Good afternoon. My name is Latif, and I will be your conference facilitator. At this time, I would like to welcome everyone to Intuit's Second Quarter Fiscal 20 16 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period.
With that, I'll now turn the call over to Matt Rhodes, Antoinette's Vice President of Investor Relations. Mr. Rhodes?
Thank you very much. I appreciate it. Good afternoon, everyone, and welcome to Intuit's Q2 fiscal 2016 conference call. I'm here with Brad Smith, our Chairman and CEO and Neil Williams, our CFO. Before we start, I'd like to remind everyone that our remarks will include forward looking statements.
There are a number of factors that could cause Intuit's results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our Form 10 ks for fiscal 2015 and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit's website at intuit.com. We assume no obligation to update any forward looking statement. Some of the numbers in this report are presented on a non GAAP basis.
We've reconciled the comparable GAAP to non GAAP numbers in today's press release. Unless otherwise noted, all growth rates refer to the current period versus the comparable prior year period and the business metrics and associated growth rates refer to worldwide business metrics. Also, all reported results and guidance except GAAP, net income and EPS exclude Demandforce, Quickbase and Quicken, which have been declared held for sale and reclassified to discontinued operations. A copy of our prepared remarks and supplemental financial information will be available on our website after this call ends. And with that, I'll turn the call over to Brad.
All right. Thank you, Matt, and thanks to all of you for joining us. We are out of the gate strong in the first half of fiscal twenty sixteen. We grew revenue 23% in the second quarter, exceeded our guidance across the board and we're on pace to deliver against our full year outlook. We know tax is on everybody's mind at this point in the year, so let me start there first.
Overall, our tax strategy is on track. We are focused on expanding the do it yourself software category while driving customer growth and share gains, particularly in the Simple Return segment. TurboTax Online units grew 12% through February 20, with total units up 9%. We're growing our accepted e files season to date faster than the category, which implies that we're once again taking share. Our growth is being driven by product innovation as we continue our journey to reimagine tax preparation.
This year, TurboTax expanded its data import capability in pursuit of taxes are done. Approximately 75% of tax payers will be able to digitally import W-2s directly into the product this year, up from 68% last year. TurboTax securely imports tax information directly from more than 1,400,000 employers and financial institutions, saving considerable time and improving accuracy for the taxpayer. This season, all mobile and online customers can snap a photo of their W-two and TurboTax will import the information into their tax return whether they're on a phone, a tablet or a computer, which also saves time and reduces errors. Our TurboTax Smart Look feature is resonating with customers.
This new feature quickly connects users with TurboTax experts who will answer the questions in real time completely free. And for the 2nd consecutive year, Americans with more straightforward tax situations are able to use TurboTax to file both their federal 1040 or their 1040 EZ returns as well as their state returns for free. This is a highly compelling offer for the 60,000,000 Americans, many of whom live paycheck to paycheck and count on their tax refund as the biggest check that they will receive all year. I am really excited about our pace of innovation. While there's plenty of time left on the clock, if you look at the scoreboard so far, you'll see that IRS data through February 19 shows the self prepared e files were up about 3%, contracted with assisted e files being down 5%.
And as I mentioned earlier, our e file growth and other third party data indicate that we're gaining share so far this season. Looking beyond TurboTax Online, our TurboTax desktop units are roughly flat and the data suggests we're gaining share and winning back customers who may have gone elsewhere last year. On the ProTax side of the business, we've seen positive early trends in customer acquisition and returns growth as well. Staying agile and I'm very pleased with our products and our customer experience. Now let's talk small business.
We continue to generate strong new user growth in our online ecosystem. Over 80% of QuickBooks Online customers were new to the Intuit franchise once again this quarter. Total QuickBooks paying customer growth was also healthy in the quarter as our desktop business posted strong results as well. QuickBooks Online continues to build momentum. Total QuickBooks Online subscribers grew 49% in the 2nd quarter.
This resulted in the addition of nearly 100,000 QBO subscribers in the quarter, bringing us to 1,000,000 257,000 paid subs worldwide at the end of January. Roughly 50,000 of our QBO subscribers are using QuickBooks Self Employed, which is up from 35,000 last quarter. Outside the U. S, QBO subs grew roughly 80% to 230,000 paying subscribers, which is in line with our expectations. We remain focused on growing customers globally.
