Good morning. Good morning, everyone, and welcome to Intuit's Annual Investor Day. My name is Kim Watkins and I'm Director of Investor Relations here at Intuit. And thank you so much for joining us here today. We've got a great day planned for you.
We're going to have our senior leaders talk through our strategy and top priorities. And then, we're going to have a break about halfway through, give you an opportunity to take a look at the demos that we have in our gallery walk. I also wanted to mention here with us today, we have Brad and Neil's staff. They're sitting on the sides of the room right now. And also our incoming CFO, Michelle Clatterbuck, who's right there on the side.
Make sure you say hello and introduce yourself at the break. After the presentations, we'll have ample opportunity for Q and A with Brad. And then for those of you here in Mountain View, please join us for lunch and another opportunity to mix and mingle with the leadership team and also see the demos in the gallery walk. A couple more housekeeping items before we get started. Wi Fi is available on the Intuit guest network.
There's no access code required. The bathrooms are out the back door. Turn to your left to go through the demo area and then veer to your right and you'll see signs. And last, you have a little thumb drive in front of you that has product demos and tutorials on it. And for those of you on the webcast, that's also available on the Investor Relations section of our website.
Relations section of our website. Moving on to forward looking statements. These presentation materials include forward looking statements. There are a number of factors that could cause our results to differ materially from our expectations. Please see the section entitled cautions about forward looking statements in the enclosed appendix for information regarding forward looking statements and related risks and uncertainties.
You can also learn more about these risks in our Form 10 ks for fiscal 2017 and our other SEC filings, which are available on the Intuit Investor Relations page of Intuit's website at www. Intuit.com. We assume no obligation to update any forward looking statement. These presentations include certain non GAAP financial measures. Please see the section entitled About Non GAAP Financial Measures in the enclosed appendix for an explanation of management's use of these measures and a reconciliation to the most directly comparable GAAP financial measures.
In this presentation, we may also announce plans or intentions regarding functionality that is not yet delivered. These statements do not represent an obligation to deliver this functionality to customers. Okay, with that out of the way, this is our lineup of our gallery walk. We have many very interesting demonstrations available to you this year. We'll be showcasing 8 innovations.
Many of these are staffed by very senior leaders at Intuit and others that are very familiar with our products and technologies. They're organized by our key customer benefits of more money, no work and complete confidence and include many exciting technologies like chatbots and machine learning and other innovations that are part of our customer experience. So I encourage you to spend some time there. And one last thing before we get started, I wanted to mention that we're going to be sending out a link to a survey at the end of today. We really value your feedback and we'd be very grateful if you could spend 2 minutes and help us with some feedback, so we can make next year as effective as possible for everyone.
And with that, we'll get started.
Some of my best employees would be people that just need another chance. Someone that probably couldn't get a job. They've had a record. They had baby daddy trauma. And I want to be that place where a girl can get a second chance.
I did TV sales for years, love the money, but there came to be a part of me that felt like I was selling out every day. And I started to think, well, if you could do anything in the world, what would it be? You love cleaning your own house. Why don't you start cleaning house? But in doing so, I'm still me, and so that meant that I had
to be a domestic diva.
And it's up to the diva standard. That's how it started. I started using TurboTax when I moved in this house 11 years ago because I was using TurboTax when I started my business. I was like, oh, get QuickBooks. That's the one that I use pretty much daily.
They make me look bigger than what I am. My invoices are pretty with my little leave the dust to us. We're going to go past them out.
There have been times, well,
you can go get a job. I don't really want to go get a job. There are girls out there that really kind of need what I have to offer, which sometimes is wisdom and motherly advice. It's almost like a ministry to me because the money will come. There are girls that need to know that you can do better in life.
You can make a change. You don't have to keep going down the wrong road. You can start over. And I like to be the place where they can get a chance to do over over here with me at Domestic VIVUS.
Wow. That's why we get up and get out of bed every morning and into it. For people like Nikki Bell, 50,000,000 customers just like her we already serve and 100 of millions around the globe that we have the opportunity to impact their lives. Good morning, everybody. I want to welcome you to Intuit's fiscal year 2018 Investor Day.
As Kim said, we have a pretty full agenda in store for you and I hope you're going find what we have to share with you useful and informative. Fiscal year 2017 was a milestone year for Intuit. It was a milestone year because not only were we able to deliver strong results in fiscal year 2017, but we delivered those results while simultaneously executing a future back exercise, and that exercise led to the most comprehensive set of market and customer insights that our company has ever collected at any one point in time. The goal that we have today is to put our fiscal year 2017 results into context as well as our multiyear change journey. Then from there, I want to share with you what we see on the horizon and then I'm going to walk you through our company game plan, which has been refreshed from rewriting our company mission all the way down to the metrics that we're using to measure success.
So this is going to be a hopefully informative and new and fresh conversation today. And to get us started, I want to begin by first looking back. They say those that fail to study history are doomed to repeat it. And this time last year, I was flying on an airplane reading a Fortune Magazine and I came across an article that stopped me dead in my tracks. Why?
Because of the opening sentence. I figured it could be a career limiting move if I didn't read this article. Why isn't Intuit dead? The author went on to say the answer is easy to state but hard to emulate. His hypothesis because Intuit continually disrupts itself.
He wanted to describe only a handful of incumbents have been able to successfully do this time and time again, companies like Amazon, Netflix and yes, Intuit. And he said we share 3 patterns. 1st of all, we view our businesses the way a disruptor would view it. 2nd, we have the courage to drive change even when the company is performing well and third, we rinse and repeat. We do it time and time again.
Now he concluded this article by saying that Peter Drucker once said that leaders who are unable to abandon yesterday will never be able to create tomorrow. But that's exactly what the generations who've come before us here at Intuit have done. 34 years, 4 chapters, through every major technology shift, every competitive threat, the generations before us have had the courage to reinvent the company and to find the next chapter of great. And when you unpack how Intuit's formula has played out, it also has 3 parts. First of all, we fall in love with the customer problem, not our solution.
We went from DOS to Windows to the web to the cloud to mobile to artificial intelligence. We're always willing to adapt and evolve. The second, the effort we put into our products are always grounded in 3 things: deep customer empathy, simple elegant design and the most contemporary technology of the day. But perhaps what's most important is we measure success in the only way that matters, through the improvement in the customer's life. So if you had to sum up the Intuit way, it is 3 things: customer obsession, design inspired, technology powered.
Our most recent reinvention began 5 years ago in fiscal year 'twelve. That's when we set out to move the company from a North American desktop software company to a global cloud driven product and platform company. We divested businesses that no longer fit strategically. We leaned into the cloud and we shifted our accounting to a ratable revenue model. And over the last 5 years, we have found a new gear.
We've accelerated our customers who are moving into the cloud while retaining a very important loyal and profitable customer base on desktop. We have accelerated the sources of revenue from 63% coming from 63% coming from connected services and subscriptions to 73%, up 10 points over this 5 year period. We have accelerated our global footprint, growing over 100% compounded annually over this 5 year period. And it's the combination of these things we were changing the engine while the plane was flying that culminated in a strong fiscal year 2017, where we delivered strong 10% growth on the top line, 12% growth in non GAAP or excuse me, I say in non GAAP I'm sorry, what operating income up 12%, non GAAP earnings per share up 17%. Perhaps what's most important is we also accelerated our quality of our customer experiences, which showed up in customer growth continuing to increase.
QBO Subs achieved 58% growth last year, up from 41% the prior year. So with a strong fiscal year 2017, you look at the financials. But this is into it. You've come to expect we also look underneath the hood and say, where are we doing well and where do we have an opportunity to improve? And there are two sides to these 6 key drivers and I'm going to walk you through each of them.
And let me begin first with our company culture. I'm proud to say every day is like a startup day at Intuit. We're a 34 year old startup with 8,000 employees who operate as entrepreneurs and each one of them every day wake up with a way to try to improve the customer's life. For 16 consecutive years, we've been listed as one of the top 100 best places to work, one of only 2 technology companies to be on the list for 16 consecutive years. On the other side, our employees will tell you we're not moving fast enough.
We have to do more to invest in the tools and the technology so they can be productive and make faster decisions. When we talk about customer passion, we have it. You saw that video. You're going to see 4 more videos today. We've done thousands of hours of follow me homes.
We do it all the time. Yet we haven't translated that passion into product experiences that have at least a 10 point advantage in net promoter over all the alternatives in the connections, in particular, between accountants and the clients they serve. But on the other side, not all the members of our ecosystem are getting the same benefits, a great example of 3rd party software developers, and we haven't yet unlocked that network effect that we feel will really be the catalyst for growth as we look ahead. Technology, we are a 34 year old company, which means sometimes our technology is yesterday's technology and in other cases, we know we need to invest in tomorrow's technology. Our team is tackling that tech debt with vengeance.
On the other side of the equation, it's going to be a multiyear journey to replatform our core products, to get our products into AWS to public cloud and to continue to invest in artificial intelligence and machine learning. Market results last year, really strong year in small business. Net promoter improved 22 points. We accelerated the QBO subscriber growth and we had strong financial results. And I will say on the tax side of the equation, in an incredibly volatile and complicated year, our team delivered very strong financial results, but our customer growth was tepid and we held share.
That's not a year to be embarrassed of, but we believe we're capable of more and we're going to lean in and deliver those kinds of results as we look ahead. Financially, I've already touched on the numbers. But as we look ahead, as you might imagine, with a completely refreshed company game plan from a new company mission all the way through our strategy, that means we have to reallocate our resources, our time, our people and our dollars. Over the last 4 months, we've been doing just that and Neil will talk more about where we're putting our resources when he speaks a little bit later. So fiscal year 2017 was a strong year.
Yes, we do have work ahead of us, but the one thing that I've come to appreciate about this company is when we put something on the right hand side of this chart, we focus on it and we move it to the left. And yes, we always find something else to put on the right. But it gives us a strong foundation as we look ahead. And we need that foundation because as we look out over the horizon, we see secular shifts in the marketplace that we believe will serve as catalysts for growth if we capitalize on them. And so this year, we took our top 100 leaders, we broke them down into 3 person teams, they fanned out around the globe, conducted over 500 direct customer observations, They interviewed 225 experts, venture capitalists, companies we admire.
They ran 100 experiments. And what we got back on these things were some incredibly important insights. I'll summarize the insights very quickly on the left hand side of the slide. First of all, customer expectations are increasing daily. They want immediate benefit with no friction, deeply personalized experiences.
The second is the gig economy is real, and it's not a U. S. Phenomenon. It's happening around the globe. And net net, they are worried every day about where the next job will come and where the next dollar will come.
Last but not least, all of our customers are living more and more of their life on fewer and fewer platforms. These platforms Marc Andreessen refers to as mega cities or mega platforms are spending as much to 8 to 10 hours a day on these platforms. The second major insight is the employees of the future want to be a part of a mission driven company surrounded by rock stars and they want to have immediate impact, which means they want to operate like a start up, which requires us to change how we create our company environment. Speed as a habit has become one of our top themes. The second is we've got to lean into the technology they want to work on.
And today, that is data, machine learning and artificial intelligence. And they also want to not only work on cool technology, they want to create disruptive business models that will create new sources of growth. So those are the insights we got as we went around the globe. That led to these implications. 1st, we're going to remain customer passionate, but we're going to up it, the customer obsession.
In customer obsession, we're going to be really clear that the only things we build into our products are things that matter to customers, which is the benefit, and I'll talk more about that in a minute. We're really leaning in to creating deeply personalized experiences, and we're moving beyond being just a product that drives a transaction into a platform that facilitates interactions or what we call indispensable connections. The second thing we have to do is we have to adapt to the evolving role of the players in our ecosystem. We're upping our focus on self employed. We're working with our accountant partners as artificial intelligence and machine learning starts to replace a lot of the work they used to do to help them define the new things they can do for clients.
And third, we're leaning in to strong partnerships with these mega platforms where our customers are spending 8 to 10 hours a day. And last but not least, we realized while we have competitive moats that have served us well in the past, we've got to forge new competitive moats, and I'll talk about that in a minute. So if you pull all this together, we expected new insights, but I profoundly underestimated the impact those insights were going to have on our company's game plan. And the end result is it led to a fundamental rethink of everything. And once again, we've organized this information in a best practice model known as an alignment triangle, so every employee in our company and you can see what we're solving for all the way down to how we'll measure success.
What I want to do now is I want to walk you through what has changed in our company's game plan, and this will set the context for the rest of today's speakers. I'll start with our company mission. A mission is why you exist. Our company mission began 34 years ago at a small kitchen table sitting out there in the hallway. But what you may not know is the company mission we've been operating behind the last decade is not the one Scott started the company with.
In fact, our mission has evolved 4 times over 34 years. As we looked out over the horizon with these new insights, we said we have a real opportunity to create an impact in the world like we've never had before. We need a mission statement that represents that opportunity. So we studied the best mission statements out there. We Googled them, we talked to people and they had 2 characteristics.
They're aspirational and they're succinct. Our prior mission statement was to improve our customers' financial lives so profoundly they couldn't imagine going back to the old way. It was aspirational, but it was anything but succinct, 16 words and a comma. So we said we've got a new mission statement and this is the company's mission state of flourishing, thriving, good fortune. It is a personal definition.
You heard Nikki Bell in that video most importantly, it describes why we get out of bed every morning, to champion those who dare to dream small businesses and self employed who know the odds are stacked against them and yet one half of the world's population works in a small business. And on the other side, the individuals and families who struggle to make it paycheck to paycheck and if we can help them live better lives and help these small businesses and self employed succeed, we will power prosperity around the world. So this is our company's mission. In support of that mission, we also have a purpose driven culture, a culture rooted in values. Like our mission statement, our values have been refreshed 4 times in 34 years.
The most recent update was in 2014. We tested these values against our future vision and they stand the test of time. So there is no change to the values I shared with you last year. Then you get to how do you measure success. Every company has a way of measuring success.
At Intuit, we have a term we call true north. It is grounded in 2 principles, stewardship and stakeholders. Stewardship is the accountability we have for short and long. Said another way, delivering the best results we can in this current 12 month period, while making the decisions today that leaves the company stronger for the generation who will follow us. And stakeholders are being clear about who we serve and who we won't serve.
We serve employees, customers and partners and shareholders, and we have a clear definition of success underneath each of those labels, and we also have a set of metrics we use to measure our progress. Now I will tell you there's an internal version of this document that under each of these metrics has a 1, 2 3 year goal And those are more than aspirations, they're commitments. And when I say commitment, that means that's how the Board assesses my performance hitting 1, 2 3 years and that is how every employee in the company is assessed as well. It's not a 12 month goal, it's a 3 year goal. So that's how we measure success.
Now if you have a way to measure success, you got to have a way to deliver those results and that's where our strategy comes in. And a strategy as you know is like a GPS or like a roadmap. Now GPS has 3 pieces to it. The first is you got to know where you're going and we've got our destination. It's a refresh mission and that mission is powering prosperity around the world.
The second thing a GPS does is it says, okay, where are you starting from? And this is an Intuit mindset, 1 customer at a time. We've gotten really clear what matters to our customers when making the decision to choose our products. All of our products do 3 things. They put more money in your pocket with little to no work and hopefully give you complete confidence you got the maximum money and you didn't make any mistakes in the process.
So that is our destination and our point of origin. The third thing is, okay, how are you going to get from here to there? And that's where the strategy comes in. It's a 1 Intuit ecosystem. The definition of this strategy is unlocking the power of many for the prosperity of 1.
The platform is stronger together than its individual pieces. You're going to hear more about this today. Now to lay our strategy out, we looked back over the last 34 years and we brought those things forward that will continue to be elements in our go forward plan, customer obsessed design inspired technology powered. And we got really clear where we're going to put all of our innovation energy in finance and compliance. Now you all followed us for many years.
Many people would say we must be crazy. Who gets excited about waking up in the morning and talking about taxes or payroll or paying a bill or overdraft fees? But we understand our customers have to get these things done. These are required but not desired. And so if we can do our job, we can help them get more money in their pocket with no work at all thinking about these things and have complete confidence they got it right and that will help power prosperity.
Now we're clear about who we serve. We serve the small business, the self employed and the consumer. These are the overlooked. These are the underserved. These are the customers that many companies choose to look past because they pay you nothing or maybe $10 a month, they're not worth tens of 1,000 of dollars in contracts, but they power the world's economy.
And we understand as a platform company now, we can't solve all of their problems alone. So our partners now sit at the table with us, And we're talking about explicitly having a mindset that our partners get as much or more value than we do. Last but not least is with the combination of all of these contributions and the data they create and we match it up with our machine learning, our algorithms and our easy elegant design, our strategy delivers 3 components: personalized experiences through a trusted open platform where everything works together whether we built it or somebody else and it creates indispensable connections. These themes are going to play out time and time again today as we walk through the material. That's our strategy, a one into an ecosystem that unlocks the power of many for the prosperity of every individual customer.
