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 2016 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star then number one on your touchtone telephone. If you would like to withdraw your question, press the pound key. With that, I'll now turn the call over to Matt Rhodes, Intuit's Vice President of Investor Relations. Mr. Rhodes?
Thank you very much. I appreciate it. Good afternoon, everyone, and welcome to Intuit's Second Quarter 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-K for fiscal 2015, and our other SEC filings. All of those documents are available on the investor relations page of 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 and 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. With that, I'll turn the call over to Brad.
All right. Thank you, Matt. Thanks to all of you for joining us. We are out of the gate strong in the first half of fiscal 2016. 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. Now, 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 gain, particularly in the simple return segment. TurboTax Online units grew 12% through February 20th, 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 taxpayers 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 1.4 million 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-2, 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 SmartLook feature is resonating with customers. This new feature quickly connects users with TurboTax experts who will answer the questions in real time, completely free.
For the second consecutive year, Americans with more straightforward tax situations are able to use TurboTax to file both their federal 1040A or their 1040EZ returns, as well as their state returns for free. This is a highly compelling offer for the 60 million 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 19th shows the self-prepared e-files were up about 3%, contrasted with assisted e-files being down 5%. 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 Pro Tax side of the business, we've seen positive early trends in customer acquisition and returns growth as well. As I always say at this time of year, it's early in the season for our tax businesses, but I like the strong start that we delivered so far. We're 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 second quarter. This resulted in the addition of nearly 100,000 QBO subscribers in the quarter, bringing us to 1,257,000 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 U.K., 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 lifetime 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. 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 three clients using QuickBooks Online. That's more than double the number of accountants with at least three clients versus last year. 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 third-party application, up from 8% 12 months ago. We know the retention of a QBO customer who also uses a third-party app is better, which increases lifetime value.
QBO subscriber growth remained near 50% this quarter, we remain confident in our full-year outlook as well as the outlook we gave for fiscal 2017. We saw QBO subs growth during the last month of this quarter become a peak for us, that is a good news story because that is the peak season for adding QBO subscribers. 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. 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, that would enable us to exit fiscal year 2017 with between 2 million to 2.2 million subs.
Given this quarter's performance, we remain absolutely on track to deliver against this longer-term outlook. 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, there's much more innovation in store from these teams over the next few years. In small business, customer growth remains strong as we continue to focus on global customer acquisition enabled by our cloud solutions. With that overview, I'm going to turn it over to Neil to walk you through the financial details.
Thanks, Brad, good afternoon, everyone. For the second quarter of fiscal 2016, we delivered revenue of $923 million, up 23%. Non-GAAP operating income of $114 million versus a loss of $22 million a year ago. GAAP operating income of $42 million versus a loss of $89 million. Non-GAAP earnings per share of $0.25 versus a loss of $0.06. 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 one-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 second quarter. Our strong desktop performance was driven by our pricing and promotion strategy.
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 second quarter last year. Consumer tax revenue is significantly higher than last year, reflecting a shift from the third quarter to the second quarter, primarily driven by an extra weekend day in January this year. We still expect revenue growth of 5%-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 million, driven by changes to our desktop offerings, where revenue is now recognized ratably as services are delivered. For the third and fourth 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 in opportunities that yield an expected return on investment greater than 15% over five years. We repurchased $455 million worth of shares in Q2, $900 million remained on our authorization as of the end of the quarter. Our cash and investments balance was $334 million at the end of the second quarter. On February the first, we secured $1.5 billion in debt financing, including a $1 billion revolver and a new term loan of $500 million. 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 third fiscal quarter, payable on April 18, which represents a 20% increase versus last year.
One final note on capital allocation, we expect the process to sell Demandforce, QuickBase, and Quicken will be completed this fiscal quarter with total proceeds of approximately $500 million. We expect to record GAAP-only gains when these sales close. We provided our guidance for the third quarter 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. With that, I'll turn it back to Brad to close.
Thank you, Neil. We're pleased with our performance in the first half of the fiscal year. 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. If you look back over the 3+ 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. 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. 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. We remain deeply committed to accelerating both customer and revenue growth. It all starts with great people. 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 in our consumer tax and our small business units following the tax season. Effective May first, Sasan Goodarzi will take over as the head of the small business group. Dan Wernikoff will assume responsibility as the general manager for our consumer tax business. This commitment to leadership 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 Dan and Sasan to develop deep empathy for each of Intuit's core customers, as well as a better understanding 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. We have clear visibility into strong outlooks in both small business and consumer tax. I'm excited to watch that momentum continue as Sasan and Dan bring a fresh perspective and a new set of capabilities to their respective teams.
