually making decisions around marketing decisions and where we apply marketing dollars and how we do that throughout the tax season.
So there really wasn't anything dramatically different this year that would have impacted our margins. But once again, I would tell you, I wouldn't focus overly on consumer group margin. We really do manage the margins at the total company level on an annual basis. And so, I really wouldn't get too hung up on what happened at
the beginning of season or
end of season or between and amongst the quarters. I really would look more from a company standpoint on an annual
basis. Thanks. Understood. Yes. And certainly, small business margins were impressive on a year over year basis.
My follow-up is on the 4th quarter guide, it's down $0.16 to $0.14 year over year. That's the lowest guide in the Q4 or the last time we saw performance of that low was fiscal 'ten. I'm just curious is there what are the drivers, is it timing or is it something that's impacting that? Thanks.
Thanks for your question. We actually feel great about the momentum of the company and the momentum of online revenue growth, especially in small business because that's the majority of our revenue in the Q4. So, in fact, as I look back and to the years that you're comparing it to, we have more momentum now than we did then. So, I feel great about the momentum of the business, the innovation coming out of the company and what we've guided. The last thing I would say is, this could be comparing 606 to 605 accounting, and we believe that's probably why you are comparing a set of numbers that may look odd.
But in terms of what we're guiding to and the momentum, it's never been stronger.
All right, great. Thanks very much.
Your next question comes from the line of Jennifer Lowe from UBS. Jennifer, your line is now open.
Great. Maybe just a couple of quick ones for me. First, looking at the growth in online services, I know you mentioned that you're anniversarying the TSheets acquisition, but even with that, that was a pretty impressive growth number. And it certainly looks like you're going to exit that inorganic benefit sort of at a higher growth rate than you were before that. Can you just talk a little bit about what are the levers that are really working within by that segment?
Is it payroll? Is it payments? It everything? Just any color there would be very helpful.
Hi, Jennifer. Thank you for your question. We're also very pleased with our online services growth. In fact, if you look back to where we are today versus about 18 months ago, the Q1 of our fiscal year 'eighteen, we've more than doubled the growth rate. And really it's very focused on what's most important to our customers, which is helping them grow, helping them get paid, helping them get access to capital, helping them pay their employees.
We really think about our customer problems and how we solve them in context of services, whether it's accounting services, whether it's payment services, whether it's payroll services, capital, time tracking and now expert services that we're going to be launching with QuickBooks Live. And so the direct answer to your question is, it's really all the services that we've been investing in and focusing on because they matter a lot to our customers that's contributing to the online services growth that you're seeing. It's not any one thing, it's all of them.
Great. And then just a quick one. I know last year there was a lot of discussion around the 1st year of learning on the renewal rate of the self employed users that came in through TurboTax attach. Now that we've got another year of history on that, obviously, the aggregated numbers look very good. But I'm curious as you sort of explore that cohort, just any additional insights on how the retention trended this year and how you think about that going forward?
That's it for me.
Sure. Very good question. Let me make 2 different statements. One is the reason we're excited about this whole notion of being an AI driven expert platform in context of the customer problems that I articulated, it's also about solving the interactions between customers on our platform. 40% of those that are small businesses higher are actually self employed.
And so what we're solving for is to ensure that we can get as many customers on our platform as possible because we find we have solved a particular pain point for them and then solving the interactions between those customers on our platform seamlessly. So it becomes the place where they run their time, they run their business, they run their life. And so strategically, I want to make sure you knew why the self employed segment is so important. And it's not we don't just view it as a segment on its own. With that said, in terms of the renewal rates now that we're a couple of years in, it's in line with what we had assumed.
And of course at Investor Day, we'll share more, but it's very much in line with
Great. Thanks for taking the question. Obviously, a really good success with TurboTax Live more than tripling. I'm wondering if you look underneath it, the growth a little bit, could you talk about the retention in those live filers from the prior season and if they renewed that product SKU?
Hi Josh, thank you for your question. You know what I would share is one, as you said, you know we look at this as a $20,000,000,000 TAM opportunity where there is a huge confidence problem to solve which is why we expanded across all of our SKUs and we see it as an opportunity to get it, create income for our pros and help them with their life. With that said, we loved what we saw this year. As you said, 3x the growth on customers, 70% of the new customers came from the assisted method the prior year and our MBS and net promoters that up into the right. We of course at this point are not sharing the exact numbers.