Now like every company, we take our strategy, we break it down into priorities. These are the 6 priorities we focus on inside the company. These are going to be the major talking points you're going to hear throughout the day. And underneath those priorities, we have a set of metrics and these are the metrics we review in every one of my staff meetings, all of our operating reviews and all of our Board meetings that we update the Board. But when you pull it all together, we have refreshed our company's game plan to win from a completely new mission statement to a new strategy to a new set of metrics.
And what encourages me is if you believe Thomas Edison, which is a vision without execution is merely hallucination, But I'm pleased to tell you that this strategy is already working and being executed and it's delivering 3 things. And I'm going to close out on these three things to let you see that this is not a standing start, but it's actually building on continuing momentum. The first thing our strategy is doing is it is moving us away from a company that focused on delivering a transaction, get your tax return done, pay your payroll, to now a platform that creates indispensable connections and interactions between multiple parties. Let me give you a few examples. Small businesses, we know the odds are stacked against them.
50% fail in the 1st 5 years. The number one anecdote to preventing that failure is to work with an accountant. It increases their odds of success 89%. But accountants are busy. They're keying all this information in.
They're getting it out of shoe boxes, bring it in out of Excel spreadsheets, so they get 4 new clients a year on average. This last year, we introduced Matchmaking. What happened? These small businesses who now work with an accountant grew 10 points to 53%. Accountants are getting 3 times as many leads as they were just 8 months ago.
They're both succeeding as a result. And we benefit because if an accountant is working with a small business, the retention of QBO goes up 12 points. That is a win, win, win. It's not just accountants working with small businesses, it's tax experts working with tax filers. We know there are tens of millions of consumers who are willing to file taxes on their own if it wasn't for that one nagging question where they just don't have enough confidence in themselves.
And we have tax experts who would be willing to answer those questions for a nominal fee if it was without friction. Last year, we introduced SmartLook, the ability to have human expertise at the touch of a screen. What happened? The confidence of the tax filer went up 10 points. The accountants got a whole new revenue stream.
The people willing to consider the do it yourself category expanded. And by the way, this is a new value pool for TurboTax. What does that mean? People are paying 100 of dollars to go to a tax store. They're paying tens of dollars for TurboTax and with a very small premium, we can still be much cheaper than a tax store and yet increase our revenue per return.
Again, a win win win. Last but not least, the self employed. We've talked about the importance of the gig economy. It's 34% of the workforce today. It will be 43% by the year 2020.
It's over half in Europe. The challenge is they operate every day doing their thing and then the government tells them that they're
a small business and they
have to file a different tax return. They have no idea. We introduced QuickBooks Self Employed and we matched it up with a bundle in TurboTax Self Employed. Last year, we saved $4,340 That's an 8% increase in their annual income if you're an Uber or Lyft driver. They got an 8% raise by using our product.
We have 4,000,000 more of these customers sitting in the TurboTax customer base today as a channel. By the way, the self employed bundle grew 12 points faster than core TurboTax and it tripled the QuickBooks Self Employed customer base by simply tapping in to the TurboTax channel. And that was our V1.
So if you look at
this, the first thing our strategy is doing is it's moving us beyond a product into facilitating interactions where everybody wins and we get value as a result also. 2nd thing our strategy is doing, creating new competitive moats. Our products have benefited from strong competitive moats in the past. First of all, we're trusted. We're trusted by individual customers, by the government, by banks with very sensitive information, and we take that trust seriously.
2nd, we've always had relationships like accountants and small businesses that depend on each other and we've been able to facilitate that. And the third is we've always worked hard to make complicated things simple. That's not easy to do to take the IRS tax code and turn it into yesno questions that ultimately get answered by somebody at home. These things will continue to be important, but they won't be sufficient going forward. But our strategy has already started to unlock 3 new competitive moats that are not easily copied by competitors.
First of all, we're building increased stickiness or loyalty on our platform. Neil is going to walk you through something that we haven't shared before, the percent of revenue we get from existing customers who were with us last year. I think you'll be surprised to see, especially when we think about tax season, I owe it a redo every year, just how much of our revenue is built into our base because of the loyalty we've created in our And having them add a third party software product that increases retention even further. So we're getting more sticky. The second is we have all that data.
We're now matching it with machine learning, artificial intelligence. On the last earnings call I shared with you, we had filed 100 patents and we had 30 machine learning applications in the market. As we stand here today, just 6 weeks later, we have 150 patents filed, We have 40 in the market. We are moving with real velocity. And last but not least, we are looking to create network effects.
Those are those multisided problems I talked about, but here's the difference. Many companies have a relationship with 1 customer. We serve accountants, small businesses and consumers, all of whom depend on each other for their livelihood. We already have them as customers. And what we're doing now is opening up the freeway so they can all interact and get value.
So this is the second thing our strategy is doing. It's creating new competitive moats. Last but not least, it's opening up TAM. Three levers that are expanding our total addressable market. The first is the cloud and mobile adoption is increasing the consideration of our categories and accelerating our customer growth.
If you look in the upper right, the first column are the number of customers we serve today, the second column are the prospects in the countries we're already in with the products we've already launched. And that's a $30,000,000,000 TAM. And so TAMs get really unrealistic and so we look down underneath that as a proof point. Here are 4 examples and just 4 examples. First of all, the shift to the cloud is accelerating our customer base.
QuickBooks for many, many years had 4,000,000 installed customers on the fact sheet and the question was always when you're going to grow that. I'm proud to tell you that the number of active customers we had this year grew 14%. That's the number of people buying QBO or the people on the last 3 years version of QuickBooks Desktop. That 14% growth is up from 3% growth last year and up from pretty much flat for a decade before that. 8 out of 10 new customers coming into QuickBooks are choosing the cloud over desktop.
It was fifty-fifty just 2 years ago. Same thing happening in tax. You can see the results. The second is the cloud is allowing us to go into other countries. Last year, our global base grew 75%.
That's up from 45% 1 year ago. And it's also allowing us to serve the self employed. We could have never served the self employed on desktop because they operate on wheels. They're out on the road. They're in the cloud.
They're on mobile devices. But now we've been able to accelerate the growth and almost quadruple first way we're expanding TAM is by capturing the cloud and mobile and accelerating our categories and our customer base. The second, we're opening up the freeway. We're creating these connections. If you look in the upper right, you'll notice one big number in blue, that's the consumers.
Here's the catch. Many times, we count consumers as the number of people filing TurboTax and the number of people using Mint. But we forgot all the people that our small businesses pay as employees on their payroll and all the tax returns our accountants are doing for their tax clients. And when you put all that together, we have over 300,000,000 potential prospects and we're starting to connect them all. A great example is e invoicing, getting small businesses paid in 1 third of the time and the consumers love it because it's a frictionless touch the phone and they're paid.
That increased our e invoicing and our charge volume 35 percent last year. The second, algorithms match with the data inside of our products. 50% of the loans we facilitated to small businesses last year were to companies that banks considered unlendable, and our loss rate was below the industry average. The 3rd, SmartLook, I've already talked about that, connecting tax experts with tax filers. What I didn't mention is the customer Dan Wernicoff is going to talk about this last bullet.
But we have we've put a lot of time into creating a small business platform. We're now starting to lean into a consumer platform. Here's a couple of factoids that we've never shared before. When you connect Mint with TurboTax, it increases the conversion to TurboTax in the funnel up to 10 points. The second is the customers interact with TurboTax 2 times a year.
They interact with our Mint product 112 times a year. There is a real opportunity for us to build an ongoing relationship and
solve other problems for consumers.
The 3rd and final piece of our TAM is our opportunity to take our home game on the road. Now this is one of those things that last year we weren't we could stand in front of you and say could we do this because we had not proven to ourselves we have a playbook. This year, I feel like we did prove a playbook. The playbook is simple. Get product market fit first in the local country, then turn on the marketing and then make sure you're getting an efficient LTV to CAC.
Last year in the fall, we said we finally got product market fit in Canada, the U. K. And Australia. We turned on marketing at all three countries across 100,000 subscribers in this 12 month period. We're now focused on France, Brazil and India, and we're also testing the self employed product, which can be downloaded through an app store to see what other countries may be the next targets.
So our strategy is not only opening up interactions, creating new competitive moats, but it's expanding our opportunity to serve larger markets and increase our TAM. So I'll put a bow around it and I'll begin I'll end where I began. We look back over 34 years. We studied what it was that the generations before us were able to do for Intuit to navigate so much change and remain a vibrant and growing company, and we brought those lessons forward. Then we looked out over the horizon and we took the lessons from Peter Drucker, we abandoned yesterday, we focused on tomorrow, and we had the courage to rewrite the company's game plan with a new mission, a one intuit ecosystem strategy and that is now starting to create interactions, new competitive moats and new opportunities to serve markets we couldn't serve before.
We are confident and excited that we're already seeing the proof points and what we want to share with you over the next few hours is to dive deeper into each of these areas so you get the same confidence we do that we have momentum that continues to build. I hope this sets the context for the rest of the day. And with that, we'll roll the next video. Thank you.
In shops, they were making clothes in Chiffon Seafood. They will have prints saying juicy on the bums. And I just didn't feel that was right for my child. I wanted to make something that will make my child look like a child. Now I've branched out making clothes for adults as well.
What makes my business unique is the fact that I can make your design come to life. A lot of the T shirts that I do sometimes are quite outspoken. It has a quote or saying that it's personal to the person, so I can give them that voice just by printing something simple on a c shirt
for them. I use a
lot of African fabric. I love bright colors. I love looking at fabric in the different colors. I find it very relaxing just to hear the needle going up and down in the materials. It's therapy, I think, for me.
I spend a lot of time on public transport, going to meet clients or going to get fabrics and things like that. Because I'm always out invoicing with the pain, so I have to always wait to be at home to do it. Having QuickBooks Self Employed helped so much because I can do things on the go. So I can tell when they've received it, when they've looked at it. So they can't tell me that they ain't got it, which is funny.
It's really nice just to be able to see where I'm at if I'm, like, struggling and if I need to kind of push. Sometimes I feel like I don't want to, but I look at my daughter and I'm like, I have to do this for her. I think this is my dream job, Someone's finding value in what I've made. Someone might see it and think, oh, that looks nice. That's just an amazing feeling.
I'll close the community. If you don't want to be naked, come to me. I can clothe you.
Good morning. I'm going to focus on 2 of the company's priorities, fueling small business success and providing peace of mind and prosperity for self employed around the world. We have been inspired and humbled by our growth in the last it's been 18 years since QBO was launched and humbled by what we've learned from our customers. Probably the biggest thing that we have learned, the biggest lesson is that we have a set of customer problems that are universal and they're actually multi sided. Just a few examples of what you see on the screen.
You have customers that want to get paid. On the other side, you have people that have to pay their customers. They have to pay their vendors. They have to pay their workers and they have to pay their employees. You have customers that are in need of money in tough times or if they're trying to grow their business, you have those that are ready to lend you money at the right time.
You have customers that are in need of tax documents and you have those that have to provide those tax documents. So there are multi sided problems. But what you don't see here is that you have small businesses that interact with one another. They serve one another. You have small businesses and self employed that interact with accountants.
In fact, 40% of those workers that small businesses hire are self employed. So the interaction is significant and the customer pain points are significant between the network of folks that are on the platform. And that creates a huge opportunity to take platform globally, which is why we are focused on 3 customer benefits at the company level that as we stand here 10 years from now will stand true and it's about putting more money in the pocket of our customers. It's eliminating all the drudgery work so they can focus on what their passion is and their love is which is running their business or managing their time and it's doing it in a way that delivers total confidence. Now what's interesting is these are a few examples what you see here in terms of the biggest problems and one of them is small businesses don't actually get paid on time.
They work very hard for their money, but they either forget to invoice or when they do, they get their way overdue in terms of when they get paid. It's a very lonely world out there. And when you think about the fact that small businesses and self employed drive 50% of the global economy and they're responsible for 60% of the hiring around the globe. Although they appear as a giant, they are actually very lonely, which is why we've declared a vision of being the champion of those who dare to dream. And really the essence behind our vision is to tilt the world in their favor.
It's to fight for their cause. It's to make them part of something that's far bigger, so they can be successful and thrive and drive the global economy, which is really the essence of the strategy that we've declared and it's to unlock the power of many for the prosperity of 1. And let me just hit on the 3 strategic pillars that Brad already hit on with and just cite a few examples. You think about the 800,000,000 self employed and small businesses around the world and the 9 out of 10 that come to QBO that are new to the franchise, they're using Google Sheets, they're using Excel or it's all paper. And what we must do is deliver such an amazing personalized experience when they come to us that they are compelled to switch and be on the cloud to deliver for their customers.
And we also want to bring the world of apps right to them with our trusted open platform and leverage our thousands of developers internally and externally with our partners, financial institutions, accountants to deliver for small businesses. And then last but not least, indispensable connections. This is really about the massive interaction between everybody on the platform. As I mentioned earlier, self employed interact with one another. They interact with small businesses.
They interact with accountants. They interact with consumers. And we want to take all of the friction out of those interactions and make them feel as if they are part of a huge community. Now, there are 3 priorities that we have to deliver for our customers. The first one as I mentioned, which I'll talk about in a moment is to fuel small business success.
The second one is to provide peace of mind and prosperity for the self employed and our 750,000,000 of them around the globe. And last but not least is to take that game around the world. So let me hit on each of them very quickly. But first, let me just throw some stats and figures at you that you have in your book. You can see that in the countries that we're in, we have a very large addressable market.
You can see that we significantly grew traffic and of course we grew customers. But we have a significant opportunity ahead of us to get better at delivering benefit messaging, to get better at delivering the benefits in the product, to capture the opportunity that we have and to penetrate within the core countries that we are in. So keep this in the back of your mind as I talk about some of the priorities in a moment. Let me start with global and let me first start with a framework that we're using to make it easier to decide which countries that we're in and how to think about those countries. It's a very simple framework and it's about opportunity versus investment.
Is there a massive customer problem that we can solve? Can we do it better than any other alternative? And over time, can we build advantage? And then what will it take from an investment perspective to do that and how do we sequence our decisions? These are illustrative examples, but just to put countries in each of the buckets in terms of how we think about large markets, large investments versus large markets, small investments.
And just to put some meat around the bones, let me just focus on the top quadrant. When we think about large market, large investment, this is really about first focusing on the customer problems that matter most and where there's alignment bringing our QBO ecosystem to that market, which is not only the open platform, but also then capabilities around payments, payroll and the connections to accountants. And if you look at the top left, that's really about a large market with a small investment where we now have a playbook to solve the problems, the very important problems of the self employed around the globe. So, this is just an illustrative example of how we think about global expansion and how it informs our decisions. Let me now just talk about the 4 countries that Brad just hit on a moment ago where we do have product market fit and what actually drove it.
We enjoyed good growth. We enjoyed a higher net promoter, but we believe that the best days are still ahead of us and we have a huge opportunity to deliver for our customers. But there are really three things that drove growth in these three self employed like invoicing for those that have been over served. The second is around spending more money in marketing, so that we can raise our brand awareness, raise the benefits that we can deliver for customers and bring them in, but then deliver an awesome, awesome first time experience. And then last but not least is driving connections within the ecosystem, last year and these are the same things that will drive growth in the years to come.
Let me hit on the 3 countries where we are still working on product market fit. And here's how we think about product market fit. I'm only going to focus on the actual is the product fit for market, but there are 3 things that matter: Getting the product right, getting our value proposition right, and then figuring out a way to monetize. And we entered each of these countries for very different reasons. We entered India, lots of customers, lots of problems to solve.
We wanted to understand could we monetize. We entered Brazil to see if we can enter a country via an acquisition, solve the problems well and then integrate it on our platform. And then with France, it's a very heavy compliance market. And we felt like if we could solve the problems well in France, we could solve the problems well across the globe. So let me hit on each of the markets.
In India, we're going after tech savvy service businesses, which is right now about 12,000,000 customers. The largest problem that we're focused on solving is goods and services taxes. It's a compliance event that's driving a lot of customers to the cloud. And you can see our success metrics. I'm not going to hit on each of them, but you can see where we are and what our goal is and what we view will be product market fit when we hit these success metrics.
And we're testing monetization to see over time, can this be a country where we can build a healthy franchise. In Brazil, we are focused on customers that only have cash flow needs. And they're just looking at how much money do I have coming in, how much money do I have going out and am I going to be able to make my bills at the end of the week. There's a huge segment of customers. It's about 8,000,000 customers and to put it in context, this is bigger than the U.