We've built good momentum in the UK, Australia and Brazil, and we recently went live in France. We continue to get smarter as we expand our global footprint. We're tuning the local game plan in each country to achieve our targets for lost time value versus customer acquisition costs. Near term, this is dampening subscriber growth a bit in India and in Canada, but we have clear plans in place to drive healthy profitable growth in these two markets over the long term. Finally, our expanding QBO ecosystem gives us confidence that growth will remain healthy.
85,000 accountants who use the accountant version of QBO also have at least 3 clients using QuickBooks Online. That's more than double the number of accountants with at least 3 clients versus last year. And we now have over 2,000 apps that integrate with QBO in our marketplace, which is more than double the number we had a year ago. 13% of QBO subscribers are now using a 3rd party application, up from 8% 12 months ago. We know that retention of a QBO customer who also uses a third party app is better, which increases botcom value.
The QBO subscriber growth remained near 50% this quarter. So we remain confident in our full year outlook as well as the outlook we gave for fiscal 2017. In fact, we thought QBO Subs Group during the last quarter of this the last month of this quarter become a peak for us and that is a good news story because that is the peak season for adding QBO subscribers. As a result, we're raising the low end of our QBO subscriber outlook for the remainder of this fiscal year. The range is now 1,475,000 to 1,500,000 subscribers.
Now as a reminder, at Investor Day, we shared our expectation that QBO subscribers would grow better than 40% on average between fiscal year 2015 and fiscal year 2017. And that would enable us to exit fiscal year 2017 with between 2,000,000 to 2,200,000 subs. Given this quarter's performance, we remain absolutely on track to deliver against this longer term outlook. So when you hit the total key, it has been a strong first half of the year. I'm inspired by our team's commitment to reimagine the tax prep experience in both our consumer and our professional tax businesses.
And there's much more innovation in store from these teams over the next few years. And in small business, customer growth remains strong as we continue to focus on global customer acquisition enabled by our cloud solutions. So with that overview, I'm going to turn it over to Neil to walk you through the financial details.
Thanks, Brad, and good afternoon, everyone. For the Q2 of fiscal 2016, we delivered revenue of $923,000,000 up 23%. Non GAAP operating income of $114,000,000 versus a loss of $22,000,000 a year ago. GAAP operating income of $42,000,000 versus a loss of $89,000,000 non GAAP earnings per share of $0.25 versus a loss of $0.06 and GAAP earnings per share of $0.09 versus a loss of $0.23 last year. These results reflect the changes we made to our desktop software offerings in fiscal 2015, resulting in ratable revenue recognition from that point forward.
Turning to the business segments. Total small business segment revenue increased 7% for the quarter. Small business online ecosystem revenue grew approximately 23% for the quarter as customer acquisition in our online ecosystem continues to drive growth. QuickBooks online subscribers grew 49%, online payments customers grew 5% and online payments charge volume grew 17%. Online payroll customers grew 17%.
I know some of you have been tracking QBO subs in the product itself. You should be aware that due to a 1 week lag in the data, it's not always
a good indicator of where
we will land for the quarter. You also have to consider variability from marketing and pricing tests, seasonality and other data and timing issues when looking at the subs number. Our second and third fiscal quarters are our strongest seasonally as accountants drive adoption during tax season. Switching to desktop, total desktop ecosystem revenue increased 3% for the quarter. QuickBooks Desktop units increased 14% in the 2nd quarter.
Our strong desktop performance was driven by our pricing and promotion strategy. And for the full fiscal year, we expect desktop ecosystem revenue to be up slightly versus last year. Consumer tax revenue was up 29% versus the Q2 last year. Consumer tax revenue is significantly higher than last year, reflecting a shift from the Q3 to the Q2, primarily driven by an extra weekend day in January this year. We still expect revenue growth of 5% to 7% for the full year.
We're focused on execution for the remainder of the season to grow the category and expand our share. Our pro tax group revenue grew to $84,000,000 driven by changes to our desktop offerings where revenue is now recognized ratably as services are delivered. For the 3rd and 4th quarters, pro tax revenue should be roughly the same as it was in fiscal 2015. We continue to take a disciplined approach to capital management, investing the cash we generate and opportunities that yield an expected return on investment greater than 15% over 5 years. We repurchased $455,000,000 worth of shares in Q2 and $900,000,000 remained on our authorization as of the end of the quarter.