That may be something that we share at Investor Day, but I think the takeaway you should have is on every dimension, customer growth, retention, NPS for both the customers that we serve and the experts that are on the platform serving our customers, very proud of the improvements our team has made.
Okay, that's very helpful. And then I also wanted to ask about the success that you had on the free side. When you look maybe more mid term or long term, does that in some ways increase the opportunity for monetizing Turbo? Or is that maybe not the one of the opportunities you see down the road?
Yes, the way to think about it is really around what's most important to our customers, which is really about helping our customers make ends meet and helping them get the largest tax refund and just finding ways to help them reduce their debt and increase their savings. And so when we think about Free, 1, it's focused on a segment of the marketplace where we believe they deserve to do their taxes for free and therefore why we significantly improved the experience this year to ensure that we deliver against the standards we expect of ourselves and they expect of us. It then gives us the opportunity through Turbo with the customer's consent to help connect them to benefits that matter most because we are an agnostic platform. What we care most about is ensuring that they have an opportunity to get heartbeats going faster because it's squarely focused on the for us gets our heartbeats going faster because it's squarely focused on the customer and what matters most. The opportunity is actually significant.
Just in the United States, consumers overpay in fees well over $60,000,000,000 plus and we have an opportunity to match them with products, financial products that are right for them at the lowest rates and so we do see that as an opportunity to deliver for our customers and eventually a business opportunity.
Okay, thank you so much. Very helpful.
Your next
Great. Thanks. This is Jackson Ader on for Sterling tonight. Thanks for taking our questions. The first one, Sasanik, if you can just help us reconcile something.
The 55,000,000 users over the last 5 years that you said have paid nothing. How do we square that with the roughly 1,100,000, 1,200,000 pre filing alliance users that you report on the fact sheet?
Yes, Jackson, thank you for your question. As I mentioned earlier, we have for the last 20 years supported customers that have certain income level and to be able to file for free. We do that directly with customers and we also do that through the IRS Free File Program. And that's something that the IRS has done a wonderful job setting up with the entire industry. And so the $55,000,000 includes both the free offering directly to customers and the free file offering.
That's all in one when you look at the 55,000,000 dollars over the last 5 years.
Understood. Okay. Thank you. Then a follow-up question, how many filers in the U. S.
Do you believe qualify for pre filing on an annual basis?
Our estimate is probably about over $100,000,000 ish or so. And this is a figure that we've talked about for years that ultimately are eligible for free. And our other estimate is probably 20,000,000 to 25,000,000 of them actually use free because customers have choice and they decide if they want added benefits that goes beyond free, but those are the estimates that we have.
Your next question comes from the line of Ken Wong from Guggenheim Securities. Ken, you are now live.
Great. Thanks for taking my question, guys. Michelle, you guys mentioned that you had 30% increase in your TurboTax live agent engagements, but also saw kind of essentially no increase in the number of agents to actually guys will probably have to staff up a little more? Looking next year that's an area where you guys will probably have to staff up a little more?
Hi, Ken. Thanks for the question. As we think about Turbo Tax Live, we continue to be very excited about the opportunity there. When we look at just the 20 $1,000,000,000 opportunity in the assisted market and really helping customers have the confidence to file their tax returns, we do think there's a great opportunity. As you mentioned, we did see an improvement this year with 3x the customers and yet we had the same number of pros at 2,000.
And so obviously we did have a couple of the operational efficiencies that we delivered this year. Going forward, we continue to look for ways to improve that experience. We want to make sure that we are helping pros get set up as easy as possible, so making that smooth as possible, continuing to look at the tools they use, how do we make those more efficient, really looking for ways to automate work for the pros and use augmented intelligence in the best way possible to help them with their interactions with the consumers.
Got it. And then Sasan, one
of the goals at the beginning of the year were to improve conversion at the top of funnel and then obviously increased retention as well. It sounds like retention improved to expectations. Any comments on how you guys did in terms of conversion at the top of funnel?
We'll look at sharing some of this at Investor Day, but I would tell you overall we're pleased on every mark that matters.
Got it. Fantastic. Thanks a lot guys.
Your next question comes from the line of Brent Thill from Jefferies. Brent, your line is now open.