K. Where we're focused on whether or not we can nail that problem well. You can see our product recommendation score is actually quite high, but we have a long ways to go to make it very easy for customers to get access to the data, to their income and to their expenses to solve that problem well and then integrating that on our platform which is one of the key reasons why we entered the country. And then last but not least in France, heavy compliance, heavy, heavy influence by accountants. There's a list of about 14 things that we are pursuing to nail compliance.
But also we are focused on the accountants that are very tech savvy and that are leading the way in the cloud. We've made huge progress in the last several years. You can see given our success metrics goals and where we are that we have not yet hit product market fit. And in all these three countries, when we feel like we've hit product market fit, we'll update you when it's going significantly accretive to growth. But we feel very good about our progress.
And as you can see here, we have ways to prove to ourselves that these countries can be growth engines just like the UK, Canada, Australia and the U. S. So, if I were to put a bow around the globe, we feel very good about 4 countries where we have product market fit. We are investing more in marketing, investing more in product, and we believe we have a huge opportunity to accelerate penetration, while we're focused on product market fit in these three countries and exploring a few other countries, as Brad mentioned, with self employed. Let me now hit on the second priority, which is fueling small business success around the world.
I think the simplest way to tell you the story about our focus areas is the following. Folks come to us to either solve a problem around I need to invoice, I need to better manage my cash flow, I need to pay an employee and we must solve that problem very well, which is the first element of our focus is delivering personalized experiences that is so compelling that they choose to switch. It's one of the reasons why our conversion went up in the last year, but we still feel like there's a huge element of focus to build a personalized experience, not only in the first time use, but then every time they engage with a new job that they want solved. The second is the open platform, but let me talk about the element we've not talked much about, which is being where the eyeballs are. So there is being an open platform, so when they come to us, we can solve the most important jobs and it's absolutely seamless because remember some small businesses on average use 17 apps and we want them to have access to everything on our platform.
But 50% of our customers have Gmail accounts and we want to be where they are, which is why we launched invoicing within Gmail with our great partnership with Google so that we can solve the problems right where the customer is at. And then last but not least, getting rid of all the friction to make life easy for small businesses, not only to find them accountants and to interact with accountants and bookkeepers, but also to make it very easy as an illustrative example of how they engage with self employed. You have to onboard a self employed as a worker. You ultimately have to pay them. Some self employed work for you for a week, some work for you for 12 weeks, and you have to ultimately deliver them a 10.99 and provide them what they need for tax time.
We are innovating in a way that takes all the friction out of the process and enables these customers to thrive so we can feel small business success all around the world. Now let me show you two examples of the product innovation. The first one that we'll roll in a moment is this think about a customer that today may be using Word or Excel to create their invoice and ultimately to get paid. And what we're doing is we've delivered an innovation that takes the friction and the time out of invoicing. If you can roll the video, please.
64% of small businesses have invoices unpaid for more than 60 days. Nobody wants to nag clients for money or wonder if the check is really in the mail. With QuickBooks invoicing, they don't have to. Business owners create their invoice, customize it so they look professional, and send it to their customers with payments turned on. They have visibility when their customers view and even pay their invoice, so they're always in the know.
And it's never been easier for customers to pay small businesses. Their customer gets a notification and have options to pay the way they want, Even with the tap of a thumb, QuickBooks invoicing has cut the time to payment in half.
So an example of a personalized experience to compel customers to use the platform, but more importantly get paid much faster for their hard earned money. And I want you to imagine the same when they're trying to understand their income versus expenses or if they're trying to get into payroll, delivering personalized experiences, then ultimately opening up the rest of the platform to them. The second that you heard Brad talk about is matching the self employed and small businesses with accountants. One of the largest needs of accountants is to actually find customers because they are not great marketeers, they don't want to do marketing and they don't like to do cold calling. 1 of the biggest benefits for a small business and a self employed to be connected to an accountant is that they are far more successful, which drives global economic growth.
And what you're going to see here is a new platform that we just launched that is a service that does an amazing job of making a match. If you could roll the video, please.
89% of small businesses and self employed are more successful when they work with an accountant. Last year, over 1,000,000 small businesses searched our Find A Pro advisor platform for an accountant or bookkeeper, but only 14% found the right match. Earlier this year, we completely rebuilt this matchmaking platform. It helps accountants create more effective profiles and less small businesses be more specific about what they're looking for. An improved algorithm makes sure every small business finds the perfect match.
Within a few months of launch, connections have jumped from 43% to 53%.
So just to summarize for fueling small business success, we want to deliver personalized experiences that delivers the highest impact benefit to customers so they can focus on what matters most, which is running their time or their business. The second is connecting them to any app that they need to deliver more money, no work and total confidence. And then last but not least is taking the friction out of any and all connections. Let me now shift to what we're doing to provide peace of mind and prosperity for self employed around the world. Same set of focus areas.
When a self employed chooses to get into running their own business, they have to manage their income, they have to manage their expenses, they have to track everything, they have to decide how much money they have to put aside for taxes and they have very unstable income. So, our number one focus is to deliver that personalized experiences, so they can track their time, track their mileage, send that invoice if they need, so they can manage their time and their money, so they can ultimately thrive as a self employed. The second is an open platform, but let me use an example, an illustrative example of what we mean by an open platform for self employed. This is being where they are. So think about a self employed that's on Etsy.
We now have a product and marketing partnership with Etsy where all of their data, all of their income and expenses automatically gets drawn into self employed and they can easily manage all their income, manage their expenses and be ready for tax time. And then last but not least, I use the example of all the work that small businesses have to do to hire a self employed. Will that same work exist for self employed? They have to onboard. They have to make sure that they can pay get paid very quickly with self employed and then get the documents that they need at tax time.
We are working on completely digitizing that not only to make that interaction seamless and focus on the benefits, but we actually drive customer growth. The second is, as I mentioned earlier, it is a very lonely world to be self employed or small business. You're focused on getting customers, you're focused on delivering for your customers, you want to retain your customers, and then you have to manage your business. And you don't actually have time investments. So, we want to automate all of that, so we can deliver answers and your investments.
So we want to automate all of that, so we can deliver answers to you at a time that you need it most. So if you could roll this video, please.
Small businesses and self employed have questions about how their business is doing. We are creating a platform that can answer their questions. They might ask things like, how did I do last month? Or find out how they did compared to September of last year. They could get quick answers to questions that might be buried in a report, things like how much do I owe in taxes?
We are working on a conversational interface that will answer the most important questions in seconds.
So we are inspired by how hard all the self employed and small businesses work around the world to focus on their passion and their love and we are very obsessed with delivering more money for them, eliminating work so they can focus on their passion and helping them run their business and their time with total confidence. So let me wrap and let me touch back to what you heard from Brad. I gave you a new name, Brad. So, a few proof points around growing the core. You can see that we have had opportunity in history over the last 18 years to build out the platform to deliver these benefits that we just talked about for our customers.
But if you just look at what we've done in the last year, we have grown the core and now 9 out of 10 customers that come to us are new in the franchise. They came from Google Sheets, they came from Excel or they came from just using paper. And because we got the product market fit in UK, Canada and Australia, we've been able to accelerate growth. And by getting customers in and delivering that personalized experiences, we can then grow the ecosystem by solving very important problems around invoicing and getting paid, which is why e invoicing has been significantly growing year over year. We ultimately provide them based on the data that we have loans at a time that they need it most where otherwise they can't get loans and connecting them to other parts of the ecosystem like accountants and bookkeepers with matchmaking.
And then last but not least is our opportunity to continue to expand globally. We feel good about the product market fit in the 4 countries that we've talked about. We feel good about our progress in the 3 countries, France, Brazil and India. And we're experimenting, as Brad talked about, in new countries with self employed. We feel like we've got a good playbook with self employed.
We go in, we assess the market, we understand if the jobs are universal and we assess what needs to be localized and then we launched and thus far has been working well. So, we're very excited about the opportunity as we look ahead to serve the millions that we don't serve today and we're inspired and humbled by what we're learning from our customers. Thank you.
All the great art that could be created if all the administration and the paychecks were all taken care of and an artist never had to worry about that again, it's just it would be a different world. I knew what I wanted to do was going to be in the arts but the whole world of filmmaking was kind of foreign to me. I'd done some small stuff before, but I didn't have the confidence to ask for money or know my worth. Feel like I was taken advantage of. I had no idea what an invoice was.
I would literally write it on a Post it. Intuit's apps have really helped me achieve this success of waking up every day doing what I love to do, making art because it takes care of all of the stuff behind the scenes. My favorite part about QuickVotes Self Employed is, the invoices because that's how I get my money. I've definitely come a long way. I've been lucky enough to be able to travel the world and perform and work on sets for Disney.
I've worked on cruise ships over in Western Europe. Now here in San Francisco working on major motion pictures and then you know on the weekends performing on stages little black box theaters. I'm in film school. These are all different ways to express myself and do what I love. My English teacher always used to say that organization leads the way to creativity and now I get what she was saying.
All right. You guys are in the home stretch of the morning session, so you will get a break after this one. I'm Dan Wernicoff. I'm the GM of the Consumer Group. I'm going to be walking you through the third of our priorities here, delivering financial freedom for all consumers.
The first thing to probably unpack is how did we end up with a new vision? Just like Intuit, we've refreshed our vision. And really, it's built on the foundation of the prior vision, which is taxes are done. We realized as we've continued to expand how we view the market, the consumer market, that just getting the work done quickly isn't always enough. In fact, as we continue to visit customers, we're reminded by how many of them don't have the confidence to do their own taxes.
For them, it's the biggest financial transaction of the year. And at the end of the day, it's the largest check that they receive as a consumer. And so having that confidence is one of the biggest problems we try to solve. And then additionally, as we've thought more and more about Mint as an asset and we've thought about the relationship of your finances all year round with the tax event at the end of a season, we realize that these have a significant relationship. And so we're thinking not just about taxes, but also beyond.
So as you think about the consumer ecosystem, it's interesting. Some of you know, I was the GM, I started as the GM of SPG 4 years ago. And this ecosystem looks eerily familiar to me. If you were to go back 4 years and think about small business, at that time, there were a lot of standalone applications, standalone payments like Go payments or standalone payroll, different mobile apps. There was no connectivity with accountants, even though accountants were the most trusted partner for a small business.
But there was a ton of these amazing assets. And if we could pull them together into an ecosystem, we could unlock a lot of new value. Well, this is very similar. So if you start at 3 o'clock and go counterclockwise, Mint, we have 10,000,000 customers who track income and they track spend and they try to categorize and understand where their money is going. If you think about TurboTax, we talk about the units, but really underneath units, there's consumers, there's people.
Over 50,000,000 people's W-two information is submitted through TurboTax to the IRS. You think about QuickBooks, well QuickBooks is 2 sided markets as Sasan just talked about. There are employers and there are employees. We communicate to their employees through payroll. Over 10,000,000 employees actually receive a check and view it either biweekly or monthly.
And then we also have this amazing ecosystem of tax pros. Through them, they do returns for 30,000,000 consumers, but we do nothing to help them get new customers. And then finally, probably the biggest asset that we have as a company is the ability to connect people to their banks and aggregate a lot of their financial information. We have coverage to over 95% of the consumer markets bank account information. And all of this is completely disconnected right now.
David, who you just saw the video for, is a customer who happens to use all of our products and he likes every single one of them, but we haven't done much to make these work together seamlessly nor have we helped to provide synergies across them. So as we talk to our customers, you see all of the problems they have. And because we're in the finance and compliance space, they're very similar to everything Sasan just talked about. They're similar to what Brad's been talking about. In our case, it starts with this foundation of making everything easy.
Our product is so easy at this point that customers only spend 109 minutes with us every year on the TurboTax side. So we are eliminating a lot of work significantly better than when we work with a pro. But as I mentioned, we still are the minority of returns. Most customers still seek out human assistance. So 60% of them are looking for someone to help them.
A good chunk of those very simple returns that could be done in under an hour. And the last piece I'd say is probably the most impactful. When you do customer visits and you really visit the Midwest or you visit poor communities, you see just how many people are struggling. Almost 2 thirds of the country could not pull together $1,000 in an emergency. And a lot of that when you visit them, you realize how much of it is due to bad decisions or the inability to understand where their money is going or their willingness to spend more for services that they really shouldn't need to.
So these are all the problems that get us excited about solving to help the community. Now we introduced this framework last year and this is really about thinking about different horizons of our investments. So, it starts with continuing to lead in the DIY space. And so one of the things you should feel good about is this is our bread and butter. This is the area that we need to win and our primary focus is here.
How do we continue to win when it comes to self directed tax completion? But we also need to start expanding and building off of that platform and thinking more about transforming the assisted category. So for years, we talked about disrupting it. We said everybody ought to just do a DIY return because it's so simple. But the more you talk to customers, the more you realize the risk associated with it and the comfort that they get from assistance.
And so now we think about it a little bit different. We think about how can we become a modern assisted solution. And then the 3rd piece is evolving to more of a platform versus an app and becoming that ecosystem. And this is a big foundational investment that is underneath every single thing that we do at this point, which is pulling together all those assets so that they start to feed off each other and complement each other. Now there's other things that we're exploring like how can we become a platform for developers and become a true open platform how can we move beyond just Canada and go more global.
And at this point, those are not areas where I'd say there's a significant investment, they're more explore. And if you were looking at this as Horizon Planning, you'd say about 80% of our resources are still squarely on the DIY tax press space, while we continue to ramp up these other areas of investment. Now we'll walk through each of these. And one of the reflections I had as I took this job on, Sasan said to me, I want to tell you every tax season is unique. And I thought we were having some deep metaphysical conversation.
It turns out he was being very literal, very literal. And last season was one of the toughest seasons that we've seen in a long time. Not only did we have the PATH Act, which changed the formation of the season, It moved much slower and more deliberately as consumers delayed filing due to some of the confusion of understanding what the PATH Act was, which was really meant to drive a reduction in fraud around the earned income and additional child tax credits. And so it delayed the refund process in the return. The second piece was there were additional fraud measures.
And by the way, these are things that we work very close with the IRS on and are completely supportive of as we continue to strengthen this industry. The second one was the inability to do a quick lookup of your e file PIN and instead having to know your prior year adjusted gross income, which all of us thought would be a very simple thing for consumers. But to just give you a sense of some of the sophistication of the broader American market, many people don't know their prior year AGI or couldn't find it. And so what we saw was a lot of people being kicked out of the e file process into paper filing. And it changed the dynamics of how we report share.
And then the 3rd piece was it became a highly competitive market. So legacy competition extended their free programs. And also we had the 1st credible new entry into the category who came with a completely free solution as well. And that changed our results. So if you think about at the very top of the funnel, IRS returns were flat for the first time in about 5 years, and that has a significant impact.
The DIY category grew a little slower than it has historically, 0.8 points and that is actually has to be interpolated because some of those people move to paper, it actually looked lower in e file. And then ultimately, we saw a little bit higher attrition. And I will say most of that attrition growth was due to free customers, which really is at it gets at the question that a lot of investors have asked me, which is how were you able to deliver the year financially. And it really was a shift in mix back to paid and you can see the ARPC up to $53 per return. So it was a very different year than we've seen.
Another question I typically get is, so what does that mean for next year as free is what would drive your long term growth as a business? And my answer there is it does. It's something that we take very seriously and you'll see incremental focus this year on it in terms of your long term health of the business. But the impact of any single season or even multiple season cohorts is somewhat muted because those customers are monetized over a longer period of time. So this is a really important slide, really where we focus the bulk of our energy and it leads to what we're doing for next season.
And it starts with winning with free. So last year, one of the things that we realized is we may have gotten slightly complacent in free. Being the pioneer of the free space, we assume that all customers had awareness of our free offerings. And when we looked at all the results for the year, we realized actually half of the prospects out there in the DIY category were unaware that we had a free solution, which is a pretty staggering number and that won't happen this season. We also continue to add more and more value to our product.
One thing that we do is we measure it pretty obsessively and we look at net promoter across all dimensions On every product dimension, on every product experience dimension, our product is superior to every one of our competitors in the free space. And we believe that performance is going to normalize around that product experience over time. And so we'll continue to invest in it as well as continuing to invest in mobile. So we continue to see mobile outpacing stationary, both in terms of mobile web and mobile app. And so these are areas where we'll continue to put fuel on the fire.
Now we also feel like this product is about creating personalized experiences and personalized experiences in tax means reducing the number of questions that we ask customers, because every question erodes confidence. And we've made a large investment in a consumer tax platform with the idea of starting to interpolate and understand based off the power of our ecosystem, the number of returns that we do, understanding which questions a customer actually has to ask. We're also reimagining everything that we do from a self help perspective because what we want to do is make sure that when we're receiving calls, they're about tax expertise, not about product support. And then finally, we're going to continue to extend our capabilities as it relates to self employed. So self employed, we know is a big growth opportunity for us.