Our cash and investments balance was $334,000,000 at the end of the second quarter. On February 1, we secured $1,500,000,000 in debt financing, including a $1,000,000,000 revolver and a new term loan of $500,000,000 One strategic use of this debt was the purchase of our San Diego campus, which we previously discussed. Other potential uses include share repurchases and acquisitions that closely align with our strategic priorities. Our Board approved a $0.30 dividend per share for our 3rd fiscal quarter payable on April 18. This represents a 20% increase versus last year.
And one final note on capital allocation. We expect the process to sell demand for us, Quickbase and Quicken will be completed this fiscal quarter with total proceeds of approximately $500,000,000 We expect to report GAAP only gains when these sales close. We provided our guidance for the Q3 in our press release. We also reiterated our full year revenue, operating income and EPS guidance. As a reminder, we expect to provide a final TurboTax unit update in late April after the tax season ends.
And with that, I'll turn it back to Brad to close.
All right. Thank you, Neil. We're pleased with our performance in the first half of the fiscal year. And based on these results, we're confident in our ability to deliver on the back half of the year as well. Now we recognize the macro environment looks choppy.
But if you look back over the 3 plus decades as a company, it is during uncertain times that our products are needed most by our customers. They still need to file their taxes, pay their bills and look for ways to stretch their hard earned dollars as far as they can. And we've never been in a stronger position to serve our customers. Over the past several years, we've transformed from a North American desktop software company to a cloud driven global product and platform company, and that heavy lifting is now behind us. That's why we're continuing to play offense, investing in innovation to fuel customer growth.
We have lots of opportunity in front of us and we remain deeply committed to accelerating both customer and revenue growth. But it all starts with great people. And as always, I want to thank our employees for their hard work and their ongoing focus. On the subject of Great People, as a part of this earnings release, we announced the decision to rotate the general managers and our consumer tax and our small business units following the tax season. Effective May 1, Sasan Gedarzi will take over as the Head of the Small Business Group and Dan Wernicoff will assume responsibility as the General Manager for our Consumer Tax business.
This commitment to leadership and mobility is consistent with Intuit's historical practice. As we accelerate our transformation to a single ecosystem, strengthening and developing senior talent to possess a deep understanding of all aspects of the ecosystem is more important than ever. Intuit's future success centers on our ability to solve important two sided interactions in ways that deliver tremendous benefits for both sides. This rotation will enable BAN and Sison to develop deep empathy for each of Intuit's core customers, as well as and an appreciation of our collective products and technologies across the company. We're able to implement leadership moves like this from a position of strength.
We've built deep talent benches. We've developed great momentum, and we have clear visibility into strong outlooks in both small business and consumer tax. I'm excited to watch that momentum continue as the sign and Dan bring a fresh perspective and a new set of capabilities to the respective teams. So with that, Latif, let's open it up and let's hear what's on everyone's mind.
Thank you. Our first question comes from the line of Raimo Lenschow of Barclays. Your line is open.
Hey, thanks for taking my question and congrats to a great second quarter. Two quick questions. First, you talked about the desktop numbers being better and driven by price and promotion, but we also saw better unit numbers there. Can you talk a little bit about the trends there? And then the second question was on the QuickBooks Online ARPU.
If I do the calculation here, this was the Q2 where ARPU actually started to go a little bit higher. The question is, are we kind of on the trend back upwards again? Or do I need to think be aware about other drivers here? Thank you. Great.
Thank you, Raimo. This is Brad. So let me start with desktop units. The good news is we've been able to continue to drive strong QBO subscribers, 49% and over 80% of those are new to the franchise, while also growing our desktop units 14%. And what we basically learned last year, we had tried to raise the price on desktop from $199 to $2.49 and we thought that might accelerate the migration to QBO.
That didn't happen. In fact, we didn't see migrators accelerate. What we did see though is upgraders and those that were using existing desktop delaying their purchase. So throughout the balance of last year, we tested $199 price promotions and we saw really strong results. What we saw was it had no impact at all on QBO.