Thanks. Just on QuickBooks, I think, Michelle, you said the strategic direction of how you're looking at the metrics is changing that I think many have noticed the growth rate is materially decelerating and but we've also noted some price increases from fall to now. I think you've raised prices on the central and plus list prices. Can you just talk this dynamic of the decel, but also looking at price rises and how you're thinking about that as a whole?
Hi, Brent. Yes, thanks for the question on QBS subs. QBS subs this quarter were at 30 2%, which is slightly down, but we still feel that that is a very strong number. We have continued to say that we expect the QBO subs growth to moderate. And when you really look at what is driving the health of small business, it is truly online ecosystem revenue and that is continuing to be a strong growth rate of 38% this quarter.
Just to pick up on your price comment, we always look at our price customers and we measure those very carefully. We never want to take a price increase that is then going to dramatically impact our customer retention. So, we look at those as we deliver more benefits to the customer and then we continue to watch on the retention side.
Thanks.
Your next question comes from the line of Raimo Lenschow from Barclays. Raimo, your line is now open.
Hey, thanks for squeezing me in. So, Sam, can I ask about Turbo, please? You mentioned the 14,000,000 users there and the 70 offerings. Can you talk and kind of what they do? Can you talk a little bit about what you're seeing there?
Obviously, there's other guys that kind of have that same business model. Is it more like is it more on the mortgage side, more on the credit card side? Like what are you seeing in terms of early trends there?
Hi, Raimo. Thanks for your question. So our singular focus is to help our customers make ends meet when it comes to our vision with Turbo. And with the customers' consent, what we try to do is to learn what's most important to them. And based on understanding their behaviors, we will connect them to financial products that are right for them.
And remember, we're in the very early innings of really understanding and learning what's most important to them. What's very differentiated for us is the customer is engaging with us at a very important moment, which is the tax refund moment. And it's an opportunity for us to learn from them, what do you want to do with your money? Do you want to actually save more money? We will make offers such as, hey, you look like you have 4 credit cards, would you like to consolidate it to 1 personal loan that could save you X amount of dollars and here's by the way what you can afford.
So it's really focused on helping them make ends meet, reduce their debt and ultimately save more money. And our advantage is the fact that we know the customer, we understand their behaviors and we are an agnostic platform to connect them to those products that matter most. And so we're very early, but we love what we're seeing and what we're learning and it's informing our game plan as we look ahead.
Perfect. And if I might squeeze in one follow-up. This tax season, I mean, was this remind us was this the first one you were fully on AWS? And what was the pros and cons you saw from that one? Or just did you have some duplication still?
Thank you.
Sure. It's our 2nd year on AWS and we had what I would call and our teams would call an epic finish with the number of concurrent users at the end of the season. The performance, the availability was the best we have ever seen. And one element of it is our teams did an incredible job making sure the experience was an awesome experience. But 2, we credit being on AWS the fact that we could handle those kinds of volumes.
But it was our 2nd year and it was a great outcome.
Perfect. Thank you, Willdan.
Your next question comes from the line of Chris Merwin from Goldman Sachs. Chris, you are now live.
Okay. Thanks a lot. Yes, just a couple from me if I could. I guess the first is on the TurboTax Live marketing campaign. I was wondering if you could just comment on how that performed relative to your expectations.
I know the growth you saw year on year was very, very strong. So just any detail you could share there? And I guess also how you're thinking about continuing to invest in marketing behind TurboTax Live to continue to disrupt that assisted tax prep category? And then I have a quick follow-up.
Hi, Chris. Thanks for your question. In terms of raising awareness, we take a very strategic help consumers understand that there is a different way, that there could be a better way given their tax situation and given the campaign this year it actually worked very well. We look at mix modeling, marketing modeling and to understand how what the returns were the dollars that we spent and the effectiveness of the campaign. And we really like the metrics that we have seen and we'll be doing more deep dives to understand what that will inform for next year.
But the way you should be thinking about it is just this is the beginning of a multi year and decade campaign to raise awareness, delivering awesome experiences, so more customers tell one another and then shifting the elements of the campaign from simple awareness to effectiveness. But thus far we've enjoyed what we've seen.
Okay, great. And then the follow-up was just on revenue per return. I think it was up low double digits in the 2Q, but up more like low singles in the 3Q. And you talked about the decision obviously to optimize the user experience, which resulted in more free filers in Q3. But I guess were those changes live in Q2 as well?
I'm just curious why there is I guess such a big delta between the growth in revenue per return between 2Q and 3Q? Thanks.