We'll continue to invest in reducing the number of questions. For us, that is our most complex customer and we're probably the only one out there that's singularly focusing on that segment versus putting them into a generalized SKU and we'll do that more and more with the idea of moving them over to QuickBooks Self Employed when they're completed. Now, this slide is an incredibly important one. This gets at what we think is the bigger future opportunity, which is thinking about becoming the assisted player in the marketplace. Now you can see here one of the things we talk about a lot is we're flat on share in DIY last year, 65% share in the market.
That 65% share in units translates to close to 80, a little bit over 80 percent share in spend in the DIY category. Now those numbers sound impressive, but what I like to look at is the overall share. And when you look at overall share, we're 25% share in people who file taxes and we're 10% share of total spend. In fact, when you look at the pro space in terms of pros and stores, they are $19,000,000,000 of spend against the $2,100,000,000 of revenue that we had prior season. And that is a significant opportunity and one that we actually feel like we can address as the low cost disruptor.
So in this case, you're looking at returns that are 4x a DIY return in terms of price. And so this is a big opportunity and I know we've been talking about it for years. But while we've been talking about that opportunity, we've been experimenting and you can see on the right hand side what we did last season with Expertise. We have dialed up SmartLook as a platform to deliver because one of the questions I always get is, how can you provide tax advice or support at scale? Well, we already do it today.
We just haven't commercialized it. So last season, we did a lot of experimenting and some of you have seen some of our experiments and we experimented the last 5 seasons. But this season, we made one critical adjustment, which is we moved the Pro experience to underneath the TurboTax brand. And what that allowed us to do was normalize the experience for our customers. In the past, we had handed it to a pro and that became a bit more like a commodity pro experience of moving documents back and forth.
The pro experience could be different depending on who you were matched to. And this year instead we said let's standardize that and let's make sure that we're leveraging the common tax platform to be the way that the customers can interact with that pro. So I'm happy to say that this year we won't tell you about experiments next year, but we are going to be launching an assisted solution at scale in the marketplace. So this is a big move for us. Now when you look at this, how are we going to do it?
Well, the first thing is extending TurboTax brand because the question you'd have is do people think of TurboTax as a place to come and get expertise? This is another area where we made a lot of improvements last year and how we do advertising to dial up the expert versus just the software. And so we did a campaign called Relaxers TurboTax. And within that campaign, we saw the highest improvement in consideration from people who had filed the prior year with a tax pro. And so it expanded the top of our funnel.
It was also breakthrough, had a 140 index on the breakthrough dimension relative to what is benchmark and the response rates were actually higher than the Genius campaign that we did last year by 30%. So it was a very nice campaign, a great foundation to continue to introduce our pros and the expertise that we provide through our software. Now we need to focus then on the pros and who they are. So one of the things that we're doing that's a little bit different than what you see at TaxSource is, all of our PROs are credentialed. They're enrolled agents, they're CPAs.
And right now at this point, as of October 1, we have 3x the number of pros already hired for next season than we delivered all last season. So we believe this will be a pretty scaled effort this year. And we're going to anticipate that when our customers need help. So the one advantage we have is they're working in our software. And as they work in our software, they encounter problems.
We can identify them. And to remind everybody, we have about 3,000,000 people who leave our product to then go to a pro. And usually, it's not because they need complex advice. It's just that they need one question answered and they want to have that confidence of a pro behind them. So this is really going to be about how do we extend our brand to be experts, not just be software.
Now this on demand expertise takes a platform. And so we also feel pretty comfortable that we have a novel and defensible approach because we've been building a platform that allows you to toggle between a pro experience and a consumer experience. So 1 year you might need a pro, the next year you might not. But your data is going to stay with you no matter where you go in the experience. So this is something that we think is very difficult to replicate.
We also have a goal of you being able to schedule an appointment with the pro in under 5 minutes. So truly on demand from the comfort of your house. And so these are things that it's overused, but we really do want to be the Uber of accounting and the Uber of taxes. And the great thing here is, the pros in our ecosystem are the first ones to join in. They're excited about it and see it as an opportunity for them to have income.
And it also goes after the pros that we've been probably the weakest at, which has been the ones that are very consumer centric pros that have been going to some of our competitors. And so these they are now coming back and they're becoming the core of what we're doing with the accounts in our ecosystem. So with that, I'm going to show a quick demo so you can get a sense of it.
Nearly 60% of people seek an assisted solution when filing their taxes. This year, we make speaking to a live tax expert easier than ever before. In this case, our customer is renting out his property on Airbnb for the first time this year. He's not sure if it's considered a short term rental, so he selects expert help to find out. Our customer confirms his number and enters his question.
He then opts to have a live expert connect via video with him in 5 minutes instead of scheduling a call for later. Meanwhile, Eve, one of our pros, is logged into TurboTax Live from her home and is ready to take calls. She gets a notification that she'll be connected to the customer and then initiates a smart look session. Once connected, our customer sees Eve on his screen where she walks him through the ins and outs of how to properly log his Airbnb rental. By the time the call with Eve is finished, he feels confident and continues doing his taxes.
Before filing, we ask the customer if he'd like to have an expert review his taxes. In addition to confirming a callback number, he also has a question about his self employment income, and he enters it into the field provided. The expert callback is confirmed. This time, Anderson is notified that he'll be connected to a customer for an expert review in 5 minutes. Anderson uses the 5 minutes to process the question and view a sanitized tax file, so he's ready to help as soon as they are connected.
Anderson is then automatically connected to the customer. Our customer sees Anderson, who uses capabilities like gesturing to review his Uber income. Finally, we let the customer know his return is good to go. He files with confidence knowing experts have answered his questions and reviewed his taxes.
So from a consumer standpoint, this just is going to feel like TurboTax with a Pro infused within it. But from a platform perspective, it's pretty impressive. You now have a pro interface directly to the TurboTax database. You have scheduling. You have things like collaboration and video chat, all the ingredients coming together to do something that we haven't done before.
So very exciting. Now the 3rd piece is evolving from an app to a platform and Brad mentioned this in his talk. TurboTax and Mints are highly complementary solutions. On one hand, you have TurboTax, which is one of the largest channels out there for a thin app, with over 100,000,000 unique visitors and you have Mint with 17,000,000 uniques throughout the year, but really complementary engagement models. You have TurboTax with 90% awareness, 70% trust factor, but only 2 sessions a year on average and the median is 1.
So you have a group that doesn't engage with us all that much. Now on the flip side, you have Mint highly engaging in terms of understanding and tracking spend and understanding where your money is going throughout the year, but highly complementary because most of the times we can infer what's happening in your life if we understand your finances throughout the year, which can inform how you would actually help someone complete their taxes. So two things that are very important. Now when you start looking at what's underneath all that, there's some of the most valuable data in the industry. And I always feel like it's very important to mention, our data stewardship policies, which are more restrictive than what's required.
We're always going to be 7,216 compliant, which means we'll get consumer consent. We're never going to sell our customers' data. It's in their control and we'll be as transparent as possible any time that it's being shared with a partner at that moment of the transaction. And so this is something that's very important. But the most important thing is making it portable for consumers so they can solve their own problems.
So if you know their financial transactions or if you know their income, if you know their credit score, their mortgage data, you can start to optimize their finances. So we know that about 2 thirds of our customers, their finances are not optimized. They're paying too much for what they use in terms of financial services. And this should be a way to identify and get them the right offers. This is another place where we did a lot of experimenting last year.
We had talked about student loans going into the season. And the reality is student loans was a way for us to run water through the pipes. And part of that is understanding how to position this with consumers so that they provide consent and understanding whether or not there's value for them at the end of doing that consent. And so we started the season out with a consent rate of where we ended the season, which then allows us to experiment further this season by offering more financial services to those customers. We also validated TurboTax as a channel by driving over a 1000000 customers to a credit score application.
And like Brad mentioned, we validated even though it was a small set of customers that when they use the 2 products together, they have a higher conversion rate. So this was a very important learning season last year, which takes us to what we're doing this year. We're going to continue to put fuel on this fire and get deeper TurboTax and Mint capabilities integration. You're going to see us start to play a little bit more with integration of payroll data. We think that payroll data is some of the most engaging data and customers typically go to check their payroll.
It's one of the things that they do when they work in online banking and we think that that's a good way to get them engaged with our ecosystem as well. And then we know over time that we can also bring experts to these consumers, the people who are trying to manage their finances throughout the year and it turns out actually a lot of our CPAs or enrolled agents are also CFPs. And so they think to themselves, how can I help consumers even further through the platform that you've created with SmartLook? Now that's all in service of eventually becoming a broader trusted open platform. And this is an area where I think we've failed historically.
We have not come up with a great beyond user paid business model, a way that we can help consumers at no cost to them, but monetize through financial service providers that are looking to get access to customers in a seamless way. And so this is an area where we'll focus a lot more energy as well this season. So with that, I'll roll a quick demo here as well.
44 percent of Americans can't come up with $400 in an emergency. Taxes are just one piece of our financial life. Our customers have access to the most important data, like their credit score. With customer consent, we break down the elements of our customers' financial picture, putting them in control. By knowing where they stand, we help them learn about their financial opportunities.
Finances are always in flux. We constantly monitor our customers' data to keep them in the know yet give them the tools they need to make sense of their unique situation. We compare our customers' data to millions of others in similar situations while decoding the mystery of finances. When they have questions like, do I have too much debt? Do I have the best interest rate?
We get them the answers. As customers explore these insights further, then they see how others like themselves compare. Our customers can access their numbers at any time by connecting their accounts. With consent on the tap of a button, customers' information can be shared with our partners, effortlessly joining the pieces of their financial life. Getting our customers the information that matters most gives them a more complete picture of their overall financial health.
Knowing where a customer truly stands gives them more control to make the best choices for the future.
So powering a piece of that is what we're calling an insights engine, which allows us to benchmark a lot of the tax data. So again, these are the customers who are providing consent, but it allows us to give you comparisons that aren't just about your income compared to the rest of the world, but it can be your income compared to 25 year olds that live in your direct neighborhood. And this is an area where we know that we'll get people engaged and we'll help them understand how they're doing, which is one of the biggest challenges and a foundation to doing better in the future. Now we're not announcing anything specifically here, but we will be doing a product announcement at Money 2020 in 2, 3 weeks where we'll be talking about a brand new product that's tied to this initiative and the demos that you're going to see outside, which takes me to my conclusion. I think, if I were just to put a bow around everything, I'd say, we talked a lot about transforming assisted and we talked a lot about becoming a platform.
But really foundationally, the most important thing is winning the tax season. And we think there's plenty of room to go and we know exactly what went wrong last season and what led us to slowing down our growth and just holding share. We think we have a formula to reaccelerate it. But we also feel like we have to have dexterity. We have to start thinking about what the next big opportunity that's adjacent to DIY taxes and it's 2 things.
It's thinking about becoming an assisted solution that's really technology enabled versus store enabled and starting to think more and more about how we can unlock a lot of the data that the consumers have for their benefit to help them live better lives and have more financial freedom. And so with that, I'm going to hand it back to Kim to give you some logistics for the break.
Thanks, Dan. Okay, we're heading into our break now. Just wanted to remind you what's available in our gallery walk. A lot of the demos that you saw, both Sasan and Dan showed and also, the on demand tax expert will be available. Restrooms again out the door to your left through the demo area and turn right and we'll be back here in about 30 minutes, so about 5 after 10.
Okay, thanks.
Excellent. My name is Lucas Watson. I lead the Worldwide Marketing and Sales Organization. And I thought I'd talk a little bit about how we try to take our customer benefit and turn it into discovery for our customers. We spend so much time working on making products that delight our customers and deliver true benefit in their lives.
But the real opportunity as we think about translating our total addressable market into opportunity is about how we get more of these customers to actually discover the benefits of our products. That's where the worldwide marketing and sales organization comes in and we think about it in terms of sort of three strategies about how we do this. First, we're really focused on helping new customers discover the benefits of our products. More than anything, we'd like to deliver exceptional customer growth and we like as many customers to actually see the benefit of our product before we even ask them to pay for the product. 2nd, we focus on helping our existing users see the value of our products before we ask them to pay for And as they discover new benefits in our products, then we earn the pricing that turns into revenue for our businesses.
And finally, we're constantly working on innovation, both in terms of our new business models, our sales models and our advertising models such that we can be better at this tomorrow than we were today. So let me take you through a quick journey to sort of explain how this might work. More than anything, we all know that customer growth is crucial to what we do. And so helping new customers discover our product benefits is the most important job. I worked for a long time at Procter and Gamble and after that for a long time at Google.
But I always used to talk to my wife who was also a marketer and say we would grind out on Tide, not on Pampers for like a one point of market share. And we always dreamed what it would have been like to be a marketer in the consumer product business back in the 50s when there were still undeveloped parts of the category. Not everybody has actually used laundry detergent or diapers. And so suddenly when I work here in software and software as a service, I feel like we've gone back to the 50s, but just in technology. Let's take QuickBooks as an example.
There's 215,000,000 potential customers in our category today in the markets in which we're in. 2 out of every 3 of them still don't even know the name of our brand and 98 out of 100 of them still don't use cloud based financial management software. As a marketer and as a seller, this is a dream scenario. And in fact, what happens is we get the following results. When Tide advertises their brand, if they go dark, they lose about 5% of their business by going dark on advertising.
Or said another way, when they advertise, they only get 5% lift in growth. A software category like Microsoft sees about 25% to 30% lift when they advertise their brand. TurboTax sees about 30% of their growth come from their actual advertising. But on QuickBooks, because of the slide I just showed you, we see 46% of our growth can be explained by the direct investment in advertising that we make. As a marketer, this is a dream scenario.
Our categories are incredibly responsive to advertising. For the same reasons that we talked about earlier, our competition is Google Sheets or Microsoft Excel or just a pen and paper in a shoebox. And so when we think about an elastic category, we then also want to partner that with world class creative partners. When I joined about a year ago, we were working with 1 world class creative partner agency partner called Wieden and Kennedy. They're the ones who make advertising for brands like Nike and Procter and Gamble.
But in the last 12 months since we joined, we've added the roster agencies of TBWA for our QuickBooks brand, who makes brands who does advertising for brands like Gatorade. And we've also had a phenomenon on behalf of our Intuit brand who makes advertising for brands like Disney or Warner Brothers. So we now have a full portfolio of creative agency partners that would rival what we've had on TurboTax for the last 4 years, which makes me as a marketer incredibly excited about our potential to help unlock user delight through brilliant communication. So we think about Elastic category, we think about great creative partners. We also have advertising scale advantage.
In our particular category, we are by far the largest advertiser relative to our competition. And when we think about creating brand awareness and creating top of mind awareness, having scale is a tremendous advantage in the world of communication advertising. So when we put that all together, we start to see a formula that can really work. And in fact, the last 4 years on TurboTax, it's already been happening. We have a relatively responsive category where they see 30% of their growth comes from in advertising.
They've been working with a world class creative partner called Lightning Kennedy for the last 4 years. The campaign you saw last year with Kathy Bates or the year before of It Doesn't Take A Genius, that's the key to great communication. In fact, they get persuasion that's 50% above the average benchmarks when measured by market mix modelers because of the great communication. And then leadership investment in advertising has delivered 6 points of share growth over the last 4 years. This formula that's working inside of our own company, we're just starting to apply on QuickBooks.
In fact, this year, this past year, some of the growth that you saw, we only used 2 of the 3 legs of the stool. We have an incredibly elastic category, Again, 46% of our growth comes when we invest in the advertising. We haven't even leveraged our partner TBWA yet because we just hired them in the last 6 months. So we haven't really used a world class creative partner and I'm excited to share that when we come out this January with our new campaign, we will have this leg of the stool working for us. But we did invest 23% more in advertising this last year and that helped drive the 50 which is an acceleration from the 41% before.
This is a formula that we are really excited about the potential to create massive customer growth for our businesses because from customer growth we can then help them discover the benefits of our brands through which we'll ultimately earn value. So if we have success driving customer growth, which again is job 1, job 2 is to then help our existing users realize the value of our brands. So how do we think about doing this? This chart might help you think about it. Most important job is in the bottom left, which we talked about maximizing customer growth.
But then we think about earning value after the delivery of benefit. So after we've gotten somebody to sign up for QuickBooks or for TurboTax, oftentimes they've been acquired with promotional discounts. Often we'll give you QuickBooks for 50% off for 6 months as an example. But over the 1st year, those promotional discounts expire. We've also demonstrated in the past the ability to earn price after we've delivered the benefit and we have incredible retention and loyalty to our brands.
And that's one way in which we can earn revenue from customer growth that we've already driven. At the same time, we can earn value through loyalty. When we said earlier, businesses are more successful when they get connected to an accountant, as Brad showed us in the beginning. If we can make that connection between a small business and an accountant, the probability that A, they stay in business for longer and B, stay loyal to our platform goes up. When we help them connect their bank data automatically and then auto categorize their transactions, the stickiness and the likelihood that they would ever want to leave the software goes down significantly.