There was no cannibalization, but what it did do was it incented people to actually upgrade to the newer version. And so what you're seeing happen now is we have the ability to accelerate QBO, continue to get existing desktop customers to move up to the newest version and that's the best of both worlds. And so that's what's happening with desktop units. And as you heard, we plan to see we actually anticipate that desktop units and revenue will be up slightly for the year now. The second question was on QBO and average revenue per user.
As you know, we shared at Investor Day, we're solving for total revenue growth and subscriber growth and our targets are 25% to 30% in revenue and then about 40% subscriber growth and that will get us to the targets we provided for fiscal year 2016 2017. I will say, however, that we do see opportunities for R2 to continue to accelerate over time. If you remember, we talked about a 1st year customer comes in with a period of time where they have a trial and a promotional price. Once they move into the 13th month on the product, that ARPU goes up for that customer about 50%. So as more of these new service of what payroll and payment.
So we do see upside opportunity down the road. But for us, ARPU is really an output metric. We want to stay focused on total revenue growth and customer growth. And then over time, we think by executing well, ARPU will improve. And we'll give you an update on ARPU in the next Investor Day, but we don't tend to focus on that on a quarterly basis.
Perfect. Very clear. Thank you.
All right. Thank you.
Thank you. Our next question comes from Brent Thill of UBS. Your question please.
Good afternoon. Brent, you mentioned the share gains that you're seeing early out of the gate here. I'm just curious if you could help everyone understand where you're seeing those share gains and perhaps maybe where you think there's more room where you feel that you could be doing better on tax. And for Neil, could you just talk maybe a little bit about the attach of payment and payroll? And it looked like on the payment side was a little bit lower than some had thought.
Can you give us a sense of what may be dragging that down? Thank you.
Sure.
All right. Thanks, Brent. This is Brad. I'll take the first one on share gains. So with the IRS data being published in February 2019, they're showing that total returns received are down about 1.3%.
They're suggesting that the self prepared returns, the do it yourself category is up about 3% season to date and the assisted down 5%. If you do all the translation and machinations of that, that would suggest that the do it yourself category has picked up a little more than 2 points of share from assisted so far. Now in the back half of the season, we'll see Assisted get a little bit stronger as more complex returns coming up. But the good news is the DIY category continues to take share from Assisted. And then the question is, what about TurboTax share inside that category?
And let me say, we have not seen this strong of market share advances at this time of the year in my recollection. And I've been here for a while. So right now season to date, we're a little over 3.5 points of market share and we're seeing market share increases in TurboTax Online. We're seeing market share increases in TurboTax Desktop at retail. And we're also seeing an increase in the number of FreeFall Alliance customers using TurboTax.
So it's across the board. And then your question is where could we do better? Well, we're always constructively dissatisfied, but I have to tell you right now, I feel really good about product innovation the team has put out into the market. I love the reaction to our advertising and our marketing campaign. I love the fact that we've taken a leadership role in fighting security, our cyber fraud and leading the security efforts across the industry.
And of course, we have opportunity to continue to make sure we're answering phones faster. There's places in the product we always want to make easier for end users and the teams all over that. But by and large, I feel really good about our TurboTax execution so far.
And so Brent, moving to your attach question, there are really 2 things that are back there in play. 1 is the seasonality of the business. If you look back at the same quarterly trends from 2015, you'll see that Q1 is a high point for us. Attach rates tail off a little bit in Q2. Probably the bigger factor though is that we are including the self employed units this year in the numbers and they were very small last year in Q2.
And those are typically earlier businesses, self employed sole proprietors who don't have the same attach opportunities as our other QBO base overall. But those are the 2 main things to watch to understand the attach rates and payments in Q2.
Thank you.
Our next question comes from the line of Walter Pritchard of Citi. Your line is open.
Hey guys, Steve Rogers on for Walter. Just do you think that's playing a factor in the market growth year to date? Or is it just seasonality?
Yes. Thanks, Steve. It's Brad. So what we see every year is the tax business is always hard to predict in terms of total returns filed. There's macro trends that you can go back and look at over a decade where there's just more procrastination.
As tools become easier to use, people's 1099s and W-2s tend to come out a little bit later. They tend to wait a little further into the season to file their taxes. And so that's been one thing that just continues and it has been doing that for the last 10 years. The second is, the good news is with the IRS data that came out through February 19, this past week looks like returns actually went up about 3 percent. So even though we got out to a slow start, it brings the total season to date down to about 1.3% below prior year.