With that, Latif, let's open it up and let's hear what's on everyone's mind.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. Again, that's star then the number one on your telephone keypad. Our first question comes from the line of Raimo Lenschow of Barclays. Your line is open.
Hey, thanks for taking my question, 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? The second question was on the QuickBooks Online ARPU. If I do the calculation here, this was the second quarter 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 be aware about other drivers here? Thank you.
Great. Thank you, Raimo. This is Brad. Let me start with desktop units. The good news is we've been able to continue to draw strong QBO subscribers, 49%, over 80% of those are new to the franchise, while also growing our desktop units 14%. What we basically learned is last year, we had tried to raise the price on desktop from $199 to $249, 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. 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.
What it did do was it incensed people to actually upgrade to the newer version. What you're seeing happen now is we have the ability to continue to accelerate QBO, continue to get existing desktop customers to move up to the newest version, and that's the best of both worlds. That's what's happening with desktop units, and as you heard, 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, our targets are 25%-30% in revenue, then about 40% subscriber growth, and that'll get us to the targets we provided for fiscal year 2016 and 2017.
I will say, however, that we do see opportunities for ARPU to continue to accelerate over time. If you remember, we talked about a first-year customer comes in with a period of time where they have a trial at a promotional price. Once they move into the 13th month on the product, that ARPU goes up for that customer about 50%. As more of these new customers start to age, we see a natural tailwind in ARPU. Of course, we continue to get smarter in how we do a tax service of like payroll and payment. 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, then over time, we think by executing well, ARPU will improve.
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. Brad, 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. 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. With the IRS data being published through February 19, 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 is down 5%. If you do all the translation and machinations of that would suggest that the do-it-yourself category has picked up a little more than two 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 come in. The good news is the DIY category continues to take share from assisted. The question is, what about TurboTax share inside that category?
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. Right now, season to date, we're a little over three and a half 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 Free File Alliance customers using TurboTax. It's across the board. Your question is, where could we do better? Well, we're always constructively dissatisfied, I have to tell you right now, I feel really good about the 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. 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, the team's all over that. By and large, I feel really good about our TurboTax execution so far.
Brent, moving to your attach question, there are really two things that are at fact there in play. One is the seasonality of the business. If you look back at the same quarterly trends from 2015, you'll see that Q1's a high point for us. Attach rates tail off a little bit in Q2. Probably the bigger factor, though, is that we're including the self-employed units this year in the numbers, and they were very small last year in Q2. Those are typically earlier businesses, self-employed, sole proprietors, who don't have the same attach opportunities as our other QBO base overall. Those are the two main things to watch and understand the attach rates and payments in Q2.
Thank you.
Thank you. Our next question comes from the line of Walter Pritchard of Citi. Your line is open.
Hey, guys, it's Steve Rogers on for Walter. Wanted to see what you guys were seeing with the overall growth in the tax market, with returns being down. Maybe we could just start there. With fraud, do you think that's playing a factor in the market growth year to date, or is it just seasonality?
Thanks, Steve. It's Brad. 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. 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%. Even though we got out to a slow start, it brings the total season to date down to about 1.3 below prior year.
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. 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. I can tell you right now, we have collectively leaned in. We've added 23 data schemas and protocols. We've strengthened the passwords. We've added opportunities to share information at a federal and state level between the private industry and the government, we are starting to adopt a framework called NIST.
I think all of that is having an impact, and that is good news for all of us. Right now, I think the season's still playing out, and I think it's just a combination of procrastination, and then we'll see how much of it ends up 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 pulled back a little bit in India and Canada. 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 U.K., Australia, maybe Germany, your sort of outlook on the international side?
Okay, Sanjit, this is Brad. I would say, first of all, overall, we feel very good about our global progress. I mentioned the countries, the U.K., Australia, Brazil, where we made an acquisition last year of a company called ZeroPaper, and now we just ported that onto the QBO platform in February. Of course, we opened up France, and overall, it's up 80%. We have over a quarter of a million paying subs, a lot more in the pipeline in trial periods and kind of using the product. That looks very healthy. I did mention the two 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, then you would activate it, hopefully. 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. We didn't feel those were good quality leads. We didn't think that was a good effective cost to acquire customers, so we pulled that out this year, and we have a little bit of a grow over on that. The underlying health of 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's 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 two scrum teams of engineers. We've also pulled back on marketing just through the accountant channel, we're starting to go more direct to small businesses, that one's in a little bit of a pivot. I feel really good. We have 1,000 engineers that work in our India development center, they are all passionate about helping get QBO localized, 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 that this is the perfect time to learn those lessons and to get readjusted, we are committed to both Canada and India over the long term, where this is a matter of right now, we're making adjustments to the channel in Canada, and we're making sure the product is compliant in India.