As a result, the lifetime value increases because people stay with us longer. And then finally, once we have loyal customer relationships, we have the opportunity to introduce our customers to new benefits. You saw this in this past year in the magic between TurboTax and QuickBooks working together for the first time, 170,000 active customers floating across those two brands for the first time. We just have started to expose the possibilities between TurboTax and Mint, a really large customer base with infrequent usage, a smaller customer base with high frequency of usage. There's tremendous synergy by bringing those two brands together.
Introducing people to QuickBooks Payments or QuickBooks Capital or even just carrying over data from the previous year, all those provide opportunities for us to introduce new benefits to our existing customers, which gives us the opportunity to earn revenue after we've delivered the benefit for our customer. To make this sort of real and tangible, these are 2 illustrative examples that I don't know that we always internalize the lifetime journey that our customers can go on. Take Ashley who might have just come out of college and she's a new college graduate and she signed up for TurboTax Absolute 0. She's worth absolutely nothing to us economically in the 1st year, except she's not. Because by year 3, rather than manually typing in all her tax data from the previous year's return, she chooses at this point that it might be worth to her to pay $30 to TurboTax to just import her data from last year automatically into this year's return.
And also by giving her access to a SmartLook agent, which gives her access to customer care to help in the video inside the product, that's worth $30 to her. So suddenly what was a free customer that we view as not worth anything to us is worth $30 Let's go forward to year 6. In year 6, she's actually her job is going well. She's starting to have some investments. She's starting to save for retirement.
So she trades up to TurboTax Deluxe for $80 She has more complicated investments to manage. And because she's now a 2 time buyer, in fact, she's a 6 time buyer of TurboTax, her loyalty climbs to 90%, which increases her lifetime value as well. If we can get a customer to sign up for TurboTax 2 plus times, there are loyalty crimes to over 90%. So we think about these lifetime journeys where a customer that we might have viewed is not worth anything to us because the initial product was free, so then becomes a very valuable customer relationship for us after we've delivered the benefit to them. The same opportunity exists in QuickBooks.
Take Josh who opened a cafe and he signs up for QuickBooks, but he gets a 50% off for the 1st 6 months. He might only be worth $135 to us in the 1st year. I often say with our teams that we're only earning a third of a cup of coffee for our great software today. But after the 1st year, his promotional discounts expire, but he's now getting real benefit from the product and all of a sudden we get a full year's worth of revenue and it could be worth $180 a year to us. And then all of a sudden the business is healthy and Josh hires an employee for his cafe and so he chooses to add payroll with us, well he's now suddenly worth $6.70 So we keep thinking about how do we earn customer growth first, then deliver tremendous benefits and through in product messaging and discovery, how do we help them discover benefits when they need them that are most relevant for them to start to earn lifetime value that increases over time.
This is just the model that we think about how we turn customer growth into pricing and revenue that turns into the business that we love and know so well. And then finally, we're not going to rest on our laurels. We're going to drive constant innovation in our commercial models to improve our ability to do this efficiently with customer delight. So just one example that we've alluded to in a couple of different ways and Dan will share more details at Money 2020. But if you think about Intuit, TurboTax and Mint, we have 40,000,000 consumer accounts through which $1,500,000,000,000 of consumer income flows.
With their permission, we can offer services like renegotiating student loan debt, mortgage debt, revolving debt, 401 savings, legal planning, expert review and audit defense. All these services or the ability to connect consumers to partners that might be able to deliver these services well with the full complement of insight that comes from both income and debt data working together becomes a really valuable trove for us to consider new business models. In fact, in some of our early testing with the student loan data last year, if we can have one customer sign up for one of these services, they tend to generate 5 times the average revenue per user that is they can play one of these financial actions in lieu of the initial consumer money that they pay us directly. That's a really exciting opportunity for us to unlock that we're working very hard on. 2nd, we're thinking about sales innovation.
I often use the analogy of moving from fishing with fishhooks to fishing with nets. If you think of all of our we talked about the OneInto ecosystem strategy and the importance and the role of our partners. Etsy is just one of many partners where we might be able to introduce the benefits of QuickBooks or TurboTax at a platform level at scale. There's 1,800,000 sellers on Etsy and we've earned 10,000 QuickBooks customers through Etsy in the 1st year by deeply integrating QuickBooks experience into the Etsy experience. And the cost per acquisition, which is exciting to me, is 50% cheaper than our traditional way of going after the customer directly.
This same thing exists inside of our own platform. Platform selling on TurboTax, we have 4,000,000 TurboTax users that are self employed and 170,000 of them in the 1st year chose to buy our bundle and actually activate through QuickBooks Self Employed and TurboTax Self Employed. We have a year's worth of learning and understanding under our belt and our commercial approach for year 2 will be stronger than in year 1. And there are other natural linkages inside of our portfolio that we're exploring that apply the same technique and logic. And then finally, selling at scale through partners is a big opportunity.
If you think about it for a minute, we have tons of partners to work with. We have signed accounting firms like PWC through which we sold 4,000 units at a time to their small business customers. We already sell 1,400,000 units of TurboTax through bank websites today. And through the 100 universities in the United States, we'll get 50,000 units of QuickBooks accounting software for free into the hands of students so that we become the language of accounting for the future. And what really excites me more than anything is the opportunity for advertising innovation.
Of the 45,000,000 people that are self employed in the United States, less than 0.4% of them use all 3 of our products that would be relevant for them. That's meaning TurboTax Self Employed, QuickBooks Self Employed and Mint. The lack of the center of our intersection working together is both a tremendous opportunity and also something that why haven't we taken advantage of it yet. As an example of where I came from that gets me super excited how this might work, I wanted to share a quick video. This is when I used to work at Google.
Notice in this case, you'll see Google advertising the parent brand, but they advertise 6 different products inside of it, showing how the ecosystem seamlessly works together. Let's take a quick look. So that's just an example, but for our own company, we have this amazing mission of powering prosperity around the world. People when they come to work at Intuit said, I had no idea what a powerful mission you have and how valuable this company is to the role in the world, but nobody knows it. Only 6% of people have unaided awareness of Intuit as a brand and very few people can make the linkage between Intuit, the company and the brands that we make such as TurboTax and QuickBooks.
And so while I won't share it today, just to give you a flavor for what's going to be coming this winter, Intuit is going to present a giant story. It will be Pixar animated style. It will be the first time that we've ever advertised the company, our mission and our role in society and start to make the linkage between our cornerstone brands and the 1 into ecosystem strategy. Just like you saw from the Google example, the potential to weave together this ecosystem to demonstrate how we might actually power prosperity all around the world has me incredibly excited. Every spot will finish with this closing end frame where for the first time people will see that Intuit is connected to TurboTax, Mint and QuickBooks.
So I'm really excited and when right after Christmas, hopefully you'll see this on air, you'll see it on YouTube, you'll see it in all the places you might see it as a regular consumer and the potential to unlock the power of prosperity for all of our customers has us really, really excited. So with that, I will hand it over to Tayo Stanberry. Thanks for your
time.
I had spent my twenties in and out of clinical depression. I was moving jobs, changing cities, and because of this search, I couldn't stop drinking. I couldn't believe I couldn't stop drinking. And I was so unhappy in my life and so disappointed and ashamed of myself that I chose a date to take my own life. I ended up meeting a woman who said that the first thing that I needed to learn to do was to meditate.
I remember looking at her leg. Really? When I started meditating, I never knew that it was possible to be that happy and still be living here in my human body. This method could really help people, and I decided that I wanted to write a book and coach people and help people to learn how they could change their lives too. When I first started my own business, I invested in so much business coaching.
I reached a point where I was tens of 1,000 of dollars in debt. You know, in the moment, you've got
your plastic credit card and you
think it's a good idea, you just spend the money. And I found my accountant, and I burst into tears. Him showing me how the QuickBooks software could sync with my credit cards, that was a huge tool in me being able to manage and eventually pay down and get out debt. Take a second and rearrange your body or the way that you're sitting. I started helping people.
That's where I really found something that I loved to do. It's been a couple of weeks. How are you?
So you know how sporadic I've been.
I know, but it happens to everybody. It's so normal. Prosperity and abundance for me is having a
sense of satisfaction and fulfillment to be on the other side of
it and be able to
That's what I do know all the time.
Good morning, and thanks for the opportunity to share something about Intuit's technology. I wanted to focus on 2 of our priorities. 1 of them is speed and the other is technology to drive growth. Our mission as the engineering team is to provide awesome technology to power prosperity and service into its mission. And as Brad said, we've had a history of disrupting ourselves and of deeply understanding our customers and reimagining our solutions to address their evolving needs.
And so we've managed to not only survive, but to thrive across multiple technology eras and grow with each of them. And I think we're well positioned to grow into the next era, which is going to be all about data, data science, machine learning, AI, conversational UIs, augmented reality and virtual reality. So, And so
first, let's talk a little bit
about speed and I wanted to focus on 3 areas within that. One is about refactoring QuickBooks Online. One is about getting to a common tax platform, which we mentioned earlier. And one is about continuing our journey towards cloud hosting. So first, as part of refactoring, we took a look at what were who are our customers, what were their fundamental needs for each class of customer, more money, no work, complete confidence in what they're doing.
And what were the services that we needed to build to serve all of those needs, so that they were driven customer back. And all of those services are there to provide speed so that users can actually or so that developers can grab a service that previously exist and put out a new piece of functionality and efficiency. So we build each of those services only once. So let's talk about this in the context of QuickBooks. The QuickBooks online code base began 20 years ago.
And as you might imagine, the architecture is no longer cutting edge. It's a big monolithic block of code or had been a big monolithic block of code in which it was very difficult to make changes to innovate without actually creating errors. And so it took a long time to release it to converge the quality of each release. So it would take weeks weeks to actually converge any new QuickBooks Online release. So a journey that we started on a few years ago was actually to break this into more and more separate modules, which are easier to build in, easier to innovate and could be released independently of each other with greater speed to faster satisfy our customers' needs.
So first we broke up the user experience and introduced a framework for user experience plug ins and then we broke up the back end into a number of underlying services that could power compliance for payments, payroll and accounting. The result of this is that a couple of years back on the UI side, we were able to make maybe a couple of releases a month of new functionality. Today, we're releasing over 400 new versions of that every month, which means that we are able to address evolving customer needs and our evolving understanding of our customer needs ever more quickly than we were before. So let's talk about this in the context of tax. So we mentioned having a moving towards a common tax platform.
Our history is more complicated than that. It is that we had 1 tech stack for our consumer platform for tax and another tech stack for our pro platform, both of which were like our old QuickBooks platform, big monolithic blocks of code which it was difficult to make change, slow innovation that delivered a one size fits all experience for the 30,000,000 odd users who touched TurboTax and was difficult to maintain compliance in as the tax code changes every year. So what we are in the throes of doing now is actually moving towards a single tax platform that can span the needs all the way from consumers to large pros. It breaks up the architecture into more modular components that are easier to maintain, so that there's a single data layer that serves all of tax, a single logic layer that represents the tax code of the U. S.
And of Canada in rules based logic. And then that is able to present 3 different user experiences on top of that, again, based on the same tax substrate, which is easier and faster for us to maintain. And so the result of that is we can innovate faster. What used to take a whole team of people to update a tax topic, it would be several months before they would be done. Now a couple of engineers can go off and knock one out in a couple of weeks, which really goes to our speed of innovation.
We can now present right for me or personalized experiences rather than one experience for all 30 odd 1000000 users. And, which drives significant efficiencies because instead of having to capture all the changes in the tax law every year in 2 platforms, we now do it in 1. One of the other services that of course we have been adopting is moving to Amazon Web Services. And we started this journey a little while ago and I would say in the last year we more than tripled the amount of data and the amount of compute that we're doing on Amazon And now we have very substantial components of all of our products running in Amazon today. This has driven significant speed for us.
As you might imagine, in the old world where we were provisioning our own servers, it might take a couple of months to increase capacity to meet demand or to do some new experiment. Now that can be done in a matter of minutes. And so that's bearing good fruit for us. So now what I'd like to talk about is some of the technology that we are using to drive growth and particularly around data and AI. So as you can imagine, we absorb data from all kinds of different sources into our applications.
We absorb data from banks, from credit card companies, from billers. We absorb data from governments and from payroll companies and all of that feed into our products to make the customers experience easier and more delightful. We then take that data with the customer's permission and feed that back to various different entities including banks and financial institutions, accountants who are working with our customers, 3rd party software developers who are developing applications that want to have data flows and workflows that tie together with our applications as both Sasan and Dan discussed. And also of course, sharing data back with government, so all of our customers can keep current on their taxes and other compliance. We then take that data and we analyze it rigorously and try to provide insights back to our customers and back to all of those 3rd party entities.
Now we have an awful lot of data. It's and it does behoove us to take really, really good care of that data. So we spend a lot of energy and time on security and privacy for all of our data. We started with a set of principles that govern that, the use of that data. So for example, we will not sell our customers data and we have a rigorous process for tightening and tightening, tightening our security every year.
Now with all of that data, which includes more than 20% of the GDP being tracked in QuickBooks, more than 40% of the tax returns in the U. S, What we're able to do, modern AI is driven off of data and volumes of data. And so that feeds what we're able to do with AI for our customers. If you look at and break down all the various different fields in AI, it turns out that a very large number of them actually do benefit the class of customer whom we serve. So starting here on the bottom, knowledge experts knowledge from human experts, we are aggressively codifying that into various of our systems, most particularly tax.
If you look at knowledge graphs of financial data, if you look at all the transactions that we have access to from our customers, then we can actually build a map of what's going on and then actually learn from that and provide a better experience for all of our customers, both to make the transactions that they do easier to do and so that we can make recommendations for them. And then of course, we can get into predictive modeling to help customers with things like, should I pay this bill? If I pay this bill, am I going to make payroll or am I going to miss my rent payment? It turns out we started working on AI a long time ago, about 10 years, and we've been ramping and ramping with hiring AI people and also with what we've delivered into the market. Today, we have some 150 patents that we've filed in AI and machine learning and we have some 40 products and features that we have delivered and running in market today.
Just want to give you a few examples of those. One of these is pre search. So imagine if you're in TurboTax and you have a question and you hit the search button, before you even type in a search term, what it will do is look at everything we know about you, every fact we know about you, where you are in the tax experience, users like you and what questions they've had at this point and actually pre serve up a set of answers that are going to be the most likely ones to the question that you're likely to have. If it turns out that one of those isn't actually the one that you need and you type in a question, we will parse that question, we will match that question to other questions that people have asked and serve up the most popular answers to you. If we don't happen to have any good answers for that question, we will farm that question out to people who have answered similar questions based on linguistic analysis with the highest scores and in a short period of time you'll get an answer back in the system.
So some 48,000,000 people used this service in the last year, and more than 3 quarters of the way of them walked away with the answers that they needed before they had to go to a tax expert to get the answers that they needed. So let me talk about an even deeper application of AI that I think is going to have profound impact on the tax experience. So it used to be that when you basically walk through and tell the story of your life in a series of a set of answers, which then we would compile into a set of forms to be sent off to the IRS and state agencies. It's still a rather long experience, so a lot of different questions to be answered. And what we've done is tried to compress that experience into the shortest one possible that makes sure that you get all the deductions that you should and file an accurate return.
And we're doing that both with old school and new school AI, both rules and logic and also machine learning with data. So with rules and logic, we're doing things like, if there's something that we can infer about you from facts we know before and logic, we will not ask you that question, where in past years we might have asked you that question. So we can get rid of that part of the experience and make it shorter and simpler. Also with rules, we're able to answer questions like, hey, I don't like my refund. Why is it the way it is?
We can back chain through that logic and show you the most salient questions that you answered that had the biggest impact on your tax return so that you can check those answers, make sure they're correct and be confident that you got it right. With machine learning, what we're able to do is to steer you away from parts of the tax return that are likely to be fruitless based on looking at millions of other users and steer you towards the part of the tax return that people very much like you may have taken a refund or it may have taken a deduction that you might have missed. So again, logic and machine learning applied to improving the tax experience. Let me give another example. This one's about accounting and AI applied to accounting.
One of the problems of course is that when you get your bank feed of data fed into Mint or into QuickBooks is that now you've got to figure out what all those expenses were. And really in an ideal state, we want to figure all of that out for you and present that to you. Now since we have millions of users and billions of transactions to look at, along with all the categorization that all those users have done, through machine learning, we can actually come up with very good answers. So if you'd roll the video.