So I think you're starting to see momentum pick up. The question behind your question and I heard you ask it was fraud. I think collectively, we as an industry and the government are absolutely making an impact on fraud. Now whether or not that actually is correlated with the number of filings that have been filed so far, we won't know till the end of the year when the IRS and the states actually tell us how many of the returns were fraudulent. But I can tell you right now, we have collectively leaned in.
We've added 23 data schemas and protocols. We strengthened the passwords. We've had an opportunity to share information at a federal and state level between the private industry and the government. And we are starting to adopt a framework called NIT. And I think all of that is having an impact and that is good news for all of us.
But right now, I think the season is still playing out and I think it's just a combination of procrastination and then we'll see how much of it ends up being us having an impact on fraud.
Great, thanks.
Thank you. Our next question comes from Keith Weiss of Morgan Stanley. Your line is open.
Hi. This is Sanjit Singh in for Keith. Wanted to toggle back to international QBO and get a sense of what's driving some of the deceleration there. It sounds like you guys took a pullback a little bit in India and Canada. I wanted to see what your thoughts were longer term in those two countries and what are you seeing outside of Canada and India?
What's your traction in the UK, Australia, maybe Germany, your sort of outlook on the international side?
Okay, Sanjeet, this is Brad. I would say, first of all, overall, we feel very good about our global progress. And I mentioned the countries, the UK, Australia, Brazil, where we made an acquisition last year of a company called 0 Paper and now we've just ported that under the QBO platform in February. And of course, we opened up France. And overall, it's up 80%.
We have over a250,000 paying subs, a lot more in the pipeline and trial periods and kind of using the product. So that looks very healthy. I did mention the 2 countries you wanted me to drill deeper on, Canada and India. I'll start with Canada. Canada is about 30% of our global units today.
And what really impacted its growth rate this quarter is last year we had tried a test of putting QuickBooks Online in retail stores. You would go and purchase it just like you would a box. You would come home and then you would activate it hopefully. And while that drove subs, we did not like the retention rates. In fact, we saw attrition was higher in that particular channel.
We ran a similar test in the U. S. So we didn't feel those were good quality leads. We didn't think that was a good effect of cost to acquire customers. So we pulled that out this year and we have a little bit of a grow over on that.
But the underlying health is the Canada QuickBooks Online business is strong. We simply have pulled out a channel and now we're going to have to grow over it. India is a little different. To be very candid with you, our product in India, we had more work to do to get it compliant. We've now added 2 scrum teams of engineers.
We've also pulled back on marketing just through the accountant channel and we're starting to go more direct to small businesses. And so that was in a little bit of a pivot. I feel really good. We have 1,000 engineers that work in our India Development Center and they are all passionate about helping get QBO localized. And we have a lot of good end market knowledge.
We're simply in a reset mode there. It's small enough as part of our mix. It's the perfect time to learn the lessons and to get readjusted. And we are committed to both Canada and India over the long term. We're just in the matter right now, we're making adjustments to the channel in Canada, and we're making sure the product is compliant in India.
Great. And one quick follow-up on sort of payroll attach and payment attach. Other than including QuickBooks Self Employed in sort of the denominator, Is there anything that you're seeing in the market that's sort of changing your view in terms of what type of attach rate you can ultimately achieve?
No. In fact, we're still seeing healthy performance there. The numbers, 21% of all new customers attaching payroll, 8% this quarter attached payments. Now that's because of the seasonality thing that Neil walked through. But when we actually look at the penetration rates and the opportunities for customers to come in and we manage the cohorts, the 90 day cohorts, we see real strength in attach opportunities.
And so there isn't anything in the external market. This is just a matter of us being able to execute quarter to quarter and continue to get smarter each time we move forward.
Great. Thanks so much. All right.
Thank you. Our next question comes from the line of Scott Schneeberg of Oppenheimer. Your line is open.
Thanks. Good afternoon, guys. Brad, a couple of tax questions upfront. This delay in IRS start, looking at what you would deem ACA returns versus non ACA returns, are you seeing that as anything characteristic in just of these procrastination years and maybe late forms?