Great. One quick follow-up on sort of payroll attach and payment attach. Other than including a 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 number's 21% of all new customers attaching payroll, 8% this quarter attached payments. That's because of the seasonality thing that Neil walked through. 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, 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 Schneeberger of Oppenheimer. Your line is open.
Thanks. Good afternoon, guys. Brad, a couple tax questions up front. 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 one of these procrastination years and maybe late forms?
Scott, we honestly just don't see any impact of ACA on any customer's decisions, whether it's which way they choose to file their taxes or when they 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 qualified for a 1095-A, and this year they got a 1095-B 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. We're seeing on the Pro Tax side of the business, where we have an assisted method similar trends. We see good, healthy start to the season.
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. Just a follow-up, still in the TurboTax category, two 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. 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. Last year, we gave them the $25 difference in what they would've been able to get for a Deluxe product versus what it required them to move up to Premier. We made a promise we would return the desktop product lineup features to the way they had been, and we did that this year. We kept our promise. 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. 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 TurboTax again." In terms of volume relationship, our goal was 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. Right now, we're seeing good solid growth in units, as you heard us report today, 9% overall and 12% in TTO, TurboTax Online.
While we're still maintaining our guidance of 5%-7%, we really like the trends 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 adds. 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, like the net new. 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? I guess the real question 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.
Thanks, Ross. We'll start with, we feel good about the overall QBO adds. 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. We like our momentum in the U.S. In fact, we just crossed 1 million 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 million small businesses in the U.S. If you back out the self-employed, you're still looking at the neighborhood of between 8 million and 12 million, and we currently have 1 million that are using QuickBooks Online. 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. We're seeing improvements in our Net Promoter Scores.
We're seeing a lot of good traffic come into QuickBooks Online, we're seeing improved conversion rates. From a quarter-to-quarter perspective, as Neil said, you have some seasonality that kicks in. Sometimes small businesses come in in one quarter, then in the next quarter, you may see a little bit of ebb and flow. Overall, we feel good, which is why we raised the low end of our guidance, we're reaffirming our 2017 outlook. We really like the momentum.
Great. 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 path to 2017 and 2018, given that you're starting to see unit growth again? I know there's a sort of price dynamic, but would love your thoughts around how you think that plays out medium term.
Yeah, Ross, I think we started to get wiser about our multi-year outlook last year. 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 were seeing fewer customers from desktop 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. One of the things we learned last year is by raising the price to $249, we basically had customers staying but not renewing on their desktop, and they weren't moving to QBO, and that was actually a loss for us.
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. 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 would go all the way out to 2020 and further. 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.
I think that's the only difference to our outlook, is we hope to have more active customers on desktop while we continue to add new users in QBO.
Great. Thanks again, congrats on the strong start to the tax season.
Hey, 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. More on tax. To what extent do you think that the reduced growth in industry numbers on do it yourself is caused by the 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? Maybe you can give us some idea of where the California suits on tax stand, if they're still going on.
Okay, Mike, I'm going to ask you to repeat your first question because I'm not sure I got the essence of it, which was, you said reduced growth due to the slow pickup in returns.
The IRS numbers show reduced growth. As you said, it was up 3% this year. Last year, it was up 6.7%. 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, and I got the other two. Thank you for clarifying, Michael. I appreciate it. 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? We all have hypotheses, but the good news is we know that come April 18th, and yes, there actually is an Emancipation Day this year, instead of April 15th being the day, since it happens over the weekend, everyone has till Monday, April 18th. The good news is people are going to have to file their taxes by then. What we look at is the ratio of how many are choosing to send the taxes in through a self-prepared method versus assisted.
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. 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 their returns versus last year. 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 ten, 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 two years in a row in Absolute Zero, and as you saw last year, not only did it drive unit growth and share gains, we actually exceeded our revenue guidance last year. There's a monetization model behind 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. That's in alignment with our guidance, and we feel very good about the free to paid mix, and honestly, we feel even better about our monetization this year because we learned a lot from last year's program. I'm feeling good overall about free to paid. California racks. Actually, good news is we have our general counsel sitting here.
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. 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, 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?
Yeah, 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. 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.