Sorting through personal and business expenses at tax time is such a burden for the self employed that 30% of them don't take any deductions. But QuickBooks self employed customers have a better way with the expense binder feature. They can import transactions from their bank and credit card accounts. Once a customer enters in their bank's website credentials, they can select any account that contains business transactions. It's okay if they also contain personal transactions.
The machine learning and ExpenseFinder can tell them apart. ExpenseFinder's algorithm begins working on their transactions. It uses data captured in the transaction such as transaction name, account name and type, and a host of other data we can access to determine the likelihood that a transaction is business related. Here are the categories of the business expenses that ExpenseFinder found. Let's look at utilities.
Customers can review each transaction and confirm that it's a business expense. They can even split Schedule C. ExpenseFinder gets smarter each time it's used, incorporating this feedback to continuously retrain the tool to better recognize business expenses.
So imagine that the difference between looking through a box full of receipts and statements at the end of the year and trying to remember which were business, which were not, what was for what and versus going in and going to an experience that just takes a few minutes that actually is able to definitively decide in many cases, whether it was a business or a personal expense and then feed that straight into TurboTax so that you've got a Schedule C that's already created. So a day to 2 minutes to get that piece of your taxes done through AI. So with that, I'd just like to wrap it up and say, I think we are well positioned to move into the next technology era, in greater service to our customers and to our mission of powering prosperity around the world through AI machine learning, through conversational UIs, through services, through blockchain and also through the very rich set of data that our customers entrust us with. Thank you very much.
My parents were from Manila and they were brought up from a very, very poor background. I was born in Australia. As I grew up, they embed that it's important to always remember your roots. One of the things I've always wanted to do was to give back. Australia is my country, but my heritage is the Philippines.
And I'm an accountant, and I'm here in Macquarie, Philippines. On the invoices section
you can see the overdue.
We're here to try and promote online accounting to accountants and book keepers in the Philippines. I know there are plenty of accountants out there and limited numbers of jobs. Have you done this before, Joseph? So we're trading up, introducing them to QuickBooks online, so that they can have the opportunity to work with international clients, Australian clients, U. S.
Clients and be able to grow further than they can from just being here in the Philippines. I've seen firsthand how countenance and bookings have been very tough. We have someone with us who because I've taken him on he can pay for his kids schooling and then he'll pay for half of the electricity and rent. Helping people here, it has a huge impact within our business. Should we have a look at some work?
QuickBooks Online has been a huge game changer for us being able to utilize cloud software, being able to work anywhere in the country or even in the world. It has helped me believe that I could actually create this business. Without that I would have stuck in that traditional accounting firm, worked a daily grind. I don't think I would have been able to start a new age accounting firm that is profitable and innovative. We can do it all at home, but if I can give jobs in Australia and give jobs here, then it just makes my life more fulfilling.
Good morning, everyone. I'd like to add my thanks and appreciation for you being here today for your support of Intuit all this year. Then we're going to start out with what might be the last victory lap on FY 2017 results. I think it's always good to start out with what we told you last year and tell you how we did against these metrics and that's what is presented here. And we're definitely not going to miss that opportunity when the results are as good as they were last year.
Even better than this, we ended 2017 with customer counts well ahead of what we expected, especially in small business, which gives us a great tailwind and momentum going into 2018. Now results like this don't happen automatically or they don't happen by chance. Brad reviewed with you some things that have changed this year from our mission to our metrics. I want to talk about a couple of things that are not changed, that are very much part of our DNA here at Intuit that undergird all of our results that we deliver and the type of metrics you're going to see going forward. The first is to talk about our True North framework.
And there are 3 parts of this that are fundamental to the decisions we make inside the company, big and small. And these are not charts on the wall. These are things we talk about in all of our meetings and we really do drive to meet these objectives. 1st and foremost, we're always reminded that we have 4 stakeholders that we're solving for and decisions have to be good for all 4 stakeholders, employees, customers, partners and shareholders. The second part of this that's so critical to us is that we force ourselves to think of alternatives that solve short and long.
We don't take a year off from delivering our results. We want to be sure that we're delivering against our guidance and against your expectations in the current period, but also making good decisions that are building a great company and providing strong performance for many years into the future. The 3rd component of this is so critical to us is that we use a standard of measure called best we can be results. And what this means is that we gauge our results not by some absolute level, but by and against the very best competitor or the very best alternative that our customers would see or that they would face. So it's a very relative target, but it keeps our focus on not just hitting a number or hitting a set of results, but by being the very best we can be and the very best that's available in the marketplace.
So this is our True North framework. The other component that you've heard me talk about much before and it's critical to the way we run the business and think about our planning is our financial principles. And these haven't changed. They do remain very enduring, but I want to assure you that we challenge these and we discuss these every year as we go through our planning cycle and we have a good debate internally as to whether or not they're still relevant or whether we should change them. On this first one, I got to tell you that we are more encouraged than ever that we can grow the business at the very top line through delivering customer benefit, through solving and delivering more money with no work with a very high degree of confidence.
You've heard us say many times that we think customer growth is key. You've heard a number of different examples today. If we can get a customer in and demonstrate that we're driving that benefit, we can drive monetization over time where they're more than willing to pay once they're in and using the product and they're experiencing the benefits that we deliver. The evidence is clear to us, we're more confident of that than ever before that customers and customer growth should be the way we drive our top line revenue. We'll talk about margins more in a minute, but for now you should know that the idea of the discipline of growing our revenue faster than our expenses is deeply ingrained in our company across all of our management teams.
It's something we talk about consistently. And so one of the beautiful things about having a company this size with these different portfolios, we have the opportunity to change allocations and move things around. We have the opportunity to think about things like new markets for QBO and things like that that might not be profitable initially. And that's why we talk about lifetime value to customer acquisition costs to be sure we're investing prudently in those areas. But at the total company level, overall long term, we think it's a critical element of discipline to be sure that our revenue grows faster than our operating expenses that we're delivering operating income leverage.
Now we are trying to solve for the short term and the long. So we put a rigorous set of investment principles against internal investments, some you've heard mentioned here today like infrastructure, marketing, things like that or external investments. If we make acquisitions to accelerate our skills in areas like security or different market like Brazil, we're looking for a 15% internal rate of return over a 5 year period and we applied that really across the board for all of our investment alternatives and we think it's important for the growth of the business long term to continue looking for those investment opportunities that are going to deliver this year, next year and the year after that. The 4th principle really speaks to our stewardship to you all as to what do we do with the capital that we generate, the capital that we earn. Our share repurchase program, our cash dividend are critical elements, critical tools that we use to return cash to shareholders.
We think that's a critical part of our critical principle for us that that's not going to change. Finally, we consider a conservative investment grade balance sheet critical to sustain the business through all types of economic cycles and to take advantage of opportunities that may come along as they go along. So we are reaffirming, recommitting to these financial principles and these are the ways that we think about and guide our long term financial planning. Okay, back to revenue growth and how are we going to drive revenue growth at double digit levels going forward. I'm just going to
review with you quickly some of
what you've heard in prior presentations about the customer growth opportunity in front of us. Left hand side of this chart here, you see just a review of the addressable market and our penetration into those markets in the small business arena. And as you can see, even a small movement, even a small category shift into our products drives a huge unit increase component for us. So we're excited, we're encouraged about our ability to drive deeper penetration into all of these markets. The U.
S. Still has tons of opportunity left as well as our other markets around the globe, so big opportunities there. On the right hand side, I've graphed here for you the growth in our total small business paying customers back to 2014. This includes QuickBooks Online, desktop subscribers and desktop unit sales. So with the total paying customers in each year, you'll notice the last couple of years, we've had 23%, 30% growth in those categories, up from single digits a couple of years before that, which tells us that the desktop base is sustainable and also that we're having rapid growth in getting new customers into QBO.
We're not migrating, we're not simply cannibalizing our own existing base. We are getting deeper penetration and paying customers into the addressable market. For the next few years, we think this total paying customer growth number ought to be in the same 20% to 30% range as you can see by the slope of the chart. On the consumer side, Dan talked with you about this and we still think there's plenty of game in the do it yourself market. We're committed to winning and do it yourself even with free customers and there's really good plans in place to do that.
But we're excited now about some additional revenue pools as we move more to those customers, 100,000,000 customers typically, who have a question or who want some assistance. As we think there's some unique ways that we can deliver that assistance and those answers that have helped digitally that haven't been able we haven't been able to do before at a very convenient and a very reasonable price point for the customer. And so we're excited about that. I think there's plenty of game left in the consumer tax business to grow customers.
This kind of shows you
and I'm going to show you a couple of charts here that really speak to the predictability of our revenue stream going forward. This says that over the next few years, we'll be north of 60%, 63% of our revenue will come from online offerings and TurboTax Online. Clearly, QuickBooks Online is driving a lot of that growth. The other thing I'd ask you to notice from this though is that we think our desktop business is going to remain a critical component of our revenue growth for years into the future. And this is very profitable business and this is one of the things that enables us to invest in new products and new markets and have the flexibility to balance off there and still drive good current year performance, but also make big inroads going forward.
This is a chart Brad referred to earlier. And we just think about our current customer base today, 80% of revenue that we have in our plan for 2018 will come from customers who are on board today or customers who have a very predictable rate of return. This is particularly true in the tax arena. So as you can see in consumer tax, TurboTax, 73% of the revenue we have in our plan for this FY 2018 will come from returning customers with a very predictable rate, 85% in QuickBooks and 90% in our ProConnect area where customers that are already with us today, already subscribers or that return at very predictable rates. 80% of the revenue in the plan for FY 2018 is sort of already baked, we think highly predictable, reliable.
Okay. This is our annual update on average revenue per customer. I'm delighted to tell you that the trends over 2017 played out very much as we predicted and as we talked about last year. As we drive customer growth quite quickly, revenue per customer and small business is likely to decline and you saw that in 2017, but frankly a little less than we might have expected. QuickBooks outside the U.
S. Revenue per customer performed better than we had in our plan for 2017. And we talked about some of the improvements we made there in retention, some of the improvements made with account relationships and drove a little higher ARPC in 2017 than we would have thought this time last year. QuickBooks Self Employed ARPC was down a little bit more than we expected last year. This is all a factor of the inclusion of the TurboTax bundle, which was at a less lower price point.
But again, those 170,000 units were all new to Intuit, new to the QuickBooks Self Employed platform. And so we're delighted to have them. Lucas reminds us all the time that we'd be better off with millions more customers at a lower price point the ones we have today and that's certainly coming true here. The Chevron in the middle is QuickBooks Online Worldwide. This is the overall number of $333,000,000 for 2017 versus $350,000,000 last year.
This is a number that we hope and we expect is going to continue to drift down as we add a lot more units. Remember, we talked about at our earnings release and our guidance for 2017 2018 that we expect QuickBooks Online subscribers to continue to grow for the next few years, north of 40%, but our online ecosystem revenue will grow probably a little more than 30%. So we do expect there to be continued some lag effect between the time we add new customers and we get them monetized at a full level. QuickBooks Desktop is up nicely in terms of revenue per customer. I will tell you most of this is a result of the mix change with more customers, a higher percentage of desktop customers being in our enterprise solution, a very popular well used offering still today.
As we lose more desktop customers on the lower end or people convert to QBO, QuickBooks Desktop becomes enterprise becomes a bigger function of the mix and we think that's going to drive ARPC for the desktop business up going forward. Lance covered consumer tax already in the sense that most of the increase in price per unit here came as a result of losing some free business or our free units being less than we expected in 2017. But there are also some interesting levers here that we that he's reviewed with you also about how we can tap into some different revenue pools going forward in the assisted category and providing some additional support there. So we think some slight increase in revenue per customer on the consumer tax side is reasonable over the long term too and that's baked into our plans. Okay, that's a quick summary of how we make the money.
Here's what we're going to
do with it, how we're going
to spend it. This speaks to our margin. I know there's been a lot of questions about this and some have been written about our margin performance. You should just know that it's still our expectation that operating income over this long term horizon ought to grow faster than revenue. We're committed to that and that's definitely going to happen.
But we're excited and we're encouraged by some opportunities we see to accelerate customer growth and accelerate our top line revenue growth. We're taking advantage of those in the plan for 2018. You heard Lucas talk about some improved efficiencies and effectiveness in our sales and marketing model. We're investing to change some of our care model from a very call center heavy approach today where a lot of customers have to call in to a customer care approach that is much more self-service, much more embedded into the product and done with a lighter touch. Taylo talked about investing in modernizing our tech stack and platforms both in small business and in tax.
That's going to drive greater productivity and effectiveness in our R and D spend. And we know and we're working hard on our G and A. We think G and A is probably a couple of points too high for a company our size. You should know that there is a concerted effort in place that's been in place now for a few months to come up with some tangible improvements in that and drive that back drive that down a couple of points. The idea is to free up money that we can invest in machine learning and a couple of areas I'll share with you in a second.
Couple of other points here, I think revenue and margins by business unit are becoming less and less relevant as we go forward. As you can tell from Lucas and from Taylo, more of our spend now is centralized, it's done more at the 1 Intuit level and shared by our business units. We think that's a great opportunity for us to get more growth and more profitability. We'll still talk about and still disclose those margin components by business unit, but they're going to be less relevant. The way we're measuring profitability at the company level is by growth in the operating income dollars.
And we think it's critical, we've talked about this before and as you can see here, our intent is to keep our operating income levels growing in the mid teens. Our rough rule of thumb is that operating income ought to grow a point or 2 faster than our revenue. Our EPS ought to grow a point or 2 faster than that as we exercise our share repurchase program. So those are the long term frameworks that are very much still valid, still much in place and still very much in use buys. A couple of other housekeeping points here on this slide.
We have revised our fact sheet and going back with historical data to reflect the organizational changes we announced back in August and also to reflect some new ways we're reporting our metrics going forward. That revised fact sheet with all the historical data will be available on our website later this week. Just a quick down on where we're investing going forward. You've heard some of this already, but just to give you some kind of size it for you. Our goal for 2018 is to allocate roughly 10% of our internal spend against 4 big initiatives.
Accelerating our progress with artificial intelligence and machine learning is 1, enhancing our sales and marketing and our go to market position around the world is a second big initiative, Driving more productivity in our developer community or enabling more productivity, I should say, enabling them to get more things out to market faster is a third. That includes getting to AWS faster as Taylor just talked about. And then finally, accelerating our decision making and making speed and getting to market quicker across the company, a much bigger initiative for us. As Brad talked about, during the year when we were revising our strategic plan, changing our mission, things like that, we came away from those meetings committed that we wanted to put real money and real investment behind these areas so that we can make really tangible progress and not work on them part time or not just try to put a few dollars there and kind of limp along with it. So significant reallocations have already been made in 2018 plan for this year and we're going to continue to look at those as we go out throughout the year.
Some real positive trends here in free cash flow as our capital expenditures continue to trend down and continue to come down. We instituted our cash dividend in 2012 and it's grown at a compound annual growth rate of 18% since then. We've signaled a 15% growth is what we expect for 2018 and the cash dividend. Share repurchase is a critical tool that we use to return to return capital we can invest profitably in the business, back to you all, and that's going to remain a critical component for us. We signaled last year a return to more normalized levels, our free cash flow return to investors.
And frankly, some people missed it and it resulted in some share counts that were higher than we came in, higher than we delivered. So we try to be a little more purposeful about that this year in our guidance and some of the direction that we gave around our share repurchase program this year. But one thing that's not changed, one thing you can count on from this is that we will continue to return a significant portion of the capital we generate each year to our shareholders. Talking about share repurchase, there's nothing new on this page, but I just give you a little more insight into how we think about this and how we manage the program. We have some maximums and minimums here.
To determine the maximum, clearly it has to be cash in excess of what we think we need to run the business and to make prudent acquisitions in the course of our investment and accelerating the business. We use our 3 year financial plan. Brad talked earlier about the commitment we have with the Board and to each other internally for a 3 year set of results, not just 1 year. So we have that to go with. We do not assume any multiple expansion as we go through this.
And so it's just basically what we think it's going to do. And clearly, we have to earn at least our weighted average cost of capital on any shares that we repurchase. On the other side, on the minimum, we clearly expect to offset stock based compensation and we typically do that. Our policy says over a 3 year basis. Last few years, we've done even more than that in each given year.
But at a minimum that's one of the ways we think about a guardrail for that. This is the guidance that we released back in August. No big change here. We're certainly delighted with the 10% revenue growth last year and to be able to guide 9% to 11% for 2018 is a big deal for us. We've talked a lot about investing to drive this growth.
It won't be a surprise to you that a lot of the investment comes in the form of people and adding people. Over the last recent months and actually last couple of years, stock based compensation has been the largest component of our operating expense and it's for the heart that grows the fastest, I should say. And so that's caused our GAAP operating income guidance for 2018 to seem a little out of sync, out of consistent with our financial principles. I want you to be aware that we are very focused on that internally and we think that's a big issue that we need to find ways to moderate and we're working on that aggressively and we're confident that we can do that while still attracting and hiring the world's best talent. We think this is a short term thing, but many of those skill sets and many of the talent that much of the talent we need, especially in this geography, is much in demand and it is in short supply.