Scott, we honestly just don't see any impact of ACA on any customers' decisions, whether it's which way they choose to file their taxes or when they file to choose their taxes or excuse me, choose to file their taxes. It continues to be a very high converting area for us on turbotax.com. This year, as you know, about 90% of tax filers, whether they last year qualify for a 1095A and this year they got a 1095B or C form, which is a form that they need to have to basically say that they have insurance. It hasn't had any impact. You can see we came out of the gate strong.
And so we're seeing on the Pro Pac side of the business where we have an assisted method similar trends. We see good healthy start to the season. So we don't see any impact from ACA and we don't think that that's what's causing any sort of IRS delays from our perspective.
Thanks. And then just a follow-up still on the TurboTax category, 2 separate questions. The desktop strength in TurboTax, if you could elaborate that? And then one additional, the volume and revenue relationship for consumer tax growth this year, Obviously, you're trending quite well in volume right now, maintain the guidance for the year. If you could just address the relationship as you see the year play out?
Thank you.
Okay. Thanks, Scott. So on TurboTax Desktop strength, as you know, we learned a pretty tough lesson last year. We had made some product changes in the early part of last season that honestly angered our customers. And last year, we gave them the $25 difference in what they would have been able to get for a deluxe product versus what it required them to move up to Premier.
And we made a promise we will return the desktop product lineup features to the way they had been, and we did that this year. We kept our promise. And we had an aggressive campaign to go out against any customer we thought that we might have lost to a competitor. And quite frankly, our data shows that we're getting them back. In fact, our conversions from our competitors are up 3x in the desktop business.
Our share is up a couple of points in retail and the net promoter in the desktop business is up 13 points year over year. So I think this is about us learning a tough lesson. We made a mistake. We recovered well from it and our customers came back and said, great, we're back with the TurboTax again. In terms of volume relationship, our goal is always to expand the category and then to grow customers faster than revenue because as you know, ultimately over time, those customers' tax situations will become more complex and over multiple years, we can maximize the lifetime value.
So right now, we're seeing good solid growth in units as you heard us report today, 9% overall and 12% in TTO, TurboTax Online. And while we're still maintaining our guidance of 5% to 7%, we really like the trend so far this tax season and we think that that ratio will continue to play out with more units coming in faster than revenue through the balance of the season.
Thanks, Brad.
All right. Thank you.
Thank you. Our next question comes from Ross MacMillan of RBC Capital. The question please.
Thanks. Brad, I had a question just on the QBO ad. So it was a good number ahead of your plan. When I do the mix, I think the kind of core domestic ex self employed were actually down a little bit year over year in terms of net adds, that's the net new. And I was just curious, you run different promotions, there's different ways for you to sort of manage that.
How do you think about that kind of net add number? And I guess the real question is, is there anything that we're bumping up against in terms of a limit on kind of how many domestic, what I call, core non self employed adds that you could add each quarter? Love your thoughts. Thanks.
Yes. Thanks, Ross. We'll start with we feel good about the overall QBO ads. We certainly had a couple of countries outside the U. S, Canada and India that I just spoke to, but by and large, the international businesses are doing really well.
And we like our momentum in the U. S. In fact, we just crossed 1,000,000 active paying customers in the United States, which is a major milestone. In terms of opportunity ahead in total addressable market, there's about 29,000,000 small businesses in the U. S.
If you back out the self employed, you're still looking at the neighborhood of between $8,000,000 $12,000,000 and we currently have a 1,000,000 that are using QuickBooks Online. So we aren't running out of any sort of opportunities to grow. It's just a matter of us continuing to lean in and execute. And we're seeing improvements in our Net Promoter Scores. We're seeing a lot of good traffic come into QuickBooks Online and we're seeing improved conversion rates.
So, I from a quarter to quarter perspective, as Neil said, you have some seasonality that kicks in. Sometimes small businesses come in 1 quarter and then in the next quarter, you may see a little bit of ebb and flow. But overall, we feel good, which is why we raised the low end of our guidance and we're reaffirming our 2017 outlook. We really like the momentum.
Great. And one follow-up just on the desktop side. Has anything changed in terms of how you think the desktop business will play out over the past 2017 2018 given that you're starting to see unit growth again. I know there's a sort of price dynamic, but I'd love your thoughts around how you think that plays out medium term.