Sure, sure. Is this is your question around TurboTax Live versus TurboTax?
Or just the overall kind of changes you made to promote more free filing across the total platform? Got
it. Thank you for the question. So two things that I would say. One is based on the decisions that we've made to accelerate free and the decisions that we made to have TurboTax Live across the lineup, in essence our ARPC would have been several points higher if we chose not to make that decision. But we don't solve for ARPC, what we're solving for is accelerated customer growth and making sure that we grow the revenue double digits and ensuring that operating income grows faster than revenue.
So I would just focus on those principles, but I would just end with again saying ARPC would have been several points higher if we had not made those decisions on free.
Okay, understood. Thanks very much.
Your next question comes from the line of Kartik Mehta from Northcoast Research. Kartik, your line is now open.
Hey, good evening, Sasan. Just a couple of questions on TurboTax Live. As you watch the progression of that product and test at price points, what are your thoughts on price elasticity for the product? Do you think there's an opportunity that it's providing value that you can raise prices or do you think this is a product where you might have to lower prices and you'll get a more quantity or users?
Hi, Kartik. Thanks for your question. This is a $20,000,000,000 TAM, 90,000,000 customers. Our number one focus is acing the experience for our customers to help them build confidence, acing the experience for our pros that they do a spectacular job delivering for our customers and there is so much more room for growth here. The least of our focus is pricing, although we think about that.
It's about solving the problem well because we believe that there is so much head room for growth. We do believe there is certainly headroom for price increases, but we're just so early and it's such a huge TAM that we just believe the opportunity is to nail the experience and get as many customers to use the platform as possible. So it goes viral and they tell others.
Perfect. And Michelle, just one more question on margins as it relates to TurboTax Live. You've talked a lot about automating the process, AI. I'm wondering how close you think TurboTax Live margins can get to just traditional TurboTax, since there is human intervention obviously in the TurboTax Live. Live.
I'm just wondering how close you can get by using AI and automation?
Thanks Kartik. I appreciate the question on TurboTax Live. One of the things that has really helped us when we think about TurboTech Live, number 1, I mean last year was the 1st year. This year as we said a number of times we've driven a ton of efficiencies with 3x the customers and yet the same number of pros. But we really continue to look at how do we use automation and how do we use augmented intelligence to drive it.
Another thing I would say is we have focused a lot on using technology here and really focusing on technology first, then bringing in the expert to help, which has enabled us to be in potentially a different margin range than most people may with this type of an offering. So we're very pleased with the margins we're seeing. And as Sasan just mentioned, there's just so much opportunity here. Right now, we are really focused on how do we continue to bring customers in and continue to just deliver that great experience.
All right. Thanks, Michelle. Thanks, Hassane. Appreciate it.
Thank you.
Your next question comes from the line of Michael Turrin from Deutsche Bank. Michael, your line is now open.
Hey there. Thanks and good afternoon. Just one for me. Following up on the QBO subs question earlier, appreciate you've been signaling that growth rate is expected to moderate, but looks like it's happening a bit more on the U. S.
Side. Is there anything you can add in terms of expectations for how that split between U. S. And international could stack up in terms of a more normalized growth profile going forward? And then on the international side, any specific geos to call out there in terms of contribution?
Thanks.
Hi, Michael. Thanks for the question. First of all, the reason we've talked about watching online ecosystem revenue growth of 30% plus is it gets to a place where how do you count a sub because we have SE subs, we have QBO subs, we are now looking at T sheet subs, we have payment subs. So there one element of it is how do you count the subs and so we want to make sure that we actually provide you all a very clear flagpole of what to watch for. The second is we're actually very pleased with our progress in the U.
S. Because while we've been focused on self employed, which has seen very good growth, we're really focused on accelerating our focus into mid market. And so when we look at the growth rate in the U. S. Of 20 5% given the mix of customers that we're actually focused on going after and specifically the services that we're focused on going after, we're very pleased with it.
And I think ultimately the bang box to your question is I would focus on online ecosystem revenue growth because that is the best indication for the health of the franchise. And the second part of your question, I apologize, I did not answer yet, which is the geographies. We are very pleased with our progress in UK, Canada and Australia. And we are making very good progress in getting to product market fit in France and in Brazil.
Helpful. Thank you.
Your next question comes from the line of Walter Pritchard from Citi. Walter, you are now live.