So that's caused some pressure with our stock based compensation expense recently, but we're working through that and we have some plans to moderate and mitigate that going forward. So in summary, we're totally excited about the business for 2018. We think we have a good plan, aggressive plan and solid execution things to deliver against it. We also think this plan delivers really good long term growth. We're building and investing in a great company long term.
We're going to be diligent with our financial principles and we look forward to reviewing our results with you during the year as we move forward. Thank you.
Prosperity to me is not about money. It's happiness.
Waking up every day and making parts.
Prosperity is absolutely not limited to finances.
To make my own rules, to live the way I want to live and not to let anything hold me back.
Being able to have a feeling of fulfillment in just about every one of my life areas
to help those in my sphere of influence. Having a roof over my head and food to eat and free time.
To me, being prosperous is being peaceful.
Every single step that I am making towards that, whether it be helping other businesses or helping my own community or hometown, that should be
My name is David and I use QuickBooks, Self Employed, TurboTax and Mint.
My name is Nikki Bell and I'm a TurboTax user in San Antonio, Texas.
My name is Dena Proctor and I'm a QuickBooks online user.
My name is Donna Jones. I'm a QuickBooks Self Employed user, and I'm based in South London.
My name is Ruben Begala,
and I'm here in Macquarie, Philippines working on QuickBooks Online.
All right. You have been an incredibly attentive and patient group. I know we covered a lot of material today. If I could try to draw out 3 major takeaways. The first is this is a company over 34 years that has continuously been willing to step back and reimagine itself and try to define the next chapter.
And it's always been grounded in a set of principles that start with falling in love the customer problem and not our solutions. And what I hope you heard today is we're very clear what the problems are our customers want us to solve and what the benefits are they expect, more money, no work, complete confidence. But we're now entering the 5th major chapter of our company's history. And how we plan to deliver those benefits will be different than in the past. It will be unlocking the power of many for the prosperity of 1 through a 1 Intuit ecosystem.
That ecosystem will allow us to deliver deeply personalized experiences through a trusted open platform where everything works automagically together whether we built it or someone else did and most importantly, it will create indispensable connections not only between products but between people. We get up every morning fired up to go serve the customers like the videos you saw and the $50,000,000 plus we already have and the 100 of millions of more that we think we can touch their lives and as a result power prosperity around the world. So with that, we'd love to open it up now and take any questions that you would like to talk about and hands went up on this side quickly, so we'll go over here. Thank you.
Thanks, Brad. It's Brad from Jefferies.
I appreciate you hosting us all here. One of the questions we get from clients is the aggressive outlook for tax given what Dan said earlier in the conversation about one of the toughest in a long time. Can you just maybe elaborate on what gives you confidence in that guide for the next year? And I had a quick follow-up.
Sure. Thanks, Brent. First of all, I would start by saying we know that it is going to be a competitive tax season. That's been true for every year we've entered a tax season. Sometimes the players change, sometimes the dynamics in the industry change, but it's going to be competitive.
But what we also know is there are 4 major levers that drive the tax outcomes. The number of people who will file with the government, how many people will choose to do that using software, do it yourself category, what will be our share in the category and what will be the revenue per return. I want you to think about all the times our company has faced really hypercompetitive situations. What happens is new players come in, they grab a megaphone, they announce they're here and they begin to talk about how compelling this category is. We've been doing that pretty much singularly with the help of 1 other player.
Now we've got multiple players out there talking about look at what you can do automagically using software and a mobile device. We think that will drive category awareness and category growth. That's the single biggest lever we have in tax. One point of category growth is worth 3 points of margin or 3 points of revenue growth for us. So, I think the first thing that's going to happen is we're going to ultimately end up creating a lot of category awareness and the 85,000,000 people who think about going to an assisted category are going to think about software.
Then we're going to introduce the 2nd piece of that. The 2nd piece is what Scott has taught us for years. You delight, you don't dilute. And Dan talked about we deconstructed our net promoter score in every single product category relative to the competition and at this point in time, we stand above all other products. So free becomes everybody's game.
The best free becomes our game. And then the last piece is going to be transform assisted. 85,000,000 people may still a nagging question and we have the ability with SmartLook at scale to bring human expertise into the category of do it yourself with the touch of a screen. So it's a combination of those things, Brent, that I think ultimately at the end of the day boil down to 2 things. We think there will be more category excitement.
We believe that we, if we do our job, can stand above the fray relative to the alternatives. And because many of these customers will be coming from a higher priced alternative, they'll be willing to come in and our revenue per return should get an uptick, just like we saw this year because they'll be coming in from paying 100 of dollars and they're going to be paying us much less, but it will still be a premium to what we historically have had. I think those will be the levers to what ultimately will drive the confidence in our growth.
The margin, there's been questions around the new things that you're doing. Are they holding you back from your true aspirations of where you want to be longer term on operating They've been between 33%, 34%. I think the last peak you were closer to 36%. Is there any glass ceiling you see that longer term that you think you could break through there?
No, Brent. There's not a glass ceiling. It has been a conscious choice. We know very much what drives the formula for our company's growth. It's delight a customer that translates into customer growth, earn that customer's loyalty so it turns into retention and then earn the right to solve additional problems, which increases lifetime value over time.
What we've started to see is by getting really clear about more money, no work, complete confidence and adopting these technologies, we're able to accelerate that customer growth, which in turn is driving top line revenue. If you go back 2 years ago, our company guidance was 7% to 9% top line. Last year was 8 percent to 10 percent this year 9 percent to 11 percent. And so we are driving that kind of growth. But what we've committed in the same time is our operating income will grow in the mid teens.
It will still grow faster than revenue. We're making conscious choices right now to say we don't take margin percentage to the bank, we take dollars to the bank and we know fundamentally the health of this franchise will be about driving top line and then ultimately getting efficient and effective along the way. So we don't see a ceiling. We've tried before to call it. My predecessors, we go all the way back to the original times.
Bill Campbell said 15%. Bennett said we'll get into the mid-20s. Neil and I thought we had a crystal ball and said we'll be low-30s. So far, we're all over.
So we're not
going to call a ceiling. We're going to continue to drive the economies of scale. Okay. We'll come right over here. I'm sorry.
Whoever's got the mic because I've got lights in my eyes,
you can just start to speak.
Let's make sure we're getting all sides of the room, please.
This side.
Okay, got you. Thank you.
Siti Paniagai from Wells Fargo. You talked about increasing your focus on self employed. I just want to dig into more into that segment. Last year, it was a phenomenal year. So you of course had TurboTax AC, but excluding that also, we added net 25 percent growth.
Just wanted to understand your strategy this year, how you want to expand growth for self employed, but also you talked about increasing ARPC this year. It was down last year. So it would be great if you could talk about your strategy on the SE side and I have a follow-up.
Sure. I'd be happy to. First of all, we're very early days on self employed. We have been over serving this customer, and quite frankly not serving them well with a full featured product like QuickBooks Online. So what we've done is we've gotten really clear about what are the most important problems they need to have solved and Sasam walked through that.
Last year, we were able to get a product out that has a very high Net Promoter Score, perhaps one of the highest that we've ever had. And as a result, it's the number one source of growth is word-of-mouth. So we are driving self employed by having other self employed people saying, you've got to use this. It saved me $4,300 I got an 8% increase in my income. The second area of opportunity we're going after is by unlocking partnerships, and those partnerships start an accountant who's the most trusted advisor and by the way, the self employed customer is the most difficult customer for them to serve.
They're disorganized, the receipts in a shoebox they come in and they're not able to pay a lot of money. And so our ability to connect them with an accountant has accountants recommending that they use QuickBooks Self Employed. The other partnerships include the Etsy's, the Ubers, the Lyft's, the TaskRabbit's, the DoorDash's and all those alliances that you heard Lucas talk about. And then I would say beyond that, we have the opportunity to look at our own channels. And we have 4,000,000 people in the TurboTax customer base today who follow Schedule C.
We've got 170,000 of them in our V1 to actually sign up for the bundle with QuickBooks Self Employed. We learned a lot last year. And so we believe fundamentally there's lots of growth opportunities in our channel and that's not to mention the fact that we now have it in other countries outside the U. S. Now the ARPU question was really the result of us putting a bundle together that said let's put a collective benefit in there for the customer to use 2 products instead of 1.
And as a result, what we allocated to QuickBooks, we took down a little bit in our accounting treatment, so that brought the ARPU down. But this is 715,000,000 prospects. But if we could get 715,000,000 prospects at a slight decrease in ARPU, that is worth a whole lot more than us getting just a handful at the full $10 a month. So we're really not focused on the ARPU, we're focused on getting as many customers and solving their problems and we're doing it through an ability to get them to talk about it themselves through key partnerships and through our
TurboTax AC, last year, 170,000, so you talked about learning from that. Are you planning to do any kind of new promotion or anything different this year based on last year, whatever you learned?
Yes, we are. I can't share what because we've got lots of people who listen to the broadcast other than those who own our stock. Yes, we are. Thank you. Okay, we'll come to this side and then we'll go to the middle.
Thank you, Brett. This is Keith Weiss from Morgan Stanley. Hi, Keith. Thanks for having us. Two questions and
then related questions. 1, when
we think about the QuickBooks Online franchise on a going forward basis, great growth in subscribers there. Can you talk to us a little bit about the LTV to CAC ratios you're seeing from the international subscribers and Etsy subscribers and how that compares to QuickBooks Online? And a broader question, is there a point in the story on a
going forward basis where maybe
it does make sense to trade margins for growth of that you're going after these big broad market opportunities, dollars 100,000,000 TAM in India. Could that potentially become the trade off that you guys are willing to make and say, hey, listen, such a big opportunity out there, it is lower margin business. And maybe not just in QuickBooks Online, maybe also to get it after the assisted category, that sounds a little bit more expensive to do like the pro service than it is just to do the DIY. Does that ever sort of come into the equation that we trade margins for growth?
Okay, great. Thanks, Keith. I appreciate the questions. Let me start with the LTV to CAC first. Everyone in the Valley and everyone in the investment community has a fundamental understanding of LTV to CAC, lifetime value divided by cost to acquire a customer and the rule of thumb is if you're north of 3, keep investing.
Right now, on a company basis, if you look at QuickBooks Desktop, it's 6.9. If you look at QuickBooks Online and it's the U. S, it's 5 point 5. When you throw in the U. S.
And non U. S. Countries, it is 4.5. Now every country is at a different place in its product market fit and life cycle. So we look at the collective portfolio and say in every cohort are we seeing an improvement in lifetime value to CAC over the last 90 days.
But collectively, we're keeping it north of 3. And so it's a very healthy investment choice, which makes it easy for us to continue to say there's golden in our heels, continue to invest. The second is the margin question. And the answer is yes, we do consciously look at we know what ultimately is going to drive the long term health of the company. This is the short and long component of True North.
And so we will look at it and say, are we sure that if we make an investment today that may have a short term impact to margin that it will have a long term benefit will accelerate the company's growth over time. So today, we make those kinds of choices, but the good news is we're sitting in a pretty strong portfolio where it doesn't show up at the company level, but we make those choices at a business unit or product level and we make them every day. But there's a real burden of proof. Anytime someone wants to make that case, we monitor and ensure that that efficiency and effectiveness with every cohort is getting stronger so we can see a path to health. But we are willing to make those decisions.
And that's why today when you see Neil talk, he says operating margins in the mid-30s. Everyone's kind of gotten used to, hey, it used to be 50 to 100 bps expansion, then it was 40 to 80. And I know you're saying you're going to expand, but how much? And the answer is we're making choices today that are showing that it's producing top line growth, but we will commit to operating income dollars growing in the mid teens. But yes, the margin choice is one we make every day.
That help? Thanks, Keith. Kate, what's coming in the middle? Thanks.
Thanks. Hey, Brad. Scott Stamburger from Mountain Time. Yes. Two part question.
1, with the Path Act this year, obviously, it affected the timing of the tax season. Looking ahead, what do you anticipate on the regulatory front and the fraud prevention front? And how are you adjusting with regard to TurboTax and setting up for this year? And I'll ask the follow-up in a second.
Okay. So I'll start first with why it's so important to go through the material that Tayloe walked through is how efficient and effective we can make our engineers. You saw the release velocity happening in QuickBooks Online going from one release every few months to now 4 40 releases in a month. We're doing the same thing in tax and the reason being is because things are becoming real time. We know what's happened over the last 4 or 5 years.
The government had a difficult time making the final decisions on things like what tax laws will be passed. Sometimes they push it all the way up to the holidays. Then the IRS has to go into a coding frenzy to get that built in and sometimes that creates a delayed start to the tax season. We also have to react. So the first thing we're prepared for is there's a lot of conversation going on now around the tax policy.
We anticipate that it will come in, in the later part of this calendar year if it comes in. So we have to be ready to be able to react quickly. I think the other piece is on fraud. We are committed as a company, as an industry and with government that we're going to continue to take big steps forward to keep the cyber criminals out of the U. S.
Tax system. And in doing that, sometimes that introduces friction that we then have to apply innovation to eliminate that friction. And I'm actually going to Washington next week because the industry sits down again with the commissioner and we're talking about the things we're going to be putting in place. So I would say that those are both real realities, but what we have
to do is we have
to accept the responsibility of having our teams be able to be innovative and quick and react quickly and eliminate the friction that the consumers might see, and we're all over it.
Thanks. And then the follow-up on
that is just, obviously we've seen cyber attacks, cyber breaches in the news a lot lately. It would obviously be messy if your products were affected by that. So could you speak to what you're doing on that front and has it affected cost structure much more in the recent years? Thanks.
Yes. So our view is, it is our top priority. We understand that at the end of the day, our relationship is based on trust and that trust comes with very precious data, very sensitive data that a lot of customers as well as financial institutions and the government entrust us with And there's nothing we take more important or treat as a higher priority than that. We have continued to increase our investment and we have continued to do it year in and year out and day in and day out. What Neil showed you as a percent of revenue, the R and D expense as a percent of revenue is running about 19%.
In that mix is big investments in security. And it's not just the security in terms of professionals. It's artificial intelligence and machine learning and lots of things that put machines in competition with the baggedized machines. So we are all over that. I think at the end of the day, any company who would say I'm going to bed at night sleeping well probably isn't fully aware of all the risks out there.
So we are absolutely constructively paranoid, but we're also all over it and we're working not only as a company but as
an industry and with the government.
Hi, Brad.
Hey, Brad. Thanks. Matt Pfau with William Blair. Just a few questions on the assisted product. So first of all, what's the compensation structure like for the accountants that are helping out with the assisted product?
And then how do you go about making sure that the staff levels are appropriate to ensure the right customer service level that the product is successful? And then with the refocus on free this year, it seems like you're going to have 2 very different marketing messages out there between the assisted and the free tax product. So how do you go about making sure that there's not confusion between those two messages and it actually has a negative impact?
Yes. Thanks for the question. On the first, I'm not going to be able to answer it precisely because we don't want to reveal that information for competitive reasons. What I would say is what we're doing is we're introducing tax professional to take downtime or to be able to serve clients beyond the clients they're already serving in their practice and to be compensated in a way that they're excited about. We tested lots of compensation models over the last season.
As Dan said, hey, we've experimented for a while. We're proud to tell you the experimenting is done. We think we have something that's really compelling. And so that's been factored into the compensation model. There's
legacy
There's legacy and new. There's short and long. And one of the things that we've been working hard with Wyden and Kennedy, who's the agency that Luca spoke about, is how do we get a message out that talks about the Uber benefits of TurboTax, but then gets really clear about which one is right for you and what is the value proposition we're promising. So I believe you'll see us go after that in a way that will be a little more covering all the groups as opposed to just one singular message, which is what we did last year, and I think we left ourselves a little bit exposed. So stay tuned on that.
But we do know it's a duality or what ambidextrous, we have to do both and we're leaning into it and we've got a great agency to help us think through it. Okay. Thank you.
Hey, Brad. It's Adam Holt from Moffett. Yes. Hi, Adam. I guess a follow-up to that.
It seems to me that over the last number of years, a lot of the do it yourself category growth has come from the conversion of manual. And going forward, it looks like more of the growth is going to come from the conversion of paid and stores. How do you reconcile that with your unit growth coming primarily from free? It seems like that would be a different kind of demographic potentially. And so maybe that dovetails into what you just said about how do you segmenting the assisted versus free as you're targeting what seems like an upper market base?