Yes, Ross. I think we started to get wiser about our multiyear outlook last year and we shared it with you as the good news is we're getting more of our QuickBooks Online users that are new to the franchise, which means we're expanding the category. We retain fewer customers from that cost to migrate over, but since we're talking about lifetime values and profitability that are pretty equivalent on both sides, We just want to make sure they stay with us. They don't go anywhere else. But one of the things we learned last year is by raising the price to $2.49 we basically had customers staying but not renewing on their desktop and they weren't moving to QBO and that was actually a lose for us.
And so our promotional pricing now basically says we're going to keep those people who want to stay on desktop at least active, continuing to buy from us and use the newest version and get the best product, and we're going to continue to lean into QBO. And I think what you see happening overall is the best of both worlds. I think ultimately you're going to see a portion of customers still on desktop in 2017, 2018 and I'll go all the way out to 2020 and further. And there's just a group of people that are going to want to stay on desktop. We want to make sure they're using the most recent version and continuing to buy from us while we continue to open up the category with QBO.
And so I think that's the only difference to our outlook as we hope to have more active customers on desktop while we continue to add new users in QBO.
Great. Thanks again and congrats on the strong start to the tax season.
Thanks, Ross. Appreciate it.
Thank you. Our final question for the session comes from Michael Millman of Millman Research. Your line is open.
Thank you. So more on tax. To what extent do you think that the reduced growth industry numbers on do it yourself is caused by the slower slow pickup in returns. It's also kind of following up on Scott's numbers questions. Has there been a change and to what extent in the ratio yours now free versus paid?
And maybe you can give us some idea of where the California suits on rats stand, if they're still going on?
Okay. And I'm going to ask you to repeat your first question because I'm not sure I got the answer out of it, which was you said reduced growth due to
the slow pickup. Yes. IRS numbers show reduced growth. As you said, it was up 3% this year. Last year, it was up 6.7%.
So there's been reduced growth. Do you think that early on was a consequence of the slow
refund pickup early in the year?
That was the first question.
Got it. I got it. I got the other 2. Thank you for clarifying, Michael. I appreciate it.
So right now what it's hard to describe because none of us really know, it's only conjecture is why are the number of returns being filed with the IRS down 1.3% season to date. And we all have hypotheses, but the good news is we know that come April 18, and yes, there actually is an emancipation day this year. So instead of April 15 being the day, since it happens over the weekend, everyone has till Monday, April 18. And so the good news is people are going to have to file their taxes by the end. So what we look at is the ratio, how many are choosing to send the taxes in through a self prepared method versus assisted.
And we really like the fact that right now season to date 2% of the total market are leaning more to self prepared than they are assisted. So I think it's probably a safe assumption to say any year over year comparisons are probably driven by the fact that just fewer people so far have filed the returns versus last year. But the good news is the ratio of people leaning in to do it yourself versus assisted continues the trend we've seen for the last 10, which is more people are filing taxes on their own now than going to somebody to do it for them. In terms of changes in free and paid, we have had a really strong campaign for 2 years in a row in absolute 0. And as you saw last year, not only did it drive unit growth and share gains, we actually exceeded our revenue guidance last year.
So there's a monetization model behind that, that we're super excited about. This year in terms of mix, free is up a couple of points more than it was last year and that's in alignment with our guidance. And so we feel very good about the free to pay mix. And honestly, we feel even better about our monetization this year because we learned a lot from last year's program. So I'm feeling good overall about free to pay.
California Racks, actually good news is we have our General Counsel sitting here. So Laura Fennell, is there any update we have on the California situation? We don't right now. Okay. I guess that was a clear attorney answer.
We don't. So I don't have anything to share for you there, Michael.
Do you have any target dates as to when something will occur?
On that last question on the California situation?
Yes.
No, we haven't been notified by anyone in the industry and so we don't have any knowledge of what's going on there. No.
Appreciate it. Thanks, Brad.
All right. Thank you, Michael. Appreciate it.
Gentlemen, as there are no further questions, would you like to close with any additional remarks?
Yes, Latif, thank you. I want to thank everybody for your questions today. As you can tell, we're encouraged by the strong start and the momentum we've built up. I have to say, we're really competitive, so we're looking forward to the remainder of tax season and our fiscal year. But we are feeling quite confident in our full year outlook.
And so I want to thank everybody and we'll look forward to speaking with you soon. Take care and have a great afternoon.
Ladies and gentlemen, thank you for participating. This concludes today's conference call.