Hi, thanks. Just most questions have
been answered here, but quick two quick ones. One on
I think there's a fear
at the beginning of the
season possibly that you see some trade down from customers who had simplified filings and going to these standardized deduction moving to free. You did have a strong performance on free. Could you help us understand in the context of what you ended up seeing in tax season, how the trade down effect either impacted or didn't impact the number?
Hi, Walter. The trade down effect did not affect our expectations. It was within our expectations. It was a deliberate decision that we made, which was again in context of our durable strategy of delivering the best free offering ever, which was around including year over year data transfer for free and extending free for the entire season that really impacted our ARPC. But the and again that was all very deliberate and we're pleased with what saw, but really trade down was not a driver relative to our expectations.
It was within our expectations. Got it, great. And then on Advance, I'm curious how much of
I know it's early. What percentage of those customers are you seeing to sort of a direct conversion off of QuickBooks, either QuickBooks Online or QuickBooks Desktop? And how much of it is sort of out plan competitive displacement with other kind of mid market financial accounting packages and other sources?
Yes, thank you for the question. First of all, with it's around a seventythirty, 70% existing, 30% new only because we really haven't yet aggressively pursued new because we've actually been focused on building out the platform. The reason the mix is so much existing is we have about 180,000 or so QBO customers that are actually kind of in that mid market range. They're looking to be able to do a batch invoicing. They're looking to be able to have roles and permissions and we've been aggressively building out the platform, so we can ultimately migrate those customers to a platform that they are happier with and then we will shift more aggressively to go after new customers.
Desktop is not really playing a role just yet because those desktop customers are really looking for inventory capability which we will build out as we over time begin to more aggressively focus on product based businesses.
Got it. Great. Thanks, Hassan.
Thanks, Walter.
Your next question comes from the line of Yao Chu from RBC. Yao, your line is now open.
Hi, everyone. Thanks for taking my question and squeezing me in at the end here. Two quick ones. We picked up a late season TurboTax Live Pro SKU. Just can any comment on that with the meaningful impact and how to think about that either in terms of attach or build out?
And the other one I guess is lots of discussion around TurboTax Live, but we view this very much as a multiyear phenomenon. Is there a way to think about an upper bound of the attach on a 3 year basis, a 5 year basis, and the nature of investment needed to get there in broad strokes would be helpful? Thank
I'll start with your first one, which is we're always experimenting. As I mentioned earlier, it was a $20,000,000,000 market opportunity, 90,000,000 customers, most of which use the assisted category because of a lack of confidence. Really our initial focus was helping those that may just want to use TurboTax, but are looking for help on demand. We are also testing in essence full service, which is we'll do it for you if that's what you want us to do and that's the test it sounds like you fell into and we're early in our insights and learnings to see what the future brings based on what's most important to our customers. In terms of TurboTax Live, we don't think about it in terms of attach.
We think about it in terms of what's most important to our customers because there are some customers that come in and right off the bat they want to ensure that they have help along the way. Over time it could be those that also come in and are looking for a full service offering. So we don't think about it in context of attach. We think about it in context of the segments of customers that have higher doubt, fear and uncertainty and are looking for an essence expertise and help. In terms of how to think about how to model it, Michelle I think did a really nice job earlier around the way you all and the way we want you all to be thinking about this opportunity for us.
We are putting our best and brightest engineers on solving this problem through an AI driven expert platform. It's all about applying technology to solve this problem very, very well, not only for the customer, but for the expert. So we should not think about this opportunity as a typical human capital business. We should think about this as completely digitizing services and experts having AI driven power tools as And in fact, the more we learn by solving this two sided problem, we actually And in fact, the more we learn by solving this two sided problem, we actually make the platform better so that the customer gets the answer to their questions much, much more rapidly. So I think the way to think about this is just a huge opportunity for us to drive revenue growth and think about our margins and the way to model at the company level, which is the guidance that we provided.
Ladies and gentlemen, I'm not showing any further questions. Would you like to close with any additional remarks?
Yes. Thank you. I apologize for interrupting you. First of all, I want to thank everyone for the great discussion and the great questions. I just want to leave you with the notion of we are very excited about our strategy of an AI driven expert platform.
We have incredible confidence in our segments, incredible confidence in the progress of the company. We look forward to sharing more in the upcoming quarters and at Investor Day, and we hope everybody has a wonderful rest of the day and week. Thank you.
Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.