Yes, Adam, thank you for the question. One of the interesting things about the tax business is it's got several possibilities of getting new customers. One of the possibilities that powered the category for a lot of years was paper and pencil, but that number has gone down to below 5,000,000. So it really hasn't been a major source of new growth for any of us for the last several years. What is a new source is each year somewhere between 4000000 to 5000000 new people enter the tax category.
Many times they're a younger generation who grew up with technology. They're used finding all the answers on Google and using mobile devices and so they have an opportunity for us to go in and say there's a way to do that with your taxes too. The second is the opportunity to say you don't have to give up the best of the world of do it yourself if you want to have an expert do help you, we can actually with the click of a button have a video show up. So we think fundamentally if you look at the sources, there's 5,000,000 paper and pencil, they're fairly entrenched, everyone and their brother has marketed to them and they're pretty much going to finish their taxes until they finish filing taxes on paper. But there's 4000000 to 5000000 new people coming into the category.
There's another 8000000 to 10000000 that switch back and forth each year because of a nagging question that they're not sure they got right. They go between a pro or a store and into software and then back out. We think SmartLook will take that on. And then the last is retention. And retention is let's prevent customers from ever believing they no longer can do their tax on TurboTax by making it clear, you can have an expert or as Dan said, on this common tax platform, you can toggle between do it yourself or a fully assisted once we get this platform built.
Those are going to be the sources of growth, Adam, and it won't necessarily have to come from just one group anymore. It's a multifaceted approach that we're pretty excited about.
If I could just ask one quick follow-up on retention. Actually on the QuickBooks side, you had two points of improvement, which is great because it I believe included the impact of
the
do it yourself as sorry, of the self employed as well as international where presumably churn is higher. Do you have medium term targets for where you think that could go? And is there any churn improvement in the guidance? Thanks.
Yes. So as you can see, we're finding ways to improve retention. The first is deliver the benefit the customer needed most. QuickBooks Online is like a Swiss army knife. When you interview all those customers in the video, some will say, I use it for invoicing.
Others say, I want to watch my cash flow, others will say the reports matter to me and other will say it's my conduit between me and my accountant. So what we're doing is we're trying to right upfront what you're hiring the product to do and then by simply clicking on that little tile, we get you right into the benefit that you need most. That drives net promoter score up 22 points this year in 1 year. So that drives retention up. The second thing we've learned is by connecting that not as a product but as a platform either to a third party product that you're using or to an accountant, we get another 10 point lift, 12 points with an accountant.
Those are the things that are building the retention in for us. And then the last piece, as you know and you heard the presenters say earlier, if we get you to stay 2 plus years, retention goes above 90. And so as the base continues to mature and we help you get the benefit you're looking for and you add more products onto the platform, you stick around, retention goes up. We have not set a target on retention. The industry would tell you that uncontrollable out of businesses, so people who go out of business is about 10% to 12%, so they would say that the hot water market is 88%.
That's not how we think. Our goal is no small business should ever go out of business again. If we do our job, they will be successful and stay in business. And so our goal is to figure out how to make 100% successful and get retention all the way up to 100%. But we haven't set a ceiling.
We haven't built anything into the forecast that's unrealistic today, but we are building in improvement. Okay? Yes.
Sterling Auty from JPMorgan. So Brad, with tax reform front and center from
a standpoint, what kind of tax reform is actually going to be good for your tax business and what should we look out as possible warning signs? Yes, thank you. Tax reform that we are big proponents of that would be good for the country and good for our business would be massive tax simplification. We have been on record. We have been advocates.
I have been in front of Congress. We have been in front of every major group. Talking about the tax code is simply too complicated for the average taxpayer. And as a result, it needs to be simplified. So in the absence of that, we have worked very hard to make it simple through our product.
Now many would say, gosh, that feels like that would work against you. But if you look at the 150,000,000 plus people who file taxes, dollars 85,000,000 still go to a store or a pro and pay 100, if not 1,000 of dollars because they believe it's too complicated for them to do it themselves. If there is massive tax simplification, our hypothesis is it will drive a lot of people into the software category and then it will come down to who has the very best software product, which is why the Net Promoter Score that Dan talked about is such an important asset that we focus on. So I believe at the end of the day, what we are for is tax simplification and ultimately what will benefit our citizens and our customers the most simplification and what will benefit our business the most is tax simplification. And I'm hopeful something like that will come out.
The other benefit for us, of course, is corporate tax reform. You all know what our corporate tax rate is today. We don't have a lot offshore to repatriate, but we do have the opportunity that if the government does reduce the corporate tax rate, there's a benefit there as well. I don't know what would be an unfriendly scenario other than continue to make it complicated, But then that just makes us work harder to make it simple. So it's kind of hard to know the other answer to the question other than don't make a decision until February.
If they don't do that, then we've got very little time to get the tax season done. That would be hard. Okay? Thank you.
Hey, Ryan Molchanter from Barclays. I just wanted to clarify that I did understand Dan correctly earlier. And it seems to me that you're kind of opening up a little bit more towards thinking of Mind, I have a big customer base. I know a lot about my clients and I should be able to give them a lot more extra services or sell them more extra services. And in the past you've always look, it's customer privacy, I don't want to do it.
Now it seems like if he opts in, then kind of that's something that's a huge opportunity for me. And other guys like Credit Karma are getting the okay easily and are doing it already. Is that a little bit of a change in tone that I hear from you or do I just misread that? Thank you.
No, you didn't misread it. The difference has been the government has historically looked at tax data very differently than they look at any other data. And Dan threw out a number 7,216, it's an IRS policy. It's actually a rule that you're not allowed to use any individual taxpayer's data for anything else without their explicit consent and permission. And so for all these years, we have had this incredibly valuable data, but we have done what we were supposed to do, which is not allow it to get mixed and mingle with any other data pool we have in the company and never to use that data in a way without the customer's permission.
What Dan and the team have done over the last year, they've run experiments and said, if we let the customer know, did you realize this data would allow you to also do this, how many would opt in? And we have been pleasantly delighted to see the opt in rate of customers who said, if you can get me a lower student loan, if you can get me a better mortgage rate, if you can help me do those things, then I press this button and I want that data to go. And that has opened up a whole new treasure trove for us to solve important problems for customers that creates new business models for us. So that's sort of where we are now. Up to this point, it was a policy and the customer had to make the decision and we've leaned in and said, if you make the choice, here's what you can get.
And so far, it's panning out.
Hey, Brad. Michael Nemeroff, Credit Suisse. Hi, Michael. Just looking at the capital allocation and the amount percentage of free cash flow to return to shareholders, Looks like fiscal 2018 is going to be the lowest in about 5 years at 70%. I'm just curious if is this the start of a period of investment where investors should expect that those returns back to them of free cash flow should trend down over time?
Or is this kind of a 1 year investment opportunity that you're going to use?
Yes. I would say, 1st and foremost, our financial principles guide exactly how much we're going to invest versus ultimately return to shareholders. And at the end of the day, I know that you care as much about this company growing, being vibrant and continue to produce strong results as we do. And so we had that 15% rate of return hurdle. If you look over the last 5 years, there were a couple of things that occurred in those 1st 3 years that enabled us to be flushed with cash we were in the earlier days of the strategy and so we didn't have good internal investment opportunities.
So we did divestitures of businesses and we divested businesses that produced some strong cash flow. We looked at our financial principles. We said there was nothing that we could invest in internally that would accelerate the growth. There was no acquisition that made sense. Let's return this to shareholders.
Last year was a more normalized level at the 80% level roughly, and this year in that 70% to 80% range is more normalized again. We think that is a healthy balance. If you put that in conjunction with our dividend, our stock repurchase and then the acquisitions and the investments we can make, we think that gives us the right balance of sustaining top line growth with operating income leverage while returning cash to shareholders. So I would not view this as a special cause investment period. I would think about this being sort of a more current choices we have.
This is what we think the right mix is. If we get to a scenario where there isn't good investment opportunities, then you may see that go up. If we do have an opportunity to invest, we'll be very transparent and talk to you about it and it may be at that 70% level, which is where it is right now. Okay, thank you.
Hey, Brad, Kartik from North. How are you? Good. Question for you on the tax side. Two questions.
First is on the smart look or the assisted kind of hybrid model you have. If I remember a few years ago, you tried a similar model with calling of a tax expert and that didn't live up to your expectations and I think you decided not to go forward. What are the biggest changes you've made so this particular product would succeed?
Yes. I think Dan touched on a couple of things. The first is the platform choice. So the technology platform, what we did in the past is we would come up with a solution and say, okay, if you didn't want to have TurboTax complete your return, we kind of handed off a lead to a pro. A pro was on a completely different tech stack, but have to kind of get the thing going again and it was a very disconnected kind of experience.
Now we have the platform and the technology sort of like an Upwork would have or an Uber would have where pros are able to opt in, be able to work on this platform with us and be able to help complete the transaction or review the transaction. So first of all, the platform is different. The second is TurboTax. I will tell you that over all the years, we've earned at certain points in time a little bit of distrust from some of the pros who view TurboTax as a competitor. We've now learned that by going out and saying these are the things you told us are important to you as a tax professional, you want to save time, you want to grow your practice and you want to serve your clients.
Here's a way to do that in a very frictionless way, and by the way, this is the brand, there has been no resistance to TurboTax. And so those are the 2 fundamental differences. And I think what we've also done is we've experimented our way there and now we feel like we have a model that works.
And then I think you said on revenue per return next year for FY 2018, you'd expect a slight increase. And I think during Dan's presentation, he said you wanted to get back those customers that were free that maybe went to another brand. So if you increase your free, will the revenue per return go up because you're anticipating greater number of customers for this hybrid solution, which will have a much higher price point?
Yes. So I would say, there's 2 things here. There's 4 levers, obviously, the IRS returns, the category growth, our share in the category and revenue per return. What we know we're going after aggressively and we always have and we're going to get back on our knitting this year is going after every free customer. Every customer matters to us and they matter to us monetarily
as they continue to grow over time as
Lucas laid out. That will be the disruptive solution with SmartLook and our Transform Assisted. Those disruptive solution with SmartLook and our Transform Assisted. Those customers are going to be coming from a method where they're paying 100, if not 1,000 of dollars and they'll be paying a much lower rate to come into TurboTax, but that rate will be on the higher end of our SKU line. And so you're going to have those two pieces.
If I put that weighted average together, I would say if I had to sit here and think about the levers, I think category growth is going to be a real opportunity this year and I think revenue per return is going to be another opportunity. If we miss revenue per return, it will be a good new story. We will have gotten a ton of free customers, which means we're setting this franchise up for an even longer run. But that's the qualification that I should put out there on the revenue per return. Okay.
Thank you.
Thanks. Kirk Materne with Evercore ISI. Hi, Kirk. Brad, when you think about the evolution of Intuit to a platform, one of the opportunities would clearly be to leverage more your partners, whether it's the Etsy example or Uber. When you think over the next year, what needs to happen so that every Uber driver is instrumented with self employed off the bat?
Or if you think about the ISVs that are now being developed to go after more small businesses. What can you guys do to maybe accelerate those partnerships? And how much of your growth in that category is sort of based on those partnerships expanding versus that's more of a call option when we think about it over the next couple of years?
Yes. Thank you for asking this question because I had it several times during the break. There's a big mindset shift when you become a platform company. And to do that, what you have to realize is that you alone can't solve the customer's problem as well as you with somebody else together. And so when you have a partner and you sit down with a partner, it's called value co creation, which is what is it that you have that's better than ours?
What is it that we have that may be better than what you have? And how do we put these together as if we were at one company, as if we acquired each other? And how do we go to develop that kind of product together? That's the first thing that we're doing differently. And to make sure that that becomes a part of our DNA, CeCe Morgan, who leads or led our ProConnect group, now leads the strategic partner group.
So not only does she have one of our most important partner groups, which is accountants, but she's got the mega platforms and all the other partners that we're working with. And she's driving that mindset into our culture, and we've had the best practices companies come in and talk to us, speak to our Board and speak to our management team and help our developers figure out how to do that. So that's one big bucket. If I think about the Ubers and the Lyfts and some of the others and the self employed, there is a line that they have to walk and that line is they want to make access to tools available to those people who are contractors, but they can't treat them as employees. In that case, there's a different kind of go to market, which is we end up marketing to those customers or those contractors.
So it doesn't come across as this is an employee benefit. And so each one of these have a slightly different flavor. But if I have to pull up and say what's the ultimate theme that links it all together, it is think about value co creation where yours plus theirs does something neither one of you can do together. And don't worry about arguing the economics. Get that right and then everything else will flow through.
And that's really been the mindset shift we've worked on. Okay? I think we have time for 2 more.
All right. Thank you, Brad. Nandan Amladi from Deutsche Bank. So a little bit of a different question. The focus on the QBO side has been primarily on the unit growth and so on.
What is happening at the higher end of the market? There's been some consolidation Sage bought, Intact. Your enterprise product apparently is doing quite well. As you put that in the context of one of the strategic priorities for acquisitions, do you feel like you have a gap in the portfolio for a pure SaaS type accounting product for slightly larger enterprises? Yes,
it's a 2 part answer. The first is when we talked about the strategy and I drew the blue donut and it has the 3 customers in there, it's a small business, a self employed, the consumer and then the 6 partner groups underneath. The one thing we want to always remind ourselves of is our core customer are the over served, those people that are not being championed, the consumer, the self employed, the small business. At the same time, we learned over the years that our technology will scale much further upmarket than a definition of a self employed or a small business customer may be. And so QuickBooks Enterprise is a great example.
And so we are building those same capabilities into QuickBooks Online and it continues to extend its reach further and further upmarket. Google ran on QuickBooks Enterprise until about 2000 and And so our product technology is very easy to use and very powerful in the desktop and we want to bring the same thing to online. I don't think we have a hole in our portfolio. We do have a hole in our feature functionality in QBO and we're building that out. But I would not see us looking at, hey, let's go buy an enterprise product because we are very clear we serve the small business, the self employed and the consumer and if our technology scales up that would be great.
Okay. One more.
Thanks. Yes. Thanks, Brad. Ross MacMillan from RBC. Just a question on the mix between ARPC and unit growth on QBO or the entire ecosystem, there's obviously been that delta, but we're starting to see self employed inflect positive in your slide, but there's still a mix effect.
So I guess the first question is just how do we think about that delta between the revenue growth and unit growth? And should it naturally narrow or should it continue to stay fairly wide because you're adding proportionately more in self employed and international?
Yes. I would say that if we are successful and we grow our customers north of 40% of subscriber base and our revenue north of 30, then the weighted average or the average revenue per customer will go down. It will be mix. That's why Neil each year tries to lay out the actual cohort so you can see if you look at QuickBooks Online in the U. S, it's going up.
If you look at QuickBooks Online outside the U. S, it's going up. If you look at Self Employed, you factor out the TurboTax bundle, it's going up. So all the elements are getting healthier and we track that LTV to CACs so that we know we're getting more efficient and effective. But when we actually mix it together and we open up new countries and we begin to introduce a new segment like self employed at a lower average price, we're going to have a weighted average effect, but it's not impacting the economics of the company.
It's simply the optics of the math. It's just the weighted average. That's why we don't even talk about ARPU and Neil said it. I don't know if you all got it. We said, hey, we're going to talk about ARPU one time a year and that's here.
And we probably won't be talking about ARPU again because it's not something that we look at that drives the business. We actually look at 40% subscriber growth and 30% revenue growth.
That's helpful. And then just on M and A more generally, you talked about as you move to platform, you work with an ecosystem of partners, you get better visibility into how your customers are using 3rd party products, etcetera. But we haven't really seen into do much M and A and you talk about co creation with partners. So I guess I'm just curious as to how you're thinking about M and A more broadly.
Yes. It's always been one of the levers when it comes down to our uses of cash. The first priority is we look internally at things that we can invest in, accelerate organic growth, R and D, sales and marketing infrastructure. We look at acquisitions. And by the way, we look at 30 to 40 companies a quarter.
So we're actively looking at all times. But we're not ever making the decision if it's not a good strategy fit for us or it's not a good financial outcome in terms of the price that some of them may want to pay. Then if we don't have good internal organic growth or acquisitions, then we do stock repurchases and dividends. I would say this, the neat thing about products. And so it points out real opportunities to sit down and have conversations and say, hey, would you like to strengthen this strategic alliance more?
That could look like a lot of things, including an acquisition. So that's always going to be a part of our decision making set, but we will make the decision if it's the highest and best use of cash relative to the other options we have. Okay. I know that we have covered a lot of turf. We have some lunch out here.
We have the gallery walk. The management team will still be out. If you want to ask us any questions, I'll finish up with one final thought. Anybody in this room a Game of Thrones fan? The power of an ecosystem is not unlike the wisdom of the Stark family.
When the snow falls and the white wind blows, the lone wolf dies, but the pack survives. We're super excited about the ecosystem and we're looking forward to the next year. Thanks everybody. Have a great day.